Goldman Sachs is bullish on Cambricon: Cloud chips are set to explode, with shipments expected to exceed one million units by 2028, and the stock price could rise another 76%!

Cambricon's Q1 performance greatly exceeded expectations, Goldman Sachs

In the latest report on April 22, Goldman Sachs stated that Cambricon's revenue structure has undergone a significant transformation, with the cloud chip business accelerating its rise and seasonal fluctuations significantly reduced. Benefiting from the growth of AI capital expenditures, shipments are expected to exceed 1 million units by 2028.

At the same time, multiple indicators confirm the demand explosion, with Q1 inventory rising to 2.8 billion yuan and contract liabilities increasing to 1.4 million yuan. In addition, R&D efficiency has also significantly improved, with per capita revenue exceeding 610,000 yuan in 2024.

Goldman Sachs expects Cambricon's revenue from 2025 to 2027 to grow at a compound annual growth rate (CAGR) of 111%, with profitability expected to improve significantly. It is projected to achieve profitability in 2025, and by 2030, the EBITDA profit margin will increase to 26%, approaching the levels of international peers such as NVIDIA and AMD.

Based on this expectation, Goldman Sachs raised its rating from "Neutral" to "Buy," and significantly increased the target price from 607.8 yuan to 1,223 yuan, an increase of over 100%, with a 76% upside potential compared to the latest closing price.

The rise of the cloud chip business, Q1 revenue breaks seasonal patterns and achieves quarter-on-quarter growth

Cambricon's Q1 performance far exceeded analysts' expectations, showcasing key signals of improvement in the company's fundamentals.

Goldman Sachs' report pointed out that the company's Q1 revenue reached 1.111 billion yuan, which is a 12% quarter-on-quarter increase compared to the traditional off-season performance in the first quarter (which has averaged a 90% quarter-on-quarter decline over the past five years). Notably, the company's business structure has undergone a significant transformation.

The company's business focus has shifted from intelligent computing cluster systems (mainly government projects) to cloud chip business, with 99% of 2024 revenue coming from cloud chip business, a qualitative leap compared to 20%/13% in 2022/2023. This transformation has allowed the company to break free from the seasonal fluctuations that heavily relied on government projects, establishing a more robust business model.

Goldman Sachs further noted that with the rise of domestic large models in China (such as DeepSeek) in early 2025 and the increasing demand for generative AI, Cambricon's cloud chip business is expected to experience explosive growth.

Quarterly shipments of cloud chips are expected to increase from 25,000 units in 2024 to an average of 31,000 units per year, with shipments expected to exceed 1 million units by 2028. The company's revenue CAGR from 2025 to 2027 is projected to reach 111%.

In 2024, the Chinese market consumed 2.7 million AI chips, with 30% supplied by domestic companies, while Cambricon's total shipments were 39,000, accounting for 5% of domestic suppliers, indicating significant growth potential.

Inventory and orders rebound, confirming demand explosion

Changes in Cambricon's inventory and contract liabilities further confirm the strong market demand.

Goldman Sachs pointed out:

The company's Q1 inventory in 2025 increased to 2.8 billion yuan, far exceeding 990 million yuan in 2023 and 1.77 billion yuan in 2024. Notably, raw materials (mainly wafers) surged by 1,400% year-on-year, while finished goods inventory decreased by 23% year-on-year, clearly reflecting the strong market demand for cloud chips

At the same time, contract liabilities (reflecting pre-order situations) increased to 1.4 million yuan in Q1 2025, a significant rise compared to 300,000 yuan in 2023, indicating an enhanced willingness of customers to make advance payments, suggesting the company's potential for future growth.

In addition, improvements in the scale and efficiency of the R&D team also show positive signals. After hitting a low of 727 engineers in the first half of 2024, the number rebounded to 741 by the end of the year. Meanwhile, revenue per capita increased from 381,000 yuan in 2022 to 619,000 yuan in 2024, a growth rate of 62%, reflecting the concentration of R&D resources on high-value projects.

The number of R&D engineers hit a low of 727 in the first half of 2024 and increased to 741 in 2024. Revenue per capita reached 619,000 yuan, higher than the 381,000 yuan level in 2022. Goldman Sachs expects R&D investment to grow at a compound annual growth rate of 52% from 2025 to 2030.

Profitability may significantly improve, with profitability expected in 2025

Overall, Goldman Sachs expects Cambricon to achieve profitability in 2025, with the net profit forecast for 2026 raised from 879 million yuan to 2.369 billion yuan, and revenue from 2025 to 2030 is expected to grow at an 80% CAGR. EBITDA profit margin is expected to increase from 16% in 2025 to 26% in 2030, approaching the levels of global peers (NVIDIA/AMD are expected to be 66%/27% in 2026).

Despite the bright outlook, Goldman Sachs also highlighted key risk factors, including wafer supply constraints, slower-than-expected cloud chip development, and potential intensification of industry competition, all of which pose risks to Cambricon's profitability