J.P. Morgan: Insta360 revenue growth accelerates, but profit recovery is delayed again

Why did profit fall sharply despite continued revenue growth?

In the third quarter of 2026, Insta360 reported revenue of 3.919 billion yuan, up 33% year over year and faster than the second quarter’s 31%; net profit, however, was only 17 million yuan, down 94% year over year.
Higher revenue did not bring more gross profit: third-quarter gross profit was 1.321 billion yuan, below 1.401 billion yuan a year earlier; gross margin fell from about 48% to 34%. Operating expenses rose from 1.126 billion yuan to 1.327 billion yuan over the same period, further squeezing profit.
JPMorgan attributes the pressure on gross margin to rising memory costs, intensifying competition and continued investment in products and categories. The third-quarter gross margin fell about 14 percentage points year over year, a larger decline than the approximately 12 percentage points in the second quarter.

JPMorgan says DRAM prices rose more than 500% year over year; meanwhile, after entering the panoramic camera market, DJI captured about 35% share within one quarter, with comparable models priced 20%–30% lower. Higher input costs and fiercer price competition are simultaneously squeezing margins.
The bank believes forward memory purchases help improve cost visibility, and that pricing for new models and price increases will also reflect higher input costs. But if competition persists longer, or DRAM prices continue to rise or remain high, gross margin recovery could be delayed.

JPMorgan still expects revenue to grow 36% year over year in 2027 and views 2027 as a year of profit recovery; but because of weaker gross margins, heavy investment and a slower release of operating leverage, it has lowered its earnings forecasts for 2027–2028 by about 15% on average.
The bank expects net profit to decline about 90% year over year in 2026, then grow about 10-fold year over year to approximately 1 billion yuan in 2027, returning to roughly the profit level of 2024–2025; by then, revenue is expected to have expanded to 2–3 times its level at that time.
The profit recovery still depends on gross margin stabilizing. The bank assumes gross margin will recover only to about 37% in 2027, well below the level of more than 50% in 2024; the recovery in its model is therefore primarily a partial recouping of margin, rather than a return to previous levels.

As of 27 October 2026, the share price had fallen about 57% year to date. JPMorgan recognizes the company’s strengths in product growth and software experience, but believes gross margin, pricing and cash conversion need to show clearer improvement.
The bank maintained its neutral rating and cut its December 2027 price target from 125 yuan to 110 yuan, based on a forward price-to-earnings multiple of 15 times, in line with Chinese consumer electronics peers. Based on its forecasts, the current share price represents about 39 times 2027 earnings; the pace of earnings recovery remains key to valuation.