For years, Foxconn (Hon Hai Precision Industry Co., Ltd. – Taiwan Stock Exchange: 2317) has been the name behind the world’s best-selling smartphones. But 2025 has brought a quiet yet seismic shift that is redefining what the company means to the global tech supply chain. Its artificial intelligence (AI) server business has overtaken its smartphone unit as Foxconn’s top revenue contributor. If you are trying to make sense of why a contract manufacturer would suddenly become the infrastructure backbone of the AI era, you are not alone.
In Foxconn’s latest quarterly report, the company revealed that AI servers contributed 41% of total revenue, surpassing its long-dominant consumer electronics segment, which includes Apple’s iPhones and made up 35% this quarter. Last year, the smartphone business contributed 46%, so the turnaround has happened in a flash. The reason is straightforward: demand for AI infrastructure is exploding across every sector.
On the numbers, Foxconn reported $59.79 billion (NT$1.79 trillion) in revenue for the second quarter of 2025, up 16% over the previous year. Net profit reached $1.48 billion (NT$44.36 billion, far exceeding analyst expectations. For the first half of 2025, total revenue hit 114.7 billion (NT$3.44 trillion), a 20% increase year over year. Notably, net profit for the first half jumped 52%, signaling that the company’s AI pivot is driving not just big sales but also higher margins and profitability.
What is behind this sudden outperformance? Start with technology. Foxconn is no longer just assembling hardware. Through partnerships with Nvidia, it now develops custom AI server racks powered by the latest Blackwell AI chips. These racks are being rolled out in Tier 1 data centers for everything from cloud computing to autonomous vehicles. Foxconn has also deepened its vertical integration by manufacturing its own high-speed connectors, liquid cooling systems, and power management technology, all of which are critical for high-performance AI workloads. These specialized components command a premium, and so does the intellectual property they generate.
The manufacturing strategy is also evolving. Despite geopolitical uncertainty and lingering supply chain questions, Foxconn has invested $900 million into a new facility in Mexico to diversify beyond China and is using digital twin technology, real-time virtual modeling of factories, to optimize global operations.
But the biggest driver is simply demand. Across the world, cloud service providers and AI developers are scrambling for more high-powered compute infrastructure. Foxconn’s management expects its AI server revenue to grow more than 170% year-over-year next quarter, continuing a run that already saw rack shipments triple in just three months. By the end of 2025, annual AI server revenue is projected to break the $33.3 billion (NT$1 trillion) threshold.
Of course, transitions like this are seldom painless. There are operational realities to contend with. Foxconn’s CFO noted that while the high unit price of AI servers temporarily diluted gross margin, overall profitability improved thanks to scale and efficiency gains. Foxconn’s capital expenditures jumped 25% in the first half of 2025, reflecting massive new investment in AI manufacturing capacity. As the company shifts focus, it will need to balance research and development, capital expenditure expansion, and supply chain risk with financial discipline.
While Foxconn remains the dominant assembler of iPhones, it is now much more. The company is aiming for over 50% global market share in the AI server sector by year’s end, with industry forecasts predicting that the broader AI infrastructure market will balloon from $167 billion in 2025 to more than $1.5 trillion by 2034.
For years Foxconn’s brand was built on consumer gadgets, but 2025 may be the year everyone starts seeing them first as an AI infrastructure giant.
