Author | Zhang Qiming

Editor | Chen Xiaoran

Computing Power Demand Stays Robust, Though Structural Challenges Remain

The AI sector continues to surge, propelling the development of domestic computing infrastructure.

Inspur Information (000977.SZ) released its 2026 Q1-Q3 performance forecast, highlighting a significant year-on-year net profit increase and ongoing enhancement of its high-end product portfolio. Nevertheless, the industry’s inherent gross margin and cash flow challenges continue to impose long-term operational constraints.

Remarkable Net Profit Growth

On October 13, Inspur Information unveiled its 2026 Q1-Q3 performance forecast, showcasing substantial growth in operating figures. The company anticipates a net profit attributable to shareholders for the first three quarters ranging from RMB 3.8 billion to RMB 4.1 billion, marking a year-on-year surge of 156.40% to 176.64%. Non-recurring net profit is expected to reach RMB 3.31 billion to RMB 3.61 billion, up 147.88% to 170.37% year-on-year.

Image source: Inspur Information announcement

In comparison, Inspur Information’s net profit attributable to shareholders for the same period in 2025 stood at just RMB 1.482 billion. The profit scale in 2026 has more than doubled, clearly reflecting the benefits of the computing power boom.

Inspur Information attributes this performance surge primarily to the rapid growth of the AI industry and sustained strong global server demand. The company has closely aligned with the industry’s upward trajectory, continuously refining its full range of server products, enhancing product value through technological advancements, and bolstering upstream supply chain capabilities to ensure stable delivery of large-scale orders, thereby driving a significant rise in overall operating profits.

This performance growth is not an isolated phenomenon for the company but rather a concentrated reflection of the global increase in computing power capital expenditures.

According to publicly available IDC data, global server vendor revenue reached USD 166.3 billion in Q2 2026, achieving substantial year-on-year and quarter-on-quarter growth, setting a new single-quarter record. GPU-accelerated servers accounted for over half of this revenue, highlighting a clear trend towards high-end computing hardware.

TrendForce statistics reveal that in 2026, capital expenditures by leading global cloud providers expanded significantly, continuously driving demand for AI servers and computing power systems, providing stable order support for domestic server manufacturers.

For Inspur Information itself, high-growth momentum was already evident in H1 2026. The company achieved revenue of RMB 84.379 billion and net profit attributable to shareholders of RMB 2.952 billion, representing a year-on-year increase of nearly 269.59%.

As of the end of June 2026, Inspur Information’s contract liabilities reached RMB 28.369 billion, indicating a substantial backlog of signed but unfulfilled orders. This provides a solid foundation for deliveries in Q3 and beyond, with performance growth supported by genuine orders rather than short-term market sentiment.

Product Portfolio Upgrade

Market investors familiar with Inspur are aware that the company has long been labeled a “hardware assembly vendor,” with overall gross margins consistently remaining in the single digits and limited profitability.

In 2025, Inspur Information’s overall gross margin was only 4.9%, reflecting weak profitability. However, since 2026, the company has achieved a significant upgrade in its product portfolio, leading to a qualitative improvement in profitability.

In H1 2026, the gross margin of Inspur Information’s server and components business increased by 4.41 percentage points to 8.73%.

The primary driver of this profitability improvement is the sustained growth in sales of two high-end product lines: liquid-cooled servers and hyper-converged cabinets.

In the liquid cooling computing power sector, Inspur Information is an industry leader. The company has deployed multiple technological routes, including negative pressure liquid cooling, two-phase liquid cooling, and native liquid cooling, holding over 800 core liquid cooling patents. It has consistently maintained the highest market share for liquid-cooled servers in China for years.

Currently, all of Inspur’s product series have passed certification for high-end NVIDIA chips, making them compatible with ultra-high-power AI computing clusters.

In April 2026, Inspur Information secured an AI server order worth over RMB 10 billion from ByteDance, with the proportion of liquid-cooled servers jumping from 40% to over 85%. The increasing share of high-end, high-margin products has directly boosted overall profitability.

