Operator: Good morning, ladies and gentlemen, and thank you for standing by for Kingsoft Cloud’s second quarter 2026 earnings conference call. All participants are currently in listen-only mode. Following management’s prepared remarks, we will open the call for questions. Please note that today’s call is being recorded. I will now turn the call over to Mr. Jacky Zhou, Senior Director of Capital Markets at Kingsoft Cloud. Jacky, please go ahead.

Jacky Zhou, Senior Director of Capital Markets, Kingsoft Cloud: Thank you, operator. Hello everyone, and thank you for joining us today. Kingsoft Cloud’s second quarter 2026 earnings release was issued earlier today, and is available on our IR website and through PR Newswire. Joining us today are Mr. Zou Tao, Chairman and CEO, Ms. Li Yi, CFO, Mr. Liu Tao, Senior Vice President, Mr. Tian Kaiyan, Senior Vice President, Ms. Yu Jun, Vice President, Mr. Zhou Ruilong, Associate Vice President, and Mr. Kwok Chen, Board Secretary and Associate Vice President. Mr. Zou will discuss our business performance and key developments, followed by Ms. Li with a review of our financial results. Management will then take your questions. Consecutive interpretation will be provided for convenience and for reference only. In the event of any discrepancy, management’s statements in the original language will prevail.

Before we begin, I would like to remind you that today’s call contains forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties, and actual results may differ materially from those expressed or implied by the forward-looking statements. Additional information concerning factors that would cause actual results to differ materially is included in the company’s filing with the U.S. SEC. The company undertakes no obligation to update any forward-looking statements except as required by applicable law. Unless otherwise stated, all financial figures discussed on today’s call are denominated in CNY. With that, it is my pleasure to turn the call over to our Chairman and CEO, Mr. Zou. Mr. Zou, please go ahead.

Zou Tao, Chairman and CEO, Kingsoft Cloud: 大家好，欢迎参加金山云2026年第二季度业绩电话会。我是金山云CEO周涛。本季度我们看到了AI云业务形态的进一步演进，开源大模型生态的空前繁荣，给公有云厂商带来巨大的发展空间。而我们几年来一直坚信的AI落地千行百业，正以模型即服务、智能体即服务和FDE相结合的形式向我们走来。面对这一深刻的行业变革，金山云继续坚持技术立业与高质量可持续发展战略，全面推动AI云服务、MaaS业务、FDE业务的发展，取得了可喜的成绩。首先，AI业务继续驱动公司收入高速增长，本季度实现总收入30.7亿元，创单季度历史新高，同比增长31%。其中AI云账单收入达13.3亿元，同比增长82%，占公有云收入比例进一步提升至56%。MaaS业务收入增长强劲，二季度MaaS收入较一季度增长12倍。其次，盈利水平显著提升。本季度经调整毛利率提升至15.4%，环比上升2.4个百分点。经营利润首次转正，经调整经营利润率达4%，创历史新高。这是我们抓住AI浪潮，提升收入质量，落实降本增效等多项举措并行所取得的可喜成果。第三，客户结构持续优化，生态内外商机加速兑现。生态内，本季度来自小米和金山生态的收入达8.1亿元，同比增长28%，占总收入比例为26%。生态外，前五大客户收入同比增长51%。AI云业务已覆盖互联网、前沿AI实验室、汽车智能、自动驾驶、AI for Science、金融科技、游戏、音视频等广泛行业。多元化的客户结构与业务布局，不仅带来收入规模的持续提升，也使我们能够更灵活地调配算力资源，提升议价能力和抗风险能力。

Jacky Zhou, Senior Director of Capital Markets, Kingsoft Cloud: Hello everyone, and welcome to Kingsoft Cloud’s second quarter 2026 earnings call. I am Zou Tao, CEO of Kingsoft Cloud. This quarter, we saw further evolution in the AI cloud market. The rapid growth of the open source model ecosystem is creating significant opportunities for neutral cloud providers. At the same time, our long-held vision of bringing AI to every industry is becoming a reality through a combination of Model-as-a-Service, Agent-as-a-Service, and FDE services. Against this backdrop, Kingsoft Cloud remains committed to technology leadership and high-quality, sustainable growth.

Tian Kaiyan, Senior Vice President, Kingsoft Cloud: We are accelerating the development of our AI cloud, MaaS and FDE businesses with encouraging progress. First, AI continues to drive strong revenue growth. Total revenue reached a record of CNY 3.07 billion, up 31% year-over-year. AI cloud gross billings increased 82% to CNY 1.33 billion and accounted for 56% of public cloud revenue. MaaS revenue also grows strongly, with Q2 revenue up more than 12 times from the Q1 level. Second, profitability improved significantly. Adjusted gross margin rose to 15.4%, up 2.4 percentage points quarter-over-quarter. Operating profit turned positive for the first time, with adjusted operating margin reaching a record high of 4.0%. This reflects our continued efforts to capture AI opportunities, improve revenue quality and drive greater operating efficiency. Third, our customer mix continued to improve with stronger momentum both within and outside our ecosystem.

