Kingsoft Cloud Holdings Ltd. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Business Growth: Total revenue for the first quarter was RMB 1.97 billion, a year-over-year increase of 11%. AI gross billing surged over 200% year-over-year to RMB 525 million, contributing significantly to public cloud revenue.
• Ecosystem Cooperation: Revenue from the Xiaomi and Kingsoft ecosystem reached RMB 500 million, up 50% year-over-year, accounting for 25% of total revenue. Collaboration with the ecosystem continued to progress in the AI space.
• AI Initiatives: Kingsoft Cloud built a rich set of model resources via an open-source model marketplace and provided a one-stop model toolchain. The Xinyu training and inference platform expanded ecosystem capabilities for AI applications.
• Infrastructure: Efficiently constructed a 512-node cluster for key customers, with revenue and profit from this cluster expected to reflect in the second quarter.

Segment Performance

• Public Cloud: Revenue reached RMB 1.35 billion in the first quarter, a year-over-year increase of 14%. AI gross billing was RMB 525 million, up over 200% year-over-year and 11% quarter-over-quarter, accounting for 39% of public cloud revenue.
• Enterprise Cloud: Revenue was RMB 616 million, up 5% year-over-year, but declined quarter-over-quarter due to seasonal slowdowns in project delivery and acceptance.

Guidance

• AI business is expected to continue growing, with cluster services set to launch in the second quarter, boosting AI revenue.
• Margin profile is anticipated to improve in subsequent quarters, particularly in the second half of 2025, driven by increased AI business penetration and better revenue quality.

Risks

• Seasonality impacts enterprise cloud revenue due to factors like project budgeting around Chinese New Year.
• Chip ban and supply chain uncertainties pose potential long-term impacts on AI infrastructure.
• Pricing pressure in AI cloud leasing services due to market competition affecting gross margin.

Question and Answer

Q: Reasons for slower growth in public and enterprise cloud, and leverage of Xiaomi's LLM A: For enterprise cloud, seasonality (e.g., budgeting around Chinese New Year) affects growth. For public cloud, cluster delivery timing (end of March) leads to revenue reflection in Q2. Xiaomi's model was trained on Kingsoft Cloud's cluster, with potential for future revenue from Xiaomi's model inference demand.

Q: Government affairs AI business opportunities and non-GAAP OP margin outlook A: Joint launch with Kingsoft Office for government affairs sector has business opportunities, with pricing varying by hardware configuration. Non-GAAP OP margin is expected to improve in the second half of 2025 due to AI business growth and better revenue quality Q: AI CapEx, OpEx breakdown, chip ban impact, and effect of distilled models A: CapEx includes cash, leasing, etc., with updates expected for next quarter. Chip ban has an impact but is mitigated by inventory and partnerships. Distilled models may lead to new customer demand from emerging industries, offsetting some impact from large model demand shrinkage