On the evening of October 20, global lithium battery leader CATL (300750.SZ) released its Q3 2026 earnings report.

In the first three quarters of 2026, the company achieved operating revenue of 442.137 billion yuan, up 56% year-on-year, with net profit attributable to shareholders of 64.53 billion yuan, up 32% year-on-year, and non-GAAP net profit of 57.88 billion yuan, up 33% year-on-year. Revenue and shipments continued their high growth trajectory, but profit growth was notably slower than revenue growth.

Deteriorating profitability in the product mix was one of the main factors dragging down profit growth, with both power batteries and energy storage batteries seeing across-the-board price cuts in the quarter, operating cash flow plunging 94%, and falling lithium carbonate prices and tax expenses amplifying the negative impact.

What worries the market even more is the pessimistic outlook for the future. As growth in new energy vehicles and energy storage slows, uncertainty over lithium battery demand is increasing, and automakers' "de-CATLization" efforts are exerting a profound impact on CATL's long-standing strong pricing power and the competitive landscape of the industry chain.

In the fourth quarter of this year and next year, consumption tax and export tax rebates are expected to further weigh on profit prospects. Following the release of the Q3 report, major banks including JPMorgan and UBS successively downgraded their ratings, and CATL's stock price experienced a rare plunge of more than 10%, signaling that the company's operations have entered a pressure zone.

Revenue and Profit Growth Divergence Intensifies; Across-the-Board Price Cuts for Power and Storage Batteries Send Operating Cash Flow Down 94%

Last night, CATL released its Q3 report, with revenue and net profit for the first three quarters growing 56% and 32% year-on-year respectively, sustaining growth momentum but with the gap between the two further widening.

In the third quarter alone, the company achieved operating revenue of 165.221 billion yuan, up 58.58% year-on-year, net profit attributable to shareholders of 21.246 billion yuan, up 14.54% year-on-year, and non-GAAP net profit of 18.862 billion yuan, up 14.86% year-on-year. Since the first quarter of this year, the divergence between revenue and profit growth has been continuously intensifying.

Looking at the two core business segments of power batteries and energy storage batteries, CATL's trend of rising volumes alongside falling prices and shrinking unit profitability is particularly prominent.

In power batteries, the company's average price in the third quarter was approximately 0.68 yuan/Wh, roughly flat quarter-on-quarter, but gross margin was 18%, down 5 percentage points year-on-year and 2 percentage points quarter-on-quarter. Gross profit per Wh was 0.11 yuan, down 20% year-on-year and 10% quarter-on-quarter, and profit per Wh was 0.057 yuan, down 35% year-on-year and 20% quarter-on-quarter.

In energy storage batteries, the third-quarter average price was approximately 0.55 yuan/Wh, flat quarter-on-quarter, with gross margin of 20%, down 6 percentage points year-on-year and 3 percentage points quarter-on-quarter. Gross profit per Wh was 0.10 yuan, down 25% year-on-year and 10% quarter-on-quarter, and profit per Wh was 0.056 yuan, down 38% year-on-year and 18% quarter-on-quarter.

Overall, CATL's gross profit per Wh was 0.131 yuan, down 0.018 yuan quarter-on-quarter, and non-GAAP net profit per Wh was 0.072 yuan, down 0.019 yuan quarter-on-quarter. Although power and storage battery unit prices were roughly flat quarter-on-quarter, gross margins, unit gross profit, and unit net profit all declined, indicating that prices did not fully offset cost pressures.

Since the second quarter of 2026, lithium carbonate prices have entered a new round of sharp declines, not only suppressing battery selling prices through price linkage mechanisms but also dealing a blow to CATL's massive inventory. As of the end of Q3 2026, CATL's inventory reached 144.8 billion yuan, up 53% from the beginning of the year, with a quarter-on-quarter increase of 14 billion yuan, corresponding to nearly 30GWh of new inventory.

During the lithium price downturn, the consumption of previously high-priced raw materials and impairment provisions directly caused asset impairment losses in the third quarter to surge to 1.712 billion yuan, a quarter-on-quarter increase of 1.19 billion yuan.

