Summary of Kingsoft Corp Ltd Conference Call Company Overview - **Company**: Kingsoft Corp Ltd (3888.HK) - **Industry**: Greater China IT Services and Software - **Market Cap**: RMB 37,510 million - **Current Stock Price**: HK$30.80 - **Price Target**: HK$33.00, indicating a 7% upside potential Key Points from the Conference Call Games Segment - The new game "Goose Goose Duck" exceeded expectations with 5 million users on the first day, double the internal forecast [9] - Management anticipates overall improvement in the games segment for 2026 after a challenging 2025, aided by a strong game pipeline [9] - The game has a high Daily Active Users (DAU) count but low Average Revenue Per User (ARPU), focusing on user scale in the first half of 2026 and commercialization in the second half [9] - Expected profit margin for "Goose Goose Duck" is between 15-20% after revenue sharing with partners [9] - Other games in the pipeline include "Jian Xia World 4" and a licensed version of "Angry Birds" [9] Office Business - Revenue growth in the office segment is expected to be higher, but margins will be lower in 2026 [1] - The company is focusing on the Xinchuang initiative and increasing overseas contributions to stabilize or improve revenue growth [9] AI and Cloud Services - AI product development is progressing, but monetization on the B2C side remains challenging, similar to other B2C applications [9] - Kingsoft is increasing R&D investment in AI, which may lead to slight margin pressure [9] - The demand for AI computing is accelerating, but supply chain capabilities pose a challenge [9] Financial Metrics and Projections - **2026 Revenue Projections**: Expected to be RMB 10,825 million, up from RMB 9,761 million in 2025 [6] - **2026 EPS Projections**: Expected to be RMB 1.01, compared to RMB 0.75 in 2025 [6] - **Capex**: Anticipated to be higher than in 2025 due to increased investment in GPU [9] Customer Contributions - Xiaomi currently contributes 25% of revenue, but this is expected to decrease in 2026 as demand from other customers rises [9] Risks and Challenges - Risks include slower-than-expected processing of localization tenders and failure to improve payment ratios for WPS [11] - The GPU investment cash back cycle has lengthened to 24-36 months due to price competition [9] Additional Insights - Management's KPIs are focused on increasing paying users and AI members rather than ARPU [9] - The company is optimistic about long-term opportunities in the gaming and AI sectors, despite current challenges [9] This summary encapsulates the key insights and projections from Kingsoft Corp Ltd's recent conference call, highlighting both opportunities and risks within the company's operational landscape.

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **China On-line Entertainment, Software, and Data Center** sectors, highlighting potential catalysts that could impact share prices in the near future [1][6]. Company-Specific Insights Bilibili Inc (BILI.O) - **Catalyst**: New game launch - Three Kingdoms: N Card - **Expected Launch**: Mid- to late March 2026 - **Monetization**: Anticipated slow monetization initially, focusing on Daily Active Users (DAU) with a base case of 10-20 million DAU [7][7]. GDS Holdings Ltd (GDS.O) - **Catalyst**: High-end GPU import regulation update - **Importance**: Very High, with a meaningful upside surprise expected - **Market Expectation**: Anticipation of Chinese government approval for NV H200 GPU imports, likely with conditions [7][7]. Kingdee International Software Group (0268.HK) - **Catalyst**: Full-year 2025 profit alert - **Expectation**: Profit forecast of Rmb280 million in 2025, marking a turnaround after five years of losses [7][7]. Kuaishou Technology (1024.HK) - **Catalyst**: Kling model iteration and full-year 2026 guidance - **Outlook**: More bearish than consensus on 2026 profit growth due to increased depreciation and normalization of income tax rates [8][8]. Meitu Inc (1357.HK) - **Catalyst**: Full-year 2026 guidance and strategic partnership updates with Alibaba - **Profit Guidance**: Estimated adjusted net profit of Rmb12.6 billion for 2026, expected to align with estimates [8][8]. Tencent Music Entertainment Group (TME.N) - **Catalyst**: Regulatory approval of the Ximalaya acquisition - **Profit Contribution**: Expected Rmb1.7 billion annualized profit contribution post-cost synergy [8][8]. Trip.com Group Ltd (TCOM.O) - **Catalyst**: Full-year 2026 guidance - **Key Focus**: Operating margin guidance, with expectations of flat YoY margins due to aggressive overseas investments [8][8]. Tuya Inc. (TUYA.N) - **Catalyst**: 2026 Consumer Electronics Show - **Market Reaction**: Positive share price reaction anticipated if breakthroughs in AI applications are showcased [8][8]. Regulatory and Market Dynamics - The Chinese government is expected to loosen restrictions on KPOP stars hosting concerts in mainland China, which could be discussed during the upcoming Korean President's visit in early January 2026 [10][10]. Additional Insights - The conference highlighted the importance of monitoring the **Chinese hyperscalers' data center tenders** and their GPU sourcing strategies, which could significantly impact the data center market [7][7]. Conclusion - The conference call provided a comprehensive overview of upcoming catalysts in the China On-line Entertainment, Software, and Data Center sectors, with specific focus on company performance expectations and regulatory changes that could influence market dynamics in 2026.

