Kingsoft Cloud Holdings Limited

Good day and thank you for standing by. Welcome to Kingsoft Corporation's third quarter 2025 earnings conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. And I'd like to hand the conference over to your first speaker today, Ms. Yinan Li, IR Director of Kingsoft. Please go ahead.

Thank you, Operator. Ladies and gentlemen, good evening and good morning. I would like to welcome everyone to our 2025 Third Quarter Earnings Call. I'm Yinan Li, the IR Director of Kingsoft. I would like to start by reminding you that some information provided during the earnings call may include forward-looking statements, which may not be reliable in the future for various reasons. These forward-looking statements are based on our information and information from other sources, which we believe to be reliable. Please refer to the other publicly disclosed documents for detailed discussion on risk factors which may affect our business and operations. Additionally, in today's earnings call, the management will deliver prepared remarks in both Chinese and English. A third-part interpreter will provide consecutive interpretation into English. During the Q&A session, we will accept questions in both English and Chinese with alternating interpretation provided by the third-part interpreter. On-site translation is forwarded to facility communication during the conference call. In case of any discrepancy between the original remarks and the translation, the statements made by the management will prevail. Having said that, please allow me to introduce our management team who joined us today, Mr. Zhou Tao, our executive director and CEO, and Ms. Li Yi, our acting CFO. Now, I'm turning the call to Mr. Zhou.

Hello, everyone. Welcome to the third quarter of the third quarter of the fifth quarter of the current year. This quarter, the group focuses on the main business, and continues to expand its core competitiveness. Jinshan Office focuses on the strategic focus of AI cooperation and blockchain, and continues to deepen the landing scene of AI applications, strengthen brand and ecological construction, and promote the diversification and globalization of online gaming business. The science fiction mecha game, The Renderer, is globally online,

Hello, everyone, and thank you for joining Kingsoft's 2025 third quarter earnings call. This quarter, we continue to prioritize strengthening our co-businesses with AI collaboration and internationalization as its strategic priorities. Kingsoft's office group continues to deepen AI application scenarios and strengthen its brand and ecosystem development. Our online games business advanced the general experience and extended its global reach, notably with the global launch of the 5.5K Metabricks.

This quarter, the group's total revenue of RMB 24.19 billion fell 17% at the same time, and increased by 5% at the same time. Among them, office software business maintained a steady growth trend, The rapid growth of the IPS software business, the rapid growth of the IPS 365 business, and the growth of the IPS personal business. Games and other business decline, mainly due to the decline in computer sales and the decline in income from the market. The new game, Uncharted, is in the early stages of development and is still in the process of establishing market influence.

In the third quarter, Kingsoft's total revenue reached RMB 2.019 billion, representing a year-on-year decrease of 17% and a quarter-on-quarter increase of 5%. Specifically, our office software and services business maintained a steady growth momentum. This growth was supported by robust momentum in WPS software business. rapid growth of WPS 365 business, and steady growth in the WPS individual business. Revenue from online games and other businesses decreased, primarily due to low revenue contributions from certain exacting games. And because the new game is still in its early development phase and gradually built its market influence.

Next, I will give you a detailed introduction. the performance of the third quarter of 2025. In the third quarter, the financial indicators of Jinshan Office are fully optimized, profit and quality continue to be optimized, and revenue will accelerate in the first two quarters. In the personal business of ATS, the land promotion of new AI products and the fine-tuning operation of the domestic and foreign markets have motivated ATS AI to become more popular, and the number of paid users and user value have been steadily improved. The net income is 8.99 billion yuan, which is 11% of the total growth. As of September 30, 2025, WPS Office's global operating equipment value is 6.69 billion yuan, which is 9% of the total growth. WPS Office PC version's operating equipment value is 3.16 billion yuan, which is 14% of the total growth. WPS Office mobile version's operating equipment value

Now I will walk you through the business highlights of the third quarter of 2025. In the third quarter, Kingsoft's office group demonstrated overall improvement in its financial indicators, with continuously optimized profitability and a significant acceleration in revenue compared to the previous two quarters. For WPS individual business, The rollout and promotion of new AI-powered products together with offline operations in both domestic and international markets drove a steady increase in WPS AI monthly active users paying subscribers and user value. Revenue reached RMB 899 million, up 11% year-on-year, As of 13 September 2025, WPS Office's global monthly active devices reached 669 million, an increase of 9% year-on-year. Specifically, WPS Office PC version's monthly active devices grew by 14% to 316 million, while the mobile version's monthly active devices increased by 5% to 353 million.

