Once upon a time, CATL (SZSE: 300750 / HKEX: 03750) stood tall on a trio of advantages: technological leadership, economies of scale, and high overseas margins; today's predicament stems from a quadruple squeeze of price wars, de-CATLization, subsidy rollbacks, and trade barriers.
On the evening of October 20, CATL released its 2026 third-quarter report: revenue grew 56%, net profit grew 32%. The very next day, its A-share stock price plummeted 12.03% in a single session, with trading volume reaching 32.439 billion yuan — the second-largest single-day drop since its listing. Why would a seemingly strong earnings report become the trigger for a sell-off?
Single-Quarter Deceleration, Gross Margin Hits Two-Year Low
According to the third-quarter data disclosed by CATL: for the first three quarters of 2026, the company achieved operating revenue of 442.137 billion yuan, up 56.19% year-on-year; net profit attributable to shareholders of 64.530 billion yuan, up 31.60% year-on-year; non-GAAP net profit attributable to shareholders of 57.876 billion yuan, up 32.68% year-on-year. Looking at the first three quarters alone, net profit has grown for six consecutive years, averaging over 230 million yuan in daily net earnings. However, breaking down the single quarter using the half-year report data reveals a markedly different picture: in the third quarter, the company's revenue was 165.221 billion yuan, up 58.58% year-on-year; net profit attributable to shareholders was 21.246 billion yuan, up only 14.54% year-on-year and down 5.77% quarter-on-quarter; non-GAAP net profit was 18.862 billion yuan, down 9.84% quarter-on-quarter.
The third-quarter gross margin fell to 20.69%, down 5.1 percentage points from 25.80% in the same period last year and down 2.46 percentage points from 23.15% in the second quarter, marking the lowest level since the fourth quarter of 2022. The net sales margin dropped to 13.60% (including minority shareholders), the lowest since 2024, or approximately 12.9% on an attributable basis. On a per-unit shipment basis, third-quarter unit profit fell to 82 yuan per kilowatt-hour, a record low. The overall gross margin for the first three quarters was approximately 22.7%, down about 2.6 percentage points year-on-year.
After the third-quarter report was disclosed, UBS cut its net profit forecasts for 2026 to 2028 by 11% to 14%, lowering its target price from HK$820 to HK$730; Citi, JPMorgan, and others also reduced earnings expectations. According to public reports, the market's consensus estimate for full-year net profit has been revised down from approximately 100 billion yuan to around 90 billion yuan, and several foreign institutions had expected third-quarter net profit to fall between 22.9 billion and 26 billion yuan — the actual figure came in below the lower end of that range.
Nine Consecutive Years as Global Leader — So Why the Bearish Sentiment?
To understand CATL's current difficulties, one must first return to its former glory days. In 2025, the company's full-year operating revenue was 423.702 billion yuan, up 17.04% year-on-year; net profit attributable to shareholders was 72.201 billion yuan, up 42.28% year-on-year; net operating cash flow was 133.220 billion yuan, up 37.35% year-on-year. With revenue growing 17%, profit surged 42%, gross margin climbed to 26.27%, and the attributable net margin reached 17.04%.
In 2025, CATL's lithium battery sales volume reached 661 GWh, up 39.16% year-on-year, of which power batteries accounted for 541 GWh (+41.85%) and energy storage batteries 121 GWh (+29.13%). According to SNE Research, the company's global market share in power batteries was 39.2%, up 1.2 percentage points, ranking first globally for nine consecutive years; energy storage shipments ranked first globally for five consecutive years; overseas power battery market share rose to 30.0%, and domestic installed capacity market share reached 43.42%.
In terms of shareholder returns, the company has implemented cash dividends at 50% of net profit for three consecutive years, with cumulative dividends approaching 100 billion yuan after completing the 2025 payout; the 2025 buyback plan amounted to 4 to 8 billion yuan, with approximately 4.386 billion yuan repurchased by the end of the reporting period. These figures demonstrate that CATL is not a company that rose on a single trend. It possesses advantages across technology, scale, supply chain, and more. Yet the combination of "technology premium + economies of scale + high overseas margins" that these moats once supported has now loosened.
Second-tier manufacturers catching up have shrunk the technology lead from one to two generations down to half a year to a year; amid overcapacity, scale may become a burden; high overseas margins remain, but export tax rebate cuts, the introduction of consumption tax, and local content requirements in Europe and the U.S. are eroding this profit source.
Battery Swapping, Energy Storage, and Overseas Expansion — The Next Ace?
As of October 22, CATL's A-share price stood at 222.28 yuan. Based on A-share capital stock, the A-share market capitalization is approximately 980 billion yuan; based on total capital stock, the total market capitalization is approximately 1.03 trillion yuan; the trailing price-to-earnings ratio is approximately 12 times. Compared to its historical high of 467.35 yuan in May, it has retreated more than 52%.
Facing these challenges, CATL has simultaneously launched reforms across organization, products, and business models. In mid-October, Yang Jun, CEO of Shidai Dianfu, succeeded Han Wei and concurrently assumed the roles of co-president of the market system and president of the domestic passenger vehicle product line — a move interpreted as an upgrade of the battery-swapping business. The Chocolate battery-swapping stations have been built at 2,520 locations, with a full-year target of over 3,000, extending revenue toward energy replenishment services; on the product front, the Kirin condensed-matter battery, Shenxing ultra-fast charging battery, and sodium-ion new battery maintain a high-end generational gap, with R&D expenses of 18.517 billion yuan in the first three quarters; on the business model front, Q3 power and energy storage sales exceeded 260 GWh, with energy storage accounting for about one-quarter, shifting from selling battery cells to system integration; in overseas markets, the company is transitioning from "product going global" to "capacity going global," advancing localization in Germany, Hungary, and Indonesia, transforming overseas high margins from "policy arbitrage" into "capability premium."
Financially, the company is pursuing high-intensity expansion alongside shareholder returns, but operating cash generation is slowing, and the alignment between capital and returns is declining. The next step is to match capital expenditure with cash flow, debt with project returns, and shareholder returns with safety margins, rebuilding financial balance between expansion and safety.
CATL executives stated at an earnings briefing that combined demand for vehicle-mounted batteries and energy storage batteries could grow 20% to 30% by 2027, citing the advancement of commercial vehicle electrification and growth in overseas pure electric sales. This judgment may not be overly pessimistic. But what the market wants to see is not demand forecasts, but gross margin stabilization, unit profit recovery, operating cash flow restoration, and overseas localization taking root. CATL needs to prove it has the capacity for sustained growth.
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