From "Selling Traffic" to "Selling Computing Power": The Three Major Telecom Operators' Profits All Declined in the 2026 Third-Quarter Reports

Due to the transition between old and new businesses, the three major telecom operators are under pressure in their performance.

The 2026 third-quarter reports show that in the first three quarters of this year, the net profit attributable to parent company shareholders of China Mobile and China Telecom fell by 7.9% and 14.84% respectively, while that of China Unicom fell by 33.8%; China Mobile and China Telecom's revenue also declined by 1.85% and 3.59% respectively, and only China Unicom achieved year-on-year revenue growth of 0.6%, with the increment mainly coming from sales of communications products.

This year's value-added tax adjustment affected the operators' revenue and profits, while growth in traditional communications businesses has also slowed. The operators are looking for new growth opportunities, but there is still a gap in scale between old and new businesses. Taking China Telecom as an example, its financial report shows that in the first three quarters of this year, the company's communications revenue was 313.1 billion yuan, and intelligent revenue was 46.2 billion yuan. How to make computing power and AI businesses achieve scale and contribute profits has become the key to the operators' transformation.

Profits under collective pressure; China Unicom's positive revenue growth mainly relies on sales of communications products

Among the third-quarter performance of the three operators, China Telecom had the largest revenue decline, and China Unicom had the largest profit decline.

Financial reports show that in the first three quarters, China Mobile's operating revenue was 780.295 billion yuan, down 1.8% year on year, and net profit attributable to parent company shareholders was 106.198 billion yuan, down 7.9% year on year; China Telecom's operating revenue was 380.100 billion yuan, down 3.59%, and net profit attributable to parent company shareholders was 26.207 billion yuan, down 14.84%; China Unicom's operating revenue was 294.647 billion yuan, up 0.6%, and net profit attributable to parent company shareholders was 5.803 billion yuan, down 33.8%. Under the Hong Kong stock financial reporting basis, profit attributable to equity holders of the company was 13.3 billion yuan, down 33.6%.

Revenue and net profit of China Mobile, China Unicom and China Telecom in the first three quarters of 2026. Data compiled by Beijing News Shell Finance reporter; image generated by AI.

Along with the decline in profits, the operating cash flow of all three operators maintained growth. Financial reports show that in the first three quarters of this year, China Mobile's net cash flow from operating activities was 185.3 billion yuan, up 15.1%; China Telecom's was 97.717 billion yuan, up 11.92%; China Unicom's was 59.686 billion yuan, up 2.3%.

In explaining the reasons for the performance decline, all three operators mentioned the adjustment to the scope of application of value-added tax items. According to the three major operators' announcements in February, the Announcement on Matters Concerning the Specific Scope of Value-Added Tax Taxation (Ministry of Finance and State Taxation Administration Announcement No. 9 of 2026) issued by the Ministry of Finance and the State Taxation Administration stipulates that, starting from January 1, 2026, within the territory of the People's Republic of China, business activities that use fixed networks, mobile networks, satellites and the Internet to provide mobile data services, SMS and MMS services, and Internet broadband access services shall have their applicable tax item adjusted from value-added telecommunications services to basic telecommunications services, with the corresponding value-added tax rate adjusted from 6% to 9%.

All three operators stated that this adjustment will affect the company's revenue and profits. Huatai Securities estimated in a research report on February 2 that, assuming tax-inclusive prices remain unchanged, after the value-added tax rate is adjusted from 6% to 9%, the tax-exclusive revenue of this type of business involved in the adjustment will decrease by 2.75%; with other conditions unchanged, the impact of this adjustment on the three operators' total revenue is approximately 1.3%-1.4%.

Before the tax system adjustment, revenue in the telecommunications industry was already in a state of low growth. Data from the Ministry of Industry and Information Technology show that in the first three quarters of 2025, national telecommunications business revenue grew by 0.9% year on year; in the first three quarters of 2026, telecommunications business revenue totaled 1.3 trillion yuan, down 2.5% year on year.

China Unicom is the only one of the three to achieve positive revenue growth, mainly driven by sales of communications products. Its Hong Kong stock financial report shows that in the first three quarters, service revenue was 260.893 billion yuan, down 0.28% year on year, and revenue from sales of communications products was 33.754 billion yuan, up 7.68% year on year. However, the corresponding cost of this revenue was 32.649 billion yuan, up 8.1% year on year based on disclosed amounts; cost growth was higher than revenue growth, and the gross profit margin of product sales narrowed somewhat.

