LowV Technology Geopolitics & AI26 October 2026, Monday
ZTE leaned on computing revenue to almost quintuple quarterly profit
ZTE lifted third-quarter net profit from 264 million yuan to 1.31 billion yuan in results published on 26 October. Computing revenue grew by more than 70% over nine months and made up 38% of total sales.
ZTE published its third-quarter results on 26 October. Quarterly revenue rose 34% year on year to 38.81 billion yuan, and net profit climbed from 264 million yuan to 1.31 billion yuan. Part of the gain came not from sales but from investment valuation gains.
On the company's own filing, nine-month revenue rose 16.2% to 116.84 billion yuan. Computing revenue grew by more than 70% and made up 38% of total sales. Server and storage revenue also rose by more than 70%, while revenue from data centre solutions climbed roughly 130%.
Over the same nine months net profit fell 23.7%, so the quarterly rebound did not repair the annual picture. ZTE said the industry cycle and a shift in product mix continue to press on gross margin. Overseas revenue rose by more than 30%, and home and personal devices delivered 23% of total revenue.
Talay assessment
Bottom line
The figures show a telecom supplier under US export controls shifting its weight towards server and data centre hardware. Computing reaching 38% of revenue means domestic substitution demand in China has covered the stagnation in network equipment. But a 23.7% fall in nine-month net profit and continued margin pressure say the transition is building volume rather than profit. Part of the quarterly jump came from investment valuation gains, which limits how repeatable it is.
Likely effects
- China data centre supplyPositive1–6 months
Growth of roughly 130% in data centre solutions shows domestic AI infrastructure turning to a local supplier instead of imported hardware.
- ProfitabilityNegativeWeeks
The 23.7% fall in nine-month net profit reveals that volume growth in computing hardware is not offsetting the margin of the network business.
- Export controlsNegative6 months+
A sanctioned company expanding its server business strengthens the effect of controls in steering Chinese demand to domestic suppliers.
Possibilities, ranked
- 1Computing share keeps growing55%
Domestic AI investment continues and computing's share of revenue climbs above 38% in the fourth quarter.
Watch: The computing revenue share in ZTE's year-end results
- 2Margin pressure caps profit30%
Volume rises but product mix and price competition pull gross margin down, and annual net profit falls.
Watch: The fourth-quarter gross margin ratio
- 3Supply constraint brakes growth15%
Memory and advanced packaging chokepoints slow server deliveries and data centre growth drops to single digits.
Watch: A ZTE statement on server delivery delays
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Quarterly net profit growth▲ 394.5%
- Data centre revenue▲ up roughly 130%
- Computing share of revenue▲ 38%
- Nine-month net profit▼ −23.7%