ZTE's Pivot: From Cell Towers to AI Data Centers as Telecom Capex Shrinks

For two decades, ZTE made its money selling base stations and network equipment to China's three telecom operators. That business is plateauing. The operators are spending less on traditional infrastructure: combined 2026 capex is down 8% to RMB 262.6 billion ($38.4 billion). User growth has flattened, and base station coverage across China is near saturation.

The money is moving somewhere else.

Where the capex is going

All three operators, China Mobile, China Telecom, and China Unicom, have made computing infrastructure their top spending priority for 2026. Combined investment: over RMB 80.8 billion ($11.8 billion), with each operator posting double-digit growth in this category.

The global comparison makes the scale clearer. Amazon, Google, Meta, and Microsoft invested $383 billion in AI infrastructure in 2025. S&P Global projects $635 billion for 2026. IDC forecasts global AI investment will exceed $1.2 trillion annually by 2029.

China's own AI usage has grown accordingly. Daily AI token calls across the country jumped from 100 billion to 140 trillion over the past two years. That is a roughly 1,000x increase in two years.

ZTE's bet

ZTE's EVP Xie Junshi described the shift in engineering terms: "Like telecommunications, AI is fundamentally a complex engineering science." The company is repositioning from pure connectivity to connectivity plus computing power, selling the server racks, cooling systems, and networking gear that AI data centers require.

The competition among suppliers is shifting too. When every operator buys similar hardware, differentiation comes down to total cost of ownership, not specs. ZTE's pitch is that its telecom-grade reliability and existing operator relationships give it an edge over pure IT infrastructure vendors.

The transformation is still early. Telecom equipment remains the majority of ZTE's revenue. But the direction is clear: the customers ZTE already has are spending less on what ZTE traditionally sold and more on what ZTE wants to sell next.

Sources: KrASIA, ZTE Investor Relations