HK Stock Market Move | ZTE Corporation (00763) falls more than 3%, with the company's first-quarter gross profit margin under pressure. Domestic telecommunications capital expenditure decreases.

ZTE Corporation (00763) fell more than 3%, dropping by 3.29% to 24.68 Hong Kong dollars as of the time of writing, with a trading volume of 331 million Hong Kong dollars. In terms of news, recently, ZTE Corporation disclosed its first quarter performance in 2026. Goldman Sachs pointed out that the company's first quarter revenue increased by 6% year-on-year to 35 billion RMB, in line with the bank's expectations. The proportion of related business revenue to total revenue increased to 27%, higher than the 24.6% for the entire year of 2025. However, the gross profit margin decreased from 29.4% in the fourth quarter of last year and 34.3% in the first quarter to 28.3%. Management attributed this to the decrease in domestic telecommunications capital expenditures, resulting in reduced contribution from domestic network product revenue. Citigroup released a research report stating that ZTE Corporation's first quarter revenue increased by 6% year-on-year to 35 billion RMB, exceeding market expectations by 3%. However, the gross profit margin decreased by 6 percentage points to 28.3% year-on-year due to the impact of product mix, which was 2.7 percentage points lower than market expectations and partially offset by a 12% decline in operating expenses. Operating profit fell by 13% year-on-year to 1.6 billion RMB, 22% lower than market expectations. Citigroup expects that ZTE's revenue growth will be driven by new initiatives such as AI servers, other computing-related products, and consumer business, which should offset the weakness in telecommunications network business.