Revenue from the Xiaomi and Kingsoft ecosystem reached CNY 810 million, up 28% year-over-year and accounting for 26% of total revenue. Revenue from our top five non-ecosystem customers grew 51%. Our AI cloud business now serves a broad range of sectors, including internet services, Frontier AI Labs, embodied AI, autonomous driving, AI for Science, Fintech, gaming, and online video, to name a few. This diversified customer base supports continued growth while allowing us to allocate computing resources more flexibly and strengthen our pricing power and business resilience.

Zou Tao, Chairman and CEO, Kingsoft Cloud: 下面我向大家具体介绍2026年第二季度的业务进展。公有云方面，本季度实现收入23.6亿元，同比大幅增长45%。首先，小米AI全面赋能人车家全生态。金山WPS AI业务推进作为小米金山生态的唯一战略云平台，AI时代所带来的云服务业务增长潜力空前庞大。2026年6月，股东大会正式批准了我们再次提升来自小米关联收入的上限金额。2026年和2027年来自小米关联收入上限合计达100亿元，较上调前提升了39%。今年上半年来，自小米和金山的公有云收入同比增速达54%。其次，星流平台MaaS服务能力进一步强化。星流模型API服务持续完善多模型服务与企业级接入能力。目前星流平台已部署上线120款模型，主流新模型推出后做到同步上线，已接入230多家客户。第三，我们在新兴赛道深化与头部客户合作，面向头部具身智能客户和头部自动驾驶客户，完成大规模算力集群交付，稳定支撑其模型高效迭代。与AI for Science行业头部客户达成深度合作，保障其新业务快速拓展。

Tian Kaiyan, Senior Vice President, Kingsoft Cloud: Now let me walk you through our business progress in the second quarter of 2026. In public cloud, revenue reached CNY 2.36 billion, up 45% year-over-year. First, Xiaomi continues to expand AI across its human car home ecosystem. WPS AI continues to advance. As the only strategic cloud platform for the Xiaomi and Kingsoft ecosystem, we see substantial AI driven growth opportunities. In June, our shareholders approved a further increase in the annual caps for connected transactions with Xiaomi. The combined caps for 2026 and 2027 now total CNY 10 billion, 39% higher than before the adjustment. In the first half, public cloud revenue from Xiaomi and Kingsoft grew 54% year-over-year. Second, we further strengthened the MaaS capabilities of our StarFlow platform.

StarFlow now supports 120 models, with major new models launched on the platform in sync with their market release, and serves more than 230 enterprise customers. Third, we deepened cooperation with leading customers in emerging sectors. We delivered large scale computing clusters to leading embodied AI and autonomous driving customers, supporting rapid model iteration and expanded our cooperation with the leading AI for Science customers to support the growth of its new business.

Zou Tao, Chairman and CEO, Kingsoft Cloud: 航运云方面，本季度实现收入7.1亿元。公共服务领域，我们与长江南京通信管理局签约打造江海云，共同打造适配长江航运需求的专属数字化底座。我们还与武汉市数据局、武汉云达成战略合作，在算力网、数字政府、智能算力应用、产业生态打造等领域展开合作，夯实武汉数字政府与产业生态底座。数字健康领域，我们牵头国家重点研发计划生物与信息融合专项，打造云端一体化医学虚拟手术平台，成果已在全国30多家医院应用，树立了云厂商牵头医工信交叉国家级科研攻关的行业标杆。企业服务领域，我们与云上甘肃达成深度合作，以投建运一体化模式，共同建设并运营甘肃省级政务平台。

Tian Kaiyan, Senior Vice President, Kingsoft Cloud: In enterprise cloud, revenue reached RMB 710 million. In public services, we signed an agreement with the Nanjing Communications Administration of the Yangtze River to build Jianghai Cloud, a dedicated digital infrastructure platform for Yangtze River shipping. We also formed a strategic partnership with the Wuhan Municipal Data Bureau and Wuhan Cloud across computing resource interconnection, digital government, intelligent computing applications, and ecosystem development. In digital health, we are leading a project under the National Key R&D Program on Biology and Information Integration to develop a cloud-based virtual surgery platform, which has been deployed in more than 30 hospitals nationwide. In enterprise services, we deepened our cooperation with Yun Shang Gansu to jointly build and operate the Gansu Provincial Public Services Cloud under an integrated investment, construction, and operations model.

