Kingsoft Cloud’s Earnings Call: Mixed Sentiments Amid Growth

Kingsoft Cloud Holdings Ltd. ((KC)) has held its Q1 earnings call. Read on for the main highlights of the call.

Kingsoft Cloud Holdings Ltd. recently held its earnings call, reflecting a mixed sentiment among investors and analysts. The company showcased significant growth in its AI and public cloud segments, but concerns were raised over declining gross margins and external pressures, such as chip bans. Strategic investments in AI and ecosystem collaborations offer a positive outlook, yet operational and financial challenges remain a concern.

Year-over-Year Revenue Growth

Kingsoft Cloud reported an impressive year-over-year revenue growth of 11%, reaching RMB 1.97 billion. This growth was primarily driven by a 14% increase in public cloud revenue, which amounted to RMB 1.35 billion. The figures highlight the company’s robust performance in expanding its cloud services.

AI Business Expansion

The earnings call highlighted the remarkable expansion of Kingsoft Cloud’s AI business. AI gross billing surged over 200% year-over-year, reaching RMB 525 million. This growth contributed 39% to the public cloud revenue, underscoring the company’s strategic focus on AI as a key growth driver.

Ecosystem Collaboration

Revenue from collaborations within the Xiaomi and Kingsoft ecosystem reached RMB 500 million, marking a 50% increase year-over-year. This collaboration contributed 25% to the total revenue, showcasing the strength of Kingsoft Cloud’s strategic partnerships.

Non-GAAP EBITDA Margin Improvement

The company reported a significant improvement in its non-GAAP EBITDA margin, which reached 16.2%, up by 14.3 percentage points year-over-year. This improvement indicates better operational efficiency and cost management.

Non-GAAP Operating Loss

Despite the positive revenue growth, Kingsoft Cloud reported a non-GAAP operating loss of RMB 55 million, with a negative operating margin of 2.8%. This loss highlights ongoing challenges in achieving profitability.

Gross Margin Decline

The non-GAAP gross margin declined by 2.6 percentage points quarter-over-quarter to 16.6%. This decline suggests pressure on the company’s profitability, despite overall revenue growth.

Enterprise Cloud Revenue Decrease

Enterprise cloud revenue experienced a 25% sequential decrease, attributed to seasonal slowdowns in project delivery and acceptance. This decrease indicates potential volatility in the enterprise segment.

Impact of Chip Ban

The earnings call addressed concerns over the potential mid to long-term impact of chip ban restrictions on operations. While short-term effects are mitigated by existing inventory, the company remains vigilant in navigating these external challenges.

Forward-Looking Guidance

Looking ahead, Kingsoft Cloud remains optimistic about its growth prospects, particularly in the AI sector. The company reported a year-over-year revenue growth of 11% and a notable increase in AI gross billing. Despite some fluctuations in gross margins, the company is focused on strategic growth while managing market pressures and supply chain uncertainties.

In conclusion, Kingsoft Cloud Holdings Ltd.’s earnings call presented a mixed outlook, with strong growth in AI and public cloud segments counterbalanced by challenges in profitability and external pressures. The company’s strategic investments and ecosystem collaborations provide a positive outlook, but operational and financial hurdles remain to be addressed.