Kingsoft Corp Ltd Adr

Thank you for standing by. Welcome to Kingsoft Corporation's fourth quarter 2025 and annual results 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 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. 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 first quarter and annual results 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 virus 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-party interpreter will provide a 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-party interpreter. Concept translation is solid to facilitate communication during the conference call, In case of any discrepancies 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. Zou Tao, our executive director and CEO, and Ms. Li Yi, our acting CFO. Now, I'm turning the call to Mr. Zou.

Hello, everyone. Welcome to the 4th quarter of this year, the 4th quarter of this year. In 2025, the Group will insist on technical success and strengthen core capabilities. Today, the office continues to focus on the internationalized core strategy of AI cooperation, and the deepening of the AI office channel to surround the needs of personal and enterprise users in the field of office and create smart office products that face the future. In terms of online game business, we will continue to deepen the hardware classic IP,

Hello, everyone, and thank you all for joining Kingsoft's 2025 First Quarter and Annual Results Earnings Call. In 2025, we remained committed to technology empowerment and focused on enhancing our core capabilities. Kingsoft's office group continues to prioritize its core strategy of AI collaboration and internationalization. depend its prices in the AI office market, and the development of future-oriented intelligent office products tailored to the four scenario office needs of both individual and enterprise users. In the online game business, we further deepen our expertise in classical Wuxia IP and actively expanding into diversified game categories and global markets.

The total income of the group is RMB 96.8 billion, down by 6%. The total income of office software and service businesses is RMB 59.3 billion, up by 16%, maintaining a steady growth. The total income of online games and other businesses is RMB 37.5 billion, In 2025, the group's total revenue reached R&D 9.68 billion.

representing a year-on-year decrease of 6%. Among these, revenue from the office software and services business recorded revenue of RMB 5.93 billion, up 16% year-on-year, and maintaining steady growth. Revenue from the online games and other business amounted to RMB 3.75 billion, up 28% year-on-year, primarily due to the high base in the same period last year Next, I would like to introduce

and the performance of the fourth quarter of the year in 2025. In 2025, Jinshan Office will continue to advance the AI cooperation and internationalization core strategy. The annual total income is 59.3 billion yuan, which is 16% of the total growth. The fourth quarter income is 17.5 billion yuan, which is 17% of the total growth. In terms of AI progress, we will simultaneously advance the Office AI redevelopment upgrade AI Office Original Exploration. On the one hand, it surrounds the existing IPS components, systems, and promotes comprehensive intelligent upgrade to rebuild the whole scene office experience. On the other hand, it explores the original office form of the smart body as the core. The office smart body RTS-07 has been upgraded alternately to be an all-powerful partner of AI office. The first to start is the office smart era. In terms of cooperation, WTS365 uses AI as the core to complete the full upgrade. From the technical framework, cooperation system, smart lock, digital employee ecology, and other multi-dimensional system layout, the all-round negative energy enterprise digitalization transformation, and the improvement of office co-operation and marketing efficiency. At the same time, in terms of internationalization layout, we are also steadily advancing the WTS international personal version Now, I will walk you through the business highlights of the full year and fourth quarter of 2025.

In 2025, Kingsoft Office Group continues to advance its core strategy of AI collaboration and internationalization. Total annual revenue reached RMB 5.93 billion. 60% year-on-year. Fourth quarter revenue reached RMB 1.75 billion, also up 17% year-on-year. The company is pursuing a dual-track approach in composite office AI reconstruction and upgrade and AI office native exploration. On one hand, it's driving a comprehensive intelligent upgrade across its existing WPS component suite to reshape the full scenario office experience. On the other hand, it is exploring an agent-native office paradigm with its office AI agent, WPS Lin Xi, evolving into all around AI office companion, marking an early entry into the year of office AI agent. WPS 365 have undergone a comprehensive AI-driven upgrade, established a multidimensional framework that dense technology infrastructure, collaborate system and intelligent search, and digital employee ecosystems comprehensively empowers enterprises in their digital and intelligent transformation, while enhancing office collaboration and operational efficiency. The company's international expansion is progressed steadily with a complete product upgrade and overall model development. now offering global integration of its capabilities.