Zou Tao, Chairman and CEO, Kingsoft Cloud: 在产品技术方面，我们紧密围绕智算落地与AI应用的需求，升级全栈AI能力。本季度，星流MaaS平台围绕高并发推理需求，持续进行模型部署优化，多个核心模型吞吐能力显著提升，并支持按权限、用量与模型维度进行精细化管理。我们正式发布星元Agent Kit平台，提供涵盖安全沙箱、知识与记忆，及评测治理的全套底座，帮助企业快速搭建生产级AI agents应用。同时，我们将云产品周边AI化，将数据库、存储等组件变成为Agent可便捷调用的平台型产品。我们优化了星流训推平台，提升资源调度灵活性，围绕训练与微调场景，新增了物理队列、资源借用与回收，以及资源算力的灵活配置能力，极大地提升了多任务并发下的资源利用率，降低了研发团队的训练环境门槛与运营成本。面向私有化与国产化智算需求，银河平台完成了多款主流国产算力芯片的深度适配及全生命周期的可视化管理。

Tian Kaiyan, Senior Vice President, Kingsoft Cloud: In products and technology, we continued to upgrade our full stack AI capabilities for intelligent computing and AI application deployment. This quarter, we further optimized the model deployment on StarFlow MaaS for high concurrency inference, significantly improving throughput for several core models, and enabling more granular access, usage, and model-level management. We also launched AgentKit, providing secure sandbox, knowledge and memory management, and evaluation and governance tools to help enterprises build production-grade AI agents. At the same time, we are making general purpose cloud products such as database and storage easier for agents to access and use. We enhanced the StarFlow training and inference platform with more flexible resource scheduling, sharing, and allocation for training and fine-tuning workloads, improving utilization and reducing development and operating costs.

For private deployment of domestic AI infrastructure, our Galaxy Stack platform completed deep integration and full lifecycle visual management for multiple mainstream domestic AI chips.

Zou Tao, Chairman and CEO, Kingsoft Cloud: 展望未来，我们将继续深耕生态内外巨大的商业机遇，不断优化算力资产运营效率，在技术演进与应用落地的浪潮中，持续增强自身的盈利与造血能力，以坚实的业绩表现为客户、股东和社会创造长期可持续的价值。接下来有请公司CFO李奕为大家介绍二季度财务业绩。谢谢。

Tian Kaiyan, Senior Vice President, Kingsoft Cloud: Looking ahead, we will continue to capture opportunities both within and outside our ecosystem, improve the operating efficiency of our computing assets, and strengthen our profitability and cash generation capability amid AI industry tailwinds. We remain committed to creating long-term sustainable value for customers, shareholders, and society. With that, I will hand the call over to our CFO, Li Yi, who will review our second quarter financial results. Thank you.

Li Yi, CFO, Kingsoft Cloud: Thank you, Mr. Zhou and Mr. Tian, and thank you all for joining the call today. I will now discuss the second quarter financial results using CNY as currency. Before we walk through the details of financial results for the second quarter, I would like to highlight the following aspects. First, our quarter revenue reached over CNY 3 billion for the first time in our company history, up year-over-year for the last consecutive quarter. In particular, our AI cloud gross billing increased 82% year-over-year to CNY 1.33 billion, accounting for over 43% of our total revenue, versus 31% a year ago. This reflects a continued structural shift in our business mix towards AI. Second, our profitability has improved. Our adjusted gross margin was 50.4%, up 2.4 percentage points quarter-over-quarter and 0.5 percentage points year-over-year.

Our adjusted EBIT margin reached 36%, up from 17% in the same quarter last year and 82% last quarter. Notably, we returned to breakeven at operating income level this quarter and recorded an adjusted operating profit margin of 4%. These outcomes validate our ability to turn strong AI business demand into healthy profit growth. Third, we continue to invest to accelerate the build-out of our AI compute capacity. Capital expenditures together with right of use assets obtained through third-party financing and finance leases reached $3.3 billion this quarter, versus $2.9 billion in last quarter and $2.8 billion in the same quarter last year. Now, let me walk you through our financial results for the second quarter of 2026. This quarter, total revenue was CNY 3,072 million, up 31% year-over-year or 40% quarter-over-quarter.

Of these, revenues from public cloud services were CNY 2,358 million, up 45% from CNY 1,624 million in the same quarter last year. Revenues from enterprise cloud services reached CNY 740 million, compared with CNY 724 million in the same quarter last year, down slightly by 1% year-over-year. Total quarter revenues was CNY 3,606 million, representing a 30% year-over-year increase, mainly due to a continued investment in AI cloud infrastructure. IDC costs increased by 23% year-over-year from CNY 803 million to CNY 990 million this quarter. The increase was mainly due to the increase of rack services. Depreciation and amortization costs increased by 75% year-over-year from CNY 752 million in the same quarter of 2025 to CNY 964 million this quarter, largely due to the depreciation of newly acquired and leased AI infrastructure, including servers and network equipment.

