Hikvision: Price Hikes as Lifeline, Layoffs for Efficiency — Has the Growth Thesis Changed?

Hikvision released its 2025 annual report and Q1 2026 results (through Mar 2026) after the A-share close on Apr 17, Beijing time. Key takeaways are as follows:

I. Headline results: price hikes drove double-digit growth. Hikvision posted Q1 2026 revenue of RMB 20.7bn, up 11.8% YoY. The return to double-digit growth was largely due to broad-based product price increases in the quarter ; Q1 attributable net profit reached RMB 2.8bn, with NPM recovering to 15.7%. Profit recovery was supported by higher revenue and a stronger margin post price hikes, with GPM improving to 49.1%.

II. Biz. updates: innovation kept growing; domestic core remains soft.$HIKVISION(002415.SZ) saw declines across its three domestic divisions in 2H25. Public services (PBG) and large/mid-size enterprise (EBG) fell by around 5%, while the SME division (SMBG) dropped 23% YoY. Innovation lines still delivered double-digit growth, but decelerated to ~12%, remaining the key growth driver.

III. Integrated soft + hard: software rebounded; hardware slipped modestly. Transitioning from a hardware-centric CCTV vendor to a software-empowered security leader, the company has maintained an integrated model. Based on our estimates, software revenue share rebounded to ~22% in 2H25, which lifted the overall margin mix.

Dolphin Research view: price hikes prop up growth; core biz. still under pressure

Hikvision delivered double-digit YoY top-line growth this quarter, primarily driven by product price increases, which also supported a GPM rebound.

Specifically, the company implemented three rounds of price hikes in Q1: (1) on Feb 27, an 8%–15% increase across the portfolio (cameras, NVRs, servers, AI devices, etc.); (2) on Mar 12, a separate hike on HDDs; (3) on Mar 24, another ~5% increase across the board.

On the biz. front, using 2H25 as context, operating pressure remains notable. Domestic demand is still subdued, especially with tighter spending by gov. procurement, corporates and SMEs, weighing on security product demand. Innovation and overseas remain in growth, but are slowing.

Against this backdrop, the company cut headcount and trimmed costs. In 2025, total headcount fell by 2,479, the first reduction in a decade, with R&D staff down to 26.8k by year-end, a reduction of 1,466 within the year.

For Hikvision, the market focuses on the 'core base' and 'growth drivers':

a) Domestic operations are the core base:

In 2025, all three domestic divisions declined: PBG (public services) was soft amid cautious spending in public safety and smart-city. EBG and SMBG were pressured by macro headwinds, prompting cuts to capex and opex.

b) Overseas + innovation provide growth optionality.

i) Overseas: incremental demand is mainly from EMs, yet growth is showing signs of slowdown; 2H25 revenue growth was only 6%.

ii) Innovation: a key focus area, including smart home and robotics, also faced deceleration. Smart home grew 35% in 2H25, but robotics declined by double digits. Innovation accounts for only 27% of revenue, limiting its contribution to the group.

At the current market cap of RMB 303.6bn, this roughly implies ~18x 2026E P/E (assuming revenue +10% YoY, GPM 48%, tax rate 10%). Versus the historical 16–27x range, valuation sits in the lower half.

Overall, while operating pressure persists, headcount and cost cuts plus product price hikes lifted GPM and lowered opex ratios, keeping overall EPS growth in the double digits.

The industry headwinds are well understood and expectations are subdued, but the continued GPM improvement underscores strong execution.

After COVID disruptions and property-cycle volatility, the stock has consolidated at low levels, reflecting support. With valuation already on the low side, a recovery in revenue growth and GPM could rekindle confidence.

Below is Dolphin Research's detailed take on Hikvision's results:

I. Key metrics: price-led revenue lift; headcount and cost control

1.1 Revenue

Hikvision delivered Q1 2026 revenue of RMB 20.7bn, up 12% YoY. The return to double-digit growth was mainly driven by broad-based price hikes across the portfolio in the quarter.

