Kingsoft Cloud Holdings Limited (KC) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The company shows strong growth in AI-driven cloud services, with significant revenue increases and positive trends in AI business contributions. Despite some concerns about margin drops and lack of specific details in the Q&A, the overall sentiment remains positive due to optimistic guidance, strategic investments, and a cooperative market strategy. The positive impact of AI advancements and strong demand outlook support a positive stock price movement over the next two weeks.
Key Financial Performance
Total Revenue RMB 2.7 billion, representing a year-over-year growth of 37.2%. The growth was driven by both public cloud and enterprise cloud services.
Public Cloud Revenue RMB 2.0 billion, a year-over-year increase of 47.5%. Growth attributed to increased demand within Xiaomi and Kingsoft Ecosystem and expansion of customer base outside the ecosystem.
Enterprise Cloud Revenue RMB 710 million, a year-over-year increase of 14.7%. Growth driven by projects in public services, digital healthcare, and enterprise services sectors.
Adjusted Gross Profit RMB 351 million, up 8.6% year-over-year. Growth attributed to AI revenue growth despite supply chain challenges.
Adjusted EBITDA RMB 748 million, representing a year-over-year increase of 134.7%. Adjusted EBITDA margin reached 27.6%, a significant improvement of 11.4 percentage points year-over-year, driven by AI business growth.
AI Cloud Gross Billings RMB 1.0 billion, a year-over-year increase of 90.1%. Growth driven by increased adoption of AI cloud services and token services.
Revenue from Xiaomi and Kingsoft Ecosystem RMB 838 million, a year-over-year increase of 68.9%. Growth driven by Xiaomi's investment in smart ecosystem and AI advancements.
Top 5 Non-Ecosystem Customers Revenue Increased by 66% year-over-year. Growth attributed to expanded customer coverage and deeper business cooperation.
Cost of Revenues RMB 2,358 million, up 43% year-over-year. Increase due to investment in AI computing resources, including rack services and newly acquired servers.
IDC Costs RMB 911 million, up 26% year-over-year. Increase due to expanded AI business and rack services.
Depreciation and Amortization Costs RMB 819 million, up from RMB 379 million in the same quarter of 2025. Increase due to depreciation of newly acquired and leased servers and network equipment for AI business.
Solution Development and Services Costs RMB 575 million, up 14% year-over-year. Increase due to personnel expansion for solution development.
Adjusted Operating Loss RMB 60 million, increased by 7% year-over-year. Improvement due to revenue scale expansion.
Non-GAAP EBITDA Profit RMB 748 million, increased by 135% year-over-year. Non-GAAP EBITDA margin achieved 28%, up from 16% in the same quarter last year, driven by AI cloud computing development and strategic business adjustments.
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Operating Highlights
AI Cloud Infrastructure: Strengthened AI cloud infrastructure and enhanced training inference platform capabilities.
StarFlow Platform: Expanded model ecosystem, added new API services for speech recognition and synthesis, and improved user management experience.
Agent Engine: Launched to enable efficient development, deployment, and management of AI agents.
Galaxy Stack Platform: Completed a full-stack closed-loop private deployment solution for AI cloud.
Public Cloud Revenue: Revenue reached RMB 2.0 billion, a year-over-year increase of 47.5%.
Enterprise Cloud Revenue: Revenue reached RMB 710 million, a year-over-year increase of 14.7%.
AI Cloud Gross Billings: Reached RMB 1.0 billion, a year-over-year increase of 90.1%, accounting for over 50% of public cloud revenues.
Xiaomi and Kingsoft Ecosystem Revenue: Revenue reached RMB 838 million, a year-over-year increase of 68.9%.
Customer Mix Optimization: AI business now spans industries like Internet, AI companies, autonomous driving, logistics, fintech, gaming, and video streaming, leading to a more balanced customer mix.
State-Owned Cloud Platform: Launched in Shenzhen to meet high security and compliance needs of state-owned enterprises.
Digital Healthcare Collaboration: Collaborated with Union Hospital for data governance and signed a large-scale medical consortium platform project.
Green Energy Platform: Delivered a green energy operation platform for a clean energy service provider, exploring digital solutions for solid waste management.
AI Business Growth: AI business became the majority revenue driver for public cloud services, marking a pivotal structural shift.
Infrastructure Investment: Capital expenditures and leased assets grew 38% year-over-year to RMB 3 billion to support business expansion.
AI-Driven Strategy: Focused on AI-driven strategy to provide high-value-added cloud services and enhance profitability.
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Risk or Challenges
Supply Chain Challenges: The company faced increased costs in server acquisition and network equipment due to the expansion of AI business, which impacted gross margins.
Profitability Pressures: Adjusted gross margin decreased from 17% last quarter to 13% this quarter, primarily due to higher server costs and upfront costs for future revenue-generating activities.
Capital Expenditure Risks: Capital expenditures and leased assets grew 38% year-over-year to RMB 3 billion, indicating significant investment risks tied to infrastructure expansion.
Customer Concentration Risk: A significant portion of revenue is tied to Xiaomi and Kingsoft Ecosystem, which could pose risks if these partnerships weaken or fail to deliver expected growth.
Economic and Market Uncertainties: The company highlighted the difficulty in predicting market and operating conditions, which could impact future performance.
Regulatory and Compliance Risks: The company operates in sectors like public services and healthcare, which require high security, compliance, and data confidentiality, posing regulatory challenges.
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Guidance & Outlook
AI Cloud Growth: Kingsoft Cloud plans to continue investing in AI cloud infrastructure and enhancing training inference platform capabilities to capitalize on the growing demand for AI-driven solutions. The company expects AI to fundamentally reshape industries and drive long-term growth.
