Foxconn’s third-quarter revenue surged 47% from a year earlier as demand for Nvidia-linked AI servers accelerated, yet the Taiwanese manufacturer’s shares remain one of the less spectacular ways investors have played the artificial-intelligence boom.
Revenue reached NT$3.03 trillion in the July-September quarter, beating the NT$2.83 trillion LSEG SmartEstimate.
Foxconn stock nevertheless closed only 1.2% higher at NT$254 on Monday. Yahoo Finance data show a year-to-date total return of about 13.7%, far behind the roughly 71.6% gain for Taiwan’s benchmark index.
That gap reflects a market still questioning how much of Foxconn’s explosive sales growth will translate into margins and durable market share.
Revenue growth is running ahead of profitability
Foxconn has become Nvidia’s biggest server manufacturing partner and AI infrastructure is increasingly displacing the iPhone as its main growth engine.
In the second quarter, revenue rose 41% to NT$2.53 trillion and net profit increased 35% to NT$60 billion.
Cloud and networking products accounted for 51% of sales, overtaking smart consumer electronics. But gross margin slipped to 6.12% from 6.33% a year earlier.
That is the key tension for the stock. AI servers carry enormous selling prices and push revenue higher quickly, but contract manufacturing remains a relatively low-margin business.
Foxconn’s November 12 earnings report will therefore matter more than Monday’s sales number because investors will be watching whether operating leverage catches up with the top-line surge.
Competition makes the AI boom less straightforward
Foxconn is scaling production aggressively as Nvidia moves into its Vera Rubin generation.
The company said in August that AI rack shipments should more than double in 2026, while Vera Rubin racks were entering mass production in the third quarter.
The opportunity is large, but Foxconn is not alone. Morgan Stanley analysts expect its share of the high-end AI rack market to fall to about 39% this year from 51% in 2025 as standardised designs make it easier for rivals to compete.
That helps explain why investors have been more willing to pay premium valuations for chip designers and foundries that capture higher margins than for the companies assembling their systems.
Foxconn believes its scale, automation and vertically integrated manufacturing should help it defend its position as AI racks become more complex.
The laggard status could become the opportunity
The valuation gap is now large enough to attract bullish analysts. Investing.com lists 19 Buy ratings on Hon Hai, with an average 12-month target of NT$347.45. Macquarie’s NT$435 target is among the most bullish.
Those targets assume Foxconn can convert rapidly expanding server volumes into higher operating profit.
There is some evidence of that already, as second-quarter operating profit jumped 68%, much faster than revenue, and the operating margin improved to 3.75%.
Still, investors are demanding proof that this can persist as competition intensifies and Foxconn spends heavily on new capacity in Taiwan, the US, Mexico and Vietnam.
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