Foxconn Posts Profit Surge as It Bets on AI for Long-Term Growth — Update
By Sherry Qin
Foxconn Technology Group backed its upbeat outlook for the year after posting a surge in first-quarter profit, betting that its artificial-intelligence servers will drive long-term sales growth.
The world's largest contract electronics manufacturer, known for assembling Apple's iPhones, said Tuesday that net profit rose 72% from a year earlier to 22.01 billion New Taiwan dollars (US$679 million). The surge had been expected after last year's result was hindered by a NT$17.3 billion write-down related to Foxconn's 34% stake in Japanese electronics maker Sharp, but missed the NT$28.76 billion profit projected by analysts in a FactSet poll.
First-quarter revenue fell 9% to NT$1.324 trillion amid lower demand for consumer electronics. That was in line with unaudited figures previously provided by the company and follows a pandemic-boosted result in the first quarter last year, when Foxconn booked sales that had been delayed by Covid-19 shutdowns that affected its factory in Zhengzhou, China.
The Taiwan-listed company's cloud and networking segment was a bright spot, generating solid revenue growth thanks to robust demand for AI servers.
Foxconn, formally known as Hon Hai Precision Industry, has been taking steps in recent years to diversify its lines of businesses to include electric vehicles and AI, while expanding production in countries such as India to reduce concentration in China.
Investors have cheered on the efforts, sending the company's shares up 65% so far this year, outpacing the benchmark Taiex index's 17% gain. Shares closed 1.5% higher ahead of the earnings results.
Foxconn maintained its upbeat guidance for "significantly positive growth" this year. It had previously upgraded its guidance from a neutral outlook to reflect booming demand for AI servers, which saw a more than 200% jump in revenue in the first quarter.
Earlier this month, Foxconn reported record revenue for the month of April and reiterated that it expects to record a rise in second-quarter revenue.
By segment, Foxconn expects revenue from smart electronics, which comes mainly from iPhones, to be flat in the second quarter. AI server revenue will meanwhile see continuous growth in the long term, Foxconn spokesperson James Wu said on an earnings call.
The clouds and service segment, which made up 28% of Foxconn's revenue in the first quarter, will comprise a more significant share of overall revenue by 2025, Wu added.
Write to Sherry Qin at sherry.qin@wsj.com
(END) Dow Jones Newswires
May 14, 2024 04:44 ET (08:44 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.-
What’s Happening in the Markets This Week
-
Worst-Performing Stock ETFs of the Quarter
-
Q3 in Review and Q4 2024 Market Outlook
-
Top-Performing Stock ETFs of the Quarter
-
September Jobs Report Forecasts Show Moderate Hiring Gains
-
Port Strike a Headache for Shippers but a Potential Tailwind for Certain US Transport Stocks
-
13 Charts on Q3′s Roller-Coaster Rally for Stocks and Bonds
-
5 Stocks to Buy Instead of Overpriced US Equities
-
Consumer Defensives: Despite Angst, Thirsty Investors Have Names to Pursue
-
Industrials: Many Stocks Overvalued After Q3 Outperformance
-
Basic Materials: Despite Index Rise, We See Multiple Long-Term Opportunities
-
What the Election Could Mean for Big Tech Stocks
-
3 Lessons From Recent Stock Market Drama
-
Consumer Cyclicals: Even Amid Moderating Consumer Spending, We See Discounts
-
Healthcare: Valuations Look Fair Overall, With Select Industries Still Undervalued
-
Utilities: Falling Interest Rates, Growth Outlook Boosting Stocks