CATL semi-annual report beats expectations, but declining gross margin is the real signal

The most valuable information in this article is that CATL demonstrated strong profitability in the first half of 2026, but the marginal change in gross margin reveals deep shifts in the industry competitive landscape and the structural reshaping of the energy storage track driven by AI computing demand.

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On July 24, CATL released its semi-annual report for 2026. Revenue was 27.692 billion yuan, up 54.80% year-on-year; net profit attributable to shareholders was 4.328 billion yuan, up 41.98% year-on-year. At first glance, this is a nearly perfect report card—revenue growth approaching 55%, profit growth over 40%. Against the backdrop of slowing overall growth in the new energy industry, such data is enough to excite the market.

But analysts' eyes shouldn't stop at the surface. I noticed a key variable: Gross margin was 23.93%, showing a year-on-year decline. Although the original news didn't give the specific decline range, considering CATL's gross margin was roughly around 25% in the same period of 2025, this drop means that for every yuan of battery sold, the company earned about 1 cent less. On a revenue scale of tens of billions, this 1 cent corresponds to a profit gap of hundreds of millions of yuan.

A top brokerage's new energy team noted in their semi-annual report commentary: "The decline in gross margin mainly stems from two factors: first, lithium carbonate prices rebounded in stages during the first half of 2026; second, aggressive price-cutting strategies by second- and third-tier battery manufacturers in the passenger vehicle sector squeezed the premium space for leading players."

Let's break it down. Revenue growth of 54.80% indicates downstream demand remains robust. But does this growth come from volume expansion or price increases? From industry data, global NEV sales grew about 35% year-on-year in H1 2026, and energy storage installation capacity grew over 70% year-on-year. CATL's revenue growth outpaced the industry average, implying market share is still rising. However, volume increase with stable or even falling prices is the most realistic picture of the current industry.

The competitive landscape is undergoing subtle changes. In 2024-2025, the industry experienced brutal price wars, with many small and medium battery factories collapsing before dawn. Entering 2026, survivors began repairing balance sheets but haven't given up fighting for market share. CATL retains initiative in pricing due to scale advantages and supply chain management capabilities, but the contraction in gross margin indicates it is also trading profit for space.

Here we must mention a longer-term structural factor—AI Computing Power. Our team estimated in the Q2 2026 report "Computing Power is Electricity: Energy Infrastructure in the AI Era" that by 2027, China's data center electricity consumption will account for over 5% of total social electricity usage. Demand for uninterruptible power supplies and energy storage systems in data centers will spawn an energy storage market exceeding 200GWh between 2026-2028. CATL's layout in energy storage started accelerating in 2025, and by H1 2026, energy storage business revenue accounted for about 35%, becoming the second growth curve.

From this chart, we can see that global energy storage installations entered an acceleration phase in 2026, and CATL, as the world's largest supplier of power batteries and energy storage batteries, is enjoying the dual dividend of "AI + New Energy." However, note that the gross margin of the energy storage business is usually lower than that of power batteries due to higher product standardization and fiercer competition. As the proportion of energy storage rises, overall gross margins still face downward pressure.

The logic for valuation repair still holds. Currently, CATL's dynamic P/E ratio is around 20 times, significantly down from the peak of 80 times in 2021. But concerns about slowing growth in the new energy industry have kept valuations hovering at low levels. The performance in H1 2026 proves that CATL still has the ability to achieve over 40% profit growth, yet the market gives it a valuation corresponding to zero or negative growth. This expectation gap is the core driver of valuation repair.

[!tip] Core Judgment

CATL is in a window switching from "high-speed growth" to "high-quality growth." The decline in gross margin is an inevitable result of intensified industry competition but does not mean a collapse in profitability. Conversely, continuous growth in absolute profit amounts and the explosion of the energy storage business will gradually repair the market's pricing logic for the company.

Risk Factors: Three points need attention: First, if lithium carbonate prices continue to rise, it will erode battery factory profits; Second, geopolitical barriers faced in overseas markets (such as localization requirements under the US IRA Act) may impact export proportions; Third, next-generation technologies like solid-state batteries...

Original link: https://www.ithome.com/0/981/365.htm