Annual losses: Why are the executives' salaries at Capital Online increasing?

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Jingji Reporter Gu Mengxuan, Li Zhenghao, reporting from Guangzhou and Beijing

Although Beijing Online (300846.SZ) has been losing money for four consecutive years, its executives’ compensation has continued to rise year after year. According to the annual report recently released by Beijing Online, in 2025 the company still posted a loss, with net profit of -170 million yuan, but the magnitude of the loss narrowed.

《中国 Business News》 reporters also noted that in recent years, Beijing Online’s executives’ compensation has continued to increase, and especially in 2025, the increase was even more pronounced, with the executives’ annual salary exceeding 6 million yuan at the highest.

Renowned financial writer Gao Chengyuan, president of the Zhuyuan Influence Research Institute, told reporters in an interview that when Beijing Online is in a loss-making state, executives’ compensation remains high, fundamentally reflecting a mismatch between the company’s incentive mechanism and its performance.

He said that although the company emphasizes that compensation is linked to operational performance assessments, “a narrowing of losses” is being treated as “meeting operating targets,” allowing executives to receive high performance compensation even before the company becomes profitable. While this approach may help stabilize the core team and attract high-end talent in the AI field, it may also weaken the urgency of cost control, leading investors to question the company’s governance structure.

Four Consecutive Years of Loss

Beijing Online’s 2025 annual report shows that in 2025 the company’s full-year operating revenue was 1.237 billion yuan, down 11.47% year over year; net profit attributable to shareholders was -170 million yuan, up 43.91% year over year; and net profit after excluding non-recurring gains and losses attributable to shareholders was -186 million yuan, up 37.09% year over year.

Regarding Beijing Online’s performance, a research report from China Galaxy Securities indicates that Beijing Online is currently in a period of transformation pain, with revenue supported by its智算 cloud and overseas markets. In 2025, Beijing Online actively reduced its IDC business, lowering the overall revenue scale, achieving net profit attributable to shareholders of -170 million yuan. Its loss narrowed significantly by 43.91%, reflecting early results of the business transformation.

Tian Lihui, Dean of the Financial Development Research Institute at Nankai University, pointed out to reporters that from a business perspective, in 2025 Beijing Online actively scaled back traditional IDC businesses with low gross margins; revenue from this segment fell 36% year over year, which was the main drag on revenue decline.

From a cost perspective, Tian Lihui said that since 2020, the company has continued to increase investment in building its cloud platform and bare metal platform. Depreciation of fixed assets and amortization of intangible assets have increased significantly. Although the scale of its compute cloud business has remained steadily growing and its gross margin has been gradually recovering, the revenue growth rate has not yet fully covered the fixed costs formed by earlier investments, leaving the company still in a loss state. “This ‘path of trading short-term pain for long-term transformation’ is an essential stage for companies to cross over from being traditional IDC service providers to becoming compute and AI cloud service providers,” Tian Lihui said.

Reporters noted that although Beijing Online is still loss-making, its net profit has increased. In response, Gao Zhengyang, a special research fellow at Sushang Bank, told reporters that the company’s loss narrowing benefited from cost-control implementation and adjustments to its business structure. By shrinking low-gross-margin businesses to reduce the scale of losses and simultaneously optimizing the business structure to improve profitability quality, the company ultimately achieved the effect of narrowing losses.

Specifically, Gao Zhengyang said, first, the IDC business adjustment has shown results. The company’s ongoing reduction of its low-gross-margin traditional IDC business improved gross margin and effectively reduced the sources of losses.

Second, the compute and AI cloud business is growing strongly, with revenue achieving rapid year-over-year growth and becoming a new engine for the company’s growth. Its high-gross-margin characteristics further drove an improvement in the company’s overall gross margin. “Third, expense management has produced clear results. In 2025, the company’s period expenses declined year over year, effectively easing pressure on the profit end,” Gao Zhengyang said.

However, in recent years Beijing Online has remained loss-making, with net profit already in its fourth consecutive year of losses. Although in 2025 the company’s losses narrowed, the absolute amount of Beijing Online’s losses still remains high, with net profit attributable to shareholders still at a loss of 170 million yuan.

Regarding the company’s consecutive year losses, Dong Peng, a senior corporate management expert and senior consultant, believes that in terms of time sequence and logical progression, in the early stage of the company’s development, during a period of high industry prosperity, it carried out large-scale infrastructure expansion, resulting in a heavy burden of asset holdings.

In the company’s mid-stage development, Dong Peng said that as industry competition became increasingly intense and the customer structure shifted toward leading cloud vendors, the company faced pressure from external market price wars as well as the dilemma of insufficient differentiated competitive strength, leading to the failure to realize the benefits of scale.

“By the time the company has developed to now, long-term losses have caused a ‘bleeding effect’ on the enterprise, limiting its ability to reinvest in technology iteration and the recruitment of high-end talent, pushing the company into a negative cycle of ‘insufficient investment, declining competitiveness, and continued losses,’ reflecting that the company has not achieved an effective breakthrough in strategic execution and in grasping market timing,” Dong Peng said.

Gao Zhengyang told reporters that Beijing Online’s compute-related investment carries a relatively heavy depreciation burden. To meet market demand for cloud computing and compute and AI, the company increased investment in building cloud platforms and bare metal platforms, leading to a substantial increase in fixed asset scale. As a result, annual depreciation expenses also rose accordingly, squeezing profit margins.

