Kingsoft Cloud Holdings Ltd. ((KC)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Kingsoft Cloud Holdings Ltd. revealed a generally positive sentiment, driven by impressive revenue growth fueled by advancements in AI and strategic ecosystem partnerships. However, the company faces challenges in maintaining its gross margins and potential future issues with chip supply.
Strong Revenue Growth
Kingsoft Cloud reported a robust Q2 revenue of RMB 2.35 billion, marking a 24% year-over-year increase. This growth was significantly bolstered by a 32% rise in public cloud revenue, which reached RMB 1.63 billion.
AI Business Expansion
The company’s AI segment demonstrated remarkable progress, with gross billings hitting RMB 728 million. This represents a year-over-year growth of over 120% and a quarter-over-quarter increase of 39%, now comprising 45% of the public cloud revenue.
Xiaomi and Kingsoft Ecosystem Success
Revenue from the Xiaomi and Kingsoft ecosystem soared to RMB 629 million, a 70% increase from the previous year, contributing 27% to the company’s total revenue.
Enterprise Cloud Growth
Enterprise cloud services also saw growth, with revenue reaching RMB 724 million, a 10% increase year-over-year, indicating a steady demand in this segment.
Non-GAAP EBITDA Improvement
The company achieved a significant improvement in its Non-GAAP EBITDA, recording a profit of RMB 406 million, a 5.7x increase from the same quarter last year, with a margin of 73%.
Increased Costs Impacting Gross Margin
Despite the revenue growth, Kingsoft Cloud’s adjusted gross margin faced pressure, declining to 17% due to higher service costs and upfront AI business expenses.
Operating Loss
The company reported an adjusted operating loss of RMB 166 million, which, while slightly improved from the previous year, increased compared to the last quarter.
Chip Supply Chain Uncertainty
Kingsoft Cloud is navigating potential future supply issues for domestic chips, driven by geopolitical tensions, which could affect the long-term supply-demand balance.
Forward-Looking Guidance
Looking ahead, Kingsoft Cloud remains optimistic about its financial outlook for the second half of the year. The company plans to focus on AI, technological enhancements, and ecosystem partnerships to sustain its growth trajectory. Despite some impacts on gross profit margins due to procurement model shifts, the expectation is for stronger growth compared to the first half.
In summary, Kingsoft Cloud Holdings Ltd.’s earnings call conveyed a positive outlook with strong revenue growth and strategic advancements in AI and ecosystem partnerships. However, challenges such as maintaining gross margins and potential chip supply issues remain on the horizon. The company’s forward-looking guidance suggests a continued focus on innovation and strategic partnerships to drive future growth.