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China Mobile delivered a "fire and ice" financial report in the first quarter of 2026. On one hand, revenue from its main telecom business dropped 1.1% year-on-year, net profit narrowed 4.2% to 29.3 billion yuan, and profit pressure continued to be evident. On the other hand, net cash flow from operating activities more than doubled, surging 128.1% to 71.4 billion yuan, achieving an impressive performance for the period and demonstrating the company's proactive capabilities in liquidity management and payment scheduling.

In total, first-quarter operating income amounted to 266.5 billion yuan, up 1.0% year-on-year, reflecting moderate growth. The main driver of overall revenue growth came from "other business income," which jumped 12.7% year-on-year to 46.6 billion yuan, showing that new business areas such as computing power and intelligent services are becoming important sources of supplementary income. However, core telecom business income reached 219.9 billion yuan, down 1.1% year-on-year, indicating the increasingly mature characteristics of traditional communication services.

On the profit side, EBITDA fell by 5.0% year-on-year to 76.7 billion yuan, with the EBITDA margin dropping from 30.6% last year to 28.8%, a contraction of 1.8 percentage points; net profit margin also decreased from 11.6% to 11.0%. In terms of cost, operating costs rose 3.2% year-on-year, significantly faster than revenue growth. R&D expenses even increased 22.3% year-on-year—a core reason for profit pressure, also reflecting the company's ongoing strategic commitment to technological innovation.

On the user side, performance remains steady. The total number of mobile customers exceeded 1.009 billion, with a net increase of 3.76 million in the quarter; the number of 5G network customers reached 668 million, with a net increase of 26 million since the start of the year; IoT card connections surpassed 1.5 billion, with a net increase of over 22 million in the quarter. These figures show that China Mobile continues to maintain its moat advantage in the communication foundation.

Main Business Income Says Goodbye to Growth, Other Businesses Take Over

Breaking down the income structure, the core issue is that growth in the traditional main business has hit a ceiling. Main business income of 219.9 billion yuan, down 1.1% year-on-year, means that voice, traffic and other traditional telecom business remain saturated.

Nevertheless, the "other business income" delivered a structural counterbalance: at 46.6 billion yuan, up 12.7% year-on-year, it now accounts for nearly 17.5% of overall revenue. This income mainly represents cloud computing, computing power leasing, digital government, intelligent services and other emerging areas, directly reflecting China Mobile's strategy of "communication service + computing power service + intelligent service" landing in practice.

From a full-year perspective, if other business income maintains double-digit growth, it could offset structural pressure on main business income in the next 1-2 years and become a new engine for renewed revenue growth.

Comprehensive Cost Rise, R&D Investment Grows Against the Trend

Profit was under pressure in the first quarter, with costs as the main driver. Operating costs were 198.9 billion yuan, up 3.2% year-on-year, an absolute increase of about 6.2 billion yuan, while operating income increased by only about 2.7 billion yuan, highlighting an obvious scissors effect.

More noteworthy is that R&D expenses surged 22.3% year-on-year to 3.9 billion yuan, showing the company is ramping up investment in frontier technologies such as AI large models, computing power infrastructure, and 5G-A. In the increasingly competitive computing power arena, forward-looking R&D investment is a necessary price, but in the short term it directly erodes profits.

Administrative and sales expenses were relatively stable, with only slight year-on-year growth of 0.9% and 1.3% respectively, showing the company maintains certain cost discipline in daily operations. Credit impairment losses fell from 6.66 billion yuan last year to 6.11 billion yuan, easing bad debt pressure and providing a marginal positive contribution to profits.

Investment income performed strongly, reaching 6.84 billion yuan in the first quarter, up substantially by 2.57 billion yuan year-on-year, including 4.01 billion yuan from associates and joint ventures, helping buffer downward pressure on operating profits to some extent.

Explosive Cash Flow Improvement, CapEx Significantly Contracted

The biggest positive surprise this quarter is undoubtedly the net cash flow from operating activities, which grew 128.1% year-on-year to 71.4 billion yuan (approximately 71.4 billion RMB in absolute terms).

Breaking down the driving factors: operating cash inflows were essentially flat year-on-year (274.8 billion yuan vs 274.5 billion yuan), with the key change on the outflow side—"cash paid to purchase goods and accept services" plummeted from 201.4 billion yuan last year to 157.9 billion yuan, a reduction of roughly 43.5 billion yuan, down over 21%. This change may relate to the company's adjustment in payment schedules to suppliers and reduced procurement expenditure, reflecting obvious improvement in operating cash management efficiency.

Capital expenditure also contracted noticeably. Cash paid for purchase/construction of fixed assets, intangible assets, and other long-term assets amounted to 30.4 billion yuan, down about 6.0 billion yuan from 36.4 billion last year, a decrease of 16.5%, suggesting the company is entering an optimization phase after a period of heavy infrastructure investment.

Ending cash and cash equivalents reached 155.3 billion yuan, up over 24% from 125.1 billion yuan last year, with ample reserves to support subsequent shareholder returns and strategic investments.

Robust Expansion of User Scale, 5G and IoT Become New Growth Engines

In terms of user operations, China Mobile maintained steady positive momentum overall. Last quarter (Q4 2025) saw a net outflow of 3.71 million mobile customers, but Q1 this year switched to a net growth of 3.76 million, returning to the growth track and demonstrating the company's solid attractiveness in market competition.

The 5G migration process continues to advance. At the end of the first quarter, 5G network customers totaled 668 million, with a quarterly net increase of about 26 million, and the 5G penetration rate among all mobile customers exceeded 66%, with scaled 5G dividends still being released.

The momentum in the IoT sector is even stronger. IoT card connections reached 1.504 billion, with a net quarterly increase of 22.33 million, with both the total and incremental numbers leading the industry. Combined with the company's strategic deployment in computing power services, the massive data flow and processing demands generated by IoT connections will become an important driver of future computing power business growth.

Broadband customer numbers totaled 333 million, with a net increase of 3.9 million, and continued family market penetration, providing room for bundled sales and ARPU (average revenue per user) improvement.

Solid Assets and Liabilities, Continued Equity Accumulation

On the balance sheet, as of the end of March 2026, China Mobile's total assets reached 2.1535 trillion yuan, up 2.9% from the start of the year; equity attributable to shareholders of the parent company was 1.4228 trillion yuan, up 2.1% from the start of the year, with shareholder value steadily accumulating.

On the liability side, total current liabilities amounted to 645.3 billion yuan, with accounts payable of 350 billion yuan as the largest item, mainly normal operating liabilities, with overall financial structure healthy. Long-term loans were just 9.5 billion yuan, with extremely low interest-bearing debt and highly controllable financial risk.

Of note, construction-in-progress rose from 61.8 billion yuan at the start of the year to 83.5 billion yuan, an increase of about 21.7 billion yuan, or 35%, indicating the company continues to advance network infrastructure and computing power infrastructure projects, further strengthening its competitive barriers after completion. Weighted average return on equity (ROE) was 2.1%; given the massive equity base, absolute return remains robust.

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