Raking in a huge profit of 23.7 billion yuan in half a year, has the inflection point of Foxconn Industrial Internet arrived?

After the market closes on August 11, Foxconn Industrial Internet (601138.SH) released its 2026 semi-annual report, with both revenue and net profit hitting new all-time highs for the same period, and its AI server-related business achieved explosive growth.

As the world's leading OEM for core AI servers, Foxconn Industrial Internet benefits deeply from the computing power expansion cycle, while hidden risks such as inventory, exchange rate, and cyclical fluctuations have become the focus of continuous market debate.

Continuous Improvement of Earnings Quality

In the first half of 2026, Foxconn Industrial Internet for the first time achieved semi-annual revenue exceeding the 500 billion yuan mark, recording operating revenue of 5.57861 trillion yuan, a year-on-year increase of 54.63%; the net profit attributable to shareholders also crossed the 200 billion yuan threshold for the first time, reaching 237.4 billion yuan, a year-on-year increase of 95.99%.

However, the impressive performance did not trigger positive sentiment in the secondary market. As of the close on the day of the announcement, the share price of Foxconn Industrial Internet closed at 66.01 yuan, down 4.58%, with a total market value of about 1.31 trillion yuan.

Breaking down the quarterly data, the growth resilience is clearly visible.

In the first quarter of 2026, Foxconn Industrial Internet posted revenue of 251.078 billion yuan and net profit attributable to shareholders of 105.95 billion yuan; in the second quarter, revenue reached 306.783 billion yuan, up 22.19% quarter-on-quarter, and net profit attributable to shareholders hit 131.46 billion yuan, up 24.08% quarter-on-quarter, with single-quarter revenue standing above the 300 billion yuan mark.

It is worth noting that Foxconn Industrial Internet has recorded net profit attributable to shareholders exceeding 100 billion yuan for four consecutive quarters, and the 100-billion-yuan profit scale has transformed from a phased dividend to a normalized operating result.

Core indicators highlight structural optimization. In the first half of 2026, Foxconn Industrial Internet's revenue growth rate was 54.63%, and its net profit growth rate nearly doubled, with profit growth significantly outpacing revenue growth. Basic earnings per share stood at 1.20 yuan, up 96.72% year-on-year; the weighted average ROE increased by 5.72 percentage points year-on-year.

In the first quarter of 2026, the gross profit margin stopped its multi-year downward trend, and the gross profit margin steadily rebounded in the first half of the year, rising 0.55 percentage points year-on-year to 7.15%, behind which high value-added AI computing power products continue to replace low-margin traditional OEM businesses.

At the market level, the performance forecast in early July had released the growth expectation in advance, and the positive factors were digested ahead of time, giving rise to the capital game of "implementation and delivery". Beyond the rapid growth, investors began to reassess the sustainability of prosperity and valuation matching, and their differences gradually widened.

Computing Power Drives the Main Growth Line

The core driving force of this round of performance upside comes from the continuous expansion and structural reshaping of the cloud computing sector.

In 2024, the business scale of cloud computing and communication equipment was relatively balanced; in 2025, the revenue share of cloud computing rose to 66.75%; in the first half of 2026, the revenue of this sector surged 75.7% year-on-year, firmly acting as the top engine of performance.

Further breaking down the product structure, the growth momentum is becoming stronger. In the first half of 2026, the operating revenue of AI servers for cloud service providers increased by 2.3 times year-on-year; the shipment volume of GPU AI cabinets increased by 3.2 times year-on-year, and the shipment volume of ASIC AI cabinets and ASIC CPU servers increased by 3 times and 2.5 times year-on-year respectively.

Most critically, GPU and multi-line ASIC products are expanding in volume simultaneously, getting rid of the dependence on a single chip route and effectively dispersing supply chain risks. The communication business follows the wave of computing power, with strong demand for switches above 800G and high-speed network cards, and the successful prototype delivery of CPO all-optical switches, building a second growth curve.

Looking at the overall industry environment, global cloud vendors continue to increase their investment in computing power.

According to TrendForce data, the total capital expenditure of the world's nine major cloud service providers will exceed 886.7 billion US dollars in 2026, with a year-on-year increase of as high as 90%, and the annual growth rate of AI server shipments has also been raised to nearly 31%.

Against the blowout of external demand, the share advantage of leading suppliers is being realized at an accelerated pace. Goldman Sachs research report predicts that Foxconn Industrial Internet's global market share in the AI server ODM market is expected to rise from 55% in 2026 to 69% in 2028.

This share expansion is not accidental. Relying on the long-term customer certification barrier, Foxconn Industrial Internet is deeply bound to leading overseas cloud vendors, and simultaneously promotes the R&D of the new generation VeraRubin platform and liquid-cooled computing power solutions to consolidate its echelon advantage in the industry.

It is worth noting that Foxconn Industrial Internet did not conduct cash dividend in the first half of 2026, and the funds will continue to be invested in production capacity expansion and cutting-edge technology R&D.

Exchange Rate, Inventory and OEM Model

The global wave of AI infrastructure construction has opened up a broad market space, and Foxconn Industrial Internet has fully benefited from the industry beta market, but a number of signals in its financial report are worthy of vigilance, and medium and long-term uncertainties continue to exist.

Exchange rate and financial pressure are prominent. In the first half of 2026, Foxconn Industrial Internet's financial expenses surged 749.91% year-on-year to 19.12 billion yuan, mainly affected by interest expenses and exchange gains and losses under exchange rate fluctuations. Given the company's high proportion of overseas business, continued exchange rate volatility will continuously disturb its profit level.

The scale of inventory continues to rise. As of the end of June 2026, the inventory of Foxconn Industrial Internet reached 192.109 billion yuan, up 56.25% year-on-year, and inventory accounts for nearly 40% of the total assets.

This inventory structure is highly dependent on the prosperity of AI servers. Once downstream cloud service providers reduce capital expenditure and slow down orders, large inventory will bring impairment pressure and directly impact the profit level.

The deeper contradiction comes from the business model and industry cycle. The OEM model that Foxconn Industrial Internet relies on determines that there is a natural ceiling for the company's gross profit margin, and profit growth is highly dependent on scale expansion, making it difficult to achieve a leap in profitability.

At the same time, its growth is highly tied to the capital expenditure cycle of overseas cloud vendors. Once the computing power arms race cools down in stages, there is a risk of order growth slowing down. Meanwhile, new production capacities around the world continue to be put into operation, which may intensify industry competition in the long run and compress the earnings of the manufacturing sector.

The core logic of the game in the secondary market is changing. The market no longer simply chases short-term performance growth, but predicts the length of the prosperity cycle. Under the current high base, high growth cannot be maintained forever, and the slowdown of quarterly growth in the future is a high probability event.

With a market value of over one trillion yuan, Foxconn Industrial Internet is a typical computing power cycle asset. As long as the global computing power construction continues to advance, orders will be supported; once the inflection point of capital expenditure comes, performance and valuation may face dual adjustments.

Short-term financial reports can only confirm the current prosperity, and whether it can continuously seize the opportunity of hardware iteration to go through the cycle is the key to determining long-term value.

This article is from the WeChat official account "Global Finance Review", written by Gong Xingchao, edited by Chen Xiaoran, and published with authorization from 36Kr.