Ruijie Networks 2025 Annual Report Analysis: Operating Cash Flow Surges by 735%, Financial Expenses Turned Profitable with a 214% Increase

Interpretation of Core Revenue and Profit Metrics

Operating Revenue: Up 22.37% Year-over-Year, Main Business Growth Is Strong

In 2025, the company achieved operating revenue of RMB 14.316 billion, up 22.37% year over year. By product, core business networking equipment revenue was RMB 12.521 billion, up 29.70% year over year, accounting for 87.46% of revenue, rising and becoming the core driver of revenue growth. Network security product revenue was RMB 494 million, up 9.20%. Cloud desktop solutions revenue was RMB 573 million, up 4.43%. Other business revenue was RMB 729 million, down 30.21% year over year, mainly due to adjustments in the business structure.

Net Profit: Up 21.30% Year-over-Year, Profitability Improves Steadily

In 2025, the company’s net profit attributable to shareholders of listed company was RMB 696 million, up 21.30% year over year. Non-recurring items excluded net profit was RMB 656 million, up 23.68% year over year. The growth rate of non-recurring items excluded net profit is higher than that of net profit, indicating that the company’s main operating business delivers better profit quality. Non-recurring profit and loss was RMB 40.7568 million, mainly including government grants of RMB 27.5291 million, gains from fair value changes of other non-current financial assets of RMB 2.3009 million, and others.

Earnings per Share: Growing in Step with Profit

Basic earnings per share in 2025 was RMB 0.8754 per share, up 21.30% year over year. Non-recurring items excluded earnings per share was RMB 0.8242 per share, up 23.68% year over year, remaining consistent with the growth rates of net profit and non-recurring items excluded net profit. The weighted average return on net assets was 14.65%, up 1.61 percentage points from the previous year, showing improved profitability efficiency of net assets.

Deep Analysis of Expense Structure

Overall Expenses: R&D Spending Continues to Increase, Financial Expenses Fluctuate Significantly

In 2025, total operating expenses during the period were RMB 4.362 billion, up 0.78% year over year. The expense growth rate was far lower than the revenue growth rate, and the effect of expense management is evident. Details of each expense item are as follows:

Selling Expenses: Down 8.77% Year-over-Year, Scale Effect Emerges

Selling expenses were RMB 1.6555 billion, down 8.77% year over year. This was mainly due to the increased share of direct sales business, optimized channel costs, and improved market promotion efficiency. The selling expense ratio was 11.56%, down 3.23 percentage points from the previous year, indicating improved efficiency in expense investment and output.

Administrative Expenses: Up 7.62% Year-over-Year, Personnel and Operating Costs Increase

Administrative expenses were RMB 693 million, up 7.62% year over year. This was mainly due to higher compensation for administrative personnel brought by the company’s scale expansion, as well as increased office lease and information technology investment. The administrative expense ratio was 4.84%, down 0.67 percentage points from the previous year, still within a reasonable range.

Financial Expenses: Turnaround to Profit, Up 213.91% Year-over-Year

Financial expenses were RMB 16.114 million; in the same period of the previous year, they were RMB -14.146 million. This represents a significant year-over-year increase of 213.91%. The main reasons are (1) increased foreign exchange losses (net foreign exchange loss of RMB 16.1134 million in the current period, compared with a net loss of RMB 1.9584 million in the same period last year), and (2) reduced interest income (interest income of RMB 32.7866 million in the current period, compared with RMB 50.6617 million in the same period last year).

R&D Expenses: Up 5.94% Year-over-Year, R&D Intensity Remains High

R&D expenses were RMB 1.998 billion, up 5.94% year over year, as R&D investment continues to be increased. The R&D expense ratio was 14.00%. Although it decreased compared with the previous year, it remains at a relatively high level in the industry, showing the company’s emphasis on technological innovation. The capitalization rate of R&D investment was 4.20%, down significantly from 13.99% in the previous year. This is mainly because the Network System research and industrial project reached completion, and accordingly the capitalized investment decreased.

R&D Personnel: Team Size Slightly Decreases, Structure Optimizes

At the end of 2025, the number of R&D personnel was 3,359, down 217 from the previous year, representing a 6.07% decrease year over year. The proportion of R&D personnel was 50.28%, up 0.17 percentage points from the previous year. In terms of educational background, the proportion of R&D personnel with bachelor’s degree or above was 97.74%, including 1,209 master’s degree holders and 26 PhDs, with the proportion of high-education talent remaining stable. In terms of age structure, there were 1,984 R&D personnel aged 30–40, accounting for 59.06%, which is the core R&D force. The proportion of personnel under age 30 decreased by 22.47%, likely due to personnel optimization and adjustments.

