The Zhitong Finance App learned that in a series of financial report analyses since 2025, combined with comprehensive analysis of income statements, balance sheets, and cash flow statements, the fundamentals of listed companies have entered an improvement channel from 4Q24. Non-financial companies' profits increased 20% in 2Q26, making it the highest quarterly profit growth rate in the past 5 years. However, behind this high profit growth is a prominent differentiation. Geographic factors have boosted oil prices and resource prices, causing profit margins in the upstream industry to reach a new high in nearly 10 years. The hardware part of the AI industry chain has also experienced significant growth in performance due to short supply; on the other hand, the performance of traditional industries is still sluggish on the basis of a low base in the early stages.
CICC's main views are as follows:
Performance growth: The profit growth rate of 2Q26A shares hit a new high in nearly 5 years, with outstanding structural highlights
A-share profit increased 25.7% year-on-year in the second quarter of 2026, the highest quarterly profit growth rate in the past 5 years. Total A/financial/non-financial net profit for the first half of 2026 increased 16.2%/17.1%/15.4% year on year, respectively. Looking at earnings for the second quarter, total A/financial/non-financial net profit increased 25.7%/32.4%/19.9% year on year, respectively, up further from the first quarter (none of which included the impact of Changxin Technology). On the financial side, capital market transactions continued to be active in the second quarter. Non-bank financial profits increased 134.9% year on year, of which securities increased 80%. The insurance sector benefited from the rise in the equity market and the increase in market entry last year. Short-term profit flexibility was high, with a 163% year-on-year increase in the second quarter. On the non-financial side, the revenue growth rate of non-financial enterprises in the second quarter was 6.9%, a further increase from the first quarter. Similar to the trend where the nominal GDP growth rate was driven by rising prices, it also showed that the improvement in corporate profits was driven by a combined increase in revenue and profit margins. It is worth noting that the RMB has continued to appreciate since the second half of 2025, and the rate of appreciation accelerated in the first half of this year. The foreign exchange profit and loss scale of non-financial enterprises continued to grow during the same period. Exchange profit and loss reached 107 billion yuan in the first half of this year, accounting for 5.5% of exchange gain/net profit to mother, the highest level in nearly ten years, and there is a certain erosion of the profits of non-financial enterprises, especially those that go overseas.
At the same time, profit performance in the second quarter was clearly divided. With the profit growth rate reaching 20% in a single quarter, 40% of the industry's profit declined year on year, while the share of industries with performance growth of more than 20% or 30% did not spread significantly compared to the past two quarters. Looking at the breakdown, one main line is that changes in the overseas geographical situation drove up the prices of crude oil and some chemicals. The other main line is that AI demand led to an increase in the prices of some technology hardware and upstream resources. Among them, electronics/non-ferrous metals/petroleum and petrochemicals/basic chemicals contributed 9.4/6.5/4.1/2.7 percentage points respectively. The four industries already contributed to most of the A-share non-financial profit growth in the second quarter. In terms of upstream and downstream dimensions, upstream and downstream profit differentiation widened further in the second quarter. Profits in the upstream, middle, and downstream industries increased by 74.6%/1.0%/12.4% year-on-year respectively; in terms of sectors, the earnings performance of each sector in the second quarter was divided year-on-year, and the non-financial performance of the Science and Technology Innovation Board/GEM Board/Main Board increased by 103.5%/40.8%/15.1%, respectively.
At the industry level, the upstream energy raw materials and TMT sectors performed well. Specific industry-level performance growth characteristics include:
1) Energy raw materials industry: Various industries generally grew in the second quarter. Crude oil prices and some chemical prices rose due to the US-Iran conflict, demand expansion and supply constraints in emerging industries such as AI. Prices of copper and aluminum remained high, and profits of non-ferrous metals/basic chemicals/petroleum and petrochemicals increased by 106.0%/73.2%/58.8%, respectively. Among them, industrial metals profits increased by more than 80%, while gold prices fell back to 20.6% (vs. 108% year-on-year increase in the first quarter); coal supply elasticity was still limited, compounded by low profit base effects YoY The increase was 62.5%; the performance of steel and building materials upstream of the real estate chain was weak, and profits fell 9.6%/32.7% year on year, respectively.
2) Midstream manufacturing sector: Profit from power equipment and new energy sources increased 15.3% year on year. Among them, lithium battery production improved month-on-month, energy storage was driven by increased overseas demand and data center orders. Battery profits increased 73.3% year over year, while wind power equipment fell 57% year on year; the photovoltaic industry chain continued to lose money, and the year-on-year profit decline widened. In other industries, shipping was dragged down by losses in aviation performance. Profits fell 14.6% year on year. Driven by rising freight rates, the profits of shipping increased by nearly 30% year on year, and the performance of railways, highways and logistics was relatively stable; profits in the machinery/light industry manufacturing sector increased 7%/1.8% year on year; the performance of electricity and utilities and defense and military industries was weak, falling 14%/18% respectively. Among them, the price difference for thermal power ignition narrowed significantly, down about 35% year on year.
