Against the backdrop of surging AI demand, Tianfu Communication delivered a strong third-quarter report.
In the third quarter of 2026, the company achieved operating revenue of 1.923 billion yuan, up 31.50% year-on-year; net profit attributable to shareholders of the parent company was 879 million yuan, up 55.30% year-on-year; net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses was 879 million yuan, up 55.78% year-on-year.
Extending to the first three quarters, the company achieved operating revenue of 4.751 billion yuan, up 21.25% year-on-year; net profit attributable to shareholders of the parent company was 2.083 billion yuan, up 42.18% year-on-year; net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses was 2.065 billion yuan, up 44.26% year-on-year.
The financial report gives a very clear reason for the growth: the accelerated development of the global artificial intelligence industry and the advancement of global data center construction have driven sustained and stable growth in demand for high-speed optical device products. In other words, the AI computing power industry chain remains the main driver of Tianfu Communication's performance growth.
However, behind the strong profit growth there are several changes worth noting: accounts receivable and inventory rose sharply, and the growth rate of operating cash flow was lower than that of net profit; at the same time, the company increased R&D investment, made strategic stockpiling, and prepaid for equipment, indicating that it is still in a cycle of capacity expansion and product iteration.
Quarterly profit elasticity stands out, net margin continues to rise
In the third quarter, Tianfu Communication's revenue was 1.923 billion yuan, up 31.50% year-on-year; net profit attributable to shareholders of the parent company was 879 million yuan, up 55.30% year-on-year.
On a quarterly basis, the company's net margin attributable to the parent company in the third quarter was approximately 45.72%, a clear increase from approximately 38.71% in the same period last year. Net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses was 879 million yuan, almost flat with net profit attributable to shareholders of the parent company, indicating high profit quality in the quarter and no reliance on non-recurring items such as government subsidies or investment income.
In terms of earnings per share, basic earnings per share in the third quarter were 0.8062 yuan, up 54.98% year-on-year; diluted earnings per share were 0.8045 yuan, up 55.04% year-on-year. The weighted average return on equity was 12.91%, up 1.74 percentage points year-on-year.
Gross margin improves significantly in first three quarters, cost side contributes notably
In the first three quarters, the company's operating revenue was 4.751 billion yuan, up 21.25% year-on-year; operating cost was 1.779 billion yuan, down 5.69% year-on-year.
This set of data is the most noteworthy part of the financial report: while revenue grew, operating cost actually declined, directly boosting gross margin. Based on the financial report data, the company's gross profit in the first three quarters was approximately 2.972 billion yuan, with a gross margin of approximately 62.56%; the gross margin in the same period last year was approximately 51.87%, an increase of more than 10 percentage points year-on-year.
The company did not break down specific product gross margin changes in the third-quarter report, but from the results, revenue growth, product mix, economies of scale, and cost control jointly amplified profit elasticity. Operating profit in the first three quarters was 2.408 billion yuan, up approximately 42.5% year-on-year; total profit was 2.404 billion yuan, up approximately 42.0% year-on-year; the growth rate of net profit attributable to shareholders of the parent company basically matched the growth rate of operating profit.
AI and data centers remain the core drivers
Tianfu Communication clearly stated in its financial report that the growth in operating revenue was mainly due to the accelerated development of the global artificial intelligence industry and global data center construction, which drove sustained and stable growth in demand for high-speed optical device products.
This means that the company's current performance is still highly benefiting from the AI computing infrastructure investment cycle. As an important link in high-speed interconnection within and between data centers, high-speed optical devices play a key role in the upgrading of AI servers, switches, and optical modules.
From the performance in the first three quarters, Tianfu Communication's growth was not just volume expansion on the revenue side, but also reflected in improved profitability. The growth rate of net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses was 44.26%, higher than the revenue growth rate of 21.25%, indicating that under the pull of AI demand, the company's operating leverage is emerging.
R&D expenses surge nearly 48%, exchange losses drag on financial expenses
The expense side shows a structure of "one increase and one decrease."
In the first three quarters, the company's R&D expenses were 296 million yuan, up 47.71% year-on-year, mainly due to increased investment in R&D projects and higher labor costs. The R&D expense ratio was approximately 6.22%, up from approximately 5.11% in the same period last year. For high-speed optical communication device companies, the product speed upgrades and process requirements brought by AI data centers mean that R&D investment remains key to maintaining competitiveness.
Selling expenses were 13.7833 million yuan, down 11.62% year-on-year; administrative expenses were 101 million yuan, down 5.25% year-on-year. Selling and administrative expenses remained restrained, helping to release profits.
The pressure mainly came from financial expenses. In the first three quarters, financial expenses were 61.745 million yuan, compared with -35.0805 million yuan in the same period last year, an increase of 276.01% year-on-year. The company explained that this was mainly due to an increase in exchange losses year-on-year. In other words, exchange rate fluctuations created a certain drag on profits.
In addition, credit impairment losses were 44.4898 million yuan, up 154.99% year-on-year, mainly due to an increase in bad debt provisions made according to credit impairment testing. This corresponds to the rapid growth in accounts receivable.
