(Bloomberg) — Hon Hai Precision Industry Co. reported strong profit growth for the second straight quarter after sales of lucrative AI hardware helped offset weakness in iPhone and electronics demand.
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Apple Inc., the world’s largest assembler of iPhones, reported a 33 percent rise in net income to NT$53.2 billion ($1.7 billion) in the quarter ended December. It beat analysts’ average estimate of NT$43.8 billion, helped by a large one-time gain.
The company’s shares have risen more than 15% this year, fueled by growing optimism about opportunities to capitalize on demand for Foxconn’s artificial intelligence servers and hardware. The Taiwanese assembler, also known as Foxconn, wasn’t among the early cohorts of companies fueled by the AI craze, but investors and analysts see the potential for a growing stake in such businesses. Is. This month, it was reported that it had secured a major order from long-time US partner Hewlett-Packard Enterprise Co.
For the current period, Hon Hai forecast that sales will again decline, as it is coming off a higher comparison to the post-pandemic recovery period earlier last year. AI sales have helped improve profits during a down year for the iPhone, the flagship product that first brought Foxconn global fame.
“The business saw a nice sequential return in Q4 that is partially focused on AI, but if you take a step back and look at 2023 as a whole, it was a relatively weak year,” said Bloomberg Intelligence analyst Robert Lia. ” “The company should have a much better year as their core customers begin to rebuild inventory.”
JPMorgan said earlier this week that Foxconn’s rally could accelerate as the market increasingly bets on the company’s prospects in AI server infrastructure from the second half of the year. Analysts including Gokul Hariharan estimate that Hon Hai’s AI revenue and gross profit exposure is likely to be in the 10-12% range in 2025.
Still, Apple makes up more than half of Hon Hai’s revenue, challenges remain. This month, Counterpoint Research said that iPhone sales in China fell a staggering 24 percent during the first six weeks of this year. To spur demand, Apple also launched rare discounts on its web store in January, and online resellers are now slashing prices by as much as $180.
(Updates with analyst response)
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