Financial Data and Key Metrics Changes - In Q3 2025, Kingsoft's total revenue was RMB 2.419 billion, a year-on-year decrease of 17% but a quarter-on-quarter increase of 5% [6][13] - Revenue from the office software and services business increased by 26% year-on-year and 12% quarter-on-quarter to RMB 1.521 billion [13][14] - Revenue from online games and other businesses decreased by 47% year-on-year and 6% quarter-on-quarter to RMB 898 million [14] - Gross profit decreased by 21% year-on-year but increased by 5% quarter-on-quarter to RMB 1.944 billion, with a gross profit margin decrease of 4% year-on-year [15] - Profit attributable to owners of the parent was RMB 213 million, down from RMB 413 million year-on-year [18] Business Line Data and Key Metrics Changes - WPS individual business revenue reached RMB 899 million, up 11% year-on-year, with global monthly active devices for WPS Office at 669 million, a 9% increase [7][8] - WPS 365 business revenue was RMB 201 million, a significant increase of 17% year-on-year [8] - Revenue for the WPS software business was RMB 391 million, up 15% year-on-year, driven by localization projects and AI-enabled products [9] Market Data and Key Metrics Changes - The online game business saw a decline in revenue primarily due to low contributions from certain existing games, although new games are in development [6][10] - The flagship game Jian Wang 3 Online celebrated its 16th anniversary, with new content updates planned [10] Company Strategy and Development Direction - Kingsoft continues to prioritize AI collaboration and internationalization, aiming to meet the needs of individual users and enterprises [4][12] - The online games business will focus on high-quality content development and global publishing [12] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainability of growth in the office software segment, driven by increased membership and AI product enhancements [24][25] - The company is optimistic about the overseas market potential for WPS Office and 365, particularly in competition with Microsoft [31][32] Other Important Information - As of September 30, 2025, Kingsoft had cash resources of RMB 26 billion, indicating a strong cash position [19] - Research and development costs increased by 4% year-on-year, reflecting higher investment in AI and collaboration products [15][16] Q&A Session Summary Question: Regarding the gaming business, could management elaborate on operational strategies and the update progress of Metal Brick? - Management indicated that they are focusing on long-term upgrades and new content for existing games, with ongoing improvements for Metal Brick [22][23] Question: What are the main drivers behind the accelerated growth in the office business, and will this momentum be sustainable? - Management highlighted three growth factors: personnel growth, AI enhancements, and positive user feedback, indicating confidence in sustainability [24][25] Question: How does the company view opportunities for WPS Office and 365 in international markets? - Management noted strong growth in overseas markets and emphasized their competitive advantages against Microsoft, particularly in mobile and AI capabilities [31][32][33] Question: What is the progress of the AI business and its commercialization pace? - Management stated that the AI business is in early stages but is developing various applications across industries, with plans to establish an AI product center [42][43] Question: Will sales and marketing expenses return to normal levels in the near future? - Management expects that as the business stabilizes, marketing expenses will normalize, with a focus on long-term sustainable development [44][45]

Financial Data and Key Metrics Changes - In Q3 2025, total revenue reached RMB 2.419 billion, a year-on-year decrease of 17% but a quarter-on-quarter increase of 5% [6][13] - Gross profit decreased by 21% year-on-year but increased by 5% quarter-on-quarter to RMB 1.944 billion, with a gross profit margin decrease of 4% year-on-year [15] - Profit attributable to owners of the parent was RMB 213 million, down from RMB 413 million year-on-year [17] Business Line Data and Key Metrics Changes - Revenue from the office software and services business increased by 26% year-on-year to RMB 1.521 billion, driven by growth in WPS software and WPS 365 [13][14] - WPS individual business revenue reached RMB 899 million, up 11% year-on-year, with global monthly active devices reaching 669 million, a 9% increase [7] - Online games and other businesses saw