Earnings call transcript: Kingsoft Cloud Q2 2025 earnings beat expectations

Kingsoft Cloud Holdings Ltd (KC), a $3.66 billion market cap cloud services provider, reported its Q2 2025 earnings, significantly surpassing analysts’ expectations with an EPS of -0.11 against a forecasted -0.97, marking an 88.66% surprise. Despite this positive earnings news, the stock experienced a slight premarket decline of 0.22%, trading at 13.59, reflecting cautious investor sentiment amid broader market challenges. According to InvestingPro analysis, KC is known for its high price volatility, with 11 additional exclusive ProTips available to subscribers.

Key Takeaways

• Kingsoft Cloud’s EPS outperformed expectations with a significant 88.66% surprise.
• Revenue grew by 24.2% year-over-year, driven by strong demand for cloud services.
• The stock dropped 0.22% in premarket trading, despite positive earnings.
• AI gross billings increased over 120%, highlighting successful innovation.
• Potential chip supply challenges pose a risk to future growth.

Company Performance

Kingsoft Cloud demonstrated robust performance in Q2 2025, with total revenues reaching 2,649.2 million RMB, a 24.2% increase year-over-year, building on its trailing twelve-month revenue growth of 14.67%. The company benefited from strong demand in both public and enterprise cloud services, with revenues in these segments rising by 31.7% and 101%, respectively. This growth underscores Kingsoft Cloud’s effective market positioning and strategic focus on AI and cloud innovations. InvestingPro’s comprehensive analysis indicates the stock is currently fairly valued, with detailed valuation metrics available to subscribers.

Financial Highlights

• Revenue: 2,649.2 million RMB, up 24.2% year-over-year
• Earnings per share: -0.11, compared to a forecast of -0.97
• Adjusted gross margin: 14.9%, down from 17% in Q2 2024
• Non-GAAP EBITDA profit: 406 million RMB, a 5.7x increase

Earnings vs. Forecast

Kingsoft Cloud’s actual EPS of -0.11 significantly exceeded the forecasted -0.97, resulting in an EPS surprise of 88.66%. This performance indicates effective cost management and operational efficiency, marking a notable improvement over previous quarters.

Market Reaction

Despite the positive earnings surprise, Kingsoft Cloud’s stock price declined by 0.22% in premarket trading, closing at 13.59. With a beta of 2.1, the stock typically shows higher volatility than the market average. This movement suggests investor concerns over operational challenges and broader market conditions, despite the company’s strong financial performance. Analyst targets range from $12.73 to $26.20, reflecting mixed sentiment about the company’s prospects.

Outlook & Guidance

Looking ahead, Kingsoft Cloud anticipates stronger revenue growth in the second half of the year, driven by continued focus on AI computing capabilities and new service delivery models. However, potential chip supply challenges and the development of domestic partnerships are critical areas to monitor.

Executive Commentary

CEO Zhou Cao emphasized the transformative impact of AI on cloud computing, stating, "AI is injecting new momentum into cloud computing, while cloud computing in turn is essential to support rapid model training and adoption." He also highlighted the company’s commitment to the Xiaomi and Kingsoft ecosystem, reinforcing strategic partnerships.

Risks and Challenges

• Declining gross margins may affect future profitability.
• High capital expenditures could impact cash flow.
• Chip supply challenges may hinder operational efficiency.
• Market saturation in cloud services could limit growth.
• Macroeconomic pressures may affect overall demand.

Q&A

During the earnings call, analysts inquired about Kingsoft Cloud’s chip supply strategies and gross margin fluctuations. The management addressed these concerns, emphasizing ongoing efforts to secure supply chains and improve operational efficiency.

Full transcript - Kingsoft Cloud Holdings Ltd (KC) Q2 2025:

Conference Operator: Good day, and thank you for standing by. Welcome to the Kingsoft Cloud Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. Presentation, be question Please be advised that today’s conference is and being recorded.

I would now like to hand the conference over to your speaker today, Nicole Shan. Please go ahead.

Nicole Shan, Investor Relations, Kingsoft Cloud: Thank you, operator. Hello, everyone, and thank you for joining us today. Kingstalk Cloud’s second quarter twenty twenty five earnings release was distributed earlier today and is available on our IR website at ir.ksyun.com as well as on PR Newswire services. On the call today from Kingstalk Cloud, we have our Vice Chairman and CEO, Mr. Zhou Cao and the CFO, Ms.

