Cheetah Mobile Inc.

Good day and welcome to the Cheetah Mobile second quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ms. Helen Zhu, Investor Relations of Cheetah Mobile. Please go ahead.

Thank you, all three of you. Welcome to Cheetah Mobile's second quarter 2025 earnings conference call. With us today are our Chairman and CEO, Mr. Fu Sheng, and our Director and CFO, Mr. Thomas Yuen. Following management's prepared remarks, we will conduct a Q&A session. Please note that the management script will be presented by an AI agent. Before we begin, I refer you to the safe harbor statement in our earnings release, which also applies to our conference call today. I will make four looking statements. At this time, I will now like to turn the conference call over to our chairman and CEO, Mr. Fushun. Please go ahead, Fushun.

Thank you everyone for joining us today. In the second quarter, we delivered our best results since Q1 2021. Revenue grew 58% year-over-year, driven by a 39% year-over-year increase in internet business and an 86% year-over-year increase in AI and other segments. Our operating loss decreased 86% year over year, while long gap operating loss was down 97% from last year, almost break even. In the first half of 2025, our revenue grew by 47% year over year. We believe we can maintain fast growth in the second half of 2025, driven by about 100% year over year revenue growth in our AI and other segments, along with a stable internet business. This shows our turnaround is working and gaining momentum. What is even more important is how we work today. We have made AI a core part of our process, working in an AI-native way. Our R&D teams are small and flexible, using AI every day to design, test, and build products, much like open-source developers. This helps us move faster and use fewer resources and shows AI allows one person to do what once took a whole team. We have been investing in AI since 2016. And at the intersection of AI and robotics today, we now have advantages and experience that are hard to replicate. For example, DeepRoll, our AI tool that turns video, audio, and documents into summaries and mind maps, runs with only three full-time employees. Our core internet business remains solid thanks to our shift from advertising to a subscription model, which has improved user engagement and retention. Today, subscriptions make up about 60% of our internet revenues. This healthy base gives us the room to invest in new AI products while staying financially disciplined. We are enhancing existing apps like Duba Antivirus wallpaper apps and PDF tools with AI agents. For example, in Duba Antivirus, we are testing a new AI feature that helps users fix PC issues, especially long tail problems they couldn't solve before. And early feedback is encouraging. While we are still in the launch and improvement phase for most AI utilities, we believe Chase has a natural advantage in utility applications. At the end of the day, the core value of AI utilities is to help people work more efficiently and productively. If we can deliver on that, we believe users will be willing to use our products. On the service robotics side, we made solid progress. Revenues from service robots continue to contribute to growth in the AI and other segments. In late July, we completed the acquisition of Ufactory Wound of the few robotic arm companies that is already profitable and earns most of its revenue overseas. Combining Ufactory's strengths with JADIS distribution network and 100 plus global partners give us a clear advantage to scale globally. Ufactory arms, already being used at scale in real-world scenarios, from assembly, picking, painting, and dispensing tasks in factories to grabbing beverages, making coffee and beers in commercial applications, strawberry harvesting in agricultural settings, and even in universities for robotic research. We now have a broad range of robots and are piloting wheeled robots with arms that can handle more physical tasks in more places. We believe the true breakthrough in robotics is not just in using the most advanced lab technology, but about finding technologies that match real-world use cases which can scale and generate earnings for the company. While the future of robotics is exciting, our years of experience tell us that real commercial adoption depends on delivering sustainable ROI that customers can clearly see. Our strategy is to stay optimistic, yet patient, Moving forward steadily, we will continue to identify scalable use cases and grow the business gradually. That said, we want to caution investors that it is not something that will reach mass deployment in the coming quarters. The service robotics market is still developing, but AI agents are making robots smarter and easier to use. Seems adding agent to the ask. Our next generation voice system powered by AI agents. Earlier this year, our voice-enabled robot revenue in China grew by about 100% in Q2, both driven by recurring demand from our existing channel partners, alongside expansion into new high-quality customers in healthcare, education, eldercare, and cultural institutions, such as the National Center for the Performing Arts. In addition, this group does not rely on one-off large orders, but comes from steady and repeat demand, especially in use, cases like poor guiding and reception, which shows it is sustainable. Few companies have both our global experience in consumer internet products and use of real-world robotics operations. This unique combination allows us to apply AI agent technology across both software and hardware, creating synergies that are hard to replicate, supporting our goal to become a leading service robot company in the coming years. Looking ahead, our core internet business remains healthy and profitable. We will keep investing in AI tools and robotics with discipline, and we are on track to reach profitability in the near term. Our strong cash position and zero debt give us the flexibility to grow while keeping our finances strong. The transformation is just getting started, but it is already producing results. We are building two growth engines, AI-powered utility apps, and AI robots that work together as synergistic forces, combining software and hardware to create a stronger moat, expand our market reach, and open new growth opportunities. At the same time, our solid internet business and strong cash reserves provide a stable base. With over seven years of our being in AI-focused strategy and a culture of innovation, we are confident about the road ahead.