Solution development and services costs increased by 4% year-over-year from CNY 564 million in the same quarter of 2025 to CNY 586 million this quarter. The modest increase was mainly due to higher costs incurred in AI transformation in solution development and delivery. Fulfillment costs and other costs were approximately CNY 66 million in total this quarter versus CNY 92 million in the same quarter last year. Our adjusted gross profit for the quarter was CNY 472 million, increased by 35% year-over-year and 34% quarter-over-quarter. Adjusted gross margin was 50.4%, up from 14.1% in the same quarter last year and from 13% last quarter. The increase was driven by higher gross margin in public cloud business, thanks to strong AI demand.

On the expense side, excluding share-based compensation cost expenses, our total adjusted operating expense were CNY 391 million, a decrease from CNY 561 million in the same quarter last year and from CNY 455 million last quarter, mainly reflecting our disciplined cost and expense control. Of which our adjusted research and development expenses were CNY 184 million, up 1% year-over-year. Adjusted selling and marketing expenses were CNY 102 million, down 7% year-over-year. Adjusted general and administrative expenses were CNY 104 million, down 61% year-over-year, largely due to lower credit loss expenses. Our adjusted operating profit was CNY 124 million, turning profit from adjusted operating loss of CNY 166 million in the same period last year. This improvement was primarily driven by the expansion of our revenue scale, higher gross margin, and enhanced operating efficiency.

Adjusted operating profit margin was 4% this quarter, compared with -7.1% in the same period last year and -2.2% last quarter. Our adjusted net loss was CNY 6 million, down from CNY 300 million in the same quarter last year and CNY 237 million in previous quarters. Our non-GAAP EBITDA profit was CNY 1,100 million, increased by 171% from CNY 406 million in the same quarter last year. Our non-GAAP EBIT margin achieved 36%.

Tian Kaiyan, Senior Vice President, Kingsoft Cloud: compared with 70% in the same quarter last year and 82% last quarter. It was mainly due to our improving gross profit as well as higher depreciation costs in our data centers as we accelerate our AI computing capacity build-out. As of June 30, 2026, our cash and cash equivalents totaled CNY 4,674 million, compared with CNY 4,904 million as of March 31, 2026. The modest decrease was mainly due to our continued investment in AI infrastructure to support business growth. Looking ahead, we aim to capitalize on the explosive growth in AI demand by further investing in infrastructure, expanding our product and service offerings, managing credit and liquidity risk, and improving operating efficiency. We remain committed to our all-in AI strategy and continue to deliver high-quality growth to our shareholders. Thank you all.

Jacky Zhou, Senior Director of Capital Markets, Kingsoft Cloud: This concludes our prepared remarks. We will now begin the Q&A session. If possible, please ask your questions in both Mandarin and English. Operator, please proceed.

Operator: Thank you. We will now begin the question and answer session. If you wish to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. We will take our first question. Your first question comes from Liping Zhao from CICC. Please go ahead. Your line is open.

Liping Zhao, Analyst, CICC: 周总、李总，晚上好，感谢接受我的提问。首先恭喜公司这个季度获得了OP层面的一个转正。那我这边有两个问题，其实都是关于我们星流MaaS平台的。最近关于开源模型能力提升的讨论也挺多的，那请问这个对公司的MaaS业务的影响，那么基于对咱们自己平台的观察，目前用量增长的趋势是怎么样的？主要来自于哪些典型的用例？第二个问题是，考虑到整体星流这个平台，它的投资回收周期可能更短，不知道公司是否会向这块业务去倾斜更多的资源？

Good evening, Ms. Zhou and Ms. Li. Thanks for taking my questions. I got two questions on your MaaS business. First, how will improvements in open source model capabilities affect the company’s MaaS business? Based on your observations, what is the current usage growth trend and which use cases are driving it most? Second, given the payback period for the MaaS business might be shorter, will the company allocate more resources to it? Thank you.

