ZTE (00763) dropped more than 3% in Hong Kong trading, with the stock down 3.29% to HK$24.68 at the time of writing, recording a turnover of HK$331 million. The decline follows the company's recent release of its first-quarter 2026 results. Goldman Sachs noted that ZTE's first-quarter revenue increased 6% year-on-year to RMB 35 billion, in line with the bank's expectations. Revenue from computing-related businesses accounted for 27% of total revenue, up from 24.6% for the full year 2025. However, the gross margin fell to 28.3%, down from 29.4% in the fourth quarter of last year and 34.3% in the first quarter of the previous year. Management attributed the decline to reduced domestic telecommunications capital expenditure, which led to a lower contribution from domestic network product revenue.
Citigroup issued a research report stating that ZTE's first-quarter revenue grew 6% year-on-year to RMB 35 billion, exceeding market expectations by 3%. However, gross margin fell by 6 percentage points year-on-year to 28.3%, impacted by product mix and coming in 2.7 percentage points below market forecasts. This was partially offset by a 12% decrease in operating expenses. Operating profit declined 13% year-on-year to RMB 1.6 billion, falling 22% short of market expectations. Citigroup expects ZTE's revenue growth to be driven by new initiatives such as AI servers, other computing-related products, and consumer business, which should help offset weakness in the telecommunications network segment.
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