In terms of our PS365 business, we continue to improve our cooperation with AIS to limit products, and cover all performance of private and local state-owned enterprises and customers. Product power and industry influence continue to increase, extending the trend of high-speed growth of the business, with a revenue of 2.0 billion yuan and a growth rate of 72%.

For WPS365 business, we continuously enhanced our collaboration and AI product offerings, achieving significant progress in expanding our customer base among private enterprises and local stand-owner enterprises, and strengthening our product competitiveness and industry influence. This segment continued its high growth trend, with revenue reached RMB 201 million. a significant increase of 72% year-on-year.

In terms of software use in the day-to-day market, Xinchang's bidding process is accelerating, and its AI products are still being delivered. Currently, it has been widely promoted in the central and local party-government institutions, and has been digitized for Xinchang customers. Its revenue is up to RMB3.91 billion, and it has increased by 51%.

The WPS software business saw acceleration progress in localization projects. Our AI-enabled products for government scenarios continue to integrate and deploy across government agencies, supporting the digital and the intelligent transformation of localization customers. Revenue for this segment reached RMB 391 million, up 51% year-on-year.

For the online gaming business, QiJian Game's official website will be launched on the 16th of August, and will be released on the 10th to introduce innovative gameplay. The 20-dollar game will be released in the near future, and will rely on long-term content updates and user operations to stabilize the core user community. The sci-fi mecha game, Uncensored, will continue to improve gameplay and operation mode after it is released.

In the third quarter, for our online games business, our flagship game, GX3 Online, celebrated its 16th anniversary in August, followed by the launch of its annual expansion pact in October, which delivered innovative new game players. The anime shooter game Snowbreak Containment Zoo maintained its core user base through long-term content updates and user operations. Sci-fi microgame Metroid Break has been continuously optimizing its gameplay and operations to enhance the player experience. Additionally to international IP games, Goose Goose Duck and Angry Birds are expected to launch this and next year in China respectively.

Looking forward to the future, Jinshan Office will continue to surround the international core strategy of AI cooperation, rely on core product governance, and cover the needs of all scenarios of individual users to large companies. Game business will focus on product content development and globalization, continue to strengthen classic IP vitality, and promote growth and sustainable development of new products.

Looking ahead, Kingsoft Officeworks will stay committed to its whole strategy of AI collaboration and internationalization, meeting the scenario needs from individual users to enterprises through its core product portfolio. The online games business will focus on developing high-quality content and expanding global publishing, enhancing the long-term vitality of its classic franchises. while we are driving the growth and sustainable development of new general.

Now I will read it out.

