(Bloomberg) – Hon Hai Precision Industry Co. reported faster-than-expected 15% revenue growth after Nvidia Corp.’s server assembly partner. had driven continued demand for AI infrastructure.
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Hon Hai, also the world’s largest maker of Apple Inc. iPhones, reported revenue of NT$2.13 trillion ($64.6 billion) in the past three months. December sales rose 42%, helping the company known as Foxconn beat analyst expectations. It also predicts “significant” sales growth for the first quarter, which could see Taipei shares rise as much as 3.6%, the biggest intraday gain in about two weeks.
The company and other Taiwanese AI hardware suppliers have been boosted by massive spending on data center servers by top U.S. tech companies like Alphabet Inc. and Microsoft Corp. But the lack of a compelling use case for AI so far has made investors nervous about when expansion might slow.
Goldman Sachs analysts revised their 2024 earnings estimate by 1% based on higher-than-expected December sales. They also raised revenue estimates for this year and the next two years, citing higher revenue from AI servers.
“Sequential cloud revenue growth supports our positive view of the increase in supply of next-generation rack-level AI servers and recovery demand for general-purpose servers and networking equipment,” Goldman Sachs analysts wrote.
Hon Hai expects revenue from its cloud business, which includes AI servers, to equal the revenue of its iPhone division by 2025.
Still, Citi analyst Carrie Liu warned in a note that the stock could be negatively impacted in the near term based on the company’s first-quarter outlook that appeared to be weaker than market estimates.
The AI market is important to Hon Hai’s efforts to diversify its business away from Apple, whose iPhones are seeing moderate growth. Apple historically accounts for more than half of the Taiwanese company’s revenue.
Hon Hai is also looking to break into the electric vehicle market, although that venture has yet to have any meaningful impact on revenues. The company contacted Renault SA about a partnership with Nissan Motor Co., of which Renault owns 36%. For now, that effort is on hold now that Nissan and Honda Motor Co. negotiating a merger, Bloomberg News reported.
(Updates with stock moves and analyst commentary)