As AI Becomes More Popular, iFLYTEK Becomes More Difficult | Jucha

Source: Cninfo WAVE

Text | Old Fish

Editor | Yang Xuran

In March 2026, a rumor that “iFlytek filed for a 30% layoff with the government” quickly spread online, causing a market uproar. Public security authorities soon clarified that the message was fabricated by netizen Sha and imposed administrative detention on him.

However, this incident still acts like a mirror, reflecting the complex emotions the market has towards this company in the AI era.

Two months earlier, on January 28, 2026, iFlytek released its 2025 performance forecast, estimating net profit attributable to parent of 785 million to 950 million yuan, a year-on-year increase of 40%–70%. The data was impressive, and the stock price rose 6.42% that day.

But this joy was fleeting, and the stock price soon experienced continuous fluctuations downward.

On one side was the “growth news” from the performance forecast; on the other, the persistent weakness of the stock price. On one side was the halo of the “AI national team” at the technical level; on the other, market panic triggered by a rumor. The stark contrast behind these reveals significant questions.

Removing the support of policies and technological narratives, is iFlytek in the AI era actually getting further away from profitability?

Dilemma

At first glance, iFlytek’s 2025 performance forecast appears to be an impressive report card. The company expects net profit attributable to parent of 785 million to 950 million yuan, up 40%–70% year-on-year; non-recurring profit of 245 million to 301 million yuan, up 30%–60%, with all core operational indicators showing positive growth.

But a closer look at the data reveals some discrepancies—the difference between net profit attributable to parent and non-recurring profit is as high as 640 million to 690 million yuan. The main source of this gap is the company’s clear mention of “an increase of about 300 million yuan in government subsidies for major projects.”

In other words, iFlytek still relies on government subsidies to “beautify” its profits, and no fundamental change has occurred.

Since 2019, the government subsidies recorded in the current profit and loss statement have never been below 400 million yuan, making it a regular feature on the profit statement. From 2022 to 2024, these figures were 473 million, 404 million, and 419 million yuan, accounting for 84.31%, 61.49%, and 74.82% of the net profit attributable to parent during the same periods.

This means that over 60% of the company’s net profit in the past three years came from government subsidies rather than core business profits. Excluding this “blood transfusion,” iFlytek has actually been in a state of continuous loss for many years.

In fact, iFlytek’s growth has always been steady. Over the past 17 years, except for 2022 and 2023, the company’s revenue has maintained double-digit growth, with only two years below 20%. Its growth rate is considered excellent among tech companies listed on the A-share market.

However, the problem lies in the fact that revenue growth has consistently failed to translate into equivalent profits. The “double high” investments in R&D and sales continue to erode the company’s profit margins.

In the first three quarters of 2025, sales expenses reached 3.227 billion yuan, up 26.38%, far exceeding the 14.41% revenue growth during the same period; R&D expenses were 3.188 billion yuan, accounting for 18.76% of total revenue, remaining high. In 2024, R&D expenses totaled 4.58 billion yuan, nearly 20% of total revenue.

These two expense categories combined account for about 37% of total revenue, and their growth rate has been consistently higher than revenue growth, continuously squeezing profit margins.

This is even after financial statement beautification. For a long time, iFlytek has capitalized about 40% of its R&D expenses, greatly alleviating apparent profit pressure. While this approach can temporarily beautify profit figures, it is essentially “robbing Peter to pay Paul”—capitalized R&D costs must be amortized over several years. If the related projects fail to achieve expected commercial returns, not only will amortization continue to drag down profits, but asset impairments may also be necessary.

Risks

If the profit dilemma on the income statement is the most direct source of market anxiety about iFlytek, then the series of financial risks hidden deep within the balance sheet are even less obvious.

Among these, the continuously rising accounts receivable and the lengthening collection cycle are some of the most critical operational risks the company faces. As of September 30, 2025, iFlytek’s net accounts receivable reached 15.913 billion yuan, accounting for 93.67% of operating income, nearly doubling from 5.768 billion yuan at the end of 2020.

This indicates that revenue growth has not translated into real cash inflows; much of it has turned into accounts receivable on the books.

More concerning than the scale of receivables is the ongoing deterioration of their aging structure. As of the end of June 2025, only 54.76% of accounts receivable were within one year, meaning over 45% of receivables were over one year old, totaling 6.75 billion yuan.

The amount of receivables with a period of over five years has increased 87 times over the past decade, with their proportion rising from 0.28% to 2.26%. As a result, in the first half of 2025, iFlytek’s bad debt provision for accounts receivable had already reached 3.772 billion yuan.

In stark contrast to the high level of receivables, the company’s cash holdings have been continuously tightening, and short-term debt has been rising rapidly.

As of the end of September 2025, iFlytek’s cash balance was only 3.151 billion yuan, but its short-term borrowings had surged from 310 million yuan at the end of 2024 to 1.865 billion yuan. Non-current liabilities due within one year also reached 1.759 billion yuan. These two short-term interest-bearing debts totaled 3.624 billion yuan, exceeding the company’s cash holdings.

