More than half of Foxconn’s revenue now comes from the servers and networking gear behind the AI buildout, a bigger share than the iPhones and other consumer devices that made it famous. Hon Hai Precision Industry, as the company is formally known, said on Thursday that cloud and networking products made up 54% of third-quarter revenue, up from 51% in the second quarter, and that the shift carried profit to a record.
Net profit attributable to shareholders rose 34% from a year earlier to NT$77.52 billion, or about $2.35 billion, on revenue of NT$3.02 trillion, up 46%, according to the company’s third-quarter results presentation. Profit beat the LSEG consensus of NT$69.6 billion, Reuters reported. For the world’s largest contract electronics maker, which Reuters describes as Nvidia’s biggest server maker as well as Apple’s top iPhone assembler, the quarter shows how far the AI buildout has moved the center of its business.
The better news sits below the top line. Operating income jumped 64% to NT$115.35 billion, and operating margin widened to 3.83% from 3.43% a year earlier, even as gross margin slipped to 6.02% from 6.35%. Hon Hai said in a statement carried by Focus Taiwan that its core business, including AI servers and AI racks, grew more than expected. Through nine months, operating margin is 3.73%, above the company’s 3% target, and return on equity is 10.44%, which the presentation says is moving toward 12%.
Chairman Young Liu said the mix shift has further to run. “Cloud and networking products already account for more than 50% of our revenue this year and we expect that share to exceed 60% over the next three to five years,” he said on the earnings call, according to Reuters. The company does not give numeric forecasts, but its slides call for high double-digit quarter-over-quarter growth in AI rack shipments in the fourth quarter, higher AI server revenue and high double-digit growth in rack shipments again in 2027, along with market-share gains. Hon Hai said it revised its full-year 2026 outlook upward, raising its view for smart consumer electronics, computing and components. Its outlook for cloud and networking, and for total revenue, stayed at growth.
Paying for the buildout
The growth is consuming cash. Operating activities used NT$125.7 billion in the first nine months, compared with NT$49.5 billion a year earlier, while capital spending rose to NT$161.7 billion from NT$112.8 billion. Inventory climbed 27% from a year earlier to NT$1.51 trillion and receivables rose 46%, and the balance sheet moved from NT$219.8 billion in net cash at the end of June to a small net debt position of NT$21.5 billion at the end of September.
That pattern looks familiar to anyone following the companies buying the hardware. CoreWeave raised its 2026 forecast this week, and Microsoft last month put a number on Azure for the first time. Liu said global cloud providers are expected to keep increasing AI-related capital spending next year. Reuters reported that Foxconn is building factories in Mexico and Texas to make AI servers for Nvidia, and the presentation says the company is partnering with Nvidia on next-generation AI infrastructure in Asia-Pacific and has deployed its own robots on AI server production lines.
Investors have been slower to reward the change. Foxconn shares were up 4% this year before the results, against a 49% gain for the broader Taiwan index, Reuters reported.
The constraint for 2027 may be parts rather than demand. Hon Hai listed component supply first among the factors behind a “cautiously optimistic” outlook, ahead of geopolitics, inflation and monetary policy. Liu said chips, memory and some key components are tight across the AI and consumer electronics supply chains. “Although supply bottlenecks should gradually ease as new capacity comes online, overall demand is expected to still exceed supply next year, and the tight supply-demand situation may persist for some time,” he said.
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