KC Q2 2025: Expects stronger H2 growth on AI demand, margins stable
- Strong Revenue Outlook: Management expects stronger growth in the second half of the year compared to the first half, supported by robust demand across both public and enterprise cloud services, particularly through accelerated AI adoption.
- Robust AI Business Momentum: The company's deep integration of AI technologies is driving high incremental demand—as evidenced by significant year-over-year increases in AI-related revenue—and continues to unlock new business opportunities across multiple verticals.
- Strategic Flexibility in Cost Structure: The pivot to diversified procurement models—including resource pool, profit sharing, and agent models—helps lower capital expenditure and credit risk while maintaining a stable gross margin outlook, demonstrating strategic operational flexibility.
- Gross Margin Pressure: Management indicated that the shift toward leasing and profit-sharing models to lower CapEx has already started to slightly impact gross margins. There is a risk that further reliance on leased compute resources could continue to erode margins, pressuring profitability.
- Domestic Chip Supply Risks: While current supply meets demand, management cautioned that a future surge in AI and inference computing demand might outstrip domestic chip supply, potentially disrupting service delivery and growth.
- CapEx Burden and Uncertain Guidance: With planned capital expenditures around RMB10 billion for the year—half of which has already been spent—there is concern that aggressive spending may become burdensome, especially if revenue growth and operational performance do not meet expectations.
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Growth & Margins
Q: Outlook and margin trend for upcoming quarters?
A: Management expects stronger revenue growth in the second half, supports Xiaomi with a larger computing cluster, and despite a slight gross margin dip due to leasing, the mix of self-owned, profit-sharing, and emerging agent models should keep margins stable. -
CapEx & Industry Cloud
Q: What are your CapEx and industry cloud plans?
A: The yearly capital expenditure target is about RMB 10,000,000,000 (with RMB 5,000,000,000 already spent in H1) and industry cloud delivery is accelerating across sectors such as public services and healthcare. -
Chip Supply
Q: How is chip supply affecting operations?
A: Current domestic and overseas chip supplies meet high-profile demand, though management cautions that a massive future surge in AI demand could strain domestic chip capacity over the long term.
Research analysts covering Kingsoft Cloud Holdings Ltd.