The continuous increase in debt directly amplifies the company’s financial leverage, weakening its debt repayment capacity. Data shows that the asset-liability ratio rose from 53.17% at the end of 2023 to 56.41% at the end of the third quarter of 2025.

To ease its liquidity pressure, the company is constantly extending its payment cycles to upstream suppliers. As of September 2025, accounts payable reached 9.556 billion yuan, up 11.77%.

Therefore, the fundamental solution still lies in “collections.” In 2025, iFlytek repeatedly emphasized the importance of “collection management,” and in the first half of 2025, announced that “sales collection exceeded 10 billion yuan” for the first time, reaching 10.361 billion yuan, setting a new half-year record.

However, a closer look at this collection data, compared with cash on hand, reveals that the quality of collections is not optimistic. The company’s collections likely include a large amount of receivables from bills. This results in a high scale of collections, but the net cash flow from operating activities in the first half still was -772 million yuan, only turning positive to 123 million yuan by the end of Q3.

Of course, this is also supported by large government subsidies.

Imbalance

In 2025, iFlytek proposed a business strategy of “strengthening the C-end, deepening the B-end, and optimizing the G-end,” actively abandoning projects with high customization, low gross margins, and high collection pressure, aiming to focus on higher-return areas.

But based on last year’s operational performance, all three major business segments—C-end, B-end, and G-end—face significant challenges.

C-end is the core focus of this strategic adjustment. Data shows that C-end revenue grew nearly 40% in the first three quarters of 2025, accounting for 34% of total revenue, becoming the main driver of growth.

Behind this impressive growth are high marketing costs, and the “cost-effectiveness” of this success is questionable.

In the first half of last year, marketing expenses for C-end hardware products increased by 90.5% year-on-year, adding 340 million yuan, totaling 720 million yuan. To boost brand awareness, the company sponsored top TV shows like “The Brain” and “One vs. All,” and launched large-scale outdoor advertising in airports and high-speed rail stations, with unprecedented marketing efforts.

However, these high marketing costs did not generate proportional revenue. In the first half of 2025, the overall revenue from smart hardware was only 870 million yuan, down 3.27% year-on-year, and its share of total revenue dropped from 9.65% to 7.98%.

Meanwhile, as the C-end business expanded, product quality and service capabilities were put to the test. On major consumer complaint platforms, the company accumulated around 2,000 complaints, covering product defects, false advertising, after-sales evasion, and more, with the highest proportion related to AI learning machines.

In the B-end market, iFlytek has fallen into a price war quagmire. According to the financial report, in the third quarter last year, the company’s bid-winning amount for large model projects reached 545 million yuan, 1.88 times the combined total of the second to fifth place. Both the number of bids and the amount ranked first in the industry. But details about gross margin, net margin, collection cycle, and confirmed revenue were not disclosed.

In March last year, Li Zhanmei, senior vice president of iFlytek’s intelligent vehicle business, commented on collaborations with large model companies and automakers:

Over the past year, including iFlytek and other large model competitors, everyone has been pouring money in, and some competitors even offered free solutions. Under such circumstances, profitability is definitely an issue.

This somewhat reflects the core difficulties faced by iFlytek’s B-end business. During the initial outbreak of general AI, many companies adopted a “capture the market first, profit later” strategy, offering solutions at low or even no cost, which led to a continuous decline in overall industry gross margins.

The stock performance of iFlytek (from January 2025 to now)

Once a fundamental part of the company’s business, the G-end market, iFlytek has also begun to actively shrink. In the third quarter of 2025, during the earnings briefing, Vice President and Board Secretary Jiang Tao clearly stated that the company has further strengthened the “optimized G-end” decision-making—where market demand exists but project agreements are signed with extreme caution, especially in areas where funds from special bonds and ultra-long-term government bonds have not yet been secured.

This proactive contraction has somewhat reduced collection risks, but the revenue gap created cannot be fully compensated by growth in C-end and B-end, trapping the company in a dilemma of “shrinking G-end and losing growth, expanding C-end and B-end but losing profit.”

Final thoughts

The continuous revenue growth of iFlytek, coupled with persistent profitability issues, is a true reflection of the high-intensity competition era in AI.

During this period, many tech services are launching at low prices or even for free. This easily causes industry companies to fall into the “selling more, earning less” scale inefficiency trap.

Capital or national industrial policies can support companies temporarily, but cannot be a long-term safety net. Especially government support often brings many issues far beyond the subsidy amount. The intrinsic growth of enterprises still depends on their own capabilities.

However, in the AI field, clear paths to commercialization are not easy to establish, and in many industries, they have not yet been truly tested or validated. The road iFlytek is on is not an easy one. In the foreseeable future, its profitability problems are likely to persist.

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