Cambricon Turns a Profit Surge into an Inventory Test
NextFin News —— Cambricon Technologies reported first-half 2026 revenue of 5.996 billion yuan, up 108 percent from a year earlier, and net profit attributable to shareholders of 23.11 billion yuan, up 123 percent. Profit excluding one-off items rose even faster, at 137 percent. The company has now posted seven consecutive profitable quarters. Gross margin held steady near 55 percent. Almost all of the revenue—99.98 percent—came from cloud and data-center chips sold mainly to internet and financial customers. Edge products contributed only a negligible amount.
On the day the results were released, the shares closed near 1,200 yuan, giving the company a market value of roughly 754 billion yuan. The stock had earlier pushed the firm’s valuation above one trillion yuan before retreating. The high multiple reflects expectations that growth will continue, not merely the first-half numbers already delivered.
The more revealing figures sit on the balance sheet. Inventory climbed to 8.25 billion yuan by the end of June, up more than 66 percent from the end of 2025 and larger than the entire first-half revenue. Most of that stock is still in the early stages of production: raw materials and materials sent out for processing. Finished goods ready for sale remain small. Goods already shipped to customers but not yet recognized as revenue stood at 4.7 billion yuan. The pattern shows Cambricon is not holding unsold finished chips; it is buying ahead and waiting for the manufacturing pipeline to convert materials into deliverable product.
Because Cambricon designs chips but does not manufacture them, it depends on external foundries. Securing wafer capacity requires advance orders and prepayments. Prepayments for purchases rose to about 29 billion yuan, nearly four times the level at the start of the year. At the same time, the company recorded higher inventory write-downs on older materials, consistent with a shift toward newer product generations. The combination of longer lead times upstream and product transitions limited how much additional revenue could be recognized in the second quarter. Second-quarter sales rose only 8 percent from the first quarter even as inventory jumped sharply.
Operating cash flow stayed positive for the half-year but turned negative in the second quarter as the company paid suppliers. Accounts receivable fell despite higher sales, indicating customers are paying promptly. The pressure is on the supply side, not the demand side.
Management has set explicit targets through a new equity-incentive plan announced in late July. For the full awards to vest, 2026 revenue must reach at least 13.5 billion yuan, the two-year cumulative total for 2026-2027 must hit 40.5 billion yuan, and the three-year cumulative total through 2028 must reach 100 billion yuan. Meeting the 2026 figure would require roughly 7.5 billion yuan of sales in the second half. Brokerage forecasts for full-year profit cluster around 5.1 billion to 5.6 billion yuan, implying that the market’s near-term earnings expectations are not extreme. The current valuation, however, prices in the longer-term growth implied by the three-year target.
Cambricon has concentrated its resources on cloud chips and the software stack needed to run them. It has built its own instruction set, compilers and operator libraries rather than relying on external frameworks, and has adapted major domestic large models so they can run on its hardware. Training workloads, once a smaller part of the business, have begun to enter commercial deployments. The first-half results show that the existing product line can generate substantial profit once volume arrives. The second half will test whether the large inventory already on the books can be turned into finished deliveries at a similar pace.
For a fabless chip designer, the gap between ordering materials and recognizing revenue is measured in months. The 8.25 billion yuan of inventory is therefore both a commitment and a risk. If manufacturing and customer acceptance proceed smoothly, the stockpile becomes the foundation for the next leg of growth. If lead times lengthen or demand softens, the same stockpile becomes a drag on cash and margins. The next few quarterly reports will show which outcome materializes. Until then, Cambricon’s story has shifted from whether it can make money to whether it can convert its accumulated materials into sales at the speed its targets require.
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