In 2025, the company achieved rapid earnings growth, with operating revenue reaching RMB 902.887 billion, a year-on-year increase of 48.22%; net profit attributable to parent company shareholders reached RMB 35.286 billion, a year-on-year increase of 51.99%. By business segment, AI server revenue grew over 3 times year-on-year, driving both volume and price higher for the cloud computing business, whose gross margin reached the highest level in nearly a decade; revenue from switches above 800G grew 13 times year-on-year, with market share firmly ranking first in the industry. Looking ahead, all four major North American CSPs have indicated "strong AI demand and tight computing power supply." As a global leader in the AI server and switch market, the company is poised to benefit from the robust AI demand. The company continues to collaborate with customers on next-generation products, with its delivery capability and depth of supply chain integration firmly positioned in the industry's first tier. As order scale and product value-added increase simultaneously, the cloud computing business is expected to continue experiencing "volume and price rising together."

Thesis

1. Rapid earnings growth in 2025, cloud computing business sees volume and price rise together. In 2025, the company achieved rapid earnings growth, with operating revenue reaching RMB 902.887 billion, a year-on-year increase of 48.22%; net profit attributable to parent company shareholders reached RMB 35.286 billion, a year-on-year increase of 51.99%. By business segment, AI server revenue grew over 3 times year-on-year, driving both volume and price higher for the cloud computing business, whose gross margin reached the highest level in nearly a decade; revenue from switches above 800G grew 13 times year-on-year, with market share firmly ranking first in the industry.

2. Optimistic Capex guidance from North American CSPs, the company expected to continue benefiting from strong AI demand.

Looking ahead, on the demand side, the full-year 2025 capital expenditure of the four major North American CSPs totaled USD 413.5 billion, a year-on-year increase of 65%. Amazon, Google, and Meta's capital expenditure guidance for 2026 is USD 200 billion, USD 175-185 billion, and USD 115-135 billion, respectively. Using the mid-point of the guidance, the combined capital expenditure for these three companies in 2026 is appr oximately USD 505 billion, a year-on-year increase of 71%. All four major North American CSPs have indicated "strong AI demand and tight computing power supply." As a global leader in the AI server market, the company is poised to benefit from the robust AI demand. The company continues to collaborate with customers on next-generation products, with its delivery capability and depth of supply chain integration firmly positioned in the industry's first tier. As order scale and product value-added increase simultaneously, the cloud computing business is expected to continue experiencing "volume and price rising together."

Risks: AI development falling short of expectations; risks arising from macroeconomic fluctuations; risks from industry volatility; foreign exchange rate fluctuation risks; risks associated with customer concentration.

Risks

The development of AI falls short of expectations. If future AI demand declines and major companies' capital expenditures fall short of expectations, the company will face risks such as reduced or lost orders, which could adversely affect its performance.

Risks from macroeconomic volatility. The electronics industry is highly correlated with the broader macroeconomy and is sensitive to fluctuations in international and regional trade. If economies within the company’s business coverage fall into recession or experience adverse macro changes, end-consumer spending in those markets will be directly affected. This would reduce client demand and lead to lower operating revenue.

Risks from industry fluctuations. The electronics industry is characterized by rapid technological and product iteration. If the company fails to upgrade its technologies, products, or operations in line with new industry needs, its business performance may be negatively impacted.

Risks from exchange rate fluctuations. The company operates in multiple countries and regions with different currencies. Exchange rate volatility may affect profitability.

Risks from client concentration. If demand from major clients declines, if their market share weakens, if there are significant changes in their competitive positioning, or if the company’s relationships with them change, the company could face reduced or lost orders. This would directly affect operations and have an adverse impact on overall performance.