Thank you, Sozo and Elan. Good evening and good morning, everyone. I will now discuss the third quarter operational and financial results using R&B as currency. Real news decreased by 17% year-over-year and increased by 5% quarter-over-quarter to $2,419 million. The real news rate was 33% for office software and services business and 37% for online games and other business. Renewal from the office software and services business increased by 26% year-over-year and 12% quarter-over-quarter to $1,521 million. The increases were mainly attributable to the growth of WPS software, WPS 365, and WPS individual business of KSoft Office Group. The remarkable increase of WPS software business was primarily driven by the robust orders of localization projects. The rapid growth of WPS 365 business was mainly due to our continuous improvement in collaboration and AI products, as well as expansion of our customer base among private and local state-owned enterprises. The state growth of WPS in virtual business was primarily attributable to increased numbers of paying subscribers, supported by our active promotion of AI features and refined operations. Revenue from the online games and other business decreased by 47% year-over-year and 6% quarter-over-quarter to $898 million. The decreases primarily reflected lower revenue from certain existing games, partially offset by the newly contribution from newly launched games. Cost of revenue increased by 3% year-over-year and 5% quarter-of-quarter to $475 million. The year-over-year increase was primarily due to higher server and bandwidth costs, greater travel costs, as well as increased service costs of institutional clients. along with the business growth of KeySort Office Group, partially offset by the lower channel costs of online games business. The quarter-of-quarter increase was primarily due to higher channel costs and increased server and bandwidth costs, both associated with online games business. World profit decreased by 21% year-over-year and increased by 5% quarter-of-quarter, to around $944 million. Gross profit margin decreased by 4 percentage points year-over-year and kept flight quarter-over-quarter to 80%. The year-over-year decrease was mainly due to the decline in the revenue contribution from certain self-development high margin gains. Research and development costs increased by 4% year-over-year and 5% quarter-of-quarter to $900 million. The year-over-year increase was mainly attributable to higher investments in AI and collaboration products, partially offset by lower accrued performance-based bonus. The quarter-of-quarter increase was mainly driven by the increased headcount and AI-related expenses of consort office groups. Selling and distribution expenses increased by 55% year-over-year and 33% quarter-over-quarter to $564 million. The increases primarily reflected higher promotional and advertised expenditures associated with online games business. Administrative expenses increased by 7% year-over-year and 2% quarter-over-quarter to $178 million. The year-over-year increase was mainly due to higher personal related expenses and increased depreciation arising from the completion and operation of our Wuhan campus, which was constructed to support the group's long-term development. Share-based compensation costs increased by 37% year-over-year and 30% quarter-over-quarter to $80 million. The increases were mainly due to the ground awarded shares to the selected employees of certain subsidiaries of the company. Operating profit before share price compensation costs decreased by 70% year-over-year and 21% quarter-over-quarter to $357 million. The other gains were $13 million for this quarter, compared with losses of $63 million and gains of $443 million for the third quarter of 2024 and the second quarter of 2025, respectively. Shares of profits of associates of $5 million were recorded for this quarter. compared with losses of $428 million and $170 million for the third quarter of 2024 and the second quarter of 2025. Income tax expense was $66 million for this quarter, compared with income tax expense of $31 million and $104 million for the third quarter of 2024 and the second quarter of 2025 respectively. As a result of the reasons discussed above, profit attributable to owners with a parent was $213 million for this quarter, comparable profit of $413 million and $532 million for the third quarter of 2024 and the second quarter of 2025. Profit attributable to owners with a parent, including share price compensation costs, was $277 million for this quarter, compared with profit of $453 million and $570 million for the third quarter of 2024 and the second quarter of 2025, respectively. The net profit margin, including share-backed compensation costs, was 11%, 16%, and 25% for this quarter, the third quarter of 2024, and the second quarter of 2025. The group had a strong cash position towards the end of the reporting period. As of 30 September 2025, the group had cash resources of $26 billion. Net cash generated for operating activities was $494 million. $1,387 million and $767 million for this quarter, the third quarter of 2024, and the second quarter of 2025. Capital expenditure was $72 million, $109 million and $81 million for this quarter, the third quarter of 2024, and the second quarter of 2025. That's all for the introductions of our operational and financial results. Thank you all. Now, we are ready for the Q&A section. Thank you.

Thank you. We will now begin the question and answer session. As a reminder, to ask a question, please 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 now take our first question from the line of Xiaodan Zhang from CICC. Please go ahead, Xiaodan.

Good evening, Mr. Song. Thank you for accepting my question. I have two questions. The first one is about our game business. In this quarter, the income of the game business has dropped a bit. I would like to ask Mr. Wang to share the future plans for our new and old games, especially the revision and optimization of the deadline. So thanks management for taking my questions. And my first question is regarding the gaming business. Gaming revenue for the quarter is down both year on year and quarter on quarter. So could management elaborate on the operational strategies for existing games as well as the new game pipelines. And also, could you share some color on the update progress of Metabricks? And regarding the office business, what are the main drivers behind the accelerated growth in Q3, and will this momentum be sustainable? Thank you.

