Chinese robotics company Unitree reported a drop in third-quarter net profit, driven by increased investment in "brains" for robots--an artificial-intelligence system that allows them to perform more complex tasks.
Net profit fell 17% to 112.69 million yuan, equivalent to US$16.90 million, during the three months ended September, according to a filing with the Shanghai Stock Exchange late Wednesday.
Revenue rose 70% to 665.04 million yuan, as sales benefits from a more diversified product lineup.
The Hangzhou-based company, officially known as Yushu Technology, saw its research and development spending surged nearly 250% during the quarter as it invested more developing AI systems to improve the capabilities of its robots, the filing showed.
Unitree's Shanghai debut was one of China's most prominent tech listings this year, with shares vaulting more than fivefold on the first day of trading. While the stock subsequently declined more than 60% from its peak, it has pared some losses this month.
Shares fell 2.7% in early morning trading, underperforming the Shanghai Composite Index's 0.7% decline.
Founded in 2016 by Wang Xingxing, the company specializes in developing robots that walk and run like human and is widely regarded as a leader in robot hardware development.
While current humanoid robots can perform tasks such as a dancing or putting bread in an oven, more advanced AI systems are needed to help them understand their surroundings, make decisions, and carry out more complicated tasks.
Wang said earlier this month that he now expects a breakthrough in humanoid robots to come in as little as two years.
Morgan Stanley said in a recent note that it remains positive on Unitree's transition toward a robotics company that develops both hardware and the AI software that supports it.
"We appreciate its pragmatic, commercialization-focused approach and strong cash flow, which support continued investment in intelligence," the bank said. "However, further progress in 'brain' and repeatable commercial deployments is needed for more upside on stock performance."
Laila Khawaja, a research director at Gavekal Technologies agreed that Unitree "must own the robot intelligence layer" if the company wants to become a top-tier global robotics company.
"Hardware alone won't do it as many hardware components tend to be commoditized, while value will increasingly accrue to the robot 'brain'," she said.
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