Shenzhen-based flash memory designer XTX Tech filed for a Hong Kong IPO twice within six months, with GF Securities and CITIC Securities as joint sponsors. The company had previously passed its ChiNext review in 2022 but failed to secure regulatory approval and withdrew its A-share application in late 2023 after significant earnings forecast deviations triggered regulatory warnings.

Founded in 2014, XTX operates a fabless model, specializing in NOR Flash, SLC NAND, and MCP code-storage flash from 1Mbit to 8Gbit, serving networking, smart home, industrial/medical, and automotive markets. It ranked fifth globally among fabless flash vendors in 2025 and fourth in SLC NAND, serving over 2,500 end customers.

Financials reflect the memory cycle's volatility. Revenue fell to RMB 442 million in 2024 with a RMB 37.1 million loss as gross margin collapsed to 14%. The 2025 recovery brought revenue back to RMB 519 million, profit of RMB 27.2 million, and a 22.8% gross margin. Q1 2026 saw explosive growth – revenue RMB 224 million (+77.4% YoY) , gross margin surging to 55.6% , and net profit RMB 75.9 million – 2.8x the full-year 2025 result, driven by SLC NAND supply tightness and new NOR product ramp.

However, earnings quality is weak: Q1 operating cash flow turned negative at -RMB 45 million , with inventories and receivables climbing. Inventory days reached 330 and receivables days 57 , reflecting poor cash conversion.

Concentration risks are high: top five customers accounted for 52.8% of Q1 revenue; top five suppliers 86.8% of procurement – with limited domestic NAND wafer sources creating single-point supply exposure. Notably, the company continued paying dividends during loss-making years (2023–2024), raising capital allocation concerns.

While XTX leverages the memory upcycle and domestic substitution narrative for its HKEX listing, the Hong Kong market places premium on earnings stability, cash flow quality, and supply chain resilience. The key questions ahead: can XTX sustain profitability as SLC NAND supply normalizes, and how will it diversify customer/supplier concentration?

From ICgoodFind: A 55% gross margin in Q1 looks great – until you see negative cash flow. XTX proves the memory cycle giveth, but the real test is whether it can convert paper profits into real cash.