Goldman Sachs China Musings: 1Q26 Earnings Brochure — A-Share Tech in the Driver's Seat
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Goldman Sachs highlights the A-share technology sector as the primary growth engine in its 1Q26 earnings brochure, with profit growth expected to outpace all other industries. The report anticipates tech earnings growth at 15%, significantly exceeding the broader market average. This strength is largely driven by accelerating domestic substitution in the semiconductor industry, where relevant companies posted revenue growth exceeding 20%. Furthermore, the commercialization of artificial intelligence applications has improved profitability for software and services firms, boosting gross margins by an average of 3 percentage points.
Consumer electronics demand is also recovering, with smartphone shipments climbing 8% year-over-year, thereby benefiting supply chain manufacturers. Policy support remains robust, underscored by the continuation of enhanced tax deductions for research and development spending. From a valuation perspective, tech valuations trade near historical median levels, presenting an attractive entry point. Consequently, Goldman Sachs upgraded earnings forecasts for multiple tech companies by an average of 5% and recommends an overweight allocation toward semiconductor and AI-related targets. Earnings growth momentum is expected to persist into the second half of 2026, though US-China tech competition and domestic regulatory tightening present notable risks to overseas operations.
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