Rising AI And Cloud Trends Will Expand Global Demand

Key Takeaways

• Accelerated growth in AI server sales, advanced R&D, and global supply chain flexibility position Quanta to outpace competitors and deliver superior margins.
  
• Expanding adoption of AI, cloud, and sustainable manufacturing strengthens Quanta's customer base, recurring revenues, and long-term earnings stability.
  
• Reliance on major customers, rising operational complexities, limited product differentiation, and growing financial pressures collectively threaten long-term growth, profitability, and stability.

Catalysts

Manufactures, processes, and sells laptop computers and telecommunication products in the United States, Mainland China, the Netherlands, Japan, and internationally.

• While analyst consensus expects AI server revenue to exceed 70% of total servers and drive strong growth, current data points to triple-digit year-on-year growth in AI server sales, with visibility into continued hyperscaler investment and a rapidly rising mix of higher-ASP AI platforms, which together could produce upside surprises for both revenue and profit expansion beyond consensus views.
  
• Analysts broadly agree that global manufacturing resilience will underpin margin improvement, but Quanta's accelerated capital investment and flexible global network-including fast-growing North American and European AI server capacity-enable it to outmaneuver competitors on supply chain localization, supporting structurally higher net margins and sustained premium customer wins ahead of expectations.
  
• The intensifying adoption of AI, cloud, and edge computing worldwide is fundamentally expanding Quanta's addressable market, positioning the company to secure growing multi-year deal flow in both enterprise and consumer segments that could significantly outpace industry revenue growth rates.
  
• Quanta's established, trusted relationships with top-tier CSPs and rapid-turn R&D capabilities position it to capture an increasing share of next-generation notebook, edge AI, and automotive compute design–resulting in higher-margin recurring revenue streams and best-in-class earnings stability relative to peers.
  
• With global tech brands accelerating their outsourcing of both data center and advanced notebook manufacturing, and with growing regulatory pressures favoring sustainable production, Quanta's scale, automation, and early investments in green computing could cement its standing as the contract manufacturer of choice, driving superior margin and cash flow growth over the long term.

Quanta Computer Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Quanta Computer compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Quanta Computer's revenue will grow by 39.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 4.1% today to 2.2% in 3 years time.
• The bullish analysts expect earnings to reach NT$99.9 billion (and earnings per share of NT$28.07) by about July 2028, up from NT$67.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 20.2x on those 2028 earnings, up from 15.2x today. This future PE is greater than the current PE for the TW Tech industry at 19.4x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.7%, as per the Simply Wall St company report.

Quanta Computer Future Earnings Per Share Growth

Risks

• Heavy dependence on a few dominant customers, particularly hyperscale cloud providers, means that any shift in customer sourcing strategy, insourcing, or reduction in orders would sharply impact Quanta's future revenue and reduce its earnings visibility.
  
• Macro risks such as tariff changes, geopolitical uncertainty, and the necessity for manufacturing relocations add operational complexity, ongoing cost escalation, and may result in fluctuating profit margins and increased capital intensity, negatively affecting net margins.
  
• Intensifying competition within the ODM industry and lack of meaningful product differentiation increase the risk of margin compression-especially as Quanta grows its high-volume, low-margin AI server business-potentially eroding net profits despite topline expansion.
  
• Secular headwinds, including slowing global PC and notebook demand, threaten long-term sales growth from Quanta's historic core business segment, raising the risk of stagnant or declining top-line revenue if diversification into new categories does not succeed.
  
• Rapidly growing working capital requirements to support AI server shipments, coupled with higher R&D and CapEx expenditures, could strain free cash flow and require greater debt financing, putting pressure on net earnings and increasing financial risk if demand weakens.

Valuation

• The assumed bullish price target for Quanta Computer is NT$420.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Quanta Computer's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NT$420.0, and the most bearish reporting a price target of just NT$240.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be NT$4479.3 billion, earnings will come to NT$99.9 billion, and it would be trading on a PE ratio of 20.2x, assuming you use a discount rate of 7.7%.
• Given the current share price of NT$264.5, the bullish analyst price target of NT$420.0 is 37.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.