At the same time, depreciation and expense pressures from heavy-asset capacity expansion continued to emerge, and cash flow and inventory metrics also indicated that growth quality was under periodic pressure. In the third quarter, CATL's capital expenditure reached 17.1 billion yuan, up 73% year-on-year and 35% quarter-on-quarter, with net fixed assets increasing by 14.7 billion yuan at quarter-end. Operating net cash flow was only 1.41 billion yuan, down 94% year-on-year and 95% quarter-on-quarter.

In addition, the reduction in export tax rebates and the introduction of consumption tax collectively eroded current-period profits. The combination of multiple factors caused CATL's third-quarter performance to come under further pressure.

Slowing Demand Combined with "De-CATLization" Reshapes Competitive Landscape; Strong Bargaining Power Faces Major Challenges

What may worry the market even more is the pessimistic outlook for the company's future. For a long time, CATL has occupied the lion's share of industry chain profits by virtue of its technology and scale advantages. However, against the backdrop of increasingly fierce price wars in end-market vehicles, automakers' sensitivity to battery costs has reached unprecedented heights, and "de-CATLization" moves by car companies have been frequent.

It is understood that as early five-year long-term agreements gradually expire, major automakers are seeking to break single-supplier dependence and reclaim battery pricing power by introducing second and third suppliers and advancing self-developed PACK battery packs. Even in the energy storage sector, leading system integrators have begun to support second-tier cell manufacturers through long-term agreement splitting and equity investments.

This subtle change in the competitive landscape not only raises market concerns about CATL's medium- to long-term market share but also directly constrains the company's ability to pass through costs amid consumption tax and export tax rebate reductions.

From the perspective of total downstream demand, the lithium battery industry is bidding farewell to explosive growth and entering a stage of moderate-speed development. Currently, domestic new energy passenger vehicle penetration has crossed the 60% threshold and entered stock competition, and the marginal effect of increasing battery capacity per vehicle in offsetting overall vehicle growth slowdown is diminishing.

Meanwhile, the domestic large-scale energy storage market, which performed most impressively in 2026, is facing significant cyclical fluctuations and inventory destocking pressure after experiencing a rush installation wave triggered by policy timing in the first three quarters, with actual grid-connected installation growth far below cell shipment growth.

Against the backdrop of slowing demand growth in both downstream new energy vehicles and energy storage, the supply-demand outlook for upstream lithium carbonate is becoming increasingly murky. In the past, falling raw material prices often brought "cost dividends" to midstream battery makers, but the premise for this logic to hold is sufficiently strong end demand and no need for battery makers to simultaneously make substantial concessions.

Currently, as lithium mine supply continues to be released and lithium battery demand growth shifts gears in 2027, if lithium carbonate prices continue to decline or oscillate at low levels, on the one hand, it will trigger linked downward adjustments in power battery prices and suppress revenue per GWh; on the other hand, it means downstream customers will become more cautious in stockpiling, and CATL's on-book inventory of 144.8 billion yuan and nearly 30GWh of new inventory will still need to be painstakingly digested during a demand slowdown cycle.

In addition, the pressure from the 2% consumption tax imposed since September 2026 will intensify quarter-on-quarter in the fourth quarter of this year, and the pressure from the 6% export tax rebate reduction in January 2027 will also gradually materialize starting in the first half of next year. Consumption tax and export tax rebates are expected to further weigh on the profit outlook for CATL and the entire lithium battery industry.

With weakening demand growth combined with the spread of "de-CATLization" downstream, CATL's strong industry chain bargaining power faces major challenges, and the industry's long-term competitive landscape is being reshaped. Following the release of the Q3 report, major banks including JPMorgan and UBS successively downgraded their ratings. Under the new competitive landscape, CATL's growth logic has been questioned by the market, with both A-shares and H-shares experiencing rare plunges of more than 10%, and the operating pressure facing the company is self-evident.