Sungrow Power Supply Co., Ltd. has delivered a semi-annual report characterized by declining revenue, compressed profitability, and a shifting business mix. In the first half of 2026, the company recorded operating revenue of RMB 30.91 billion, a year-on-year decrease of 28.99%. Net profit attributable to shareholders stood at RMB 5.26 billion, down 32.01% year-on-year, while non-GAAP net profit fell more sharply by 42.96% to RMB 4.28 billion. Despite these top-line pressures, net cash flow from operating activities improved 8.75% year-on-year to RMB 3.74 billion, and R&D investment bucked the trend by rising 2.85% to RMB 2.10 billion.

Examining the business structure, the solar division was the primary driver of the revenue decline, while energy storage is emerging as a more central revenue pillar. During the period, energy storage revenue reached RMB 15.46 billion, accounting for half of the company's total turnover, with a comparatively milder decline of 13.18% year-on-year. Solar industry revenue, conversely, plunged 44.83% to RMB 12.42 billion. Within this segment, new energy investment and development revenue collapsed by 85.02% to just RMB 1.26 billion. As a result, the share of energy storage revenue expanded from 40.89% in the same period last year to 50%.

Profitability trends showed distinct divergence across segments, yet the overall gross margin actually improved. The composite gross margin for the first half reached 35.92%, up 1.56 percentage points year-on-year, largely thanks to an optimized product mix. Notably, the gross margin for power electronics conversion equipment, including photovoltaic inverters, climbed 6.98 percentage points to 42.72%. Conversely, the gross margin for energy storage systems contracted to 32.43%, a year-on-year decrease of 7.49 percentage points.

Looking ahead, the company is positioning AI computing power supply as a key new growth avenue. The semi-annual report indicates that its AIDC power segment has entered the commercial deployment phase. The EnerNeo solid-state transformer is now officially on the market, 800V high-voltage DC products have completed small-batch deliveries domestically, and strategic cooperation and framework procurement agreements have been signed with Dongyang Guang and Chinasoft International. Additionally, a "Green Token Joint Innovation Center" has been established with Alibaba Cloud. These moves signal that the company is extending its reach from a traditional new energy power electronics equipment maker towards becoming a comprehensive power solutions provider integrating new energy, storage, and AI computing power supply.

Revenue Down 29% with Solar Investment and Development as the Primary Drag

From a revenue composition perspective, the performance pressure was rooted mainly in the solar segment rather than energy storage. During the reporting period, solar industry revenue fell 44.83% to RMB 12.42 billion, with its revenue share dropping to 40.17% from 51.72% a year earlier. Energy storage revenue, however, dipped a relatively modest 13.18% to RMB 15.46 billion, its share rising to 50% from 40.89%.

A closer look reveals that revenue from core power electronics gear like solar inverters declined 19.17% to RMB 12.39 billion, a contraction noticeably smaller than the broader solar segment’s drop. The sharpest retreat came from the new energy investment and development business, whose revenue fell 85.02% to RMB 1.26 billion, shrinking to just 4.07% of total revenue from 19.29% a year ago. Meanwhile, revenue from solar power station generation also slipped 61.05%.

This indicates that the overall revenue decline was not due to a wholesale slump in core equipment sales, but rather a combination of a significant reduction in power station investment and development income and temporary headwinds in the solar equipment business.

Storage Now Accounts for Half of Revenue but Faces Significant Margin Pressure

Energy storage has become the company's largest single business segment. Although energy storage system revenue of RMB 15.46 billion registered negative growth, its 13.18% decline was far milder than that of the solar business. This segment now contributes 50% of total revenue, making it one of the company's primary income sources for the first time.

However, scale expansion has not fully translated into improved profitability. The gross margin for energy storage systems fell 7.49 percentage points year-on-year to 32.43%. Operating costs for this segment were RMB 10.44 billion, down just 2.36% year-on-year, a far slower pace than the revenue contraction. This discrepancy underscores a notable data point: while storage demand continues to grow, intensifying industry competition and pricing pressure are starting to erode profit margins.

