Kingsoft Cloud AI Sales Surge 120% in Q2 2025
Kingsoft Cloud (NASDAQ:KC) announced its second quarter 2025 earnings on August 20, reporting total revenue of RMB 2.35 billion. Public cloud revenue increased 32% year-over-year (YoY), while AI-related gross billings jumped more than 120% YoY. Management pointed out a strategic shift in capital expenditure (CapEx), margin effects from AI infrastructure investments, and strong growth in ecosystem partnerships—all signaling ongoing expansion and evolving business strategies.
AI Revenue Growth Accelerates
AI-related gross billings reached RMB 728.7 million, accounting for 45% of public cloud revenue. This represents over 120% YoY growth, fueled by demand from large language model clients and ecosystem partners. The surge reflects a broader industry trend where generative AI adoption is driving cloud market growth and infrastructure spending.
Tao Zou, CEO, said: “This quarter, AI gross billings reached RMB 728 million, a year-over-year increase of over 120% and quarter-over-quarter growth of 39%, accounting for 45% of public cloud revenue. Over the past two-plus years, alongside high-quality growth in our basic cloud business, we have built an intelligent computing cloud business of nearly equivalent scale.”
This rapid AI revenue expansion demonstrates Kingsoft Cloud’s shift toward more technology-intensive offerings, strengthening its position in China’s competitive cloud market.
CapEx and Procurement Model Shift Affect Margins
Kingsoft Cloud maintains its annual CapEx guidance at about RMB 10 billion, with roughly half spent in the first half of 2025. The company is transitioning to a blend of asset ownership, profit-sharing, and agent procurement models. This approach reduces capital intensity and risk but has led to a temporary decline in adjusted gross margin due to higher leasing and upfront costs for AI clusters.
Tao Zou explained: “Since the second half of 2024, we pivoted to new procurement models—resource pooling and profit-sharing—that lower our CapEx and improve ratios. Although gross profit margin has slightly decreased, this strategic shift achieves our goal of reducing financial leverage while maintaining flexibility. Overall, it’s a successful outcome.”
This evolving procurement strategy helps balance revenue growth, margin stability, and financial flexibility, making Kingsoft Cloud more resilient to market fluctuations and supply chain uncertainties.
Strategic Partnerships Boost Ecosystem Revenue
Revenue from Xiaomi and Kingsoft ecosystem partners rose 70% YoY to RMB 629 million, representing 27% of total revenue. For the first half of 2025, this revenue reached RMB 1.13 billion, accounting for 40% of the expected annual cap on related product transactions. These partnerships position Kingsoft Cloud as a key infrastructure provider for major technology groups.
Tao Zou stated: “This quarter, revenue from Xiaomi and our ecosystem reached RMB 629 million, up 70% year-over-year, further increasing its contribution to total revenue to 27%. We are confident in continued growth of these ecological business collaborations in the second half of the year.”
Strengthening these partnerships supports faster scaling of both AI and basic cloud solutions, enhancing Kingsoft Cloud’s growth outlook.
Outlook for the Second Half of 2025
- Management expects stronger revenue growth in the second half, driven by expanding AI clusters for Xiaomi and rising enterprise cloud demand, particularly in public service and financial sectors.
- Full-year CapEx remains targeted at approximately RMB 10 billion, with ongoing flexibility in procurement models based on client requirements.
- Gross margin is expected to stabilize at current levels, with close monitoring of impacts from procurement changes.
For sales professionals, Kingsoft Cloud’s results highlight the growing importance of AI-driven cloud services and strategic partnerships. Capitalizing on these trends requires understanding evolving procurement models and how they affect pricing and margin structures.
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