Accounts receivable and inventory rise sharply, cash conversion weaker than profit growth
As of the end of the third quarter, the company's accounts receivable were 1.945 billion yuan, up 73.33% from the end of last year. The company said this was mainly a natural increase brought by sales growth.
Inventory increased even more, with period-end inventory of 1.274 billion yuan, up 178.65% from the end of last year, mainly due to an increase in raw materials brought by strategic stockpiling. Prepayments were 92.187 million yuan, up 343.75% from the end of last year, mainly due to an increase in prepaid material payments.
This shows that, on the one hand, the company is taking on growing demand, and on the other hand, it is locking in raw materials and production capacity resources in advance. Strategic stockpiling usually means that the company is confident about subsequent orders and delivery pace, but it also occupies working capital and places higher demands on inventory turnover.
In terms of operating cash flow, in the first three quarters, net cash flow from operating activities was 1.462 billion yuan, up 8.75% year-on-year, a growth rate lower than the 42.18% growth rate of net profit attributable to shareholders of the parent company. Net operating cash flow accounted for approximately 70% of net profit attributable to shareholders of the parent company, lower than approximately 92% in the same period last year.
From the cash collection perspective, in the first three quarters, cash received from sales of goods and provision of services was 4.433 billion yuan, up approximately 20.6% year-on-year, basically matching the revenue growth rate; however, cash outflows for procurement, employee compensation, taxes, and other items also rose simultaneously, especially with stockpiling and expansion investment occupying cash flow.
Balance sheet expands while leverage remains low
As of the end of the third quarter, Tianfu Communication's total assets were 8.245 billion yuan, up 27.84% from the end of last year; owners' equity attributable to shareholders of the listed company was 6.580 billion yuan, up 19.50% from the end of last year.
Total liabilities were 1.659 billion yuan, with an asset-liability ratio of approximately 20.1%, still a low overall leverage level. The company had no short-term borrowings or long-term borrowings at period-end. Notes payable were 284 million yuan and accounts payable were 707 million yuan, up 207.20% and 75.75% respectively from the end of last year, mainly related to increased procurement and an increased use of bank acceptance bill payments.
Contract liabilities were 366 million yuan, up 128.14% from the end of last year, mainly due to an increase in advance receipts from customers. To a certain extent, the increase in advance receipts also reflects customer demand and advance funding arrangements for order execution.
Current assets were 6.209 billion yuan, current liabilities were 1.633 billion yuan, and the current ratio was approximately 3.80 times. The company's monetary funds were 2.659 billion yuan. Although this was down 11.26% from the end of last year, the absolute scale remained relatively ample.
Large investment cash outflow, mainly due to capacity expansion and US dollar time deposits
In the first three quarters, the company's net cash flow from investing activities was -2.161 billion yuan, compared with -50.4478 million yuan in the same period last year. The company explained that this was mainly due to the impact of increased purchases of US dollar time deposits during the reporting period.
The cash flow statement shows that in the first three quarters, cash paid for the purchase and construction of fixed assets, intangible assets, and other long-term assets was 491 million yuan, reflecting that investment in production capacity, equipment, and land is still ongoing. At period-end, other non-current assets were 152 million yuan, up 446.60% from the end of last year, mainly due to an increase in prepaid equipment payments; intangible assets were 116 million yuan, up 28.75% from the end of last year, mainly due to land purchased by a subsidiary.
In addition, other current assets were 50.0925 million yuan, up 134.38% from the end of last year. The company said this was mainly due to Hong Kong stock listing expenses that had been incurred during the reporting period and should be capitalized. This means that the company's work related to advancing its Hong Kong stock listing has already been reflected in expenses.
In terms of cash and cash equivalents, the period-end balance was 939 million yuan, a clear decline from 2.864 billion yuan at the beginning of the period. In addition to the outflow from investing activities, it was also affected by cash dividends and exchange rate changes. In the first three quarters, the impact of exchange rate changes on cash and cash equivalents was -141 million yuan.
Large dividend implemented, equity incentives cover 740 people
In terms of shareholder returns, the company's 2026 semi-annual profit distribution plan was: based on total share capital of 1.091 billion shares, distribute a cash dividend of 5 yuan for every 10 shares to all shareholders, totaling 545 million yuan in cash dividends. This equity distribution was completed on September 17, 2026.
The cash flow statement shows that in the first three quarters, cash paid for dividends, profits, or interest was 1.093 billion yuan, a clear year-on-year increase, which was also the main reason for net cash flow from financing activities of -1.084 billion yuan.
In terms of equity incentives, the company's 2026 restricted stock incentive plan ultimately set October 8, 2026 as the grant date, granting 2.2769 million second-class restricted shares at 119.5 yuan per share to 740 incentive recipients. The incentive recipients cover a relatively broad group, showing that the company is trying to bind its core team during a stage of rapid growth and intensifying competition.
As of the end of the reporting period, the total number of ordinary shareholders of the company was 239,991. Among the top ten shareholders, Suzhou Tianfu Renhe Investment Management Co., Ltd. held 37.47% and was the largest shareholder; Zhu Guodong held 6.97%; Hong Kong Central Clearing Limited held 3.05%.
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