Ruijie Networks (301165) Report Interpretation

Overview

Goldman Sachs reviews Ruijie Networks’ strong 2Q26 results and argues that China CSP demand is accelerating AIDC white-box switch shipments. The institution raises earnings forecasts and its target price, while maintaining Neutral because it views valuation as fair.

Core views

Ruijie delivered stronger-than-expected 2Q26 results, which Goldman Sachs attributes primarily to robust local demand for data-center switches. Revenue rose 42% year-on-year and 94% quarter-on-quarter to Rmb5.833bn, exceeding Goldman Sachs’ estimate by 9% and Bloomberg consensus by 7%. Gross profit increased 37% year-on-year to Rmb1.721bn, while the 29.5% gross margin was in line with Goldman Sachs’ expectation. Operating expenses were higher than expected because of greater selling and R&D spending; Goldman Sachs considers these investments supportive of product-specification upgrades and longer-term client-base expansion. Net income reached Rmb571mn, up 66% year-on-year and 365% quarter-on-quarter, broadly in line with both Goldman Sachs and consensus expectations. The report links the earnings momentum to Ruijie’s competitive position in China’s AI data-center networking market. Management said Ruijie ranked third in China’s data-center switch market in 1Q26 and second in the 200G/400G data-center switch segment, based on IDC data. Goldman Sachs describes Ruijie as a local white-box switch leader benefiting from an uptrend in domestic cloud capital expenditure. Its AIDC networking products have been adopted for large-language-model training and inference by China Mobile, Alibaba, ByteDance, Baidu, Tencent, Kuaishou and 360, according to management. The company is also developing next-generation 1.6T high-speed interconnect equipment and has released a 51.2T CPO switch spanning LPO, NPO and CPO technical routes. Reflecting the 2Q26 performance, Goldman Sachs raises its 2026-30E revenue forecasts by 3%, 7%, 9%, 10% and 12%, respectively, chiefly due to a greater expected contribution from AIDC white-box switches. It lifts 2026-30E net-income estimates by 3%, 5%, 6%, 7% and 8%, respectively. The institution expects gross margins to decline because white-box switches generally carry lower margins than other product lines, while leaving operating-expense-ratio assumptions largely unchanged. The forecast revision therefore combines higher sales expectations with a less favorable product-mix margin profile. Goldman Sachs continues to value Ruijie on a near-term P/E basis. It raises the target 2027E P/E to 63x from 60x because of stronger expected 2027E-28E net-income growth, using peers’ observed relationship between forward P/E multiples and earnings growth. Applying the revised multiple to 2027E EPS produces a 12-month target price of Rmb133.10, up from Rmb120.50. Although the institution remains positive on the company’s exposure to China cloud-capex growth and AIDC switching demand, it maintains a Neutral rating on fair valuation.

Analysis framework

Goldman Sachs first compares Ruijie’s quarterly revenue, profit and margins with its own estimates and Bloomberg consensus, then connects the results to China data-center switch demand and the company’s AIDC product positioning. It revises multi-year revenue and earnings forecasts for higher white-box switch contribution, incorporates the associated margin trade-off, and derives a 12-month target price from a peer-informed 2027E P/E multiple tied to expected EPS growth.

Methodology notes

• Valuation methodsP/E and PEG Valuation

  Near-term P/E valuation linked to peer correlations between forward P/E and net-income growth.

  Goldman Sachs sets a 63x target P/E for 2027E EPS by relating Ruijie’s expected 2027E-28E EPS growth to peers’ forward valuation multiples, then uses that multiple to calculate the 12-month target price.

• Industry AnalysisVolume-price decomposition

  Revenue growth and margin effects from changing product mix.

  The report attributes higher revenue forecasts to increasing AIDC white-box switch shipments while expecting gross margins to fall because this product category has lower margins than other lines.

Asset mapping & comparison

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

• Ruijie Networks (301165.SZ)

  Primary covered company and beneficiary of China CSP-driven AIDC switch demand.

  Strengths

  Strong 2Q26 revenue and earnings growth; leading positions in China data-center switches and 200G/400G switches; product coverage across LPO, NPO and CPO pathways.

  Weaknesses

  Higher selling and R&D expenses increased the operating-expense ratio, while a larger white-box switch mix is expected to reduce gross margins.

  Comparison

  Ranked third in China’s data-center switch market and second in the 200G/400G data-center switch market in 1Q26, according to IDC data.

  Risks

  China cloud capex, product migration and pricing competition may differ from Goldman Sachs’ expectations.

Key data

• 2Q26 revenueRmb5.833bnUp 42% year-on-year and 94% quarter-on-quarter; 9% above Goldman Sachs estimates and 7% above Bloomberg consensus.
• 2Q26 net incomeRmb571mnUp 66% year-on-year and 365% quarter-on-quarter; in line with Goldman Sachs and Bloomberg consensus.
• 2Q26 gross margin29.5%In line with Goldman Sachs’ estimate.
• 2026-30E revenue revisions+3% / +7% / +9% / +10% / +12%Driven mainly by higher expected AIDC white-box switch contribution.
• 2026-30E net-income revisions+3% / +5% / +6% / +7% / +8%Mainly reflects higher revenue expectations.
• Target P/E63x 2027ERaised from 60x based on stronger expected 2027E-28E net-income growth.
• 12-month target priceRmb133.10Raised from Rmb120.50; compares with Rmb106.93 price as of 11 September 2026.

Impact & implications

Goldman Sachs sees domestic cloud-capex growth and AIDC deployment as supporting Ruijie’s switch revenue trajectory and raises multi-year forecasts accordingly. However, a larger white-box switch mix is expected to pressure gross margins, and the institution retains Neutral despite the increased target price.

Risks

• China cloud capital expenditure could be higher or lower than expected.
• Product migration could occur faster or slower than expected.
• Pricing competition could be milder or fiercer than expected.