Foxconn profits beat forecasts thanks to AI boom, but smartphone demand stagnates

Foxconn showed a 6% increase in quarterly net profit, exceeding all analysts’ forecasts. The world’s largest contract electronics manufacturer expects robust demand for AI-powered servers to continue to drive growth in the fourth quarter, leading to a significant increase in annual revenue compared to the prior year. Foxconn shares closed up 2.5%.

Image source: Foxconn

Foxconn’s net income for the second quarter of 2024 rose to $1.087 billion, up from $1.024 billion in the same period last year and surpassing analysts’ previous estimates of $1.064 billion. The company’s profit grew for the fourth quarter in a row. AI servers accounted for more than 40% of Foxconn’s server business in the second quarter. The company predicts that “AI servers should soon become Foxconn’s next trillion [Taiwanese] dollar revenue product” ($31 billion).

Foxconn Vice President and Press Secretary James Wu said that preparations for production of NVLink switches, which as part of the GB200 accelerators are responsible for transferring information between the CPU, GPU and other system components, are on schedule for Nvidia. Deliveries of the first batches should begin in the fourth quarter of 2024, and in 2025 supply volumes will increase significantly. “If the schedule remains unchanged, the performance of the entire AI server segment may be higher than the initial estimate,” Wu said. He is confident that the company will maintain its technological leadership: “That won’t change anytime soon.”

Foxconn is looking to replicate the success it achieved with iPhone contract manufacturing, but in the electric vehicle space. Negotiations with the two Japanese automakers will be completed this year, Wu said. “Rub your eyes and wait,” he said, without revealing the names of the companies.

The full-year outlook for smartphone production remains “flat” due to a higher base in the first half of last year, according to Wu, but expectations for the second half of this year are higher than the results for the second half of 2023. The company expects third-quarter revenue to rise significantly year-over-year, although revenue from smart consumer electronics, including smartphones, is likely to remain flat.

Foxconn also expects growth in the second half of the year, driven by demand from electronics suppliers including Apple, which typically release new products in time for the holiday shopping season.