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NewsMaterial3 min readDisconfirmAI Editorial

Chinese Optical Giants Slump Despite Strong Q3 Earnings as Growth Slowdown Fears Mount

Shares of leading Chinese optical module makers fell sharply for a second day despite robust Q3 profit growth, as investors focused on cooling sequential momentum and cash flow concerns.

2026-10-30 12:27 GMT+8

Shares of major Chinese optical communications suppliers extended a two-day sell-off on Friday, despite upbeat third-quarter earnings driven by the global artificial intelligence infrastructure boom. During morning trading in Shenzhen, Chengdu-based Eoptolink Technology dropped as much as 15 per cent, while Suzhou TFC Communication slid 10.3 per cent and industry leader Zhongji Innolight fell over 7 per cent. By the midday break, the trio had trimmed their losses: Eoptolink was down around 9 per cent, TFC pared its decline to 4 per cent, and Innolight also steadied. The retreat followed steep drops on Thursday, when TFC plunged 19.8 per cent, Eoptolink tumbled 11.1 per cent and Innolight fell 8.5 per cent.

The market rout came even as the firms reported robust headline earnings growth. Innolight on Thursday posted a 173.7 per cent surge in third-quarter net profit to 8.59 billion yuan (US$1.29 billion), as revenue jumped 171.8 per cent to 27.77 billion yuan. The company credited AI infrastructure investment and rising sales of high-end 800-gigabit and 1.6-terabit optical modules for driving top-line growth in the first nine months. Beneath the headline expansions, however, sequential momentum showed signs of cooling, sparking valuation worries among investors.

Eoptolink on Thursday reported quarterly net profit of 3.84 billion yuan, up 61.2 per cent year on year, on an 80.3 per cent rise in revenue to 10.94 billion yuan. But on a quarter-on-quarter basis, profit dropped 19.1 per cent and revenue shrank 13 per cent, according to calculations based on company filings. Cash flow also raised concerns. Eoptolink’s nine-month operating cash flow contracted 68.4 per cent to 1.46 billion yuan, hit by increased materials procurement outlays and tax payments. The third quarter saw an operating cash outflow of about 152 million yuan.

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Meanwhile, Suzhou-based TFC earlier this month posted quarterly net profit of 879.2 million yuan, up 55.3 per cent, alongside a 31.5 per cent revenue increase to 1.92 billion yuan. The figures fell short of market expectations. Citigroup said TFC’s revenue missed its own forecast by 34 per cent and lagged Bloomberg consensus estimates by 24 per cent. While gross margins were better than expected at 65 per cent, Citi cut its 2026 and 2027 earnings forecasts by 19 per cent each, citing slower revenue recognition and more cautious assumptions about the ramp-up of optical engines.

Industry analysts and company executives, however, maintained that downstream appetite remained intact. “The faster revenue growth in 3Q26 implies that the component shortage is gradually easing,” Morgan Stanley analysts wrote in an October 28 research note. The companies have moved to reassure jittery investors. Innolight said in a disclosure last week that its order book was full, with major overseas clients placing orders through 2027, while offering clear demand guidance into 2028. Eoptolink said mass shipments of its 1.6T modules had entered a sustained shipment growth phase, expressing confidence in the company’s business prospects this year and next.

Sources

  • scmp.comSouth China Morning Post↗
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