(Bloomberg) — Hon Hai Precision Industry Co. reported 15% faster-than-expected revenue growth after Nvidia Corp.’s server assembly partner. met sustained demand for AI infrastructure.
Most read on Bloomberg
Hon Hai, also the world’s largest iPhone maker Apple Inc., reported revenue of NT$2.13 trillion ($64.6 billion) in the past three months. December revenue rose 42%, helping the company known as Foxconn beat analysts’ expectations. It also forecast “significant” sales growth for the first quarter, helping its shares climb as much as 3.6% in Taipei, their biggest intraday rise in about two weeks.
The company and other Taiwanese AI hardware providers have benefited from massive spending on data center servers by top U.S. tech companies like Alphabet Inc. and Microsoft Corp. But the lack so far of a compelling use case for AI has incentivized investors. nervous about the slowdown in expansion.
Analysts at Goldman Sachs revised their 2024 earnings estimate upwards by 1%, based on higher-than-expected December revenue. They also increased their revenue estimates for this year and the next two years, citing higher revenue for AI servers.
“Sequential cloud revenue growth supports our positive view of accelerating shipments of next-generation rack-level AI servers and recovery in general demand for servers and networking equipment,” wrote analysts at Goldman Sachs.
Hon Hai expects revenue from its cloud business, which includes AI servers, to match sales from its iPhone manufacturing division in 2025.
Still, Citi analyst Carrie Liu warned in a note that the stock could see a near-term slowdown, based on the company’s first-quarter outlook that appeared lower than market estimates.
The AI market is important to Hon Hai’s efforts to diversify its business beyond Apple, whose iPhones are seeing moderate growth. Apple historically represents more than half of the Taiwanese company’s sales.
Hon Hai also aims to break into the electric vehicle market, although this venture has yet to have a significant effect on its profits. The company contacted Renault SA about a tie-up with Nissan Motor Co., in which Renault owns 36%. For now, that suit is on hold while Nissan and Honda Motor Co. negotiate a merger, Bloomberg News reported.
(Updates with stock movements and analyst comments)
