Xizhi Technology launches IPO: With annual revenue just exceeding 100 million, why has it attracted more than 700 times oversubscription?

ZC Asia has learnt that on 20 April 2026, Xizhi Technology-P officially launched its Hong Kong share offering, planning a global offering of 13.7952 million H-shares, of which 689,800 shares are for the Hong Kong public offering, with 13.1054 million shares allocated to the international offering. The subscription period runs from 20 to 23 April 2026, with pricing expected on 24 April and trading commencing on the Stock Exchange of Hong Kong on 28 April. The offer price range is set at HK$166.60 to HK$183.20 per share, with each lot comprising 15 shares. CICC and Haitong International are acting as joint sponsors.

As of midday on 21 April, total margin subscription funds for the public offering had reached HK$88.967 billion, representing an oversubscription of over 704 times.

High Growth and High Investment Coexist

Xizhi Technology specialises in the field of opto-electronic hybrid computing. It is an independent supplier that has achieved large-scale deployment of opto-electronic hybrid computing and the large-scale commercialisation of scale-up optical interconnect solutions. The company’s development follows a clear technological trajectory. In 2017, *Nature Photonics* published a paper by founder Dr Shen Yichen, which was the first to demonstrate the feasibility of using light for computation, laying the foundation for subsequent technological advancements in the field. Building on this scientific breakthrough, Xizhi Technology has transformed cutting-edge research into engineering capabilities and product advantages, and has developed multiple technologies based on this foundation, converting them into products and solutions.

Currently, the company has established two core product lines centred on optical interconnect and optical computing. By introducing optical capabilities at both the interconnect and computing ends, it alleviates bottlenecks in computing power supply and supports the continuous demand for computing power required for the training and deployment of large AI models. The optical interconnect solutions primarily focus on cutting-edge scale-up scenarios, constructing GPU ‘super-nodes’ composed of high-bandwidth, low-latency optical interconnect technologies. In 2025, Xizhi Technology also launched the PACE 2 (Xizhi Tianshu) opto-electronic hybrid computing accelerator card, which integrates over 40,000 photonic devices and supports a 128x128 matrix, marking the company’s first application of its technology in complex commercial models.

From a financial perspective, Xizhi Technology is currently in a phase of rapid growth but has not yet turned a profit. The prospectus indicates that revenue for 2023, 2024 and 2025 was 38.235 million yuan, 60.19 million yuan and 106 million yuan respectively, representing a compound annual growth rate of 66.9%.

Gross profit for the same periods was 23.2 million yuan, 32.21 million yuan and 41.47 million yuan respectively, with gross profit margins of 60.7%, 53.5% and 39%, showing a downward trend year on year. Sales of optical interconnect solutions constitute the company’s primary source of revenue, with Scale-up products serving as the core growth engine—between 2024 and 2025, revenue from Scale-up optical interconnect products is projected to rise from 47.02 million yuan to 75.58 million yuan.

Meanwhile, R&D expenditure remained consistently high, with R&D costs amounting to RMB 280 million, RMB 350 million and RMB 479 million in 2023, 2024 and 2025 respectively; in 2025, R&D expenditure accounted for as much as 450.4% of revenue. As at 31 December 2025, the company’s cash balance (comprising cash and cash equivalents, financial assets at fair value through profit or loss, and current bank deposits) stood at 616 million yuan.

Impressive shareholder line-up: Tencent and Baidu on board, Series C valuation at 7.8 billion yuan

Since its establishment, Xizhi Technology has secured multiple rounds of funding, with the total Series C funding reaching 1.5 billion yuan. Of this, the C1, C2 and C3 rounds completed in 2024 raised a total of 1.265 billion yuan, with a pre-investment valuation of 4.458 billion yuan and a post-investment valuation of 6.279 billion yuan. In April 2025, the C4 round raised 300 million yuan, with a pre-investment valuation of 7.5 billion yuan and a post-investment valuation of 7.8 billion yuan, at a cost per share of 99.78 yuan.

The cornerstone investors in this IPO have collectively subscribed to approximately HK$1.644 billion worth of shares, with the line-up comprising industry giants such as Alibaba, China Mobile Capital, Lenovo and ZTE, alongside international capital firms including the Government of Singapore Investment Corporation, BlackRock, Fidelity International, Schroders, Temasek and UBS, as well as renowned institutions such as Hillhouse Capital, Jinglin Capital and CPE Source.

Examining Potential Risks

Beyond the dazzling prospectus figures and the star-studded shareholder roster, several risk factors warrant attention.

In terms of commercialisation, whilst revenue growth has been impressive, the annual revenue of 106 million yuan remains at a very early stage of market penetration relative to a potential market worth hundreds of billions. Furthermore, the gross margin is projected to decline from 60.7% in 2023 to 39% in 2025.

Regarding the technological roadmap, optical computing and optical interconnects are not the only solutions. Electrical solutions such as NVIDIA’s NVLink and advanced chiplet packaging are still evolving rapidly, whilst giants like Intel and TSMC are also investing in silicon photonics technology, meaning Xizhi’s market space may face the risk of being squeezed.

The timeline for profitability remains unclear. The company plans to allocate approximately 70% of the net proceeds from the offering to R&D over the next five years; investors are effectively funding a long-term technological roadmap. Furthermore, it is uncertain how long the cash balance of RMB 616 million, as of the end of 2025, will last given the high level of R&D expenditure.

In terms of valuation, based on the upper limit of the IPO price, the price-to-sales ratio exceeds 100 times, which already implies expectations of revenue multiplying several times over the coming years. Should the pace of commercialisation fall short of expectations, the share price will face pressure to be revalued.

Disclaimer: The content herein is for reference only and does not constitute any form of investment advice. Should any information contained herein prove inaccurate, incomplete, or potentially misleading, please refer to the company's official announcements. Market risks exist; investment requires caution.