Compared with China Mobile and China Unicom, China Telecom lacks a buffer from revenue growth in other businesses. Financial reports show that China Mobile's other business revenue in the first three quarters was 122.6 billion yuan, up 9.9% year on year; China Telecom's operating revenue in the first three quarters was 380.100 billion yuan, down 3.59% year on year, with main business revenue of 359.3 billion yuan, lower than 366.3 billion yuan in the same period last year.

Revenue structure of China Mobile, China Unicom and China Telecom in the first three quarters of 2026. Data compiled by Beijing News Shell Finance reporter; image generated by AI.

From expanding computing power resources to launching platforms and intelligent agents, the three operators are extending their business layout to model invocation and application services.

China Telecom said it adheres to Token operations as the main line, continuously upgrades the Xingchen TokenHub platform, and releases the Xingchen super intelligent agent TeleAgent; China Unicom said it enhances full-chain capabilities for Token creation, storage, transfer, cleaning and application, acts as an operator of high-value Tokens, and opens the two major platforms "Unicom Mogong" and "Security Hui"; China Mobile said it advances the layout of communications networks, computing power networks and intelligent networks in an integrated manner.

However, according to the financial reports, the operators' intelligent transformation business indicators are currently mainly concentrated on comprehensive revenue, user numbers and infrastructure scale.

From the perspective of China Telecom's revenue structure, communications business still occupies the main body, and there is still a volume gap between it and intelligent business. The financial report shows that in the first three quarters, China Telecom's main revenue was 359.3 billion yuan, of which communications revenue was 313.1 billion yuan, covering mobile, fixed-line, IoT, satellite, information services, etc.; intelligent revenue was 46.2 billion yuan, covering computing power, platforms, data, models and intelligent applications, etc. In addition, China Telecom did not break down the various components of intelligent revenue. The financial report said that the daily Token call volume grew rapidly, but did not disclose the absolute value of the call volume.

China Unicom's computing power revenue maintained double-digit growth, and China Mobile's computing power service revenue growth in the first half of the year was also higher than that of intelligent services.

According to the financial report, China Unicom's computing power revenue in the first three quarters increased by 12.2% year on year, of which intelligent computing center revenue grew by 10.4%. China Unicom disclosed that paid users of its cloud-intelligence products exceeded 120 million; as of the end of September, it had 1.2 million standard racks and a total IDC resource scale of 3000MW.

China Mobile's third-quarter report did not disclose cumulative segment data for computing power and intelligent services. Looking at the half-year report, its computing power service revenue in the first half of the year was 52.9 billion yuan, up 14% year on year, of which intelligent computing service revenue was 5.3 billion yuan, up 130.1%, and data center revenue was 19 billion yuan, up 13.2%; intelligent service revenue was 49.3 billion yuan, up 0.9%. Among them, intelligent computing services grew notably, but still accounted for a relatively small share of computing power service revenue.

In Huatai Securities' comments on the third-quarter reports of the three operators, all focused on the contribution of new businesses to subsequent growth. The research report believes that in the future, with the cultivation and growth of emerging businesses such as mobile cloud, AIDC and Token packages, China Mobile will accelerate its transformation into a technology service enterprise; for China Telecom, the report is optimistic about the space for coordinated development of computing power, platforms, models and intelligent applications, and will continue to pay attention to the conversion of AI demand into revenue; for China Unicom, the report believes that the scale of connections and the accumulation of cloud-intelligence product users will help expand business scenarios, and subsequent computing power demand is expected to accelerate its conversion into revenue and profit.

In the public cloud model service market, internet cloud vendors already occupy the main share. The operators' Token business needs to compete with these vendors for enterprise customers' model invocation demand.

IDC data shows that in the first half of 2026, China's MaaS market reached 10.63 billion yuan, with Volcano Engine and Alibaba accounting for 45.1% and 25.2% of revenue respectively, while Telecom AI Company accounted for 1.6%. In the large language model MaaS sub-market, Alibaba's share was 46.6%, while Zhipu and Volcano Engine accounted for 10.6% and 10.2% respectively.

In parallel with public cloud model services, the large model private deployment market reached 2.88 billion yuan in the same period, up 108.4% year on year, with demand mainly from government, manufacturing, energy, finance and other industries. These industries are also key areas for operators to expand government and enterprise business.

IDC data shows that by revenue share, Baidu accounted for 15.2%, SenseTime 9.4%, and Telecom AI Company 7.8%, ranking in the top three; Innovation Qizhi, Zhongguancun Kejin and Transwarp accounted for 3.7%, 2.6% and 1.7% respectively, while other vendors together accounted for 59.5%.

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