Revenue up only 17.84%, net profit soaring 221.08%! Where did SHANGHAI FUDAN's (01385) first three quarters' profit come from?

On October 28, SHANGHAI FUDAN (01385) released its results for the first three quarters of 2026. In the first three quarters, the company achieved revenue of RMB3.564 billion, up 17.84% year on year; net profit attributable to shareholders of RMB1.06 billion, up 221.08% year on year; and basic earnings per share of RMB1.29. Putting the three figures together, the most striking thing is not SHANGHAI FUDAN's total net profit of RMB1.06 billion, but the huge gap between the 221.08% profit growth rate and the 17.84% revenue growth rate. Profit is growing more than ten times faster than revenue. Where did the money come from? Was it a one-off accounting reversal, or has a change in business structure begun to become visible? Product mix optimization, profit elasticity further released A deeper look at SHANGHAI FUDAN's financial report makes it clear that the value of this third-quarter report lies not in the "221.08%" figure itself, but in the fact that it confirms one thing: after inventory was cleared in 2025, SHANGHAI FUDAN's profit model is shifting from "dragged down by inventory write-downs" to "driven by product mix optimization." According to the financial report, after deducting non-recurring gains and losses, SHANGHAI FUDAN's net profit attributable to shareholders in the first three quarters still surged 153.83% year on year, indicating that the profitability of its core business has undergone a fundamental, trend-based improvement. This is not only the result of a recovery in demand, but also a comprehensive reflection of the company's all-round improvement in product competitiveness, cost control capability and operational efficiency. (Image source: SHANGHAI FUDAN third-quarter report) At the same time, the increase in its gross margin is also direct proof of the leap in the company's profit quality. In the first three quarters, the company's consolidated gross margin rose from 58.47% to 59.34%, and the gross margin for the third quarter alone reached as high as 63.26%, reflecting the results of an increased share of high-gross-margin products and product mix optimization. From the perspective of business structure and inventory management, SHANGHAI FUDAN's explosive profit repair is mainly related to these two major internal changes. In terms of business structure, during the reporting period, the company's product structure continued to iterate toward high-end segments, and the share of high-gross-margin categories rose steadily. The company continued to phase out low-value-added conventional products and concentrated resources on high-barrier categories such as high-end programmable logic chips, automotive-grade chips and intelligent computing power chips, driving the overall consolidated gross margin to continue rising and profit space to continue opening up. According to the financial report, in the first three quarters, the company's FPGA and other product line contributed revenue of RMB1.196 billion, making it the company's largest source of revenue and core growth engine. This product line directly benefits from the demand explosion in downstream high-growth areas such as artificial intelligence, high-performance computing and communication base stations (5G-A). The company's "Fuwei Qinglong" JFMQL30TAI676H adopts a CPU+FPGA+AI multi-core heterogeneous fusion architecture, targeting high-throughput, low-latency scenarios such as image and video, wireless communications and data analysis, driving the upgrade of products from traditional FPGAs to heterogeneous intelligent computing power platforms. At the same time, the company launched the Agent intelligent FPGA development platform, covering code generation, simulation verification and deployment delivery, further improving the development ecosystem. Non-volatile memory (revenue of RMB1.092 billion) and security and identification chips (revenue of RMB726 million) constitute the company's stable cash flow and business foundation. Smart meter chips (revenue of RMB430 million) and integrated circuit testing services (revenue of RMB120 million) reflect the company's deep cultivation in segmented markets and its ability to vertically integrate the industrial chain, providing stable support for overall performance. In terms of inventory management, in the first three quarters, SHANGHAI FUDAN's refined inventory management delivered notable results, shedding the historical operating burden. During past industry downturns, chip companies generally faced inventory impairment pressure, which eroded corporate profits. In 2025, the company's profit was suppressed by inventory write-down losses; in 2026, this factor reversed, becoming an important source of profit elasticity. During the period, the company proactively optimized its inventory structure and strictly controlled inventory risks, and inventory write-down losses fell sharply year on year, greatly reducing non-operating profit