CXMT's 2Q results significantly beat expectations, with AI-driven DRAM demand and product upgrades supporting growth

Overview

The report focuses on CXMT's 2Q26 results, AI-driven DRAM demand, customer supply-chain diversification, capacity expansion, and product upgrades. Goldman Sachs views the company as a major beneficiary of rising domestic DRAM demand in China and accordingly raises its 2026 earnings forecast while maintaining its Buy rating and RMB129 target price.

Core views

CXMT's 2Q26 results significantly exceeded expectations. Revenue rose 977% year over year and 96% quarter over quarter to RMB99.5 billion, exceeding Goldman Sachs' forecast and Bloomberg consensus by 52% and 54%, respectively. Goldman Sachs attributes the growth to AI-driven DRAM demand, customers diversifying suppliers to secure supply, and persistently high DRAM prices. The expense ratio improved to 5.4%, better than Goldman Sachs' and market expectations, driving net profit 75% and 260% above Goldman Sachs' forecast and Bloomberg consensus, respectively. This indicates that strong demand not only translated into revenue but also further amplified profit performance through a lower expense ratio. The core demand thesis centers on the expansion of DRAM and HBM driven by Chinese AI servers. Goldman Sachs expects the value of Chinese DRAM demand to increase from US$113.919 billion in 2026 to US$171.918 billion in 2027 and US$257.315 billion in 2028, representing a 50% CAGR from 2026 to 2028. Of this, conventional DRAM demand value is expected to rise from US$110.046 billion in 2026 to US$225.209 billion in 2028, representing a 43% CAGR; HBM demand value is expected to increase from US$3.873 billion to US$32.105 billion, representing a 188% CAGR. The report therefore believes that growth in AI server shipments will boost demand for both server DRAM and HBM, while customers' expansion of supplier networks to enhance supply security will further strengthen opportunities for local manufacturers. Demand growth is being driven by both shipment volumes and prices. Chinese DRAM shipments are expected to rise from 9.365 billion GB in 2026 to 19.505 billion GB in 2028, representing a 44% CAGR; conventional DRAM and HBM shipments are expected to record CAGRs of 36% and 138%, respectively, over the same period. Overall average selling prices are expected to be US$12.2, US$13.8, and US$13.2 per GB, respectively, representing a 4% CAGR from 2026 to 2028; conventional DRAM's average selling price is expected to record a 5% CAGR, versus 21% for HBM. This volume-price breakdown shows that overall market expansion will primarily be driven by volume growth, while HBM will also benefit from more pronounced price increases. On the supply and product fronts, Goldman Sachs believes CXMT's ongoing capacity expansion and product-mix upgrades position it to capture demand. Through architectural innovation and data-transmission optimization, the company's independently developed LPDDR6 improves performance versus LPDDR5X, reaching a peak speed of 12,800Mbps and a maximum capacity of 16GB; samples have been delivered to key customers for validation, and mass production is accelerating. The report's long-term forecasts project revenue rising from RMB354.859 billion in 2026 to RMB659.741 billion in 2027, RMB882.821 billion in 2028, RMB1,100.192 billion in 2029, RMB1,371.380 billion in 2030, and RMB1,659.370 billion in 2031, corresponding to the report's stated annual growth rates of 474%, 86%, 34%, 25%, 25%, and 21%, respectively. After incorporating the 2Q26 results, Goldman Sachs raised its 2026 net profit forecast by 14% but largely maintained its forecasts for 2H26 through 2030, indicating that the adjustment mainly reflects the already realized 2Q beat rather than a broad increase in subsequent assumptions. On valuation, Goldman Sachs maintains its RMB129 12-month target price and Buy rating. The target price uses a discounted P/E methodology: based on the correlation between peers' forward P/E ratios and earnings growth, it first determines a 2030 target P/E of 16.6x for CXMT. This multiple corresponds to an assumption of 21% average year-over-year net profit growth for the company from 2030 to 2031. Goldman Sachs then applies the 16.6x multiple to 2030 earnings per share and discounts it back to 2027 using a 12.7% cost of equity. Neither the target price nor the target multiple was adjusted, indicating that the rating rationale continues to rest primarily on long-term earnings growth, the peer valuation relationship, and the execution of capacity expansion and product upgrades.

