The surging wave of artificial intelligence demand is accelerating value realization for Kingsoft Cloud Holdings Ltd (NASDAQ: KC). In the second quarter, the company's revenue crossed the 3 billion yuan mark for the first time, achieving a historic turnaround at the operating profit level, signaling that its AI infrastructure investments are beginning to convert into tangible returns.
According to the unaudited second-quarter financial results released on August 19 for the period ending June 30, 2026, Kingsoft Cloud reported total revenue of 3.072 billion yuan, up 30.8% year-over-year, setting a new quarterly record. Notably, AI cloud billings surged 82% year-over-year, now accounting for 56% of total public cloud revenue. The company posted its first-ever positive operating profit under GAAP this quarter, with an adjusted operating margin of 4.0%, a dramatic improvement from the -7.1% recorded in the same period last year.
While profitability improved, the company remains in a net loss position, though the loss narrowed considerably. The second-quarter net loss was 92.98 million yuan, a 79.6% reduction from the 457 million yuan loss in the prior-year quarter. However, escalating capital expenditures are putting pressure on cash reserves. Second-quarter capital expenditure, including assets capitalized through lease arrangements, reached 3.3 billion yuan, while cash and cash equivalents fell to 4.674 billion yuan from 6.018 billion yuan at the end of 2025.
AI Cloud Engine Running at Full Speed, Public Cloud Growth Far Outpaces Other Segments
AI-related businesses were the core driver behind this quarter's performance leap. Public cloud services revenue reached 2.358 billion yuan, up 45.1% year-over-year and 18.1% quarter-over-quarter, leading both business segments by a wide margin. Within this, AI cloud billings hit 1.327 billion yuan, with growth momentum primarily stemming from incremental contributions from AI infrastructure services and Model-as-a-Service (MaaS) products.
In contrast, industry cloud services revenue was 714 million yuan, down 1.3% year-over-year, managing only a marginal 1.0% sequential increase, indicating that traditional enterprise cloud operations still face growth headwinds. The rapid shift in revenue mix toward AI has further elevated public cloud's share of total revenue, laying the groundwork for continued gross margin improvement.
Gross Margin and Operating Efficiency Both Improve, Cost Control Delivers Notable Results
Gross profit for the quarter was 466 million yuan, up 37.6% year-over-year, with gross margin climbing to 15.2%, up from 14.4% in the prior-year period and 12.8% in the previous quarter, extending the improvement trend for two consecutive quarters. Significant compression in operating expenses also played a key role. Total operating expenses for the quarter were 443 million yuan, down 33.4% year-over-year, with general and administrative expenses plunging 58.7% to 140 million yuan, primarily benefiting from reduced credit loss provisions and share-based compensation expenses. Selling and marketing expenses and research and development expenses also declined 14.3% and 2.3% year-over-year, respectively.
The combination of shrinking expenses and rapid revenue growth enabled the company to achieve a positive operating profit of 23 million yuan, compared to an operating loss of 327 million yuan in the same period last year. Non-GAAP operating profit reached 124 million yuan, with adjusted EBITDA margin further expanding to 35.8%, nearly doubling from the 17.3% recorded in the prior-year period.
Capital Expenditure Jumps Sharply, Cash Consumption Accelerates
To support the rapid expansion of its AI computing power business, Kingsoft Cloud continues to intensify hardware investment. Second-quarter depreciation and amortization costs reached 964 million yuan, up 74.6% year-over-year, driven primarily by depreciation of newly purchased and leased servers and network equipment related to AI cloud operations. The balance sheet shows property and equipment net value increasing to 13.725 billion yuan from 10.095 billion yuan at the end of 2025.
Cash pressure is correspondingly intensifying. As of June 30, 2026, the company's cash and cash equivalents stood at 4.674 billion yuan, down approximately 1.344 billion yuan from the end of 2025, which the company attributes to continued investment in computing equipment procurement. Meanwhile, net accounts receivable expanded to 2.433 billion yuan from 1.740 billion yuan at the start of the year, with total current liabilities rising to 10.861 billion yuan.
First-Half Summary: Growth Accelerates but Loss Widens
For the combined first-half performance, Kingsoft Cloud reported total revenue of 5.776 billion yuan for the first half of 2026, up 33.7% year-over-year, with growth accelerating further compared to the full year of 2025. However, the company recorded a net loss attributable to shareholders of 437 million yuan in the first half, up 43.4% year-over-year, primarily dragged down by a sharp increase in interest expenses, which rose 54.3% to 320 million yuan.
Management remains optimistic about the profitability trajectory. The CEO stated in the earnings release that the company will continue to pursue its high-quality, sustainable growth strategy, deepen collaboration with customers within and beyond its ecosystem, and consolidate its market position. The CFO emphasized that the company remains committed to investing in sustainable long-term growth while profitability continues to improve, driven by AI demand tailwinds and operational optimization.
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