JPMorgan: Hon Hai Precision | AI Server Momentum Boosts Revenue
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JPMorgan maintains an Overweight rating on Hon Hai Precision with a December target price of NT$270, driven by robust AI server momentum and resilient iPhone demand. March revenue reached NT$804 billion, surging 35% month-over-month and 46% year-over-year, fueled by strong AI server requirements and better-than-expected iPhone 17 shipments. First-quarter revenue declined 18% sequentially but grew 30% annually, slightly missing JPMorgan estimates by 4% while remaining within company guidance.
Looking ahead to the second quarter, JPMorgan projects 3% sequential revenue growth, with AI servers acting as the primary growth engine. This should partially offset seasonal declines in consumer electronics during production transitions. For full-year 2026, AI server rack shipments are expected to more than double, with JPMorgan forecasting 29,000 racks versus 12,000 in 2025. Industry-wide shipments could reach 70,000 racks, depending on the Vera Rubin production timeline.
Hon Hai is also gaining share in ASIC server assembly for AWS Graviton and Google TPU, potentially securing Microsoft MAIA projects. Consequently, ASIC servers should increase from 10% to 20% of AI server revenue. The critical factor to monitor remains AI server profitability, as increasing component integration, higher ASIC proportions, and elevated foundry ratios may offset gross margin dilution from GPU carry costs. Key catalysts include sustained operating margins above 3% and shifting market sentiment.