Wenting Yu

Wenting Yu asked for Kingsoft Cloud's revenue guidance and growth expectations for the upcoming year. She also sought insights into which new industries and application scenarios, beyond current internet complex post-model training and embodied intelligence, are expected to drive significant computing power demand. Furthermore, she questioned management's strategy for allocating resources between server procurement and leasing, considering market dynamics, cost-effectiveness, and profit margins.

Answer

Li Yi, CFO, stated that the company's budget process is ongoing, but expressed strong confidence in future AI business demand growth. Zou Tao, Vice Chairman and CEO, highlighted rapid expansion in robotic companies and increasing adoption of API token services by internet firms as key future revenue drivers. Regarding resource acquisition, Li Yi explained that the choice between leasing and self-procurement is driven by customer needs, offering flexibility and control respectively. Zou Tao reiterated that the Capex model is preferred for large, reliable clients (e.g., Xiaomi), while leasing is used for smaller or developing enterprises to manage risk. He noted that Q3 gross margins improved sequentially, and future inference business growth is expected to further enhance margins.

Wenting Yu from CLSA asked for Kingsoft Cloud's revenue outlook and guidance for the next year, particularly identifying other industry and application scenarios beyond current trends that could drive computing power demand. She also questioned management's perspective on the market dynamics for procuring versus leasing computing resources, considering cost-effectiveness, profit margins, and resource allocation strategies.

Answer

CFO Li Yi stated that the budget process for next year is ongoing, with details expected early next year, expressing confidence in AI business demand growth. She explained that procurement methods align with customer needs, with leasing offering flexibility and self-procurement providing autonomy and better profit margins by reducing supplier profit sharing. CEO Zou Tao added that robotic companies and API token services for internet companies are rapidly growing and will be significant revenue drivers next year. He clarified that CapEx is preferred for large, trustworthy customers like Xiaomi, while leasing is used for smaller, growth-stage companies to mitigate risk, with no rigid allocation target between the two models.

Wenting Yu of CLSA Limited inquired about the revenue outlook for the second half of 2025 and first half of 2026, Xiaomi's AI investment pace, and AI capacity trends among large model vendors. She also asked about the impact of leasing compute resources on gross margins and the expected future trend.

Answer

CEO Zhou Tao stated that H2 2025 revenue growth is expected to be stronger than H1. He confirmed the delivery of a larger computing cluster for Xiaomi and noted that overall market demand for AI remains strong, with a mix of training and inference needs. Regarding margins, he explained the strategic shift from a high-CapEx self-procurement model to lower-CapEx resource pool and profit-sharing models. While this caused a slight dip in gross profit margin, it was a successful strategic choice. He added that a new 'agent model' is also being explored and expects the gross profit margin to stabilize around the current level.

Wenting Yu of CLSA Limited inquired about the revenue outlook for the second half of 2025 and the first half of 2026, Xiaomi's AI investment pace, and trends in AI training versus inference demand. She also asked about the impact of leasing compute resources on gross margin and the target ratio of leased versus owned capacity.

Answer

CEO Zhou Tao, via a translator, stated that H2 2025 revenue growth is expected to be stronger than H1. While not providing specifics on Xiaomi, he confirmed the delivery of a larger computing cluster. He noted that market AI demand is strong, with some clients focusing on training and others on inference. Regarding margins, the shift to a leasing model was a strategic choice to lower CapEx and gearing, and while it slightly lowered the GP margin, it was deemed a success. The company expects the gross profit margin to stabilize around current levels.

Wenting Yu of CLSA Limited inquired about Kingsoft Cloud's business outlook for the second half of 2025 and the first half of 2026, the investment pace of Xiaomi in AI, and trends in AI computing demand. She also asked about the impact of leasing compute resources on the company's gross margin and the target ratio for leased versus owned capacity.

