Goldman maintains Hon Hai Buy: March revenue up 46% YoY, AI cloud products support 2Q growth

Overview

This report is Goldman Sachs' company research update on Hon Hai Precision Industry Hon Hai (2317.TW). It focuses on March 2026 revenue performance, the 2Q26E revenue outlook, growth in AI servers and cloud businesses, progress at EV subsidiary Foxtron, and valuation and risks. Goldman maintains its Buy (on CL) rating and NT$400 12-month target price on Hon Hai.

Core views

The core view is that Hon Hai's growth momentum remains strong. March revenue rose sharply both YoY and MoM, mainly supported by a low base after the Lunar New Year holiday, new product launches, and pull-forward demand for AI cloud products. Cloud & Networking delivered strong YoY growth thanks to AI cloud products, while Consumer electronics and PC also benefited from new product support. Although 2Q is usually a slower production-transition quarter, management still expects revenue to grow both YoY and QoQ, and Goldman expects continued AI server rack shipments to support 2Q26E growth.

Analysis framework

The report uses monthly revenue tracking, business segment driver decomposition, 2Q26E revenue forecasting, EPS revision checks, and relative valuation. Valuation is centered on 2026E P/E and also references the peer PEG&M framework, i.e. the relationship between P/E and forward one-year earnings growth and operating profit margin.

Methodology notes

• Valuation methods2026E P/E

  Target price based on 21.0x 2026E P/E

  Goldman's NT$400 12-month target price is based on 21.0x 2026E P/E. This multiple is above the high end of Hon Hai's historical trading range of around 20x, reflecting a positive view on margin expansion and business diversification from AI servers and EV outsourcing.

• Relative valuationPEG&M

  P/E relative to future earnings growth and operating margin

  The target P/E is derived from the ratio of peer-average P/E to the sum of next-12-month net profit YoY growth and OPM, used to compare growth, margin, and valuation.

• Factor analysisGS Factor Profile

  Growth, financial return, valuation multiples, and composite factors

  Goldman Sachs Factor Profile compares individual stocks with the market and industry peers through growth, financial return, valuation multiples, and composite indicators.

Asset mapping & comparison

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

• Hon Hai (2317.TW)

  Main subject of the report and the buy-rated name

  Strengths

  AI cloud products drive strong growth in Cloud & Networking; the AI server business has continued growth and share gain opportunities; 2026E smartphone form-factor changes may bring incremental momentum; EV outsourcing offers business diversification opportunities.

  Weaknesses

  Traditional consumer electronics EMS is highly competitive; 2Q usually sees a production-transition off-season; some monthly growth is supported by a low base and order pull-forward after the Lunar New Year holiday.

  Comparison

  A 21x target P/E is above the high end of Hon Hai's historical trading range of around 20x, reflecting Goldman's premium for business expansion and margin improvement.

  Risks

  AI server ramp-up slower than expected, EV total solution performance weaker than expected, global capacity ramp-up slower than expected, and intensifying competition in consumer electronics EMS.

• Foxtron (2258.TW)

  Hon Hai's EV subsidiary, not covered

  Strengths

  It has launched its first proprietary-brand vehicle, Foxtron Bria, and is partnering with Mitsubishi Motors on passenger cars and zero-emission buses, which may create incremental growth opportunities.

  Weaknesses

  March 2026 revenue of NT$4.16 hundred million was below NT$4.85 hundred million in March 2025, and the EV business remains in a development and validation stage.

  Comparison

  Compared with Hon Hai's core AI and consumer electronics businesses, Foxtron is still small in scale but provides an EV outsourcing and diversification angle.

  Risks

  The overall solution performance in EV assembly, design, software, and semiconductors may be weaker than expected.

Key data

• March 2026 revenueNT$8040 hundred millionUp 46% YoY and 35% MoM, broadly in line with Goldman's expectations.
• March revenue in USD terms+52% YoY / +34% MoMManagement guidance.
• 2Q26E revenue forecastNT$2.3 trillionGoldman expects 30% YoY growth and 10% QoQ growth.
• April 2026 revenue forecastNT$7390 hundred millionGoldman expects an 8% MoM decline and 15% YoY growth, reflecting a high base and the off-season for smartphones and PCs.
• Foxtron March 2026 revenueNT$4.16 hundred millionCompared with NT$3.92 hundred million in February 2026 and NT$4.85 hundred million in March 2025.
• Target priceNT$40012-month target price based on 21.0x 2026E P/E.
• Disclosed priceNT$193.00The Hon Hai price shown in the report disclosure.

Impact & implications

The investment implication for Hon Hai is positive: AI servers and cloud networking are becoming the main growth drivers and can partially offset competition in traditional consumer electronics EMS and seasonal volatility. If AI rack shipments continue to grow, smartphone form-factor changes materialize, and EV outsourcing gradually contributes incremental opportunities, Hon Hai's revenue mix and margin expansion potential may continue to improve.

Risks

• AI server ramp-up slower than expected.
• EV total solutions weaker than expected in assembly, design, software, and semiconductors.
• Global capacity ramp-up slower than expected.
• Consumer electronics EMS competition stronger than expected.
• Seasonal weakness or a high base in smartphones and PCs could pressure near-term monthly revenue.

What to watch

• Whether April 2026 revenue comes close to Goldman's forecast of NT$7390 hundred million.
• Whether 2Q26E revenue reaches about NT$2.3 trillion, with 30% YoY growth and 10% QoQ growth.
• Whether AI server rack shipments keep rising and help Cloud & Networking maintain strong YoY performance.
• Whether 2026E smartphone form-factor changes create incremental demand in the consumer electronics business.
• Progress in integrating Luxgen after the Foxtron acquisition, the performance of Foxtron Bria, and the commercialization pace of the partnership with Mitsubishi Motors.
• Whether 2026E-2028E EPS estimates need to be revised further up or down.