Company Coverage
Z.AI Co (2513 HK): 1H26: Revenue Miss And Mix-Driven Margin Pressure, But ARR Momentum Remains Robust
BUY (Maintained)
Current price:
Target price:
Upside:
HK$1,195.00
HK$1,830.00
+53.1%
Analyst
Highlights
- Z.ai’s 1H26 results were mixed. Revenue rose 400% yoy to Rmb953.9m, below consensus estimates. Cloud-based revenue surged 27x yoy to Rmb825.2m, while on-premise revenue fell 21% to Rmb128.7m. Gross margin declined 23.6ppt yoy to 26.4% on the mix shift toward lower-margin cloud deployment, while adjusted net loss widened 12.1% yoy to Rmb2.0b but beat expectations. ARR reached US$1.6b as of Aug 26, with a US$2.4b year-end target, slightly above our estimate.
- Maintain BUY with an unchanged target price of HK$1,830.00.
Analysis
- 1H26 revenue missed expectations despite strong cloud-based growth. Revenue rose 400% yoy to Rmb953.9m (2H25: +99%), below our/consensus estimates of Rmb1.36b/Rmb1.45b. Cloud-based revenue surged 27x yoy to Rmb825.2m (2H25: +431%), accounting for 86.5% of revenue, supported by stronger model capabilities, token usage and pricing. On-premise revenue fell 21% yoy to Rmb128.7m (2H25: +57%) as Z.ai scaled back lower-quality projects. Adjusted net loss widened 12.1% yoy to Rmb2.0b but beat expectations, while R&D expenses rose 33.6% yoy on continued model-training investment.
- Commercialisation accelerated following GLM-5.2/5.3 launches, with both usage intensity and monetisation strengthening. Annualised revenue run-rate (ARR) reached US$1.6b as of Aug 26, with Z.ai targeting US$2.4b by year-end, slightly above our US$2.3b. MaaS token usage increased over 40x from the beginning of the year and Coding Plan usage rose over 23x, despite average API pricing increasing 101%, indicating stronger demand and monetisation. MaaS registered users reached over 7.4m (+144%) and paying DAU increased 603%. Average daily usage among the top 10 revenue contributors rose 98x, while 37 customers contributed over US$1m ARR and eight over US$10m ARR as of Aug 26.
Highlights
- Z.ai’s 1H26 results were mixed. Revenue rose 400% yoy to Rmb953.9m, below consensus estimates. Cloud-based revenue surged 27x yoy to Rmb825.2m, while on-premise revenue fell 21% to Rmb128.7m. Gross margin declined 23.6ppt yoy to 26.4% on the mix shift toward lower-margin cloud deployment, while adjusted net loss widened 12.1% yoy to Rmb2.0b but beat expectations. ARR reached US$1.6b as of Aug 26, with a US$2.4b year-end target, slightly above our estimate.
- Maintain BUY with an unchanged target price of HK$1,830.00.
Analysis
- 1H26 revenue missed expectations despite strong cloud-based growth. Revenue rose 400% yoy to Rmb953.9m (2H25: +99%), below our/consensus estimates of Rmb1.36b/Rmb1.45b. Cloud-based revenue surged 27x yoy to Rmb825.2m (2H25: +431%), accounting for 86.5% of revenue, supported by stronger model capabilities, token usage and pricing. On-premise revenue fell 21% yoy to Rmb128.7m (2H25: +57%) as Z.ai scaled back lower-quality projects. Adjusted net loss widened 12.1% yoy to Rmb2.0b but beat expectations, while R&D expenses rose 33.6% yoy on continued model-training investment.
- Commercialisation accelerated following GLM-5.2/5.3 launches, with both usage intensity and monetisation strengthening. Annualised revenue run-rate (ARR) reached US$1.6b as of Aug 26, with Z.ai targeting US$2.4b by year-end, slightly above our US$2.3b. MaaS token usage increased over 40x from the beginning of the year and Coding Plan usage rose over 23x, despite average API pricing increasing 101%, indicating stronger demand and monetisation. MaaS registered users reached over 7.4m (+144%) and paying DAU increased 603%. Average daily usage among the top 10 revenue contributors rose 98x, while 37 customers contributed over US$1m ARR and eight over US$10m ARR as of Aug 26.
BUY (Maintained)
Current price:
Target price:
Upside:
HK$1,195.00
HK$1,830.00
+53.1%
Analyst
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This report is provided subject to, and must be read together with, the full Disclosures / Disclaimers available at this link, which are incorporated by reference into this report. In particular, this report is intended for general circulation and informational purposes only and does not constitute personal investment advice or a recommendation to buy or sell any investment product or security. You should independently evaluate the information and, where necessary, seek advice from a qualified financial adviser regarding the suitability of any investment. Analyst certifications required under applicable regulations, including SEC Regulation AC (where relevant), are included in this report. By accessing, receiving or using this report, you acknowledge that you have read, understood and agreed to be bound by the Disclosures / Disclaimers, as may be amended, supplemented or updated from time to time.
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