Achieved single-quarter profitability for the first time! Kingsoft Cloud’s adjusted net profit in Q3 is 28.7 million yuan, AI billing business revenue increased 120% year-on-year | Earnings Report News

Achieved single-quarter profitability for the first time! Kingsoft Cloud’s adjusted net profit in Q3 is 28.7 million yuan, AI billing business revenue increased 120% year-on-year | Earnings Report News

```On Wednesday, Kingsoft Cloud delivered an impressive Q3 report card—revenue accelerated and the company achieved quarterly profitability for the first time. The company’s strategic bet on AI is starting to pay off, with AI business billings in Q3 up 120% year-on-year, making it the core growth driver.

Key highlights from the financial report:

Financial performance:

  • Total revenue of RMB 2.478 billion, up 31.4% YoY and 5.5% QoQ; growth rate accelerating due to AI-related client revenue
  • First-ever quarterly profit: adjusted net profit of RMB 28.7 million, compared to a RMB 237 million loss in the same period last year
  • Adjusted EBITDA RMB 827 million, a staggering increase of 345.9% YoY, with a profit margin of 33.4% (up 23.6 percentage points YoY)
  • Public cloud service revenue RMB 1.752 billion, up 49.1% YoY, becoming the main growth engine
  • Gross margin 15.4%, down 0.7 percentage points YoY, mainly due to higher server costs
  • Cash and cash equivalents RMB 3.955 billion, down RMB 1.51 billion QoQ

Core business progress:

  • AI business billings RMB 782 million, up about 120% YoY, now the core growth driver
  • Xiaomi-Kingsoft ecosystem revenue RMB 691 million, up 83.8% YoY, with significant synergy effects
  • Industry cloud service revenue RMB 726 million, basically flat, lacking growth momentum
  • Depreciation and amortization cost RMB 650 million, doubled YoY, reflecting massive AI computing investment

Zou Tao, CEO of Kingsoft Cloud, said: "We are very pleased to see our high-quality sustainable development strategy continuously deliver results. This quarter, we achieved accelerated revenue growth and improved profitability, with both adjusted operating profit and adjusted net profit turning positive for the quarter. The integration of artificial intelligence and cloud services brings us enormous market opportunities. Not only did we rapidly expand the intelligent computing cloud in public cloud, we also actively laid out the strategic foundation for deep integration of AI and industries in industry cloud. We are excited and optimistic about the rapid adoption of AI in the ecosystem and multiple vertical fields, which will bring us significant AI-driven growth opportunities."

AI share of revenue surges

In Q3, Kingsoft Cloud's public cloud service revenue reached RMB 1.752 billion, surging 49.1% YoY and contributing the main revenue increment.

Among this, AI business billings of RMB 782 million, up about 120% YoY, already accounting for 44.6% of public cloud revenue.

Also noteworthy is the contribution from the Xiaomi-Kingsoft ecosystem. In Q3, revenue from this ecosystem was RMB 691 million, soaring 83.8% YoY, and accounting for 27.9% of total revenue.

In contrast, industry cloud service revenue was RMB 726 million, up only 2.2% YoY, and almost zero QoQ growth.

Despite rapid revenue growth, gross margin fell from 16.1% to 15.4%. Management attributed this to "increased server costs caused by AI business expansion."

Achieves quarterly profitability for the first time

In the third quarter, adjusted net profit was RMB 28.7 million, marking Kingsoft Cloud's first-ever quarterly profit.

However, under US GAAP, the company still posted a net loss of RMB 7.8 million for the quarter. The transition to profit relies mainly on adjustments: excluding RMB 117 million in equity incentive costs, and RMB 80.4 million in exchange gains, etc.

The financial report disclosed "non-recurring other income" in the quarter, with Kingsoft Cloud posting a RMB 21.8 million gain by selling properties and equipment. Excluding this non-recurring item, "normalized adjusted EBITDA" was RMB 805 million, with a margin of 32.5%.

Additionally, improved profitability largely came from aggressive cost and expense controls.

Q3 operating expenses were RMB 526 million, down 63.6% YoY, mainly because RMB 920 million long-term asset impairment was reserved in the same period last year.

All-in on AI, major purchases/rentals of computing power equipment

Behind the explosive growth in AI business is Kingsoft Cloud's massive capital investment. Depreciation and amortization costs soared from RMB 298 million to RMB 650 million, doubling YoY, mainly from newly purchased and leased AI servers and network equipment.

The balance sheet shows net property and equipment jumped from RMB 4.63 billion to RMB 10.33 billion, an increase of RMB 5.7 billion in just nine months, up 123%. Meanwhile, short-term loans grew from RMB 2.23 billion to RMB 3.40 billion, and long-term loans from RMB 1.66 billion to RMB 2.79 billion, total borrowings reaching RMB 6.19 billion, up 65% YoY.

Operating cash inflow was RMB 1.72 billion, but investment cash outflow hit RMB 2.72 billion, mainly spent on purchasing computing power equipment. Cash and cash equivalents fell sharply from RMB 5.46 billion to RMB 3.96 billion, a RMB 1.5 billion outflow in a single quarter.

The company adopted a "balance of purchasing and leasing" strategy, with payments to related parties surging from RMB 1.89 billion to RMB 3.41 billion (including RMB 2.47 billion in non-current portion), indicating the company may be using related-party financing leases to ease cash pressure.

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