Liu Tao, Senior Vice President, Kingsoft Cloud: 好，这个问题我来回答一下。首先来看模型能力提升带来的几个变化。一方面是说国内的web coding需求的整个市场盘子是非常大的，需求也非常多。那么传统意义上来看，我们看到大量的客户是在使用或可能会使用海外的模型。随着像GLM 5.3这些模型的能力提升，我们可以看到在web coding领域存在国产模型对海外模型的替代效应，所以这是一个对国产模型需求的增长。另一方面，agentic的渗透性在提高，越来越多的场景在使用agentic了，包括我们很多客户的agent开始上生产了，所以它引出了我们的agentic的产品。另一方面，在agent的使用上，我们可以看到两种分化的需求，一方面是在做复杂问题解析的时候，可能会倾向于用Kimi K3包括GLM 5.3这样的新型模型。但是当它需要去完成日常任务的时候，我们可以看到客户会倾向于选择最具性价比的模型。就最近大家肯定看到DeepSeek的斩杀线。所以像DeepSeek-V4-Flash，包括像MiMo-V2-Flash这些模型，在日常工作场景中的调用量我们看到是有增长的。所以这是第一个问题，我们的这个增长趋势来的主要是哪些东西。另一方面来说，MaaS业务和算力业务来说，实际上两者是各自有特性的。对于算力业务来说，当我们把一台机器售卖出去的时候，它的售卖率就是100%。并且通常我们签合约都是签长合约，所以这个业务的安全性是相对很高的，并且它的利润水平是相对高并且固定的。那么MaaS业务它涉及到了市场的价格竞争的波动，新模型的替代，包括运营水平以及多方面因素的影响，所以它的利润率是一个变动的数值。所以说这两者其实对我们来说希望是一个平衡性的选择。一方面我们希望两者都发展，另一方面，我们也会在两者这个业务之间互相作为备份。比如当我们的算力遇到特殊的情况的时候，我们可以拿算力业务去做推理。反过来说，当我们的推理掉量的时候，我们也可以把推理的业务去转向算力业务。所以整体来说是个平衡发展的策略。谢谢。

Tian Kaiyan, Senior Vice President, Kingsoft Cloud: Okay, just to quickly translate. This answer comes from our SVP, Lisa Liu. In relation to your first question, the development in open source large language models has mainly three impacts. Number 1 is that we are seeing very big demand coming from web coding and traditionally, foreign models have been taking the lead in this area. However, once we have seen the launch of GLM and K3, these kind of high-performance models, we are seeing increasingly users from mainland China adopting and using this made-in-China large language model. Secondly, the increasing use of agentic scenarios also brought change to our business. With that, we have launched, as mentioned in the prepared remarks, the AgentKit product to satisfy such needs.

Thirdly, it is worth mentioning that in terms of day-to-day routine tasks and workloads, the choice usually is the price for value kind of models, which are essentially the Chinese models. That is why this development open source large language model is actually beneficial for our business. Your second question regarding the balance between MaaS business and the computing power. We basically have different business models for the two business. For computing power business, essentially, once we sell the computing power, the utilization is by nature 100%, and we usually come with long-term contracts to secure the utilization throughout a prolonged period of time, and therefore it is relatively safe, so to speak.

But for the MaaS business, it is subject to quantity factors, including the fluctuation of the token price, the launching of new models, which the customers might prefer to use, and also the operating efficiency that we are able to achieve in doing a MaaS business. Therefore, we generally balance these two business models and hope to have each one of them complement the other one. So we generally dynamically evaluate these two business and try to decide how much resources to allocate. Thank you.

Liping Zhao, Analyst, CICC: Thank you, Taozhong. That is very helpful.

Operator: Thank you. We will take our next question. Next question comes from Wenting Yu from CLSA. Please go ahead. Your line is open.

Wenting Yu, Analyst, CLSA: Hey, Taozhong. The first question is that since June, how has the chip procurement progressed in recent months, and what is your latest full year CapEx guidance? The second question is about the enterprise cloud. This second line of revenue has decelerated in the past two quarters. How should we think about the full year enterprise cloud growth and what is the AI transformation and medium-term positioning for this segment? Thank you.

Tian Kaiyan, Senior Vice President, Kingsoft Cloud: The first question is about supply chain. Actually, every time we release our quarterly results, everyone is very concerned about it. I believe everyone has also observed that three years ago, when AIGC started to develop, supply chain tensions have been accompanying the business. This supply chain tension, as we look at it will not be short-term, it should last for a relatively long time. We should look at it as a new normal. That is the first point. The second point is that in the past few years of actual development, we have all observed that the development of China’s AI industry and computing has been advancing at a very fast pace, including our business, which also reflects this point. From our perspective, the most important characteristic is that we are constantly increasing the number of our partners and suppliers.

At the same time, we are also speeding up our matching on the technical level to increase the diversity of our supply chain. You should also have noticed that now that the company has listed domestic chips, from their performance, capacity to matching optimization, they are all improving rapidly. Especially in the field of inference, it has been widely applied and recognized. The third point is that because there is actually a certain seasonality in the supply market, there may be a relatively large amount of one-time procurement, and then the volume and rhythm may not be very continuous. If we look at it on a monthly basis, it is not a linear development. The fluctuation in the amount of procurement will be relatively large. But if we look at it on the scale of the whole year, it should be relatively close to our expectations.

