Hon Hai (2317.TW): AI server continuous ramp-up ahead across GPU/ASIC; 3Q26 OP beat; Buy (on CL)

In 4Q26, the company expects YoY growth in Cloud and Networking revenues, driven by strong GPU/ASIC AI servers; YoY increase in Consumer electronics, driven by peak-season shipment momentum, robust end-market demand, and higher blended ASP; YoY increase in PCs, as component cost pass-through lifts blended ASPs; and YoY increase in Components and others, riding on downstream component restocking across terminal segments. We maintain our positive view on Hon Hai, driven by AI servers, foldable phones, and EV outsourcing. With vertical integration of systems and components, coupled with global production capabilities, we expect Hon Hai to leverage its scale advantages into long-term order and market share sustainability. Maintain Buy (on CL). We expect 4Q26E revenues to be +51% YoY/+31% QoQ to NT$3.9 trillion. 3Q26 OP beat our and Bloomberg estimates by 23%/15%, driven by the company improving operational efficiency, with GM at 6.0% and 3Q26 NI up 34% YoY to NT$78bn. Our 12m TP for Hon Ha