In terms of personal business, the user size is steadily expanding. The double-line growth of domestic and foreign businesses, the annual total income of RMB36.3 billion, the same growth rate of 10%, the four-week continuous growth trend, the actual income of RMB9.8 billion, the same growth rate of 14%, The number of annual paid personal users in China has reached 46.15 million, which is 11% of the total growth. Since the end of 2025, the number of active users in WPS AI has exceeded 80 million, which is 307% of the total growth. WPS AI services have generated more than 200 billion Japanese tokens, which is more than 12 times the total growth. For WPS individual business, the user base continues to expand steadily, with both domestic and international operations achieving quality growth.

Total annual revenue reached RMB 3.63 billion, year-on-year. The growth trend continued in the fourth quarter with revenue reaching RMB 918 million, the year-on-year growth rate accelerating to 14%. The cumulative number of annual paid individual users in domestically is 6.2 million, up 11% year-on-year, By the end of 2025, WPS AI's monthly active users have surpassed 18 million, presenting a year-on-year increase of 307%. Overseas markets, the cumulative number of paying users grew substantially with particularly stronger growth among large-scale users. The monthly active devices for the Overseas PC version reached 42.5 million, up 54% year-on-year.

In terms of 365 business, we continue to maintain high-quality and high-speed growth, with a total annual income of 7.2 billion yuan, which is 65% of the total growth, and a total income of 2.4 billion yuan in four seasons, which is 63% of the total growth, and a total growth of more than 60% in four consecutive seasons. We continue to advance the upgrade of products and services by unification, intelligentization, and internationalization. to launch the industry-specific version. At the same time, continue to consolidate the advantages of domestic and state-owned enterprises in the field, accelerate the expansion of private enterprises, foreign enterprises and local state-owned enterprises. At the same time, promote channel ecological construction and further improve the market influence of products. In 2025, S365 will continuously improve the ecological layout of digital employees, promote AI technology in the semiconductor industry, For WPS365 business, we maintain high quality and rapid growth.

Total ad revenue reached RMB 720 million. of 65% year-over-year. Postcode revenue was RMB $210 million, also up 60%. It is a constructive quarter of the year-on-year growth of about 16%. We continue to advance product and service upgrades guided by the core principle of integration, intelligence, and industry-specific additions. The company's future consolidated is advanced among venture, accelerating expansion into private enterprises, foreign-invested enterprises, and local stand-alone enterprises. We also advanced our China ecosystem development to further enhance its market strength.

In 2025, WPS 365 continues to improve of AI technology in all these scenarios.

Our official digital employer has already achieved a large-scale standardized delivery. In early 2026, 7PS 365 efficiently integrated open-source capabilities, injecting new momentum into improving the quality and the effectiveness of enterprise collaboration and office work. This intelligence further enriched our AI office ecosystem.

In terms of software business of SPS, the annual income of 14.6 billion yuan increased by 15% in the same year, and the income of 5.4 billion yuan increased by 16% in the fourth quarter. We actively participate in the national office software bidding of central and local customers, and continue to maintain the leading position For WPS software business, total annual revenue reached RMB 1.46 billion, up 15% year-on-year.

Post-post revenue reached RMB 513 million, up 16% year-over-year. We actively participated in videos for domestic office software by central and local governments. We continue to maintain a leading share in both slow layout and safe layout document software market. We continue to advance the implementation of government digitalization projects, support the development of digital platforms in multiple regions, and effectively empower the intelligent up-grading of government office operations.

In the fourth quarter, QIJIAN Game 3 has been upgraded in terms of technology, improved appearance, national style design, and received a wide range of praise from players. In the end of 2025, the version of QIJIAN Game 3 has been upgraded in terms of flow and service, and has been verified by the market. We will further enhance the game gameplay

In the fourth quarter, our flagship PC game GS3 Online enhanced its customer design through technological upgrades, and Chinese aesthetic style was widely upgraded by players. The version optimization and service upgrade is completed at the end of 2021. We received a positive market feedback, and we will further increase investment in gameplay and narrative. Our classic GX series PC games and their second software mobile game World of War Ranger continue to interact with content. . . . . . . .

. . . . . . . The Angry Little Bird series of two leisure and easy games has also won the title. It is expected to be released in China in 2026, and further enrich the quality of leisure products. Ziyu City's田园生活模拟游戏星沙岛 will open in February 2026. With its unique style and play style, it has established a good reputation in the global core player circle.