revenue decrease by 47% year-on-year to RMB 898 million, primarily due to lower contributions from existing games [14] Market Data and Key Metrics Changes - WPS 365 business revenue reached RMB 201 million, a significant increase of 17% year-on-year, reflecting enhanced collaboration and AI product offerings [8] - The online game business is focusing on developing high-quality content and expanding global publishing, with new titles expected to launch in the coming years [10][12] Company Strategy and Development Direction - The company is prioritizing AI collaboration and internationalization as strategic focuses, aiming to meet the needs of individual users and enterprises [4][12] - Kingsoft Office Group is committed to strengthening its brand and ecosystem development while enhancing AI application scenarios [4] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainability of growth in the office software segment, driven by increased membership and AI product enhancements [22][25] - The online gaming segment is expected to improve with the launch of new games and ongoing content updates for existing titles [10][12] Other Important Information - As of September 30, 2025, the company had cash resources of RMB 26 billion, indicating a strong cash position [18] - Research and development costs increased by 4% year-on-year, reflecting higher investment in AI and collaboration products [15] Q&A Session Summary Question: Regarding the gaming business, could management elaborate on operational strategies and the update progress of Metal Brick? - Management indicated that they are focusing on long-term upgrades and new content for existing games while continuing to optimize gameplay for new titles like Metal Brick [21] Question: What are the main drivers behind the accelerated growth in the office business, and will this momentum be sustainable? - Management highlighted three growth factors: personnel growth, AI product enhancements, and positive user feedback, indicating confidence in sustainable growth [22][25] Question: How does the company view opportunities for WPS Office and 365 in international markets? - Management noted that they have increased overseas R&D investment and are focusing on competition with Microsoft, emphasizing their advantages in mobile and AI capabilities [31][34] Question: What is the progress of the AI business and its commercialization pace? - Management stated that the AI business is in an early stage, with ongoing development in various industries, and plans to establish an AI product center [42][43] Question: Will sales and marketing expenses return to normal in the upcoming quarters? - Management expects that as the business stabilizes, marketing expenses will normalize, with a focus on long-term sustainable development [44]

Investment Rating - The report indicates a positive outlook for the gaming industry, estimating total game approvals in 2025 to reach between 1,500 and 1,700, with a significant increase in both domestic and imported titles [6][8]. Core Insights - The National Press and Publication Administration (NPPA) approved a total of 158 games in June 2025, marking the largest monthly batch in the past three years. This includes 147 domestic and 11 imported titles [1][6]. - In the first half of 2025, 812 games were approved, which is 18% and 12% higher than the approvals in the first and second halves of 2024, respectively. This growth is attributed to larger batch sizes for domestic games and more frequent approvals for imported games [6][8]. - Tencent and NetEase are expanding their portfolios with new first-person shooter (FPS) titles, reflecting a rising preference among gamers for this genre [1][6]. Summary by Sections Game Approval Highlights - The June 2025 approval batch included 137 mobile, 8 cross-platform, and 2 PC games domestically, along with 4 mobile, 3 cross-platform, and 4 PC games imported [2][3]. - Notable titles in the imported batch include "CrossFire: Rainbow" and "Squad," both FPS games published by Tencent, and "Wildgate," an FPS by NetEase [3][4]. - The domestic batch featured significant titles such as "Zhu Lu Ma Fa," "Rumble Adventure," and "Soul Land," showcasing a variety of RPGs and mobile games [4][9]. Market Trends - The report anticipates that game companies will accelerate new game launches and updates during the summer season to enhance user engagement and monetization [6][8]. - The increasing approval rates and the variety of genres being introduced suggest a robust growth trajectory for the gaming industry in China [1][6].