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Kingsoft Cloud Holdings Limited (KC) Q2 Earnings call transcript Aug 20, 2024

AInvestThursday, Aug 22, 2024 12:01 pm ET
1min read

Kingsoft Cloud, a leading provider of cloud services, held its second quarter 2024 earnings call, highlighting significant improvements in revenue scale, profitability, and operational cash flow. The call, led by CEO Tao Zou and CFO Haijian He, provided insights into the company's strategic achievements and future prospects.

Financial Performance and Strategic Direction

Kingsoft Cloud reported impressive financial results for the second quarter of 2024, with revenues reaching RMB 1.89 billion, a 6.5% sequential growth and a 3.1% year-over-year increase. The company's adjusted gross profit reached RMB 323 million, marking a 56.4% year-over-year increase, while adjusted EBITDA margin hit 3.2%, demonstrating a significant improvement in profitability.

CEO Tao Zou highlighted the company's strategic transformation over the past two years, which included improvements in profitability, expansion into AI services, and the phasing out of low-margin businesses. This strategic shift has positioned Kingsoft Cloud for long-term sustainable growth, with a focus on high-value services and strategic partnerships.

AI and Strategic Partnerships

Kingsoft Cloud's AI services have been a significant driver of growth, with revenues surging to RMB 326 million in the second quarter, accounting for 26.3% of public cloud revenues. The company's strategic partnerships, particularly with Xiaomi and Kingsoft Group, have contributed to a 36.9% year-over-year increase in revenue contribution from these entities.

Kingsoft Cloud's focus on AI is a strategic move to capitalize on the growing demand for artificial intelligence in various industries. The company's capabilities in AI services are attracting leading AI model companies in the China tech space, indicating a promising future for this business segment.

Looking Ahead

Kingsoft Cloud's future prospects are encouraging, with a focus on enhancing profitability, expanding strategic partnerships, and investing in AI capabilities. The company's commitment to a high-quality and sustainable development strategy positions it well for long-term growth and value creation for its stakeholders.

Investor Questions and Management's Responses

During the Q&A session, analysts raised questions about the company's capital expenditure guidance and the return on investment for AI services. Management responded by highlighting the company's aggressive investment in AI, the potential for significant revenue growth, and the positive ROI from AI services, which boast higher gross margins than other business segments.

Overall, Kingsoft Cloud's second quarter 2024 earnings call underscored the company's successful transformation and strategic growth trajectory, with a focus on high-value services, strategic partnerships, and AI capabilities. With a solid foundation in place and a clear vision for the future, Kingsoft Cloud is well-positioned for continued growth and success in the evolving cloud services landscape.

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