Aihuishou Q1 Earnings: Profit growth outpaced revenue growth by more than double, clearly benefiting from the memory supercycle

A simple line of reasoning is this: in a memory price supercycle, whoever holds memory inventory benefits.Companies like SK Hynix and Samsung have been significantly re-rated by the market precisely because they possess memory production capacity; yet few people associate Aihuishou with the memory theme, even though it has clearly benefited substantially from this supercycle.

In Aihuishou's Q1 2026 earnings report, an interesting financial detail emerged: cash and cash equivalents on the balance sheet declined from RMB 2.187 billion at year-end to RMB 1.72 billion, while inventory rose from RMB 1.07 billion to RMB 1.486 billion. At first glance, this doesn’t seem positive—but when viewed in the context of broader changes across the 3C industry in Q1, a different conclusion emerges.

In Q1 2026, memory prices continued to surge sharply. According to TrendForce’s latest forecast on May 14, high-specification memory chips used in smartphones are projected to see a quarterly price increase of 78% to 83% in Q2. Rising memory costs have driven up new smartphone prices, which in turn lifted secondhand device prices. At this juncture, Aihuishou is using its own capital to secure inventory, effectively positioning itself within the upward pricing cycle and laying the groundwork for further profit expansion.

Summary:

1. The company reported a 32.4% year-over-year revenue increase in Q1, a marked acceleration compared to the same period last year, with a more robust underlying structure. For Q2 guidance, the company maintained its usual conservative stance, forecasting year-over-year growth of 25% to 27%. Although this appears modest, over the past few quarters, actual results have consistently met or significantly exceeded the upper end of the 25%–28% guidance range.

2. Profit growth has far outpaced revenue growth. Non-GAAP operating margin improved from 2.4% a year ago to 3.1%, while net margin rose from 1.7% to 2.3%. Aihuishou’s current market capitalization stands at approximately USD 990 million, implying a trailing twelve-month (TTM) non-GAAP P/E ratio of only around 14x—a valuation that appears reasonable given its growth trajectory.

3. In this quarter, the company further strengthened its control over its self-operated supply chain. The share of product revenue from direct-to-consumer (B2C) retail sales rose to 45.1% from 33% a year earlier, driven by nearly 150% year-over-year growth in B2C sales of certified refurbished devices. In March alone, monthly sales of its premium certified refurbished devices surpassed RMB 200 million for the first time. Additionally, gross merchandise value (GMV) from multi-category recycling grew 81.5% year-over-year, reflecting both expanded scale and broader category coverage.

Starting with the financial figures: in Q1 2026, total revenue reached RMB 6.16 billion, up 32.4% year-over-year, landing at the high end of prior guidance. Non-GAAP operating profit was RMB 190 million, a 70.2% increase year-over-year, while non-GAAP net profit hit RMB 140 million, up 79.6%—results that broadly exceeded expectations. By revenue composition, 1P (first-party/self-operated) product sales contributed RMB 5.73 billion, up 34.4% year-over-year, while 3P (third-party/platform) service revenue amounted to RMB 430 million.

For a company still growing revenue at a 30%+ pace, achieving profit growth more than double that rate validates Aihuishou’s high-quality growth model.

On the quality-of-growth front, transaction volume increased by only 13.7% in Q1, while revenue jumped 32.4%—a significant gap indicating that growth wasn’t driven merely by processing more devices. Instead, each device fetched a higher resale price, reflecting markedly improved per-unit monetization efficiency. This aligns with the earlier observation that secondhand device prices are rising alongside new phone prices; during this pricing uptrend, every additional tradable device in Aihuishou’s inventory translates directly into incremental profit.

Breaking down the profit side further, sales expenses rose just 17.9% and fulfillment costs increased only 22.5%—both significantly slower than revenue growth. As a result, non-GAAP sales expense ratio declined from 8.3% a year ago to 8.0%, and non-GAAP fulfillment expense ratio fell from 9.1% to 8.5%.

More importantly, despite disciplined spending, the company continued to expand: its door-to-door delivery team grew from 1,765 to 2,248 personnel year-over-year, and its store count increased from 1,886 to 2,156. This demonstrates that the current profit expansion isn’t achieved by cutting investments but rather through natural cost dilution as scale increases—a much higher-quality form of profitability.

The sustainability of this profit trajectory stems from fundamental shifts in business structure. As early as Q4 2025, the company prioritized a retail-first strategy, aiming to sell more of its self-sourced (1P) inventory directly to end consumers and capture the full margin between acquisition and retail sale. This strategy continued to deliver results this quarter, with the B2C retail share of product revenue jumping from 33% to 45.1%. Every percentage point increase in retail penetration inherently retains more value within the company.

Memory prices continue to rise, pushing up the prices of secondhand devices and widening the margin retailers can capture—a trend with no clear end in sight in the near term.

During the earnings call, management was straightforward: 'As upstream costs for new devices—particularly memory—rise, pricing in the secondhand market has remained relatively stable compared to historical cycles, with some used products even seeing price increases. Therefore, we are not in a rush to quickly adjust prices and turn over our high-quality inventory; part of it will be sold in Q2.'

He also emphasized that the inventory buildup 'aligns with our strategic focus on strengthening the 1P-to-C business model.' As revenue shifts toward 1P-to-C, inventory turnover days naturally increase. In other words, the Q1 inventory build reflects both a deliberate cyclical play and a natural outcome of the retail transformation. For this business, such control over upstream product sourcing itself constitutes a competitive moat.

Finally, on the efficiency front, Aihuishou significantly accelerated AI-driven productivity improvements across the board in Q1. As management stated during the earnings call, the company is 'actively encouraging internal learning and sharing of AI capabilities,' and has already made progress in areas like store audit and risk control, resale pricing algorithms, and coding efficiency. The company plans to 'gradually expand the application of these capabilities to build long-term organizational efficiency and profitability.'

When viewed through the lens of valuation, these operational and financial developments lead to a clear conclusion. A company still growing revenues at a 30% clip, with profit growth more than doubling that pace, already paying cash dividends, and committing to return at least 60% of its adjusted net income to shareholders over a three-year plan—such a company reported roughly RMB 490 million in non-GAAP net profit over the past four quarters (from Q2 2025 to Q1 2026), implying a trailing twelve-month (TTM) non-GAAP price-to-earnings (P/E) ratio of just 14x. That multiple is typically reserved by the market for businesses with little to no growth.

During this earnings call, management also expressed optimism about 2026: as brand manufacturers and platforms ramp up dedicated investments in trade-in scenarios, the company can 'secure more primary-sourced inventory at low cost and high efficiency,' and explicitly stated, 'In 2026, we expect to achieve faster-than-initially-forecast scale growth and deliver meaningful margin expansion.'

The simultaneous acceleration of growth, improvement in profitability, and strengthening control over the supply chain may well represent the most significant developments to watch for this company going forward. $ATRenew (RERE.US)$

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