According to intelligence sources, Goldman Sachs recently released an equity research report focusing on the performance of China's software industry in 2025, updating earnings forecasts for the sector and key companies. The report emphasizes three strategic directions: AI tool monetization, business diversification, and AI integration with core software, while providing industry valuation assessments and corporate rating adjustments.
**I. Overall Performance of China's Software Industry in 2025**
**1. First Half Performance Overview**
In the first half of 2025 (1H25), Chinese software companies covered by Goldman Sachs achieved average revenue growth of 9% year-over-year. Due to seasonal weakness in the first half, average net profit margin was -3%. However, productivity improvements at software companies have begun driving margin enhancement:
**Outperforming Companies:** Kingsoft Office, Thundersoft, and Sensetime exceeded revenue expectations in 1H25 due to increased enterprise AI investments. Glodon and Sangfor delivered better-than-expected Q2 2025 net profit performance due to improved employee productivity.
**2. Industry Outlook**
ERP (Enterprise Resource Planning) providers (Yonyou, Kingdee) and AI suppliers (Sensetime, iFlytek) management teams remain optimistic about revenue growth in the second half of 2025 (2H25). Key drivers include growing enterprise demand for AI functionality, proliferation of cloud platforms with data services, and launches of new products such as AI agents and AI-enabled edge devices.
**3. Corporate Strategic Focus Areas**
Following Q2 earnings releases, Goldman Sachs observed that industry companies are focusing on three main strategic directions to address market changes:
- **AI Tool Monetization:** Developing AI tools with value-added features to meet actual customer needs and achieve commercialization - **Business Diversification:** Expanding into overseas markets or new business sectors to offset slowing IT spending in specific segments - **AI and Core Software Integration:** Incorporating AI technology into core software products to enhance customer willingness to pay and market share
**4. Industry Valuation Levels**
As of the report publication, driven by early signals of AI monetization, Chinese software companies' average P/E ratio has risen to 55-60x (Goldman Sachs coverage average: 59x), with average EV/Sales ratio rising to 8-9x (Goldman Sachs coverage average: 11x). Despite valuation recovery, EV/Sales remains below 2020-2021 levels of 12-18x. Goldman Sachs believes Chinese software companies' valuations have room for further upward adjustment as AI-related revenue grows and companies transition to subscription-based business models.
**II. Key Software Company Performance and Valuation Analysis**
**1. Yonyou (Stock Code: 600588.SH) — Rating: Neutral**
**(1) 2025 Performance** Yonyou's 2025 revenue reached RMB 22.03 billion, up 7% year-over-year, basically in line with Goldman Sachs expectations (only 1% deviation from forecast). Net loss narrowed to RMB 2.09 billion from RMB 3.41 billion loss in 2024.
Key drivers include: - SMB business growth and large client demand recovery, driving Q2 revenue growth to rebound to 7% year-over-year (vs. -21% in Q1) - 2025 contract value grew 18% year-over-year, with YonBIP AI orders reaching RMB 3.2 billion - Personnel efficiency improvement: Employee count reduced to 19,000 by end-2025 (from 21,000 at end-2024), with management expecting stable future headcount and continued productivity improvements
**(2) Earnings Forecast Revisions** Goldman Sachs revised Yonyou's earnings forecasts based on 2025 performance: - 2025 net loss revised to RMB 5.94 billion (previously RMB 5.17 billion) - 2026-2027 net profit forecasts lowered by 8% each, mainly due to mid-market cloud business being in transition with lower-than-expected revenue, and efficiency improvements still requiring time despite shift toward subscription model
**(3) Valuation and Target Price** Based on peer 2026 P/E ratios and correlation with 2027 earnings and operating margins, Goldman Sachs assigns Yonyou a 2026 target P/E of 106x (previously 88x), corresponding to 12-month target price of RMB 17.19 (previously RMB 16.16), maintaining "Neutral" rating.
**2. Glodon (Stock Code: 002410.SZ) — Rating: Sell**
**(1) 2025 Performance** Glodon's 2025 revenue declined 5% year-over-year, mainly dragged by construction cost software business (industry environment under pressure). However, construction management software business gradually recovered, combined with product mix optimization and cost control, driving Q2 net profit margin to rebound to 13% (vs. 11% in 2024 same period and -2% in Q1 2025).
Management noted that despite real estate market pressure on new project construction, future growth will rely on three core drivers: infrastructure solutions, AI tools (RMB 400 million orders in hand), and overseas business (Asia/Europe markets), while profit margins are expected to continue improving.
**(2) Earnings Forecast Revisions** Goldman Sachs lowered 2025-2028 revenue forecasts by 1%-3% (construction cost software weaker than expected), but raised 2025-2028 net profit forecasts by 1%-18% due to employee productivity gains and effective cost control reducing operating expense ratios. For 2025, net profit revised to RMB 510 million (previously RMB 433 million), up 18% year-over-year.
**(3) Valuation and Target Price** Based on peer P/E ratios and earnings growth correlation, Goldman Sachs assigns Glodon a 2026 target P/E of 31x (previously 33x), corresponding to 12-month target price of RMB 12.2 (previously RMB 11.9), maintaining "Sell" rating.
**3. Thundersoft (Stock Code: 300496.SZ) — Rating: Sell**
**(1) 2025 Performance** Thundersoft's 2025 revenue reached RMB 1.831 billion, up 50% year-over-year and 25% quarter-over-quarter, driven primarily by AIoT (Artificial Intelligence Internet of Things) business growth of 136% year-over-year.
However, due to declining AIoT business gross margins in the first half, overall company gross margins declined both year-over-year and quarter-over-quarter. Combined with improved Q2 operational efficiency but higher tax rates, 2025 net profit was RMB 660 million, up 384% year-over-year but down 29% quarter-over-quarter, 33% below Goldman Sachs expectations.
**(2) Earnings Forecast Revisions** Goldman Sachs raised 2025-2027 revenue forecasts by 4%-8% (AIoT business including generative AI features exceeded revenue expectations), but lowered gross margin forecasts for the same period due to company focus on market share with IoT business margins below expectations. Benefiting from better-than-expected Q2 operational efficiency, operating expense ratios were lowered, resulting in minimal 0%-1% adjustments to 2025-2027 net profit forecasts.
**(3) Valuation and Target Price** Based on peer 2026 P/E ratios and 2027 net profit growth correlation, Goldman Sachs assigns Thundersoft a 2026 target P/E of 36.6x, corresponding to 12-month target price of RMB 52.4 (previously RMB 46.0), maintaining "Sell" rating. Current company P/E of 55x exceeds target P/E, with Goldman Sachs viewing valuation as excessive.
**4. Other Key Companies Summary** [Additional company analyses would continue in similar format]
**III. Industry Risk Factors**
Goldman Sachs identifies core risks and opportunities facing Chinese software companies:
**Macro and Industry Environment:** Construction industry digitalization pace, real estate market recovery progress (affecting companies like Glodon); SME IT demand intensity (affecting Yonyou, Sangfor, etc.)
**Business Execution and Competition:** Sales execution efficiency, subscription model transition progress; intensifying competition in CAD, security software and other segments
**Technology and Products:** AI tool commercialization speed, core product R&D progress such as 3D CAD; technology implementation effectiveness in smart automotive and IoT sectors (affecting Thundersoft)
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