CATL's Expansion Drive Meets Its Toughest Test: Turning Revenue Into Profit
Published on 10/26/2026 at 14:12 | Editorial boerse-global.de
CATL has spent October stacking up partnerships, unveiling new products and buying back its own stock. What it has not done is convince the market that the money flowing in is turning into profit at a satisfying rate — and that gap is now the central question for anyone holding the shares.
The battery giant's third-quarter figures, released about a week ago, laid the problem bare. Revenue climbed 58.6%, yet net profit advanced just 14.5% — the slowest pace in nearly two years, according to Reuters. Lower-margin products, China's reinstated battery consumption tax and reduced export VAT rebates all weighed on the bottom line, with higher impairment charges adding to the drag. Reuters also pointed to fiercer competition in the battery sector and cooling growth in Chinese car sales.
Two Houses, Two Verdicts
The analyst community has responded by pulling in different directions. UOB Kay Hian trimmed its earnings forecasts for 2026 through 2028 by 5%, 10% and 16% respectively, citing CATL's absorption of part of the tax increases — yet kept its Buy rating intact. That combination says as much about the valuation's dependence on a future earnings recovery as it does about near-term caution.
JPMorgan took the more defensive route on October 20, cutting its rating on the H-shares from Overweight to Neutral and pointing to a faster-than-expected deterioration in profitability across the battery industry. The split is instructive: one house sees a growth story worth paying for, the other sees margins eroding too quickly to justify the current multiple.
The Deals Keep Coming
None of that has slowed CATL's dealmaking. On October 10, the company signed a long-term strategic cooperation with SERES covering battery supply for AITO, charging and battery services, and joint development of overseas markets. The second phase of their "Plant in Plant" project is slated for 10–12 GWh of annual capacity, with both phases together targeted at more than 20 GWh.
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Wednesday brought a strategic cooperation agreement with Shaanxi Transportation Holding Group spanning commercial vehicle electrification, battery-swap infrastructure for heavy trucks, and energy storage with related services. A day earlier, on October 19, CATL joined Shidai Dianfu and Huawei-affiliated Yinwang in a further pact that media reports say will link Huawei's intelligent driving systems with CATL's battery-swap ecosystem.
On the product side, CATL unveiled the Tianxing II heavy-truck battery platform and an upgraded swap solution roughly a week ago. The company also published its "Storage+" report with the International Renewable Energy Agency, IRENA, on October 16, with both parties promoting a global energy-storage initiative.
Buybacks Already on the Books
The quarterly report published October 20 also disclosed repurchases already completed. By the end of September, CATL had bought back a cumulative 10,945,162 A-shares — 0.2482% of total A-share capital — for 3.303 billion RMB before fees.
What matters for the investment case, though, is whether the new business converts into durable earnings. Additional demand helps shareholders only up to a point if an unfavorable product mix or fresh cost burdens consume a growing share of it. Even a stabilization in margins would sharpen the signal from that 58.6% revenue jump.
A Dated Test for the Swap Buildout
The most concrete operational checkpoint is CATL's target of 900 battery-swap stations for heavy trucks in China by the end of 2026, a goal the company set out at its platform launch. It aims for 2,000 such sites in 2027 and, over the longer term, 10,000 locations, Reuters reported. Hitting the near-term number would show the infrastructure rollout is real; it would not, on its own, prove the network earns its keep.
That distinction frames the two scenarios now in play. In the bullish one, projects like the SERES tie-up, the Shaanxi agreement and the Tianxing II platform broaden CATL's growth while cost pressures ease — a far more convincing story than revenue expansion without better earnings quality. In the bearish one, the company keeps winning business but at persistently thinner margins, and if tax burdens are only partly passed on, even strong growth could disappoint profit expectations again.
The risk for investors, then, is not simply slower growth. It is expansion whose incremental contribution to earnings keeps falling short — a possibility that only operational delivery and economic returns, taken together, can rule out.
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