Hon Hai Precision Industry Co., Ltd.

Q2 2025 revenue was TWD1.79 trillion, up 16% YoY and a record for the period. Gross margin was 6.33%, down 0.09 percentage points YoY; operating margin was 3.16%, up 0.28 percentage points YoY; net margin was 2.47%, up 0.21 percentage points YoY; and EPS was TWD3.19, up TWD0.66 YoY. Cash and net cash at the end of June were TWD870.5 billion and TWD243.6 billion, respectively. Operating cash flow was TWD21.9 billion versus TWD43.8 billion a year ago, and free cash flow was a net outflow of TWD55.3 billion. For Q3, management said overall operations should show significant growth versus both Q2 and last year, AI server revenue should rise over 170% YoY, server-rack shipments should triple QoQ, and full-year AI server-related revenue should exceed TWD1 trillion. Full-year outlook for significant growth was unchanged, though revenue in TWD may be affected by FX; the company reiterated its target of keeping full-year operating profit margin roughly flat versus last year.

Kathy Yang said AI remains the main growth engine and emphasized that demand from cloud service providers and sovereign AI projects is still expanding. She framed the company as moving from planning to execution across AI servers, EVs, semiconductors, digital health, and smart manufacturing, with modular data centers and U.S. campus expansion as key next steps. Her tone was confident but cautious: she repeatedly noted that tariffs, geopolitics, and FX create uncertainty, while arguing that Hon Hai’s global footprint and supply-chain capabilities help turn those risks into an advantage.

Chiu-Lien Huang highlighted the quarter’s financials, including TWD1.79 trillion of revenue, 6.33% gross margin, 3.16% operating margin, and TWD3.19 EPS. He said the gross margin decline was mainly due to exchange-rate fluctuations, while the higher operating margin reflected only 4% expense growth against 16% revenue growth. On liquidity and capital allocation, he cited TWD870.5 billion of cash, TWD243.6 billion of net cash, TWD77.2 billion of capex in Q2, and a cash conversion cycle of 48 days; he said first-half capex was up about 22% YoY and the 2025 capex growth target remains above 20%, with next year’s capex plan not yet available. He also said a TWD1 appreciation versus the dollar still has about a 3% revenue impact and about 0.1 percentage point gross-margin impact, and that the company will offset pressure through scale, procurement, and automation.

Analysts focused on AI-server demand, the timing of next-generation rack transitions, U.S. investment plans, capex, and FX sensitivity. Management said there is no meaningful transition ‘window period’ between old and new AI-server racks, production yields have improved, and shipments should continue rising sharply through Q3 and Q4. On the U.S., management said investment has already exceeded the earlier USD1.5 billion estimate, with more expansion planned in Texas, Wisconsin, Ohio, and California. On FX, the company said a TWD29 exchange rate versus about TWD32.3 last year would hurt margins, but it still expects full-year operating margin to stay roughly flat.