Foxconn Stock: Third-Quarter Profit Rises 17% on AI Server Demand

TLDR

• Foxconn’s third-quarter profit jumped 17% year-over-year to $1.89 billion, beating analyst estimates of $1.56 billion.
• AI servers now represent 42% of total revenue, surpassing the iPhone assembly business for the second consecutive quarter.
• The company reported $31 billion in total AI server revenue, with continued quarterly growth expected.
• Foxconn is expanding manufacturing operations with new AI server factories in Mexico and Texas for Nvidia.
• New partnerships include agreements with Nvidia, Stellantis, and Uber for Level 4 autonomous vehicles, plus a joint venture with Mitsubishi Electric for AI data center solutions.

Foxconn reported third-quarter net profit of $1.89 billion on Wednesday. That’s a 17% increase from the same period last year.

The result beat analyst expectations by a wide margin. Wall Street had forecast profit around $1.56 billion.

Revenue for the July to September quarter reached $63.5 billion. That’s an 11% increase year-over-year.

The company’s cloud and networking segment drove most of the growth. This division includes AI server manufacturing.

AI servers have now become Foxconn’s largest business line. They account for 42% of total company revenue.

This marks the second straight quarter where AI servers generated more revenue than smart consumer electronics. The consumer electronics category includes iPhone assembly, which Foxconn has long been known for.

Total AI server revenue has reached $31 billion. The company manufactures server racks for Amazon and Nvidia.

In October, Foxconn’s chairman met with OpenAI’s chief executive. No deal was announced from that meeting, but the stock hit a record high afterward.

Manufacturing Expansion Plans

Foxconn is building new factories in Mexico and Texas. These facilities will manufacture AI servers specifically for Nvidia.

The expansion is part of a strategy to spread production across multiple locations. This approach aims to shorten delivery times for customers.

While most iPhone production still happens in China, Foxconn has been moving some assembly to India. The majority of iPhones sold in the U.S. now come from Indian facilities.

New Partnership Agreements

The company announced a partnership with Nvidia, Stellantis, and Uber. The collaboration will focus on building Level 4 autonomous vehicles, which don’t require a safety driver.

On November 6, Foxconn signed a memorandum of understanding with Mitsubishi Electric. The two companies will jointly supply energy-efficient AI data center solutions globally.

The partnership with Mitsubishi Electric will explore additional business models. Both companies plan to combine their technological capabilities for new solutions.

Counterpoint Research senior analyst Ivan Lam described Foxconn’s strategy as “follow the cash.” The company is sacrificing some consumer electronics orders to focus on high-growth server manufacturing.

Lam said the pivot is “clearly paying off” even as Foxconn trades parts of its consumer electronics business for long-term growth.

Foxconn expects operations in the second half of the year to maintain continuous quarterly growth. The company cited stronger AI server shipments and rising demand for information and communications technology products.

The company cautioned that global political and economic uncertainty will require close monitoring. Exchange rate fluctuations also remain a concern.

Component price volatility and logistics challenges could pressure margins. However, Lam expects fourth-quarter results to “remain favorable.”

In August, Foxconn agreed to sell a former car plant in Ohio for $375 million. The company had purchased that site in 2022 to build electric vehicles but has since changed direction.

HNHPF shares closed at $15.98 on Tuesday, down 0.95%. The stock carries a Moderate Buy consensus rating from analysts with an average price target of $20.

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