Taiwan's Foxconn, the world's largest contract electronics maker, delivered impressive second-quarter results with net profit rising 35% to T$59.97 billion ($1.86 billion) for the April to June period. According to reports from Reuters, this performance beat analyst forecasts of T$58.8 billion and represented a significant increase from T$44.4 billion recorded in the same quarter last year. The company, formally known as Hon Hai Precision Industry, demonstrated strong operational performance driven by robust demand across its key business segments. In an earnings release, Foxconn stuck to its previous forecast of 'strong' growth for revenue this year and said it also saw strong AI demand driving growth throughout the year.
Foxconn's revenue composition underwent a significant transformation during the quarter, with AI-related business accounting for 51% of second-quarter revenue, marking the first time this segment exceeded 50% of total revenue. As reported by Reuters, the company's cloud and networking products segment, which includes AI servers, drove this growth while its smart consumer electronics products segment, including iPhones, contributed 29% of revenue. Rotating CEO Michael Chiang emphasized that "AI-related business performance will continue to grow in the third quarter," positioning this as a key growth driver for the remainder of the year. The company reported a 40% year-on-year jump in second-quarter revenue in July, demonstrating the sustained momentum in AI-driven demand.
While customer demand remains very strong, Foxconn CEO Michael Chiang cautioned that the key determinant for the overall AI server rack market next year will be how much CoWoS capacity chip companies are able to secure. As reported by Reuters, Foxconn's customers, including Nvidia, rely heavily on manufacturing by Taiwan's TSMC, the world's largest contract chipmaker. CoWoS, or Chip on Wafer on Substrate, is a key advanced packaging technology developed by TSMC used in AI chip production that has been constrained by tight capacity amid booming AI demand. "The market currently expects CoWoS capacity to grow by more than 50% next year, but how much of that can ultimately be translated into shipments of next-generation AI server racks will depend on chip supply," Chiang said. This constraint could limit the company's ability to capitalize on strong AI demand despite robust customer interest.
Looking ahead, Foxconn maintained its optimistic growth forecasts while providing specific guidance for capital expenditure. According to Reuters, the company expects capital expenditure to increase by 30% in 2026 compared to the previous year. CEO Chiang noted that "combined with ICT products entering their peak season in the second half of the year, we expect significant quarter-on-quarter growth and strong year-on-year growth." The company continues to benefit from strong customer demand, with most iPhones assembled in China now produced in India for the US market. Foxconn is also building factories in Mexico and Texas to produce AI servers for Nvidia, while also exploring opportunities in the electric vehicle sector to diversify its business portfolio.
Regarding Nvidia's latest Vera Rubin server products, Chiang provided detailed updates on manufacturing timelines and market positioning. As reported by Reuters, the AI server racks will enter mass-production preparation in the third quarter with shipments expected to begin in the fourth quarter. The CEO indicated that "production volumes will increase gradually over the next several quarters, and it will become our major product next year." However, he cautioned that market growth will depend on CoWoS capacity availability, noting that "the market currently expects CoWoS capacity to grow by more than 50% next year, but how much of that can ultimately be translated into shipments of next-generation AI server racks will depend on chip supply."
Despite strong operational performance, Foxconn's stock has underperformed broader market indices this year. According to Reuters, the company's shares have risen 17% so far this year, underperforming the broader Taiwan index's 57% gain. However, shares closed 2.7% higher on Wednesday ahead of the earnings release. The company continues expanding its manufacturing footprint, building factories in Mexico and Texas to produce AI servers for Nvidia, while also exploring opportunities in the electric vehicle sector to diversify its business portfolio. Foxconn is also developing production facilities in Mexico and Texas to manufacture AI servers for Nvidia, while also exploring opportunities in the electric vehicle sector to diversify its business portfolio.
