ZTE Corp (H share: 00763) reported a record-breaking first half of 2026, with total revenue reaching RMB 78.03 billion, marking a 9.0% year-on-year increase and setting a new all-time high. The company posted net profits attributable to shareholders of RMB 2.75 billion, with both revenue and profit showing sequential improvement in the second quarter compared to the first. Operating cash flow remained in positive territory throughout the period.
While traditional telecommunications investment from domestic carriers experienced a decline, robust double-digit growth across the computing power segment, personal devices, and international markets successfully offset this shortfall. The computing power business emerged as the standout performer, surging over 55% year-on-year and now accounting for 35.1% of total revenue. Within this division, server storage revenue expanded by nearly 60%, while data center products witnessed a remarkable 90% surge.
The international market delivered an exceptional performance, with revenue climbing 33.1% year-on-year during the first half. Strategic focus on the Asia-Pacific, Europe, and Latin America regions has proven fruitful, with the company exporting not just communication equipment but also computing power-related products to overseas markets. Consumer and terminal business, contributing 23.9% of total revenue, saw solid demand for smartphones, routers, and AI-enabled devices both domestically and internationally.
Research and development expenditure for the first half totaled RMB 10.93 billion. By the end of June, the company had filed approximately 98,000 patent applications globally, with over 50,000 already granted. The company has accumulated substantial intellectual property in chips and artificial intelligence, with multiple self-developed chips now achieving large-scale commercial deployment.
The financial results also highlight the challenges accompanying this business transformation. The expansion of lower-margin computing power products has exerted pressure on overall gross margins. In response, management is tightening administrative and sales expenses to strike a balance between scale growth and profitability. On the terminal front, several new products have launched, including a new AI agent smartphone from the nubia brand and Wi-Fi 7 home devices shipped to international markets.
Beyond hardware, the company is investing in AI operating systems and vertical industry intelligence platforms, delivering AI capabilities to sectors such as manufacturing, mining, and power utilities. While the computing power business has clearly become a critical growth engine for ZTE, the fiercely competitive server industry raises questions about whether the company can successfully convert its scale advantage into sustainable profits in the quarters ahead.