ZTE Stock Plummets 8.2% After 33% Profit Drop

Edgen Stock

·Mar 09 2026, 02:50

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Key Takeaways

ZTE Corporation's shares tumbled after its 2025 annual results revealed that a sharp increase in operating costs wiped out revenue gains, leading to a significant drop in profitability and prompting a negative market reaction.

Profit Decline: Despite a 10.4% rise in annual revenue, ZTE's net profit fell 33.3% to RMB5.618 billion as operating costs grew by 24%.
Market Sell-Off: Following the announcement on March 9, the company's Hong Kong-listed shares (00763.HK) plunged 8.18% to $23.34, while its A-shares fell 6.6%.
Margin Pressure: Analysts attribute the poor performance to squeezed gross margins stemming from an industry cycle transition and changes in business structure, leading to downward profit forecast revisions.

Hong Kong Shares Plunge 8.18% in Sell-Off

ZTE's stock faced intense selling pressure on March 9th after the company's disappointing annual results. Its Hong Kong-listed shares (00763.HK) opened 3.93% lower and extended losses throughout the early session, ultimately closing down 8.18% at $23.34. Trading was heavy, with 9.03 million shares changing hands for a total value of $213 million. The company's A-shares listed in Shenzhen (000063.SZ) experienced a similar downturn, falling 6.6% to RMB34.93 on turnover of RMB2.47 billion.

Operating Costs Rise 24%, Erasing Revenue Gains

The market backlash was a direct response to ZTE's 2025 financial report, which showed operating costs spiraling out of control. While revenue for the year grew a healthy 10.4% to RMB133.896 billion, operating costs increased by a much larger 24%, reaching RMB93.391 billion. This cost explosion crushed profitability, causing net profit attributable to shareholders to decrease by 33.3% year-over-year to RMB5.618 billion. Despite the profit decline, the company declared a final dividend of RMB4.11 for every 10 shares.

Analysts Blame Squeezed Margins for Profit Warning

According to an analysis from China Merchants Securities (CMS), ZTE's gross margin is under significant temporary pressure. The firm pointed to the "dual impact of industry cycle transition and business structure changes" as the primary drivers behind the margin contraction. This pressure on profitability prompted CMS to revise its profit forecast for ZTE downward, signaling to investors that the challenges may persist and explaining the sharp, negative re-evaluation of the company's stock.