The hyper-converged business has also become a core growth driver. Leveraging its multi-computing power strategy, Inspur has formed deep partnerships with leading internet giants, continuously winning large-scale cabinet projects from companies such as Alibaba, ByteDance, and Tencent, making it a key supplier for top-tier smart computing centers.

Simultaneously, Inspur Information has adapted over 30 domestic AI chips, deeply integrating into the local computing power ecosystem and continuously gaining market share in the process of achieving self-sufficiency.

According to MIR Databank statistics, in H1 2025, Inspur Information held a 32% market share in China’s AI server market, ranking first in the industry. Entering 2026, the company’s market share for high-end computing power products has further increased, with order backlogs extending production schedules into 2027 and production capacity operating at full load over the long term.

This round of profit growth is essentially a structural premium derived from product high-endization and integrated solutions, completely breaking away from the low-end competition model of relying solely on shipment volume and price competition in the past.

Existing Structural Pressures

Behind the high-growth performance, the long-standing structural operational issues at Inspur cannot be overlooked. Short-term profit surges cannot conceal the inherent shortcomings of the industry model, which remain core variables constraining Inspur Information’s valuation and growth in the future.

Firstly, there is a clear ceiling on gross margins. The server and system integration businesses are high-turnover industries, and their operational models make it difficult for companies to maintain high gross margins. Although the comprehensive gross margin increased by 4.2 percentage points year-on-year in H1 2026, further breakthroughs will rely on the implementation of a higher proportion of hyper-converged and software-hardware integrated solutions, which is unlikely to happen quickly in the short term.

Secondly, inventory occupies significant capital. The computing power system business requires advance stockpiling of core chips, resulting in substantial capital occupation. As of the end of June 2026, Inspur Information’s inventory scale reached RMB 52.679 billion, with a significant year-on-year increase in raw material stockpiles, tying up substantial capital in inventory.

Cash flow remains under sustained pressure. In H1 2026, Inspur Information’s net cash flow from operating activities was -RMB 7.493 billion. Historically, the company’s payment collections have been concentrated in the latter part of the year, with cash flow typically showing net outflows in the first three quarters and only turning positive in the fourth quarter. The working capital gap during this period needs to be filled through external financing.

As of the end of June 2026, Inspur Information had RMB 12.269 billion in cash and cash equivalents and RMB 765 million in trading financial assets, which were insufficient to cover RMB 13.128 billion in short-term borrowings, RMB 2.589 billion in non-current liabilities due within one year, and RMB 2.680 billion in long-term borrowings.

To alleviate liquidity pressures, in September 2026, Inspur Information launched a RMB 9 billion private placement plan, with over 40% of the funds earmarked for supplementing working capital. This highlights the industry’s characteristic of being capital-intensive and continuously burning cash, with cash flow pressures persisting over the long term.

Finally, industry competition and ecological changes pose challenges. With the rapid rise of domestic AI chips, leading chip manufacturers are gradually extending their reach into the downstream server sector. Competition in the industry is no longer solely about hardware shipments but increasingly involves a struggle for ecological influence.

Coupled with the continuous entry of new industry players, competition in the high-end server sector is set to intensify further, requiring ongoing vigilance against risks such as price competition and order diversion.

Therefore, while Inspur Information’s current performance forecast solidly validates the industry dividends of AI computing power and demonstrates the effectiveness of its high-end transformation, the company—as a domestic leader in computing power systems—boasts a solid foundation with sufficient orders, high-quality clients, and steady technological iteration.

However, the market needs to rationally distinguish between cyclical dividends and long-term growth. Given the strong cyclical nature of the computing power industry, along with issues such as the gross margin ceiling, cash flow pressures, and intensifying industry competition, Inspur Information’s subsequent growth will not be smooth sailing.

The key to determining Inspur Information’s long-term value lies in its ability to continuously break through profitability bottlenecks, optimize its financial structure, and consolidate its ecological position.