Company Coverage
Foxconn Industrial Internet (601138 CH): Read Across From 2Q26 Hon Hai Precision Earnings Call
BUY (Maintained)
Current price:
Target price:
Upside:
Rmb65.60
Rmb89.50
+35.59%
Analyst
Analyst
Highlights
Guidance remains solid, driven by sustained AI infrastructure investments, alongside a seasonal rebound in ICT and consumer electronics.
Mass production for Vera Rubin and silicon photonics CPO switches are on track to commence in 3Q26, with the primary near-term supply chain bottlenecks being chip supply and advanced packaging capacity.
Analysis
Cloud business guidance remains robust for the rest of 2026, with AI rack shipments in 3Q26 expected to expand in high double digits qoq and more than double for 2026. General-purpose servers are forecast to deliver double-digit yoy revenue growth in 2H26, fuelled by strengthening CPU demand for Agentic AI deployments.
Vera Rubin mass production in 3Q26 is on track, with initial shipments starting in 4Q26 before scaling progressively throughout 2027 as the core growth engine. Management targets a 50% market share, with primary near term supply chain bottlenecks being chip supply and TSMC CoWoS advanced packaging capacity. Sustained demand for the Grace Blackwell platform remains strong in the near term and should persist into 2027 to bridge the VR ramp.
CPO switches for scale-out applications have commenced shipments, with scale-up deployments scheduled for future rollout. Silicon photonics CPO switches are expected to enter mass production in 3Q26, with full-year shipments guided to reach 10,000 units, and result in high-speed networking revenue (800G+ switches) doubling yoy in 2026.
Increased adoption of consignment procurement model expected to ease gross margin pressure. While ASIC server projects are mostly consignment based, they only accounted for 10% of total server revenue last year. Management actively aims to expand consignment structures across GPU servers and targets a >40% market share in ASIC projects over the medium term, and expects ASIC servers to make up to 40% of total AI server shipment by 2030, compared with 28% now.
Smart consumer electronics is expected to register solid revenue growth both yoy and qoq in 3Q26, driven by seasonality and higher product prices.
Highlights
Guidance remains solid, driven by sustained AI infrastructure investments, alongside a seasonal rebound in ICT and consumer electronics.
Mass production for Vera Rubin and silicon photonics CPO switches are on track to commence in 3Q26, with the primary near-term supply chain bottlenecks being chip supply and advanced packaging capacity.
Analysis
Cloud business guidance remains robust for the rest of 2026, with AI rack shipments in 3Q26 expected to expand in high double digits qoq and more than double for 2026. General-purpose servers are forecast to deliver double-digit yoy revenue growth in 2H26, fuelled by strengthening CPU demand for Agentic AI deployments.
Vera Rubin mass production in 3Q26 is on track, with initial shipments starting in 4Q26 before scaling progressively throughout 2027 as the core growth engine. Management targets a 50% market share, with primary near term supply chain bottlenecks being chip supply and TSMC CoWoS advanced packaging capacity. Sustained demand for the Grace Blackwell platform remains strong in the near term and should persist into 2027 to bridge the VR ramp.
CPO switches for scale-out applications have commenced shipments, with scale-up deployments scheduled for future rollout. Silicon photonics CPO switches are expected to enter mass production in 3Q26, with full-year shipments guided to reach 10,000 units, and result in high-speed networking revenue (800G+ switches) doubling yoy in 2026.
Increased adoption of consignment procurement model expected to ease gross margin pressure. While ASIC server projects are mostly consignment based, they only accounted for 10% of total server revenue last year. Management actively aims to expand consignment structures across GPU servers and targets a >40% market share in ASIC projects over the medium term, and expects ASIC servers to make up to 40% of total AI server shipment by 2030, compared with 28% now.
Smart consumer electronics is expected to register solid revenue growth both yoy and qoq in 3Q26, driven by seasonality and higher product prices.
BUY (Maintained)
Current price:
Target price:
Upside:
Rmb65.60
Rmb89.50
+35.59%
Analyst
Analyst
IMPORTANT NOTICE - DISCLOSURES AND DISCLAIMERS
This report is provided subject to, and must be read together with, the full Disclosures / Disclaimers available at this link, which are incorporated by reference into this report. In particular, this report is intended for general circulation and informational purposes only and does not constitute personal investment advice or a recommendation to buy or sell any investment product or security. You should independently evaluate the information and, where necessary, seek advice from a qualified financial adviser regarding the suitability of any investment. Analyst certifications required under applicable regulations, including SEC Regulation AC (where relevant), are included in this report. By accessing, receiving or using this report, you acknowledge that you have read, understood and agreed to be bound by the Disclosures / Disclaimers, as may be amended, supplemented or updated from time to time.
Related articles
1 Sept 2026
Ganfeng Lithium (1772 HK): 2Q26: Results Beat, But Price Guidance Cut Clouds Outlook
17 Sept 2026
Trip.com (9961 HK) - 2Q26: In-line Results; 3Q26 Growth To Slow On Regulatory Pressure; Expect A Recovery In 2027
21 Sept 2026
Alibaba Health Information Technology (241 HK): 1HFY27 Preview: Lowers FY27 Revenue Growth Target To 7-10% yoy On Subsidy Optimisation; Earnings Guidance Unchanged
Our latest research
30 Sept 2026
TA: Guming Holdings (1364 HK) / BYD Electronic (0285 HK)
29 Sept 2026
Alibaba Group (9988 HK): APSARA Conference 2026 Key Takeaways
29 Sept 2026