Demand for 800G and 1.6T modules lifted quarterly sales by a quarter, but currency and investment losses now decide how much of that reaches Innolight's reported profit.
Zhongji Innolight, a Chinese maker of the optical modules that link AI chips inside data centers, said third-quarter net profit rose 173.74% from a year earlier to RMB8.59 billion on revenue of RMB27.77 billion, up 171.83%. The Shenzhen- and Hong Kong-listed company published the results after the market closed on October 29, the 21st Century Business Herald reported, and attributed the growth to rising sales of high-end 800G and 1.6T modules as AI computing infrastructure is built out worldwide.
Optical modules convert electrical signals into light so that data can travel between servers and switches over fiber; the 800G and 1.6T labels refer to data rates of 800 gigabits and 1.6 terabits per second. For the first nine months, Innolight earned RMB22.24 billion, up 211.81%, on revenue of RMB69.55 billion. Profit excluding one-off items reached RMB22.11 billion, according to Phoenix New Media.
The quarter also showed a gap between sales and earnings. Zhongji Innolight’s third-quarter revenue rose 24.62% from the second quarter, while net profit rose only 8.46%. Losses on currency and on equity investments held profit back: second-quarter profit had been RMB7.92 billion. In the first half, Innolight earned RMB13.65 billion on revenue of RMB41.78 billion, Phoenix New Media reported.
Hong Kong listing proceeds and investments trimmed the quarter’s profit
A report by Wallstreetcn, republished by Futu News, breaks down the difference. The weaker Hong Kong dollar against the yuan produced a currency loss of about RMB390 million in the quarter on the cash Innolight raised in its Hong Kong listing in July; after interest income and other items, that fundraising reduced net profit by about RMB254 million. The company also booked a fair-value loss of about RMB440 million on equity investments in listed companies during the quarter.
Excluding non-recurring items, chiefly that RMB440 million fair-value loss, third-quarter profit was RMB9.02 billion, up 190.13% from a year earlier. On that measure, which still includes the currency loss, profit grew faster than revenue, so the slowdown in reported profit growth came from investment and currency losses rather than from weaker module sales.
Operating cash flow for the nine months was RMB8.01 billion, up 46.81%, while the company spent a net RMB12.42 billion on investing activities. The controlling shareholder group sold 6,208,552 A-shares for about RMB3.16 billion; with dilution from the Hong Kong share issue, its stake fell from 17.99% to 16.53%, according to the Wallstreetcn report.
Innolight has also been buying back stock: treasury shares rose from RMB46.88 million at the start of the year to RMB4.999 billion, according to Wallstreetcn. The board agreed to cancel 5.65 million repurchased A-shares that had been held for employee incentive plans, reducing total share capital from 1.178 billion to 1.172 billion shares.
The results did not stop a sell-off across China’s AI hardware names
Innolight shares fell more than 8% on October 29 to close at RMB582.05, before the results were published, giving its A-shares a market value of about RMB686 billion. Its Hong Kong shares fell 10% the same day. The decline matches a broader retreat in Chinese AI hardware stocks, which EastFrontier has tracked since the CSI 300 entered a bear market on October 22.
Rival Eoptolink reported the same evening. Its third-quarter net profit rose 61.15% to RMB3.84 billion on revenue of RMB10.94 billion, up 80.30%, according to the Herald’s earnings roundup. Over nine months Eoptolink earned RMB11.37 billion, up 79.74%, on revenue of RMB31.85 billion, up 92.97%. Innolight’s third-quarter growth rates were more than twice Eoptolink’s on both revenue and profit.
The fourth quarter will test whether 1.6T demand outruns the currency drag
Innolight’s report gave no separate revenue figure for 1.6T modules, and the company did not issue a quarterly forecast. Investors will look to the fourth quarter for three things: whether revenue keeps rising at the third quarter’s 24.62% sequential pace, whether currency losses on Hong Kong proceeds fade as the money is spent, and whether the controlling shareholders sell more stock.
The clearest signal will come from the data-center operators that buy high-speed modules. Their capital spending plans for 2027 will show whether demand for 1.6T products can keep Innolight’s revenue rising at the third-quarter pace.