The company itself has flagged this risk, noting that as more players enter the storage niche, rapid capacity expansion and declining prices could lower product gross margins. To counter price wars, it plans to leverage technological innovation, a global marketing and service network, high value-added services, and full-chain cost reduction and efficiency programs. On the product front, the company continues to strengthen its large-capacity and grid-forming storage offerings. The PowerTitan 3.0 liquid-cooled storage system Plus version now features a single-container capacity of 3.125MW/12.5MWh, achieving an energy density exceeding 500kWh per square meter and reducing land use for GWh-scale plants by 32%. A new "1+X" modular PCS series has also been launched, covering a power range from 3.45MW to 12.5MW with a full-load efficiency of 98.5%.

Overseas storage expansion persists as well. The company states that its storage systems are now widely deployed across Europe, the Americas, the Middle East, Africa, and the Asia-Pacific, with application expertise accumulated in areas such as frequency regulation, peak shaving, renewable integration support, microgrids, and commercial and residential uses.

Inverter Revenue Declines but Profitability Improves

In stark contrast to storage, the inverter business saw revenue fall while gross margin improved markedly. Revenue from solar inverters and other power electronics conversion equipment came in at RMB 12.39 billion, down 19.17% year-on-year. Operating costs, however, fell 27.95% to RMB 7.10 billion, pushing the gross margin up 6.98 percentage points to 42.72%. In other words, despite lower sales volume and revenue, the steeper cost reduction enhanced the segment’s earnings quality.

Product upgrades remain a competitive lever. During the period, the company launched its PowerMatrix matrix inverter, integrating photovoltaic inversion, storage conversion, energy routing, and grid-forming control into a single unit. It also introduced the 465kW high-power string inverter SG465HX series, which boasts a 28% higher power density and a 0.2% improvement in system efficiency.

Globalization continues to underpin the inverter business. As of the end of the reporting period, the company’s overseas inverter production capacity reached 50GW. It operates over 30 overseas branches, maintains more than 520 service outlets, and sells products in bulk to over 100 countries and regions. Its overseas workforce grew 20.6% year-on-year to 2,435 employees.

Gross Margin Improves, but Exchange Losses Eat into Profits

Despite lower revenue, the company managed to improve its gross margin in the first half. The composite gross margin rose 1.56 percentage points year-on-year to 35.92%, driven mainly by an optimized product mix. However, new cost pressures emerged on the expense side. Selling expenses fell 7% to RMB 2.13 billion, administrative expenses dropped 10.49% to RMB 750 million, while R&D expenses climbed 2.85% to RMB 2.10 billion.

Financial expenses swung dramatically, from a net gain of RMB 263 million in the prior-year period to a net expense of RMB 368 million, an increase of roughly RMB 631 million. The company attributes this to increased exchange losses caused by the depreciation of the euro and the US dollar. Consequently, despite gross margin improvement, profit was squeezed by both shrinking revenue scale and exchange losses. Net profit attributable to shareholders fell 32.01% to RMB 5.26 billion, while non-GAAP net profit declined a steeper 42.96% to RMB 4.28 billion. Notably, non-recurring items totaled RMB 983 million in the first half, including RMB 776 million in gains from changes in fair value and disposal of financial assets and liabilities. This suggests that a substantial portion of reported profit still stems from non-recurring items, making non-GAAP net profit a more reliable gauge of the company’s core operating profitability.

Cash Flow Improves with Cash Balances Exceeding RMB 31.5 Billion

In contrast to falling profit, operating cash flow strengthened. Net cash from operating activities rose 8.75% year-on-year to RMB 3.74 billion. Net cash from investing activities surged to RMB 6.06 billion, primarily due to reduced purchases of wealth management products. Financing cash flow was RMB -445 million, narrowing significantly from a year earlier. As a result, cash and cash equivalents saw a net increase of RMB 8.86 billion.

By the end of June, the company held RMB 31.52 billion in monetary funds, representing 24.80% of total assets, an increase of RMB 8.69 billion from the start of the year. Total assets reached RMB 127.09 billion, up 7.09% from the beginning of the year. One noteworthy shift on the asset side is inventory, which climbed to RMB 32.15 billion, or 25.30% of total assets, an increase of roughly RMB 4.9 billion from the start of the year and a 2.33 percentage point rise in share. Meanwhile, accounts receivable fell to RMB 24.45 billion from RMB 26.91 billion at the start of the year. The company’s risk warnings explicitly cite the characteristics of the power station investment and development business, such as large project amounts and long collection cycles, which pose certain recovery risks.

Overall, the company does not currently exhibit obvious cash flow deterioration, but elevated inventory and receivables levels warrant ongoing attention to future business scale and capital turnover efficiency.