ZTE (000063) Q2 2026 earnings summary

Executive summary

• Revenue for H1 2026 reached RMB 78.03 billion, up 9.05% year-over-year, driven by strong growth in government and enterprise business, while net profit attributable to shareholders dropped 45.57% to RMB 2.75 billion due to margin pressure and business mix shift.

• Gross margin declined to 25.48%, down 6.97 percentage points year-over-year, mainly due to changes in product mix and increased costs.

• Domestic revenue decreased slightly by 0.91%, while international revenue surged 33.13%, now accounting for 35.72% of total revenue.

• The company maintained high R&D investment, with R&D expenses at RMB 10.93 billion, representing 14.01% of revenue.

Financial highlights

• Operating cash flow was negative RMB 127 million, a significant decrease from positive RMB 1.3 billion in H1 2025, mainly due to increased cash outflows for goods and services.

• Total assets grew to RMB 240.55 billion, up 10.47% from year-end 2025; total liabilities increased to RMB 163.42 billion, with an asset-liability ratio of 67.94%.

• Basic EPS was RMB 0.58, down 45.28% year-over-year; diluted EPS was RMB 0.56.

• Weighted average ROE dropped to 3.65% from 6.85% a year earlier.

• Non-recurring gains totaled RMB 532 million, mainly from investment income and fair value changes.

Outlook and guidance

• The company expects continued robust demand for AI and computing infrastructure, with ongoing expansion in international markets.

• Domestic operator network investment remains under cyclical pressure, while storage and raw material price volatility pose uncertainties.

• Strategic focus remains on 6G, AI infrastructure, smart terminals, and core technologies such as chips, OS, and databases.