CEO Morning Brief

Apple Supplier Foxconn's 1Q Profit Jumps 72% But Misses Forecasts

Publish date: Wed, 15 May 2024, 10:40 PM
TheEdge CEO Morning Brief

TAIPEI (May 14): Apple supplier Foxconn reported a 72% rise in first-quarter profit, boosted by strong demand for artificial intelligence (AI) servers and coming off a low base from the same period a year earlier, but the growth was lower than expected.

In a separate statement, Foxconn, whose earnings took a hit last year by a T$17.3 billion (RM2.52 billion) writedown related to its 34% stake in Sharp Corp, reaffirmed its commitment to the Japanese electronics maker, describing it as an "important asset".

"The worst is behind Sharp. Its future only gets better from here," Foxconn chairman Young Liu said, adding that the Japanese company's Sakai factory would be transformed into an AI data centre.

The Taiwanese company, the world's largest contract electronics maker, said net profit for the January-March quarter rose to T$22.01 billion from T$12.8 billion in the same period the previous year, when earnings were hit by the Sharp writedown.

While the profit missed the T$29.31 billion forecast by analysts, it was Foxconn's third consecutive quarterly profit rise.

In the first quarter, consumer electronics including smartphones accounted for 48% of its revenue while cloud and networking products, including servers, contributed 28%.

Foxconn said it expects revenue for the second quarter to grow significantly from a year earlier, broadly in line with previous guidance, with revenue for smart computer electronics likely to be flattish.

It also forecast demand for consumer electronics to be flat this year. It does not provide numerical guidance.

The company, formally called Hon Hai Precision Industry Co Ltd, said in March that it expected a significant rise in revenue this year driven by booming demand for AI servers.

In an earnings call after the results, Foxconn, which wants to replicate the success it has had with Apple's iPhone with electric vehicles (EVs), said it expects EV sales to be expanded to markets including Southeast Asia, the US and Europe. It did not provide a timeframe.

Apple's quarterly results and forecast beat modest expectations this month, and chief executive officer Tim Cook said revenue growth would return in the current quarter.

Foxconn's shares have risen 65% so far this year, driven by its rosy AI outlook, far outperforming a 17% gain for the broader market.

Source: TheEdge - 15 May 2024

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