On August 20, AAC TECH (02018) unveiled its interim results for the first half of the fiscal year 2026. The company achieved a record revenue of RMB 14.51 billion, marking an 8.9% year-on-year increase. Gross margin expanded by 1.7 percentage points to 22.4%, while reported net profit grew 2.9% to RMB 901 million. Excluding other gains and losses tied to fair value fluctuations, net profit surged 37.4%. Operating cash inflow stood at RMB 1.91 billion.

Management noted that despite macroeconomic headwinds such as memory price volatility, the company delivered robust top-line growth and margin expansion. Looking ahead to the second half, with the peak season approaching and AI-related businesses gradually scaling up, management expressed confidence in achieving double-digit revenue growth for the full year alongside further gross margin improvement.

The company is deepening its footprint in several emerging areas, including vapor chamber (VC) cooling, active thermal management, AI devices and gimbals, CDU liquid cooling, robotics core components, AR optics, and WLG-based optical communication modules. These new ventures are expected to hit a combined revenue contribution of RMB 8 billion to 9 billion by 2027. Specifically, thermal VC plus active cooling is projected to generate around RMB 5 billion or more in revenue next year; AI devices and gimbals are expected to contribute roughly RMB 1.5 billion; CDU liquid cooling is targeted at about RMB 1 billion; robotics and desktop device core components are anticipated to bring in RMB 400 million to 700 million; automotive acoustics is expected to add RMB 500 million; and WLG optical communication is forecast to achieve at least RMB 100 million.

Where to start

Regarding the thermal business, an investment bank has projected that 2026 thermal-related revenue will surge 110% year-on-year to RMB 3.5 billion. Management was asked to assess this forecast and to break down the share of consumer electronics versus server liquid cooling within the first-half thermal revenue. The company responded that it continues to expand its thermal product roadmap. For 2026, the precision components segment is expected to grow over 30% year-on-year, with thermal solutions serving as a key growth driver. The penetration of active cooling in smartphones is anticipated to accelerate, sustaining high growth over the next several years. Following the acquisition of Yuandi Technology, which brings CDU and liquid cooling capabilities, the liquid cooling business is projected to generate approximately RMB 200 million in revenue this year, scaling to nearly RMB 1 billion next year — a rapidly expanding market.

Exploring AR strategic rationale

When questioned about its focus on light engines and optical waveguides in the AR space, and whether it might venture into complete AR device assembly, management explained that the acquisition of Finland-based waveguide designer Dispelix provided a fast entry into the field. Additionally, with support from a major overseas customer, the company recently integrated a world-leading light engine R&D team, securing direct access to key overseas client resources and a highly certain technology roadmap. By combining leading waveguide technology, light engine optics, and prism manufacturing based on WLG (wafer-level glass), the company can produce the entire display module. Since the display module (including waveguides and optics) accounts for 40% to 50% of the BOM cost of AR glasses, and leveraging AAC's existing strengths in acoustics and haptics, the company now possesses the capability to manufacture the majority of AR glasses components. The decision on whether to enter final assembly will depend on customer demand, manufacturing complexity, assembly margins, and overall return on investment.

Optical communication advantages

In the optical communication segment, the company is engaged in technical exchanges and collaboration with a leading overseas optical communication firm. AAC has accumulated strong optical manufacturing capabilities in consumer electronics and, through years of WLG technology development and precision manufacturing expertise, has gained recognition from overseas clients. This positions the company well in areas such as lenses and fiber array units (FAU), which present substantial market potential.

Liquid cooling certification progress

Regarding the certification status with US cloud providers following the consolidation of Yuandi Technology, and the expected unit value of active cooling components slated for mass production in 2027, management stated that the liquid cooling segment offers robust growth opportunities in both manifolds and quick-connect components. The revenue target for this year is RMB 200 million, growing to approximately RMB 1 billion next year, with significant upside anticipated in the coming years. The company is actively engaged in certification discussions with overseas customers and will provide updates as concrete progress is made. Specific unit value figures are not being disclosed at this time.

