AI Business Drives Growth! Behind Industrial-Tech's Record Revenue Exceeding 900 Billion Yuan Last Year, Inventory Surged Over 70% Year-over-Year

Source: Times Weekly
Author: Guan Yue, Han Xun

Trillion-dollar industry leader Industrial Fulian (601138.SH) releases 2025 performance report!

On the evening of March 10, Industrial Fulian announced its 2025 annual report, showing that last year the company’s revenue exceeded 900 billion yuan, reaching 902.887 billion yuan, a year-on-year increase of 48.22%; net profit attributable to shareholders was 35.286 billion yuan, up 51.99%, with profit growth outpacing revenue growth.

During the reporting period, Industrial Fulian’s basic earnings per share were 1.78 yuan, a 52.14% increase, setting a new record since listing; return on equity (ROE) was 21.65%, up 5.8 percentage points year-on-year, reaching a new high since 2020.

Image source: Times Weekly reporter’s own creation, data source: Wind

The annual report states that the high growth is mainly due to “the continuous expansion of the AI server market, steady increase in market share among major customers, and excellent performance of cloud service provider businesses, driving overall revenue growth.”

Along with high growth, Industrial Fulian also launched a substantial dividend plan. The announcement shows that Industrial Fulian plans to distribute a cash dividend of 6.5 yuan (tax included) for every 10 shares to all shareholders, totaling 12.9 billion yuan. The total cash dividends (including interim dividends) for the year will reach 19.451 billion yuan, with a cash dividend payout ratio of 55.12%, both hitting new highs since listing. According to Wind data, since its listing, Industrial Fulian has distributed a total of 63.1 billion yuan in dividends.

However, behind the impressive performance, issues such as a sharp decline in operating cash flow in 2025, a surge in inventory scale, and relatively low R&D investment intensity remain concerning. Times Weekly reporter attempted to contact Industrial Fulian by phone and sent interview questions on the morning of March 11; as of press time, no reply has been received.

On March 11, Industrial Fulian opened high and fluctuated, closing down 0.86% at 53.89 yuan per share, with a total market value dropping to around 1.1 trillion yuan.

Cloud computing business surges, industrial internet business contracts

Tianyancha shows that Industrial Fulian was established in March 2015, registered in Shenzhen, Guangdong Province, and listed on the Shanghai Stock Exchange main board in June 2018. The annual report describes it as a “globally leading provider of high-end intelligent manufacturing and industrial internet solutions,” with core businesses covering cloud computing, communication and mobile network equipment, and industrial internet. Relying on advanced manufacturing and system integration capabilities, it has become a “core supplier in the global AI computing industry chain.”

Image source: Tianyancha

From an industry perspective, the development of Industrial Fulian’s three major business segments in 2025 shows some divergence, with cloud computing becoming the main driver of performance growth.

The annual report shows that the cloud computing business achieved revenue of 602.679 billion yuan in 2025, a significant increase of 88.70% year-on-year, accounting for 66.75% of total revenue. The gross margin for this segment was 5.73%, up 0.74 percentage points from the previous year. Revenue from AI servers for cloud service providers increased more than threefold, with products related to GPUs and ASICs (integrated circuits for specific applications) also experiencing rapid growth.

The communication and mobile network equipment segment achieved revenue of 297.851 billion yuan in 2025, up 3.46%, much lower than the overall growth rate. Its gross margin was 9.28%, slightly down 0.28 percentage points from the previous year. Despite the 13-fold increase in revenue from high-speed switches over 800G throughout the year, the segment’s overall slow growth trend persisted.

Notably, before 2023, the communication and mobile network equipment segment was Industrial Fulian’s largest revenue source. After 2024, cloud computing revenue surpassed it, indicating a strong development momentum. Chairman Zheng Hongmeng also stated in the opening letter to shareholders that the company’s “business structure continues to optimize, entering a new development stage driven by AI.”