I'll answer two questions. The first one is related to the game. We talked about This is the second for the old game. The main thing is actually In general, in the future, we will still focus on the content of the product, including the operating mode, and the user's more detailed operating service. to do this long-term support, including new gameplay, new content, this continuous update. Yes, this is normal. In addition, we will also do some targeted improvements for some technical or operational problems that will be exposed. This is the overall game strategy. Then for the simulator, uh, uh, uh, uh,

So firstly, it's regarding the question for the games. We have discussed the privacy for the future and future strategy of the different versions. And so we currently have already obtained the version numbers. And we're going to be launching different games, including like Merchant Break and Goose Goose Duck, and also the other products. But for the old games, we're mainly focusing on the fate of SWAT and also the Snowbreak containment zone. And we're going to have the target for the customer, for the operation service. We're going to have the long-term, like upgrading the generations, including the new playway, including new content. We're going to continue to upgrade that. This is the regular way. And target for the technology and operation, we're going to have some new improvement. So this is relevant to the strategy of the game. And for the merger break, because it's just launched for one season roughly, and the target for this game, for the play way, for the operation, and also the rich content, we are still doing the operation and improvement. We think that we need longer time to give the answer.

第二个关于Dapest的增长因素, 从它三块来看,都还不错。 无论是个人业务还是企业业务, 以及他们那个信号这块。 具体说一下,个人业务这块, 我觉得基数还是取决于 There are two. One is the base number of users, and the other is the pay and up value, and there are three factors. So from the three-week figure, in general, PC or mobile, the number of users is still above our expectations, especially PC, which is much higher than the target set this year. So I think this is the core number of users. The second one is actually our AI, which is called 0C3.0. Actually, by looking at the number of active users of AI, compared to the end of last year, our number of active users of AI has increased by nearly 200%. Compared to the last half of the year, after the release of the 0730, compared to the number of active users of AI in the last half of the year, it has basically achieved double growth. So I think this is mainly because Uh, these two points, one is the growth of the user base itself. The second is that it was released in this 07 3 0. Uh, the user response is still very good. The second is that the corporate business is 365. Uh, you can basically see that we are basically 70% of the same price. This is basically, uh. It's a little better than we expected. That means this. More and more of this business users This is the end of our this this this This is the form And also to our this product and service It's more satisfied So it should be said that this industry competitiveness is increasing The third one is this one in the early days Our software is also in fact a new product It's very smooth from the perspective of the whole promotion of Q3. It's very smooth. Yes, the same rate of growth is nearly 52% or 51% So this is from the point of view of whether it is a personal enterprise or a startup The general office is a relatively good attitude And then whether this kind of growth factor is sustainable From three, it should be said that since it is these three, personal enterprises and credit, then we will be able to solve it. My credit is from the present credit, because many times I have said that my credit is this thing, because it is a political orientation. We say that as long as we have it, we can keep 90% of the market share. From the current point of view, I think it is from a short term point of view, at least from the point of view of Q4, it can still maintain a good growth trend. Then in the future, in fact, everyone knows that the goal of the new general election is to complete in 2027. I think that in 2027, it should be an acceleration, unless the whole big policy direction is adjusted. So for this one, I am still very confident that the growth will continue. This should also be said to be more certain. The second is his personal business. Personal business. The increase is actually relatively low in these three businesses. Although there are still two numbers left, but everyone just talked about the key to the increase in this business. One is the growth of the number of users. This is the basis. The second is actually our this payout rate and time. Yes, so from this point of view, at least from now on, the number of users is still not bad. It also keeps two digits. Yes, from this point of view, I think personal business keeps a growth of about two digits, especially the growth of this member of the 07300 release. I think in general, it is still relatively confident, relatively confident, but the increase should be more than the enterprise and software business. uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, This kind of product power we have and this kind of service reputation is gradually forming. This is my own judgment, which is even possible to accelerate. Of course, this team has also been strengthening internal and external cooperation in the past two years. Ah, strengthen this kind of delivery capability, because this is still under some pressure, OK? In addition, it is that this is overall. Well, I think this time this time this this There are some data to refresh. In fact, I look at our research and development personnel ratio, that is, the research and development investment ratio has reached a historical high. It has reached about 35-36% of this ratio. In the past, it has remained at 32-33% for a long time. Yes, so I think this kind of continuous increase in research and development investment is all these growth factors. Let me translate this.

