Recently, Chinese telecommunications equipment manufacturer ZTE released its 2025 financial results, with a sharp 33.52% year-on-year decline in net profit attributable to shareholders. In addition, the core business of the operator continued to shrink, and overall gross profit margin was under pressure. At the same time, the company is still embroiled in a bribery investigation by the U.S. Department of Justice, with potential fines of up to $2 billion, posing both financial and legal risks, making the future uncertain.
According to reports from The Paper, ZTE’s revenue in 2025 returned to growth trajectory, but its profitability significantly deteriorated. The net profit attributable to shareholders was only 5.618 billion yuan, a decrease of more than 30% from the previous year; the net profit in the fourth quarter even dropped by 42.95% year-on-year, falling to 296 million yuan.
Looking at the three major business segments, revenue from operator network business was 62.857 billion yuan, a 10.62% year-on-year decrease, and the gross profit margin also fell by 2.81 percentage points to 48.09%, becoming the main factor dragging down overall performance. This is directly related to the global operators cutting capital expenditures in recent years and the transition of 5G construction to the stage of stock optimization. Consumer business saw a slight growth of 4.35% to 33.816 billion yuan, but the gross margin also declined by 4.35 percentage points.
The company admitted that under the dual background of industry cycle switching and business structure adjustment, the gross profit margin is under pressure in stages, leading to pressure on net profit attributable to shareholders. The annual R&D expenditure reached 22.76 billion yuan, accounting for about 17% of revenue. While long-term investment efforts remain unabated, the short-term profit space has narrowed significantly.
Despite the pressure on traditional business, the explosive growth of the computing power sector has provided ZTE with new narrative support. In 2025, revenue from government-enterprise business was 37.222 billion yuan, an increase of over 100% year-on-year. Revenue from servers and storage grew by more than 200% year-on-year, and the computing power business accounted for 24.6% of total annual revenue.
This transformation was not achieved overnight. As early as 2024, ZTE proposed a “connectivity + computing power” dual-drive strategy, accelerating its layout in computing power infrastructure areas such as servers and data centers. According to a report by Southern Metropolis Daily last year, in 2024, ZTE’s domestic government-enterprise business revenue increased by nearly 60% year-on-year, and revenue from the smartphone business grew by over 40%, showing initial results of the transformation.
However, the gross profit margin of the government-enterprise business was only 10.97%, a decrease of 4.36 percentage points year-on-year, indicating that the current revenue expansion is still being traded for market share at a low profit margin. The competition in the computing power sector is fierce, and whether ZTE can gradually improve its profit structure through scale expansion remains a core issue of market concern.
ZTE’s performance has been continuously declining in recent years. According to financial reports, in 2024, ZTE experienced decreases in both revenue and net profit.
While under pressure in performance, bigger uncertainties come from a legal standpoint.
Last December, Reuters reported, citing sources, that the U.S. Department of Justice has launched an investigation into ZTE, accusing the company of long-term violations of the Foreign Corrupt Practices Act in South America and other regions, alleging bribery of foreign officials to secure telecommunications contracts. The potential settlement amount could exceed $1 billion and even reach $2 billion, causing ZTE’s A-shares to hit the limit down and its Hong Kong shares to plummet by over 13% on the day the news broke.
This is not the first time ZTE has been embroiled in legal troubles in the United States. In 2017, ZTE admitted to illegally exporting U.S. products to Iran and paid a $1.19 billion (including both criminal and civil) fine. In 2018, ZTE was placed under a “denial order” by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) for misrepresenting employee disciplinary actions to U.S. authorities, resulting in a comprehensive ban on American companies exporting key chips and software to ZTE, suspending ZTE’s business for nearly three months. With the support of then-President Trump, ZTE reached an agreement with the U.S. Department of Commerce to pay $1 billion, and the ban was lifted in the summer of 2018.
In this latest investigation, Venezuela has been confirmed as one of the countries involved, with the Department of Justice determining that related bribery activities continued until at least 2018. If negotiations fail, ZTE may face another export ban, threatening its ability to procure chips from U.S. companies like Qualcomm and Intel, with high-end smartphone business being hit the hardest.
Insiders revealed that any final settlement involving ZTE must be approved by Beijing authorities, adding further variables to the negotiation process. Calculated based on ZTE’s net profit of 5.618 billion yuan in 2025, once a fine of over $1 billion is imposed, the financial impact would be significant.