UBS analyst Wei Xiong has initiated coverage on Kingsoft Cloud (KC, Financial) with an optimistic outlook, upgrading the price target to $14 from the previous $12.50. UBS believes that Kingsoft Cloud is well-positioned to capitalize on the increasing demand for large language model training and inference. The company is projected to experience a turnaround in its public cloud sector, with revenue expected to grow at a compound annual rate of 20% between 2025 and 2027.
According to the research note, Kingsoft Cloud's non-GAAP operating margin is anticipated to reduce its losses before achieving profitability in 2027. This improvement is attributed to a greater proportion of revenue from AI services and cost efficiencies achieved through scaling. Overall, the new evaluation suggests a promising future for Kingsoft Cloud as it adapts to market demands and enhances its financial performance.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 7 analysts, the average target price for Kingsoft Cloud Holdings Ltd (KC, Financial) is $16.03 with a high estimate of $19.00 and a low estimate of $12.70. The average target implies an upside of 39.65% from the current price of $11.48. More detailed estimate data can be found on the Kingsoft Cloud Holdings Ltd (KC) Forecast page.
Based on the consensus recommendation from 8 brokerage firms, Kingsoft Cloud Holdings Ltd's (KC, Financial) average brokerage recommendation is currently 2.0, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Kingsoft Cloud Holdings Ltd (KC, Financial) in one year is $4.57, suggesting a downside of 60.19% from the current price of $11.48. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Kingsoft Cloud Holdings Ltd (KC) Summary page.
KC Key Business Developments
Release Date: March 19, 2025
- Total Revenue: RMB2.2321 billion, a 29.6% year-over-year increase.
- Public Cloud Revenue: RMB1.4098 billion, up 34% year over year.
- Enterprise Cloud Revenue: RMB822.3 million, up 22.7% year over year.
- Non-GAAP Operating Profit: Turned positive for the first time, with a margin of 1.1%.
- Non-GAAP Gross Profit: RMB427.7 million, up 63% year over year.
- Non-GAAP Gross Margin: 19.2%.
- Non-GAAP EBITDA Margin: 16.1%, a year-over-year increase of 17.7 percentage points.
- AI-Related Business Revenue: RMB474 million, nearly 500% year-over-year growth.
- Revenue from Xiaomi Kingsoft Ecosystem: RMB493 million, up 78% year over year.
- Cash and Cash Equivalents: RMB2.6488 billion as of December 31, 2024.
- Operating Cash Flow: Net inflow of RMB570.2 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kingsoft Cloud Holdings Ltd (KC, Financial) achieved a significant milestone by turning non-GAAP operating profits positive for the first time since its inception in 2012.
- The company reported a 30% year-over-year increase in total revenue for Q4 2024, reaching RMB2.23 billion, outpacing other listed public internet cloud companies.
- AI-related business saw substantial growth, with gross billing increasing by nearly 500% year-over-year, contributing 34% to public cloud revenue.
- Revenues from the Xiaomi Kingsoft ecosystem increased by 78% year-over-year, highlighting strong strategic partnerships and growth potential.
- The company has made significant advancements in AI, with AI-related business contributing significantly to revenue and positioning Kingsoft Cloud as a leader in the AI cloud computing industry.
Negative Points
- Despite the positive financial performance, Kingsoft Cloud Holdings Ltd (KC) faces challenges in scaling AI inference demand outside the Xiaomi and Kingsoft ecosystem.
- The company has not yet seen large-scale single customer demands for AI services, which could impact future revenue growth.
- There are concerns about the potential impact of stringent supply-side restrictions on the company's capital expenditure plans.
- The pricing strategy for AI-related services remains sensitive and confidential, which may create uncertainty for investors.
- The company is still in the early stages of transitioning from traditional IT cloud services to AI cloud and solution services, which may involve risks and challenges.
