ZTE up 7% after AI pivot, computing surge drive fivefold increase in third quarter profit

Shares in ZTE rose as much as 7 per cent in Hong Kong on Tuesday morning after the Chinese telecommunications equipment maker posted a nearly fivefold jump in third-quarter profit, driven by rapid expansion in its computing infrastructure and overseas operations.

Net profit attributable to shareholders reached 1.31 billion yuan (US$196.3 million) for the three months ended September 30, up 395 per cent from a year earlier, according to an exchange filing released on Monday evening. Revenue climbed 34 per cent to 38.81 billion yuan over the same period.

The Shenzhen-based company said its third-quarter surge in computing infrastructure, consumer terminals and international sales helped counter a slump in capital expenditure by domestic telecoms carriers.

For the first nine months, computing-related revenue surged over 70 per cent, accounting for 38 per cent of total sales, supported by an active pivot towards artificial intelligence.

“Since the beginning of 2026, ZTE has remained focused on AI as a strategic priority,” the company said in a statement on Monday.

Within the computing segment, revenue from servers and storage climbed more than 70 per cent, while sales of data-centre products surged nearly 130 per cent.

International revenue increased more than 30 per cent during the nine-month period, propelled by global opportunities in 5G networks, fibre upgrades and AI computing infrastructure, the company said.

Home and personal terminal products contributed 23 per cent of total revenue.

Despite the quarterly rebound, gross margins remained constrained by industry cycles and shifts in product mix, ZTE said, adding that it was “further strengthening expense discipline”.

The three-month turnaround also contrasts with a weaker performance earlier in the year. For the nine months to end of September, net profit dropped 23.7 per cent year on year to 4.06 billion yuan, even as revenue expanded 16.2 per cent to 116.84 billion yuan.

Operating cash flow rose 76 per cent to 841.6 million yuan in the third quarter, though the nine-month tally shrank nearly 60 per cent to 715 million yuan because of higher cash outlays for goods and services.

Looking ahead, ZTE said it was refining its product architecture to reduce the cost per token through better coordination between computing hardware and network systems.

“Competition in the AI industry is shifting from expanding computing capacity to improving efficiency across the entire token-processing chain,” ZTE said.