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Leading domestic computing power chip provider, Hygon Information Technology, has released a first-quarter 2026 report that has excited the market.
During the reporting period, the company achieved operating revenue of 4.034 billion yuan, a significant year-on-year increase of 68.06%, marking a new quarterly revenue record. Net profit attributable to shareholders of the listed company reached 687 million yuan, a year-on-year increase of 35.82%, with basic earnings per share rising to 0.30 yuan. Against the backdrop of accelerating AI computing power infrastructure construction in China, Hygon Information Technology is advancing on both general computing and artificial intelligence computing markets with its high-performance, high-reliability, and low-power product matrix, with performance realization exceeding market expectations.
Notably, if accounting for the impact of share-based payments is excluded, the company's net profit attributable to the parent company would reach 923 million yuan, a substantial year-on-year increase of 74.86%. Correspondingly, net profit after deducting non-recurring items reached 833 million yuan, a year-on-year increase of 79.44%.
However, the same financial report also recorded a significant &#34;flaw&#34;: net cash flow generated from operating activities this quarter was only 67.62 million yuan, a sharp decrease of 97.32% from 2.522 billion yuan in the same period last year. While this figure appears alarming at first glance, a closer examination reveals that it is primarily due to the company's proactive increase in raw material inventory, a substantial expansion of inventory, and a high base effect from the large amount of advance payments received from customers in the same period last year. This does not indicate a deterioration in operating quality.
<h2>Revenue Surge Amidst Pressured Gross Margins</h2>
Despite nearly 70% revenue growth, the growth in profit was noticeably slower than that of revenue, reflecting subtle changes in the profit margin structure. Breaking down the income statement, operating costs for the quarter were 1.791 billion yuan, resulting in a gross profit of approximately 2.243 billion yuan, with a gross margin of about 55.6%. In the same period last year, the gross margin was approximately 61.2%, a year-on-year decrease of nearly 6 percentage points.
The narrowing of gross margin, on one hand, reflects the dynamic adjustment of the company's product mix – as AI computing power products rapidly ramp up in shipment volume, the proportion of products with stronger hardware attributes and relatively higher cost percentages may increase. On the other hand, the rapid expansion of sales expenses has also significantly dragged down net profit margins. This quarter, sales expenses reached 180 million yuan, a year-on-year increase of as high as 176%, far exceeding revenue growth. This indicates that the company is increasing upfront investment in market development and customer services to seize the window of opportunity presented by the penetration of AI computing power. Management expenses, however, decreased slightly year-on-year, suggesting stable internal operational control.
Overall, the operating profit margin for the quarter was approximately 24.1%, a decline from 30.4% in the same period last year. This is directly related to the dual expansion of research and development expenses and sales expenses. During a phase of rapid revenue growth, sacrificing short-term profit margins for long-term market positioning is a common choice for technology companies, and Hygon Information Technology is no exception.
<h2>R&amp;D Investment Exceeds 1.2 Billion: Share-Based Payments as a Key Variable</h2>
Total R&amp;D investment for the quarter was 1.211 billion yuan, a year-on-year increase of 58.61%. Of this, 1.149 billion yuan was recorded as &#34;R&amp;D expenses&#34; in the income statement, accounting for a high 28.5% of revenue. The remaining approximately 62 million yuan was capitalized (recorded as development expenditures in the balance sheet).
The main reason for the substantial increase in R&amp;D investment, as directly stated by the company, is a significant year-on-year increase in the number of R&amp;D personnel, leading to substantial increases in personnel expenses and share-based payments. Share-based payments are a key variable in understanding the quality of Hygon Information Technology's earnings – this is a non-cash expense that recognizes employee incentive costs through option amortization, which depresses reported net profit but does not affect the company's actual cash-generating ability.
After excluding the impact of share-based payments, net profit attributable to the parent company and net profit after deducting non-recurring items increased by 74.86% and 79.44% year-on-year, respectively, significantly higher than the statistics that include share-based payments. This indicates that as the company's revenue continues to grow, operating leverage is gradually manifesting. In the future, once the peak period of share-based payments passes, there will be considerable room for improvement in reported net profit.
