(Bloomberg) — Hon Hai Precision Industry Co. shares saw their biggest intraday jump in more than three years after the company forecast strong growth for its AI hardware sales this year.
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The Taiwanese firm expects its artificial intelligence server business to grow by 40% this year and it’s targeting a 40% share of that overall market, Chairman Young Liu said on an earnings call Thursday. The company, known also as Foxconn, reported its second straight quarter of strong profit growth after lucrative AI hardware sales helped offset weakness in iPhone and consumer electronics demand.
Shares jumped as much as 9.5% in Taipei on Friday, extending a rally since the start of this year on growing optimism about Foxconn’s opportunity to benefit from AI demand. The world’s largest assembler of Apple Inc.’s iPhones wasn’t among the initial cohort of companies boosted by the AI frenzy, but investors and analysts see it likely to gain a growing share. This month, it was reported to have secured a major order from longtime US partner Hewlett Packard Enterprise Co.
Hon Hai posted a 33% rise in net income to NT$53.2 billion ($1.7 billion) in the quarter ended December. That beat an average of analyst estimates of NT$43.8 billion, helped by a large one-time gain.
For the current period, Hon Hai had forecast that sales would decline again, as it’s coming off an elevated comparison base from the post-pandemic recovery period early last year. AI sales have helped it improve profit while weathering a down year for the iPhone, the flagship product that first brought Foxconn global renown.
“The business saw a good sequential rebound into Q4 partly driven by the AI-focused side, but if you take a step back and look at 2023 as a whole, it was a relatively weak year,” Bloomberg Intelligence analyst Robert Lea said. “The company should have a much better year as their main customers start to rebuild inventory.”
JPMorgan earlier this week said that Foxconn’s rally could extend as the market is betting increasingly on the company’s prospects in AI server infrastructure from the second half of the year. Analysts including Gokul Hariharan estimate that Hon Hai’s AI revenue and gross profit exposure is likely to be in the 10-12% range in 2025.
Still, with Apple making up more than half of Hon Hai revenue, challenges remain. This month, Counterpoint Research said iPhone sales in China fell by a surprising 24% over the first six weeks of this year. To stimulate demand, Apple even rolled out rare discounts on its web store in January, and online resellers are now cutting prices by as much as $180.
(Updates with share price reaction)
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