Ruijie Networks' net profit in 2025 increased by 21.3% year-over-year, with AI computing power driving nearly 44% growth in direct sales revenue from major clients, but overall gross profit margin declined by 3.14 percentage points.

Every reporter｜Cai Ding Every editor｜Chen Junjie

Ruijie Networks (SZ301165, stock price 82.06 yuan, market value 65.275 billion yuan) disclosed its 2025 annual report on the evening of March 27. The company achieved revenue of 14.316 billion yuan in 2025, a year-on-year increase of 22.37%; the net profit attributable to shareholders of the listed company was 696 million yuan, a year-on-year increase of 21.30%; the net profit after deducting non-recurring items was approximately 656 million yuan, a year-on-year increase of 23.68%; basic earnings per share was 0.8754 yuan. The company plans to distribute a cash dividend of 5.25 yuan (including tax) for every 10 shares to all shareholders, and to convert 4 shares from capital reserves for every 10 shares.

Image source: Ruijie Networks annual report

Data compiled by Wind Financial Terminal shows that 8 institutions have a consensus expectation for Ruijie Networks’ net profit attributable to the parent company in 2025 of approximately 1.032 billion yuan. The 696 million yuan figure disclosed by the company falls short of institutional expectations, being 32.52% lower than the consensus forecast value. Nevertheless, there are still many highlights in Ruijie Networks’ annual report.

Image source: Wind

Direct sales model revenue increased by 43.61% year-on-year, while overall gross margin decreased by 3.14 percentage points.

In 2025, the global wave of generative AI (artificial intelligence) large models continued, and the upgrade of computing power infrastructure became one of the largest certainties for growth in the ICT (Information and Communication Technology) industry. Ruijie Networks continued to launch related products in the AI computing track. The annual report shows that Ruijie Networks not only launched the 51.2T CPO (Co-Packaged Optics) switch suitable for AI training and ultra-large-scale computing clusters, but also released a new generation of 1.6T/800G optical module products during the year. These technological reserves have directly accelerated the conversion into large customer orders, and its AI intelligent computing center network solutions have been scaled to serve leading internet companies such as Alibaba, ByteDance, Baidu, and Tencent.

The breakthroughs with core customers are also reflected in the company’s sales model and revenue structure. In 2025, Ruijie Networks’ direct sales model revenue reached 7.782 billion yuan, a year-on-year increase of 43.61%, accounting for 54.36% of total revenue. The massive demand from internet giants for data center switches has become the main engine driving the leap in revenue.

While expanding in scale, the company’s overall gross margin level has declined. The financial report shows that in 2025, the company’s overall gross margin was 35.48%, down 3.14 percentage points from the previous year. By product category, the gross margin of the core main business “network equipment,” which accounts for the bulk of revenue, was 33.53%, a year-on-year decline of 4.33 percentage points.

Image source: Ruijie Networks annual report

In terms of sales model comparison, facing internet giants and operators, Ruijie Networks’ direct sales business had a gross margin of 27.19%, down 2.46 percentage points year-on-year, and significantly lower than the gross margin level of 45.36% for traditional distribution models. In addition, during the reporting period, the company made a provision for inventory impairment of 66.0994 million yuan.

The revenue of wholly-owned subsidiary Shanghai Ruishan declined by 47.45% year-on-year.

On the other hand, as profit margins are squeezed, Ruijie Networks’ operational safety net has indeed thickened. During the reporting period, the net cash flow generated from operating activities increased by 735.17% to approximately 1.828 billion yuan year-on-year. The company stated that this was mainly due to an increase in sales receipts and enhanced inventory turnover management, leading to a decrease in inventory scale and reduced capital occupancy.

Image source: Ruijie Networks annual report

However, the reporter from the Daily Economic News also noticed that the tilt towards direct sales to large customers has begun to have a substantial impact on the company’s internal business structure and subsidiary coordination. The annual report also disclosed that Ruijie Networks’ wholly-owned subsidiary Shanghai Ruishan experienced a year-on-year decline of 47.45% in operating income due to a major customer changing its procurement channel from “purchasing from Shanghai Ruishan” to “purchasing directly from Ruijie Networks,” resulting in significant losses for Shanghai Ruishan’s standalone report. This “internal reduction” triggered by changes in customer procurement paths and the performance fluctuations of subsidiaries is the result of the company’s adjustment of its sales system to adapt to the direct sales mechanism for large customers.

Image source: Ruijie Networks annual report

In addition, in terms of R&D investment, the proportion of R&D expenditure to revenue in 2025 fell from 18.74% last year to 14.57%. At the same time, the capitalization rate of R&D expenses dropped from 13.99% to 4.2%, and the contribution of capitalized amounts to current net profit also sharply decreased from 53.43% last year to 12.59%. From a financial accounting perspective, this marks the completion of the major project R&D such as the “meta-network system” and its transition to mass production, with a more stable and conservative financial treatment, but it also objectively weakens the short-term profit enhancement effect on the balance sheet.

In 2025, Ruijie Networks achieved revenue growth, and the net cash flow from operating activities significantly increased. In the future, the repair of the company’s gross margin and the optimization of internal business coordination remain important topics.

Cover image source: AIGC