Foxconn's Q4 Upside: AI Servers and iPhone Assembly Drive Growth

Foxconn, the world's leading contract electronics manufacturer, has reported a 3.47% year-on-year increase in November revenue, reaching T$672.6 billion ($20.75 billion). The company's strong performance and positive outlook for the fourth quarter have sparked renewed interest among investors. This article explores the factors driving Foxconn's growth and the potential implications for the wider technology sector.

The increased demand for AI servers has been a significant driver of Foxconn's recent growth. The company's CFO, David Huang, highlighted the strong demand for AI servers as a key factor behind the company's record-breaking third-quarter revenue of NT$1.85 trillion. Looking ahead, Foxconn maintains a bullish outlook for the full year 2024, with better visibility for the fourth quarter.

Foxconn's role as Apple's leading iPhone assembler has also contributed to its robust performance. The company's strategic focus on AI, semiconductors, and other emerging technologies, coupled with its operational scale and vertical integration, has led to significant growth in gross profit, operating profit, and net profit. This has enabled Foxconn to maintain and even enhance its profit margins despite the impact of product mix on margins.

Foxconn's AI server production growth aligns with the broader AI market trends. The company expects its AI server shipment volume to grow quarter by quarter in 2025, indicating a positive outlook for the AI market. This is supported by Foxconn's 2024 revenue growth of 10% compared to the same period last year, with AI servers being a significant driver. Additionally, Foxconn's 2025 "AI Year" prediction reflects the company's confidence in the market's rapid development.

Foxconn's strong Q4 outlook, coupled with record-breaking revenue in the third quarter (2024: NT$1.85 trillion), has significantly boosted investor sentiment. The company's stock has risen by 9.5% in early trading on a single day following the earnings briefing. This growth is attributed to the bullish outlook, driven by booming demand for AI servers. The positive sentiment is further supported by the company's prediction that 2025 will be the "AI Year", indicating a strong growth trajectory.

Foxconn's Q4 growth outlook is buoyed by strong demand for AI servers and a surge in iPhone sales. Its competitors, such as Pegatron and Quanta Computer, also report robust earnings, indicating a broader industry trend. However, Pegatron's Q3 revenue growth slowed to 2.5%, compared to Foxconn's 20%, suggesting Foxconn may have a competitive advantage in the AI server market.
In conclusion, Foxconn's strong Q4 outlook and robust performance in 2024 are driven by the increased demand for AI servers and its role as Apple's leading iPhone assembler. As the company continues to invest in emerging technologies and maintain its operational scale and vertical integration, it is well-positioned to capitalize on the growing AI market and other technological advancements. Investors should closely monitor Foxconn's performance and the broader technology sector as they evaluate potential investment opportunities.