Foxconn Earnings Call AI Summary - August 12, 2026

1. Q2 2026 Financial and Operational Details

### Financial Performance:

**Revenue and Profitability**: Q2 revenue reached NT$2.53 trillion, up 19% quarter-on-quarter and 41% year-on-year, a record high for the same period. Gross margin was 6.12%, down 0.21 percentage points year-on-year, but gross profit increased 36% year-on-year. Operating profit reached NT$94.8 billion, up 68% year-on-year, with an operating margin of 3.75%, up 0.6 percentage points from the same period last year, also a record high. Net profit after tax was approximately NT$60 billion, up 30% year-on-year and 20% quarter-on-quarter, also a record high; EPS was NT$4.27, up 34% year-on-year and 20% quarter-on-quarter. Net profit margin for Q2 was approximately 2.37%.

**First Half Performance**: Revenue for the first half reached NT$4.65 trillion, up 35% year-on-year; operating profit was NT$170.5 billion, up 65% year-on-year; net profit after tax was NT$109.9 billion, up 27% year-on-year; EPS was NT$7.84, up 26% year-on-year. Operating profit, net profit, and EPS all reached record highs for the same period. Gross margin for the first half was 6.15%, down 0.08 percentage points year-on-year, but gross profit increased 33% year-on-year; operating margin rose to 3.67%, up 0.67 percentage points from the same period last year.

**Balance Sheet and Cash Flow**: As of the end of June, cash and time deposits totaled NT$1.52 trillion, with net cash of NT$219.8 billion, down NT$23.8 billion from the same period last year, mainly due to expanded operations and increased working capital needs. Cash conversion cycle in Q2 was 42 days, down 6 days year-on-year; excluding the impact of accounts receivable management tools, it was 52 days, down 2 days year-on-year. Debt ratio was 62%, maintaining a stable financial structure. Net cash outflow from operating activities in the first half was NT$69.1 billion, free cash flow net outflow was NT$150 billion, and capital expenditure was NT$80.9 billion, up 5% year-on-year.

2. Q3 and Full-Year 2026 Outlook

### Q3 Outlook:

**AI Servers**: AI operations will continue to grow, with CSP customers increasing capital expenditure and AI rack shipments scaling up. AI rack shipments are expected to show strong sequential and year-on-year growth in Q3. New-generation AI racks are expected to begin mass production in Q3, with shipments gradually increasing in subsequent quarters. Demand for the GB series remains stable and is expected to continue into next year.

**Consumer Smart Products**: Q3 enters the traditional peak season, with revenue expected to grow significantly compared to Q2 and the same period last year.

**Computer Terminals**: Revenue is expected to decline slightly from Q2 due to passed peak demand for new products and tight memory supply. However, rising component prices are driving higher shipment prices, enabling significant year-on-year growth.

### Full-Year Outlook:

Foxconn maintains a strong full-year growth outlook, with better visibility than at the May earnings call, primarily driven by strong AI server demand. July revenue exceeded NT$900 billion for the first time, setting a new monthly record.

**Profitability**: First-half operating profit grew 65% year-on-year, outpacing revenue and gross profit growth, reflecting AI scale expansion and improved automation benefits. First-half ROE reached 6.21%, up 0.73 percentage points year-on-year; operating margin was 3.67%, up 0.67 percentage points year-on-year. The company is confident that full-year operating margin will exceed last year's 3.2%, with a medium-to-long-term target of maintaining above 3%.

3. AI Servers and AI Infrastructure

**AI Growth Engine**: Since 2024, AI server revenue has continued to rise, becoming Foxconn's most important growth engine, maintaining double-digit year-on-year growth each quarter, with momentum clearly accelerating over the past year. AI servers are infrastructure with low seasonality, helping offset fluctuations in consumer electronics.

**AI Rack Shipments**: Full-year 2026 AI rack shipments are expected to achieve 'more than doubling' growth; after the new platform launch in Q3, shipments are expected to grow at a high double-digit rate sequentially. New-generation AI racks are expected to enter mass production preparation in Q3 and begin shipping in Q4, becoming the main product next year.