3) Consumer sector: Agriculture, forestry, animal husbandry and fishing were affected by falling pig prices and continued to lose money in the second quarter; due to poor domestic demand and declining policies, the profit components of the consumer industry weakened, and related food and beverage/automobile/retail retail/home appliance performance declined 27.2%/20.2%/14.3%/6.2% year on year, respectively. Textiles, clothing and consumer services increased 6.9%/27.3% year on year under a low base; the pharmaceutical sector increased 10.6% year on year. Among them, the innovative drug sector benefited from BD and internationalization trends, improved CXO order expectations, and the profit components of the China Securities Innovative Drug Index were compared to the second quarter +38.7%.
4) TMT sector: Profits generally continued to grow at a high rate in the second quarter. Demand for AI computing power was strong, prices of hardware products in the industrial chain continued to rise, and the profit component of the China Securities Artificial Intelligence Index increased 95% year-on-year in the second quarter. By industry, electronics profit increased 98.6% year on year, and the semiconductor/component/optoelectronics segment increased 202%/65%/39% respectively. At the industry theme level, the second-quarter profit of science and technology innovation chips/optical modules/PCBs increased 234%/140%/98% year on year; the computer industry increased 122% year on year, of which computer equipment/internet profit increased 172%/51% year on year, respectively; media sector profit increased 16.4% year on year. In the context of RMB appreciation in the first half of the year, the scale of A-share non-financial exchange gains and losses grew rapidly, which had a relatively large impact on the profits of enterprises exporting overseas. Among them, the exchange gains/loss/operating income of home appliances/machinery/power equipment and new energy/electronics/automobiles in the first half of the year was 1.1%/1.0%/0.8%/0.7%, respectively. In summary, the top five industries with year-on-year growth in second-quarter results were non-bank finance, computers, non-ferrous metals, electronics, and basic chemicals, while the top five declines were agriculture, forestry, animal husbandry and fishing, construction, building materials, food and beverages, and automobiles.
Chart 1: Overview of A-share profit growth in the second quarter of 2026 by sector
Source: Wind, CICC Research Division
Chart 2: Both financial and non-financial 2Q26A shares had the highest quarterly profit growth rate in the past 5 years
Source: Wind, CICC Research Division
Chart 3: Upstream profit increased sharply in the first half of 2026, with no significant improvement in the middle and downstream
Source: Wind, CICC Research Division
Chart 4: The share of booming industries with high performance growth has not spread significantly
Source: Wind, CICC Research Division
Chart 5: Profit differentiation in the industry increased in the second quarter. The upstream and AI industry chains contributed more than 20 percentage points of growth, but half of the industry still had negative growth
Source: Wind, CICC Research Division
Chart 6: Exchange gains and losses due to RMB appreciation had a big impact on profits in the first half of the year
Source: Wind, CICC Research Division; The indicator comes from a segment of financial expenses, which represents an increase in financial expenses due to exchange gains and losses
Chart 7: Profits in export/overseas related industries in the first half of 2026 were greatly affected by exchange gains and losses
Source: Wind, CICC Research Division
Chart 8: Net profit growth rate of the A-share industry in a single quarter
Source: Wind, CICC Research Division
Performance quality: The upstream sector drives the recovery in A-share ROE, and the balance sheet and cash flow statement are relatively healthy
1) Non-financial ROE rebounded steadily in 2Q26, and the rebound in upstream ROE was the main contribution. Since the high in the 2nd quarter of 2021, the current ROE downward cycle showed an improvement in 2026. The non-financial ROE (ttm) of 2Q26A shares rebounded about 0.5 percentage points month-on-month compared to 4Q25. Among them, ROE in the upstream industry rebounded sharply, while the middle and downstream ROE did not change significantly. Judging that after a 4-year downward cycle, the bottom of the ROE stage for A-share non-financial companies may be confirmed, but internal segmentation is still significant. In particular, ROE in traditional domestic demand and consumer-related industries is still weak. From the perspective of DuPont's analysis, the non-financial net profit margin (ttm) clearly rebounded by 0.2 percentage points. In particular, the net profit margin (ttm) of the upstream industry rebounded for two consecutive quarters, with a cumulative rebound of 1.2 percentage points to 7.15%, exceeding the high net profit margin in 2022. Among them, exchange gains and losses due to the appreciation of the RMB since the second half of last year had an impact of about 0.2 percentage points on the net profit margin. However, profit margins in the middle and downstream industries are still weak, showing only some signs of stabilization. Looking at the asset turnover ratio, the overall asset turnover ratio of non-financial companies was basically the same as in the first quarter, reflecting that this round of ROE rebound was more driven by price factors. The asset turnover ratio of the old and new economies did not change much, but the decline in the asset turnover ratio of the old economy industry in the past two years was even more obvious. Judging from the balance ratio, the balance ratio of non-financial enterprises is basically the same as compared to the same period last year, but it is worth noting that the balance ratio of the new economy industry has increased markedly, or it is related to the leveraged expansion of industries such as the AI industry chain. In summary, the bottom of the A-share ROE stage may have been further confirmed on the basis of quarterly reports. Among them, the sharp increase in profit margins in the upstream industry is the main contribution. The new economy industry also shows a certain trend of increased leverage, while the relatively weak ones are still mainly asset turnover indicators. At the industry level, ROE (TTM) improved for two consecutive quarters in first-tier industries, including power equipment and new energy, computers, electronics, basic chemicals, consumer services, petroleum and petrochemicals, and nonferrous metals. Among them, non-ferrous metals increased by 4.9 percentage points to 18.7%.
