Release Date: March 19, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kingsoft Cloud Holdings Ltd (KC, Financial) achieved a significant milestone by turning non-GAAP operating profits positive for the first time since its inception in 2012.
- The company reported a 30% year-over-year increase in total revenue for Q4 2024, reaching RMB2.23 billion, outpacing other listed public internet cloud companies.
- AI-related business saw substantial growth, with gross billing increasing by nearly 500% year-over-year, contributing 34% to public cloud revenue.
- Revenues from the Xiaomi Kingsoft ecosystem increased by 78% year-over-year, highlighting strong strategic partnerships and growth potential.
- The company has made significant advancements in AI, with AI-related business contributing significantly to revenue and positioning Kingsoft Cloud as a leader in the AI cloud computing industry.
Negative Points
- Despite the positive financial performance, Kingsoft Cloud Holdings Ltd (KC) faces challenges in scaling AI inference demand outside the Xiaomi and Kingsoft ecosystem.
- The company has not yet seen large-scale single customer demands for AI services, which could impact future revenue growth.
- There are concerns about the potential impact of stringent supply-side restrictions on the company's capital expenditure plans.
- The pricing strategy for AI-related services remains sensitive and confidential, which may create uncertainty for investors.
- The company is still in the early stages of transitioning from traditional IT cloud services to AI cloud and solution services, which may involve risks and challenges.
Q & A Highlights
Q: Could management share views on how recent AI trends are impacting the cloud computing industry and what opportunities and challenges Kingsoft Cloud faces? Also, provide an update on the 2025 capital expenditure plan.
A: (Tao Zou, CEO) The AI advancements, particularly with DeepSeek, have proven that Chinese tech companies can achieve global impact, benefiting Kingsoft Cloud by reducing deployment costs and increasing share value. AI has removed the glass ceiling for cloud businesses, accelerating large language model deployment in China. (Haijian He, CFO) Our AI investment is split between operational expenses and capital expenditures. We've spent RMB8-10 billion in the past year, and expect to continue significant investment in 2025, supported by partnerships and alternative financing arrangements.
Q: What are the expectations for 2025 revenue growth, particularly for AI-related revenue and contributions from Xiaomi and Kingsoft Group?
A: (Haijian He, CFO) We expect accelerated revenue growth in 2025, driven by both public and enterprise cloud sectors. AI will be a significant growth driver, alongside contributions from Xiaomi and Kingsoft. Our margin improvements are expected to continue, with EBITDA and operating profit growing faster than gross margin.
Q: How do you view the demand for AI inference and its contribution to revenue? What is the outlook for legacy public cloud business equipment?
A: (Tao Zou, CEO) Demand for AI inference is growing, especially within the Xiaomi and Kingsoft ecosystem, where AI supports various products. However, large-scale single customer demands are not yet prevalent. (Haijian He, CFO) We have a healthy asset balance, with a conservative depreciation policy, positioning us well for future profitability and efficiency improvements.
Q: How will falling prices for high-performance AI services affect Kingsoft Cloud's pricing strategy and AI cloud revenue?
A: (Haijian He, CFO) Our AI services have higher margins compared to traditional services. We offer a mix of computing formats to meet client demands, and our pricing reflects the value of AI services in clients' workflows. We have shifted our strategy to focus on AI cloud and solutions, which supports a different pricing model.
Q: What are the long-term profitability trends for Kingsoft Cloud?
A: (Haijian He, CFO) We aim for steady margin expansion across gross, EBITDA, and operating margins. Our operating cash flow has been positive, indicating strong financial health. We expect our EBITDA margin to continue improving, supporting further AI investment and enhancing shareholder returns.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
