Kingsoft Cloud(KC +8.41%) reported second quarter 2025 earnings on August 20, 2025, with revenue reaching RMB 2.35 billion, public cloud revenue up 32% year-over-year (YoY), and AI-related gross billings surging more than 120% YoY. Management highlighted a strategic capital expenditure (CapEx) shift, margin impacts from AI infrastructure investment, and strong momentum in ecosystem partnerships, setting expectations for continued growth and evolving business models.
AI revenue growth accelerates Kingsoft Cloud’s top line
AI-related gross billings totaled RMB 728.7 million, making up 45% of public cloud revenue and growing over 120% YoY, driven by demand from large language model clients and ecosystem partners. This growth aligns with a broader industry trend of generative AI adoption expanding the cloud market and increasing infrastructure investment.
"This quarter, AI gross billings reached RMB 728 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 2-plus years, while successfully driving high-quality developments in our basic cloud business, we have also built an intelligent computing cloud business of nearly equivalent scale."
-- Tao Zou, CEO
This rapid expansion of AI revenue streams demonstrates Kingsoft Cloud’s effective transition to technology-intensive offerings, strengthening its competitive position in China’s cloud market.
CapEx and procurement model shift impacts Kingsoft Cloud margins
Annual CapEx guidance remains at approximately RMB 10 billion, with about half spent in the first half of 2025, as management adopts a mix of asset ownership, profit sharing, and agent models to optimize capital intensity and risk. The shift has led to a decline in adjusted gross margin due to increased leasing and upfront costs for AI clusters, reflecting a strategic tradeoff for lower indebtedness and greater flexibility.
"So since the second half of 2024, given that consideration, we have adjusted and pivoted to some of the new models, which we would call the resource pool model or the profit sharing loss where our CapEx level would be relatively lower and also, we will benefit from lower in ratio. So overall speaking, because of that shift of that procurement model, although there is a slight decrease of of GP margin. However, I would say, we generally achieved the strategic choice that we made for the changing of procurement model. And therefore, I think it's actually quite a good success. It's a successful result."
-- Tao Zou, CEO
This evolving procurement approach positions Kingsoft Cloud to balance revenue growth, margin stabilization, and financial leverage, increasing resilience amid sector volatility and supply chain uncertainty.
Strategic partnerships drive Kingsoft Cloud’s ecosystem revenue
Revenue from Xiaomi and Kingsoft ecosystem partners rose to RMB 629 million (70% YoY growth), contributing 27% of total revenue, with first half revenue at RMB 1.13 billion, representing 40% of the total annual cap of related product transactions in 2025. These partnerships reinforce Kingsoft Cloud’s role as a core infrastructure provider to leading technology conglomerates.
"This quarter, revenue from Xiaomi and Kingsoft ecosystem reached RMB 629 million, up 70% year-over-year. with its contribution to total revenue further increased to 27%. In the first half of 2025, revenue from Xiaomi and Kingsoft ecosystem reached RMB 1.13 billion, accounting for 40% of the total annual cap of related product transactions in 2025. Benefiting from the continued prosperity of the Xiaomi and Kingsoft ecosystem and ever-expanding business opportunities, we are fully confident in further growth of ecological business collaborations in the second half of this year."
-- Tao Zou, CEO
The deepening of these ecosystem relationships supports faster scaling of both AI and basic cloud solutions, enhancing Kingsoft Cloud’s long-term growth prospects.
Looking Ahead
Management expects second half revenue growth to be stronger and better than the first half, supported by a growing AI cluster for Xiaomi and increased enterprise cloud demand, especially in public service and financial sectors. Full-year CapEx is reiterated at approximately RMB 10 billion, with continued flexible adjustment between self-owned, leasing, and agent models based on client needs. Gross margin is expected to stabilize at current levels, with management closely monitoring further impacts from the evolving procurement mix.
