Foxconn May Revenue Exceed Expectations by 9%, Upgraded 2Q26 Outlook

Overview

Morgan Stanley released a monthly revenue tracking report on Foxconn Precision (2317.TW) on June 5, 2026. The key message is: May revenue reached NT$859bn, up 3% sequentially and 40% year-on-year, exceeding Morgan Stanley's expectations by 9%, mainly due to strong AI server / cabinet shipments and sustained iPhone order momentum. Based on this, Morgan Stanley has upgraded its 2Q26 revenue outlook from an estimated 9% sequential growth to over 14%, and maintains its Overweight rating with a target price of NT$310. The report believes that AI server / cabinet shipments will be the main driver of profit growth over the next 2-3 years.

Core views

**May Revenue Significantly Exceeds Expectations:** Foxconn's May revenue reached NT$859bn, up 3% sequentially and 40% year-on-year, exceeding Morgan Stanley's previous expectations by 9%. Looking at the business segments: the consumer business (primarily iPhone assembly) benefited from strong order momentum and saw sequential growth; server-related revenue remained roughly flat, despite ongoing cabinet shipment ramp-up; computing business slowed down due to seasonal adjustments. **Significant Upgrade in 2Q26 Outlook:** Based on recent channel surveys, Morgan Stanley believes that 2Q26 revenue will grow by more than 14% sequentially (previously around 9% outlook), better than the visibility one month ago. Strong AI server / cabinet shipments can effectively offset the impact of the traditional off-season on consumer and computing businesses. According to this, June revenue is at least NT$757bn (up 40% year-on-year but down 12% sequentially). Morgan Stanley's revenue forecast for 2Q26 is NT$2,329bn (up 9% sequentially and 30% year-on-year), and believes there is potential for upward revision. **Clear Mid-to-Long-Term Growth Logic:** Morgan Stanley maintains its Overweight rating and target price of NT$310. The core logic is that strong AI server / cabinet shipments will drive strong profit growth from 2026 to 2028. In terms of order visibility, GB300 server cabinet orders are visible until the end of next year; VR NVL72 server cabinets are expected to start mass production at the end of 3Q26 and become mainstream in 1Q27. In addition, the delivery volume of AI ASIC server cabinets will also increase, contributing 30% of AI server revenue in 2H26.

Analysis framework

Morgan Stanley adopts a **monthly revenue tracking + forward guidance** analysis approach. First, by comparing May revenue data (actual vs. expected), it verifies the company's current business momentum and dissects the sequential changes in each segment (consumer, server, computing) to identify the drivers. Second, based on channel surveys and order visibility, it upgrades the 2Q26 revenue outlook and infers the implied level of June revenue. Finally, by combining longer-term order visibility (GB300, NVL72, ASIC) and financial forecasts (PE, EPS), it evaluates the company's mid-term earnings prospects and reiterates its investment rating. Valuation-wise, the report uses the residual income model (Residual Income Model), with key assumptions being: cost of equity 8.5%, medium-term growth rate 13%, and terminal growth rate 3%.

Methodology notes

• Company Fundamentals and Financial FrameworkFree cash flow analysis

  Comparison of actual data with model expectations

  Institutions compare the company's actual revenue with their own model predictions to quickly determine whether the operating trend is exceeding or falling below expectations. This report found that May revenue exceeded expectations by 9%, which was the key basis for upgrading the subsequent outlook.

• Industry/Industry Analysis FrameworkVolume-Price Split

  Segmental breakdown of sequential revenue changes

  Institutions analyze the sequential changes of each business segment (consumer, server, computing) one by one to identify the real source of growth. The report found that the sequential growth mainly came from the consumer business (iPhone order momentum), while server shipments were still ramping up but revenue remained flat sequentially, indicating significant differences in profit contributions across different business lines.

• Valuation methodsRIM Residual Income Model

  Residual Income Model Valuation Logic

  The residual income model evaluates value based on the profits a company creates above its cost of equity capital. This report used it to determine Foxconn's target price. Key parameters are the cost of equity (8.5%), medium-term growth rate (13%), and terminal growth rate (3%), and these parameters' changes directly affect the target price.

Asset mapping & comparison

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

• Foxconn Precision (2317.TW)

  Beneficiary: Strong AI server / cabinet shipments are the core driver of 2Q26 revenue exceeding expectations and the upgraded outlook

  Strengths

  GB300 order visibility until the end of next year; NVL72 cabinets expected to start mass production at the end of 3Q26; AI ASIC servers' contribution is expected to account for 30% of AI server revenue in 2H26; revenue structure continues to shift toward high-value-added AI hardware

  Weaknesses

  Consumer business (iPhone assembly) and computing business face seasonal off-season pressure

  Risks

  iPhone sales below expectations (downside risk).

Key data

• May RevenueNT$859bnUp 3% sequentially, 40% year-on-year, exceeding Morgan Stanley's expectations by 9%
• 2Q26 Revenue Outlook (Revised)More than 14% sequential growthPreviously estimated around 9%, significant upgrade, mainly due to strong AI server / cabinet shipments
• Implied June RevenueNT$757bnUp 40% year-on-year, down 12% sequentially
• 2Q26 Revenue ForecastNT$2,329bnUp 9% sequentially, 30% year-on-year, and the report believes there is potential for upward revision
• Target PriceNT$310.00Based on the residual income model, implying about 9% upside
• Current Share Price (June 5, 2026)NT$284.5052-week range NT$152.00-314.00
• Earnings Per Share Forecast (2026e/2027e/2028e)NT$16.38 / 19.90 / 23.03Yearly growth, reflecting the continuous pull from AI servers on profitability

Impact & implications

Morgan Stanley believes that the strong momentum of Foxconn Precision's AI server / cabinet shipments indicates that the company has successfully captured the growth opportunities in AI infrastructure construction, which will continue to drive improvements in its revenue and profit structure, transitioning from traditional consumer electronics assembly to high-value-added AI hardware production. Upgrading the 2Q26 outlook further strengthens market confidence in the company's short-term performance. The clear production schedules of new products such as GB300 and NVL72 provide visibility for mid-term growth. Maintaining the Overweight rating means that the institution believes that compared to the industry coverage, the stock has the potential to outperform the average in total risk-adjusted returns over the next 12-18 months.

Risks

• iPhone sales below expectations (downside risk).
• AI business profit contribution below expectations (downside risk).
• Electric vehicle business development progress slower than expected (downside risk).
• Geopolitical developments may negatively impact foreign investment (downside risk).
• iPhone sales exceed expectations (upside risk).
• AI server business progresses faster (upside risk).
• New M&A activities boost market sentiment (upside risk).

What to watch

• Whether June revenue reaches or exceeds NT$757bn.
• VR NVL72 cabinet mass production time (expected at the end of 3Q26) and subsequent order visibility.
• AI ASIC server revenue contribution in 2H26 (target 30% of AI server revenue).
• GB300 server cabinet order delivery schedule.