Social deduction game Goose Goose Ducks, officially launched in January 2016, has over 5 million new users on launch day, surpassed 13 million cumulative new users, and ranked number one on iOS, and by word of mouth and the original traffic benefited the board's social circle.

Two carol games from the Amber Bird series also received a publishing license and are currently publishing our carol games portfolio.

Starts in Iceland, our hiding season The path to real-life simulation game began early ethics in February 2016. The game established a stronger reputation among co-players worldwide. Going forward, we will actively optimize the product based on player feedback to lay a solid foundation for the official version launched in the second half of the year.

In the future, Jinshan Office will deepen the AI Agents technology in the use of the office scene, strengthen Datis 365 as the core competitiveness of the smart cooperation platform, and accelerate the promotion of the global strategic layout. The online game business will continue to focus on product content development and globalization, continue to strengthen the classic IP vitality, and actively promote growth in new products. Looking ahead, Kingsoft Office Group will deepen the application of AI agent technology in various office environments,

For online games business, we will continue to focus on premium content development and global publishing, and foster the growth of new game genres to achieve sustainable growth. We will deepen technological innovation and commercial expansion. actively expand global market opportunities and create long-term value for our shareholders. Next, I would like to invite Ms. Li Yi to introduce the financial performance for the fourth quarter and annual. Thank you, Zouzong and Yilan. Good evening and good morning, everyone. As for the financial results, I'm starting for the Q4, use RMB as the currency. Revenue decreased 6% year-on-year and increased 8% quarter-on-quarter to $2,618 million. The revenue split was 67% for office software and services and 33% for online games and others. Revenue from the office software and services business increased 70% year-on-year and 50% quarter-on-quarter to $1,750 million. The increases were primarily attributable to the growth across three principal business of consort office groups. The state increase of WPS individual business was primarily driven by the expanded number of paying subscribers, attributable to continuous interaction of AI capabilities and improvement in intelligent office experience. The strong growth in WPS 365 business was mainly driven by the deep integration of documents, AI, and collaboration capabilities, along with continued customer expansion among private and local state-owned enterprises. The growth in WPS software business was mainly supported by sustained demand from government and enterprise clients, further consolidating our leading position in the flow layout and fixed layout document market. Revenue from the online games and other business decreased 33% year-on-year and 3% quarter-on-quarter to $868 million. The decreases were mainly due to decline in revenue from certain existing games. Cost of revenue increased 5% year-on-year and decreased 1% quarter-on-quarter to $471 million. Gross profit decreased 8% year-on-year and increased 10% quarter-on-quarter to $2,148 million. Gross profit margin decreased by 2 percentage points year-on-year and increased by 2 percentage points quarter-on-quarter to 82%. Research and given costs increased 30% year-on-year and 6% quarter-on-quarter to $953 million. The increases were primarily driven by increased headcount and AI-related expenditure, reflecting our strategic focus on advancing AI and collaboration capabilities. Selling and distribution expenses increased 36% year-on-year and decreased 80% quarter-on-quarter to $462 million. The year-on-year increase was mainly due to high market expenditures in both office software and services and online games business. The quarter-on-quarter decrease was mainly due to high bets from promotions for new game launches in the prior quarter, partially offset by increased spending on market activities for Microsoft Office Group. Administrative expenses increased 33% year-on-year and 40% quote-on-quote to $202 million. The increases were mainly due to higher personal related expenses and increased depreciation arising from the completion and operation of our Wuhan campus. Shop-based compensation costs increased 55% year-on-year and 15% quote-on-quote to $92 million. The increase was mainly due to the growth of awarded shares to the select employees of certain subsidiaries of the company. Operating profit before share-based compensation costs decreased 48% year-on-year and increased 70% quarter-on-quarter to $606 million. Net other gains for the fourth quarter of 2025 were $819 million, compared with losses of $74 million for the fourth quarter of 2024 and gains of $13 million for the third quarter of 2025, respectively. The gains in this quarter were mainly due to that we recognized the gains on deemed disposal of Keysoft Cloud as a result of the dilution impact of the issue of new shares of it. Share of losses of Associates were $132 million for the fourth quarter of 2025, compared with losses of $148 million and profits of $5 million for the first quarter of 2024 and the third quarter of 2025 respectively. Income tax expense was $220 million for the first quarter of 2025, compared with expenses of $212 million and $66 million for the first quarter of 2024 and the third quarter of 2025. As a result of the reasons discussed above, profit attributable to owners of the parent was $975 million for the first quarter of 2025, compared with the profit of $416 million and $213 million for the first quarter of 2024 and the third quarter of 2025. Profits attributable to owners of the parent, excluding share-based compensation costs, was $1,726 million for the fourth quarter of 2025, compared with the profit of $496 million and $277 million for the fourth quarter of 2024 and the third quarter of 2025. The net profit margin, excluding share-based compensation costs, was 39 percent, 18 percent, and 11% for this quarter, the first quarter of 2024, and the third quarter of 2025, respectively. And now on the year 2025. Revenue decreased 6% year-on-year to $9,683 million. Office software and services made up 61%, increased 60% year-on-year to $7,929 million. Online games and others made up 39% and decreased 28% year-on-year to $3,754 million. Gross profit margin decreased by 2 percentage points year-on-year to 81%. Operated profit before share-based compensation costs decreased 47% year-on-year to $2,072 million. Profit to owners of the parent was $2,004 million for the year of 2025, compared with the profit of $1,552 million for the last year. The group had a strong cash position towards the end of 2025, and at 31 December 2025, the group had cash resources of $27 billion. Lead cash generated from operating activities was $2,000 $292 million and $4787 million for the years ended 31 December 2025 and 31 December 2024 respectively. Capital expenditure was $342 million and $426 million for the years ended 31 December 2025 and 31 December 2024. That's all for the introduction 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 write 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 Li Ping Zhao of CICC. Your line is open. Li Ping, please ask your question.