Li Yi. Mr. Zhou will review our business strategies, operations and other company highlights, followed by Ms. Li, who will discuss the financial performance. They will be available to answer your questions during the Q and A session that follows.

There will be consecutive interpretations. Our interpretations are for your convenience and reference purpose only. In case of any discrepancy, management statement in the original language will prevail. Before we begin, I’d like to remind you that this conference call contains forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended and as defined in The U. S.

Private Securities Litigation Reform Act of 1995. These forward looking statements are based upon management’s current expectations and current market and operating conditions and relate to UN’s standing of known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company’s control, which may cause the company’s actual results, performance or achievements to differ materially from those in the forward looking statements. Further information regarding these and other risks, uncertainties or factors are included in the company’s filings with the US SEC. The company does not undertake any obligation to update any forward looking statements as a result of new information, future events or otherwise as required under the applicable law. Finally, please note that unless otherwise stated, all financial fingers mentioned during this conference call are denominated in RMB.

It’s now my pleasure to introduce our vice chairman and the CEO, Mr. Zou. Please go ahead. Thank you

Zhou Cao, Vice Chairman and CEO, Kingsoft Cloud: Hello, everyone. Thank you, and welcome all for joining Kingsoft Cloud’s second quarter twenty twenty five earnings call. I am Zhou Tao, CEO of Kingsoft Cloud. During the past three years, the company firmly implemented high quality and sustainable development strategies, fully embraced AI opportunities, and our business fundamentals have taken on a completely new look. We have not only achieved growth in both revenue and profitability, but also extensively upgraded our IaaS PaaS cloud service capabilities for the generative AI era.

This quarter, our business sustained growth capability was once again verified. The high speed growth of AI Intelligent Computing business has driven incremental demand for basic cloud services, further accelerating revenue growth. First, our Q2 revenue reached RMB2.35 billion, representing a year over year growth of 24%, a significant acceleration from previous quarter’s 11% year over year. Both public cloud and enterprise cloud achieved year over year growth, among which public cloud increased significantly by 32%, reaching RMB1.63 billion. Second, our embracement of AI continues to unleash favorable momentum.

This quarter, AI gross billings reached RMB728 million, representing a year over year increase of over 120% and a quarter over quarter growth of 39%, accounting for 45% of public cloud revenue. In other words, over the past two plus years, while successfully driving high quality development in our basic cloud business, We have also built an intelligent computing cloud business of nearly equivalent scale. The rapid development of Gen AI itself and the demand for its implementation across diverse industry verticals have lifted the ceiling of cloud services market. We will continue to embrace AI, enhance our technical capabilities, refine our intelligent computing products, and be a leading player in the era of Gen AI. Third, as the sole strategic cloud platform of the Xiaomi and Kingsoft ecosystem, we firmly grasp the enormous demands of ecosystem clients and pursue symbiotic growth and mutual success with the ecosystem.

This quarter, revenue from Xiaomi and Kingsoft Ecosystem reached RMB629 million, up 70% year over year, with its contribution to total revenue further increased to 27%. In the 2025, revenue from Xiaomi and Kingsoft ecosystem reached RMB1.13 billion, accounting for 40% of the total annual cap of related party transactions in 2025. Benefiting from the continued prosperity of the Xiaomi and Kingsoft ecosystems and ever expanding business opportunities, we are fully confident in further growth of ecological business collaborations in the second half of this year. Now let me walk you through the key business highlights for the 2025. In public cloud space, revenue reached RMB1.63 billion this quarter, representing a year over year increase of 32%.

The development of intelligent computing cloud and basic cloud has been mutually reinforcing, with cloud consumption growth from both ecosystem internal and external clients advancing in parallel. In terms of intelligent computing clouds, the solid demand for training computing power services and the gradually growing demand for inference computing power services have laid a solid foundation for the sustained development of intelligent computing cloud. On one hand, the implementation and application of AI across various industries have begun to emerge. Customers such as large language model companies, Internet audiovideo services, real time communications, online travel agencies, and gaming have added incremental demand for AIREC inference. On the other hand, the growth in data volume driven by AI has boosted the growth of basic cloud services, and growth in such high quality basic cloud services has offset the revenue pressure caused by our proactive scaling down of low margin services.