As for the specific CapEx figures, you can ask our CFO to answer that.

Allow me to quickly translate. The answer comes from our FP team, Mr. Kaiyan Tian. Three points. Number one, actually, since 2023, it has been three years and the market has always been hearing voices about the limited supply. I would say this is actually a new norm. The supply difficulty is actually a long-term kind of situation. Secondly, we should also be aware of the fact that despite of those constraints, financial constraints, the Chinese cloud computing or AI industry development has not been restricted or largely restricted by that. The way that we actually tackle with such situations is that we try to increase the number of business partners that we work with. We try to increase the number of suppliers we work with, and we also work with increasing the compatibility of made in China chips.

You are all very much aware of the. Recently, many of the made in China chips are becoming public, and they are particularly good in use cases such as model inference. Number three, I would like to say that when you look at the CapEx number from a month-to-month basis, it is usually quite volatile. I have to say that the purchasing number, because of it is usually a large chunk of money in a relatively small number of purchases. So the purchasing number, if you look at it by monthly basis, is actually not a linear number. I would say that for our whole year CapEx estimate, it should still be in line with what we have been expecting and our CFO, Li Yi, should be able to give you more details in that regard.

Li Yi, CFO, Kingsoft Cloud: Hi, Tingting. Our CapEx venture includes capitalized assets through lease arrangement, reaching CNY 6.2 billion in the first half of 2026, accounting for over 75% of our full-year CapEx master year. July’s data cannot fully represent the third quarter of all trends, it clearly shows tangible growth acceleration. Accordingly, we maintain our full-year CapEx base case unchanged at CNY 15 billion. Thank you, Tingting.

Wenting Yu, Analyst, CLSA: Thanks, Tingting. Over to you, Song.

Operator: Thank you. We will take our next question.

Jacky Zhou, Senior Director of Capital Markets, Kingsoft Cloud: Oh, sorry. We need to continue for another question.

Operator: Apologies.

Wenting Yu, Analyst, CLSA: Okay.

Tian Kaiyan, Senior Vice President, Kingsoft Cloud: Okay. This answer comes from our VP, Li Yijun. Generally, although we are seeing relatively slow growth in the enterprise cloud segment, I would say it is not the right way to look at it from the linear extrapolation perspective. I will give you three reasons. I think number 1, just to explain why we are thinking of looking at relative weakness in this regard, is that the upstream supply pricing hike, which changed quite significantly in recent quarters, has affected our prospective customers, essentially the SOE companies and also the government agencies. They have to frequently adjust their budgeting quota, which delays their decision-making process. That is number 1. Number 2, you are all quite aware that the seasonality in enterprise cloud business is quite strong. Usually, the delivery and the revenue recognition are concentrated in the second half of every year.

We have actually quite a strong pipeline to deliver in second half of the year. Thirdly, this is actually a result of a proactive adjustment of our business structure, namely proactively from the project-based business model to operating based business model, where operating business model from a financial reporting perspective is automatically classified into public cloud. This is not simply as it would seem, as a weakening of the enterprise cloud business. That is the three points I would like to offer. Thank you. Thank you.

Operator: Thank you. We will take our next question. Your question comes from Timothy Zhao from Goldman Sachs. Please go ahead. Your line is open.

Timothy Zhao, Analyst, Goldman Sachs: 好的，多总、李总晚上好，感谢接受我的提问啊。那我这边有两条问题想要请教一下。第一个可能还是回到我们的这个星流MaaS的业务啊，想请教一下我们金山云平台相对于市场上面其他的一些竞争对手，我们的定位或者是场景，或者竞争优势具体有哪些？那关于我们的MaaS服务的收入确认和利润率的情况，可不可以再更仔细地分享一些？这是第一条问题。那第二条问题是关于我们的这个AI云服务的一些价格的变化，那可不可以关于这个分享一下我们过去几个月看到的这个AI云服务的这个价格变化的趋势，以及行业价格情况是怎样的。那我们也宣布了一些这个加价或者是减少折扣的一些动作，那我们现在看到客户的反馈是怎样的？那能不能帮我们量化一下整个价格因素对于AI云的这个收入增速的一些影响？那我很快翻译一下。Thank you very much for taking my question.

