Foxconn's AI Server Revenue Surpasses Smartphones
The global technology landscape is witnessing a profound transformation, and at its heart, contract electronics giant Foxconn has reached a pivotal milestone: for the first time, revenue generated from its burgeoning artificial intelligence (AI) server business has eclipsed that from its long-standing smartphone manufacturing operations, including the ubiquitous Apple iPhone. This shift, driven by the insatiable demand for AI infrastructure, marks a significant reorientation for the world’s largest electronics assembler.
The financial figures underscore this dramatic pivot. In the second quarter of 2025, Foxconn reported a robust 27% year-on-year surge in operating profit, reaching NT$56.6 billion, with net profit hitting NT$44.36 billion, surpassing analyst expectations. Quarterly revenue climbed 16% to NT$1.79 trillion, approximately $59.7 billion. Crucially, the AI server segment contributed a dominant 41% of this revenue, outpacing smart consumer electronics, which accounted for 35%. Looking ahead, Foxconn projects an astounding year-on-year revenue growth of over 170% for its AI server business in the third quarter, a clear indicator of sustained momentum.
This strategic shift is not merely about volume; it’s about value. AI servers boast significantly higher gross margins—between 10% and 15%—compared to the typically slim margins of traditional consumer electronics manufacturing. This improved profitability is a key driver for Foxconn, allowing it to offset the maturing demand and fierce competition in its legacy markets. The company’s cloud and networking division, which encompasses AI servers, now accounts for 50% of its total server revenue, highlighting the depth of this transformation. Foxconn’s ambition is palpable, aiming to capture 40% of the global AI server market by the end of 2025, with projected AI segment revenue reaching an impressive $34.7 billion.
At the core of Foxconn’s AI server dominance lies its critical partnerships, most notably with NVIDIA. As the exclusive assembler of NVIDIA’s high-performance Blackwell-powered GB200 servers, which command a substantial 40% price premium, Foxconn has cemented its role as a linchpin in the AI supply chain. Beyond assembly, the company is actively co-developing essential components such as high-speed connectors, advanced liquid-cooling systems, and power supplies for these cutting-edge chips, moving beyond mere contract manufacturing to become a co-creator of AI infrastructure.
Geographic diversification also plays a vital role in Foxconn’s strategy, mitigating geopolitical risks and strengthening client relationships. The company’s Guadalajara, Mexico plant is already producing 20,000 AI servers annually, while a $3.7 billion semiconductor joint venture in India with HCL Group further bolsters its supply chain resilience. Significant investments in North America underscore its commitment to serving major U.S. clients, including Amazon and Microsoft, who are aggressively expanding their data center capacities.
This pivot extends beyond servers, reflecting Foxconn’s broader strategic evolution into high-tech sectors. The company recently acquired a stake in industrial motor firm TECO Electric & Machinery, aiming to create a comprehensive “one-stop shop” for clients establishing large-scale AI data centers, integrating everything from servers to electrical infrastructure and cooling systems. Furthermore, Foxconn is making aggressive inroads into electric vehicles and semiconductor manufacturing, signaling a comprehensive diversification strategy away from its historical reliance on a single product category. This dramatic shift at Foxconn is not just a company story; it’s a powerful narrative about the re-industrialization driven by artificial intelligence, reshaping manufacturing priorities globally.