**Market Share**: Foxconn stated that the new-generation AI racks feature significantly higher automation, combined with vertical integration and system-level delivery capabilities, helping win new customers and projects. The company continues to target a 50% market share.

**ASIC**: In addition to GPUs, Foxconn expects to significantly increase its ASIC market share this year, participating in modules, cooling systems, compute, and rack integration for different projects. The company remains positive on ASIC growth over the next few years, targeting a market share of over 40%.

**One-Stop AI Server Capability**: Foxconn emphasized that its AI hardware strategy is not limited to single products but covers components, GPU modules, motherboards, switch trays, compute trays, rack assembly, inter-rack connectivity, liquid cooling, power management, connectors, busbars, mechanical parts, and high-speed transmission. The self-made ratio of key components has reached over 50%.

4. AI Data Centers, CSPs, and New Customers

**CSP Capital Expenditure**: Major North American CSPs continue to raise capital expenditure. Foxconn believes this global cloud investment wave will be a direct growth driver for the coming years. Order visibility has also improved, with clear upward trends in orders extending into 2027.

**Customer Structure**: AI data center demand mainly comes from four categories: large language model providers, CSPs/New Cloud, government, and enterprises. Currently, demand is primarily from model providers, CSPs, and New Cloud; government and enterprise contributions are smaller but have future potential.

**New Cloud Customers**: In addition to large CSPs, Foxconn is seeing increased demand from New Cloud and AI model development companies. As AI applications expand from model training to inference, enterprise AI services, and sovereign cloud, contributions from new cloud customers are expected to emerge by the end of this year.

5. High-Speed Networking and Optical Communications

**Networking Business**: Networking product revenue grew strongly in the first half, benefiting from increased shipment volumes and higher unit prices for switches. As AI rack computing power increases, demand for network bandwidth and high-speed interconnects rises, and switch specifications continue to upgrade. Foxconn believes networking will gradually shift from traditional high-speed connectivity to optical communications.

**CPU Switches**: CPU switches have begun shipping, primarily used for Scale Out (horizontal expansion between AI racks). As platforms and system architectures upgrade, they will gradually expand to Scale Up.

**Optical Communications Strategy**: Foxconn continues to strengthen key components such as optical modules, optoelectronic integration, advanced packaging, cable connectors, high-speed transmission, and power management. Through vertical integration and increased self-made ratios of key components, the company aims to enhance product value and profitability. Foxconn expects optical communications to maintain high growth over the next few years, with a potential market size exceeding $100 billion.

6. Capital Expenditure and Funding Plan

**Capital Expenditure**: 2024 CAPEX was approximately NT$136.3 billion, increasing to about NT$173.8 billion in 2025; first-half 2026 CAPEX was about NT$80.9 billion, up NT$3.7 billion year-on-year. The company expects full-year 2026 CAPEX to increase by over 30% year-on-year, mainly to expand key capacities in AI server racks, liquid cooling, and testing in advance, and to strengthen global manufacturing and automation.

**Return on Investment**: 2025 revenue reached NT$8.1 trillion, operating profit NT$259.2 billion; first-half 2026 operating profit reached NT$170.5 billion, up NT$67.4 billion year-on-year, indicating that prior capital investments are gradually translating into revenue scale and profitability. First-half 2026 EBITDA reached NT$227.7 billion, up NT$77.6 billion year-on-year.

**Funding Sources**: Short-term operating funds are primarily supported through working capital management and bank facilities, while medium-to-long-term CAPEX will be funded through various capital market instruments. The company currently has no plans for cash capital increases to support business growth and will rely on debt financing as a primary source.

**Financial Discipline**: The company manages its capital structure with metrics such as ROE above 12% and Net Debt/EBITDA below 1.5x. Cash and deposits total approximately NT$1.5 trillion, maintaining an S&P A- credit rating with a stable outlook.

7. Transaction Model and Profitability

**Consignment Model**: Currently primarily used for ASIC projects, but in the future