Zhi Tong Cai Jing·2025-10-31 03:27Core Viewpoint - ZTE Corporation's stock has declined nearly 5% following the release of its Q3 earnings report, indicating significant challenges in profitability despite revenue growth [1] Financial Performance - For the first three quarters, ZTE reported revenue of 100.52 billion yuan, an increase of 11.63% year-on-year [1] - Net profit for the same period was 5.322 billion yuan, a decrease of 32.69% year-on-year [1] - In Q3 alone, the company achieved revenue of 28.97 billion yuan, up 5% year-on-year, but net profit dropped to 264 million yuan, down 88% year-on-year [1] Market Analysis - Huatai Securities attributes the profit decline primarily to a decrease in high-margin operator business revenue, which has reduced its proportion in the overall revenue structure, shifting towards lower-margin computing services [1] - Jefferies' report indicates that ZTE's projected revenue, core operating profit, and net profit for Q3 2025 are expected to grow by 5%, but with declines of 115% and 88% respectively, significantly below market expectations [1] - The gross margin has decreased from 40% to 26% year-on-year, leading to a 33% decline in gross profit, attributed to delays in telecom equipment delivery and weak telecom demand [1] Future Outlook - Jefferies anticipates an improvement in gross margin for Q4, but overall, with Chinese telecom operators further cutting capital expenditures, high-margin telecom revenue may see a double-digit decline in 2025 [1] - There is no indication that new business areas, such as servers and switches, will provide sufficient offset to these declines [1]