iFlytek stock faces downgrade as core loss weighs on results

iFlytek's third-quarter results prompted UOB Kay Hian to downgrade the company to Sell in a research note dated October 21, 2026. The analyst cited revenue below expectations and higher spending on research and development as key concerns for investors.

In the report, UOB Kay Hian said third-quarter revenue rose 8.0 percent year over year to RMB 6.56 billion, but remained 8 to 9 percent below its forecast. Revenue for the first nine months reached RMB 18.19 billion, an increase of 7.1 percent from the comparable period.

Reported profit versus core performance

Attributable net profit increased 31.0 percent to RMB 226 million. The research note said this result was supported by non-recurring investment gains and government grants. Excluding non-recurring items, iFlytek recorded a net loss of RMB 126 million, reversing a profit in the third quarter of 2025.

UOB Kay Hian reported that gross margin eased 0.4 percentage points to 40.0 percent, while operating expenses expanded 15.1 percent to RMB 2.98 billion. Research and development expenses and selling expenses each rose to RMB 1.32 billion. The figures highlight the tension between iFlytek's investment in artificial intelligence capabilities and near-term earnings quality.

Business refocus adds an important distinction

The company is taking a more selective approach to government projects and is scaling back its smart-city business. UOB Kay Hian said government-sector revenue declined 2.4 percent year over year, while smart education and smart medical services each grew by more than 20 percent. Consumer offerings and enterprise penetration remain part of the company's broader expansion effort.

The analyst lowered the target price to RMB 30.00 from RMB 39.00 and changed the rating to Sell. For investors, the central issue is whether growth in education, healthcare and other application areas can eventually offset the cost of developing and commercializing iFlytek's large-model technology.

China's broader equity backdrop can be followed through the Shanghai Composite market coverage.

For more company-specific coverage, see More news and analyses on iFlytek stock.