As competition in the industry intensifies, leading cloud computing vendors capture the overwhelming majority of market share, while mid-tier and lower-tier vendors are trapped in the double predicament of price wars and pressure from reduced traffic. Traditional IDC businesses’ gross margin has remained sluggish. “In addition, transformation costs are high. During the company’s transition to compute and AI cloud, it must continue investing R&D resources and funding for compute procurement, creating substantial short-term cost pressure,” Gao Zhengyang said.

Misalignment Between Incentive Mechanisms and Performance

Although it has been losing money year after year, Beijing Online’s executives’ compensation has remained high. The company’s 2025 annual report shows that Beijing Online’s executives’ compensation totaled 17.1747 million yuan, of which the highest annual salary was for the company’s director and executive president, Yao Wei, whose annual salary was 6.6196 million yuan; the average compensation for 12 executives was 1.4312 million yuan.

Reporters noted that in recent years, Beijing Online’s executives’ compensation has increased year after year. In 2022–2024, Beijing Online’s executives’ compensation totals were 12.1337 million yuan, 14.3917 million yuan, and 14.7992 million yuan, respectively.

Meanwhile, according to Wind data, among 18 companies in the SW computer sector at the Shenwan Level 1, Beijing Online’s executives’ compensation totals ranked third, behind only Desay SV (002920.SZ) and Gelianda (002410.SZ).

Why, when the company is loss-making, is Beijing Online’s executives’ compensation rising?

In its annual report, Beijing Online stated that in this period, the compensation for senior executives was overall higher than in the previous year, mainly because the company’s loss-making narrowed further, operating quality improved gradually, and overall operating efficiency showed a positive trend. According to the company’s compensation management system, the compensation of senior executives is linked to the results of operational performance assessments. In the previous year, due to assessment results not meeting targets, the payout of performance compensation was less; in this period, operating performance met targets, and performance compensation was fully paid in accordance with regulations, so the compensation level increased compared with the prior year.

Gao Chengyuan pointed out to reporters that from the compensation structure, Executive President Yao Wei’s basic annual salary is around 3 million yuan, and in 2025 total remuneration was 6.6196 million yuan; the difference is mainly performance pay.

When compared with the industry, Gao Chengyuan said that Beijing Online’s average executives’ compensation is at a relatively high level within the cloud computing industry. This is related to the company’s incentive needs for core management talent under its “compute and AI transformation” strategy, and it also reflects the fierce competition in the industry for AI compute talent.

Wang Huaidong, chief attorney at New Gu Law Firm, told reporters that from a legal perspective, the final amount of executives’ compensation differs from the “basic annual salary” plan disclosed at the beginning of the year. This is usually due to variable components such as performance pay, bonuses, and long-term incentives being paid out.

Wang Huaidong said that Beijing Online, in accordance with the Company Law of the People’s Republic of China and the company’s articles of association, has the board-established compensation and assessment committee comprehensively determine the final compensation based on factors such as the completion of annual operating objectives and the results of personal performance assessments. As long as relevant decision procedures comply with regulations and information disclosure obligations are fulfilled, fluctuations in the amount fall within the company’s management autonomy in operation.

“As for comparisons with peers’ compensation levels, this is a business decision made by listed companies based on their own talent strategy, position value assessment, and market competitive environment. From a legal standpoint, the main focus is whether the decision procedures are compliant and whether the information disclosure is true, complete, and accurate.” Wang Huaidong said.

With the company losing money year after year, but executives’ compensation remaining high, is this reasonable?

Tian Lihui said that this issue touches on the core contradiction in corporate governance. Based on the company’s explanation, the logic for the rise in compensation is “performance-oriented.” As losses narrowed, gross margin improved, and the composite growth rate of the compute and AI cloud business reached 114%, these operating improvements were recognized as meeting performance targets, so performance compensation was fully paid.

“But the point of dispute is this: when the company is still in a net loss position, unrecovered losses exceed one-third of paid-in capital, and the total amount of pending litigation exceeds 100 million yuan, should ‘loss reduction’ be treated as a sufficient condition for performance rewards?” Tian Lihui pointed out that this approach reflects the company’s dual characteristics at the governance level: on the one hand, high incentives help retain core talent and ensure continuity of the transformation strategy; on the other hand, it also reveals space for calibration between compensation assessment indicators and shareholders’ long-term value.

“From the perspective of company development, if high compensation truly drives strategic transformation and improves operating quality, then it has its reasonableness; but if compensation growth continues to run ahead of improvements in profitability, it may lead to scrutiny at the governance level,” Tian Lihui said.

However, Wang Huaidong believed that when the company is operating at a loss, the determination of executives’ compensation is still an internal corporate governance matter. From a legal perspective, the key is whether the compensation plan was validly approved by the board of directors or the shareholders’ meeting; whether related directors or shareholders recused themselves from voting in accordance with law; and whether the mechanism linking compensation to the company’s actual operating performance is clearly reflected in the compensation system.

Wang Huaidong said that if the compensation decision procedures are compliant and the information disclosure is true and accurate, then it falls within the scope of business judgment. But if executives’ compensation levels show a clear contrast with the company’s long-term loss situation, it may attract investors’ attention to the reasonableness of the board’s compensation decisions and the effectiveness of corporate governance, and even become a focal point for small and medium shareholders to question whether management is diligent and responsible. “In the long run, this may bring unfavorable impacts and challenges to the improvement of corporate governance structures and the maintenance of investor trust,” Wang Huaidong said.

(Editor: Wu Qing; Review: Li Zhenghao; Proofreading: Chen Li)

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