GoerTek: Apple supply chain has volume but little pricing power

GoerTek Co., Ltd. released its Q2 2026 results and 2026 interim report (through Jun 2026) after the A-share close on Aug 20, 2026 (Beijing time). Key takeaways are as follows:

1) Overall results: Q2 2026 revenue was RMB 21.4bn (+0.7% YoY), slightly below market expectations (RMB 21.7bn). H1 growth was largely driven by Q1, while Q2 was weighed by tight supply of memory and other components, dampening demand across smartphones and other consumer electronics.

GPM was 15.2% this quarter, improving both YoY and QoQ, mainly as Vietnam labor disruption cleared and share from key customers recovered.

In H2 2025, GPM for intelligent acoustic assemblies once fell to 0.4%, primarily due to US‑China tariffs. The company shifted capacity to Vietnam, and 'high-priced hiring' amid industry peers also building plants pushed up labor costs, compressing margins over that period.

2) Intelligent hardware: H1 2026 revenue was RMB 19.9bn, down 2.2% YoY. Shipments of legacy lines (PS5 late-cycle, Quest softness) declined, and AI glasses have yet to ramp.

3) Traditional hardware & components

(i) Intelligent acoustic assemblies H1 2026 revenue was RMB 11.3bn (+36% YoY). Growth was driven by last year's low base and product cycle effects.

AirPods 4 (two models) launched in Sep 2024, and AirPods Pro 3 launched in Sep 2025. H1 2025 followed the initial AirPods 4 ramp and AirPods Pro 3 had not yet entered production. H1 2026 is the first full production year for AirPods Pro 3, reflecting a normal mass-production cadence.

Market focus: intelligent acoustic assemblies GPM was 9.7% in H1 2026, down 20bps YoY. With revenue up 36% but margin down again, it suggests$Goertek.SZ remains under Apple’s pricing pressure.

(ii) Precision components H1 2026 revenue was RMB 7.76bn (+2% YoY). With subsidy tightening and other factors, revenue growth in precision components slowed sharply (from ~20% to ~2%).

4) Opex & operations: Total core operating expenses were RMB 1.94bn this quarter, with a core expense ratio of 9%, broadly stable YoY. Inventory stood at RMB 18.6bn, up RMB 5.1bn QoQ. The inventory-to-revenue ratio was 0.87, with inventory levels edging higher mainly due to increased reserves of raw materials and finished goods.

Dolphin view: Vietnam ‘pit’ filled, growth gap remains

GoerTek’s quarterly print was fairly ordinary. Revenue growth slowed amid a soft consumer electronics cycle. Margin improvement was driven by easing hiring issues in Vietnam and recovering share from major customers.

In detail:

a) Intelligent hardware: another YoY decline, still in a transition phase between old and new lines. Within intelligent hardware, the company derives the most revenue from game consoles and VR/MR, where it is a key supplier to PS5 and Meta Quest. Meta Quest remains weak; PS5 is late-cycle with PS6 expected in 2027; AI glasses have not achieved scale to lift growth.

b) Intelligent acoustic assemblies: a strong rebound. H1 intelligent acoustic assemblies grew 36%, primarily driven by the AirPods product cycle. It is the first full year for AirPods Pro 3 (AirPods Pro 2 launched in 2022).

Considering the slight GPM decline in acoustic assemblies and the slowdown to 2% in precision components, Dolphin believes GoerTek has merely ‘returned to the table’ in AirPods, without grabbing substantial share. The improvement is mainly cycle-driven by the client.

c) Precision components: growth decelerated sharply. Memory price hikes and other raw-material inflation squeezed end-demand for electronics, leading to a sharp slowdown in this business.

With a current market cap of RMB 78.2bn, GoerTek trades at roughly ~15x 2026E core NP (assuming revenue +10%, GPM 14%, and a 7.5% tax rate). Versus its historical range (15x–40x PE), the valuation is near the lower end, largely due to a lack of clear catalysts.

Across the company’s three core businesses: ① Memory prices keep rising, directly impacting end-demand and indirectly slowing precision components growth. ② MR/VR is no longer mainstream, and consoles are mid-transition; hopes rest on AI glasses, but no breakout product has emerged. ③ Intelligent acoustic assemblies show ‘revenue up, profit not’, mainly cycle-driven by AirPods, with weak bargaining power and GPM down YoY.

This interim report shows the Vietnam labor-cost issue encountered last year has been digested, with GPM recovering. But growth has not been fixed: precision components and intelligent hardware remain sluggish, and acoustic assemblies still show ‘revenue up, profit not’. These are key reasons why valuation stays depressed.

While the issues have been ‘priced in’, there is still little confidence in a bottoming rebound, especially with uncontrollable memory inflation and client product cycles. The report also suggests continued pricing pressure from Apple in AirPods, with bargaining power still weak. Before the industry/product cycle turns, GoerTek’s share price may continue to range at low levels.

Below are GoerTek’s results and related charts: