China Merchants Securities Co.,Ltd. (ASX: 600999) has released a research report stating that for the first nine months of 2026, the computer industry overall achieved stable revenue growth, with net profit attributable to parent and non-recurring net profit rising substantially, although the median net profit growth rate of individual stocks turned from positive to negative.

In terms of growth quality, the industry gross margin for the first nine months of 2026 remained flat year-on-year, period expense ratios narrowed overall, and operating cash flow came under pressure in the third quarter. Among these, AI is the core engine of industry growth, with the AI computing infrastructure, AI data services, and AI application sub-sectors continuing to deliver outstanding performance. It is recommended to focus on core targets in the relevant industrial chain.

The main views of China Merchants Securities Co.,Ltd. (ASX: 600999) are as follows: From a growth perspective, the industry overall achieved stable revenue growth in the first nine months of 2026, with net profit attributable to parent and non-recurring net profit rising substantially, but the median net profit growth rate of individual stocks turned from positive to negative.

In the first nine months of 2026, the computer industry recorded total revenue of RMB 881.259 billion, up 12.31% year-on-year on an aggregate basis, an increase of 2.67 percentage points compared with the same period last year; the median revenue growth rate of individual stocks in the industry was 2.72%.

In the first nine months of 2026, the computer industry's total net profit attributable to parent was RMB 22.054 billion, up 67.72% year-on-year on an aggregate basis, maintaining a high-growth trend; the median net profit growth rate of individual stocks in the industry was -10.06%, turning from positive to negative year-on-year.

In the first nine months of 2026, the computer industry's total non-recurring net profit was RMB 14.170 billion, up 188.31% year-on-year; the median non-recurring net profit growth rate of individual stocks in the industry was -8.45%, turning from positive to negative.

In terms of distribution, 57.61% of companies achieved year-on-year revenue growth in the first nine months of 2026 (57.19% in the same period last year), of which 5.37% of companies recorded revenue growth exceeding 50%, and 52.24% of companies recorded revenue growth within the 0%-50% range; 45.07% of companies achieved net profit growth, turned profitable, or reduced losses (55.99% in the same period last year), of which 11.04% of companies achieved substantial net profit growth (>=50%), 10.15% of companies achieved slight growth (0%-50%), 6.87% of companies turned profitable, and 17.01% of companies reduced losses.

On a quarterly basis, in Q3 2026 the industry recorded total revenue of RMB 318.752 billion, up 18.24% year-on-year on an aggregate basis, an increase of 13.86 percentage points year-on-year; the median growth rate of individual stocks was 3.98%. Total net profit attributable to parent was RMB 8.199 billion, up 21.91% year-on-year on an aggregate basis; the median growth rate of individual stocks was -5.87%, turning from positive to negative year-on-year.

In terms of distribution, 58.51% of companies achieved year-on-year revenue growth (56.29% in the same period last year); 47.46% of companies achieved net profit growth, turned profitable, or reduced losses (50.30% in the same period last year).

From a growth quality perspective, the industry gross margin remained flat year-on-year in the first nine months of 2026, period expense ratios narrowed overall, and operating cash flow came under pressure in the third quarter. In the first nine months of 2026, the industry's overall gross margin was 22.36%, down 0.08 percentage points year-on-year. Total period expense ratio was 20.06%, down 1.19 percentage points year-on-year, of which the selling expense ratio was 6.19%, down 0.66 percentage points year-on-year; the administrative expense ratio was 4.93%, down 0.47 percentage points year-on-year; and the R&D expense ratio was 8.33%, down 0.52 percentage points year-on-year.

On a quarterly basis, in Q3 2026 the industry's overall gross margin was 22.35%, down 0.45 percentage points year-on-year; the period expense ratio was 19.22%, down 1.85 percentage points year-on-year.

In terms of cash flow, in the first nine months of 2026 the industry's overall net operating cash flow was -RMB 43.990 billion, with the net outflow expanding compared with the same period last year. In Q3 2026, overall net operating cash flow was RMB 431 million, down 87.98% compared with the same period last year.

In the first nine months of 2026, the industry's total advance receipts and contract liabilities were RMB 207.960 billion, up 48.80% year-on-year. In the first nine months of 2026, the industry's total accounts receivable and contract assets were RMB 368.154 billion, down 1.28% year-on-year, indicating that industry accounts receivable management has achieved slight results.

By sub-sector, the AI industrial chain delivered strong performance. On the revenue side, most sectors achieved revenue growth in the first nine months of 2026. Among the eight key sub-sectors we tracked (see appendix for sector constituents), six sectors achieved positive revenue growth in the first nine months of 2026, with the top three by median revenue growth rate being AI computing infrastructure, AI data services, and AI applications, up 22.09%, 19.57%, and 5.64% year-on-year respectively.

Compared with the first nine months of 2025, four sectors—AI computing infrastructure, AI data services, financial IT, and cybersecurity—saw year-on-year acceleration in revenue growth. On the profit side, a total of seven sectors recorded positive median non-recurring profit growth. AI computing infrastructure, AI applications, and AI data services ranked in the top three by median growth rate, at 105.02%, 30.60%, and 14.20% respectively.

Compared with the first nine months of 2025, in the first nine months of 2026, four sectors—AI computing infrastructure, AI applications, cybersecurity, and healthcare IT—saw acceleration in non-recurring net profit growth. On a quarterly basis, in Q3 2026 a total of six sectors achieved positive revenue growth, with AI computing infrastructure, AI data services, and AI applications ranking highest by median revenue growth rate at 28.61%, 26.73%, and 2.03% respectively; four sectors—AI computing infrastructure, AI data services, financial IT, and cybersecurity—saw year-on-year acceleration in revenue growth.

In Q3 2026, a total of five sectors recorded positive median non-recurring profit growth, ranked from high to low as AI computing infrastructure, healthcare IT, AI applications, AI data services, and domestic innovation, up 126.90%, 27.01%, 25.14%, 3.75%, and 3.75% year-on-year respectively.

Investment recommendation: Taken together, the AI computing infrastructure, AI data services, and AI applications sectors are showing highly prosperous performance, and it is recommended to pay attention to core targets in the relevant industrial chain.

Risk warnings: policy support for domestic innovation and cybersecurity may fall short of expectations; AI industry technological development may fall below expectations; industry competition may intensify; and technological innovation may fall short of expectations.