(Bloomberg) — Honorable Hai Precision Industry Co reported faster-than-expected 15% revenue growth after server assembly partner Nvidia Corp rode continued demand for AI infrastructure.
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Honorable Hai, also the world's largest maker of iPhones Apple Inc., reported NT$2.13 trillion ($64.6 billion) in revenue for the past three months. December revenue rose 42%, helping the company known as Foxconn beat analysts' expectations. It also forecast “significant” sales growth for the first quarter, helping its shares rise as much as 3.6% in Taipei, their biggest intraday gain in about two weeks.
The company and other Taiwanese AI hardware suppliers have enjoyed a boost from huge spending on servers for data centers by the biggest US tech companies such as Alphabet Inc. and Microsoft Corp. But the lack of a compelling use case for AI so far has made investors nervous about when the expansion might slow.
Goldman Sachs analysts revised their earnings estimate for 2024 up 1% based on higher-than-expected December revenue. They also raised revenue estimates for this year and the following two years, citing higher AI server revenue.
“The sequential revenue growth in Cloud supports our positive view on the next-generation rack-level AI server shipment ramp, and general servers and networking equipment are calling for a recovery,” Goldman Sachs analysts wrote.
Honorable Hai expects revenue from its cloud business, which includes AI servers, to match sales from its iPhone-making division in 2025.
Still, Citi analyst Carrie Liu warned in a note that the stock could experience a near-term drag based on first-quarter forecasts from the company that appeared to fall short of market estimates.
The AI market is important for Honorable Hai's effort to diversify his business away from Apple, whose iPhones are seeing muted growth. Apple has historically accounted for over half of the Taiwanese company's sales.
Hon Hai is also aiming to break into the electric vehicle market, although that venture has yet to have any meaningful impact on its earnings. The company approached Renault SA about a tie-up with Nissan Motor Co., in which Renault owns 36%. For now, that attempt has been put on hold as Nissan and Honda Motor Co. merger discussion, Bloomberg News reported.
(Updates with stock moves and analyst comments)