AI demand growth slows, Hon Hai's May sales increased by 11.9% year-on-year, falling short of expectations

Hon Hai's sales in May reached NT$615.7 billion, a year-on-year increase of 11.9%. Although revenue hit a record high for the same period in previous years, the growth fell short of the market expectation of 16.8%. In the first five months of 2025, cumulative revenue reached NT$2.9 trillion, a year-on-year increase of 21.65%. AI-related demand has become the core growth engine, with cloud network products leading the growth both year-on-year and month-on-month compared to other business segments. However, the company remains cautious about its performance outlook for 2025, primarily due to potential impacts from U.S. tariffs. Strong Demand for AI Cloud Products, Cautiously Optimistic Q2 Revenue Outlook As a major manufacturer of iPhones and NVIDIA servers, Hon Hai saw a significant sales increase of 25.5% in April, leading market analysts to forecast an average revenue growth rate of 16.8% for the second quarter. However, the revenue growth in May fell below market expectations, indicating that the growth rate of demand for AI-related products may be slowing. The most noteworthy aspect is the differentiated performance across product categories. In terms of year-on-year growth, the cloud network product category performed the strongest, primarily driven by robust demand for AI cloud products. In terms of month-on-month performance, the consumer smart product category achieved significant growth, surpassing cloud network products, which may reflect seasonal recovery signs in the consumer electronics market. However, from an annual perspective, consumer smart products can only maintain "approximately flat" growth, with traditional consumer electronics demand likely to remain weak. The performance of computer terminal products is relatively lackluster, showing a declining trend both month-on-month and year-on-year, consistent with the overall slump in the PC market. Although Hon Hai is benefiting from the growing demand for electronic products required for AI computing from companies like Alphabet and Amazon, the company lowered its full-year revenue forecast in April. The company's outlook for Q2 is relatively cautiously optimistic. Management expects significant growth in the second quarter both quarter-on-quarter and year-on-year, but emphasizes that "it is still a traditional off-season" and that "main products are entering a transition period between old and new products." This suggests the complexity and uncertainty of growth