Foxconn sees robust AI demand as second-quarter profit tops forecast

Foxconn on Thursday forecast a significant rise in third-quarter revenue as the world's biggest iPhone maker said it had for the first time made more money from its AI server business than from smart electronics last quarter.

 

The company said artificial intelligence server revenue is expected to leap more than 170% year-on-year in the coming quarter, though it also warned of uncertainty from U.S. tariffs.

 

Nvidia's biggest server maker and Apple's top iPhone assembler has been riding a data centre boom, as cloud computing firms such as Amazon, Microsoft and Alphabet's Google spend billions of dollars to expand their AI infrastructure and research capacity.

 

Cloud and networking products, which include servers, accounted for 41% of its revenue in the second quarter, while smart consumer products represented 35%, the company said. 

The contribution from the server business to its revenue is set to grow further in the current quarter, as Foxconn expects a slight decline in smart consumer electronics revenue. Some experts expect iPhone sales to slow after they surged in the June quarter ahead of the expected imposition of U.S. tariffs. 

"AI has been the primary growth driver so far this year," Kathy Yang, rotating CEO of Foxconn, said on a call with media and analysts. She warned however that "close attention is needed due to the impact of changes in tariffs and exchange rates".

The company said on Thursday its capital spending would rise more than 20% this year, as it plans to boost server production capacity in its manufacturing sites in Texas and Wisconsin. 

Global trade uncertainty and particularly the trade spat between the U.S. and China could dim its outlook this year as it has a major manufacturing presence in China, though Washington and Beijing this week extended a tariff truce for another 90 days.

Most of the iPhones Foxconn makes for Apple are assembled in China, but the bulk of those sold in the U.S. are now produced in India. The company is also building factories in Mexico and Texas to make AI servers for Nvidia. 

LORDSTOWN SOLD 

Foxconn has also been looking to expand its footprint in electric vehicles, which the company sees as a major future growth generator, though that has not always gone smoothly. 

Earlier this month, Foxconn said it had struck a deal to sell a former car factory at Lordstown, Ohio, for $375 million that it purchased in 2022 to manufacture EVs. 

However, it will continue to occupy the facility. The company said the Ohio plant would be used to manufacture cloud-related products. 

The goal of manufacturing its Model C EV for the U.S. market remains unchanged, although initial production will take place in Taiwan, Foxconn said. 

A source familiar with the matter told Reuters that the plant was sold to its partner SoftBank. Foxconn and SoftBank declined to comment. 

Overall, the company reported net profit for the April-June period of T$44.4 billion ($1.48 billion), higher than the consensus estimate of T$38.8 billion compiled by LSEG. 

Foxconn, formally Hon Hai Precision Industry, last month reported record second-quarter revenue on strong demand for AI products, but cautioned over geopolitical and exchange rate headwinds. 

Its shares have risen 8.4% so far this year, outperforming the broader Taiwan index's 5.2% gain. They closed up 0.5% on Thursday ahead of the earnings release.