Domestic CPU leader Hygon Information Technology saw a 57% increase in revenue last year, but raw material costs dragged down gross margin

Hygon Information's annual financial report shows that the company achieved revenue of approximately 14.377 billion yuan in 2025, a year-on-year increase of 56.92%; net profit attributable to shareholders was 2.545 billion yuan, a year-on-year increase of 31.79%; and net profit attributable to shareholders after deducting non-recurring gains and losses was approximately 2.305 billion yuan, a year-on-year increase of 26.92%. Regarding the reasons for growth, Hygon Information stated that the explosion of AI computing power and the upgrade of digital infrastructure have significantly boosted market demand in the industry. The company seized the high-end chip market, leveraging the advantages of high performance, high reliability, and low power consumption, along with the collaborative expansion of an open ecosystem, which drove a substantial increase in sales scale. The announcement indicated that last year, Hygon Information's R&D investment accounted for 31.78% of revenue, a decrease of 5.83 percentage points compared to the previous year. In absolute terms, Hygon Information's investment in R&D reached 4.568 billion yuan last year, still showing a growth of 32.58% compared to 3.445 billion yuan in 2024. In the past two years, the explosive growth of domestic market demand for AI computing power has been evident. At the same time, the acceleration of domestic replacement demand has led to a leap in the demand for companies in the computing infrastructure-related industries. According to Hygon Information's first-quarter report for 2026, revenue in the first three months of this year has already reached 4.033 billion yuan, a year-on-year increase of 68.06%; net profit attributable to shareholders was 687 million yuan, a year-on-year increase of 34.99%, still maintaining a high growth trend. However, Hygon Information's finances are not without concerns. The rise in raw material and processing costs has led to a decline in the company's gross profit margin; although net profit continues to rise, the growth rate is slowing down. While revenue is increasing, accounts receivable and inventory are also significantly rising. "Securing" Key Industries On the first trading day after announcing its annual performance, Hygon Information's stock price rose by 5.04%, closing at 228.5 yuan per share, with a market value exceeding 531.1 billion yuan and a price-to-earnings ratio exceeding 200 times. Behind Hygon's performance growth, on one hand, the national Xinchuang strategy has opened up growth space for Hygon's CPU products through procurement system arrangements; on the other hand, the explosion of computing power for AI large model training, coupled with the accelerated landing of inference applications, has created an incremental market for Hygon's DCU products. From publicly available information, in addition to major internet companies like Alibaba, Tencent, ByteDance, and Baidu, state-owned enterprises such as Industrial and Commercial Bank of China are also on Hygon Information's client list, with application fields including telecommunications, finance, internet, education, transportation, industrial design, and graphic image processing. Notably, in October last year, the Industrial and Commercial Bank of China announced a procurement project for 3 billion servers, with Inspur Information, the server manufacturer of Hygon chips, being the first bidder. Hygon Information mentioned in its financial report that the company's main sales model is direct sales, with a small amount using a distribution model, indicating that large clients are the primary source of the company's customers. Specifically, in terms of revenue proportion, direct sales generated 13.735 billion yuan in revenue last year, accounting for over 95% of total revenue; while distribution revenue was only 627 million yuan, a year-on-year decline of 54.99%, which is less than a fraction of direct sales revenue The financial report mentions that Hygon CPU has three main technological advantages: first, excellent product performance; second, good system compatibility; and third, high system security. Among these, security is the key point most valued in critical areas such as government, education, finance, and transportation. Subtle Financial Concerns Another factor that cannot be ignored is the explosive demand for AI computing power that has emerged in recent years, providing an environmental backdrop for Hygon Information's market growth. The financial report states that the integrated circuit industry is at a critical development stage of "systematic racing." Driven by the dual forces of explosive demand for AI computing power and self-controllable policies, the market space is rapidly expanding. With the acceleration of global digitalization and intelligence trends, there is an urgent demand for high-performance, low-power, and highly integrated high-end processor chips in fields such as data centers, cloud computing, artificial intelligence, and the Internet of Things. At the same time, there is also potential incremental space for high-end processors in the domestic market. According to IDC data, in the third quarter of 2025, China's server market shipment volume is expected to grow by 6.3% year-on-year; by 2029, the shipment volume of China's x86 server market is projected to reach 5.47 million units, and Hygon CPU is a product that can be compatible with the x86 processor architecture and technology route, possessing advantages in system architecture and industrial ecology. Additionally, according to the "2025 China Artificial Intelligence Computing Power Development Assessment Report" released by IDC, China's intelligent computing power scale is expected to reach 1,037.3 EFLOPs by 2025, and is projected to reach 2,781.9 EFLOPs by 2028. For specific examples, the Alibaba Cloud Zhangbei Intelligent Computing Center, which was launched in 2022, claims to enhance AI training efficiency by 11 times with its 12 EFLOPs. The forecast for the computing power scale in 2028 predicts that it will enable hundreds of millions of users to simultaneously invoke AI-generated content without noticeable delays. However, while Hygon Information is racing ahead in performance, subtle warning signals are also emerging in its finances. One notable concern is the continuous rise in inventory scale. By the end of 2025, Hygon Information's inventory value is expected to exceed 6.4 billion yuan, an increase of 18.4% compared to the end of 2024, accounting for 17.98% of total assets at the end of the period. According to the company's first-quarter report this year, by the end of March, the inventory value had climbed to 7.3 billion yuan, a 14% increase in just one quarter. Although there are fluctuations in turnover, the inventory scale remains quite substantial. Hygon Information also mentioned that if the market environment changes, competition intensifies, or technological updates lead to inventory obsolescence, unsold and backlogged inventory could pose a risk of inventory depreciation, affecting the total asset value. At the same time, due to a significant reliance on major clients, Hygon Information's accounts receivable have also seen a substantial increase. By the end of the period, the book value of accounts receivable was approximately 4.034 billion yuan, while at the end of 2024, the accounts receivable scale was only 2.275 billion yuan, representing a significant increase of 77.32% in just one year Hygon Information Technology admitted that this is due to a significant increase in sales scale. However, as the company's business scale continues to expand, if accounts receivable continue to increase while the financial condition of downstream customers changes and they lose repayment ability, it may lead to accounts receivable not being fully recovered, affecting the company's future performance and cash flow. It can be said that against the backdrop of policy dividends and the explosion of computing power, Hygon Information Technology still has a broad market space. However, while moving forward, maintaining the financial bottom line is also an issue that this rapidly growing chip company needs to improve