So actually regarding the two factors, we think that we could take a look from three perspectives. I can say that basically they are all good, but I would like to separate into like personnel, for the enterprise, and also their information innovation, three aspects due to the introduction. For the personnel, actually they're growth rate of the members is, we have the basic number, including like the payment for the up value, and for their PCs, growth rate is actually out of, exceeded of expectations. So this is going to be a key thing, which is the members. The second is the AI. Once we have released the 3.0 version, so through the AI, we have this monthly activity, members compared with the last year is going to increase 20%, especially launch 3.0 version. So compared with the first half year, we have realized the doubled. And this is the second point. Another thing is that from the basic for the membership groups, so we can see that the feedback from the users are quite good. So we can say that basically it's exceeded than what we expected. It means that more and more enterprises customers, they started to accept us. And also for our product and service are quite satisfied. That is why we have increased the industry's competitiveness. And thirdly, it's about the software and information, the information innovation. So regarding this part is that we can see that the Q3 is quite smooth and it has increased like 51% no matter for the personal or information innovation. So basically it's going to be a very positive situation. So the growth element, whether we could be sustainable development, we would like to talk through three perspectives, personal enterprise and information innovation. And firstly, for the information innovation, that is policy oriented. So basically, we can realize that more than 90% of the growth rate, this is from the short-term perspective, we can see that Q4 is quite good, probably because we're going to complete in 2027, but the acceleration is quite good, unless we have the big policy direction, we're going to have some adjustment. Otherwise, we have the confidence that we could realize this much growth constantly. For the personal business, regarding their growth rate, for these three businesses, we have realized more than 10% increase So from the increase of the membership and secondly is the payment conversion rate and also their UP value. So up to now we can see is that the use of membership groups is quite good and especially for the AI members is good rapidly. So generally speaking we have confidence but of course it's a little bit lower than the expectation and then the enterprise. membership course so from the end like an enterprise perspective my personal judgment is that if we could realize the delivery if the delivery is on time in the future we have a pretty big space to improve so in the next two years we're going to have we believe that we have more and more enterprise members to use our product so we can see is that our productivity is quite good and and our service is going to have a reputation. For our team, we need to strengthen their internal and external cooperation to strengthen our delivery ability. We believe that this has a certain pressure for us, but generally speaking, so from this report, we can see a lot of data was renewed, including our R&D and our staff percentage and also the investment of R&D could reach to 36%. previously was 32 to 33%. So we can see that we continue to do a further bigger investment for R&D. This is we believe that is going to be the very basic reason we could have such increase, especially like Wuhan, their industrial center, started the construction was in 2018 and up to now it's become the largest industrial base for Kingsoft. And this is going to be a very, solid foundation for us.

Hello, operator. We're ready for next question.

Thank you. We will now take our next question from the line of Wenting Yu from CLSA. Please ask your question, Wenting.

Thank you for the opportunity. I have two questions. The first is about our software. How do we look at WPS software and 365 in the future? Which countries will be the focus of the strategy? And how do we see the competition between overseas and Microsoft? The other question is about games. So my first question is how does the company view the opportunities for WPS Office and 365 in international markets and which countries or regions will be the strategic priorities? And how does management assess the competitive dynamics overseas, particularly against the Microsoft Office? And the second question is about the online game. So over the next two years, on top of the two IP titles mentioned in our pipeline, which game genres will be the main focus in the company's pipeline? And how does management view the opportunities for games to expand into the overseas market?

