Victory Giant Technology's shares tumbled 7.5% to HK$234 on Friday after the company released its half-year financials that combined robust top-line growth with a deterioration in profitability metrics.
The company reported operating income of 11.63 billion yuan for the first half of 2026, a year-on-year increase of nearly 29%. Net profit rose 33% to 2.86 billion yuan. Management attributed the stronger sales and earnings primarily to an uptick in artificial intelligence-driven demand for its printed circuit boards (PCBs).
Despite those revenue gains, the results revealed a slide in gross margins across the business. Consolidated gross margin fell to 33.2% in H1 2026 from 36.2% a year earlier. PCB-specific margins contracted to 28.6% from 33.1% over the same period.
The company said several cost pressures contributed to the margin decline: higher labor expenses, the impact of expanding production capacity, and rising raw material costs. The latter was linked in the company's commentary to disruptions in the Middle East supply chain, which increased input prices and weighed on profitability.
Victory Giant has been among the most actively watched AI-linked names within Chinese equities, and the mixed H1 print raised questions among investors about whether adding new capacity will translate into improved bottom-line returns. That dynamic coincided with profit-taking after the stock had climbed almost 20% over the previous month.
Market action on the day showed Victory Giant's drop occurring while the Hang Seng index registered a 0.3% rise.
Key financial figures highlighted in the report include:
- Operating income: 11.63 billion yuan, up nearly 29% year-on-year.
- Net profit: 2.86 billion yuan, up 33% year-on-year.
- Group gross margin: 33.2% in H1 2026, down from 36.2% a year earlier.
- PCB margin: 28.6% in H1 2026, down from 33.1% a year earlier.
The company's results illustrate a common tension for manufacturers expanding capacity into high-demand markets - strong revenue growth can coincide with margin compression when input and operating costs rise faster than efficiencies.