{"text":[[{"start":6.84,"text":"This article only represents the author's own views."}],[{"start":10.44,"text":"When Kingsoft Cloud Holdings Ltd. (3896.HK; KC.US) released its 2025 annual results in March, the charismatic Lei Jun, who currently leads smartphone giant Xiaomi, announced his resignation as non-executive chairman, succeeded by vice chairman and CEO Zou Tao. Kingsoft Cloud seems to be doing well under its new leadership, judging from the solid results in its first financial report since that changing of the guard."}],[{"start":10.94,"text":"https://www1.hkexnews.hk/listedco/listconews/sehk/2026/0819/2026081900521.pdf"}],[{"start":39.8,"text":"According to the report, released last week, the company’s revenue rose 33.7% year-over-year to 5.78 billion yuan ($858 million) in the first half of 2026. And while it’s still losing money, its loss for the period narrowed by a considerable 43.4% to 437 million yuan."}],[{"start":61.64,"text":"On a sequential basis, the company’s revenue rose by 13.7% in the second quarter compared to the first, while its loss narrowed by an even larger 72% over that time. That improvement dangles the tantalizing possibility that Kingsoft Cloud could achieve breakeven in the second half of the year."}],[{"start":81.32,"text":"Zou Tao deserves much of the credit for the improvement. A company veteran who joined Kingsoft Corp. (3888.HK) nearly three decades ago in 1998, Zou was on board as the company transitioned from office software to gaming, and most recently to AI cloud services. He became a director of the company’s separately listed Kingsoft Cloud in 2016 and assumed the role of acting CEO in 2022, before becoming the chairman this year."}],[{"start":109.44,"text":"Since taking over the CEO duties four years ago, Zou has moved aggressively to slash the company’s low-margin content delivery network (CDN) business. In its place, he has focused on AI cloud, constructing a suite of offerings including infrastructure as a service (IaaS), platform as a service (PaaS), and mobility as a service (MaaS)."}],[{"start":129.2,"text":"As the transformation moved ahead, the company’s loss narrowed steadily from 2.66 billion yuan in 2022 to 936 million yuan last year, and fell further to slightly over 400 million yuan in the first half of this year. Intelligent computing cloud services have emerged as its new star performer during that time."}],[{"start":150.48,"text":"Revenue for the company’s AI business reached 926 million yuan in last year’s fourth quarter, nearly double the year-ago period. The AI business grew by another 90% in this year’s first quarter, rising to more than half of the company’s total public cloud revenue for the first time."}],[{"start":167.68,"text":"Revenue from public cloud services reached 4.35 billion yuan in the first half of this year, up 46.2% year-on-year, as the company credited strong demand for AI cloud services."}],[{"start":180.02,"text":"Investors sober up"}],[{"start":181.72,"text":"Zou Tao has clearly placed the right bet, as AI-related industries have become hot among investors lately. Businesses engaged in large models, GPUs, memory chips, PCBs and optical transmission fiber have seen explosive growth, exciting investors. Such euphoria is nicely captured by Kingsoft Cloud’s former Chairman Lei Jun, who once famously said: “Even a pig can fly if it stands in the center of a whirlwind.”"}],[{"start":207.12,"text":"Kingsoft Cloud was one company caught up in that whirlwind, which briefly lifted its Hong Kong stock roughly tenfold from around HK$1.10 two years ago to a high of HK$11.32 last year."}],[{"start":220.74,"text":"But investors have begun to have second thoughts about such high valuations, and are gradually sobering up from the buying binge. Kingsoft Cloud was caught up in the resulting AI-related stock correction dating back to June, and has seen its price subsequently pull back to the HK$6 level."}],[{"start":236.94,"text":"High investments and massive depreciation"}],[{"start":239.28,"text":"While Kingsoft Cloud's AI cloud services are growing rapidly, there’s also a hidden darker side to its story. Most importantly, investments needed to operate AI cloud services are exceptionally high. Goldman Sachs previously estimated that Alibaba Cloud plans to invest 380 billion yuan over the next three years, and Tencent Cloud's capital expenditure for a single quarter in 2025 alone reached 17.9 billion yuan."}],[{"start":264.9,"text":"Alibaba and Tencent are both quite large and possess the financial resources to handle such expenses. But for companies like Kingsoft Cloud, whose market capitalization stands at less than HK$30 billion ($3.83 billion) and which holds less than $1 billion in cash, the slightest misstep could cost it dearly."}],[{"start":286.04,"text":"Kingsoft Cloud also disclosed in its midyear report that its capital expenditures and leased assets totaled 6.24 billion yuan in the first half of this year, up 26% from 4.95 billion yuan last year."}],[{"start":300.76,"text":"In addition to its big capital spending, the company also incurs massive depreciation and amortization costs for related facilities such as leased servers and networking equipment. That figure amounted to 930 million yuan in the first half of last year, and nearly doubled to 1.78 billion yuan this year."}],[{"start":319.8,"text":"While Kingsoft Cloud's revenue is rising steadily, particularly within its AI cloud business, the company has also come under fire for relying on its affiliated entities, Xiaomi and Kingsoft Corp. In the past three quarters, those two companies contributed roughly 30% of Kingsoft Cloud's total revenue. That means Kingsoft Cloud could take a hit if either of those two companies scales back its business."}],[{"start":320.3,"text":"Top five outsider"}],[{"start":343.98,"text":"What’s more, competition within China’s AI cloud sector has become quite fierce. A report by Omdia ranked Alibaba Cloud as China’s largest AI cloud services provider last year with 38.1% of the market, while Volcano Engine ranked second with 20.4%. They were followed by Baidu Cloud, Tencent Cloud, and Tianyi Cloud. Kingsoft Cloud failed to make the top five, putting it squarely in the second tier of major players. Such status leaves the company at the risk of being marginalized, and presents greater difficulties in competing for new business. Its smaller size also means its costs are higher than the big players as a percentage of sales, which makes it harder to operate profitably."}],[{"start":386.28,"text":"Zou Tao once remarked that “With the arrival of the AI era, the ceiling of the cloud has not merely been elevated; rather, it has been completely torn off.” But for Kingsoft Cloud, the more fundamental problem is its relatively low market share. That means that even if the market ceiling has been blown wide open, how much of the sky can it actually claim?"}],[{"start":409.12,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1787647664_9102.mp3"}