Orbbec Technology Group Co., Ltd. (688322.SH), referred to as Orbbec, submitted a listing application to the Hong Kong Stock Exchange on September 24. Just five days later, the company disclosed that all claims in its patent infringement lawsuit at the first-instance trial had been dismissed.

The filing stated that Orbbec had "no material pending litigation," yet the company also faces unavoidable issues including customer concentration, related-party transactions, and the quality of its profitability.

First-instance ruling rejects all claims, company decides to appeal

On the evening of September 29, Orbbec issued an announcement titled "Announcement on the Progress of the Company's Litigation Matters." The company, as plaintiff, had sued Shenzhen Guangjian Technology Co., Ltd. for infringement of its invention patent rights, and has now received the first-instance Civil Judgment from the Shenzhen Intermediate People's Court of Guangdong Province.

The court ruled to dismiss all claims by the plaintiff, Orbbec, and the case acceptance fee of RMB 293,050 was borne by the company. The company said it would appeal within 15 days from the date the first-instance judgment was served, and the first-instance judgment has not yet taken effect. Under the rules governing jurisdiction over patent infringement cases, if the case proceeds to the second instance, it will be heard by the Intellectual Property Court of the Supreme People's Court.

The company also stated that the lawsuit was a rights-protection action brought to defend its patent rights, that all business operations are currently proceeding normally and in an orderly manner, and that the ruling is not expected to have a material adverse impact on its current-period or post-period profit. As of the announcement date, the company had no other material litigation or arbitration matters that should be disclosed but had not been disclosed.

The announcement initiating this lawsuit was disclosed on July 8, 2025. Regarding the alleged infringement of its Chinese invention patent, the company asked the court to order the defendant to compensate RMB 50 million for infringement losses, plus RMB 250,000 for reasonable expenses including attorney fees and investigation costs incurred to stop the infringement, totaling RMB 50.25 million, with the defendant bearing the litigation costs. From filing to the first-instance judgment, about 14 months passed.

Yet just five days earlier, in the prospectus the company had submitted to the Hong Kong Stock Exchange, it explicitly disclosed that "during the track record period and up to the latest practicable date (September 20, 2026), we were not involved in ... any actual or pending legal, arbitration, or administrative proceedings."

Just removed the "U" label; how solid is the profitability?

Orbbec focuses on the design, development, production, and sale of 3D vision perception products. Its product lines cover 3D vision sensors, consumer application devices (3D scanners), and industrial application devices (biometric payment terminals, etc.), and it calls itself a "robotics and AI vision industry platform."

The company listed on the Science and Technology Innovation Board of the Shanghai Stock Exchange on July 7, 2022 under the ticker 688322.SH, and removed its unprofitable-company designation, or "U" label, in April 2026. As of the close on September 29, Orbbec's share price was RMB 85.1 per share, with a total market capitalization of about RMB 35.1 billion, down RMB 25.4 billion, or about 42%, from a high of about RMB 60.5 billion in early July, wiping out more than 40% of its market value.

Citing data from consultancy Frost & Sullivan, the prospectus says that by 2025 revenue, Orbbec ranked first in the global robotics 3D vision perception market with a 29% share. It is also the world's largest provider of dedicated consumer-grade 3D scanner solutions and the world's largest supplier of biometric payment terminal sensors.

Orbbec's customer base covers robotics, 3D scanning, biometrics, and embodied intelligence data collection, among other scenarios, and it has served more than 7,000 cumulative customers.

On the financial side, from 2023 to 2025, the company's revenue was RMB 360 million, RMB 564 million, and RMB 941 million, respectively, with year-on-year growth rates of 56.7% and 66.8%, for a two-year compound growth rate of about 61.7%. The company posted net losses of RMB 276 million and RMB 63 million in 2023 and 2024, respectively, and in 2025 achieved its first profitable year since listing, with net profit attributable to shareholders of RMB 128 million. In the first half of 2026, Orbbec generated operating revenue of RMB 438 million and net profit of RMB 40.786 million.