<h2>Cash Flow: Double Disturbance from Inventory Expansion and High Base</h2>
The sharp drop in net operating cash flow from 2.5 billion yuan to 67.62 million yuan is the most significant data point in this financial report that warrants in-depth analysis.
From the breakdown of the cash flow statement, cash received from selling goods in the quarter was 4.034 billion yuan (lower than current revenue, indicating an expansion of accounts receivable). However, cash paid for purchasing goods reached 3.417 billion yuan, nearly doubling year-on-year, directly reflecting the company's strategic intent to proactively increase inventory. The balance sheet shows that as of the end of March, inventory had expanded from 6.406 billion yuan at the beginning of the year to 7.333 billion yuan, an increase of over 900 million yuan in a single quarter. Advances paid also expanded from 2.885 billion yuan to 3.440 billion yuan.
Concurrently, contract liabilities (i.e., customer prepayments) decreased from 2.019 billion yuan at the beginning of the year to 1.510 billion yuan. Combined with the high base formed by receiving a large amount of contract prepayments in the same period last year, this has led to a significant contraction in operating cash flow for the current period. This phenomenon typically occurs at cyclical nodes where demand is strong and supply chains are proactively laid out, and it is not an indication of operational deterioration. On the contrary, large-scale inventory build-up itself is strong evidence of the company's optimistic expectations for future order fulfillment.
In terms of investment activities, there was a net inflow of 191 million yuan in the quarter, compared to a net outflow of 4.039 billion yuan last year due to large-scale wealth management investments. In terms of financing activities, the company net repaid loans of approximately 700 million yuan, and paid dividends and interest of over 200 million yuan, resulting in a net financing outflow of 929 million yuan. The financial leverage level is steadily decreasing.
<h2>Balance Sheet: Ample Ammunition, Sound Financial Structure</h2>
As of March 31, 2026, the company's total assets were 35.185 billion yuan, a slight decrease of 1.27% from the beginning of the year. Cash and cash equivalents totaled 7.852 billion yuan, and with year-end cash equivalents balance of 6.722 billion yuan, overall liquidity is ample. Net assets (attributable to parent company) reached 23.497 billion yuan, an increase of 4.46% from the beginning of the year. The weighted average return on net assets was 2.99%, an increase of 0.52 percentage points from the same period last year.
On the liabilities side, short-term loans were reduced from 3.450 billion yuan at the beginning of the year to 2.950 billion yuan, and long-term loans decreased from 500 million yuan to 200 million yuan. The total scale of interest-bearing debt decreased from approximately 3.95 billion yuan at the beginning of the year to about 3.15 billion yuan, indicating a clear deleveraging trend. With net interest expenses of only approximately -35.76 million yuan (interest income of 53.99 million yuan vs. interest expenses of 18.16 million yuan), the company's substantial cash pool still generates significant interest income, with net financial expenses being negative and contributing positively to profits.
In terms of shareholder structure, the major shareholder landscape is stable. Dawn Information Industry holds 27.96% as the largest shareholder. Tianjin HFU TIDING holds 10.81%. Shareholders with state-owned capital backgrounds, such as Chengdu Industrial Investment Group, Chengdu Blue Ocean Light Boat, and Chengdu High-tech Investment, collectively hold more than 23% of the equity. The company's state-owned capital background and strategic positioning are clear, and its equity structure is stable.

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The company achieved operating revenue of 4.034 billion yuan, a significant year-on-year increase of 68.06%, setting a new historical record for quarterly revenue. Net profit attributable to shareholders of the listed company reached 687 million yuan, a year-on-year increase of 35.82%. Against the backdrop of accelerating AI computing power infrastructure construction in China, Hygon Information Technology is advancing on both general computing and artificial intelligence computing markets with its high-performance, high-reliability, and low-power product matrix, with performance realization exceeding market expectations

AI Computing Power Wave Surges, Hygon Information Technology Q1 Revenue Soars 68% to New High, Net Profit Up 35.8% | Earnings Watch