Thank you. I'll answer the first one first. This is a particularly good question. In fact, the office has also mentioned this on the front page since last year. We are AI plus corporate plus overseas. From the data point of view, our overseas business has been doing very well in recent years. Not only from the number of users, but also from the number of customers. In fact, since this year, we have been uh uh uh uh From the perspective of 2C, in fact, we are all aware that we have been running with Microsoft in China for more than 30 years. There are several key points. One is that I think it is actually a transformation from a document editing tool to a content service platform. This is very clear to everyone. If you use our products, you will know that we are called the party. We are called Daoke members to provide the model. Later, we have provided a lot of services related to the micro-publishers, including pdf transfer, including text search, and so on. So, in fact, I think this is the first and most important step. In addition to the earliest, in fact, in addition to the three steps, it is from an editorial editing tool to an editorial content service. This platform conversion is a disadvantage. The second is actually the strategy of the mobile platform that started in 2013. In fact, we are two years earlier than Microsoft in the mobile platform. And if I remember correctly, we actually solved it in just one F. Microsoft is still a big team. Yes, and our whole body is smaller. So I think the second point is that the mobile end, including many overseas users, mainly start to contact us from the mobile end. Nearly 300 million users. I think we have this kind of priority advantage in the mobile end. In the past nearly 10 years, it has accumulated in the mobile end. In terms of experience and technology, it still has a certain lead. So I think these are the two most core. Of course, this wave of AI, especially this year's 07 3.0, we have been through two years. It should be from the beginning of 2023. Uh, although I'm going to talk about this, this, this, this direction first, but after these two years, we have our own, uh, this with the user together, this is repeated. Until 07 3.0, this kind of user software and other AI forms this kind of This model of three-way interaction, especially after this season has been pushed out, is widely accepted by users. So we think that in the area of AI, we have gradually begun to have a relatively strong difference with Microsoft in the field of application processing. And the aspect is the regime. So this is from the perspective of 2C, that is to say, the difference between us and Microsoft is that we are a core service provider with content. This is a business platform. We are not a simple document editing tool. The second is that we still have certain advantages and technical accumulation in mobile. The third is the practice of AI in recent years. We think we have found the right path. From the point of view of domestic users, this is also a difference in some technical lines with Microsoft. This is mainly 2C. What about 2B? I think this may be a bigger advantage. In fact, domestic users are all very clear, especially after the non-library law came out. It is not a simple text file processing platform. It is actually a platform that is related to a part-time job, especially now these two years. 我就这块也就相当于 我们不是拿一个办公产品 去跟微软打一个办公产品 不过我们不是拿一个文档处理的 套件去跟微软打 实际上我们现在已经是 一旦是办公平台 其实包括我们企业内部 也都用了两年了 包括国内这些企业录取也在采用 对尤其是它是这种组件式的 可以很好的 and integrate it with the existing OS systems. Especially in the past two years, especially in the domestic market, this advantage has become more and more obvious. So, we dare not claim that this is a counterattack to the client. At least, we are not taking a document from a document editor to take a document from a Microsoft document editor to take a document from a Microsoft document editor to take a document from a Microsoft document editor to take a document from a Microsoft document editor. Okay, I think this is what we think, especially since we chose this kind of component model at the beginning. It's very, very flexible. The deployment is also very flexible. Yes, I think this is what we think is the most competitive core element in the 2B field. And then talk about which areas, to be honest, just one sentence must be According to two bars, one bar is based on us In the past few years It should be said that it has been in the past ten years since the release of the mobile branch We already have a better population base area Even in the past few years, through the mobile branch to the other side In the initiative download Our customer area of ​​this PC section Choose these people, to put it simply, the area of ​​good population base 我们去重点去去去去去部署去去去推广对这是第一条 第二个呢肯定是 呃从国家角度啊就跟跟中国 是中国好朋友的这些区域 呃去去去去去去去推广发展 我就洗这个这个主要是围绕这两条这个核心大思路 呃具体的呢我暂时就就就没有办法去 就去去去展开说了好吧反正就围绕这两条 This is the first question. It's quite long. Please translate it.

