Foxconn's AI Server Boom: Surpassing iPhone Revenue
For decades, Foxconn has been synonymous with the iPhone, serving as the colossal manufacturing engine behind Apple’s iconic devices. Yet, a dramatic shift in its business model has repositioned the Taiwanese giant: it is now, first and foremost, an AI server manufacturer. This transformation is not merely a strategic pivot but a financial reality, with AI server production now generating more revenue for Foxconn than its long-standing consumer electronics segment, including its massive iPhone output.
This significant change was unveiled during Foxconn’s second-quarter earnings announcement, which reported a robust 16 percent increase in revenue, reaching $59.73 billion, alongside a 27 percent surge in operating profit to $1.9 billion. A key highlight of these results was the performance of the company’s Cloud and Networking Products division. This segment, which encompasses server manufacturing, contributed 41 percent of Foxconn’s total revenue, marking a nine percent increase compared to the same period in 2024 and, crucially, surpassing the Smart Consumer Electronics unit for the first time. The latter division is where Foxconn’s extensive work for Apple resides.
CEO Kathy Yang underscored the profound impact of artificial intelligence on the company’s trajectory, asserting that the growth within the Cloud and Networking Products division was almost entirely driven by servers. Sales of AI servers alone soared by an impressive 60 percent year-over-year. Looking ahead, Yang’s projections for the third quarter are even more striking, forecasting a 170 percent increase in revenue from AI servers and a staggering 300 percent growth in sales of server racks. For the full year, Foxconn anticipates revenue from AI servers to exceed $33 billion. Yang confidently stated that this product category is expected to “maintain strong growth and remain our largest revenue driver this year,” propelled by a gradual increase in AI server rack volume and sustained demand for general-purpose servers.
Yang views AI not as a transient trend but as a fundamental “industrial revolution” and a “structural, long-term growth trend.” She noted that several major clients have indicated continued expansion of their AI infrastructure investments, a trend Foxconn expects to persist through 2026 and beyond. To meet this escalating demand, Foxconn is strategically embracing modular data centers, a development Yang believes will significantly accelerate the shipment of AI server racks. This strategy is reinforced by Foxconn’s recent partnership with TECO to manufacture such data centers, a move designed to bolster its market share in the burgeoning AI server sector.
Addressing the complexities of the global trade landscape, particularly new tariffs imposed by the USA, Yang articulated that the primary challenge lies not in the tariffs themselves but in the inherent volatility of such policies. She emphasized that manufacturing, unlike other industries, cannot be simply relocated, necessitating proactive global planning rather than a reactive approach. Despite these hurdles, Yang expressed confidence that tariffs, while posing certain challenges, also present opportunities to optimize Foxconn’s global supply chain. By expanding into new markets and serving a broader customer base, she believes these challenges can be transformed into long-term competitive advantages, reinforcing the company’s overall resilience and strategic foresight.