Cash Flow: Operating Cash Flow Improves Significantly, Overall Cash Reserves Increase

Operating Cash Flow: Up 735.17% Year-over-Year, Improved Receivables and Inventory Management

In 2025, net cash flow generated from operating activities was RMB 1.828 billion, up 735.17% year over year. This was mainly due to an increase in sales collections (operating cash inflow was RMB 16.543 billion, up 28.20% year over year) and the company strengthening inventory turnover management. Inventory scale decreased, reducing capital occupation (ending inventory balance was RMB 2.960 billion, down 12.10% from the beginning of the period). Net operating cash flow was far higher than net profit, indicating that the company’s profitability quality and cash acquisition capability improved significantly.

Investing Cash Flow: Net Amount Up 53.00% Year-over-Year, Slower Pace of Capital Expenditure

Net cash flow generated from investing activities was RMB -503 million. In the same period of the previous year, it was RMB -1.070 billion. This represents an increase of 53.00% year over year. This was mainly due to decreased cash outflows for development of R&D projects in the current period, as well as reduced cash outflows compared with the same period of last year for newly purchasing large-denomination time deposits and term deposits.

Financing Cash Flow: Net Amount Down 23.76% Year-over-Year, Financing Scale Contracts

Net cash flow generated from financing activities was RMB -432 million. In the same period of the previous year, it was RMB -349 million. This represents a decrease of 23.76% year over year. This was mainly because the cash received from loans obtained in the current period was RMB 700 million, sharply lower than RMB 1.318 billion in the previous year. Meanwhile, cash paid for repaying debts was RMB 700 million, flat with the previous year, resulting in a contraction of financing scale.

Cash and Cash Equivalents: Ending Balance Up 73.92% Year-over-Year

At the end of 2025, the balance of cash and cash equivalents was RMB 1.956 billion, up 73.92% from RMB 1.072 billion at the beginning of the period. This was mainly due to increases in net cash flows generated by operating and investing activities compared with the same period of last year, and the company having more ample cash reserves.

Compensation for Senior Executives: Stable Pay for Core Management

In 2025, the compensation details for the company’s core management were as follows:

• Chairman Yuan Jiayong: Pre-tax compensation received from the company during the reporting period was not disclosed separately; he also receives compensation from the controlling shareholder, Xingwang Ruijie.
• General Manager Liu Zhongdong: Pre-tax compensation of RMB 4.41 million.
• Vice General Managers Chen Hongtao, Liu Hongyu, and Zhu Yiping: Pre-tax compensation is RMB 4.41 million each.
• Vice General Manager Huang Yuhui: Pre-tax compensation of RMB 2.3452 million.
• Board Secretary Yao Bin: Pre-tax compensation of RMB 1.2417 million.

The compensation of the core management is linked to the company’s operating performance, maintaining a certain level of stability. At the same time, the company further binds the interests of core personnel through an equity incentive plan (795 million shares of second-class restricted stock granted in February 2026).

Risk Warning

Innovation Risk: Pressure from Technological Iteration Persists

The ICT industry updates and iterates technology quickly. If the company’s R&D direction differs from the market demand change trend, and new products cannot meet customer needs in a timely manner, the company’s product competitiveness will be reduced. The company needs to closely track industry developments, adjust its R&D direction, and maintain product foresight.

Tendering and Bidding Risk: Large-Customer Cooperation Stability Needs to Be Maintained

Many of the company’s direct-sale customers and industry customers purchase through bidding. If the company or channel partners fail to win bids, or if the winning bid price declines, it will have an adverse impact on performance. The company needs to continuously improve the competitiveness of its product solutions and optimize bidding strategies.

R&D Failure Risk: Uncertainty Exists in Technological Breakthroughs

The company’s product R&D involves knowledge across multiple disciplines. If key technologies cannot be broken through, it will face the risk of R&D failure, and early-stage investment may be difficult to recoup. The company needs to strengthen talent introduction, improve R&D incentive mechanisms, and increase the probability of successful R&D.

Chip Supply Risk: Supply-Chain Stability Still Requires Attention

The company’s core chips for networking equipment rely on external procurement. If the international trade environment changes, the company will face the risk of insufficient chip supply. The company needs to continuously improve a diversified supply-chain setup and increase research on domestically made chip substitution.

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