Supplier Nvidia's profits soar amid AI boom. What's next for the company?

Foxconn is strengthening its position in the fast-growing artificial intelligence server segment, which has become the company's main source of profit and revenue growth. Increased demand for AI equipment helped the manufacturer to exceed analysts' expectations for profits. At the same time, the management remains confident in the market prospects and predicts that artificial intelligence will become the main business driver in the coming years.

The world's largest contract manufacturer of electronics, Taiwan's Foxconn reported on November 12 a 17% increase in net profit for the third quarter compared to the same period last year. This was helped by growth in its artificial intelligence server business, CNBC writes. The company is a major supplier of servers for Nvidia.

Foxconn, officially called Hon Hai Precision Industry, reported net profit of NT$57.7 billion ($1.9 billion). Analysts LSEG, whose forecasts cited CNBC, expected a profit of 50.4 billion. Revenue rose 11% year-on-year to NT$2.06 trillion ($66.29 billion), matching analysts' expectations. The company's revenue continues to grow at double-digit rates since last summer, Bloomberg notes.

Foxconn's Cloud and Network Solutions division, which includes servers for artificial intelligence, accounted for 42% of the company's total revenue. This division remains the largest in the business structure after it surpassed the smart consumer electronics segment for the first time in the previous quarter.

The company also gave an optimistic outlook on demand related to artificial intelligence, saying the sector will be a major growth driver in 2026. Foxconn announced an upcoming joint announcement with OpenAI to be made next week, Reuters writes.

"Overall, based on what we are seeing now, I am very optimistic about the AI market next year," Foxconn Chairman Yang Liu said at a conference following the report. His words are quoted by Reuters. At the same time, he expressed cautious optimism about the recovery of the consumer electronics market in 2026 - the direction in which the company is engaged in the assembly of iPhones, MacBooks and other equipment for Apple, writes Bloomberg.

Foxconn also forecast significant year-over-year revenue growth, in line with previous expectations announced in August. The company did not elaborate on the details, noting that it does not provide numerical forecasts - neither for quarterly nor annual results, Reuters reports.

The company's securities closed trading up 1.8% on Wednesday before the report was published. Since the beginning of the year, they have risen 36%, outperforming the broad index of Taiwan stocks, which added 21%. Shares of Foxconn's largest partner, Nvidia, added 1.5% on the premarket in New York. The day before, they fell 3% on news that Japan's SoftBank Group sold its $5.83 billion stake in the chip maker.

Foxconn's server business is now in a strong growth phase, fueled by robust market demand, Counterpoint Research senior analyst Ivan Lam told CNBC. The company is using its dominance in contract manufacturing to secure current and future orders, Lam said, describing it as an example of a "follow the money" strategy that involves giving up a portion of consumer electronics orders.

He added that Foxconn's refocusing on its fast-growing server business is already clearly paying off, even as the company sacrifices part of its presence in the consumer electronics segment for long-term growth.

Although component price volatility, currency fluctuations and logistics issues may put pressure on margins, Lam expressed confidence that Foxconn's fourth-quarter results will remain favorable.

In addition, the electronics maker said it is working with Nvidia, Stellantis and Uber to develop so-called Level 4 autonomous cars that don't require a safety driver.

Foxconn signed a memorandum of understanding with Mitsubishi Electric on November 6 to jointly supply energy-efficient solutions for AI data centers worldwide. In addition to AI data centers, Foxconn and Mitsubishi Electric intend to explore new business models and solutions using their combined technological and expert resources.

In May, the company said it was partnering with Nvidia to build an AI supercomputer center in Taiwan using 10,000 Nvidia Blackwell chips.

This article was AI-translated and verified by a human editor