2) Capital expenditure of non-financial enterprises continues to grow positively, which is supported by improved cash flow from financing. The capital expenditure of A-share non-financial enterprises changed from 4Q25 to a positive year-on-year increase. In the first half of the year, the year-on-year increase continued to increase by 3.8%, and the upward trend in capital expenditure in the old and new economies was consistent, all of which improved a lot. Among them, the fund-raising cash flow/operating income of listed companies is often the leading indicator of capital expenditure. Since the indicator stabilized in early 2025, the decline has continued to narrow, reflecting the improvement in corporate financing conditions, and there is still support for the subsequent recovery in capital expenditure growth in 2026. However, the decline in operating cash flow/operating income does not represent a weakening of fundamentals. It may mainly reflect an increase in the company's working capital occupation, and large industry inventory reserves will take up a certain amount of operating cash flow capital. Affected by this, the level of free cash flow has declined, but free cash flow/owners' equity is still at a historically high level. Structurally, the year-on-year recovery in capital expenditure in traditional industries was mainly driven by transportation, building materials, and non-ferrous metals. The 2Q26 growth rates were 51.5%, 37.1%, and 36.2%, respectively. Capital expenditure for basic chemicals, coal, and petroleum and petrochemicals also changed from negative to positive year on year; while capital expenditure for real estate, automobiles, and steel fell by more than 20% in 2Q26. In terms of emerging industries, the growth rate of computer and electronic capital expenditure in the AI industry chain increased significantly. 2Q26 was 45% and 25%, respectively. Components, communication equipment, and semiconductors in the segment were 125%, 82%, and 47%, respectively. Upstream AI related materials such as glass, glass fiber, and small metals also increased by more than 60% year on year; 2Q26 capital expenditure for emerging industries such as media, pharmaceuticals, and defense and military industry declined year-on-year. In summary, the overall financing needs and investment confidence of A-share companies have improved, and the willingness of listed companies to invest in capital expenditure has increased, especially in booming circuits such as the AI industry chain, and upstream industries driven by price increases. However, the differentiation in the production capacity cycle is quite obvious. Although more and more fields are gradually approaching the balance between supply and demand after the past three years of losing capacity, industries with prominent supply and demand imbalances before, such as real estate chains, automobile chains, and photovoltaics, are still shrinking capital expenses.
3) The balance sheet status of A-share companies continues to improve. At the total volume level, the balance sheets of A-share listed companies have returned to an expanded state. Among them, the total asset growth rate of non-financial companies has continued to rebound since bottoming out in 3Q24, and the growth rate rebounded from a low of 5.0% to 7.0% in 2Q26 after excluding real estate; while the total asset growth rate of the financial sector began to expand earlier and by a large margin, 2Q26 fell 1 percentage point to about 9% compared to 4Q25. A-share listed companies are aggregated from the bottom up to form balance sheets for non-financial companies (excluding real estate, construction, and “three barrels of oil”) and booming industries (TMT). The segment has the following noteworthy information: a) The operating asset and liability indicators of non-financial enterprises have further recovered. Among them, accounts receivable and contract liabilities have some forward-looking significance for revenue growth. Since 3Q24 bottomed out, the 2Q26 growth rate has further risen to 9.2%, and there has been no significant weakening; the prepayment index has also rebounded to 21.8%, and business activity has improved. Among them, the TMT sector's advance payment index increased 55.5% year on year; b) The inventory growth rate of non-financial enterprises continued to rise, and the inventory growth rate of non-financial enterprises in 2Q26 rose to 15.2%, Among them, the inventory growth rate of the TMT sector rose to 29.2%, entering the rapid replenishment stage; c) the growth rate of non-financial enterprises under construction changed from negative growth in the early period to 2.6%, and the rate of fixed asset expansion slowed, in line with the rules of the production capacity cycle; d) From the debt side, both short-term loans and long-term loans of enterprises have rebounded, and the willingness to finance has improved. In particular, the TMT sector's debt growth rate is quite obvious.