Hi, Mr. Zhu. Hi, Mr. Li. Thank you for accepting my question. I have two questions about the game. First, Mr. Zhu, after you became the CEO of Xishan Group at the end of last year, did you make any changes to the game development strategy? In the future, will there be a space or possibility for AI to be effective? The second question is about the EYASHA that we participated in the launch. We saw that the popularity of the entire game is not bad. Can you share the current user size and storage situation? I also want to know how big is the imagination space for the future commercialization rhythm and the overall revenue contribution increase? I will translate it quickly. Good evening, Mr. Zhou and Mr. Li. Thanks for taking my questions. I have two questions on the gaming business. So first, after Mr. Zhou recently took on the role as the CEO of Xishanju, what strategic adjustments have been made regarding to the future development of the gaming business? And are there any opportunities or possibilities for implementing AI to improve efficiency in the game development. And second, we have observed that GooseGooseDAG is performing well in terms of popularity. Could you share some insights on the current user base and retention matrix? I'd also like to understand the timeline for future monetization and potential incremental contribution to the overall revenue and profit. Thank you.

Let me talk about EYASA first. EYASA has been on the line since January 7th. Anyway, the total number of new users must be more than 30 million. Currently, the DAU is stable at more than 3 million. This is the current result. Of course, we are currently planning We hope that we can continue to make this game stable through each stage. How do we think about this game in the long term? The first is to look at the current process data through the online. We are confident that we will be able to get the DAU through the follow-up version. This is also our first priority. To put it bluntly, let's do the number of people first. And then from a sales perspective, this is not our current focus. In fact, after the whole product was launched, we basically didn't do it on purpose until we received it. Then, based on the average performance of such a game industry, we believe that in the future, There will still be a lot of room. So to put it simply, this game has gone beyond our expectations and even beyond the market's expectations. We believe that there is still a lot of room for growth in the future. This also includes the fact that we are going overseas to expand the space of this game further. So our overall strategy is to put the number of users continue to sit steadily, and then gradually start commercialization digging. So the focus of the current stage is in the first stage. The focus is still to ensure that the version is stable and the service quality is good. Under the premise, through various versions or operations, we will continue to increase the number of online users. This is basically our strategy. Okay.

So first, I'd like to talk about the Goose Goose Doc. And so I actually think we have launched on the 7th of January, related research of over 30 million new users.

And up until now, generally speaking, and the total users could be quite stable at the three meetings up and down.

So we are actually doing this planning, starting from the spring festival up here, the summer holiday.

