January 13, 2025

Hon Hai Revenue Surges on AI Demand, Shares Climb 📈

Hon Hai Precision Industry Co., also known as Foxconn, reported a 15% year-on-year revenue increase for the fourth quarter, driven by booming demand for AI infrastructure. The company recorded NT$2.13 trillion ($64.6 billion) in revenue, with December alone seeing a 42% surge. This strong performance beat analyst forecasts, lifting its shares by up to 3.6% in Taipei.

Key Highlights:

  • AI Server Growth: Hon Hai’s role as a key assembly partner for Nvidia and other AI hardware makers has benefited from heavy investments in AI servers by major U.S. tech firms like Alphabet and Microsoft. Goldman Sachs revised its 2024 earnings estimate for Hon Hai, citing robust AI server demand.
  • Cloud Business Expansion: Hon Hai projects its cloud business, including AI server sales, will rival revenue from its iPhone division by 2025, a critical step in diversifying away from Apple, which historically accounts for over 50% of its sales.
  • iPhone & EV Outlook: While iPhone growth remains tepid, Hon Hai is pursuing the electric vehicle (EV) market. Talks with Renault for a tie-up involving Nissan are currently on hold due to ongoing negotiations between Nissan and Honda for a potential merger.

Challenges Ahead:

Despite its strong quarter, Hon Hai issued a cautious first-quarter outlook that some analysts, including Citi’s Carrie Liu, believe may weigh on the stock in the near term. Additionally, investors remain wary of when AI-driven growth might plateau, given the lack of clear, widespread use cases for AI technology.

Hon Hai’s focus on diversifying its revenue streams, particularly through cloud and EV ventures, will be critical as it seeks to reduce its reliance on Apple and sustain growth.

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