Loongson Technology Reports 14% Revenue Growth in First Three Quarters; Stock Incentive Plan Reflects Confidence in Future Development

Loongson Technology Corporation Limited (688047) released its Q3 2025 financial report, showing a 13.9% year-on-year increase in revenue for the first three quarters, reaching 351 million yuan. The growth was attributed to improved cost-performance competitiveness of its products and gradual recovery in the business market. However, net profit attributable to shareholders widened to a loss of 394 million yuan, an increase of 51 million yuan compared to the same period last year. Gross margin stood at 42.37%, up 12.40 percentage points year-on-year.

In Q3 alone, revenue rose 21.5% year-on-year to 107 million yuan, though it declined 9.6% quarter-on-quarter. Net loss narrowed slightly to 99 million yuan, a reduction of 5.29 million yuan year-on-year and 44 million yuan quarter-on-quarter. Gross margin for the quarter was 42.20%, up 11.50 percentage points year-on-year but down 4.93 percentage points sequentially.

The company has entered a new phase of development, driven by its independent R&D efforts. Having successfully developed key technologies in processors, supporting chips, and system software, Loongson CPUs now demonstrate competitive cost-performance in the open market. The completion of a Linux-based software ecosystem and a binary translation system from X86 to Loongson architecture has effectively broken software ecosystem barriers. The company’s focus is now shifting from product development to market expansion, marking the start of a new revenue growth cycle.

On September 28, Loongson announced a restricted stock incentive plan, granting 530,862 shares (0.13% of total shares) to 100 employees at 79.03 yuan per share. The vesting conditions include revenue growth targets of 30%/24% for 2025 and 100%/80% for 2026, relative to the 2024 baseline. This plan underscores management’s confidence in future growth.

Investment recommendation: Adjusted earnings forecasts maintain an "Outperform the Market" rating. With expectations of recovery in e-government and industrial control markets, revenue for 2025–2027 is projected at 629/913/1,256 million yuan (previously 563/739/1,028 million yuan), with net losses narrowing to 323/71 million yuan before turning profitable at 155 million yuan in 2027.

Risks include weaker-than-expected downstream demand, policy market fluctuations, and competitive pressures.