Cambridge Technology 'explodes with bad news', stock price drops over 12%, is the optical module myth showing cracks?

On January 19, Hong Kong stocks$CIG (06166.HK)$ Plummeted by 12.2%, while the A-share market's$Cig Shanghai (603083.SH)$ Dropped by 10%, with billions of funds firmly locking the price limit down.

In terms of news, Cambridge Technology recently announced that its estimated net profit attributable to shareholders for 2025 will be between 252 million yuan and 278 million yuan, representing a significant year-over-year increase of 51.19% to 66.79%. The performance is quite impressive.

Some analysts believe that the global AI infrastructure construction will continue to accelerate in 2025, with cloud vendors' demand for high-speed optical modules growing exponentially. Cambridge Technology has seized the industry trend, so its performance growth is not surprising. The company’s 800G optical module has been mass-produced for leading cloud vendors, and its 1.6T optical module has completed prototype development and entered small-scale trial production.

Cambridge Technology also stated in the announcement that the direct driving force behind the company's continuous performance growth is its high-speed optical module business, which benefits from the strong market demand brought by AI and the acceleration of global data center construction, as well as the company's production capacity layout. Last year, the company's order size and shipment volume increased significantly year-over-year. At the same time, the company continues to advance product technology iteration and structural optimization, significantly increasing the proportion of high-speed, high-margin products, thereby further improving overall sales gross margin.

However, data shows that Cambridge Technology's net profit attributable to shareholders for the first three quarters of 2025 was 259 million yuan. Based on this calculation, the net profit for Q4 2025 is expected to range from -7 million yuan to 19 million yuan. Analysts' consensus forecast for Q4 net profit is 139 million yuan, meaning the company's performance is significantly below expectations.

From being the 'hot favorite' of the AI computing power concept to the sudden 'deceleration' of its Q4 performance, this might be an important reason for today’s sharp drop in Cambridge Technology's stock price.

Cambridge Technology admitted in the announcement that foreign exchange gains and losses are a double-edged sword. The appreciation of the US dollar in 2024 allowed the company to earn effortlessly, while in 2025, due to the depreciation of the Hong Kong dollar and fluctuations in the US dollar exchange rate, it is expected to result in approximately 81.61 million yuan in foreign exchange losses for the year. Compared to a gain of 14.44 million yuan in the same period last year, this difference directly eroded nearly 100 million yuan in profits.

Even though foreign exchange gains and losses have significantly lowered net profits. If we add back this loss, Q4 profitability still falls short of expectations, indicating potential weakness in the company's core business, which is what really worries the market.

Industry insiders speculate that factors such as the short-term cost allocation from Cambridge Technology’s capacity expansion and seasonal fluctuations in the optical module industry may further reduce its Q4 profitability.

Another perspective suggests that the market landscape faced by Cambridge Technology may be changing. On one hand, ZTE Xuchuang, as a core supplier of NVIDIA, holds an advantage in both technology and scale; on the other hand, New Easy Access maintains a solid position within the supply chains of major internet companies. The advantages these two 'giants' have in production capacity and cost control are squeezing the market space for Cambridge Technology.

Cambridge Technology's recent earnings forecast has cast a cold shower on the overheated AI computing power hype. The company’s situation highlights an industry reality: even in high-tech fields like optical modules, the attribute of 'high-end contract manufacturing' remains significant. When industry leaders create competitive moats through scale and technology, profit margins for other participants can quickly erode.

Previously, the market assigned high valuations to optical module companies based on the logic of being 'water carriers for AI computing power'—believing this to be a track with high technological barriers and high gross margins. However, Cambridge Technology’s weaker-than-expected Q4 performance is making investors realize that profitability in optical module firms might not be as stable as imagined, and shifts in the competitive landscape could occur faster than anticipated.

This earnings 'bombshell' reflects not only Cambridge Technology’s operational challenges but also serves as a wake-up call for the entire optical module industry. Amid the boom in AI infrastructure construction, the speed of technological iteration and market competition intensity are both rising, requiring companies to strengthen their fundamentals to sustain market confidence.

Author: Flying Fish

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