In terms of ecological customers, we deepened our cooperation with Xiaomi, integrating the advantageous resources of both parties, providing long term, stable, and high performance cloud computing services for Xiaomi. We also ensured the smooth launch of Sword Heroes Fate zero by Sithongames, a subsidiary of Kingsoft, by providing products and services such as database and cloud elastic compute. In enterprise cloud space, revenue reached RMB724 million this quarter, representing a year over year increase of 10%. In terms of public services sector, we partnered with Kingsoft Office to take the lead in officially releasing the Kingsoft Government AI All in One Server, increasing investment in AI plus public services scenarios, and providing full stack AI capabilities, including intelligent computing services, platform services, and large language model services. Through the strong cooperation between Kingsoft Cloud and Kingsoft Office, we have successfully integrated AI technology with practical applications in public services sectors.

This provides scalable and replicable solutions for customers’ digital transformation. In the healthcare sector, drawing on our industry leading capabilities in top level planning, comprehensive data governance, robust technology foundation, and AI capability, We are continuously building the information capabilities for regional healthcare systems and hospitals in the field of digital health. In this quarter, we won the bid for the Changchuan Municipal Public Health Information Platform project, facilitating the interconnection and sharing of local health big data. In addition, we are also working on the construction of the data lake project of Zhujiang Hospital of Southern Medical University and the cloud native hospital information system of Zhongnan Hospital of Wuhan University. In the field of enterprise services, we are committed to implementing AI in multi industry scenarios and complex business models, truly improving enterprise operational efficiency and achieving process intelligence.

This quarter, we took the lead in cooperating with a major state owned bank to advance the credit report automation project, building a benchmark project in the banking industry. We applied AI capabilities end to end in complex core business scenarios, enabling intelligence throughout the entire process, including data collection, analysis, decision making, and report writing, which has significantly improved the work efficiency of bank account managers. In terms of product and technology, we uphold the principle of building success based on technology and innovation, focusing on delivering best in class customer experiences across our core product offerings. We set up basic cloud and intelligent computing cloud R and D teams separately but collaboratively to improve the AI plus path capabilities on top of our robust public cloud infrastructure. This quarter, we continued to optimize our AI suites.

Using cloud container services as the foundation, we provide out of the box cloud native components such as heterogeneous resource management, AI workload scheduling, intelligent operation and maintenance, and resource monitoring, offering full lifecycle support for language model scenarios. We continue to optimize the capabilities of the Starflow training inference integration platform, providing datasets, simulation service capabilities required by the AI industry, as well as full lifecycle management of data processing tasks. Our intelligent computing cloud technologies help customers improve model training performance and save unit costs through optimized resource management, data governance, network communication, and protection. In addition, we released a new version of Kingsoft Cloud Galaxy stack, supporting multiple mainstream processor platforms and domestic operating systems, and improving its compatibility for private deployment scenarios. Overall, AI is injecting new momentum into cloud computing, while cloud computing in turn is essential to support rapid model training and adoption.

We continue to build and upgrade our intelligent computing cloud resources, and at the same time leverage our expertise to enhance AI implementation into key sectors like public services, financial services, healthcare, and other fields. AI adoption is accelerating in various sectors and its substantial ability to improve productivity, enhance user experience, and generate additional revenue streams has been clarified. Looking ahead, we firmly believe the market opportunities brought by AI revolution has just begun. We will leverage on the comprehensive capabilities we have accumulated over the past few years by embracing AI, continue to deepen our commitment to the Xiaomi and Kingsoft ecosystem and high quality external customers, and focus on polishing our core products and solution capabilities to create long term value for our customers, shareholders, employees, and other stakeholders. In addition, this quarter, I would like to extend a warm welcome to the company’s new CFO, Ms.

Li Yi. I will now pass the call to Li Yi to go over our financials for the second quarter twenty twenty five. Thank you.

Conference Operator: Thank you all for joining the call today. It’s my pleasure to join Tsoft Cloud. I’m looking forward to working collaboratively with the team to navigate the challenges, capitalize on opportunities, and do my best to contribute in execution of high quality and sustainable development strategy. Thanks for the trust of the Board, company and the stakeholders. Now, I will walk you through our financial results for the second quarter of twenty twenty five.

