Highlights

Macquarie's latest report highlights that Foxconn's August revenues met market expectations, thanks to the robust growth in their cloud business. Looking ahead, September is expected to be even stronger. Collaborations with companies such as TECO and Softbank have significantly amplified Foxconn's opportunities in sovereign AI projects. Notably, the target price for Foxconn's shares has been raised by 11%, from 270 NT to 300 NT, attributed to **increased system integration value**. This key insight significantly impacts the understanding of Foxconn's market potential.

Sentiment Analysis

• The article reflects a **positive outlook** on Foxconn's future growth prospects.
• Market confidence increases as indicated by the target price boost.
• AI and system integration are seen as major growth drivers.

Article Text

Macquarie, an Australian brokerage firm, has revised its perspective on Foxconn, formally known as Hon Hai Precision Industry (2317-TW), with a positive tilt. The company's performance in August met market expectations, notably in their cloud business, suggesting strong growth momentum. September revenue is anticipated to build upon this success, bolstered by strategic alliances, particularly those with TECO (1504-TW) and Softbank.

The partnership with TECO involves a stock swap, effectively leveraging Foxconn's hardware capabilities with TECO's expertise in electrical and power systems. This collaboration is poised to advance the development of modular data centers, a potential game-changer considering TECO's past experience with Google's data center constructions. Such synergies are projected to shorten the time from building to the operational launch of data centers, enhancing Foxconn's value proposition.

Furthermore, Foxconn's strategic asset maneuvering, such as the sale of its Ohio factory, aligns with its broader ambitions in AI server development, especially in cooperation with Softbank. Given Softbank's pivotal role in the Starlink project, Macquarie suggests that Foxconn is well-positioned to emerge as a leading server supplier.

For the Starlink initiative, which envisages a $500 billion investment in the U.S. over four years, Foxconn could capture a substantial 70% of the server order, translating to $350 billion. Based on forecasts by TECO, Foxconn is expected to command a 40% share of the construction costs of data centers, with TECO receiving 30%. Annually, this equates to a shipment volume of approximately 17,000 units in a basic scenario, with optimistic estimates reaching 30,000 units.

Despite a lower-than-expected revenue in servers and consumer products earlier this year, Macquarie has adjusted its earnings per share estimates for 2025 downward by 3%. However, the anticipated increase in server revenue and margins from sovereign AI modular data centers has driven Macquarie to up its earnings per share projections for 2026 and 2027 by 2% and 7%, respectively. Consequently, the target price has been revised to 300 NT from 270 NT.

Key Insights Table