Hon Hai Precision (2317.TW): 2Q26 Revenue Beats Guidance, 3Q26 to See Continued Strong Growth
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J.P. Morgan maintains an Overweight rating on Hon Hai Precision (2317.TW) with a target price of NT$310 for June 2027. Second-quarter 2026 revenue reached NT$822 billion, declining 4% sequentially but surging 52% year-over-year, exceeding Bloomberg consensus expectations. This outperformance was primarily driven by robust AI server rack shipments, strong iPhone 17 demand, and sustained MacBook Neo and Air growth. The sequential revenue decline in June reflected temporary demand softness during product transitions for PCs and smartphones, while cloud and networking segments were constrained by supply chain tightness for rack assembly components.
For the third quarter of 2026, management guides sequential and annual revenue growth, with AI servers and iPhones serving as key catalysts. Full-year 2026 AI server revenue is projected to grow 110%, with AI GPU racks increasing 165% year-over-year, primarily fueled by GB300 deployments and recent pricing increases.
Regarding the Vera Rubin platform, Hon Hai has secured an additional customer, reportedly Google, alongside Microsoft and Oracle. Shipments are expected to commence in the third quarter and scale in the fourth quarter, with industry-wide VR200 NVL72 rack volumes potentially reaching approximately 10,000 units in 2026. Although Vera Rubin may pressure gross margins due to substantial ASP increases of 60% to 70%, operating margins should remain above 3% over the next two to three years, supported by rising ASIC content, component insourcing, and operational leverage. Key downside risks include weaker AI server share and softer iPhone demand.