This quarter, our AI strategy continued to be successful, driving business satisfaction across all products. Total revenues for this quarter were RMB 2,649,200,000.0, reflecting a 24.2% year over year increase. Of these, revenues from public cloud services were RMB1625.3 million, up 31.7% from RMB1234.5 million in the same quarter last year. This growth was primarily fueled by a surge in AI related business, with gross billings hitting over 120% year over year increase to RMB728.7 million. Revenues from enterprise cloud services reached RMB723.9 million, up 101% from RMB657.2 million in the same quarter last year, primarily driven by high demand for IT delivery services and steady progress on our external enterprise project delivery.

Total cost of revenues was RMB2010.4 million, up 27.8% year over year, which was mainly due to our investment in infrastructure to support AI business growth. IPC costs increased by 10.3% year over year from RMB728.2 million to RMB803.1 million this quarter, which was mainly due to our increased purchases catering to our new AI cluster demand. Depreciation and amortization costs increased from RMB265.9 million in the same period last year to RMB552 million this quarter, mainly due to depreciation of newly acquired high performance servers to expand our AI business, as well as the regular CPU servers to support the computing and storage demand for the AI related customers as the dataset is improving. Solution development and services costs rose by 40.8% year over year from RMB491.1 million to RMB 563,700,000.0, driven by expansion in solution architecture and delivery personnel to support revenue growth. Fulfillment costs and other costs were RMB 25.8 million and RMB65.8 million this quarter, respectively.

Our adjusted gross profit for this quarter was RMB350.6 million, increased by 8.4% year over year and 7% quarter over quarter. It was mainly due to the expansion of our revenue scale and the enlarged contribution from AI business. Adjusted gross margin was 14.9% in this quarter, compared with 17% in the second quarter twenty twenty four and sixteen point six percent last quarter. Our adjusted gross margin has been negatively impacted by the higher cost of service along with expansion of our AI business, and upfront costs incurred for certain customers for future revenue activity, as well as price pressures of certain large scale clusters. On the expense side, excluding share based compensation costs, our total adjusted operating expenses were RMB56.7 million, increased by 1% year over year and 31.2% quarter over quarter, of which our adjusted research and development expenses were RMB183.1 million, decreased by 8.5% from same quarter last year.

The decrease was mainly due to the decrease of personnel risk resulting by our strategic adjustment for research teams. Adjusted selling and marketing expenses were RMB109.5 million, decreased by 6.8% year over year. Adjusted general and administration expenses were RMB 268,100,000.0, increased by 12.8% year over year, due to the increase of credit loss resulting from prepayment related to suppliers related to the procurement of certain services. Our adjusted operating loss was RMB166.0 million, narrowed by 11.7% from 188,500,000.0 in the same period last year. The improvement was mainly due to the share based compensation adjustment.

However, the adjusted operating loss increased compared with RMB225.8 million from last quarter. It was mainly due to the increase of credit loss caused by the prepayment made to certain service providers. Our non GAAP EBITDA profit was RMB406 million, increased by 5.7 times of RMB66 million in the same quarter last year. Our non GAAP EBITDA margin achieved 73% compared to 3.2% in the same quarter last year. It was mainly due to our strong commitment to AI cloud computing development, strategic adjustment of business structure, and our third strict control over cost and expenses.

As of 06/30/2025, our cash and cash equivalents totaled RMB5464.1 million, providing a strong liquidity position to support operations and AI investment. The increase was mainly due to our public equity offering and private placement with Kingsoft Corporation, as well as the prepayment we received from strategic customers, which will be used to support its further class construction. This quarter, our capital expenditures including those financed by third party, reached RMB 1,135 million, and rights of used assets obtained in exchange for financed lease liabilities were RMB 1,665,800,000.0. Looking ahead, AI technology has created a wealth of opportunities for cloud computing. Not only the computing demands brought by modern training and inferencing, we also help enterprises to adopt AI capabilities in today’s complex business scenarios.

Our company, as the enabler of AI, provides cutting edge technology and compute resources to all kinds of customers. How does Dainty leverage sophisticated AI models and platforms without a delay for extensive in house infrastructure and large amounts of capital expenditures, significantly lowering the barriers to entry and accelerating technological breadth across various sectors. Thank you all.

Nicole Shan, Investor Relations, Kingsoft Cloud: This concludes our prepared remarks.

Conference Operator: Thank you

Nicole Shan, Investor Relations, Kingsoft Cloud: for your attention. We are now happy to take your questions. Please ask your question in both Mandarin, Chinese and English, if possible. Operator, please go

Conference Operator: ahead. Thank you. Thank you. We will now take the first question from the line of Wen Ting Yu from CLSA. Please go ahead.

