August 26, 2026, Eoptolink Technology Inc., Ltd. (SZ.300502) reported earnings results for the half year ended June 30, 2026, on August 24. For the half year, the company reported sales of CNY 20,909.75 million, compared with CNY 10,437.17 million a year ago. Net income was CNY 7,529.17 million, compared with CNY 3,942.29 million a year ago. Basic earnings per share from continuing operations was CNY 5.41, compared with CNY 2.84 a year ago. Diluted earnings per share from continuing operations was CNY 5.39, compared with CNY 2.83 a year ago.
Eoptolink's semi-annual report showed impressive figures. However, these figures can't fully satisfy investors and observers. An article on Wallstreetcn pointed out four concerns. First, despite recording profits, cash conversion was poor—only RMB 20 in cash was generated for every RMB 100 of profit. Second, gross margins have quietly peaked, while the ramp-up of 1.6T products is squeezing profits from both ends. Third, overseas revenue amounted to RMB 20.46 billion, accounting for 97.92% of the total, indicating almost total reliance on foreign markets. Finally, R&D expenditure was RMB 440 million, representing only 2.1% of revenue. In general, the article warned of a "deteriorating quality of growth" for Eoptolink.
What are the key reasons behind those concerns? In order to satisfy their giant overseas customers, the company has to increase inventory levels, for both finished products and the supply chain. It also has to invest more in next-generation products such as 1.6T products. Moreover, Chinese companies like Eoptolink rely more on manufacturing and process engineering than on leading-edge technology.
In the final paragraph of the article, the writer wrote: "Eoptolink's semi-annual report shows impeccable growth speed, but declining growth quality. Three variables will determine its performance in the second half: whether operating cash flow can catch up with profits, whether gross margins can stabilize after the volume ramp-up of 1.6T products, and whether a 2.1% R&D expense ratio can sustain its generational technological lead."
An article in 21st Century Business Herald (21 世纪经济报道) raised its own question about Eoptolink: can it grow from a beneficiary of the AI wave into a core player in the next generation of computing infrastructure upgrades? What the capital market cares about is whether Eoptolink's earnings momentum can continue. Eoptolink's own answer:
It has launched a full lineup of 400G, 800G and 1.6T products based on silicon photonics (SiPh) and thin-film lithium niobate (TFLN) technologies, and has built a range of optical modules around technical solutions such as LPO/LRO, XPO and NPO. Meanwhile, work on OCS products has also begun.
The company is continuously expanding production capacity. Its current production bases are located in Chengdu and Thailand. On the one hand, it will maximize capacity at its existing sites; on the other, it will expand into new sites. Beyond hardware expansion, the company will also keep raising capacity by improving production-line automation and optimizing equipment, software and tooling.
It is locking in material resources with its core suppliers.
Our view: Eoptolink is already a winner in this round of AI market growth. As long as the current market trend holds, its market position will not be shaken in the short term. However, the capital market's expectations may place unnecessary pressure on the company. This is also a test of the resolve of Eoptolink's management.