1.2 Gross margin

Q1 2026 gross profit was RMB 10.2bn (+22% YoY), with GPM at 49.1%, up 420bps YoY.

GPM expansion was driven by: (i) price increases across the portfolio; (ii) hardware cost rationalization, lifting hardware GPM; (iii) a higher software revenue mix, providing a structural boost.

1.3 Core opex

Core opex includes selling, admin and R&D. In Q1 2026, total core opex was RMB 6.2bn (+5% YoY), with the core opex ratio at 30%, down 200bps YoY.

1) Selling expenses: RMB 2.66bn in Q1 (+2% YoY). The selling expense ratio was 12.9%, down 110bps YoY, largely reflecting faster revenue growth.

2) Admin expenses: RMB 690mn in Q1 (+6% YoY), with the ratio at 3.3%, down 20bps YoY.

3) R&D expenses: RMB 2.86bn in Q1, down RMB 160mn QoQ. The R&D ratio was 13.8%, down 60bps YoY.

By end-2025, R&D headcount was 26.8k, down 1,466 vs. 2024, with downsizing accelerating. Average annual R&D compensation rose to RMB 438k, which includes some severance payouts.

With downstream demand subdued, the company has stepped up headcount cuts and expense control to reduce opex.

II. Biz. updates: domestic still under pressure

Since 2021, Hikvision has stopped disclosing granular categories like 'front-end', 'back-end' and 'central control', folding them into 'core and other products'. Instead, the company highlights innovation lines, and its strategic focus has been shifting toward innovation.

1) Core and other products remain the largest revenue source, contributing 71% in 2H25. Given the sluggish domestic core, its contribution is trending lower.

2) Innovation share kept rising, with a 27% contribution in 2H25, up 300bps YoY. Smart home, auto-related and storage were the main growth drivers.

2.1 Core products and services

Core products and services generated RMB 37.0bn in 2H25, down 5.4% YoY, reflecting continued softness in the domestic core.

Across domestic divisions in 2H25, all three declined: (i) SMBG (SMEs) fell 23% YoY, the steepest drop and the most exposed to macro pressures; (ii) PBG and EBG both declined by around 5% YoY, with PBG more affected by fiscal constraints.

Overseas core product revenue reached RMB 15.0bn in 2H25, up 3% YoY. Growth decelerated but remained positive.

2.2 Innovation

Innovation revenue was RMB 13.68bn in 2H25, up 12.5% YoY. While sub-30% of total, it is the company's key growth engine. Smart home, auto-related and storage each grew 25%+ in 2H25.

By region, innovation performed as follows:

(i) Domestic innovation revenue was RMB 9.8bn in 2H25, up 9% YoY, with growth slowing to single digits. In scale terms, innovation remains primarily domestic.

(ii) Overseas innovation revenue was RMB 3.9bn in 2H25, up 22% YoY.

III. Integrated soft + hard: software clearly rebounded; hardware relatively weaker

Hikvision ships hardware such as cameras as the entry point and follows with software services, constituting an integrated model. Based on the latest report, how did software and hardware perform?

3.1 Software

While the annual report breaks down products, it does not separately disclose software revenue. Software qualifies for VAT refunds, and the 'excess VAT refund over tax burden' line allows back-calculation of software revenue.

'Software revenue = VAT refund / refund rate'

(Note: 'refund rate = statutory VAT rate − effective VAT paid rate')

Based on our estimates, Hikvision's software revenue was RMB 11.4bn in 2H25, up 10% YoY. Software value-add rose back to ~22% of total revenue.

3.2 Hardware

After estimating software value-add, we derive hardware revenue from total. Hardware revenue was RMB 39.3bn in 2H25, down 4% YoY.

For 2025 in aggregate, hardware unit shipments rose 8.6%, but ASP fell 8.7%, leading to a decline in hardware revenue.

Comparing software vs. hardware growth, software improved in 2H, while hardware lagged. The hardware ASP pressure seen in 2025 was at least partially alleviated by Q1 2026 price hikes, and hardware shipments have consistently grown.

Dolphin Research on Hikvision:

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