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The AI business of China Mobile is struggling to get traction while its legacy business shows signs of shrinkage.
China Mobile's first-half net income dropped 6% year-over-year as Chinese operators battle market saturation and the impact of a major tax hike.
And while the legacy business contracts, the giant telco is getting little traction in its AI business.
"The first half of 2026 brought its fair share of external headwinds and multifaceted challenges," the company said in a stock exchange filing Thursday evening.
Revenue fell 1.1% to 538 billion Chinese yuan (US$79.8 billion), with sales from its three core segments – communications, computing and AI – declining by 3.1% to RMB453 billion ($67.2 billion). Net profit was RMB79 billion ($11.7 billion).
The only growth was from the non-core business, mostly handset sales, which grew 11%.
Among the main business units, only computing services expanded, with revenue gaining 14% to RMB53 billion ($7.9 billion), including a 13% rise in data center sales.
The AI operation appears to have plateaued. At a time when the market is scaling up exponentially, China Mobile reported growth of less than 1%. For the token business, which is also in its high-growth phase, it did not disclose any details.
At the huge communications business, which covers broadband, mobile and IoT, revenue contracted by 5.7% to RMB350.4 billion ($52 billion).
Mobile ARPU dropped to RMB45.1 ($6.70), down 9% from a year ago.
China Mobile said the telecoms businesses had been "impacted by factors such as the transition from conventional to new growth drivers, market environment, and policy adjustments to the scope of value-added tax (VAT)."
The VAT hike, introduced at the beginning of the year, raised the tax rate on mobile data, SMS and broadband services from 6% to 9%.
It certainly has weighed on Chinese telco stocks this year.
China Telecom and China Unicom have fallen 14% and 18% respectively, while China Mobile has declined 1.7%. It closed 1% higher Friday.
Against this backdrop, the banning of online third-party sales of mobile SIMs is perhaps no surprise – a sign the government is keen to bolster the financial base of the big three telcos.
Online channels such as JD.com and Taobao have been the biggest source of ultra low-priced mobile SIMs, with bargains such as 200GB for as little as RMB20 – well below the lowest prices from official channels.
These bargains disappeared when the three telcos ended the third-party sales at the start of the month.
Now customers wanting to order SIM cards online can only do so through the operators' own websites or apps.
According to China Mobile stats, it now has 1.01 billion mobile customers, of which 687 million are 5G, as well as 117 million gigabit broadband connections and 1.51 billion IoT connections.
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