In 2025, ZTE Corporation faced a dual challenge of industry cyclical adjustments and strategic transformation, delivering a mixed performance for the year. The company's latest annual report revealed a scenario of "revenue growth without profit expansion": full-year revenue reached 133.9 billion yuan (Renminbi), marking a 10.38% year-on-year increase and signaling a return to growth. However, net profit attributable to shareholders and net profit after extraordinary items dropped by 33.32% and 45.45%, respectively, indicating significant pressure on profitability. This performance reflects both the cyclical shifts in the telecommunications industry and the company's ongoing transition into new AI-driven sectors.
On March 9, ZTE's stock price experienced a sharp decline. At the time of reporting, its Hong Kong-listed shares fell by 7.63%, while its A-shares dropped by 5.80%. Beyond external factors such as pressure on the Hang Seng Index and broader weakness in Asian tech stocks, the company's strained financial results were undoubtedly a core factor influencing market sentiment.
A breakdown of the business structure shows that ZTE's growth drivers are quietly shifting. The operator networks business, once the main revenue contributor, reported revenue of 62.86 billion yuan during the reporting period, down 10.62% year-on-year. This challenge is not unique to ZTE but reflects broader industry trends. As domestic 5G network construction enters a mature phase, capital expenditures by the three major telecom operators have continued to decline since peaking in 2023, directly compressing growth opportunities in the traditional network equipment market.
In contrast, the government and enterprise business emerged as a standout performer, with revenue doubling to 37.22 billion yuan and becoming the core engine driving overall growth. This shift underscores the company's strategic focus on capturing opportunities presented by the AI wave. Through its "All in AI, AI for All" strategy, ZTE is increasingly turning to computing power for growth, accelerating its integration of connectivity and computational innovation.
During the reporting period, revenue from the company's computing power business grew by approximately 150%, rising to 24.6% of total revenue. Server and storage revenue increased by over 200%, while data center product revenue grew by 50%. These impressive figures indicate that ZTE's investments in AI infrastructure are beginning to yield results, reinforcing its transition from a traditional communications equipment provider to a technology-focused company.
However, this growth has not been without challenges. Despite the explosive expansion of its computing power business, profitability remains under pressure. Since 2025, global prices of memory chips (DRAM and NAND Flash) have risen sharply, a trend that continued into the first quarter of 2026. This has significantly increased the proportion of storage costs in the total cost of AI servers, driving up overall manufacturing expenses.
As a midstream player in the supply chain, ZTE faces dual pressures: rising costs from upstream component suppliers and limited ability to fully pass these increases on to downstream customers, such as major internet companies, due to their strong bargaining power. As a result, the gross profit margin of the government and enterprise business remains notably lower than that of the more mature operator networks segment. This margin differential has weighed on overall profitability as revenue composition shifts.
Notably, ZTE also announced its profit distribution plan for 2025. The company proposed a cash dividend of 4.11 yuan per share (before tax), based on the total number of shares on the dividend record date. Against the backdrop of profit pressure, this dividend not only reflects the company's commitment to shareholder returns but also signals management's confidence in its cash flow position and future strategic development. For investors, while monitoring the progress of ZTE's AI transformation and profit recovery, this cash dividend provides a tangible near-term return expectation.
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