The industrial internet segment underperformed in 2025, with revenue of 694 million yuan, down 26.15% year-on-year. Although this segment’s gross margin was 46.37%, ranking first among all segments and up 0.58 percentage points from the previous year, its scale continued to shrink, with revenues of 1.685 billion yuan, 1.912 billion yuan, 1.646 billion yuan, 940 million yuan, and 694 million yuan from 2021 to 2025.

Quarterly performance shows a gradual improvement. In 2025, the first to fourth quarters achieved revenues of 160.415 billion yuan, 200.345 billion yuan, 243.172 billion yuan, and 298.956 billion yuan, respectively, with continuous quarter-on-quarter growth; net profits were 5.231 billion yuan, 6.883 billion yuan, 10.373 billion yuan, and 12.799 billion yuan, reflecting the seasonal boost from AI demand.

Geographically, Industrial Fulian’s global manufacturing layout is prominent, with nearly half of its main business revenue coming from overseas. Based on manufacturing locations, Mexico contributed 307.045 billion yuan, Vietnam 83.055 billion yuan, Singapore 6.316 billion yuan, and mainland China and other regions 504.808 billion yuan. Overseas production bases account for 44.05% of main business revenue.

However, the company also pointed out in the annual report that as of the end of 2025, overseas assets totaled 327.16 billion yuan, accounting for 71.71% of total assets.

Ruo Hong, founder of Mergers & Acquisitions Expert, told Times Weekly that this is a strategic necessity for Industrial Fulian to serve global clients. Core customers require “localization” of production capacity, and geopolitical risks highlight the value of its layout. Despite risks, the company has diversified production across multiple regions to buffer risks and ensure supply security, with mature cross-border operations capable of handling exchange rate and compliance challenges.

The reporter also noted that alongside the annual report, Industrial Fulian announced plans to engage in derivative commodity trading in 2026, with a total trading limit of no more than 53 billion yuan at any time, including but not limited to forward foreign exchange, foreign exchange swaps, currency swaps, interest rate swaps, foreign exchange options, and other non-principal delivery forward foreign exchange transactions.

Cash flow plunges, inventory surges

While AI-driven performance growth was remarkable, some anomalies appeared in Industrial Fulian’s 2025 financials.

In 2025, net cash flow from operating activities was 5.238 billion yuan, a sharp decline of 78.01% from 23.82 billion yuan in 2024, contrasting with the high growth in revenue and net profit. The report states this was “due to the sustained growth of the AI server market, strong customer demand, and increased inventory buildup.”

Additionally, as of the end of 2025, inventory on the books reached 150.913 billion yuan, a substantial increase of 76.99% from 85.266 billion yuan at the end of 2024. Inventory accounted for 33.08% of total assets, far exceeding accounts receivable at 24.27% and cash and equivalents at 24.12%.

On the receivables side, as of the end of 2025, accounts receivable totaled 110.742 billion yuan, up 17.18% year-on-year.

Regarding the divergence between cash flow, inventory, receivables, and performance, Ruo Hong explained that this reflects the cyclical financial characteristics of high growth during AI market explosion, not operational deterioration. “This is a typical ‘advance production’ cycle mismatch. As inventory is delivered, cash flow is expected to continue recovering.”

Quarterly data also supports Ruo Hong’s view. In Q3 2025, operating cash flow was negative 5.548 billion yuan, but improved to positive 9.378 billion yuan in Q4, turning the annual operating cash flow positive at 5.238 billion yuan.

Furthermore, R&D investment remains relatively low. In 2025, R&D expenses were 11.151 billion yuan, up only 4.89% year-on-year, far below the 48.22% revenue growth. R&D expenditure as a percentage of revenue was only 1.24%, and has been declining over the past three years, with ratios of 2.27%, 1.75%, and 1.24% from 2023 to 2025.

Ruo Hong stated that the low R&D expense rate is related to the company’s “collaborative R&D + scale effect” model. Basic R&D is often conducted jointly with clients like Nvidia, with investments reflected in joint development. The significant revenue increase of 48% with only a 5% increase in R&D indicates scale effects, where larger scale drives greater output per R&D unit.