Cambricon’s third-quarter results: Revenue ramp-up slower than expected as rising gross margin accompanies higher inventories and receivables
Third-quarter revenue in 2026 doubled year on year, but still fell short of the ramp-up pace expected by Bernstein and the market. Gross margin rose to 58.7%, supporting the pricing assessment, while inventories and accounts receivable continued to rise and operating cash flow was negative for the quarter. Supply and the pace of revenue recognition have become key constraints.
Original source：BernsteinFirst published on Unhidea：Original source date：
Key takeaway
Bernstein believes demand and pricing for Cambricon remain supported, but supply bottlenecks and the pace of revenue recognition and collections are creating a divergence between earnings growth and cash realization.
Revenue doubled year on year. Why were institutions still disappointed?
Cambricon’s third-quarter revenue in 2026 was 3.531 billion yuan, up 104.5% year on year and 13.5% quarter on quarter. Bernstein considers the ramp-up noticeably slow: its own and market consensus forecasts for full-year 2026 revenue growth were approximately 149% and 163%, respectively, both above the quarter’s year-on-year growth rate.
The market had expected some delayed revenue to be recognized in the third quarter after the second quarter fell short of expectations. Bernstein attributes the potentially weak performance this quarter to shortages of high-bandwidth memory (HBM), manufacturing constraints and delayed revenue recognition; even when end demand is strong, supply bottlenecks can limit delivered results.
The firm also believes investors may be underestimating the time needed for cloud service providers’ orders to turn into revenue. As a result, there is a lag between order demand and revenue in a given quarter, and some revenue may shift to subsequent quarters.
Did improved gross margin accelerate profit growth as well?
Third-quarter gross margin rose to 58.7%, an increase of approximately 2.59 percentage points quarter on quarter. Bernstein believes this is consistent with strong demand for domestically produced AI chips and improved supplier bargaining power amid constrained supply. It therefore takes a more positive view of pricing and profitability than revenue alone would suggest; product mix and manufacturing costs may also have contributed.
But the gross margin improvement did not translate into across-the-board quarter-on-quarter increases in profit margins: operating margin fell from 41.4% in the second quarter to 39.8%, while net margin fell from 41.7% to 39.8%. Net profit attributable to shareholders for the quarter was 1.404 billion yuan, up 147.7% year on year and 8.2% quarter on quarter, slower than quarter-on-quarter revenue growth.
How do rising inventories and receivables constrain the assessment of earnings quality?
Inventories at the end of the third quarter were approximately 11.66 billion yuan, up 41.4% from 8.25 billion yuan at the end of the second quarter; supplier prepayments rose 4.5% quarter on quarter to 3.04 billion yuan. Bernstein interprets this as procurement and production investment running ahead of recognized sales, but inventories include raw materials and work in progress and cannot be directly converted into the amount of finished chips awaiting revenue recognition.
Accounts receivable rose from 252 million yuan at the end of the second quarter to 957 million yuan, an increase of 279.8% quarter on quarter, making the timing of collections more important. Meanwhile, third-quarter operating cash flow was negative 84 million yuan, contrasting with approximately 1.4 billion yuan in net profit attributable to shareholders: as reported earnings grew, operating activities still produced a net cash outflow during the quarter.
Why does Bernstein still rate the stock Outperform?
Bernstein assigns Cambricon an Outperform rating and a target price of 1340 yuan. Its long-term rationale rests on the company’s technological foundation and its position as a major domestic AI chip supplier benefiting from domestic substitution.
Key conditions for this thesis include commercialization of next-generation AI chips and access to sufficient domestic advanced-process manufacturing capacity. The firm identifies setbacks to either as risks that could trigger a substantial valuation downgrade, while also monitoring intensifying domestic competition and tighter sanctions; this quarter’s revenue performance specifically illustrates how supply and the pace of recognition constrain near-term results.
