(Bloomberg) — Hon Hai Precision Industry Co. reported weaker-than-expected profit as demand for iPhones remained sluggish in China, although it projected significant growth in the current quarter.
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The Taiwanese company, a key partner of Apple Inc. and Nvidia Corp., made the forecast after reporting its strongest monthly sales since the start of 2023, driven by increased demand for servers during the AI boom. It reported net profit of NT$22 billion (US$679 million) in the March quarter. Although it rose more than 70%, it was below the average estimate of NT$29.1 billion.
The loss partly reflects heightened expectations around AI that have helped boost Hon Hai shares by more than 60% this year. It is being driven by large investments in AI infrastructure such as data centers. Company executives maintained the 40% growth outlook for the AI server business this year.
On Tuesday, Japanese subsidiary Sharp Corp. said it is divesting its camera modules and semiconductor businesses and transforming a major display factory in Sakai into an AI data center.
Hon Hai’s AI business has proven to be a bright spot in an otherwise difficult operation that remains tied to the smartphone market. Investors hope growing demand for AI can help the world’s biggest iPhone maker diversify its business away from Apple, which still accounts for more than half of Hon Hai’s sales.
Hon Hai, also known as Foxconn, indicated strong demand for cloud and networking products during the current quarter in presentation materials released ahead of its earnings release. But revenues from consumer electronics are expected to remain largely stable.
Demand for iPhones fell by about 27% in the first three months of 2024 in China, according to official government data, although Apple said its iPhone business in the Asian country grew. Hon Hai previously reported a larger-than-expected 9.6% drop in overall sales in the first quarter.
(Updates with AI server business outlook in third paragraph)
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