中国软件行业-12 月收入同比增速放缓至 11.7%，环比有所增长；生成式 AI 模型加速落地以驱动应用-China Software_ Dec revenues slowed to 11.7% YoY while MoM increase; Accelerated roll-out of Gen-AI models to drive applications

Summary of China Software Industry Conference Call Industry Overview - The China software industry experienced a revenue growth of 11.7% YoY in December 2025, a decline from 14.6% in November 2025. The month-over-month (MoM) growth was 3% [1][4]. - The aggregate revenue for the software sector in December reached Rmb1.5 trillion (US$209 billion), contributing to a total revenue growth of 13.2% YoY for 2025 [15][1]. - The industry is expected to face a quarter-over-quarter (QoQ) decline in 1Q26 due to weak seasonality and the Chinese New Year (CNY), but sequential growth is anticipated thereafter [1][4]. Key Drivers and Trends - The rollout of Generative AI (Gen-AI) models is accelerating, enhancing capabilities in text, image, and video applications, which is expected to support the expansion of AI applications [1][4]. - The IT services segment remains the largest contributor to revenue, accounting for 69% of total software revenues in 2025, followed by software products at 21% [15][24]. Performance Indicators - The Small and Medium Business (SMB) Purchasing Managers' Index (PMI) decreased to 47.4 in January 2026, down from 48.6 in December 2025, indicating weakened economic momentum [4][5]. - The net margin for the software industry improved to 12.6% in December 2025, up from 8.4% in November 2025, reflecting a gradual recovery post higher employee compensation impacts [9][22]. Segment Performance - IT services saw a 16% YoY growth in December, with revenues reaching Rmb1 trillion (US$143 billion), while the security software segment grew by 5% YoY [26][17]. - The service outsourcing contract value declined significantly, down 56% YoY to Rmb275 billion in December 2025, attributed to weak demand in software R&D and industrial design services [26][27]. Investment Recommendations - Companies recommended for investment include Sensetime, Meitu, Kingdee, Hundsun, TUYA, and Empyrean [3]. Additional Insights - The overseas revenue exposure for Chinese software companies remained stable at 2.8% [15]. - The software industry is expected to continue evolving with advancements in foundational AI models, which will drive the application ecosystem [4][1]. This summary encapsulates the key points from the conference call regarding the current state and future outlook of the China software industry, highlighting growth metrics, challenges, and investment opportunities.