Nomura sharply raises Foxconn target on stronger AI outlook and margin gains
Second-quarter 2026 earnings per share came in at TWD 4.27, 5.5% above the market consensus.
Second-quarter 2026 earnings per share came in at TWD 4.27, 5.5% above the market consensus. The operating margin was 3.75%, also above expectations.
Nomura raised its 2026F, 2027F and 2028F earnings forecasts by 12.8%, 23.4% and 24.9%, respectively. The brokerage cited better-than-expected operating-expense control, stronger-than-expected networking and AI demand, and the possibility that larger hyperscale cloud providers could eventually purchase directly from original design manufacturers.
Hon Hai is expected to receive incremental orders for Google’s TPU L6 and L11. The large-scale ramp-up of Nvidia’s Vera Rubin platform is another core growth driver, according to the note.
That multiple is above the upper end of the stock’s 5x-to-15x range over the past 10 years and reflects a structural revaluation of the AI business.
Nomura’s conclusion is that Hon Hai is in a historically significant growth opportunity driven by AI servers, ASICs and optical networking. Continued improvement in operating margins is validating the company’s business-model upgrade, while further valuation re-rating may still be possible.
The current share price implies 11x 2027F P/E, well below Nomura’s 17x target valuation, suggesting that the value of the AI business has not been fully re-rated.
Catalysts include the realization of high-double-digit sequential growth in AI racks in the third quarter of 2026; formal confirmation of Google TPU L6 and L11 orders; and third-quarter 2026 mass production of CPO switches, with shipments exceeding 10,000 units.
Nomura raised its 2026F, 2027F and 2028F earnings forecasts by 12.8%, 23.4% and 24.9%, respectively. The brokerage cited better-than-expected operating-expense control, stronger-than-expected networking and AI demand, and the possibility that larger hyperscale cloud providers could eventually purchase directly from original design manufacturers.
Hon Hai is expected to receive incremental orders for Google’s TPU L6 and L11. The large-scale ramp-up of Nvidia’s Vera Rubin platform is another core growth driver, according to the note.
That multiple is above the upper end of the stock’s 5x-to-15x range over the past 10 years and reflects a structural revaluation of the AI business.
Nomura’s conclusion is that Hon Hai is in a historically significant growth opportunity driven by AI servers, ASICs and optical networking. Continued improvement in operating margins is validating the company’s business-model upgrade, while further valuation re-rating may still be possible.
The current share price implies 11x 2027F P/E, well below Nomura’s 17x target valuation, suggesting that the value of the AI business has not been fully re-rated.
Catalysts include the realization of high-double-digit sequential growth in AI racks in the third quarter of 2026; formal confirmation of Google TPU L6 and L11 orders; and third-quarter 2026 mass production of CPO switches, with shipments exceeding 10,000 units.