ZTE's carrier sales slump 9% in H1

China-based ZTE is another vendor to be clipped by the great telco capex retreat. Its core carrier equipment business shrank 8.6% in the first half, holding back underlying earnings to 4.96 billion Chinese yuan (US$700 million) – a gain of just 1.1% over last year.

The unit, which accounted for 60% of the company's total revenue, brought in RMB37 billion ($5.18 billion) in sales in H1, the company revealed in its stock exchange filing.

ZTE said demand from Chinese operators had been constrained by "overall investment sentiments," but it pointed to improved sales of indoor distribution, high-speed rail and metro kit.

It reported a 2.9% rise in total revenue to RMB62.5 billion ($8.76 billion), with net earnings up 4.76% before accounting for extraordinary items.

The biggest growth surge was in the corporate and government unit, which boosted revenue by 56% to RMB9.2 billion yuan ($1.29 billion), mainly through stronger server and storage sales. But this was offset by a 68% hike in costs, depressing the gross margin by 5.7 points – a result of "changes in revenue mix," the company said.

ZTE's consumer business, which includes mostly handsets and home routers, grew 14% to RMB16 billion ($2.24 billion).

R&D spending flat

Across the board, operating cost increased 7.9%, while R&D spend remained flat at RMB12.7 billion ($1.78 billion).

The company reported RMB67.4 million ($9.44 million) in gains from the sale of unnamed assets and RMB1.8 billion ($252.1 million) from assorted other gains.

The Chinese domestic market accounted for 69% of total sales, roughly the same as last year. The biggest offshore growth region was Asia (excluding China), which grew 23%.

ZTE said it is positioning itself as a "path-builder for the digital economy" and aimed to further expand its legacy connectivity business while growing its computing business. Its AI portfolio includes full-stack intelligent solutions, backed by key technologies such as high-speed networking, network computing and data processing.

Looking ahead, it expects gradual adoption of 5G-Advanced, further rollout of 400G optical and construction of intelligent computing centers to drive the China carrier market in the second half. Offshore, it will continue to focus on large national markets and big telcos for its wirelines and wireless product lines.

ZTE's stock on the HK exchange closed 0.60% lower Monday.