My first question is regarding the MaaS business. Just wondering, compared to the peers in the market, how do you think about the Kingsoft Cloud competitive advantage in the MaaS services in terms of the application scenarios, etc.? Could you share more about the revenue recognition and the profitability profile of the MaaS service business? My second question is regarding the overall pricing trend in the AI cloud business. Just wondering if you can share what is the latest trend over the past couple months, and what have you heard from the customers after you announced a certain price hikes or discount reduction over the past few months, and whether you are able to quantify the impact from the price hike to your overall AI cloud revenue growth? Thank you.

Liu Tao, Senior Vice President, Kingsoft Cloud: 我来回答一下这两个问题。第一个是说关于我们这个星流MaaS平台的定位优势问题。首先竞争定位，我们在市场算是一种比较独特的定位，第一，我们并没有自研的大模型；第二，就是我们又是一家云厂商。我想咱们在市场上看到的做这个MaaS的场景有几种客户，一种是做大模型的云厂商，比如说像阿里等等，包括百度。另一种是最近大家看到像硅基流动之类的这个所谓的纯的云端Token工厂。我想我们可能和他们都互相有一些区别。首先我们没有自研的大模型，那么在售卖模型的政策指导上来说，我们始终指导着我们的销售和业务团队去销售最好的模型，客户最喜欢的模型，比如说GLM-5.3，比如说K773，包括可能在视频生成领域的像C+，或者是包括MiniMax-H3。所以这一方面，我们会根据客户的需求去售卖客户更喜欢的模型，而不会捆绑在说我们必须要卖某个模型的政治任务上，我想这个在竞争策略上来说是一种灵活性。第二，对于这个云端Token工厂来说，其实Token的生产有一个非常重要的生产要素是算力，那么掌握低成本算力的公司才可以在整个MaaS的生产链上赚到钱。如果是纯粹做软件的生产去租赁算力的话，那么可能大量的利润会被算力的供给方占有。这一点我想大家可以关注一下，像海外NCP的一张卡的卡时，然后再看看对应的售价，就可以测算出来一个纯粹的不掌握资源的厂商去做推理，它能够赚多少钱。好吧，这是我觉得在MaaS平台的定位优势上。另外关于，要不你先翻译这个问题。

Tian Kaiyan, Senior Vice President, Kingsoft Cloud: In relation to your question about the positioning, we do have a unique positioning in the MaaS business. Namely, we are different from some of the full stack cloud providers, which they have their in-house or proprietary models. We do not have such models, and therefore, correspondingly, we do not have to sell those large language models that our affiliated companies have to offer. As a result, we are able to actually sell and we actually encourage our sales team to sell the models that our customers like the most. For example, the GLM, etc. That is number one. Secondly, it is quite important in today’s market to have your proprietary or your own computing power, which is the only way that you can actually secure significant profitability in this business.

Liu Tao, Senior Vice President, Kingsoft Cloud: 再讲关于价格变化。大家也看到，我们在存储和算力相关的领域其实都显著地提高了价格，在存储上我们的可能提高的比例也非常大。那么存储在这个计算场景下，它实际上是随着计算的增长而跟着增长。所以说客户们对于存储的涨价并不感觉很在意，所以我觉得目前我们看到都是很轻易地接受了我们的涨价。那么在这个涨价过程中，一方面我们追上了我们的成本上涨，另一方面，我们也还是保持我们的利润，或者是提升了我们的利润率。另一方面，算力当然也是同样的原理，就是算力的业务的机器的价格肯定是在增长的。但是我们因为我们的能力的独特性，那么一方面是我们会提供跟随着算力价格增长的指导和价格，但是我们会保持毛利率，甚至会提升我们的毛利率。另一方面，我们同时也会接受客户托管的算力，由我们来这个组织和运营运维。那么在本季我们也见到了这样的场景逻辑，那么在这种场景下，我们这个业务的毛利润显然是更高的。就这些。

Tian Kaiyan, Senior Vice President, Kingsoft Cloud: In relation to your question about the price hike, there are basically two products or solutions that we have employed increasing price. Number one, that is storage, and number two, that is computing power. I will talk about them respectively. In terms of storage, the incremental amount of storage actually comes with the intelligent computing demand. That is a relatively small portion of the intelligent computing overall ticket size. Therefore, in the vast majority of the customers that we negotiated with, they relatively easily accepted such a price hike. In which case, as a result, we are actually able to, in some cases, not only pass through the increase in our cost, but also increasing our profitability in that scenario.

Number two, in terms of computing power, because of our specific capabilities, including pack capabilities, as well as the operating maintenance and network capabilities, again, we are able to pass through that cost hike into our customers. In some of the cases, we also increased our profitability. In this quarter, we have also some projects which we are doing managed services, which is an asset-light business model. We look forward to seeing more of that coming to and reflecting the financial statements. Thank you.