We're going to prepare a series of different versions and with different stages, and we would like to have a stable and continuous stable game. And this is actually for the mid and long consideration for this game. Firstly, through this launch, we could actually have some of the remaining data, and we have confidence that for this continuous version, we could have generations. And so we could make their BAU higher. This is actually the most important priority for us. And it means that we need to make enough users. And once the product has launched, for their income perspective, we didn't do that much work on it.

Because for the game industry, the average performance in the future, we will consider about the payable rate and also the up value.

We still have a very big space for it. But for this game, since launch up to now, the total performance is more than over our expectation. In the future, we still have a very big space for the group. And in the future, we also would like to launch their game space. And from the user's perspective, we would like to make it stable and make it continue to be stable. And then step by step, digging the commercialization possibilities. This is the first stage, is that we need to make sure this version is stable, have a good quality service, and also make sure that the total quantity of the users online is good enough, and then furthermore, make it higher. So in the long-term perspective for this IP, we're going to consider how to have, like, expand different, like, surrounding products and also for the other accessories. We have different ideas for it. So let's put it in the future. But currently, the most important thing is that have a stable operation and make the users, like, have a higher user quality.

This is a very complicated question. I'll try to make it as simple as possible. Since December 1st last year, I have been the CEO of Xi'an TV. It's been more than three months. Now, the overall thinking is like this. First of all, it must be for our classic X-series, which also includes Network 3. This must be the bottom line of the entire Xi'an TV business. To put it simply, to continue to expand our investment in the basic disk. Over the past few years, we still have a lot of players and fans who are loyal to this IP. Although it is slightly affected by the external competitive environment, in general, the number of users, including active users, is still very stable. So we think that we can make the existing users to provide a better experience and quality, higher quality content. This is definitely our most basic. It must be guaranteed. So this is the first one. The second one is basically to put some strategic projects that do not have this project. We will still make some adjustments and corrections. Yes, in this case, It should be said that it is out of military force Put in what we think From medium to long-term or even longer The product of strategic value for Xi'an will come This is not convenient to talk to the outside at the moment But in fact, we are deploying it like this By May When the next quarter comes to an end, I may officially introduce it to you This is the second piece The third piece is actually with The latter half of this question is related. In fact, my point of view is that a new era of AI has arrived, not yet. Especially for myself, I have been in the game content manufacturing industry for many years. I think it's a big change. It's definitely not just about efficiency. In fact, it will subvert the past content creation model. So, since I accepted it on March 1st, it should be in the full implementation of AI. Specifically, it is the thinking level of this employee. It doesn't have to be said that it is more practical to build a platform based on AI creation. In the future, based on this platform, we will weaken the work. more creative value. To put it simply, through the creation of an AI platform, the completion of the creation of an AI platform, in the future, more and more entrepreneurs will create more meaningful content on this platform. Even internally, we will regularly select After the internal creation, we will squeeze the power of the company to commercialize it and push it to the market. So to put it simply, we also think that in the future, the organization of the entire industry, the organization of content creation will undergo a fundamental change. Even the public won't be like you. This is what I believe. Basically, it's all around the AI creation platform. Everyone is the creator. Everyone is the creator of the content. You can even simply understand that the era of the creation of the whole nation has come. This is my very firm point of view. In fact, with this In the past few years, we have been able to create a variety of AI tools that are perfect and rich. I think this point has reached this year. It should be said that in the entire industry, the entire industry, there is no doubt about it. So I also think that this practice point is basically mature. The third point, in fact, this point is more strategic. . . . . .

. .

. . . . . . . In the future, in this mode, I think there may be a surge of higher production efficiency and performance. Yes, so sometimes it's just a bad thing. It may not necessarily be a bad thing. There is no such thing as some difficulties and setbacks last year. Maybe this kind of change or reform may not be so thorough. Anyway, I think it's a good time to go first.

so actually for this first question it is quite complex i would like to make it simplified is that since i become the ceo on the first of december last year of tnr is already three months past so generally speaking firstly is for the service of the

the fate of the thought and also for the gx3 for their business is actually the basic of our business so we would like to continue for the investment of the basic space and in the past few years we always have a lot of like a very uh like only their stands and and although we have collected some infractions of the external competition and infection. But generally speaking, the customer quality is quite stable.

