Hon Hai 3Q26 Preview: The Street's Full Year Needs November and December 26% Below October
Monthly filings put the quarter up 47.1% YoY and 20.4% QoQ, 7.0% above the NT$2.83tn LSEG SmartEstimate the street carried into the quarter. The 12 November release adds the margins and the profit beneath a top line that can no longer move.
The street's FY2026E revenue of NT$10,917bn leaves NT$1,942bn for November and December, a monthly average 26% below October's record NT$1,305.3bn. In 2025 those two months averaged only 4.7% below October, so the size of the consignment change decides which pace holds.
Holding the 2Q26 margins on reported revenue puts operating profit near NT$113.5bn and net profit near NT$71.7bn, up 24% YoY. Net profit grows more slowly than revenue because the 3Q25 base carried a 2.80% net margin, against 2.37% in 2Q26.
Hon Hai attributed October's slight dip in cloud and networking revenue partly to changes in its consignment model, where customers supply parts such as GPUs and Hon Hai books only its own value added. The release is the first chance to size that effect on fourth-quarter revenue and on margin percentages.
Company snapshot
Hon Hai Precision Industry, which trades under the Foxconn brand, is the world's largest contract electronics manufacturer. It assembles iPhones and other consumer devices, builds servers and networking equipment for cloud customers, and supplies components and connectors. Management reports four segments: cloud and networking products, smart consumer electronics, computing products, and components and other products. Server racks built for NVIDIA AI platforms are the fastest-growing part of the business, and cloud and networking passed half of revenue in the second quarter. The shares trade in Taipei as 2317 TT.
Expectations snapshot
The monthly filings have already settled third-quarter revenue, so the table sets that against what management guided and what the street carries for the full year. The release is about the lines underneath revenue.
| Metric | 3Q26 | FY2026E |
|---|---|---|
| Revenue | NT$3,026.9bn reported, +47.1% YoY | Street NT$10,917bn, +34.8% YoY; our model NT$10,794bn |
| Gross margin | Not guided (2Q26: 6.12%, 3Q25: 6.35%) | n/a (consensus feed carries no gross profit line) |
| Operating margin | Not guided (2Q26: 3.75%, 3Q25: 3.43%) | Street implies 3.78% (FY2025: 3.20%) |
| Net profit | Not guided (3Q25: NT$57.7bn) | Street NT$262.0bn |
| Company guidance | Growth QoQ and YoY, AI racks still growing | Strong growth; AI business to keep growing in 4Q |
| Reported to date | Quarter fully reported via monthlies | 10M26 NT$8,975.1bn, 82% of the street's FY2026E |
Recent developments
- Second-quarter results on 12 August set records for operating and net profit. Revenue was NT$2,525.9bn, up 41% YoY. Gross margin slipped 0.21pp YoY to 6.12%, while operating margin rose 0.60pp to 3.75% and net profit rose 35% to NT$59.97bn, or NT$4.27 a share. Cloud and networking reached 51% of revenue, up from 48% in the first quarter (Hon Hai results via Focus Taiwan, 12 August).
- Third-quarter revenue reached NT$3.03tn on 5 October, up 47% YoY and above the NT$2.83tn LSEG SmartEstimate. September revenue of NT$1,158.6bn was Hon Hai's first month above NT$1tn (Reuters, 5 October; TWSE monthly filing).
- October set another record at NT$1,305.3bn, up 45.7% YoY and 12.7% MoM, taking revenue for the first ten months to NT$8,975.1bn, up 40.4%. Smart consumer electronics grew most month on month, on early shipments and higher selling prices (Hon Hai monthly revenue statement via Focus Taiwan, 5 November).
- Cloud and networking revenue dipped slightly from September despite strong AI demand. Hon Hai attributed this to changes in its consignment model, supply constraints and the early production ramp of new models (same source).
- For the fourth quarter, Hon Hai said it expects its AI-related business to keep growing in the industry's traditional peak season, and overall performance in line with market expectations. It again flagged volatile global political and economic conditions (same source).
