Hon Hai Precision Industry Co (鴻海精密) yesterday reported that net profit last quarter rose 27 percent from the same quarter last year on the back of demand for cloud services and high-performance computing products.
Net profit surged to NT$44.36 billion (US$1.48 billion) from NT$35.04 billion a year earlier. On a quarterly basis, net profit grew 5 percent from NT$42.1 billion.
Earnings per share expanded to NT$3.19 from NT$2.53 a year earlier and NT$3.03 in the first quarter.
Photo courtesy of Hon Hai Precision Industry Co
However, a sharp appreciation of the New Taiwan dollar since early May has weighed on the company’s performance, Hon Hai chief financial officer David Huang (黃德才) told an online earnings conference, adding that the impact would persist this quarter, assuming an exchange rate of NT$29 against the US dollar.
Last quarter, every NT$1 appreciation of the local currency shaved 3 percent off the company’s revenue and 0.1 percentage points off its gross margin, Huang said.
Gross margin last quarter dropped to 6.33 percent, down from 6.42 percent in the same period last year, while operating margin grew to 3.16 percent from 2.88 percent a year earlier.
The company maintained its operating margin target for this year at last year’s 2.92 percent, as it expects revenue growth and expense controls to offset exchange rate effects.
Revenue last quarter expanded 16 percent annually to NT$1.79 trillion, up 9 percent sequentially.
Capital expenditure in the first half rose 22 percent from a year earlier and is on track to increase 20 percent for the full year, Huang said.
The company expects revenue to grow significantly this quarter, driven by robust artificial intelligence (AI) server demand, Hon Hai rotating chief executive officer Kathy Yang (楊秋瑾) said.
“Overall industry demand continues to outpace supply and we are expanding capacity to meet it,” Yang said.
While the company’s smart consumer electronics and computing products did not report year-on-year revenue growth last quarter, its AI server revenue increased 60 percent annually to account for more than 50 percent of its total revenue in the quarter.
That growth momentum is expected to persist this quarter and until next year, with this quarter’s revenue projected to rise 170 percent year-on-year, Yang said.
AI server rack shipments this quarter are expected to grow 300 percent sequentially, she said.
Hon Hai has significantly improved the yield rates for AI servers powered by current-generation chips and is preparing to produce servers using the next generation, with no shipment gap amid product transition, she added.
To meet rising demand, the company plans to expand server production and liquid cooling system capacity in Texas and Wisconsin, and boost cloud and networking capacity at its Ohio plant, Yang said.
Meanwhile, the company is ready to launch its Model B electric vehicles (EVs) in the US next quarter, while its Model C has begun the verification process in the US, she said.
The company has also secured a deal to produce EVs for Mitsubishi Motors Corp, with production to begin in the second half of next year, she added.
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