That is why we believe that currently the customer service, we're going to provide better service for the customers and higher quality for them, especially for the content. This is actually our guarantee, the basic guarantee.

Second is that we need to make some projects which doesn't have like strategic requirements we need to do some adjustments and also maybe shrink that business. It means that we could have enough space, enough ability to make it into the middle and long-term strategy, especially for we're going to have some strategic value. So currently it's not that convenient for me to release some of the information about it, but probably in May when we do this seasonal report, it's going to be more convenient for me to have an official introduction for it.

And thirdly, it's about relevant to the second part of the question is that the AI is going to be the completely new area.

It's already arrived, especially for our service. And we can see is that for the industry of their game, actually for the production of the game, in many years, we have a lot of like a revolution. It's not just to have high efficiency, but this is actually completely changed the way of the mode production. And since I became the CEO on the 1st of December last year, and we could completely carry out all of their AI, their different policies, especially not only for their staff's thinking and also the platform of the AI building in the future, because based on this platform, It doesn't have that much identification for their position, but we're going to highlight their innovation through the platforms of AI construction in the future. Mostly, it's that the creator is going to create the game on the platform. They're going to have a lot of the creation. They're going to have some meaningful content, and internally, we're going to select some excellent projects and commercialize and promote it into this market. So Simplified is that we think in the whole industry of organization, the content creation organization will completely change, and also the way of working will be completely changed. So basically, based on the platform's creation on the AI, everybody is going to be a producer, and everybody is going to be the creator for the content. And this is actually everybody could do the creation. This is the time. The time has arrived. So I have strong confidence for it. And in the past few years, the AI tools have completely become more mature. And especially this year, the whole industry, for the products, we have no doubt about it. AI has already come. That is why I think that the time is already mature. And thirdly is for the season. They have actually a strategic meaning. And the last year for the game, we had has launched, it doesn't have reached our expectations, and also the performances of the old game is a little bit slow, but this is actually we analyze internally and make a conclusion, and this is actually a good point for us because we could deduct some of the old things and also welcome something new. I think that when we move forward of business app, we're going to have more space, and this is going to be our opportunity for season. In the future, under this mode, we're going to have a higher product efficiency, and so that is why I think that sometimes the bad thing is not actually a bad thing. So, like, from the challenges and difficulties last year, we actually have some challenges facing, but this is going to let us get to welcome this new page for CSUN.

Thank you. We will now take our next question from the line of Lin Yang of Guangfa Securities. Please ask your question. Lin Ling, your line is now open.

Good evening, President Qiu and President Yi. I would like to ask two questions. The first one is about AI. First of all, I would like to ask about AI. In terms of software, we have established an AI business team. As for the current progress, as mentioned before, including the industry, we are also promoting it. I would like to ask about the latest progress. The second question is about the industry and AI for our software industry, including the business office. How do you see the impact of AI on the software industry? It has a big impact on the market. It may not have a direct impact on our office. Based on the situation of the industry, how do you look at it? We also serve these corporate customers. The second question is about um um I have three questions. The first is, what is the progress of our AI business, as well as the development and commercialization of industry-specific models and products? The second question is about the AI industry. Recently, the view that AI will display traditional software. While the core business of Kingsoft of the WPS has not been materially affected so far, but there is uncertainty regarding the expansion of value added service. What is What is your opinion about this question? And when you serve enterprise customers, what are their key demands for AI and what capabilities do you need to strengthen? And recently, Xiaomi has MIMO V2. a trillion-parameter large language model, as well as a line of associated models. In what ways will the MIMO model further empower and enhance the WPS business? Thank you.

Let me answer the first two questions, and then answer the third one. The first one is relatively simple. From April last year, JinSanYuan established the AI Product Center, including this year's exhibition. After the establishment last year, our main work is to cooperate with JinSanYuan in some specific landing scenarios. In fact, it should be said that it is some practice of AI landing companies. including the legal scene, the financial scene, and so on. In fact, there are already, of course, some of us have already disclosed to the other side, such as the project of the central bank, we have already paid off the land, we have already run, such as this small law, and so on. In fact, in our internal, including some of the companies, in fact, we have already used it. So the summary of last year's words is actually to really go into some industries to find out how to really supplement the path of the industry. This year's focus is actually to go deeper, especially with the improvement of model capabilities. Of course, it also includes the appearance of Open Cloud this year, which is to raise shrimps and honey all over the world. Actually, it is also a new one. It should be said that it is an inspiration. That is to say, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, to upgrade certain fields and industries. This is the biggest difference between this year and last year. Last year, we tried to explore the path of AI landing on some roads. This year, we have to go to certain fields to really do it. This is the progress of the AI timing center.

