M Stanley Lowers ZTE (00763.HK) Earnings Projection and Adjusts Target Price to $31.5

The analyst rating for ZTE (00763.HK) was maintained at Equal-weight by Morgan Stanley due to weaker-than-expected 3Q25 results, which led to a revision of the company's revenue forecasts for 2025-27 down by 5%/6%/7%. Additionally, gross margin assumptions were reduced by 0.9%/0.5%/0.4% to account for a domestic 5G revenue shortfall. Consequently, earnings forecasts for 2025-27 were adjusted down by 11.1%/12.5%/10.9%, and the target price was lowered from HK$35 to HK$31.5.

The analyst rating from Nomura is maintained at Neutral with a target price of $39 due to a mixed outlook on ZTE's prospects. While the partnership with ByteDance to launch an AI assistant on Nubia smartphones could boost sales and position ZTE as a key beneficiary of ByteDance's edge AI initiative, there are concerns about ZTE's core telecom equipment business facing a capital expenditure downcycle in the Chinese market. Additionally, the rapid growth of ZTE's AI server business may dilute the company's overall gross margin in the near term. These factors led to a cautious stance despite the potential benefits of the collaboration.