Goldman Sachs: ChangXin Technology’s third-quarter gross margin rises to 89.5%; Goldman Sachs expects further fourth-quarter revenue growth but lower operating profit

What drove the third-quarter earnings beat?

ChangXin Technology’s third-quarter 2026 revenue was 118.714 billion yuan, up 19% quarter on quarter and 4% above Goldman Sachs’ forecast; operating profit was 100.749 billion yuan, up 23% quarter on quarter and 29% above the bank’s forecast.
Gross margin rose from 87.6% in the second quarter to 89.5%, which Goldman Sachs attributed to a shift toward higher-specification products and higher DRAM average selling prices. The operating expense ratio fell from 5.4% to 4.7%, which the bank said reflected cost controls and efficiency gains from a larger revenue base.
Profit measures grew at different rates: third-quarter net profit was 54.435 billion yuan, up just 3% quarter on quarter, while net margin fell from 53.1% in the second quarter to 45.9%.

The company has begun mass production of DDR5 products and continued to increase shipments in the third quarter; LPDDR6 has been adopted by smartphone brand customers. Next-generation DDR6 remains in the engineering sample validation stage.
Management is confident that revenue will continue to grow in the fourth quarter of 2026 and in 2027, citing end-market demand from AI servers, AI devices and automobiles, as well as product specification upgrades, capacity expansion and improvements in utilization and yield.

Goldman Sachs expects fourth-quarter revenue of 123.404 billion yuan, up 4% quarter on quarter, and a gross margin of 85.7%, below the third quarter’s 89.5% but still high.
The bank expects the fourth-quarter operating expense ratio to rise from 4.7% in the third quarter to 9.7%, and operating profit to fall 7% quarter on quarter to 93.762 billion yuan; meanwhile, it expects net profit to grow 21% quarter on quarter to 65.705 billion yuan.

Goldman Sachs raised its 2026 net profit forecast by 3% and its forecasts for each year from 2027 to 2030 by 1%, primarily based on higher gross margins from product specification upgrades and favorable pricing.
The bank maintained its Buy rating and raised its 12-month price target slightly from 130 yuan to 131 yuan. The target is based on forecast earnings per share for 2030 and a target price-to-earnings multiple of 16.6 times, discounted back to 2027 at a cost of equity of 12.7%.