Foxconn Q2 Profit Jumps 35% as AI Server Sales Cross Half of Revenue

KEY TAKEAWAYS

·Foxconn reported NT$59.97 billion in Q2 net profit, a 35% increase year-on-year, exceeding analyst expectations of NT$58.8 billion.
·AI servers accounted for 51% of quarterly revenue for the first time, with Nvidia's Vera Rubin platform entering mass production in Q3 2026.
·The company forecasts 30% capital expenditure growth in 2026 and is expanding AI server manufacturing in Mexico and Texas while shifting iPhone production to India.

AI Infrastructure Drives Earnings Beat

Hon Hai Precision Industry, trading as Foxconn, reported net profit of NT$59.97 billion (US$2.38 billion) for the April-June quarter, a 35% increase from NT$44.4 billion in the same period last year. The result exceeded the analyst consensus of NT$58.8 billion and marks a turning point in the company's revenue composition.

The world's largest contract electronics manufacturer disclosed that its cloud and networking products division crossed 50% of quarterly revenue for the first time, reaching 51%. The segment includes AI servers manufactured for customers including Nvidia. Smart consumer electronics, primarily Apple's iPhone line, accounted for 29% of revenue during the period.

Foxconn assembles the majority of iPhones globally and serves as Nvidia's largest server manufacturing partner, positioning it at the intersection of two high-growth hardware markets. The company maintained its forecast of strong revenue growth for 2026 without providing specific figures, citing continued AI demand as the primary catalyst.

Vera Rubin Production Timeline

Rotating CEO Michael Chiang outlined the production schedule for Nvidia's Vera Rubin server platform during the earnings call. The AI server racks will enter mass-production preparation in the third quarter, with initial shipments expected in the fourth quarter of 2026.

"We expect production volumes to increase gradually over the next several quarters, and it will become our major product next year," Chiang said. The platform represents Nvidia's latest generation of AI training and inference infrastructure, designed for large-scale data center deployments.

Chiang noted that customer demand remains robust but flagged a critical supply chain constraint. The availability of TSMC's Chip on Wafer on Substrate advanced packaging technology will determine how much AI server capacity can ship in 2027. CoWoS capacity is projected to grow by more than 50% next year, yet actual server rack shipments will depend on how much of that capacity translates into finished chips for Foxconn's customers.

Geographic Expansion and Capital Spending

Foxconn projects capital expenditure will rise 30% in 2026 compared to the prior year, reflecting investments in new manufacturing footprints. The company is constructing facilities in Mexico and Texas dedicated to AI server production for Nvidia, diversifying its geographic base beyond traditional hubs in China and Taiwan.

iPhone production has already shifted significantly. While most of Foxconn's iPhone assembly historically occurred in China, the bulk of devices sold in the United States are now manufactured in India. The company reported a 40% year-on-year jump in second-quarter revenue in July, underscoring the scale of its operations even as it redistributes capacity.

Foxconn is also pursuing opportunities in electric vehicle manufacturing, though the earnings release provided limited detail on progress in that segment. The company's expansion into EVs represents a longer-term bet on automotive electrification, complementing its core electronics assembly business.

Market Performance and Third-Quarter Outlook

Foxconn shares closed 2.7% higher on August 12 ahead of the earnings announcement. Year-to-date, the stock has gained 17%, trailing the broader Taiwan index, which has risen 57% over the same period. The underperformance suggests investors may be weighing supply chain risks and competitive pressures against the company's AI-driven growth narrative.

Chiang projected significant quarter-on-quarter growth and strong year-on-year growth for the third quarter. He attributed the outlook to rising AI-related business and the seasonal peak for ICT products in the second half of the year. The combination positions Foxconn to benefit from both structural AI infrastructure buildout and cyclical consumer electronics demand.

The company's ability to scale Vera Rubin production and secure CoWoS capacity will shape its earnings trajectory into 2027. With AI servers now comprising more than half of revenue, Foxconn's financial performance has become tightly coupled to the pace of data center investment and chip supply availability across the AI supply chain.

Asia's overnight moves, distilled into a five-minute read.

AI Infrastructure Drives Earnings Beat

Vera Rubin Production Timeline

Geographic Expansion and Capital Spending

Market Performance and Third-Quarter Outlook

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