Hon Hai Earnings: Demand for AI Servers Accelerating; Fair Value Estimate Up 27% to TWD 178

Hon Hai’s second-quarter 2024 result was stronger than expected and the outlook was better than expected, driven by strong artificial intelligence-related demand for Foxconn Industrial Internet, or FII, servers that are used by corporates and in data centers. AI server revenue grew nearly 300% year on year in the second quarter after increasing nearly 200% year on year in the first quarter. Second-quarter consolidated revenue and gross profit increased by 19%, with operating profit increasing by 44%, all on a year-on-year basis. July revenue was also up 22% year on year, so the momentum has been retained. For 2024, management is still guiding for flat revenue from consumer electronics products and computing products, which contributed 72% of Hon Hai’s revenue in 2023—but strong growth from cloud and networking products, and components and other products, which contributed the remaining 28% of 2023 revenue. Overall, management maintains its outlook for significant growth for the full year and believes visibility has become even better than in the previous update in May.