Wen Ting Yu, Analyst, CLSA: I’ll translate the question. So the first question is, could management share the outlook and guidance on the outlook for the second half of this year and also the first half of next year? And how is Xiaomi’s investment pace in AI and autonomous driving infrastructure? Additionally, what are the AI capacity and what trends can industries like AI six tigers and the others? Do we observe large model vendors motor model iteration and reduce demand for computing consumption?

And which other industries show strong AI infrastructures in mind? And second question is regarding the gross margin. This year, has adopted more leasing of compute resources. This had already impacted gross margin in the second quarter. And looking ahead, do we expect gross margin continue to decline in the coming quarters as we use more leasing?

What is the current proportion of lease capacity in the overall computing resources pool? And what is our target for preferred ratio? Thank you.

Zhou Cao, Vice Chairman and CEO, Kingsoft Cloud: So, I’m going to translate briefly for this for Mr. Zhou’s answer to the first question. So, generally speaking, since you’re asking about the expectations for the second half growth, I would say that the second half revenue growth we would expect that to be stronger and better than the first half. That’s the general holistic revenue top line situation that I would like to share with you. And secondly, since you asked about Xiaomi, what I can say is that we are in the process of delivering an even larger cluster for Xiaomi’s computing power demand without, you know, further details about the Xiaomi confidentiality concerns.

Thirdly, since you asked about the trend, especially in terms of the training versus reference, I would say that after the debut of DeepSeq, the different players in the market started to exhibit different patterns in terms of investments. Some of the players continued to invest heavily in the training of models and that will include Xiaomi as well, right? But some other players actually, you know, have to some extent increased some of the investment in computing power demand. However, we have also been seeing some of the other large enterprises since last year continue to have even stronger inference computing power demand for inference. So I guess generally speaking, it’s hard to comment on each player, each customer that we engage with due to customer confidentiality reasons.

But I would say that overall speaking, the market demand for AI continues to be very strong. So, in relation to the question regarding gross profit margin and its future trend, I think this is a very good question. I would like to put that into the context of our growth model since last year. If you recall since last year, our old model was purely based on self procurement, which comes with a high CapEx level and also comes with a high gearing ratio. We’ve been asked a lot of questions by the investor community highlighting to us the potential risk in relation to that model.

So since the 2024, given that consideration, we have adjusted and, you know, pivoted to some of the new models, which we would call the resource pool model or the profit sharing model, where CapEx level would be relatively lower and also we would benefit from lower gearing ratio. So overall speaking, because of that shift of that procurement model, although there is a slight decrease of GP margin, however, I would say we generally achieved the strategic choice that we made for that changing of procurement model, and therefore, I think it’s actually quite a good success. It’s a successful result. And since you also asked about the ratio between the self owned assets versus the profit sharing model, I would say that we didn’t we haven’t disclosed the particular number in that regard. However, so far I can tell you that the self owned assets still command the majority of those assets on our balance sheet.

In the future, I would say that in addition to the two models that we already have, we are already exploring a new model which we have applied in one of the key customers, which I would call the agent model, which essentially means that we would do on our customers’ behalf with our help. We would do the procurement, we would do the construction, and we would do the operation on behalf of that customer. So, putting this together, we’re actually having three models and the particular adoption of any one of these models will purely depend on the demand of those particular customers and the overall balance that we would like to achieve in terms of gearing ratio and the CapEx and indebtedness level. So I would say that in general, as we continue to run our different models and their combinations in the next few quarters, we’ll have a clearer picture as to where the GPM margin will stabilize at, but as far as I can see from this point in time, I would say that the GPM margin level relatively will stabilize at where we are right now today. Thank you.

Conference Operator: Hello, operator. Next question, please. Thank you. Thank you. We will now take the next question from the line of Xiaodan Zhang from CICC.

Please go ahead.

Xiaodan Zhang, Analyst, CICC: So thanks management for taking my questions. And my first question is 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, 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? Thank you.

Conference Operator: For this year’s capital expenditure includes the sales procurement and need to purchase models As we mentioned the last quarter, for the total year, it’s around 10,000,000,000. For the first half the year, actually, we have spent around 5,000,000,000. As Zhou Zhou mentioned, now we have three models. So we don’t because we have quite a strong cash position as at the June 31, so that is why at this time, we will we will adjust our procurement process and models according to the customers’ demand. So, we still think for the whole year, the temperature is around 10,000,000,000.

