Hon Hai Precision Industry Co., a key assembly partner for Nvidia Corp.’s AI servers, reported a stronger-than-expected 15% year-over-year revenue growth for Q4 2024, fueled by sustained demand for AI infrastructure. The company, also known as Foxconn and the world’s largest manufacturer of Apple Inc.’s iPhones, posted NT$2.13 trillion ($64.6 billion) in revenue for the quarter. December revenue alone surged by an impressive 42%, exceeding analyst projections.
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AI Server Demand Fuels Hon Hai’s Growth
Hon Hai’s robust performance reflects a broader trend of increased investment in AI infrastructure by major US tech companies like Alphabet Inc., Microsoft Corp., and others. This surge in demand for AI servers has significantly benefited Taiwanese hardware suppliers, including Hon Hai. The company’s cloud business, which encompasses AI servers, is projected to generate revenue comparable to its iPhone manufacturing division by 2025. This ambitious goal underscores Hon Hai’s strategic focus on capitalizing on the burgeoning AI sector.
Market Outlook and Analyst Perspectives
Despite the positive results, some analysts caution about potential headwinds. Citi analyst Carrie Liu noted that Hon Hai’s Q1 2025 outlook might fall short of market expectations, potentially impacting the stock in the near term. However, Goldman Sachs analysts remain optimistic, revising their 2024 earnings estimate upward by 1% based on the strong December performance. They also raised revenue projections for 2025, 2026, and 2027, citing anticipated growth in AI server revenue. Goldman Sachs analysts highlighted that the “sequential revenue growth in Cloud supports our positive view on the next generation rack-level AI servers shipment ramp-up, and general servers and networking equipment demand recovery.”
Diversification Beyond Apple
For Hon Hai, the thriving AI market represents a crucial opportunity to diversify its revenue streams beyond its dependence on Apple. While iPhones have historically constituted a significant portion of Hon Hai’s sales, the smartphone market’s growth has slowed in recent years. The company’s foray into AI server manufacturing allows it to tap into a high-growth sector and mitigate risks associated with relying on a single dominant customer.
Electric Vehicle Ambitions and Strategic Partnerships
Beyond AI, Hon Hai is actively pursuing expansion into the electric vehicle (EV) market. While this venture has yet to yield substantial financial returns, the company continues to explore strategic partnerships. Previous discussions with Renault SA regarding a collaboration with Nissan Motor Co. are currently on hold due to ongoing merger negotiations between Nissan and Honda Motor Co.
Conclusion: Hon Hai Poised for Continued Growth in the AI Sector
Hon Hai’s impressive Q4 results demonstrate the company’s successful leveraging of the growing demand for AI infrastructure. While challenges remain, the company’s strategic focus on AI and its ambitious diversification efforts position it for continued growth in the coming years. The strong performance in the AI server segment and positive analyst forecasts suggest a promising future for Hon Hai as it continues to expand its footprint in this dynamic market.