So, we would like to answer the first two questions, and then, like, Michelle is going to answer the third question. And so, this is actually quite easy. It stands to think that last April, we have set up the AI product center, and this year, we actually have the full hub. we would like to cooperate with the Kingsoft Cloud to have some collaborations altogether.

So actually, the Kingsoft Cloud, we already have delivered some of the products. Like, for example, the Kingsoft Lidl Fire and also internally, the target for the assessment, we already submitted. use some of the products and we make a conclusion since the last year that we would like to really get into the typical industry and trying to figure out the way of the road, AI how to have this empowered for different industries. So the key point of this year is that we need to target for the target their aim, especially like we can see is that this year the open cloud show that appeared and it's very popular the whole world. So this is actually a great reminder for us. AI is going to have empower for different person. AI could be able to empower for enterprises and they have different ways to show up and all of these could be able to be realized. So where we not only need to base our initial thinking, actually the key things of this year is that we need to focus on different scenarios and also to focus on different industries to get into that industry. And this is actually the biggest difference between last year and this year, is that last year we are trying different roads and trying to localize in different ways. maybe that AI works for that industry. But this year, we have to get deeply into a typical industry in probably one to two different regions and then make actual work. This is actually their AI product centers development and also progress.

The second question, I understand, is actually to ask about the impact of AI on the software industry or further AI on It also has an impact on semi-automatic software. In recent years, there have been statements that SOS is dead and AI has eaten up software and so on. Let me talk about my point of view first. In fact, I have talked about it internally since 2023, and it has not changed to this day. I said that the AI based on the original model has come. In fact, I prefer to use digital systems. All digital systems will be based on AI redevelopment. So from today's perspective, this trend is becoming more and more obvious. So you ask me how I see it. I think I've been looking at it like this for 23 years. Almost all of them will be successful. It will be the core of AI or large model behavior. It's just that over the years, AI has been continuously improving its capabilities. This has been recognized by more and more people. So in other words, Simply put, the impact on the industry is that all digital systems will succeed, right? As for the recent so-called AI eats away software, this kind of point of view, to be honest, I don't think this description is accurate. The so-called software, right? It's compared to hardware in the past. It's Hardware, Software. Of course, today we may call AI well, right? In fact, I prefer to use digital systems, right? The first point I just talked about is that all the digital systems will gather together. You say it's software, of course it's software. If you put it relatively hard, it's still called software. It's just that Doubao is a software. It's also a software. It's just that today's software is the same as the previous software. Whether it's from the strength of its functions or from its use of interaction, human interface, etc., it's the same as the previous one. So if you say traditional software, you say that AI software will eat up traditional software. This description is correct. But you say that AI will eat up software. This description is not scientific and not accurate. So this is my point of view. This is my point of view since 2003. The impact on our office has actually appeared since 2003. I just talked about my point of view I said we are doing PSA first But now we changed it again That's what I said at that time Do PSA first What did you say Put AI back What do you mean Actually at that time AI is used to enhance our PS Then I also said I said the future must be AI PS Of course, we have now changed our PS to Office To be honest, that is, two or three years The proposal is that we are first Office AI Then it will gradually transition to AI Office. These two differences are actually the same as the first one I just mentioned. At the beginning, we will use AI. AI is not strong enough. We will use AI to strengthen the system of our original office. But as the AI becomes more and more powerful, it will inevitably gradually turn to our so-called native AI office to develop this way. In fact, the office From last year, from two or three years ago, ah, this 07, this is the release of this PSI 1.0 2.0 3.0 to last year's 07. In fact, it is such a process of evolution, the process of evolution. So, uh, that is to say, from two or three years ago, the big model began to accumulate. Our Jinshan, this office has been evolving, evolving to 26 years, which is very clear, that is to say, this, this, this, or this ratio, from In 2023, Office AI may take the lead, but by 2026, all of our centers will be called AI Office. So this is the second point I'm talking about. How do we adapt to this era? It starts in 2023. So I talked about it at the telecom conference just now. Last year, 307% of our AIS members went bankrupt, which is also due to This is the second part of your question. The third part is Xiaomi's MIMO VR Pro. There is no doubt about this. I have expressed this in both the software and in the cloud. I said, based on 1 plus n, this 1 refers to Xiaomi's MIMO model. Because this is our own model. I've talked about it many times. Jinshan and Xiaomi are AI policies. I said, Jinshan won't make the model, but Xiaomi will. In fact, with the release of its VR Pro, especially in recent days, the performance of these two groups, including its anonymous performance, you can see that In fact, Xiaomi itself is also improving its ability, and this itself is also one of the most core competitiveness of our entire Jinshan department in the future. We are based on our own model to strengthen our own AI ecosystem. So basically, there is no doubt that even as time goes by, the entire Jinshan department I would like you to answer this second question.

