China Mobile's first-quarter 2026 financial results present a mixed picture. On one hand, revenue from core telecommunications operations fell by 1.1% year-on-year, while net profit narrowed by 4.2% to RMB 29.3 billion, reflecting persistent profit pressures. On the other hand, net cash flow from operating activities surged by 128.1% year-on-year to RMB 71.4 billion, marking a strong performance in recent comparable periods and demonstrating the company's proactive control over fund management and payment schedules.
In terms of total revenue, first-quarter revenue reached RMB 266.5 billion, a modest increase of 1.0% year-on-year. The growth in overall revenue was primarily supported by a 12.7% surge in "other business revenue," which rose to RMB 46.6 billion, indicating that emerging sectors such as computing power and intelligent services are becoming significant supplementary revenue sources. However, core business revenue declined by 1.1% to RMB 219.9 billion, underscoring the maturity of traditional communication services.
On the profit front, EBITDA decreased by 5.0% year-on-year to RMB 76.7 billion, with the EBITDA margin dropping by 1.8 percentage points from 30.6% in the same period last year to 28.8%. The net profit margin also declined from 11.6% to 11.0%. On the cost side, operating expenses grew by 3.2% year-on-year, significantly outpacing revenue growth. Research and development expenses surged by 22.3%, representing a key factor behind the profit pressure and reflecting the company's continued strategic focus on technological innovation.
User metrics remained robust. The total number of mobile customers exceeded 1.009 billion, with a net addition of 3.76 million in the first quarter. The number of 5G network customers reached 668 million, increasing by 26 million since the beginning of the year. IoT card connections surpassed 1.5 billion, with a net addition of over 22.3 million in the quarter. These figures confirm China Mobile's sustained competitive advantage in its core telecommunications business.
Core Business Revenue Declines as Other Businesses Step Up
A breakdown of the revenue structure highlights the central challenge: traditional core business growth has plateaued. Core business revenue fell by 1.1% to RMB 219.9 billion, indicating continued saturation in conventional communication services such as voice and data.
In contrast, "other business revenue" showed strong performance, providing a structural offset. This segment, which reached RMB 46.6 billion, grew by 12.7% year-on-year and now accounts for nearly 17.5% of total revenue. It primarily includes emerging areas such as cloud computing, computing power leasing, digital government services, and intelligent services, directly reflecting the implementation of China Mobile's three-pronged strategy focusing on communication services, computing power services, and intelligent services.
From an annual perspective, if other business revenue maintains double-digit growth, it is expected to counterbalance the structural pressure from core revenue within the next one to two years, serving as a new engine for renewed revenue acceleration.
Rising Costs Amid Expanding R&D Investment
Profit pressure in the first quarter was mainly driven by increased costs. Operating expenses rose by 3.2% year-on-year to RMB 198.9 billion, representing an absolute increase of approximately RMB 6.2 billion, while revenue increased by only about RMB 2.7 billion, highlighting a significant cost-revenue gap.
Notably, R&D expenses surged by 22.3% to RMB 3.9 billion, indicating increased investment in cutting-edge technologies such as AI large models, computing power infrastructure, and 5G-Advanced. In the increasingly competitive computing power sector, such forward-looking R&D investments are necessary but exert direct pressure on short-term profitability.
Administrative and selling expenses remained relatively stable, increasing by 0.9% and 1.3% year-on-year, respectively, showing disciplined cost management in daily operations. Credit impairment losses decreased to RMB 6.11 billion from RMB 6.66 billion in the same period last year, easing bad debt pressure and providing a slight positive contribution to profits.
Investment income performed strongly, reaching RMB 6.84 billion in the first quarter, a significant increase of RMB 2.57 billion year-on-year. Income from investments in associates and joint ventures amounted to RMB 4.01 billion, partially offsetting the decline in operating profit.
Dramatic Improvement in Cash Flow as Capital Expenditures Contract
The most notable positive surprise this quarter was the 128.1% year-on-year increase in net cash flow from operating activities, which reached RMB 71.4 billion.
Analyzing the drivers: operating cash inflows remained largely unchanged compared to the same period last year (RMB 274.8 billion vs. RMB 274.5 billion). The key change was on the outflow side—cash paid for goods and services plummeted by approximately RMB 43.5 billion, or over 21%, to RMB 157.9 billion from RMB 201.4 billion in the prior year. This reduction is likely due to adjusted supplier payment schedules and controlled procurement spending, reflecting improved efficiency in cash flow management.
Capital expenditures also contracted. Cash used for the purchase and construction of fixed assets and intangible assets decreased by approximately RMB 6 billion, or 16.5%, to RMB 30.4 billion from RMB 36.4 billion in the same period last year. This suggests that the company is transitioning from a peak phase of heavy infrastructure investment to a stage focused on optimizing returns.
The balance of cash and cash equivalents at the end of the period stood at RMB 155.3 billion, an increase of over 24% from RMB 125.1 billion a year earlier, providing ample financial reserves to support future shareholder returns and strategic investments.
Steady User Growth with 5G and IoT as New Growth Drivers
In terms of user operations, China Mobile demonstrated stable and positive trends. After a net loss of 3.71 million mobile customers in the previous quarter (Q4 2025), the company added a net 3.76 million customers in the first quarter, returning to growth and highlighting its strong market appeal.
The migration to 5G continues to advance. The number of 5G network customers reached 668 million by the end of the first quarter, with a net addition of approximately 26 million during the quarter. The penetration rate of 5G customers among total mobile customers exceeded 66%, indicating ongoing benefits from 5G scale.
The Internet of Things (IoT) segment showed even stronger momentum. IoT card connections reached 1.504 billion, with a net addition of 22.33 million in the quarter, leading the industry in both total connections and growth. Combined with the company's strategic focus on computing power services, the vast data traffic and processing demands generated by IoT connections are expected to be a key driver for future growth in computing power business.
The total number of broadband customers reached 333 million, with a net addition of 3.9 million, reflecting continued penetration in the household market and creating opportunities for bundled services and average revenue per user (ARPU) growth.
Solid Balance Sheet with Continued Equity Accumulation
On the balance sheet, as of March 31, 2026, China Mobile's total assets amounted to RMB 2,153.5 billion, an increase of 2.9% since the beginning of the year. Equity attributable to owners of the parent company grew by 2.1% to RMB 1,422.8 billion, indicating steady accumulation of shareholder value.
On the liability side, total current liabilities stood at RMB 645.3 billion, with accounts payable of RMB 350 billion being the largest component, primarily consisting of normal operational liabilities. The overall financial structure remains healthy. Long-term borrowings were only RMB 9.5 billion, indicating minimal interest-bearing debt and highly controllable financial risk.
Notably, construction in progress increased by approximately RMB 21.7 billion, or 35%, from RMB 61.8 billion at the beginning of the year to RMB 83.5 billion, signaling continued investment in network and computing power infrastructure. Once operational, these projects are expected to further strengthen the company's competitive barriers. The weighted average return on equity (ROE) was 2.1%, reflecting solid absolute returns given the substantial equity base.
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