- The shares have moved the other way from revenue. Hon Hai closed at NT$270.00 on 12 August, fell to NT$224.50 on 6 November, its lowest close since April, and closed at NT$239.00 on 9 November, 22.7% below the 3 June high of NT$309.00 (TWSE daily closes).
The quarter finished at a record, and October was higher still
All three months of the third quarter are reported, and so is October. Revenue has now set a monthly record in each of the last two months.
| Month | Revenue | YoY |
|---|---|---|
| July 2026 | NT$946.5bn | +54.2% |
| August 2026 | NT$921.8bn | +52.0% |
| September 2026 | NT$1,158.6bn | +38.4% |
| 3Q26 total | NT$3,026.9bn | +47.1% |
| October 2026 | NT$1,305.3bn | +45.7% |
- September was the first month above NT$1tn, up 25.7% MoM.
- The quarter closed at NT$3,026.9bn, up 47.1% YoY and 20.4% QoQ, the fastest year-on-year growth of any quarter this year.
- October then rose another 12.7% MoM to NT$1,305.3bn, up 45.7% YoY, with all four segments growing year on year, led by cloud and networking.
- Cloud and networking, which includes the AI server racks, made up 51% of 2Q26 revenue, against 29% for smart consumer electronics, 15% for computing and 5% for components, so it carries most of the growth.
The release cannot change any of these figures. What it adds is the gross margin, the operating margin and the profit underneath them, plus what management says about the fourth quarter.
Will the street's full-year revenue number move up?
Hon Hai does not publish numeric guidance. For the third quarter it guided growth both quarter on quarter and year on year, with AI rack shipments still growing. For the fourth quarter it said on 5 November that it expects AI-related business to keep growing and overall performance in line with market expectations.
The street carries FY2026E revenue of NT$10,917bn, up 34.8%, with operating profit of NT$412.8bn and net profit of NT$262.0bn. Our model carries FY2026E revenue of NT$10,794bn, 1.1% below the street, so on the full year we are close to in line.
Revenue through October is NT$8,975.1bn, so the street's full-year number leaves NT$1,942bn for November and December. That is 13.8% above the same two months of 2025, after growth of 40.4% through October and 45.7% in October itself.
On a monthly basis the street implies an average of NT$971bn, 26% below October. In 2025 November and December averaged 4.7% below October. Repeating that step on October 2026 would put full-year revenue near NT$11,463bn, 5.0% above the street, and holding October's level would put it near NT$11,586bn, 6.1% above.
We are not treating that range as our base case, because of the consignment change. When a customer buys the GPUs itself and supplies them, Hon Hai books only its own assembly and parts, so revenue per rack falls sharply while profit per rack changes far less. A large enough shift could take November and December well below October with no loss of volume or profit.
The comparison base also hardens late in the year: December 2025 revenue grew 31.8%, against 11.3% in October 2025. If the release shows the consignment effect is small, the street's full-year revenue number is likely to move up; if it is large, revenue can fall short of the October pace while profit holds.
What to expect from the release
- Revenue is settled at NT$3,026.9bn. What the release adds beneath it is the segment split, the margins and the profit.
- We expect gross margin close to the 6.12% of 2Q26 and below the 6.35% of 3Q25. Gross margin has stayed between 6.12% and 6.35% in the quarters we can compare, and a growing share of rack assembly has not moved it outside that band.
- We expect operating margin at or above the 3.75% of 2Q26, and above the 3.43% of 3Q25. In the second quarter operating profit rose 68% on a 41% rise in revenue, so operating costs are growing much more slowly than sales.
- We expect net profit near NT$71.7bn, the 2Q26 net margin applied to reported revenue. That is up 24% YoY, well below revenue's 47% because the 3Q25 base carried a 2.80% net margin.
- On the outlook, we expect management to repeat that AI-related revenue keeps growing in the fourth quarter. Any number attached to the consignment change, or any first view on 2027, would matter more than the quarter itself.