In terms of configuration, look for opportunities in terms of economic growth and cycle improvement
The growth in A-share performance is better than macroeconomic performance, and the characteristics of structural differentiation are still strengthening. In a series of financial report analyses since 2025, combined with comprehensive analysis of income statements, balance sheets, and cash flow statements, the fundamentals of listed companies have entered an improvement channel from 4Q24. Non-financial companies' profits increased 20% in 2Q26, making it the highest quarterly profit growth rate in the past 5 years. However, behind this high profit growth is a prominent differentiation. Geographic factors have boosted oil prices and resource prices, causing profit margins in the upstream industry to reach a new high in nearly 10 years. The hardware part of the AI industry chain has also experienced significant growth in performance due to short supply; on the other hand, the performance of traditional industries is still sluggish on the basis of a low base in the early stages. Looking ahead to the second half of the year, due to the rising base, the gradual decline in PPI price increases, and the fundamentals of traditional industries are still weak, and combined with an improvement in the growth rate of advance accounts, it is expected that profit growth in the second half of the year may decline from the second quarter, while the AI industry chain may continue to maintain a high level of prosperity. This characteristic of structural differentiation may still be prominent. In addition, a large number of A-share industries have experienced loss of production capacity over the past few years. More and more industries have gradually reduced the gap between supply and demand and cleared production capacity. Currently, the fundamentals of traditional industries seem weak, but in reality, the foundation is better than 2023-2024. Improving the production cycle is still an important bottom-up industry clue for the next one to two years. However, capital expenditure on the hardware part of the AI industry chain is generally growing rapidly. In the future, we need to pay attention to the progress of production capacity investment. For some fields where barriers are low, there may be a big risk of an imbalance between supply and demand if demand growth slows down.
Focusing on the two dimensions of boom growth and cycle improvement, combined with the information reported by listed companies, it is recommended to focus on the following main lines and industries: 1) Boom growth: The performance of the hardware segment of the AI industry chain is generally high, but as the narrative changes, the future may face differentiation. Some areas with low barriers and rapid capacity investment are at greater risk, and areas where demand is determined and production capacity bottlenecks are difficult to ease are expected to continue to benefit. It is recommended to focus on industries related to optical communications, semiconductor equipment, and upstream power bottlenecks. Outside of the AI industry chain, innovative drugs (especially CXO) and power grid equipment are booming overall. 2) Cycle improvement: Fundamentals in more and more fields are recovering from the bottom of the cycle. It is recommended to focus on areas where the supply and demand pattern is improving from the perspective of the production capacity cycle, such as the chemical, petrochemical, and construction machinery industries. The fundamentals of various fields of non-ferrous metals are better, but we need to pay attention to the impact of the risk of the Federal Reserve's austerity on financial attributes. Furthermore, the future impact of the foreign demand industry on exchange gains and losses due to RMB appreciation has been fully measured. If exchange rate appreciation slows down, it is expected to usher in trading opportunities. The fundamental recovery in the pure domestic demand industry is still relatively slow, and further observation is still needed.
Chart 9: The non-financial ROE of A-shares rebounded markedly. Among them, the ROE in the upstream industry increased sharply, and the improvement in the middle and downstream was limited
Source: Wind, CICC Research Division
Chart 10: The A-share asset turnover ratio is still low. The new economy stabilized earlier, and the old economy has not stabilized significantly
Source: Wind, CICC Research Division
Chart 11: The capital expenditure growth rate of 2Q26A shares increased slightly, and changes in the old and new economies were not obvious
Source: Wind, CICC Research Division
Chart 12: Half of the industries achieved positive capital expenditure growth in 2Q26, with transportation, computers, building materials, non-ferrous metals and electronics showing the highest growth rates
Source: Wind, CICC Research Division
Chart 13: The net cash flow of A-share non-financial real estate and petrochemical changed little. Funding cash flow continued to improve to support capital expenditure growth, while operating cash flow declined
Source: Wind, CICC Research Division
Chart 14: The overall balance sheet of A-shares after excluding some industries: the overall asset growth rate continues to pick up, and the improvement in operating project growth shows a recovery in vitality
Source: Wind, CICC Research Division;
Note: To avoid excessive influence of individual companies or industries, finance, real estate, construction, and “three barrels of oil” are excluded.
Chart 15: TMT's balance sheet is characterized by high prosperity, the growth rate of operating assets is high, and inventory replenishment is accelerated
Source: Wind, CICC Research Division
Chart 16: The asset growth rate of non-financial enterprises continued its previous rebound, while the growth rate of finance declined
Source: Wind, CICC Research Division
Chart 17: Marginal year-on-year increase in the balance ratio of non-financial companies
Source: Wind, CICC Research Division