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01/10 22:42
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong revenue growth driven by AI and ecosystem partnerships, a significant increase in non-GAAP EBITDA, and a robust cash position. Although there are concerns about declining gross margins and vague guidance in some areas, the overall sentiment remains positive due to strong demand and strategic investments in AI cloud services. The Q&A section reinforces this with expectations of stronger revenue growth and strategic flexibility. Despite some uncertainties, the positive aspects outweigh the negatives, suggesting a likely positive stock price movement.
Total Revenue RMB 2.35 billion, a year-over-year growth of 24%. This growth was driven by the high-speed growth of AI intelligent computing business, which increased demand for basic cloud services.
Public Cloud Revenue RMB 1.63 billion, a year-over-year increase of 32%. Growth was fueled by the development of intelligent computing cloud and basic cloud services, as well as increased cloud consumption from both internal and external ecosystem clients.
AI Gross Billing RMB 728 million, a year-over-year increase of over 120% and a quarter-over-quarter growth of 39%. This was driven by the rapid development of generative AI and its implementation across diverse industry verticals.
Revenue from Xiaomi and Kingsoft Ecosystem RMB 629 million, up 70% year-over-year. This growth was attributed to the enormous demand from ecosystem clients and symbiotic growth with the ecosystem.
Enterprise Cloud Revenue RMB 724 million, a year-over-year increase of 10%. Growth was driven by high demand for IT delivery services and steady progress on external enterprise project delivery.
Total Cost of Revenues RMB 2,010.4 million, up 27.8% year-over-year. The increase was mainly due to investments in infrastructure to support AI business growth.
Adjusted Gross Profit RMB 350.6 million, an 8.4% year-over-year increase. This was due to revenue scale expansion and the enlarged contribution from AI business.
Adjusted Gross Margin 14.9%, compared to 17% in the second quarter of 2024. The decline was due to higher server costs, upfront costs for certain customers, and price pressure on large-scale clusters.
Non-GAAP EBITDA Profit RMB 406 million, a 5.7x increase from RMB 66 million in the same quarter last year. This was driven by a strong commitment to AI cloud computing development, strategic business structure adjustments, and strict cost control.
Cash and Cash Equivalents RMB 5,464.1 million as of June 30, 2025. The increase was due to public equity offerings, private placements, and prepayments from strategic customers.
AI intelligent computing business: Achieved high-speed growth, driving incremental demand for basic cloud services and accelerating revenue growth. AI gross billing reached RMB 728 million, a year-over-year increase of over 120%.
Kingsoft government AI all-in-one server: Released in partnership with Kingsoft Office, providing full stack AI capabilities for public services.
StartFlow training inference integration platform: Optimized to provide data sets, simulation service capabilities, and full life cycle management of data processing tasks.
Kingsoft Cloud Galaxy Stack: Released a new version supporting multiple processor platforms and domestic operating systems, improving compatibility for private deployment scenarios.
Xiaomi and Kingsoft ecosystem: Revenue from this ecosystem reached RMB 629 million, up 70% year-over-year, contributing 27% to total revenue.
Public cloud services: Revenue reached RMB 1.63 billion, a year-over-year increase of 32%, driven by intelligent computing cloud and basic cloud growth.
Enterprise cloud services: Revenue reached RMB 724 million, a year-over-year increase of 10%, driven by demand for IT delivery services and external enterprise project delivery.
AI adoption in industries: AI implementation across industries like public services, healthcare, and banking has improved operational efficiency and created scalable solutions.
Infrastructure investment: Increased investment in high-performance servers and AI clusters to support AI business growth.
AI-driven strategy: Focused on leveraging AI to enhance technical capabilities and expand intelligent computing products.
Xiaomi and Kingsoft ecosystem collaboration: Deepened cooperation to provide stable and high-performance cloud computing services, ensuring mutual growth.
Revenue Pressure from Low-Margin Services: The company is proactively scaling down low-margin services to offset revenue pressure, which could impact overall revenue growth if not managed effectively.
High Cost of AI Infrastructure: The company has significantly increased investment in high-performance servers and infrastructure to support AI business growth, leading to higher depreciation and amortization costs, which negatively impact gross margins.