Automotive acoustics momentum

Despite pressure in the automotive market, the automotive acoustics business delivered strong growth in the first half. Management attributed this to the company's ability to offer complete acoustic systems — not just speakers but also branding, tuning, amplifiers, and in-car MEMS — through strategic acquisitions. The automotive production line is expected to achieve a 15% to 20% improvement this year, a notable achievement amid intense competition. Gross margins, excluding amplifiers, have remained stable or improved, supported by the brand and system-level approach. This sets the stage for further expansion, especially as the company engages with multiple Tier-1 automotive suppliers. While specific projects and clients are not discussed due to confidentiality, the automotive optics segment is progressing smoothly, having secured certification from a key customer with mass production and shipment expected within this year.

Seasonal trends and second growth curve

Asked about the typical revenue split between first and second halves, management noted that memory price increases have shifted the revenue mix between Android and overseas customers, reflecting market guidance changes. The second half is traditionally the peak season, with new device launches — particularly from major overseas brands — driving volume. The company achieved 8.9% revenue growth in the first half and is confident of double-digit growth for the full year. New products like precision thermal VC will contribute higher revenue growth in the second half. Gross margin, which improved by 1.7 percentage points in the first half, is expected to improve further in the second half.

Regarding the "second growth curve," beyond its deep roots in traditional consumer electronics (acoustics, electromagnetic drives, precision components, optics), the company has seized on AI-driven edge opportunities. Long-term investments span active cooling, robotics, AI server liquid cooling, AR/VR products, and optical communications. While memory prices have temporarily impacted the phone market, BOM budgets will be reallocated to other components as prices normalize. With AI driving continuous performance upgrades in phone components, the company expects steady and rapid growth across both traditional and emerging areas.

AI perception infrastructure transition

On the transition toward becoming an "AI perception infrastructure supplier," management reported that AI server liquid cooling has already generated around RMB 200 million in revenue this year, covering leading domestic clients, with new projects slated for Southeast Asia and ongoing certification efforts with overseas top-tier clients. In AI hardware, opportunities abound in server cooling and optical communications. The company has deployed "VC + active cooling" solutions for smartphones and will extend these to server applications. In optical communications, AAC will leverage its WLG expertise and high-precision glass manufacturing processes developed for mobile devices to drive further growth.

Sensors and semiconductors surge

The sensors and semiconductor segment saw rapid growth in the first half, driven by demand from overseas core customers for high signal-to-noise ratio (SNR) and low-power MEMS microphones to support real-time voice interaction in AI phone applications. The segment is expected to achieve 15% to 20% revenue growth this year, with sustained momentum in the coming years. As AI hardware expands from smartphones to wearables and desktop applications, the demand for high SNR and low power consumption will intensify. AAC's industry-leading R&D and manufacturing capabilities position it well for broader adoption as AI-enabled wearables and desktop robots proliferate.

Embodied intelligence and robotics roadmap

Regarding the development stage of embodied intelligence and which technologies are converging, management noted that the form factors of embodied robots remain diverse, spanning specialized robots for professional scenarios, small robots, desktop robots, and various emerging configurations. The company is collaborating deeply with multiple leading overseas robot manufacturers, leveraging its manufacturing strengths in motors, shafts, and gimbals. With the rollout of diverse AI devices, the company expects robotics and desktop AI equipment revenue to reach RMB 400 million to 700 million next year. Over the coming years, as products diversify and large model companies drive adoption, the industry will see widespread deployment, enabling faster growth for AAC.

Full-year outlook

Summarizing the first-half performance by segment and the full-year guidance, management stated that despite a challenging macro environment, the company delivered solid financial results with stable-to-improving gross margins across all segments. The second half and medium term will be supported by the scaling of various AI edge products. For the full year, the group expects double-digit revenue growth, with gross margin further improving over both last year and the first half of this year.