ZTE 2025 Revenue Growth Without Profit Increase, R&D Investment Declines for Three Consecutive Years, Issuing Bonds While Making Large-Scale Wealth Management Investments

Issuer: Sina Finance Listed Company Research Institute

Author: Guangxin

On March 6, 2025, ZTE Corporation released its 2025 annual report. During the reporting period, it achieved revenue of 133.895 billion yuan, a year-on-year increase of 10.38%, setting a new record. However, the company’s net profit attributable to the parent decreased instead of increasing, reaching 5.618 billion yuan, down 33.32% year-on-year.

The behind-the-scenes reason for rising revenue but declining profit is a shift in business structure. In recent years, the company’s high-margin carrier network business has continued to shrink, while government and enterprise services have rapidly expanded. This has weakened profitability, with gross margin dropping from over 40% to 30%. At the same time, accounts receivable and inventories remain high, occupying large amounts of capital and rapidly depleting cash on hand.

To meet cash needs, ZTE has actively issued bonds in recent years, with short-term bonds increasing by 7.81 billion yuan over two years. Meanwhile, the company has also invested heavily in financial products, with financial investment assets accounting for over 20% of total assets.

Regarding dividends, ZTE remains committed to a prudent policy, planning to distribute 1.966 billion yuan in cash dividends to shareholders in 2025, representing a 35% dividend payout ratio, consistent with 2023 and 2024.

Low-margin government and enterprise business drives high performance; changes in business structure impact profitability and liquidity

In recent years, the company’s core profit-generating carrier network business has continued to decline, while government and enterprise services have experienced explosive growth. This shift directly contributed to the performance growth in 2025. However, the increasing proportion of low-margin business has also caused a sharp decline in profitability.

In 2024 and 2025, revenue from carrier network business was 70.327 billion yuan and 62.857 billion yuan, respectively, down 15.02% and 10.62% year-on-year, marking two consecutive years of decline. Meanwhile, revenue from government and enterprise services was 18.566 billion yuan and 37.222 billion yuan, up 36.68% and 100.49%, respectively, doubling in 2025.

However, the gross margin for government and enterprise services is only 10.97%, significantly lower than the 48.09% for carrier network business. In 2025, the revenue share of government and enterprise services rose from around 10% in earlier years to 27.80%, while carrier network business dropped sharply from over 65% to 46.94%. The high-margin business share has fallen below 50%, impacting overall profitability.

From 2023 to 2025, the company’s gross margin decreased from 41.53% to 30.25%, and net profit margin fell from 7.44% to 4.16%.

On the other hand, as an ICT solutions provider, ZTE’s “procurement-integration” model results in large inventories. Its strong bargaining power with downstream telecom operators and government clients also leads to substantial accounts receivable, creating significant capital occupation.

By the end of 2025, accounts receivable reached 21.67 billion yuan, about four times the net profit attributable to the parent that year. Inventories increased from 41.258 billion yuan to 47.017 billion yuan, an increase of nearly 6 billion yuan in one year, a 13.96% rise.

These large capital occupations have consumed cash flow from operating activities. ZTE’s cash and cash equivalents have sharply declined, with broad money (cash + trading financial assets) decreasing from 78.696 billion yuan in 2023 to 51.147 billion yuan in 2025.

Issuing bonds while investing heavily in financial products; R&D and personnel reductions

To meet operational funding needs, ZTE has increased leverage, with non-current liabilities rising from 49.596 billion yuan in 2023 to 60.117 billion yuan in 2025, mainly relying on bond issuance, with short-term bonds increasing by 7.81 billion yuan.

Despite market criticism, under cash flow pressure and rising debt, the company has allocated substantial funds to financial management. As of the end of 2025, it held 17.396 billion yuan in trading financial assets; 31.081 billion yuan in debt investments, including large-term certificates of deposit worth 30.88 billion yuan; and short-term non-current assets of 510 million yuan, all of which are debt investments.

In total, financial investment assets amount to 48.987 billion yuan, accounting for 22.5% of total assets.

On the same day as the 2025 financial report, ZTE announced plans to use self-owned funds for entrusted financial management in 2026, with a quota not exceeding 40 billion yuan.

Meanwhile, the company has continued to control R&D costs. From 2023 to 2025, R&D expenditure was 26.783 billion yuan, 25.509 billion yuan, and 24.475 billion yuan, respectively, with proportions of 21.56%, 21.03%, and 18.28% of revenue, showing a decline in both amount and percentage.

Additionally, from 2023 to 2025, the company carried out significant personnel cuts, reducing total staff from 72,093 to 65,095 employees. R&D staff decreased from 35,393 to 31,589, maintaining about 49% of total employees.

In the face of short-term business pressures, restructuring personnel to focus on core positions and businesses is a wise move to safeguard competitiveness. However, financial metrics indicate that the return on investment (ROI) has not yet shown significant improvement.

According to financial data, in 2025, ZTE’s return on invested capital (ROIC) was only 3.58%, below the median of 6.1% over the past decade. The return on net operating assets dropped sharply from 25.9% in 2023 to 14% in 2025. These figures suggest there is still considerable room for improving capital allocation efficiency.