AI servers drive Hon Hai’s April revenue surge of 30%

Overview

Goldman Sachs pointed out in the earnings flash report that Hon Hai’s April revenue continued strong momentum, growing 30% year-on-year, mainly driven by AI server rack demand. Despite Q2 being the traditional off-season for electronics products, management still expects sequential and year-on-year revenue growth. The firm maintains a “Buy (Conviction List)” rating with a 12-month target price of TWD 400, implying a 21x 2026 PE and about 70% upside from current levels.

Core views

Demand side: AI server rack orders continue to scale, offsetting the seasonal drop in consumer electronics. April’s Cloud & Networking business grew strongly year-on-year, with management explicitly guiding continued AI rack revenue expansion in Q2. Supply side: The company’s global capacity layout and vertical integration of components keep it leading in the AI server ODM competition, poised to further increase market share. Earnings outlook: Goldman Sachs forecasts Q2 revenue at TWD 2.34 trillion, +30% year-on-year, +10% quarter-on-quarter; 2026 full-year revenue raised to TWD 11.06 trillion, with 18% CAGR in 2027-2028 and even faster earnings growth. Valuation: Priced at 21x 2026 PE, above historical upper range (20x), reflecting recognition of Hon Hai’s transformation from consumer electronics to AI servers and EV OEM and a valuation premium.

Analysis framework

The report uses a dual driver “Earnings-Valuation” framework: 1) Decomposes monthly revenue structure to verify strong AI server business and seasonal trends in traditional businesses; 2) Compares against peers through a PEG&M model (PE relative to earnings growth plus operating margin) for a fair 21x valuation; 3) Finally incorporates Foxtron EV subsidiary’s growth stage options to form the target price.

Methodology notes

• Valuation MethodPE/PEG valuation

  PEG&M Model

  The firm divides PE by the sum of next year’s net profit growth and operating margin to measure valuation and growth alignment, setting target multiples accordingly.

• Industry/sector analysis frameworkVolume-Price Breakdown

  Monthly revenue volume-price decomposition

  Breaks down month-on-month and year-on-year revenue by business line to identify structural differences such as volume growth in AI servers and price flat but volume shrinkage in traditional consumer electronics.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Hon Hai Precision (2317.TW)

  Leading AI server ODM directly benefiting from AI demand explosion

  Strengths

  Global capacity, vertical integration, strong customer stickiness

  Weaknesses

  Consumer electronics still a large portion, seasonal fluctuations present

  Comparison

  Valuation discounted relative to peers, earnings growth leading

  Risks

  AI server capacity expansion falling short, EV order delays, consumer electronics competition intensifying

Key data

• April RevenueTWD 832 billion+30% year-on-year, +4% month-on-month
• Q2 Revenue ForecastTWD 2.34 trillion+30% year-on-year, +10% quarter-on-quarter
• 2026 EPS ForecastTWD 19.05Corresponds to 21x target PE
• Implied Upside from Target Price67%Based on closing price TWD 239.5
• Foxtron April RevenueTWD 480 millionUp sequentially, still below 2024 peak

Impact & implications

Goldman Sachs believes Hon Hai is upgrading from a traditional consumer electronics EMS provider to an AI server and EV platform supplier, with an improved earnings structure driving a higher valuation midpoint. In the short term, attention should focus on AI server capacity ramp progress; mid to long term, on EV OEM order execution and market share gains.

Risks

• AI server business volume growth slower than expected
• Overall EV solution performance below expectations
• Global capacity expansion progress delays
• Increased competition in consumer electronics EMS pressures margins

What to watch

• Monthly AI server shipment and market share changes
• Foxtron EV orders and mass production timing
• 2026 new iPhone and other terminal product cycles
• Global capacity utilization and capital expenditure pacing