Summary of the Key Findings
The just-released 2026 half-year reports for A-share companies have revealed a phenomenon that goes against common sense: on the surface, the combined net profit of all listed companies increased by nearly 20% year-on-year, indicating a clear improvement in their profitability. However, upon closer inspection, this improvement is not a result of everyone improving together; instead, there is a stark "two-tiered" distribution. More than 150 companies have seen their profits increase by over 50% compared to last year, while 229 companies have seen a decrease or even losses. The number of companies with profits between 10% and 30% has also significantly decreased.
The market is now a mix of extreme success and widespread hardship: industries such as AI hardware, chips, and upstream energy and minerals are reaping huge profits, with some companies seeing their profits multiply by several times or even by dozens or hundreds of times. In contrast, industries closely related to consumer goods and real estate have either seen a decline in profits or incurred overall losses. This divergence is not a short-term fluctuation but is the inevitable result of the concurrent rise of new industries and the decline of traditional real estate sectors, and it is likely to continue for some time.
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Detailed Analysis
1. Understanding the "K-shaped" Divergence
Many people thought that a 19% increase in overall A-share profits meant that the average score had risen from 60 to 71, indicating improvement for most companies. However, the reality is different:
We define companies with a year-on-year increase in net profit of over 50% as "top performers," and those with a decrease as "underperformers." Over the past year, the number of top performers increased from 1,109 to 1,259, while the number of underperformers increased from 2,496 to 2,725. This means that the majority of companies, which previously had average profits of 60-80%, have now shifted either towards higher performance or towards failure.
This is what is known as a "K-shaped" distribution: two distinct groups are moving in opposite directions, with no middle ground. It's not that all companies are improving or declining simultaneously; rather, the number of profitable companies is increasing, while the number of losing or less profitable companies is also growing, leading to a complete breakdown in the market's profit structure.
2. The Top Performing Industries: AI and Upstream Resources
The two main industries driving the overall increase in A-share profits are:
- AI-related technology: The electronics sector (chips, AI hardware) led the growth, with net profits increasing by 195% year-on-year, meaning some companies earned as much in the first half of the year as they did in the entire previous year. The most dramatic case was a company whose profits increased by more than 700 times. This is not an exaggeration; in the previous two years, the chip industry faced overcapacity, and many companies suffered heavy losses. Now, with the global AI boom, demand for servers and storage chips has surged, leading to substantial profit increases.
- Upstream resources: Industries such as oil and petrochemicals, metals, coal, and chemicals, which rely on selling raw materials, also saw profits increase by over 30% year-on-year. The metals sector even doubled its profits, and the coal sector, which had been losing profits in the first quarter, turned to a 28% increase in the half-year report. The reason is simple: geopolitical conflicts have driven up international oil and mineral prices, allowing these companies to earn significantly more from selling their products.
Other high-growth industries, such as defense and power equipment, also belong to the top tier of the K-shaped distribution.
3. The Struggling Industries: Consumer Goods and Real Estate
In contrast to the profitable industries, the sectors most closely related to people's daily lives are facing significant pressure:
- The consumer goods sector, once considered stable, has seen profits decline by 20%.
- The home appliance sector has seen profits decrease by 6%.
- Even the food and beverage industry, which is often seen as a consistently profitable sector, experienced a 4.8% decline in the half-year report, after a 6.8% increase in the first quarter.
- The real estate sector has been particularly hard-hit, with profits plummeting by 316 billion yuan. The agriculture, forestry, animal husbandry, and fisheries sectors, which are closely linked to real estate, also suffered losses of 12.5 billion yuan.
- The decline in profits in these sectors has even accelerated, with sectors such as textiles, water and electricity, and construction seeing their profit declines double compared to the first quarter. This means that business owners in these industries earned less in the second half of the year than in the same period last year and are likely to continue losing more in the future.
4. The Causes of the Divergence
Experts attribute this phenomenon to the overlap of two major cycles:
- The rise of the new AI industry, with global investment in AI infrastructure and explosive demand for chips and servers, leading to soaring profits for related companies.
- The ongoing decline of the real estate sector, which has been driving growth for over 20 years. The demand for industries such as steel, cement, home appliances, and construction has not returned to its peak levels from a decade ago, and these sectors are still dealing with excess capacity.
- Additionally, consumers are cautious about spending, hesitant to buy new cars, appliances, or travel, which has further undermined the profits of consumer goods companies.
5. The Future of This Divergence and Its Impact on Individuals
This extreme divergence is unlikely to disappear soon:
- Geopolitical conflicts continue, oil prices remain high, and U.S. interest rates are high, creating uncertainty in exports and costs.
- Although China is implementing policies to support the real estate sector, new infrastructure, and consumer spending, the recovery of traditional industries will be a slow process.
- For individuals, it is important to avoid blindly buying stocks or funds just because overall A-share profits have increased. The current market is not characterized by widespread growth; investing in traditional consumer goods and real estate sectors can be risky. Instead, it is better to focus on high-growth industries such as AI hardware, chips, and advanced manufacturing, as these sectors offer higher chances of salary increases and year-end bonuses.
In summary, the current market is highly polarized, with some industries thriving while others struggle. This divergence will likely persist for a while, and individuals should be cautious when making investment or career choices, focusing on sectors with strong growth potential.