Revenue Projections: The company anticipates sustained revenue growth, with AI business becoming a majority revenue driver. AI business revenue increased 91% year-over-year in Q1 2026, contributing over 50% of public cloud services revenue.
Capital Expenditures: Kingsoft Cloud plans to continue investing in infrastructure, with capital expenditures and leased assets obtained growing 38% year-over-year to RMB 3 billion in Q1 2026. This investment is aimed at supporting further business expansion.
Market Trends and Customer Mix: The company is diversifying its customer mix across industries such as Internet, AI companies, autonomous driving, logistics, fintech, gaming, and video streaming. This diversification is expected to drive revenue growth and improve resource utilization.
Strategic Partnerships: Kingsoft Cloud plans to revise annual caps for continuing connected transactions with Xiaomi, with revised caps reaching RMB 14.2 billion under the 3-year framework from 2025 to 2027. This partnership is expected to bring more business opportunities.
Product and Technology Development: The company is expanding its product ecosystem, including launching new API services for speech recognition and synthesis, and introducing Agent Engine for efficient agent deployment. These advancements aim to meet the rising demand for AI applications.
Enterprise Cloud Services: Kingsoft Cloud is focusing on high-security, compliance-driven solutions for state-owned enterprises and expanding into sectors like digital healthcare and green energy. These initiatives are expected to drive growth in enterprise cloud services.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What is the current revenue scale and margin levels of the StarFlow MaaS platform, and what is management's outlook on this business?
A:The revenue of the MaaS platform increased 53x from January to April, but management did not disclose the current revenue scale. Margins for the token business are higher than traditional cloud computing, with improvements from technology advancements and algorithm optimization. However, specific margin numbers were not provided as the business is in a quickly expanding phase.
Q:Have there been increases in the average pricing for newly signed public cloud contracts in Q1 and Q2 of this year? If so, by how much?
A:Yes, there has been a surge in demand and pricing for cloud computing services. The price increase trend is expected to continue in Q2 and beyond. Management stated that the cost pressure from upstream price hikes is manageable and will not negatively affect margins, but specific pricing details were not disclosed.
Q:What are the reasons for the gross margin drop in Q1, and has the positive effect of product price increases been factored in?
A:The gross margin dropped by 3% in Q1 due to seasonal factors and upfront costs for future revenue-generating activities. Management expects gross margins to recover to normal levels in the coming quarters.
Q:How does management view the competitive position of the cloud business amidst high demand and partnerships beyond public cloud vendors?
A:Management sees a shift towards cooperation among competitors due to the strong gap between supply and demand. They believe complementary capabilities from different enterprises are forming holistic solutions to serve end customers. They view the market as more cooperative than competitive.
Q:What is the demand outlook for public cloud in Q2 and the second half of the year, and what is the trend for inferencing and model training?
A:Demand for public cloud remains seasonally strong, with a long backlog subject to supply chain restrictions. Sectors driving growth include Internet, AI labs, autonomous driving, and robotics. Autonomous driving and robotics have strong model training demands, while Internet companies and AI labs drive inference demand.
Q:Are there any changes in contract terms with clients due to rising upstream costs?
A:Yes, there are now more flexible contract period arrangements to maximize profit and benefits, deviating from the previously standard contract periods.
Q:What is the revenue growth outlook for Xiaomi and Kingsoft Cloud, and how has the MiMo large language model launch impacted demand?
A:There is growing demand for training and inference resources from Kingsoft Cloud, especially after the launch of MiMo V2. Management is optimistic about future inference demand but noted it depends on Xiaomi's returns. They did not provide specific utilization rate details.
Q:What is the CapEx outlook for this year and beyond?
A:CapEx for Q1 was around RMB 3 billion. For 2026, the estimate is RMB 15 billion to RMB 20 billion, with supply chain capacity being the primary limiting factor for capital spending.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the current revenue scale and margin levels of the StarFlow MaaS platform, the exact pricing increases for public cloud contracts, and the utilization rate for Xiaomi's demand. Additionally, they did not disclose specific margin numbers for the token business or detailed CapEx plans beyond general estimates.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI agent
AI industry
CFO Ms
Mr Vice
President Mr
StarFlow
Vice President
adoption AI
cap
cloud demand
cloud infrastructure
consortium
customer mix
driving
efficiency
energy
framework
generation
governance
hospital
host
industry quality
inference platform
infrastructure training
institution
logistics
mix AI
percentage point
point AI
profitability term
recognition
scale deployment
security
service increase
shift
speech
stack
state
use case
utilization
video
world
KC Transcript
Kingsoft Cloud Holdings Limited (KC) Q1 2026 Earnings Call Transcript
Positive5-28
The company shows strong growth in AI-driven cloud services, with significant revenue increases and positive trends in AI business contributions. Despite some concerns about margin drops and lack of specific details in the Q&A, the overall sentiment remains positive due to optimistic guidance, strategic investments, and a cooperative market strategy. The positive impact of AI advancements and strong demand outlook support a positive stock price movement over the next two weeks.
Kingsoft Cloud Holdings Limited (KC) Q4 2025 Earnings Call Transcript
Positive3-25
The earnings call summary shows strong revenue growth, strategic investments in AI and cloud services, and improved profitability. The Q&A highlights effective pricing strategies and a growing model-as-a-service business, which are positive indicators. Despite some concerns about competition and unclear responses, the overall sentiment is optimistic, supported by strategic partnerships and expanding market presence.
Kingsoft Cloud Holdings Limited (KC) Q3 2025 Earnings Call Transcript
Positive11-19
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.
Kingsoft Cloud Holdings Limited (KC) Q2 2025 Earnings Call Transcript
Positive8-20
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.
KC Report
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