Company Coverage
Foxconn Industrial Internet (601138 CH): 2Q26: Results Largely In Line; AI Business Retains Robust Growth
BUY (Maintained)
Current price:
Target price:
Upside:
Rmb66.10
Rmb89.50
+35.59%
Analyst
Analyst
Highlights
- 2Q26 earnings grew 91.0% yoy and 24.1% qoq to Rmb13.1b, which is 1.7% below consensus estimates but in line with our expectations and profit guidance.
- Cloud computing remains the key growth engine with 1H26 revenue up 75.7% yoy. GPU AI racks, ASIC AI racks, and ASIC CPU racks all registered multiple times yoy growth during the period.
- Maintain BUY with an unchanged target price of Rmb89.50.
Analysis
- 2Q26 revenue in line with consensus, but a slight miss on gross margin. Foxconn Industrial Internet’s (FII) 2Q26 revenue rose 53.1% yoy and 22.2%
qoq to Rmb307b, which is in line with consensus estimates. Gross margin expanded 0.5ppt yoy but declined 0.4ppt qoq, which is a slight miss vs
consensus expectation at 7.3% likely due to an elevated component cost. Net profit expanded 91.0% yoy and 24.1% qoq to Rmb13.1b (vs guidance of
Rmb12.8b-13.8b), which is 1.7% below consensus estimates due to worse than-expected forex losses; however, do note that this should be largely in
line with our estimate of around Rmb13b.
- Cloud computing revenue grew 75.7% yoy in 1H26 and remains the core growth engine. Management attributes the growth to surging AI compute
demand and customer share gains. Within cloud computing, AI server revenue from cloud service providers rose 2.3x yoy, GPU AI rack shipments
surged 3.2x yoy, ASIC AI rack shipments expanded 3x and ASIC CPU server shipments grew 2.5x. In communications and networking, data centre high
speed networking revenue doubled yoy, 800G-plus switch and SuperNIC shipments each rose 140%, and CPO all-optical switch prototypes shipped.
Precision components stayed resilient on flagship smartphone shipments and the AI-phone upgrade cycle.
Highlights
- 2Q26 earnings grew 91.0% yoy and 24.1% qoq to Rmb13.1b, which is 1.7% below consensus estimates but in line with our expectations and profit guidance.
- Cloud computing remains the key growth engine with 1H26 revenue up 75.7% yoy. GPU AI racks, ASIC AI racks, and ASIC CPU racks all registered multiple times yoy growth during the period.
- Maintain BUY with an unchanged target price of Rmb89.50.
Analysis
- 2Q26 revenue in line with consensus, but a slight miss on gross margin. Foxconn Industrial Internet’s (FII) 2Q26 revenue rose 53.1% yoy and 22.2%
qoq to Rmb307b, which is in line with consensus estimates. Gross margin expanded 0.5ppt yoy but declined 0.4ppt qoq, which is a slight miss vs
consensus expectation at 7.3% likely due to an elevated component cost. Net profit expanded 91.0% yoy and 24.1% qoq to Rmb13.1b (vs guidance of
Rmb12.8b-13.8b), which is 1.7% below consensus estimates due to worse than-expected forex losses; however, do note that this should be largely in
line with our estimate of around Rmb13b.
- Cloud computing revenue grew 75.7% yoy in 1H26 and remains the core growth engine. Management attributes the growth to surging AI compute
demand and customer share gains. Within cloud computing, AI server revenue from cloud service providers rose 2.3x yoy, GPU AI rack shipments
surged 3.2x yoy, ASIC AI rack shipments expanded 3x and ASIC CPU server shipments grew 2.5x. In communications and networking, data centre high
speed networking revenue doubled yoy, 800G-plus switch and SuperNIC shipments each rose 140%, and CPO all-optical switch prototypes shipped.
Precision components stayed resilient on flagship smartphone shipments and the AI-phone upgrade cycle.
BUY (Maintained)
Current price:
Target price:
Upside:
Rmb66.10
Rmb89.50
+35.59%
Analyst
Analyst
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