Nvidia supplier Foxconn third-quarter profit beats expectations, rising 17% on AI demand

Foxconn, the world’s largest contract electronics maker, said Wednesday that its third-quarter profit jumped 17% from a year earlier, driven by growth in its artificial intelligence server business.

Here’s how Foxconn did in the September quarter compared with LSEG SmartEstimates, which are weighted toward forecasts from analysts who are more consistently accurate:

• Revenue: $2.06 trillion New Taiwan dollars ($66.29 billion) vs. NT$2.06 trillion expected
• Net profit: NT$57.67 billion vs. NT$50.41 billion

Foxconn, formally known as Hon Hai Precision Industry, is best known as the world’s largest manufacturer of Apple‘s iPhones, but has been shifting into other business avenues, including AI. The firm manufactures server racks designed for AI workloads and has become a key partner to American AI chip darling Nvidia.

The company said it expects operations in the second half of the year — the traditional peak season — to maintain continuous quarterly growth, citing stronger AI server shipments and rising demand for information and communications technology products.

However, Foxconn cautioned that global political and economic uncertainty, along with exchange rate fluctuations, will require continued close monitoring.

Foxconn reported that its ‘Cloud and Networking’ segment saw strong year-on-year growth, supported by demand for AI server racks.

Foxconn’s server manufacturing business is currently in a strong growth phase, underpinned by robust demand, Ivan Lam, a senior analyst at Counterpoint Research, told CNBC.

The company is leveraging its dominance in contract manufacturing to secure both current and future orders, Lam said, describing it as a clear case of “follow the cash” strategy that involves sacrificing some consumer electronics orders.

He added that Foxconn’s pivot toward high-growth server manufacturing “is clearly paying off,” even as it trades parts of its consumer electronics footprint for longer-term momentum.

While component price volatility, currency swings, and logistics challenges can pressure margins, Lam said he expects Foxconn’s fourth-quarter results to “remain favorable.”

The electronics contract manufacturer also said it is partnering with Nvidia, Stellantis and Uber to build so-called “Level 4” autonomous vehicles, which doesn’t require a safety driver to be present.

Recently, Foxconn signed a memorandum of understanding with Mitsubishi Electric on Nov. 6 to jointly supply energy-efficient AI data center solutions globally. Besides AI data centers, Foxconn and Mitsubishi Electric plan to explore additional new business models and solutions using their combined technological and knowledge capabilities.