Analysis framework

Goldman Sachs first compares actual 2Q26 revenue, the expense ratio, and net profit with its own forecasts and Bloomberg consensus to determine the magnitude of the beat. It then explains the sources of growth through AI server demand, supply-chain diversification, and DRAM pricing. The report subsequently uses volume and price forecasts for the Chinese DRAM market to break down the demand trajectories of conventional DRAM and HBM, combining them with CXMT's capacity expansion and LPDDR6 product progress to assess its ability to benefit. Finally, the report incorporates actual results into its earnings model, determines the target multiple based on the relationship between peers' P/E ratios and earnings growth, and discounts it using the cost of equity to derive the 12-month target price.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  DRAM supply-demand analysis

  The report treats AI server growth and customers' supplier diversification as demand drivers and CXMT's capacity expansion as the supply capability needed to capture demand, using this framework to assess revenue and earnings growth.

• Industry/Sector Analysis FrameworkVolume-Price Breakdown

  Shipment volume and average selling price breakdown of the DRAM market

  The report separately forecasts shipment volumes, average selling prices per GB, and demand value for conventional DRAM and HBM to explain the respective contributions of volume and price to market expansion from 2026 to 2028.

• Valuation MethodPE/PEG valuation

  Discounted P/E valuation

  Goldman Sachs determines a 2030 target P/E of 16.6x based on the correlation between peers' forward P/E ratios and earnings growth, applies it to 2030 earnings per share, and discounts it back to 2027 using a 12.7% cost of equity to derive the RMB129 12-month target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• CXMT (688825.SS)

  Goldman Sachs views it as a major beneficiary of growth in China's domestic DRAM demand, AI server memory demand, and customers' supply-chain diversification trend.

  Strengths

  2Q26 revenue and net profit significantly exceeded expectations; ongoing capacity expansion; DRAM product-mix upgrades; LPDDR6 has entered validation by key customers, with mass production accelerating.

  Comparison

  The 16.6x 2030E target P/E is derived from the correlation between peers' forward P/E ratios and earnings growth.

  Risks

  More intense market competition than expected, weaker-than-expected market demand, and geopolitical instability.

Key data

• 2Q26 revenueRMB99.5 billionUp 977% year over year and 96% quarter over quarter; 52% and 54% above Goldman Sachs' forecast and Bloomberg consensus, respectively
• 2Q26 expense ratio5.4%Better than Goldman Sachs' forecast and Bloomberg consensus
• Magnitude of 2Q26 net profit beat75% / 260%Above Goldman Sachs' forecast and Bloomberg consensus, respectively
• Value of Chinese DRAM demandUS$113.919 billion in 2026E; US$171.918 billion in 2027E; US$257.315 billion in 2028E50% CAGR from 2026 to 2028
• Value of Chinese conventional DRAM demandUS$225.209 billion in 2028E43% CAGR from 2026 to 2028
• Value of Chinese HBM demandUS$32.105 billion in 2028E188% CAGR from 2026 to 2028
• Chinese DRAM shipments9.365 billion GB in 2026E; 12.419 billion GB in 2027E; 19.505 billion GB in 2028E44% CAGR from 2026 to 2028; conventional DRAM and HBM CAGRs of 36% and 138%, respectively, over the same period
• Chinese DRAM average selling priceUS$12.2/GB in 2026E; US$13.8/GB in 2027E; US$13.2/GB in 2028E4% CAGR from 2026 to 2028; conventional DRAM and HBM CAGRs of 5% and 21%, respectively, over the same period
• LPDDR6 performancePeak speed of 12,800Mbps and maximum capacity of 16GBSamples have been delivered to key customers for validation, and mass production is accelerating
• 2026 net profit forecast adjustmentRaised by 14%Adjusted after incorporating the 2Q26 results; forecasts for 2H26 through 2030 remain largely unchanged
• Target valuation16.6x 2030E P/EBased on the correlation between peers' forward P/E ratios and earnings growth; discounted back to 2027 using a 12.7% cost of equity
• Target price historyTarget price of RMB129.00 and closing price of RMB58.00 on August 23, 2026The target price in the table has not been adjusted for corporate actions

Impact & implications

Goldman Sachs believes that AI server-driven DRAM and HBM demand, the trend toward supplier diversification as customers seek to improve supply security, and CXMT's own capacity expansion and product upgrades collectively support strong revenue and earnings growth. The 2Q beat prompted Goldman Sachs to raise its 2026 net profit forecast, but subsequent forecasts and the target price remain largely unchanged, implying that the medium- to long-term outlook still depends on demand growth, capacity ramp-up, and the mass production of high-end products proceeding along the original trajectory.

Risks

• Market competition may be more intense than expected.
• Market demand may be weaker than expected.
• Geopolitical conditions may become unstable.