Price Pressure on Large-Scale Clusters: The expansion of AI business has led to price pressure on certain large-scale clusters, affecting adjusted gross margins.
Credit Loss from Supplier Prepayments: The company experienced increased credit loss due to prepayments made to suppliers for server procurement, which has impacted adjusted general and administration expenses.
Upfront Costs for Future Revenue: Upfront costs incurred for certain customers for future revenue activities have negatively impacted gross margins.
Dependency on Xiaomi and Kingsoft Ecosystem: A significant portion of revenue (27% this quarter) comes from the Xiaomi and Kingsoft ecosystem, which poses a risk if demand from these ecosystem clients declines.
Competitive Pressures in AI and Cloud Services: The rapid development of AI and cloud services markets increases competition, requiring continuous innovation and investment to maintain market position.
Economic Uncertainties: General economic uncertainties could impact customer demand for cloud and AI services, affecting revenue growth.
AI-driven growth: The company anticipates continued growth in AI-related business, with AI gross billing already showing a year-over-year increase of over 120% and quarter-over-quarter growth of 39%. AI now accounts for 45% of public cloud revenue, and the company plans to further enhance its technical capabilities and intelligent computing products to lead in the generative AI era.
Xiaomi and Kingsoft ecosystem: Revenue from the Xiaomi and Kingsoft ecosystem is expected to grow further in the second half of 2025, building on the 70% year-over-year increase in Q2 2025. The company is confident in the continued prosperity of this ecosystem and its contribution to overall revenue.
Public cloud services: The company projects sustained growth in public cloud services, driven by the high-speed growth of AI intelligent computing and increased cloud consumption from both internal and external clients of the ecosystem.
Enterprise cloud services: The company expects steady growth in enterprise cloud services, with a focus on AI integration in public services, healthcare, and enterprise sectors. Recent projects, such as the Changchun Municipal Public Health Information Platform and AI-driven credit report automation for a state-owned bank, highlight this focus.
AI and cloud computing synergy: The company believes that AI adoption will continue to accelerate across various sectors, driving demand for cloud computing. It plans to leverage its expertise to enhance AI implementation in key sectors like public services, financial services, and healthcare.
Capital expenditures and infrastructure: The company plans to continue investing in high-performance servers and infrastructure to support AI business growth, as evidenced by the RMB 1,135 million in capital expenditures in Q2 2025.
The selected topic was not discussed during the call.
The earnings call highlights strong financial performance with significant growth in AI and cloud revenue, turning to profitability, and improved margins. Despite some execution risks and unclear guidance, the company's strategic focus on AI and cloud, along with optimistic future demand, suggests a positive outlook. The Q&A reveals analysts' interest in growth drivers and margin trends, with management addressing these positively. The absence of negative catalysts and the presence of strong growth indicators point to a likely positive stock price movement.
The earnings call highlights strong revenue growth driven by AI and ecosystem partnerships, a significant increase in non-GAAP EBITDA, and a robust cash position. Although there are concerns about declining gross margins and vague guidance in some areas, the overall sentiment remains positive due to strong demand and strategic investments in AI cloud services. The Q&A section reinforces this with expectations of stronger revenue growth and strategic flexibility. Despite some uncertainties, the positive aspects outweigh the negatives, suggesting a likely positive stock price movement.
Despite strong growth in AI-related business and a solid cash position, the earnings miss and gross margin decline weigh negatively. The Q&A reveals seasonal impacts and regulatory risks, tempering optimism. The lack of a share buyback program and vague guidance on AI pricing further add uncertainty. However, improved profitability and strategic partnerships with Xiaomi offer positive prospects. Overall, mixed signals result in a neutral sentiment.
The earnings call presents mixed signals: strong growth in AI and public cloud, yet declines in enterprise cloud and gross margin. The absence of a share buyback program and lack of formal guidance further contribute to uncertainty. However, long-term demand from Xiaomi and a strong liquidity position are positives. Q&A insights reveal seasonality and construction cycle impacts, with potential improvements in operating margin. Overall, the balanced positives and negatives suggest a neutral stock price movement.
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