Based on my understanding is that AI is the influence for the AI.

If they are saying that, if we're saying that AI is going to eat up software, I don't personally agree on this statement. Because as we know, for the big language module, AI has bring that. I would like to use digitalization systems to restructure the AI. um currently so this trend is quite significantly recently and since 2023 we have the restructure i can see that ai is the core things and as the development in the past few years ai has constantly strengthened and more and more be recognized by people and simplified to saying is that this is actually the whole restructure for the so AI could actually, if we are saying that AI is going to eat up the software, the description is not accurate because the software is compared with hardware. So what exactly is software and hardware? So like this here, you can see that's an AI scale. I would like to be using the digital system to explain that, especially for the basics on the AI restructure for the software and compared with the hardware, like for example, Doubao, this is a software, right? But today we can see is that and compared with the privacy, they have a bigger function. They have the better interaction and also have more like different multiple functions and abilities which we cannot imagine previously. So this is actually our understanding, but additional software they're different because the AI software could be replaced the traditional software that is for sure but AI we're not going to eat up the software because that is not scientific the this is my my opinion since 2023 and also the influence for the office is that since 2023 AI has showed up I discussed about my opinion so During that time, we can see that AI could be strengthened, like keep strengthening their ability in the future. That is why right now we have changed the name as the office, because 2023, we initially used the office AI, and then we used the change name as AI office. So this is constantly of my first question is that initially the AI ability is not that strong enough. That is why we need to use the office to strengthen their AI ability. But as the AI ability becomes stronger and stronger, like, for example, we have the native AI office development since 2023, then WPS 1.0, 2.0, and 3.0, especially last year, we have launched the Linxi, and this is actually the constant development. And up to now, this year, 2023, 2026, it's consistently clear that office AI is going to be a big part and to all of us is going to use all that is like AI office. So this is second point which is super for this time in 2023. And also for the WPS AI membership since last year, we could increase the 307% since last year. The reason is that last year, the first last year we have launched the link sheet that version. So It's actually the second part of the answer to this question. And the third part is about Xiaomi. So Xiaomi has launched the Mimo World Pro. So no matter for the communication meeting with the Kingsoft or the cloud communication meeting, that is based on OnePlus N. That is Xiaomi's big model for Mimo. And for Kingsoft and Xiaomi, we are actually an AI mixture. And Xiaomi would like to do this big model by King Software or not. So as time, when we have AI launch, especially recently, Xiaomi has launched that, our own AI and the performance is actually quite good. So we can see that the ability of Xiaomi is increasing all the time. And the key thing is that we need to make our competition ability stronger and also to have our own young. to strengthen their AI ecosystem construction. As time goes by, the whole KingSoft service product could have a very competitive ecosystem together, like developing together with Xiaomi. I'll answer as soon as I can. The big principle of our field is strategic investment and priority efficiency. From the perspective of the office, the key point is AI's origin, and WPS's 3.5 corporate version market expansion. However, in the case of Spam, they still maintain a reasonable profit level. In terms of the game industry, our long-term supply of games provides a support for the cash flow. The change in the marketing is mainly due to the marketing cost. The marketing cost will still be in line with the cash flow of the new products. In terms of the overall cost, we are still monitoring the cash flow of the new products, as well as the overall output of AI. Thank you for your participation in today's conference.

This does conclude the program. You may now disconnect your lines.