Operator: Thank you. We will take the next question. Your next question comes from Wei Zhang from UBS. Please go ahead, your line is open.

Wei Zhang, Analyst, UBS: 好的，谢谢。管理层晚上好，恭喜这个季度非常强劲的业绩，也感谢接受我的提问。那我有一条问题想请教。刚才咱们谈到了咱们平台上MaaS的定位的差异化，那么我想追问一下，考虑到其他云场的资源模型和用户生态，我们应该怎么思考咱们平台在云行业的长期定位，以及可实现的这个稳定的利润率？那我也很快自己翻译一下。Good evening management, congrats on a solid quarter and thank you for taking my question.

Considering the proprietary models and user ecosystem of other cloud providers, how should we think about our long-term positioning in the cloud market and the sustainable margin level down the road? Thank you.

Liu Tao, Senior Vice President, Kingsoft Cloud: 我来回答一下这个问题。其实刚才我们也提到了，MaaS服务它其实一方面要提供顶尖的模型，另一方面要提供稳定可靠的服务。那么作为一个中立厂商，我们始终会和各家原厂保持良好的关系，并且在第一时间推出这些模型的线上服务。并且我们自有资源和原厂的资源组合在一起，能够给客户提供一个高可用、高可靠的云上的MaaS服务。那我想这一点来说，我们在这方面是没有任何所谓的心理负担的。另一方面，其实我们可以看到，因为我们手里所掌握的资源的总量来看，通常情况下，我们在SLA方面能够给客户提供更高的保障。我想这一点，云厂商大规模的基础设施是对这个MaaS业务的一个更好的支撑。那从利润预期的角度讲，一方面我们会和原厂配合，比如说我们和原厂可以配合合作在模型推理框架，包括一些模型在发布时候的权重，未披露的权重的一些合作，来提升我们的推理效率。另一方面，我们也始终长期地在投入推理优化本身的工作。目前我们的团队，其实在多个开源模型上，我们都已经验证了我们能够达到甚至或者接近原厂的推理的效率。所以整体来说，这个业务的毛利水平，不管模型怎么更新，我认为我们的团队有这个能力跟住新模型的推理效率，并且能够保持一个良好的毛利率。谢谢。

Tian Kaiyan, Senior Vice President, Kingsoft Cloud: We believe that for MaaS or cloud AI cloud service provider, it is important to be able to offer the top models which the customers like and also stable services to our customers. As mentioned, as a neutral cloud player, we are able to be in good relations with all of the top model providers, large language model labs, and be able to provide the best model according to our customers’ demands. Also, based on our technology capabilities, we are able to provide highly available and highly reliable services to them out of the SLAs that we signed with them. I think thirdly, in relation to the profitability question you asked, it is important to work closely with the LLM labs, for example, to optimize the inference of those models.

That would include, for example, working with them based on the undisclosed weighting of the models to increase our model inference efficiency. In some of the cases, we are able to get to a very close level or even reach the same level of the inference efficiency coming out from the LLM companies themselves. Thank you.

Operator: Thank you. We will take our final question. Your final question comes from Ying Lu from Morgan Stanley. Please go ahead, your line is open.

Ying Lu, Analyst, Morgan Stanley: 非常感谢提问的机会。首先恭喜公司的亮丽的业绩。那我这边的问题是想问一下公司现在看到在算力和PaaS两种商业模式下的投资回报或者ROIC的水平，以及回报的最近的一些边际变化是向上还是向下的？谢谢。Let me translate my question. I would like to ask under two business models, computing power leasing and MaaS, what is the ROIC for these two business models, and what is the marginal change for the ROIC? Thank you.

Li Yi, CFO, Kingsoft Cloud: Thank you, Liu Yang. At this stage, we do not disclose separate ROIC of MaaS and AI computing power services. ROIC varies across projects driven by payback cycles, gross margin, fixed assets and depreciation policies. Overall, MaaS bears much better probability than AI computing power services at this stage. We have seen continued improvement in operating leverage. As our AI business scales up, fixed cost are steadily diluted, and our trailing 12 months adjusted operating profit has turned positive, driving a gradual recovery in our overall ROIC. We adhere to a demand-driven and disciplined AI investment strategy with a strong focus on capital efficiency. With the continuous business structure optimization and maturing AI commercialization, I think our overall ROIC will keep improving steadily.

Ying Lu, Analyst, Morgan Stanley: Okay, thank you.

Operator: Thank you. There are no further questions. Apologies. Concludes the question and answer session. I will hand back for closing remarks.

Jacky Zhou, Senior Director of Capital Markets, Kingsoft Cloud: Okay, thank you all for joining us today. If you have any further questions, please contact our IR team. So have a good evening. You may now disconnect. Thank you.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.