China Post Securities Initiates Buy Rating on Foxconn Industrial Internet, Citing AI Server and Switch Growth

China Post Securities analysts Wu Wenji and Wan Wei recently published a research report on Foxconn Industrial Internet (601138), reiterating a "Buy" rating.

Key Investment Highlights

AI Computing Expansion Fuels Cloud Business Growth

The proliferation of AI applications continues to drive demand for computing power. Major cloud vendors and enterprise customers are increasing investment, with multiple computing technology pathways—including GPU and ASIC—developing in parallel.

Foxconn Industrial Internet maintains deep partnerships with leading clients. The company is:

• Advancing next-generation AI platform R&D and expanding ASIC projects to diversify its customer base
• Developing proprietary liquid cooling components to strengthen its integrated computing system capabilities

In the first half of 2026, the cloud business maintained strong growth, with year-over-year revenue up 75.7%. AI-related businesses became the core performance driver:

• AI server revenue from cloud service providers grew 2.3x YoY
• GPU AI cabinet shipments increased 3.2x YoY
• ASIC AI cabinet shipments rose 3x YoY
• ASIC CPU server shipments grew 2.5x YoY

Strong Demand for Computing Interconnect Drives Switch and NIC Shipments

The expansion of AI computing infrastructure has driven demand for high-speed networking. Global data center networks are transitioning from 400G/800G to 1.6T, with strong interconnect demand from hyperscale data center clusters.

In the first half of 2026:

• Data center high-speed network revenue doubled YoY
• Shipments of switches above 800G and Super NICs both grew 1.4x YoY

The company's product portfolio covers Ethernet, InfiniBand, and NVLink Switch technologies. CPO all-optical switches have completed prototype delivery, and the company maintains a leading market share in high-speed switches.

Foxconn Industrial Internet is deepening cooperation with top clients, iterating high-speed switch products, optimizing production capacity, and actively investing in next-generation technologies such as CPO to upgrade toward higher bandwidth and energy efficiency.

Meanwhile, edge AI is driving consumer electronics innovation. The trend toward high-end smartphones is clear, and the company's precision structural components for terminals benefit from stable shipments of premium models from major clients, demonstrating strong business resilience.

Investment Recommendation

The analysts forecast the company's revenue for 2026/2027/2028 at RMB 1,463.2 / 1,990.4 / 2,547.9 billion, with net profit attributable to shareholders of RMB 62.2 / 84.6 / 109.4 billion. The "Buy" rating is maintained.

Risk Factors

• Technology iteration may fall short of expectations
• Intensifying market competition
• AI server demand may underperform expectations

Analyst Consensus

According to data from the Securities Star Data Center, the research team led by Li Jiu of Northeast Securities has conducted in-depth research on the stock over the past three years, with an average forecast accuracy of 73.8%. The team forecasts 2026 net profit attributable to shareholders at RMB 59.922 billion, implying a forward P/E of 20.76x based on the current stock price.

Recent Ratings (Last 90 Days)

• 15 institutions have issued ratings:
• 12 "Buy"
• 3 "Outperform"
• Average target price over the past 90 days: RMB 84.36

Note: This article is based on data from China Post Securities and is for reference only. It does not constitute investment advice.

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