Orbbec's revenue has surged and it turned profitable in 2025, but a review of its profit composition shows that total non-recurring gains and losses in 2025 were RMB 57.027 million, accounting for 44.58% of net profit attributable to shareholders, including government subsidies of RMB 27.6034 million and gains from changes in the fair value and disposal of financial assets of RMB 38.0298 million. Net profit after deducting non-recurring gains and losses was RMB 70.883 million.

In other words, after excluding government subsidies and wealth management gains, the company's actual profit from its main business in 2025 was around the RMB 70 million level.

The prospectus shows that government subsidies, as part of Orbbec's other income, contributed RMB 42.1 million, RMB 37.2 million, and RMB 55.7 million in 2023, 2024, and 2025, respectively, with their share of revenue falling from 11.7% to 5.9%.

In terms of gross margin, the company's overall gross margin followed a "V-shaped" trend, falling from 40.5% in 2023 to 38.9% in 2024 before rebounding for two consecutive periods to 41.8% in 2025 and further to a historic high of 46.3% in the first half of 2026. By segment, sensor gross margin rose from 38.7% in 2023 to 55.5% in the first half of 2026, while gross margin for complete machines and solutions fell from 46.8% in 2023 to 36.4% in 2025 and rebounded to 41.3% in the first half of 2026. The rise in gross margin was mainly driven by structural changes as the high-margin sensor segment scaled up.

In addition, even as revenue doubled, Orbbec's research and development spending shrank for two consecutive years from RMB 301 million to RMB 203 million, with the R&D expense ratio falling from 83.6% to 21.5%. In the first half of 2026, the company's R&D expenses were RMB 111 million, up 22.2% year on year, mainly due to expanding the R&D team and rising raw material costs, but still below the investment intensity of 2023.

In terms of cash flow, the company's net cash flow from operating activities was negative RMB 160 million and negative RMB 86 million in 2023 and 2024, respectively, before turning positive at RMB 82.724 million in 2025. But in the first half of 2026, net operating cash flow was only RMB 13.912 million, down more than 80% year on year.

Major customer orders expected to plunge 68% in 2026

The prospectus shows that revenue from the company's top five customers rose from 37.6% in 2023 to 51.5% in 2024, peaked at 63.9% in 2025, and fell back to 46.6% in the first half of 2026.

Specifically, Customer B is a Hong Kong-listed company mainly engaged in consumer-grade 3D printing. It contributed 28.3%, 30%, and 27.3% of the company's revenue in 2024, 2025, and the first half of 2026, respectively, amounting to about RMB 282 million in 2025. This customer jointly built a "3D scanner digital joint innovation center" with Orbbec and is a deeply tied ecosystem partner.

Customer F is a private enterprise headquartered in China that focuses on digital payments and internet finance, and is also the parent company of one of Orbbec's shareholders. It contributed 26.8% of revenue in 2025. Based on 2025 figures, these two customers alone accounted for about 56.8% of the company's revenue that year. Moreover, Customer F is both the parent company of a shareholder holding 8.92% of Orbbec's shares and one of the company's top five customers, as well as a supplier, creating a highly overlapping set of identities between the two sides of the transactions.

Based on public information, Orbbec's disclosures can be cross-checked to indicate that Customer F is very likely an Ant Group-related entity. According to the company's earlier related-party transaction forecast announcement disclosed on the A-share market, Orbbec expects sales of products and goods to Ant Group-related entities in 2026 to shrink to RMB 80 million, a 68% decrease from the previous year's actual sales. The company's explanation was that "customer project demand is expected to slow."

In the first half of 2026, Customer F actually contributed about RMB 52.95 million in revenue, or 12.1%, already halved from 26.8% in 2025. For a company that has just achieved annual profitability, the expected 68% plunge in orders from a single important customer may call for a reassessment of the sustainability of its revenue growth.