Core Viewpoint - The strong demand for AI computing power is reshaping the cloud service industry, with a potential end to vicious price competition following AWS's price increase, leading to a dual recovery in profitability and valuation systems for the industry [1] Group 1: Industry Insights - AWS has broken the long-standing trend of only decreasing prices by raising the prices of its AI computing services by approximately 15%, indicating a shift in the pricing strategy within the cloud service sector [2] - Domestic cloud providers are expected to follow suit, potentially stabilizing the profitability of the cloud service industry as AI capital expenditures remain high [2] - The global AI token volume is projected to increase by over 100 times in the next year, leading to upward pressure on hardware costs [2] Group 2: Company Performance - Kingsoft Cloud is expected to achieve a revenue of 2.7 billion yuan in Q4 2025, representing a year-on-year growth of 22% and a quarter-on-quarter growth of 10%, driven by AI-driven public cloud business growth and the traditional peak season for industry cloud [2] - The company is projected to maintain a gross margin of around 15% and an adjusted EBITDA margin of 22%, indicating sustained profitability [2] - Kingsoft Cloud's AI business is anticipated to see a significant revenue increase, with Q4 2025 AI revenue expected to grow by 85% year-on-year to 880 million yuan [4] Group 3: Strategic Positioning - As the only strategic cloud platform within the Xiaomi and Kingsoft ecosystem, Kingsoft Cloud is well-positioned to benefit from the training and inference needs of Xiaomi's self-developed AI models and the integration of numerous terminal devices into AI services [3] - The company has established a neutral cloud vendor position and has covered most leading domestic AI startups, indicating a diversified client base and growth potential in the AI sector [3] - Kingsoft Cloud's AI capabilities are continuously improving, with the recent upgrade of its AI training and inference platform, which is expected to support sustained high growth in AI revenue [4]

Investment Rating - The report maintains a "Buy" rating for Kingsoft Cloud (3896.HK) [6] Core Views - The cloud service industry is expected to undergo a valuation reshaping, driven by strong AI demand and cost pressures, leading to an imminent price increase across the sector [2] - Kingsoft Cloud is positioned to benefit from its unique ecosystem, particularly through its strategic partnership with Xiaomi, which enhances its AI capabilities and revenue potential [3] - The company is projected to achieve a revenue of 27 billion CNY in Q4 2025, representing a 22% year-on-year growth and a 10% quarter-on-quarter increase, primarily fueled by AI-driven public cloud business growth [1] Financial Projections - Revenue forecasts for Kingsoft Cloud have been revised upwards for 2026 and 2027 to 121 billion CNY and 140 billion CNY respectively, reflecting an increase of 9% and 11% [4] - The expected revenue growth rates are 22.3% for 2025 and 26.6% for 2026, with a projected revenue of 9.522 billion CNY in 2025 and 12.060 billion CNY in 2026 [5] - The adjusted EBITDA margin is anticipated to be around 22% in Q4 2025, indicating sustained profitability [1] AI Business Growth - Kingsoft Cloud's AI business is entering a harvest phase, with expected revenue growth of 85% year-on-year in Q4 2025, reaching 8.8 billion CNY [3] - The company has established a comprehensive AI training and deployment platform, enhancing its service offerings and operational efficiency [3] - The AI revenue is projected to maintain high double-digit growth into 2026, supported by ongoing demand from various sectors [3]