Summary of Key Points
As a major model company attracting attention in the Hong Kong stock market in 2026, Zhipu’s first half-year report after listing presents a paradox of “high growth while still incurring losses”: Revenue surged nearly fourfold to 950 million yuan, but the adjusted net loss increased to 1.96 billion yuan. API revenue has become the main source of income (accounting for 86.5%, up 27 times year-on-year), with coding scenarios being the primary driving force. The gross margin has turned positive, but it is still not sufficient to cover research and development expenses (R&D costs account for 2.2 times the revenue). The stock price has dropped by 60% from its peak of over one trillion yuan, but the market value still exceeds 550 billion Hong Kong dollars (more than 10 times the issue price). The current key questions are: Can API growth be sustained? And when will the company start making a profit?
Detailed Analysis
1. API Becomes the Main Source of Income: Coding Scenarios as the “Growth Engine”
Previously, Zhipu mainly generated revenue through “localized deployment” – installing the model on customers’ servers and charging for customized services. This model was slow and had limited scalability (accounting for 84.8% of revenue last year). Now, the company has shifted to the API model, similar to how utilities like electricity, water, and gas are used: customers access the model via the cloud and pay based on their usage.
Why has API revenue suddenly exploded? The key lies in coding scenarios. Ordinary chatbots require a small amount of computing power (tokens) per conversation, but coding tasks involve repeatedly reading code, fixing bugs, and adjusting tools, which can result in dozens of calls per task, consuming many more tokens. Additionally, Zhipu’s GLM-5.2 model, launched in June, has significantly improved coding capabilities, leading to a 98-fold increase in the average daily number of calls from top customers, and the average selling price has also doubled (not due to a direct price increase, but because high-value tasks now account for a larger proportion of total usage).
API revenue has not only made up for the decline in localized business (localized revenue decreased by 20.5%) but has also driven overall growth, with nearly all new revenue coming from APIs.
2. Gross Margin Has Turned Positive, but No Profit Yet
The API gross margin has risen from -0.4% last year to 24.6%, meaning that for every 1 yuan in API revenue, 0.25 yuan remains after deducting direct costs (computing power and services). However, this profit does not cover R&D, sales, and administrative expenses, so the company is still in the red.
The reasons for the positive gross margin include: increased usage, which spreads fixed costs; improved inference efficiency (unit token costs decreased by 80%); and pricing adjustments. However, it’s important to note that total computing power costs are still rising – sales costs increased by more than 60% in the first half of the year, mainly due to the purchase of computing power. Moreover, the newly launched low-cost models (such as GLM-5.3-Flash, priced at one-tenth of the high-end models) may lower the average gross margin. Whether costs can decrease sufficiently in the future remains to be seen.
3. Losses Are Still Expanding: R&D Expenses Are High
On the surface, the net loss has decreased from 2.36 billion yuan to 2.07 billion yuan, thanks to income from financial instruments (a reduction of 400 million yuan in losses). Excluding this, the adjusted net loss has increased from 1.75 billion yuan to 1.96 billion yuan, and the operating loss has also risen to 2.15 billion yuan.
The main reason for the increase in losses is expensive R&D: 2.13 billion yuan was spent on R&D in the first half of the year, 2.2 times the revenue, an increase of 540 million yuan compared to last year. The new gross margin (about 160 million yuan) is less than 30% of the additional R&D expenditure. Although the loss per yuan of revenue has decreased from 9.2 yuan to 2.1 yuan, the absolute loss amount is still increasing.
Zhipu does not currently face a cash shortage: It has just raised 31.4 billion Hong Kong dollars, and together with its existing cash, it has enough funds for the time being. However, in the long term, the company must ensure that API revenue covers R&D and computing power costs; otherwise, it will struggle to sustain operations.
4. Volatile Stock Price: Valuation Depends on Growth Expectations
Zhipu’s stock price rose from HKD 116 at launch to a peak of HKD 2,980 (market value of one trillion yuan) before dropping to HKD 1,195 (a 60% decrease), but it is still more than 10 times the issue price. Why such a drop? The market is concerned about the sustainability of growth, as high valuations require sustained high growth.
Management disclosed that ARR (Annualized Revenue) reached $1.6 billion by the end of August (with August revenue alone approaching 900 million yuan, nearly half of the annual total), indicating rapid growth. However, whether this growth can be maintained is uncertain. The market is now focusing on whether the company can convert its model capabilities into sustained revenue.
5. What Lies Ahead?
Two key questions need to be addressed:
- Can API growth be sustained? If coding scenarios are the driving force, can the company expand into professional fields such as cybersecurity and data analysis? If only coding supports growth, there may be a bottleneck.
- When will the company start making a profit? The focus is on two indicators: whether the API gross margin can continue to increase (e.g., by reducing costs more quickly) and whether the adjusted loss can start to narrow (with new revenue covering more R&D expenses). Only when “the more we sell, the less we lose” can we confirm the presence of economies of scale.
Conclusion
The large model industry has moved from a focus on technical parameters to an emphasis on profitability. Zhipu’s API growth demonstrates that its models can generate significant revenue, but to achieve profitability, it must address the issues of high R&D costs and sustainable growth. In the next financial report, the market will closely monitor changes in the gross margin and loss amounts – these are the key indicators to assess the company’s health.