Kingsoft Cloud Holdings Limited Q2 FY2025 earnings call

• Firmly implemented high-quality and sustainable development strategy over 3 years, with AI driving revenue growth. • Public cloud revenue grew 32% y-o-y to RMB 1.63 billion, AI gross billings at 120% y-o-y growth. • Ecosystem revenue from Xiaomi and Kingsoft up 70% y-o-y to RMB 629 million. • Public cloud: AI intelligent computing and basic cloud mutually reinforcing. • Enterprise cloud: Partnered with Kingsoft Office on AI in public services, worked on health care and enterprise services projects. • Product and technology: Upgraded AI suite, optimized training inference integration platform, released new version of Kingsoft Cloud Galaxy Stack.

Kingsoft Cloud's Q2 2025 revenue reached RMB 2.35 billion, a year-over-year growth of 24%. Public cloud revenue was RMB 1.63 billion, a 32% y-o-y increase. AI gross billings were RMB 728 million, a year-over-year increase of over 120% and 45% of public cloud revenue. Enterprise Cloud revenue was RMB 724 million, a 10% y-o-y increase. Revenue from Xiaomi and Kingsoft ecosystem was RMB 629 million, up 70% y-o-y, contributing 27% to total revenue.

• Expect second half revenue growth to be stronger than the first half. • In relation to Xiaomi, in the process of delivering a larger cluster for their computing power demand. • Trend of training vs inference: Some players invest heavily in model training, others have different investment patterns; overall market demand for AI remains strong. • Enterprise Cloud revenue growth in second half expected to be significantly better than the first half.

• Supply chain uncertainties due to geopolitical factors, affecting chip supply. • Potential future risk of supply not meeting demand if there's explosive growth in inference demand for Gen AI applications.

Q: Management share the outlook and guidance on the revenue outlook for the second half of this year, also the first half of next year? And how is Shan's investment pace in AI and autonomous driving infrastructure. Additionally, what are the AI capacity trend in industries like tigers and the others, do we observe large model vendors, more iteration and reduced demand for computing consumption and which other industries show strong infrastructure in mind. And second question is regarding the gross margin. This year, case has adopted more leasing of compute sources egos had already impacted gross margin in the second quarter. And looking ahead, do we expect gross margin to continue to decline in the coming quarters? -- as we use more leasing, what is the current proportion of the lease capacity in the overall computing resources pool and what is our target for preferred ratio A: Tao Zou mentioned second half revenue growth expected to be stronger than first half; in relation to Xiaomi, in process of delivering larger cluster for their computing power demand; trend of training vs inference varies among players but overall market demand for AI strong; Enterprise Cloud revenue growth in second half expected better than first half. On gross margin, shift to new models (resource pool, profit sharing) has slightly decreased GP margin but strategic choice successful; not disclosing exact proportion of lease capacity but self-owned assets still majority, exploring agent model, GP margin expected to stabilize.

Q: Regarding our capital expenditure plans. So could management update on your capital expenditure plan for this year? And what is the expectation for AI computing power that will be ready to use at the year-end. And secondly, on the year-over-year revenue growth of Industry Cloud has reaccelerated from the last quarter. So could you please share some color on the demand and also your delivery pace of the industry cloud clients A: For this year's CapEx, total around 10 billion, spent ~5 billion in first half; expect AI computing power ready by year-end. Enterprise Cloud revenue growth in Q2 reaccelerated; demand strong in public services, health care, financial services sectors but need to focus on few areas with competitive advantages for breakthroughs; second half growth expected better than first half.

Q: We see that the current cheap supply side is undergoing some changes age 20 resumes supply, [indiscernible] and other chips will also be sold. But at the same time, issues such as chief security wearability may also suggest that next development needs to be more cautious. So we have made strategy adjustments to our Chief President's ideas such as embracing domestic production A: Tao Zou mentioned strategic thinking on supply chain due to geopolitical factors; embraced domestic chips, closely monitoring domestic firms; no material impact on supply to date; longer term, if Gen AI demand surges, domestic chip supply may not meet demand depending on domestic chip capabilities and performance