China Unicom's 2025 revenue and profit see slight growth, AI revenue surges by 140%, free cash flow significantly improves | Financial Report Insights

How does improvement in free cash flow reflect enhanced operational efficiency?

China Unicom delivers its “14th Five-Year Plan” final results, with steady revenue and significant improvement in cash flow, as artificial intelligence business becomes the most prominent growth driver.

On Thursday, China Unicom announced its full-year 2025 performance, with operating revenue up 0.7% year-over-year to 392.2 billion yuan, and pre-tax profit slightly increased by 0.8% to 25.5 billion yuan. Free cash flow surged 28.5% year-over-year to 36 billion yuan, marking one of the most notable cash flow improvements in recent years, highlighting the company’s ongoing efficiency gains while controlling capital expenditures.

Regarding shareholder returns, the board recommends a final dividend of 0.1329 yuan per share (tax included). When combined with the interim dividend paid earlier, the total annual dividend per share reaches 0.417 yuan, a 3.1% increase year-over-year, with a payout ratio rising to 61.3%.

The company also disclosed that capital expenditures in 2026 are expected to be around 50 billion yuan, with over 35% allocated to computing power investments, reflecting the company’s accelerated shift toward AI infrastructure.

AI Revenue Grows Over 140% Year-over-Year, Computing Power Becomes Core Growth Engine

In the performance report, artificial intelligence-related businesses are the fastest-growing segment. The company revealed that AI revenue increased over 140% year-over-year, with computing power revenue accounting for over 15% of service revenue, up 1.1 percentage points from the previous year. Data center revenue reached 28.1 billion yuan, up 8.5%.

In infrastructure development, the company has standardized over 1.1 million racks, with intelligent computing capacity reaching 45 EFLOPS, and has built seven 100-megawatt AIDC parks.

For AI applications, China Unicom launched the Yuanjing MaaS platform, Yuanjing Wanzu Intelligent Platform, and Yuanjing Wanjie Data Engineering Platform, accumulating over 400TB of high-quality datasets, offering more than 140 mainstream models, and engaging over 10,000 developers.

In cloud services, the company is accelerating its transition toward AI cloud, with revenue up 5.2% year-over-year, supporting the construction of over 180 provincial and municipal government clouds, and enabling digital transformation for nearly 400,000 enterprise customers.

Cash Flow Reaches New High in Recent Years, Computing Power Investment Exceeds 35%

Free cash flow increased 28.5% year-over-year to 36 billion yuan, one of the key highlights of this performance. This improvement mainly results from effective capital expenditure management: in 2025, total capital expenditure was 54.15 billion yuan, with capital spending as a percentage of service revenue decreasing to 16%.

Meanwhile, the company has achieved annual operational expenditure savings of 1.35 billion yuan through deepening co-construction and sharing initiatives and building a simplified network. Depreciation and amortization decreased by 3.1% to 80.83 billion yuan, partly benefiting from adjustments to the depreciation periods of 4G wireless equipment.

Looking ahead to 2026, the company expects capital expenditures to be around 50 billion yuan, further reducing from 2025, with over 35% allocated to computing power investments, indicating a further shift from traditional network infrastructure to intelligent computing.

Connectivity Business Remains the Mainstay, User Base Surpasses 1.2 Billion

Connectivity services continue to form the core of the company’s revenue and profit base. As of the end of 2025, the total user base exceeded 1.2 billion, an increase of 110 million from the previous year. Mobile billing users surpassed 357 million, net increase of 13.32 million; broadband users exceeded 129 million, net increase of 7.61 million.

In integrated services, penetration rate rose to 78.3%, with ARPU of bundled packages remaining above 100 yuan. IoT connections reached 720 million, with nearly 98.33 million new connections; 5G private network revenue was 12.3 billion yuan, over 50% higher than the previous year. 5G-A base stations have been deployed in over 330 cities, and 10-gigabit optical networks are being piloted commercially in more than 100 cities.

In international business, revenue reached 13.6 billion yuan, an increase of over 9%, with flagship projects in ASEAN smart manufacturing, Middle East smart warehousing, and Africa smart mining.

Stable Profit Structure, Lower Tax Rate Supports Net Profit Growth

Profit attributable to equity holders was 20.82 billion yuan, up 1.0% year-over-year, with basic earnings per share of 0.68 yuan. EBITDA was 99.42 billion yuan, representing 28.6% of service revenue.

Operating profit increased 16.0% to 18.59 billion yuan, significantly outpacing revenue growth, mainly benefiting from lower depreciation and expense control. The effective tax rate was 17.8%, with some subsidiaries benefiting from a 15% preferential tax rate.

On the balance sheet, as of December 31, 2025, the asset-liability ratio was 44.6%, down 1.2 percentage points from the end of the previous year; interest-bearing debt was only 5.48 billion yuan, with net debt-to-capital ratio at just 2.2%, maintaining a healthy financial structure.

VAT Rate Adjustment in 2026 Introduces Uncertainty

The company disclosed a potential impact in its performance announcement: according to an announcement issued by the Ministry of Finance and the State Taxation Administration in January 2026, the VAT rate for mobile data services, SMS/MMS, and internet broadband access will be increased from 6% to 9% starting January 1, 2026. The applicable tax category will shift from value-added telecommunications services to basic telecommunications services.

The company stated that this tax rate adjustment will affect revenue and profit, but did not specify the quantitative impact.

This policy change will be a key variable for investors assessing China Unicom’s performance outlook in 2026. The company’s annual general meeting is scheduled for May 26, 2026, with the final dividend expected to be paid on June 24, 2026.