What investors should watch
- Fourth-quarter revenue and the consignment effect. The street's full-year number implies 4Q26E revenue of about NT$3,248bn, up 7.3% QoQ, and October has already delivered NT$1,305.3bn of it. If management sizes how much revenue the consignment change removes, investors can tell whether the street's number is low or simply reflects the new booking basis.
- Operating margin against the 3.75% of 2Q26 and the 3.43% of 3Q25. Booking racks on consignment lowers revenue without lowering assembly profit, so it raises margin percentages. A rise in margin is only a sign of better pricing if it comes with operating profit growing at least as fast as revenue.
- The distance between operating profit growth and net profit growth. In 3Q25 net margin ran at 2.80% against an operating margin of 3.43%, so non-operating income, the tax rate and minority interests are where any gap this quarter has to be traced.
- The cloud and networking share of revenue against 51% in 2Q26, and any comment on 2027 AI rack shipments. Supply constraints and new-model ramps were named in October, and the release should say whether they move revenue into 2027 or remove it.
Valuation and peer comparables
Hon Hai closed at NT$239.00 on 9 November, for a market capitalization of about US$102.7bn. The shares trade at 7.1x forward EV/EBITDA against a peer median of 8.2x, and at 8.0x trailing against a median of 10.7x.
The all-peer median is lifted by the US-listed names, Flex at 11.1x and Jabil at 8.2x forward. Among the five Taiwan-listed peers the forward median is 5.7x, so Hon Hai trades at a premium to Wistron, Pegatron and Compal and below Quanta and Inventec.
The P/E columns carry no usable comparison. Contract manufacturing runs net margins near 2%, so the comps engine suppresses P/E for Hon Hai and for six of the seven peers; the single forward P/E in the median row belongs to Flex alone. EV/EBITDA is the column to read here.
The forward multiples run off consensus EBITDA. If fourth-quarter profit lands closer to the October revenue pace than to the street's full-year number, 7.1x overstates what a buyer is paying at today's price. A consignment effect large enough to explain the street's revenue path would leave profit, and the multiple, where the screen puts it.
| Company | Mkt cap (US$bn) | P/E (TTM) | P/E (Fwd) | P/B | EV/Sales (TTM) | EV/Sales (Fwd) | EV/EBITDA (TTM) | EV/EBITDA (Fwd) |
|---|---|---|---|---|---|---|---|---|
| US-Listed | ||||||||
| Flex | 28.9 | n.m. | 15.6x | 5.0x | 1.0x | 0.9x | 14.8x | 11.1x |
| Jabil | 26.0 | n.m. | n.m. | 16.4x | 0.8x | 0.6x | 12.5x | 8.2x |
| Taiwan-Listed | ||||||||
| Quanta Computer | 37.1 | n.m. | n.m. | 4.7x | 0.5x | 0.3x | 10.7x | 8.5x |
| Wistron | 17.6 | n.m. | n.m. | 3.0x | 0.3x | 0.2x | 8.4x | 5.7x |
| Pegatron | 7.8 | n.m. | n.m. | 1.7x | 0.2x | 0.2x | 9.4x | 4.7x |
| Inventec | 6.1 | n.m. | n.m. | 2.6x | 0.3x | 0.3x | 14.9x | 9.4x |
| Compal Electronics | 4.3 | n.m. | n.m. | 1.0x | 0.2x | 0.2x | 10.5x | 5.6x |
| Peer median (all peers) | n.m. | 15.6x | 3.0x | 0.3x | 0.3x | 10.7x | 8.2x | |
| Hon Hai (Foxconn) | 102.7 | n.m. | n.m. | 1.8x | 0.4x | 0.3x | 8.0x | 7.1x |
Source: FMP market data and consensus estimates, Zero One Investment Research. Prices are closes of 9 Nov 2026. Forward multiples use each company's next unreported fiscal year (FMP consensus). P/E shown as n.m. where net margin is below 5% or the multiple exceeds 150x: near-break-even earnings make it unstable and non-comparable.