AI Servers Now Drive 54% of Foxconn's Revenue — and It Expects 60%+

More than half of Foxconn's revenue — 54% in the third quarter — now comes from the servers and networking gear behind the AI buildout, overtaking the iPhones and consumer devices that made the company famous. Hon Hai Precision Industry, as the Taiwan-based manufacturer is formally known, reported the figure on Thursday and said the shift carried profit to a record.

The numbers behind that shift are large. Net profit attributable to shareholders rose 34% from a year earlier to NT$77.52 billion, roughly $2.35 billion, beating the LSEG consensus of NT$69.6 billion, as Reuters reported. Revenue climbed 46% to NT$3.02 trillion. 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 marks how far AI infrastructure has moved the center of the business.

The takeaway: Foxconn is no longer primarily an iPhone company, and its own forecasts say the balance will tilt further toward AI hardware.

How big was the profit beat?

The headline profit numbers undersell the quarter. Operating income jumped 64% to NT$115.35 billion, and operating margin widened to 3.83% from 3.43% a year earlier, according to the company's third-quarter results presentation. Gross margin slipped to 6.02% from 6.35%, meaning Foxconn earned slightly less per unit of revenue — but it sold so much more, and ran its operations better, that the operating result surged anyway.

Through the first nine months of the year, operating margin stands at 3.73%, above the company's 3% target, and return on equity is 10.44%. The presentation says that figure is moving toward 12%. Hon Hai said in a statement carried by Focus Taiwan that its core business, including AI servers and AI racks, grew more than expected.

The takeaway: margins are thin by consumer-electronics standards, but they're improving in the right direction while revenue scales fast.

What did Chairman Young Liu promise next?

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 investor slides are specific about direction:

• High double-digit quarter-over-quarter growth in AI rack shipments in the fourth quarter
• Higher AI server revenue
• High double-digit growth in rack shipments again in 2027
• Market-share gains

Hon Hai also revised its full-year 2026 outlook upward, raising its guidance for smart consumer electronics, computing and components. Its outlook for cloud and networking products, and for total revenue, stayed at growth.

The takeaway: management is telling investors the AI rack business will keep compounding well into 2027, not just for one strong quarter.

What is the buildout costing?

Growth on this scale consumes cash, and Foxconn's balance sheet shows it. Operating activities used NT$125.7 billion in the first nine months, compared with NT$49.5 billion a year earlier. Capital spending rose to NT$161.7 billion from NT$112.8 billion over the same period.

Working capital ballooned alongside. Inventory climbed 27% from a year earlier to NT$1.51 trillion, and receivables rose 46%. The balance sheet swung 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 will look familiar to anyone tracking the companies buying the hardware. CoreWeave raised its 2026 forecast this week, and Microsoft last month disclosed Azure revenue — $33 billion — for the first time. Liu said global cloud providers are expected to keep increasing AI-related capital spending next year.

The takeaway: Foxconn is financing the AI buildout alongside its customers, and it has moved from a net cash position to net debt to do it.

Where is Foxconn building capacity?

Reuters reported that Foxconn is building factories in Mexico and Texas to make AI servers for Nvidia. The presentation adds that the company is partnering with Nvidia on next-generation AI infrastructure in the Asia-Pacific region, and that it has deployed its own robots on AI server production lines.

Those moves tie Foxconn's manufacturing footprint directly to the geography of AI demand — North American cloud customers on one side, Asia-Pacific buildout on the other.

The takeaway: the capacity expansion is physical, transcontinental and already under construction.

Why haven't investors rewarded the stock?

Investors have been slower than the fundamentals to respond. Foxconn shares were up just 4% this year before the results, against a 49% gain for the broader Taiwan index, Reuters reported. A record quarter, a raised outlook and a fast-growing AI business have so far translated into underperformance against the local market.

The takeaway: the market is pricing in something other than headline growth — most likely the cash consumption and thin gross margins that come with it.

What could constrain 2027?

The constraint for 2027 may be parts rather than demand. Hon Hai listed component supply first among the factors behind what it called a "cautiously optimistic" outlook, ahead of geopolitics, inflation and monetary policy.

Liu said chips, memory and some key components are tight across both 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.

The takeaway: Foxconn can likely sell everything it can build in 2027 — the open question is how much it can actually build.

That supply ceiling, not customer demand, is now the number to watch as the company pushes toward Liu's 60% cloud-and-networking revenue target over the next three to five years.