Zhou Cao, Vice Chairman and CEO, Kingsoft Cloud: So allow me to quickly translate. So, first of all, I would say that what you observed is correct for the trend for enterprise cloud revenue in Q2 to grow faster than before. Now the first reason I would say is the advent of deep seq. To be quite fair, the advent of deep seq has a very good and very deep impact in terms of the relatively more traditional industries in China. It’s like a customer education process where we’re seeing a lot of strong demand coming from the public services, from healthcare, from education, from financial services, etcetera, etcetera.

However, we currently still have this pain point, which is we’re still not at the position where we’re able to provide our customers with a very easy to use application. So the final landing or application of the software or AI solution is still not there yet. So the strategy of Teams of Cloud, what we internally, know, Tara Management is actually we need to refrain the impulse to actually spread out our work and our energy across too much and too many verticals. Rather, we would ask the company, the people, to actually focus on a few, you know, focus areas where we have relative competitive advantages. And then working on those solutions to achieve the so called zero to one breakthrough and then further do the one to n spreading out and application.

So that’s what we’re doing now internally in terms of the enterprise cloud and its combination with generative AI. Now, we also asked about the trend for the second half. Generally speaking, for enterprise cloud, the delivery peak had always exhibited this seasonality that the second half is better than the first half. So, as we look at the forecast for the second half, the growth rates for revenue for the second half of this year, we do expect that to be significantly better and higher than the first half of this year. Thank you.

Nicole Shan, Investor Relations, Kingsoft Cloud: Thank

Conference Operator: you. We will now take the next question from the line of Song Chu from Citi. Please go ahead.

Song Chu, Analyst, Citi: So I will translate the question. We see that a current chip supply status undergoing some changes. H20 resumes supply, B30A and other chips will also be sold. But at the same time, issues such as chip security vulnerabilities may also suggest that an excellent development needs to be more cautious. So we have made the strategy adjustments to our chip personas ideas such as embracing domestic production?

Thank you.

Zhou Cao, Vice Chairman and CEO, Kingsoft Cloud: Okay, so actually to your question, we’ve been given this a lot of thinking and contemplation from a strategy perspective in 2023 as we started to venture into the AI generative AI computing cloud business. Because this is the general, broader picture under the final U. S. Geopolitical conflict, which gave rise to huge uncertainty in the supply chain. So on one hand now given that backdrop, on one hand we embrace the compliant chips that are, you know, supplied in China.

And on the other hand, we have also been closely monitoring and following domestic firms for supply chain. To be quite fair, the restriction for H20 actually happened on the day of our equity follow on issuers, and the ensuing lifting of that restriction, you know, happened a few months later. However, we’re not too surprised by that because, you know, given the backdrop, given the conflict nature. So also, we have been close business cooperation with suppliers for domestic chips in China, starting from one firm to many firms. And actually, a few of them we have very deep collaboration with.

So in summary, although, you know, there have been back and forth in terms of supply chain uncertainty, however, there’s no material impact to our capabilities to supply and satisfy the demands of our customers. Now also zooming into our particular situation, right, because the majority of our customers are large customers, like key accounts, large customers. And, you know, combining the strategy that I talked about, so far our capacity and all the channels that we have built both for domestic chips and also for overseas chips are sufficient to supply their demand. So that is the situation right now in the short term. However, I do think that in the longer term, if there’s going to be, for example, like a killer app, Gen AI application, where the inference demands for our customers experience explosive growth and then the demands from the industry surge significantly, we do think that there’s a chance that in the future the supply would not be able to meet this demand.

So, short, in the future the balance between supply and demand largely depends on the domestic chips capabilities as well as their performance. Personally, I take a relatively conservative view that I think, you know, in the future if demand should surge like that, there’s a chance that the domestic chip supply will not be able to meet demand in the market in China, but that’s for the longer term. Thank you.

Conference Operator: Operator, please. Thank you. I would now like to turn the conference back to Nicole Zhang for closing remarks.

Nicole Shan, Investor Relations, Kingsoft Cloud: Thank you. Due to time delay, we canceled our earnings call today. Thank you once again for joining us today. If you have any further questions, please feel free to contact our team. We look forward to speaking with you again next quarter.

Have a nice day. Thank you. Goodbye.

Conference Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

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