Hon Hai (2317)

Equity Research 13 August 2026 | 9:09AM HKT

Hon Hai (2317.TW): AI server continuous ramp-up ahead across GPU/ ASIC; 2Q26 OP beat; Buy (on CL)

3Q26 revenues outlook: The company expects (1) YoY growth in Cloud and Allen Chang | Networking revenues, driven by strong GPU/ ASIC AI servers and AI switch; (2) YoY Goldman Sachs (Asia) L.L.C. increase in Consumer electronics, riding on the specification upgrade of new Verena Jeng products; (3) YoY increase in PCs on AI products upgrade; and (4) YoY increase in | Goldman Sachs (Asia) L.L.C. Components and others. Management maintain 3Q guidance and expect to see both QoQ and YoY revenues growth in 3Q26. We maintain our positive view on Ting Song | Goldman Sachs (Asia) L.L.C. Hon Hai, driven by AI servers, foldable phones, and EV outsourcing. With vertical integration of systems and components, coupled with global production capabilities, we expect Hon Hai to leverage its scale advantages into long-term order and market share sustainability. Maintain Buy (on CL). Read more: FII 2Q result.

2Q26 beat: GM remained at 6.1% in 2Q26 (vs. 6.3%/ 6.2% in 2Q25/ 1Q26), higher than our and Bloomberg consensus estimates at 5.7%/ 6.0%, reflecting mix upgrade and cost management. Opex ratio was down to 2.4% in 2Q26 (vs. 3.2%/ 2.6% in 2Q25/ 1Q26), resulting in OP beating our and Bloomberg estimates by 36%/ 18%, driven by the company’s improving operational efficiency. 2Q26 NI was up 35% YoY to NT$60bn, or 15%/ 8% higher than our estimates and consensus.

Exhibit 1: Hon Hai 2Q26 result snapshot NT m 2Q25 1Q26 2Q26 QoQ YoY GS Act/GS Cons. Act/Cons. Revenues 1,793,468 2,119,533 2,525,894 19% 41% 2,513,270 1% 2,470,000 2% GP 113,529 130,981 154,533 18% 36% 142,479 8% 148,200 4% OP 56,596 75,649 94,803 25% 68% 69,845 36% 80,534 18% Net income 44,361 49,919 59,974 20% 35% 51,961 15% 55,439 8% Margins GM 6.3% 6.2% 6.1% -0.1ppt -0.2ppt 5.7% 0.4ppt 6.0% 0.1ppt OPM 3.2% 3.6% 3.8% 0.2ppt 0.6ppt 2.8% 1ppt 3.3% 0.5ppt NM 2.5% 2.4% 2.4% 0ppt -0.1ppt 2.1% 0.3ppt 2.2% 0.1ppt

Source: Company data, Goldman Sachs Global Investment Research, Bloomberg

Key takeaways from earnings call

n 2026E outlook: Hon Hai expects YoY revenue growth in 2026, and management highlighted the improving visibility, supported by YoY growth in Cloud & Networking as well as Consumer electronics. PC will see YoY decline, per management, and Components & Others will be flat YoY. n AI servers ramp-up: Management expects AI server rack shipment to grow high double-digit QoQ in 3Q26, and strong shipment growth of AI server rack in 2026, supported by strong demand and market share gain. n EV business progress: The company expects the delivery of the Model B in AUS and NZ by end of 2026, and the delivery of CAVIRA in Taiwan has begun from

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Goldman Sachs Hon Hai (2317.TW)

Exhibit 2: Hon Hai monthly/ quarterly revenues May 2026 June 2026 July 2026 Aug 2026E Sep 2026E Oct 2026E 2Q26 3Q26E Revenues (NT$m) 859,409 821,763 946,513 1,031,699 1,059,769 1,112,757 2,525,894 3,037,980 YoY 40% 52% 54% 70% 27% 24% 41% 48% MoM/QoQ 3% -4% 15% 9% 3% 5% 19% 20% GS estimates (NT$m) 815,456 695,162 928,592 2,386,670 Actual vs. GS 5% 18% 2% 6%

Source: Company data, Goldman Sachs Global Investment Research

Earnings revision: We factor in the 2Q26 earnings and revise up 2026E earnings by 1% on higher-than-expected GM and lower-than-expected Opex ratio, while non-OP is lower than expected. We keep 2027/ 28E earnings largely unchanged.

Exhibit 3: Earnings revision 2026E 2027E 2028E NTD m Old New Chg Old New Chg Old New Chg Revenues 11,099,298 11,068,297 0% 14,000,932 14,028,433 0% 18,055,832 18,122,500 0% GP 649,990 658,118 1% 740,165 740,692 0% 816,946 820,946…