Maxscend released 1H26 results. Revenue rose 6.2% YoY to RMB1.81bn, while net loss widened to RMB371mn; 2Q26 revenue reached RMB982mn (+3.6% YoY/+18.7% QoQ), but net loss deepened to RMB226mn, both below Bloomberg consensus. GPM fell 12.4ppts to 16.4%, as low fab loading, depreciation, pricing pressure and module ramp costs overwhelmed mix improvement. Maxscend is simultaneously digesting legacy inventory, executing its Fab-Lite transition and pivoting toward optical interconnect. With demand recovery uncertain and utilization subdued, we cut FY26E/FY27E revenue by 2.1%/2.4% and GPM by 11.7ppts/9.6ppts. Maintain HOLD and lower TP to RMB74.2, based on 40x 2027E EV/EBITDA, similar to 1-SD below the historical mean.

Module growth outpaced discrete, but margins lagged. In 1H26, RF module revenue climbed 22.9% YoY to RMB929mn, lifting its sales mix to 51%, as L-PAMiD shipments accelerated and Wi-Fi 7 scaled; Wi-Fi 8 also entered small-volume shipments. In contrast, RF discrete sales fell 8.3% YoY to RMB824mn amid soft handset demand and ongoing inventory digestion. The richer module mix has yet to translate into profitability, as module GPM fell 15.6ppts to 13.1%, while discrete GPM dropped 10.5ppts to 17.8%. We expect volume growth, yield improvement, greater customization and cost-down to underpin a gradual margin recovery.

Fab utilization remains the key earnings swing factor. Xinzhuo Fab’s revenue increased 43.8% YoY to RMB694mn in 1H26, while its net loss narrowed to RMB256mn from RMB337mn in 1H25. The 12-inch fab has monthly capacity of 9k wafers and has been running at roughly 50–60% utilization, per mgmt., while the 6-inch filter line has reached 15k wafers/month. Utilization improved from 1Q26 and should continue rising in 2H26, although mgmt. does not expect a high FY26 level. We believe a durable turnaround requires both higher loading and better unit economics through yield gains, cost down, and enhanced pricing.

Optical interconnect extends the platform’s runway but also raises the execution bar. Maxscend is repurposing its SOI and SiGe capabilities for optical and electrical chips used in AIDCs. First-generation SiGe electricalchip products are under collaboration, while the SiPho process platform is still undergoing finalization. The April placement’s RMB3.46bn net proceeds provide sufficient funding, but customer qualification and volume production remain distant milestones, in our view. We therefore assign no material near-term earnings contribution. Key upside risks include faster utilization recovery, stronger L-PAMiD wins or earlier optical validation; key downside risks include weak demand, slower qualification, intensifying competition, etc.