Cambricon met revenue expectations. Why was the market response still subdued?

  • Cambricon’s revenue in the third quarter of 2026 was approximately 3.5 billion yuan, broadly meeting recently lowered expectations; inventories, however, increased by 3.4 billion yuan to 11.7 billion yuan. JPMorgan believes an increase in memory inventory is the most likely explanation.
  • The bank says discussion of domestic GPUs is shifting from supply bottlenecks such as advanced-process manufacturing capacity and high-bandwidth memory (HBM) to whether demand can withstand the next round of changes: the use of model distillation is tightening, while rising memory costs are pushing up GPU prices.
  • In the current market mood, meeting lowered expectations still disappointed investors, with limited interest in buying the dip. JPMorgan believes that if Cambricon cannot deliver results above expectations, the near-term performance of other domestic GPU companies is also unlikely to improve markedly.

Apple suppliers’ results were weak. What will drive an improvement?

  • Lens Technology’s third-quarter net profit rose 16% quarter on quarter, markedly weaker than normal seasonal patterns. Management attributed the gap mainly to exchange rates and also mentioned a change in the timing of iPhone releases; the company expects a marked quarter-on-quarter increase in fourth-quarter results, driven by the launch of a foldable iPhone.
  • Zhuhai CosMX Battery’s third-quarter revenue was flat year on year, net profit fell 86.7% year on year, and shipments were below 90 million units; the weakness was mainly related to its PC business. The company expects iPhone steel-shell battery shipments to increase further in the fourth quarter alongside Duo shipments, and to pass on cost pressures from higher lithium carbonate prices and lower export tax rebates through pricing discussions with customers, driving a quarter-on-quarter improvement in gross margin.
  • JPMorgan believes the two companies’ shortfalls against expectations were more related to product cycles and businesses outside Apple than to a structural problem in iPhone demand. The bank prefers Cowell and Luxshare Precision, which have greater exposure to the Pro and Pro Max, but remains cautious about Android demand.

How will demand for new products and memory costs affect the smartphone supply chain?

  • JPMorgan’s seventh-week tracking of iPhone delivery wait times shows that global wait times for Pro and Duo models have broadly returned to levels seen at the same time last year; Pro wait times vary considerably by region, with the average in China falling to about one day. The bank believes overall wait times still indicate resilient demand despite the Pro price increase; the Duo could become a driver of revenue growth as supply constraints ease.
  • The bank views the handset supply chain as an investment alternative to AI and memory trades, but stresses that this ‘anti-memory’ thesis is driven mainly by market sentiment. Memory prices may remain high through 2027, and smartphone average selling prices, margins and demand typically reach a turning point only two to three quarters after changes in memory prices.

China Telecom’s profit is still falling. Why do analysts see resilience in its operations?

  • China Telecom’s third-quarter 2026 net profit fell 14.7% year on year to 6.6 billion yuan, while service revenue fell 1.5% to 115.2 billion yuan, broadly in line with market consensus. However, the year-on-year declines in service revenue and operating profit narrowed from 2.6% and 16.7%, respectively, in the second quarter to 1.5% and 14.1% in the third quarter.
  • Excluding the effect of adjustments to value-added tax items, operating revenue was broadly stable on a comparable basis, while profit attributable to the parent company maintained solid growth. On that basis, JPMorgan believes underlying operations remain resilient and expects profit growth to resume in 2027.