Kingsoft Cloud (KC) Q2 2024 earnings summary

Executive summary

• Achieved significant transformation over two years, focusing on high-quality, sustainable growth and profitability, with gross margin rising to 17% and adjusted EBITDA margin reaching 3% after turning positive in Q1.

• Year-over-year revenue grew 3.1% to RMB 1,891.8 million, driven by AI-related customer expansion and improved revenue mix.

• AI services revenue in public cloud surged from zero to 26%, doubling quarter-over-quarter, while low-margin businesses were phased out and single-customer concentration risk was reduced.

• Adjusted EBITDA turned positive, reaching RMB 60.6 million, a significant improvement from negative RMB 61.4 million a year ago.

• Completed dual primary listing in Hong Kong, inclusion in Hang Seng Composite Index, and expanded Wuhan R&D Center to 30% of workforce.

Financial highlights

• Q2 2024 revenue reached RMB 1.89 billion, up 6.5% quarter-over-quarter and 3.1% year-over-year.

• Adjusted gross profit was RMB 323 million, up 56.4% year-over-year; adjusted gross margin hit 17.1%, marking eight consecutive quarters of improvement.

• Adjusted EBITDA was RMB 60.6 million (3.2% margin), up from negative RMB 61.4 million last year; net operating cash inflow was RMB 151.2 million.

• Public cloud revenue was RMB 1.23 billion (up 6.5% YoY, 4% QoQ); enterprise cloud revenue was RMB 657 million.

• Net loss narrowed to RMB 353.7 million from RMB 498.3 million in the same quarter last year.

Outlook and guidance

• Continued focus on high-quality, sustainable development, enhancing profitability and cash generation.

• CapEx for 2024 expected to be several times higher than last year, with over 95% allocated to AI investments; strong financing channels support further AI growth.

• AI recurring revenue and long-term contracts expected to drive future growth and secure cash flows.

• Management expects continued growth in AI-related revenues and further margin improvements through strategic focus and cost control.