Shares of Kingsoft Cloud Holdings Ltd (NASDAQ: KC) surged 25.93% in pre-market trading on Wednesday, following the company's impressive third-quarter 2024 earnings release that showcased robust growth in its high-margin AI and enterprise cloud businesses.
The Chinese cloud services provider reported better-than-expected earnings for Q3 2024, with revenue increasing 16% year-over-year to 1.89 billion Chinese yuan ($268.7 million), surpassing analysts' consensus estimate. This growth was primarily driven by the accelerated demand for AI services, which offset the decline in the low-margin CDN business due to strategic adjustments.
Kingsoft Cloud's adjusted gross profit margin expanded by a substantial 420 basis points to 16.3%, reflecting the company's strategic revenue mix adjustments, optimized enterprise cloud project selection, and efficient cost control measures. The company's adjusted EBITDA margin also saw a significant improvement, reaching 9.8%, up from a loss of 8.6% in Q2 2022, indicating progress towards profitability.
Notably, Kingsoft Cloud's AI business continues to gain momentum, with AI revenue surging to account for 31% of public cloud revenues, positioning the company as an industry leader in AI. Additionally, the company is capitalizing on strong growth opportunities within the Xiaomi and Kingsoft ecosystem, with revenue from these customers increasing 36% year-over-year.
Investors are optimistic about Kingsoft Cloud's ability to sustain its growth trajectory, driven by its leadership in AI, strategic partnerships within the Xiaomi and Kingsoft ecosystem, and focus on high-margin businesses. The company's solid Q3 performance and positive outlook have fueled the significant pre-market surge in its stock price.
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