GF Securities released a research report stating that Kingsoft Cloud (03896) benefits from strong demand with high visibility, as Xiaomi and Kingsoft increase their AI investments. Foundational large models, smart vehicles, and WPS all require substantial AI training and inference computing power, while non-Xiaomi customer demand for AI is also robust. Using comparable company valuations, the firm assigns 6x PS to the AI cloud business and 2x PS to the non-AI cloud business, corresponding to a fair value of HK$10.49 per share, and maintains a "Buy" rating.
The core view maintains the previous forecast for the company's Q4 2025, projecting a 20% year-on-year revenue increase, with full-year revenue reaching RMB 9.5 billion, up 22% year-on-year. It forecasts that the gross margin for Q4 2025 will remain around 15%, with an adjusted EBITDA margin of 27.7%, showing sequential growth after excluding one-off factors.
The AI business is expected to maintain rapid growth, with Q4 2025 AI public cloud revenue projected to surge 82% year-on-year to RMB 865 million, increasing its share of total revenue to 32.2%; the industry cloud segment is expected to grow steadily. According to the Q3 results announcement, the net increase in property and equipment in Q3 2025 was approximately RMB 2.73 billion, RMB 440 million more than the previous quarter, indicating robust demand. New equipment deliveries in Q4 are expected to support the high growth of the AI business.
Collaboration within the Xiaomi-Kingsoft ecosystem continues to intensify. Xiaomi began focusing on foundational models at the end of 2024, subsequently releasing several lightweight models in 2025, and launched the 309-billion-parameter MiMo-V2-Flash language foundation model by year-end, demonstrating high efficiency. From January to September 2025, the company's total revenue from the Xiaomi-Kingsoft ecosystem reached RMB 1.82 billion. GF Securities anticipates that Xiaomi's revenue contribution for 2025 could approach the upper limit of related-party transactions, with further growth expected in 2026.
High capital expenditure is projected to continue into 2026, exceeding the 2025 level—that is, surpassing RMB 10 billion—primarily due to persistently strong demand. The firm forecasts the company's 2026 revenue to grow 28.8% year-on-year to RMB 12.2 billion, with AI public cloud revenue surging 85% year-on-year to RMB 5.37 billion, accounting for 44% of total revenue. The industry cloud segment is expected to grow steadily; the gross margin is forecast to remain stable, with the expense ratio narrowing, leading to a turnaround to adjusted operating profit and a further improvement in the adjusted EBITDA margin.
The report projects the company's revenue for 2025-2026 to increase by 22%/29% year-on-year, respectively, with AI public cloud business revenue growing by 119%/85% year-on-year.
Risks include a slower-than-expected pace of AI application adoption; rapidly increasing capital expenditures leading to significant funding pressure; supply chain dependencies and insufficient supply; and intensified competition potentially lowering gross margins through price reductions.
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