Servers and data center gear now drive ZTE's growth as Chinese carriers cut network spending, while one-off gains supplied more than half of its third-quarter profit.
ZTE, the Shenzhen-based telecom equipment maker, said its compute business, which covers servers, storage and data center products, made up 38% of revenue in the first nine months of 2026, the highest share it has reported. Group revenue rose 16.2% to RMB116.84 billion and net profit attributable to shareholders was RMB4.06 billion, according to the company’s results release on October 26.
The third quarter did most of the lifting. Revenue in the three months to September rose 34.0% to RMB38.81 billion, and net profit rose 394.5% to RMB1.31 billion. Growth in the first half had been 9%, Telecompaper noted, and it put last year’s third-quarter net profit at RMB264 million, a low base that flatters the percentage.
The nine-month profit figure tells a less flattering story. Net profit attributable to shareholders fell 23.71% from a year earlier, National Business Daily and STNN, a news site of Hong Kong’s Sing Tao News group, reported, even as revenue reached a record. The gap between ZTE’s sales and its earnings is the central question for anyone following the company’s shift from carrier networks to AI infrastructure.
Compute has become ZTE’s fastest-growing business
ZTE said compute revenue grew more than 70% year on year in the first nine months. Within it, servers and storage grew more than 70% and data center products nearly 130%. Mydrivers described the segment as mainly servers, storage and data-center-related products, and said the business is being used to offset pressure on ZTE’s traditional operator network sales.
The share has climbed quarter by quarter. Compute rose from 25% of ZTE’s revenue in the first nine months of 2025 to 27% in the first quarter of 2026, 35.1% in the first half and 38% by September. The 2025 figure comes from Huanqiu, and the first-quarter figure from Converge Digest.
Growth rates have also accelerated through 2026. In its first-half release, ZTE reported compute growth of more than 55%, with servers and storage up nearly 60% and data center solutions up more than 90%. By comparison, the 2025 boom came off a smaller base: Huanqiu reported compute revenue up 180% and servers and storage up 250% in the first nine months of last year.
The products behind the numbers are aimed at large AI clusters. ZTE’s release describes an OEX SuperPod system that holds up to 128 GPUs in a single unit, with clusters that can scale to 100,000 GPUs, and says several of its own chips are already in commercial use at scale. It said compute products gained share among Chinese internet, financial, power and public-sector customers. Home and personal devices made up 23% of revenue, and international revenue grew more than 30%.
Margins and one-off gains weigh on the profit picture
ZTE said its gross margin "remained under pressure due to shifts in industry cycles" and changes in its business mix, without giving a figure in its release.
Much of the third-quarter profit also came from outside the operating business. Net profit excluding extraordinary items was RMB590 million in the quarter, less than half the headline figure, and RMB2.81 billion for nine months. Telecompaper attributed part of the jump to valuation gains on investments.
The carrier side continues to shrink. China’s three state telecom operators spent about RMB353 billion on capital investment in 2023 and have cut it each year since, with about RMB259.6 billion planned for 2026, National Business Daily reported. Their compute spending is rising quickly: China Mobile’s grew 71%, China Telecom’s 97% and China Unicom’s more than 80% in the first half. ZTE’s operator network revenue was RMB31.77 billion in the first half, or 40.7% of the total.
Inventory and cash flow show the cost of scaling up
Building servers for AI customers ties up working capital. Inventory stood at RMB73.64 billion at the end of September, up 56.61% from RMB47.02 billion at the end of 2025, and notes payable rose 65.33%, Xinhua Finance reported. Third-quarter operating cash flow was RMB840 million, up 76.0%.
National Business Daily linked the demand to spending plans at Chinese cloud companies, including Alibaba’s pledge of more than RMB380 billion for cloud and AI hardware over three years, which an Alibaba executive said in May would be exceeded. ZTE’s shares closed at RMB28.03 in Shenzhen on October 26, giving a market value of about RMB134.1 billion.
The full-year report will show whether the third-quarter pace holds. The figures to watch are whether compute’s share of revenue keeps rising past 38% over the full year and whether gross margin stabilizes as the inventory built up this year turns into deliveries.