On September 3, Z.AI fell 3.49% in regular trading, trading at 1078.0 HKD/share, with turnover of 2.127 billion HKD, marking the third consecutive session of weakness since the company released its interim results on August 31.

The selloff stems from Z.AI's first-half earnings, which showed revenue of RMB 954 million, up 399.7% year-over-year but below market expectations. Adjusted net loss widened 12.1% to RMB 1.964 billion. Gross margin contracted sharply from 50.0% to 26.4%, primarily because the revenue mix shifted dramatically — high-margin on-premise deployment revenue shrank from 84.8% to just 13.5% of total revenue, diluted by the rapid scale-up of lower-margin API services. R&D spending rose 33.6% to RMB 2.131 billion. Management acknowledged the company still trails Anthropic by approximately 17 months, fueling debate over the sustainability of its roughly HKD 550 billion valuation.

Despite the market's negative reaction, several brokerages raised target prices post-earnings. JPMorgan lifted its target to HKD 2,000, while CMBI raised its target to HKD 1,600, both citing strong API business momentum and an ARR run-rate that reached USD 1.6 billion in August with year-end guidance of USD 2.4 billion.

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