2025-11-13 11:52Summary of the Conference Call on China IT Services & Software Industry Industry Overview - The conference call focused on the China IT Services & Software industry, specifically the performance of A-share companies in 3Q25. - 60% of the covered companies reported a miss in results for 3Q25, compared to 27% in 2Q25, indicating a trend of muted growth in the sector [1][2][4]. Key Insights - Revenue Trends: The overall revenue growth for IT service/software companies remained soft, with a 3% YoY decline in the IT Services/Cybersecurity sub-sector. In contrast, the AI sector experienced the highest revenue growth at 13% YoY [3][20]. - Opex Control: Companies are exercising ongoing operational expenditure (Opex) control, which has led to a 5% YoY decline in Opex for the ERP SaaS sector [23]. - AI Monetization: Companies with capabilities to monetize AI-related applications, such as Kingdee and iFlytek, are expected to see better growth prospects [2][4]. Company Performance - Kingdee: Maintained as the top pick due to its resilient ERP SaaS business and potential for AI monetization. Reported a 3Q25 subscription ARR increase of 18% YoY to Rmb3.86 billion [4][23]. - VenusTech: Identified as the least preferred pick, with a 45% YoY revenue decline in 3Q25 due to soft downstream demand. The company's recovery path is uncertain [4][28]. - Yonyou: Reported a 4% YoY revenue growth but faced operational losses. The company is expected to struggle to reach break-even this year [23]. Sector Performance - Overall Sector Growth: The IT services industry recorded a 14.3% YoY revenue growth in 9M25, while the software products and information security sectors posted 10.9% and 6.9% growth, respectively [9][12]. - Cybersecurity Sector: Revenue declined by 3% YoY in 3Q25, indicating ongoing challenges in demand [28]. - Automobile Software Services: Companies like ThunderSoft reported a 43% YoY revenue increase, driven by smart IoT demand, although gross margins were under pressure [26]. Market Outlook - The near-term outlook for the sector remains cautious, with expectations of continued soft demand from downstream customers. Actual recovery is anticipated to take time [2][20]. - The AI sector is expected to continue its growth trajectory, but traditional business budgets are likely to be constrained, impacting overall IT spending [2][20]. Additional Insights - Revenue Growth by Segment: The AI sector's revenue growth was the strongest at 13%, while IT services and cybersecurity sectors faced declines [20]. - Cost Control Measures: Companies are focusing on stringent cost control, with Opex in the ERP SaaS sector declining by 5% YoY [23]. - Future Expectations: Companies are optimistic about AI deployment and its potential to drive future growth, but they remain cautious about traditional business segments [2][20]. This summary encapsulates the key points discussed during the conference call, highlighting the current state and future outlook of the China IT Services & Software industry.