It expects 2027 AI server-rack shipment growth to be in the high double digits
By Sherry Qin
Foxconn Technology Group remained bullish about demand for its artificial-intelligence servers following another strong earnings outturn, though it cautioned of uncertainties ahead following the U.S. midterm elections.
Chairman Young Liu on Thursday struck a cautiously optimistic view on operations at the world's largest contract electronics maker next year. While robust AI demand will likely continue to be its biggest revenue driver, factors such as component supply constraints and volatile geopolitics could create uncertainties, he said.
Commenting on the Democratic sweep of Congress, he said the business impact will likely be limited, though the longer-term effects are indefinite and require observation when policy direction becomes clearer.
The remarks come as heightened concerns about tighter AI regulation and a possible slowdown in data-center expansion have rattled markets in recent weeks, causing a selloff in AI, chip and tech stocks around the globe.
Foxconn's management also stressed its financial strength and capital-management capability, seeking to assuage mounting worries about aggressive spending by companies in the AI supply chain.
The Taiwanese company's share performance has reflected these concerns. The stock has shed about one-fifth of its value since hitting a peak in June, as investors assessed the sustainability of Big Tech's hefty investments and continued AI data-center expansion.
For the three months ended September, Foxconn's net profit climbed 34% from a year earlier to 77.52 billion New Taiwan dollars, equivalent to US$2.36 billion, beating market estimates. Revenue rose 46% to NT$3.016 trillion, driven by sales of cloud and networking products, which now account for more than half of the total.
Once mainly known as an assembler of Apple's devices, Foxconn now derives a meaningful share of revenue from building AI servers for industry leaders such as Nvidia.
Within three to five years, revenue from cloud and networking products could contribute more than 60% of the top line, Liu said, as leading cloud service providers continue to increase their capital expenditure.
The company said it expects its AI server-rack shipment growth to be in the high double digits next year as it expands its server customer base and manufacturing footprint across the world.
Besides GPU servers, the hardware maker is also witnessing strong demand for custom AI servers amid growing AI inference demand, and forecast even faster growth in the next few years as hyperscalers scale production.
Foxconn's guidance broadly supported Morgan Stanley's view that the company will continue to grow its share of the AI server market. However, the U.S. bank also warned that delays in U.S. data-center construction could create a temporary air pocket across the AI supply chain in 2028, a potential risk factor for hardware suppliers such as Foxconn.