CATL Q3 net profit hits $3.16B as margins compress

CATL posted a third-quarter net profit of 21.25 billion yuan ($3.16 billion), up 14.54% year-on-year — but down 5.77% from the second quarter's 22.55 billion yuan, as profit growth failed to keep pace with the battery maker's rapid business expansion.

The world's largest EV battery maker (HKEX: 3750) released the results on Tuesday. Third-quarter revenue rose 58.58% year-on-year to 165.22 billion yuan, meaning revenue grew four times faster than profit.

For the first nine months, net profit attributable to shareholders rose 31.60% to 64.53 billion yuan, on revenue of 442.14 billion yuan, up 56.19%.

Why are margins compressing?

The squeeze sits in cost of sales. Over the first nine months, costs rose 61.61% to 341.7 billion yuan — faster than revenue growth. Gross margin (revenue minus cost of sales, as a share of revenue) fell about 2.59 percentage points to 22.72%, from 25.31% a year earlier.

CATL attributed its revenue growth to business expansion. R&D spending rose 22.89% to 18.52 billion yuan, while investment income climbed 73.11% to 9.07 billion yuan, mainly reflecting the company's share of investee companies' net profits.

What does this change for suppliers and OEMs?

The practical question for battery buyers and tier suppliers: is the volume leader trading margin for share? Working-capital signals suggest strain beneath the growth. Operating cash flow fell 23.60% year-on-year to 61.63 billion yuan for the nine months, even as profit rose.

Two balance-sheet lines stand out:

• Accounts receivable up 47.78% from end-2024 to 112.91 billion yuan
• Inventories up 53.15% to 144.77 billion yuan

CATL attributed both increases to business expansion. Receivables growing roughly in line with revenue is normal; cash conversion slipping while inventories climb 53% deserves monitoring from anyone holding CATL paper or payment terms.

Market position holds

CATL's global battery installations rose 25.2% year-on-year to 333.0 GWh in the first eight months, according to South Korean research firm SNE Research. Its global market share reached 39.4%, up from 37.7%, well ahead of second-place BYD (HKEX: 1211) at 15.1%.

At home, China's power battery installations rose 14.7% year-on-year to 87.2 GWh in September, a new high for the year for the second consecutive month, according to the China Automotive Battery Innovation Alliance (CABIA). CATL ranked first domestically with 35.49 GWh installed and a 40.92% share.

Energy storage is the faster-growing leg. China's energy storage battery sales doubled — up 104.4% year-on-year to 73.5 GWh in September — accounting for 33.0% of combined power and storage battery sales.

What to watch next

Watch whether fourth-quarter gross margin stabilizes above the 22.7% nine-month level, and whether receivables and inventory growth decelerate as a share of revenue. The Q4 earnings report will show whether CATL can convert 58% revenue growth back into proportional profit — or whether price competition keeps eating the spread. ($1 = 6.7200 yuan)