Sugon H1 net profit rises 33% on AI computing demand

Sugon reported H1 2026 revenue of RMB 7.47 billion, up 27.62 percent, with net profit rising 33.31 percent to RMB 971 million.

"Li Bin, senior vice president at Sugon, said the company's strategic focus has shifted from training to inference services, with computing evaluation now measured by token generation efficiency rather than card count."

Q2 net profit reached RMB 744 million, up 226 percent from RMB 228 million in Q1, reflecting concentrated AI server order deliveries. Non-GAAP net profit rose 48.45 percent to RMB 844 million, outpacing headline growth and indicating core operations drove the improvement. Gross margin expanded 0.58 percentage points to 27.23 percent. IT equipment revenue totaled RMB 6.67 billion, or 89.3 percent of total revenue, while software, system integration and technical services contributed RMB 793 million.

The results confirm Sugon's position in China's AI infrastructure buildout. In July, the company completed "Sugon 8000 (Dengfeng)," a 100,000-card AI cluster using a fully domestic technology stack — the first of its kind in China. Kaiyuan Securities raised its full-year 2026 profit forecast from RMB 2.64 billion to RMB 3.47 billion, implying second-half net profit of roughly RMB 2.5 billion, more than 2.5 times the first half.

Affiliate Hygon Information reported H1 net profit of RMB 1.80 billion, up 49.67 percent year on year. Sugon (603019.SH) recognized RMB 504 million in investment income from Hygon under the equity method, a core driver of profit growth. Hygon's DCU products form the computing foundation of Sugon's AI clusters, creating a deep supply-chain and commercial linkage between the two companies.

Operating cash flow was negative RMB 187 million, improving from negative RMB 1.38 billion a year earlier, as inventory rose by RMB 3.26 billion to stockpile for high-end computing orders. The buildup suggests large-order deliveries are front-loaded, with revenue recognition likely to follow in subsequent quarters.

R&D investment surged 78.36 percent to RMB 1.09 billion, reaching 14.65 percent of revenue. The company also released its first self-developed 400G lossless high-speed network, completing its "compute-storage-network-management" full-stack system. Convertible bond proceeds target three product lines: AI computing clusters, AI training-inference integrated machines, and domestic storage.

The full-year target depends on two variables: contract signing and revenue recognition for the Sugon 8000 cluster, and Hygon's second-half profit contribution. The cluster's utilization rate and commercialization timeline remain unverified, with deployment-to-revenue lags likely pushing some orders into 2027.

For shareholders, the accelerating profit trajectory and AI infrastructure positioning are positive. Investors will watch second-half order conversion and Hygon's quarterly results for confirmation of the full-year target.

This article is for informational purposes only and does not constitute investment advice.