So regarding the first question, this is actually a very good question from the strategic perspective. Since last year, we have raised the concept that AI collaboration plus overseas. So from the data's perspective, the growth rate overseas is quite good from the user's member's perspective and also the other perspectives. So since started from this year, we have increased their overseas R&D investments. We actively did a lot of preparations for us to go overseas. So from my perspective, especially when we talk about the competition with Microsoft, because our main competitor is Microsoft. So our competition strategy overseas is that I think I would need to separate it from 2B and 2C, two perspectives. So for WTPS in domestic market, we have actually gone through the competition with Microsoft for almost 30 years up to now. It's a long term. So several key points. The first is that from the edit tool to the content service platform, we have did this transformation. Because everybody really knows that if they're going to use our product, we're going to provide a module. So our members target for the content and to have the PDF content translation and also to like search the content information, etc. So this is actually very early stage we did this and except for very early stage we have the document edit tool. We also have provided the content, the document content service to convert it into a platform. Actually, this is the first point. And secondly, is that since 2013, we started the mobile end. So this is actually two years earlier than Microsoft. So actually for us, just an app would solve all of the problems. But for Microsoft, it's going to be more complex. And so our package, installation package is smaller for the mobile end. So that is why in overseas, a lot of customers, they actually know about us through the mobile end. Then we have the mobile end. We have disadvantages. And in the past 10 years, we have collected pretty good foundation. And then from the technical perspective, from the mobile end, we have some certain advance than Microsoft. This is going to be the core things. And this time we have the AI and especially we have released 3.0 version since 2023 after two years optimization ourselves together with our users. They're going to give us the feedback and we constantly do the practice and we have a very good like both parties, both end interactions. So we think that from the AI's perspective target for the content application, we are stronger than Microsoft. So this is actually from QC's perspective. And we are actually a platform to provide the content and also the service, not just a simple document editor. And also from the mobile end, we have two advantages. Together with our technology, we have the correct way. So we have the difference. from the technical road. So for the 2B's perspective, I think we have a bigger advantage and actually all the domestic members are all clear, especially we have the first package released to the market. Our WPS 365 is not just a content treatment platform. This is actually an office platform, especially we have the AI added. And so not just the we are not just like document treatment set, compared with Microsoft, we are actually the whole office platform. And this platform in our company internally, we have used for two years. And in domestic, we also have a lot of enterprises, they are seeing the actually could this software could have a very perfect integration with the enterprise OA system, this actually has significant advantages. So we can say that at least for our office platform and to compete with Microsoft, this is actually a very early stage. We have this module. We're going to have different components. So we have different modules. It's very flexible. And also the layouts are also quite flexible. This is from the 2B's perspective. So this is actually, we make a conclusion that we have two perspectives from 2C and 2B. And in the past few years, especially for the mobile end has been released, in the past 10 years, we have a very good public members foundation through the mobile end. So on the other hand, they would like to actively download the PC and to remake the promotion and layout. So secondly, from the national perspective, and we have a lot of Chinese friends, they would like to do the promotion and development. So I think that this is the core thing.

The second is the issue of games. The first is the issue of games. So yeah, well, you can, uh, you bought a whole new scene, uh, so I'll just keep going. Uh, I don't think she has to get through. I don't think so. I don't think so. I don't think so. I don't think so. I don't think so. I don't think so. I don't think so. I don't think so. I don't think so. I don't think so. I don't think so. uh, uh, uh, uh,

So the second is regarding the games. Actually, we have a pretty good foundation. Currently, we have some of the games already obtained their version numbers, including the GX4 and Angry Birds and Goose Goose Duck, and also the... the Snowbreak Containment Zone, and we also have some games which didn't get their certification yet, but probably we're going to launch it next year. So we think that from the overseas, the overseas opportunity is quite good. So including when we did the launch the game for the Snowbreak Containment Zone and also the Meet Your Break, we tried several times, especially for the mobile end. So we realized that in domestic market, some of the companies, they did a pretty good performance overseas. So we believe that this direction is correct. So we're going to continue to optimize our product, our technical ability, operation ability.