erosion and fully releasing profit elasticity. From the above, it is clear that for SHANGHAI FUDAN, the third-quarter report is not a numerical rebound from a low base, but a delivery note showing that product structure has begun to speak after inventory clearance. Industry recovery as the foundation, domestic substitution and emerging scenarios as the wings Of course, the profit elasticity in SHANGHAI FUDAN's third-quarter report cannot be separated from the support of industry conditions. In 2026, the domestic semiconductor industry ushers in a structural inflection point, with a recovery in end demand combined with self-controllability policy drivers, and the chip industry's prosperity continues to rise. On the one hand, domestic substitution of high-end FPGA chips has entered an acceleration phase. For a long time, the domestic high-end programmable logic chip market has been monopolized by overseas oligopolies, with a low localization rate and broad room for independent substitution. Under the major trend of computing power localization and self-controllability of core chips, downstream government and enterprise, industrial and computing power customers are accelerating their introduction of local supply chains. As a domestic FPGA leader, the company, with its mature product system and stable delivery capability, continues to capture overseas substitution share. On the other hand, three major emerging high-growth tracks continue to release dividends. The explosion in AI edge computing power demand drives continuous expansion in demand for heterogeneous computing chips; the acceleration of domestic low-orbit satellite internet construction has brought the commercial aerospace industry chain into a period of rapid implementation; and the intelligent upgrade of new energy vehicles continues to drive rigid demand for automotive-grade memory and MCU chips. The superposition of multiple industry tailwinds provides broad market soil for the company's new product ramp-up, and the external growth environment continues to improve. GMTEight observed that during the industry reshuffle phase, market resources also continue to concentrate toward leadersthat is, leading enterprises with self-developed technology barriers, complete product matrices and multi-scenario implementation capabilities will continue to harvest market share, forming a market landscape in which the strong remain strong. Among them, SHANGHAI FUDAN, as a domestic FPGA leader, is deeply bound to high-growth industry tracks and fully enjoys the dual dividends of cyclical recovery and domestic substitution. Under the wave of AI computing power localization, domestic demand for edge computing power and heterogeneous computing is exploding. The company's multi-core heterogeneous FPGA chips precisely match the needs of local computing power scenarios. With the advantages of high adaptability, low cost and customizability, they continue to replace overseas products, strengthening the company's industry competitiveness and making its leading position increasingly solid. (SHANGHAI FUDAN FPGA chips, image source: 2025 annual report) Therefore, as the chip industry's prosperity continues to rise, SHANGHAI FUDAN, as a domestic FPGA leader, relies on its self-developed technology barriers to continuously realize domestic substitution dividends, and its performance growth momentum is expected to be further released. Summary Reviewing SHANGHAI FUDAN's 2026 third-quarter report, it is not difficult to find that the 221% high profit growth is not a short-term bubble, but the inevitable result of the company's tempering through cycles, continuous technological iteration and deep cultivation of refined operations. In the short term, industry recovery combined with inventory clearance has fully released the company's profit elasticity, and the operating inflection point has been completely established; in the medium term, the product structure continues to move upmarket, and the multi-category matrix hedges cyclical fluctuations, providing a solid growth foundation; in the long term, with a position in the three golden tracks of AI computing power, commercial aerospace and automotive electronics, and relying on the wave of domestic substitution, the growth ceiling continues to broaden. This also means that even if SHANGHAI FUDAN's short-term share price fluctuates with sentiment, its long-term market value will still follow performance deliverythat is, as performance continues to grow rapidly, valuation repair will come naturally. In the first half of 2026, the semiconductor sector overall fluctuated and adjusted, and the company's share price fluctuated with industry sentiment while valuation continued to digest. As high-gross-margin new products continue to ramp up, the product structure continues to optimize and dividends from emerging tracks continue to be released, the company's profit elasticity is expected to continue exceeding expectations, and its long-term value is ushering in a window for accelerated revaluation.