Profit expectations are much more optimistic than the market; Goldman Sachs raises Foxconn Industrial Internet’s target price, saying that the third quarter is entering a period of rapid profit growth.
```
Thanks to the AI investment boom, the stock price of Foxconn Industrial Internet has repeatedly reached all-time highs, with an accumulated increase of over 200% since the beginning of the year. Goldman Sachs' latest research report may inject a new “stimulant” into this “trillion-yuan giant”!
On September 18, Goldman Sachs said in its latest report that it expects Foxconn Industrial Internet to enter a strong profit growth cycle starting from the third quarter of 2025, mainly benefiting from an increase in AI server market share, the construction of modular AI data centers, and new product cycles in smartphones, among multiple driving factors.
Analysts Verena Jeng and others pointed out in the report that Foxconn Industrial Internet's first-mover advantage in rack-level AI servers will boost its market share in the AI infrastructure market. The partnership between its parent company Hon Hai (Foxconn) and TECO Electric & Machinery will accelerate the deployment of AI data centers for clients, and together with network equipment upgrades and new smartphone product cycles, these are all important factors driving profit growth.
Based on this, Goldman Sachs has raised its net profit forecasts for 2025-2027 by 3%/3%/4%, 4%-14% higher than Bloomberg consensus, showing the bank’s significantly more optimistic outlook for the company’s prospects.
At the same time, Goldman Sachs continues to use the recent P/E ratio to derive a 12-month target price, raising the target P/E ratio from 26.9x to 29.4x, and the 12-month target price to 77.2 yuan, an increase of 13%, maintaining its Buy rating.
Four Major Factors Driving Strong Growth Momentum
1. Increased AI server market share
Goldman Sachs is optimistic about Foxconn Industrial Internet’s multiple competitive advantages in the AI server business.
The report stated that the company, leveraging its strong R&D and execution capabilities, was the first to launch next-generation rack-level AI servers, attracting new customers and suffering minimal losses during product transitions.
The company offers a comprehensive product portfolio across components and systems, with built-in liquid cooling technology to begin mass production in Q4 2025.
In addition, Foxconn Industrial Internet has production facilities around the globe and a customer base that covers US and Chinese cloud service providers, offering both GPU-driven and ASIC-driven AI servers.
Goldman Sachs expects that the strong ramp-up of rack-level AI servers from Q3 2025 will significantly drive revenue growth, while keeping operating expenses under control, with the operating expense ratio dropping from 2.3% in Q2 2025 to 1.9%/1.3%/1.2% in 2025-2027.
2. Modular data center construction
According to Goldman Sachs, the partnership between parent company Hon Hai and TECO Electric & Machinery will accelerate deployment of AI data centers for clients, supporting the growth of Foxconn Industrial Internet's AI server shipments.
3. Network equipment business enters an upgrade cycle
With ever-increasing demand for high-speed connections, Goldman Sachs states that Foxconn Industrial Internet’s network equipment shipments will grow significantly. The company is upgrading its product mix to 400G/800G, greatly increasing per-unit value and further propelling revenue growth.
4. New smartphone cycle
In addition to its AI business, the smartphone market is entering a strong season of new releases in September, providing extra support to the company’s performance. Goldman Sachs expects the new smartphone product cycle to produce a synergistic effect with the AI server business, jointly propelling the company onto a strong growth track.
Profit Forecast Significantly Raised, Far Exceeding Market Expectations
Based on the above four driving factors, Goldman Sachs has raised Foxconn Industrial Internet’s profit forecasts for 2025-2027, far exceeding the market’s expectations. Specifically:
Net profits for 2025-27 were raised 3%/3%/4% to 33.632 billion, 52.161 billion, and 66.240 billion yuan, respectively;
Operating profit margin (OPM) is expected to rise from 4.2% in 2025 to 4.3% in 2027;
Operating expense ratio is projected to decline notably, from 1.9% in 2025 to 1.2% in 2027.
According to the report, compared to Bloomberg consensus, Goldman Sachs’ net profit forecasts for 2025 and 2026 are 33.632 billion yuan and 52.161 billion yuan, which are higher than the consensus by 4% and 14%, respectively; operating profit forecasts for 2025 and 2026 are 10% and 19% higher than consensus, respectively.
Additionally, Goldman Sachs forecasts 2025 revenue at 945.957 billion yuan, 8% higher than Bloomberg consensus; and 2026 revenue at 1.432428 trillion yuan, 17% higher than consensus.
Valuation Methodology: Structural Details of Target Price Upgrade
Goldman Sachs continues to use the recent P/E ratio to derive the 12-month target price. The target P/E multiple is determined by regression of comparable companies’ P/E ratios and forward-year fundamentals (net profit growth and operating margin), currently set at 0.94x (previously 0.87x).
Accordingly, Goldman Sachs raised the target P/E from 26.9x to 29.4x, reflecting the market’s revaluation of the AI server supply chain and the strong forward-year fundamentals driven by the AI server ramp-up. The current target P/E is also basically in line with the historical peak of 28x.
Ultimately, Goldman Sachs raised its 12-month target price by 13% to 77.2 yuan, representing 20% upside from the current price of 64.36 yuan, and maintains its Buy rating.
This article is from the WeChat public account “硬AI”. For more AI industry news, click here.
Risk Disclosure and DisclaimerMarkets have risks and investment should be cautious. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial circumstances, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investments made accordingly are at your own risk. ```