Hi, operator. We're ready for next question.

Thank you. We will now take a next question from the line of Lin Yang from Guangfa Securities. Please go ahead, Lin Ling.

Okay. Mr. Zhou, Ms. Yu, good evening. I have two questions to ask. One is to ask about the latest progress of AI in software. Then how to look at the commercialization rhythm and space of this part of the business? The second question is about the cost ratio. There are new games on the line in the last two seasons, so the sales cost is relatively high in the short term. Since this business is gradually stabilizing, will the sales cost gradually return to a normal value? I have two questions. The first question is, could you share the progress of our AI business How do you think about its commercialization pace and market potential? My second question is the expenses. We see sales and marketing expenses was relatively high in the short term. As the business stabilized, will it return to normal by next quarter or Q1 in 2026? Thank you.

. . . . This is about this enterprise-level service. We only do this kind of strategic support. In fact, we Uh, including Uh, Zhuhai's The landing of this office model Includes China's This is credible, including the delivery of this project And in the field of legal industry models, we have been continuing to develop uh, uh, uh, uh, uh, uh, uh, I think that in the future, thousands of industries will rely on this model to rebuild its digital system, including the internal organization of the enterprise itself. The shape will also change, so the main work this year is actually to search for these two pieces. In some areas, cooperation with today's women has already made some progress. In some fields, we are still searching, including the field of corporate digital employees. Of course, since this business is still in a very early stage, due to many comprehensive factors, we will not disclose these details in detail. When we are actually suitable,

We would like to answer the first question, and Li Yi is going to answer the second question. Regarding the AI business improvement progress, actually since April this year, when we found the manager to collaborate with Kingsoft Cloud, target for the enterprises and the different application services from the strategic way we can do the support and actually including Zhuhai we have the local big model and we have the feasibility reports regarding the transportation we have different projects delivery and also in different industries like the law industries etc with different regions we all started of their development. And so for the more details, it's not convenient for us to disclose at this moment. But why we would like to set up an AI product center because we strongly believe that the whole industry, when we do this practice for the big module, is going to get into the specific application for different industries. So make it simplified is that we think that in the future different industries is going to have like restructure system for the big module including the internally of the enterprises for their organization organizations way is going to have some change so the many job of the of this year is to this part and we for the kingsoft class we have some progress so at this moment at this stage the business is still in a very early stage So because of a comprehensive reason, it is not convenient to disclose too much details at this moment.

Hello, Lily. I have two questions about the cost. The first one is market cost. We usually say that there will be a market cost at the beginning of the new year. But in the long term, it will still return to this level. The market cost will follow the pace of our product. Right. As I mentioned earlier, in the era of AI, especially in the early days of AI, companies are still investing in us. This is also for our long-term development. From a long-term perspective, the control of the whole company's efficiency, including a reasonable profit level, is still maintained. Thank you.

Regarding the second question for the expenses for the marketing, actually when we launch it into the market, we believe that for the long-term perspective, it's going to get back to a normal situation. When we promote the launch of different products, we think that the cost is going to have a slightly different season. In the previous season, it was 15% to 16%. the season is going to reach to 20 and more than 20. So from the whole year's perspective, this is going to get, we think that it's going to be a reasonable level because we need to have all of the costs for the R&D, especially for the AI. Specifically in the early stage, we need to have more investments, but that is for the long-term sustainable development. So we believe that in the long term, we're going to control the rate, the investment rate, and finally at a reasonable profit level.

Thank you. I am showing no further questions. Thank you all very much for your questions. And with that, we conclude our conference call for today. Thank you for participating. You may now disconnect your lines.