Answer

CEO Zhou Tao projected that revenue growth in the second half of the year would be stronger than the first half. He confirmed the ongoing delivery of a large computing cluster for Xiaomi and noted that overall market demand for AI remains very strong, with varied investment patterns in training versus inference among different players. Regarding margins, Mr. Zhou explained the strategic shift from a high-CapEx self-procurement model to resource pool and profit-sharing models. This change, while slightly pressuring the gross profit margin, successfully reduced CapEx and gearing ratios. He also introduced a new 'agent model' and expects the gross profit margin to stabilize around current levels.

Wenting Yu from CLSA Limited inquired about the revenue outlook for the second half of 2025 and the first half of 2026, the pace of Xiaomi's AI and autonomous driving investments, and AI capacity trends among large model vendors. She also asked about the impact of leasing compute resources on gross margin and the target ratio of leased versus owned capacity.

Answer

CEO Zhou Tao, via a translator, projected that revenue growth in the second half of the year would be stronger than the first half. He confirmed the company is delivering an even larger computing cluster for Xiaomi and noted that overall AI market demand remains very strong. Regarding gross margin, he explained the strategic shift from a high-CapEx self-procurement model to a resource pool/profit-sharing model. While this has slightly lowered the GP margin, it successfully reduced the gearing ratio. He expects the gross margin to stabilize around the current level.

Wenting Yu from CLSA Limited inquired about the revenue outlook for the second half of 2025 and first half of 2026, the investment pace of key client Xiaomi in AI, trends in AI training versus inference demand, and the impact of increased resource leasing on gross margins.

Answer

CEO Zhou Tao projected that revenue growth in the second half of 2025 would be stronger than the first half. He confirmed the company is delivering a large computing cluster for Xiaomi and noted that overall AI market demand remains very strong. Regarding profitability, Mr. Zou explained the strategic shift from a high-CapEx self-procurement model to lower-CapEx resource pool and agent models. While this has slightly lowered the gross profit margin, it was a deliberate choice to reduce the gearing ratio, and he expects the margin to stabilize around current levels.

Wenting Yu from CLSA Limited inquired about Kingsoft Cloud's revenue outlook for the second half of 2025 and the first half of 2026, Xiaomi's AI investment pace, and trends in AI computing demand. She also asked about the impact of leasing compute resources on gross margin and the target ratio of leased versus owned capacity.

Answer

CEO Zhou Cao, via a translator, stated that H2 2025 revenue growth is expected to be stronger than H1. He confirmed the company is delivering a large computing cluster for Xiaomi and noted that overall AI market demand remains very strong, with varied investment patterns in training versus inference. Regarding gross margin, Mr. Zhou explained the strategic shift from a high-CapEx self-procurement model to a resource pool/profit-sharing model. This change, while slightly lowering the GP margin, successfully reduced CapEx and gearing. He expects the GP margin to stabilize at current levels and mentioned that self-owned assets still constitute the majority of the resource pool.

Wenting Yu from CLSA inquired about the gross margin trends for AI cloud leasing services amid industry price competition and the impact of DeepSeek's open-sourcing of its R1 model on the demand for model training.

Answer

Management, including a response attributed to SVP Mr. Liu Tao, acknowledged external pricing pressure on new large projects due to customer concentration, but noted that existing long-term contracts are unaffected. They also explained that a new strategy of using partners' servers for non-top customers impacts gross margin due to profit-sharing. Regarding DeepSeek's open-source model, they see a mixed but overall non-negative impact: while some traditional large model companies have shrinking demand, a new group of customers has been inspired to pursue model training, creating new demand.

Wenting Yu from CLSA asked how falling prices for high-performance AI services and improved supply of inference servers would affect Kingsoft Cloud's GPU cloud pricing strategy, revenue, and earnings.

Answer

CFO Haijian He responded cautiously, citing business confidentiality due to strong performance. He confirmed that AI services carry higher margins than traditional services. He emphasized that pricing is based on the high value proposition of AI as a core production tool for clients, which justifies higher fees. The company's strategic shift to an 'AI cloud and solution services company' fundamentally alters its pricing model away from traditional IT services.