Key takeaway

In 1H26, the company maintained rapid earnings growth and recorded revenue of RMB3.313bn, up 24.69% YoY; net profit attributable to shareholders of the parent company reached RMB2.518bn, up 236.94% YoY; adjusted net profit attributable to shareholders of the parent company reached RMB1.087bn, up 28.29% YoY. The company’s core business maintained steady growth, while continued iterations of AI-related products drove intelligent upgrades to its office software. As the commercialization path for AI office products becomes clearer, the company’s long-term growth potential is expected to expand further. We forecast revenue of RMB6.986bn/RMB8.274bn/RMB9.718bn in 2026/2027/2028, up 17.83%/18.44%/17.46% YoY, respectively; net profit attributable to shareholders of the parent company of RMB3.812bn/RMB2.599bn/RMB3.110bn, changing by +107.56%/-31.81%/+19.63% YoY, respectively; and corresponding PE multiples of 29x/43x/36x. We maintain our “Buy” rating.

Event

In 1H26, the company recorded revenue of RMB3.313bn, up 24.69% YoY; net profit attributable to shareholders of the parent company of RMB2.518bn, up 236.94% YoY; and net profit attributable to shareholders of the parent company excluding non-recurring gains and losses of RMB2.487bn, up 241.99% YoY.

Quick take

2Q26 revenue growth accelerates further, while adjusted profit maintains rapid growth. In 1H26, the company recorded revenue of RMB3.313bn, up 24.69% YoY; net profit attributable to shareholders of the parent company of RMB2.518bn, up 236.94% YoY, with the sharp increase mainly driven by investment income from funds; and adjusted net profit attributable to shareholders of the parent company of RMB1.087bn, up 28.29% YoY. The company’s gross margin was 84.90%, down 0.14 pct YoY; its selling expense, administrative expense, R&D expense, and finance expense ratios were 18.04%/8.36%/34.76%/0.00%, Growth in the individual business improved, while WPS 365 and WPS software maintained rapid growth. By business segment, changing by +0.04/+0.13/-1.31/+0.16 pcts YoY, respectively. The selling and administrative expense ratios remained broadly stable. R&D investment increased 20.17% YoY to RMB1.152bn, while the R&D expense ratio declined as revenue grew rapidly; the increase in the finance expense ratio was mainly due to foreign exchange losses. Net cash flow from operating activities was RMB643mn, down 12.96% YoY, but still increased YoY after excluding the impact of prepaid income tax related to investment income from funds.

In 2Q26 alone, the company recorded revenue of RMB1.700bn, up 25.40% YoY, accelerating further from 23.95% in 1Q26; adjusted net profit attributable to shareholders of the parent company was approximately RMB507mn, up approximately 24% YoY, as the core business maintained rapid growth.

1) WPS individual business: Revenue reached RMB2.014bn in 1H26, up 15.20% YoY, while revenue in 2Q26 reached RMB1.039bn, up 16.54% YoY; cumulative annual paying users in China reached 48.25mn, up 15.44% YoY, while domestic ARPU was RMB73.73, down 3.40% YoY, mainly due to promotional discounts, and is expecte d to recover gradually. Revenue from the overseas individual business reached USD26.10mn, up 43.79% YoY, while monthly active devices for overseas PC users reached 47.83mn, up 38.11% YoY.

2) WPS 365 business: Revenue reached RMB497mn in 1H26, up 60.84% YoY, while revenue in 2Q26 reached RMB253mn, up 60.88% YoY. The company introduced a frontline deployment engineer model to strengthen coordination across products, technology, presales, delivery, and operations, and added benchmark customers such as China National Nuclear Corporation, Aluminum Corporation of China, China National Petroleum Corporation, and Industrial Securities in 1H26, marking the start of large-scale expansion in the enterprise market.

3) WPS software business: Revenue reached RMB722mn in 1H26, up 33.36% YoY, while revenue in 2Q26 reached RMB375mn, up 34.41% YoY, mainly benefiting from the release of procurement demand for tech localization and domestic IT adoption among Party and government agencies and the implementation of government digitalization projects; the range of products covered by secure and reliable product assessments continued to expand, while product capabilities and the compatibility ecosystem for tech localization and domestic IT adoption improved further.

Two AI agents strengthen the AI-powered office entry point, while usage-based billing unlocks incremental monetization opportunities. On July 15, the company simultaneously launched the professional edition of Lingxi for individual users and WPS Comate for organizational customers. The professional edition of Lingxi can use tools such as documents, spreadsheets, and browsers by incorporating users’ historical documents, project context, and personal preferences, and can directly deliver editable, reviewable, and traceable Office files through WPS’s native capabilities; through three connections, two management functions, and one platform, WPS Comate connects enterprise knowledge, data, business systems, and model resources, while centrally managing token costs, permissions, and security, and it has now been deployed in 26 representative expert scenarios across 11 major fields. The company is exploring a “subscription + AI usage” business model for individual users and a “seat + AI usage” model for enterprises, while its cloud-based document repository, native Office file delivery, and organization-level data connectivity provide differentiated advantages over general-purpose AI products and are expected to gradually translate AI capabilities into incremental revenue from memberships and enterprise services.

Investment recommendation: The company’s core business continues to grow rapidly, its AI office products are being continuously upgraded and gradually commercialized, and WPS 365 and its institutional business offer substantial growth potential, providing clear visibility into the company’s long-term growth prospects. We forecast revenue of RMB6.986bn/RMB8.274bn/RMB9.718bn in 2026/2027/2028, up 17.83%/18.44%/17.46% YoY, respectively; net profit attributable to shareholders of the parent company of RMB3.812bn/RMB2.599bn/RMB3.110bn, representing YoY changes of +107.56%/-31.81%/+19.63%, respectively; and corresponding PE multiples of 29x/43x/36x. We maintain our “Buy” rating.

Risks

(1) AI commercialization falls short of expectations: If WPS AI’s user penetration or paid conversion rate is lower than expected, the growth of the company’s AI business may be affected; (2) intensifying industry competition: Continued intensification of competition in the AI office sector may affect the company’s market share and product pricing power; (3) AI product implementation falls short of expectations: If the integration of AI features into actual office scenarios is less effective than expected, product adoption and commercialization may be affected; (4) slower-than-expected progress in the institutional business: Procurement demand for tech localization and adoption of domestic IT brands is affected by policies, budgets, and other factors, creating some uncertainty over related business expansion.