Kingsoft Corp Ltd Adr

Good morning ladies and gentlemen and thank you for standing by for Kingsoft Cloud's first quarter 2026 earnings conference call. At this time all participants are in a listen only mode. After management's prepared remarks there will be a question and answer session. As a reminder today's conference call is being recorded. I will now turn the meeting over to your host for today's call Mr. Wayne Wang, Investor Relations of Kingsoft Cloud. Please proceed, Wayne.

Thank you, operator. Hello, everyone, and thank you for joining us today. Kingsoft Cloud's first quarter 2026 earnings release was just built earlier today and is available on our website at ir.ksyun.com as well as on PR Newswire services. On the call today from Kingsoft Cloud, we have our chairman and CEO, Mr. Joe Tao, CFO, Ms. Li Yi, Senior Vice President, Mr. Liu Tao, Senior Vice President, Mr. Tian Kaiyan, Vice President, Mr. Wang Zhenzhen, and Board Secretary, Mr. Clark Tian. Mr. Zhou will discuss our business strategies, operations, and other company highlights, followed by Ms. Li, who will discuss the financial performance. They will be available to answer your questions during the Q&A session that follows. There will be consecutive interpretations. All interpretations are for your convenience. and reference purposes only. In case of any discrepancy, management statement in the original language will prevail. Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current markets and operating conditions and relate to events that involve known or unknown risks, uncertainties, and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance, or achievements to differ materially from those in the forward-looking statements. Further information regarding this and other risks, uncertainties, or factors are included in the company's filings with the U.S. SEC. The company does not undertake any obligations to update any forward-looking statement as a result of new information, future events, or otherwise, except as required under applicable law. Finally, please note that unless otherwise stated, all financial figures mentioned during this conference call have been nominated in RMB. It is now my pleasure to introduce our chairman and CEO, Mr. Zhou. Please go ahead.

Hello, everyone. Welcome to the first quarter of Jin Xiangyun's business call. I am Jin Xiangyun's CEO, Zhou Tao. Since 2026, with the further expansion of AI coding and the outbreak of AI intelligence, AI has truly moved from being able to chat to being able to do work. It has led to the beginning and end of model reasoning and training needs. It has further opened the ceiling of the cloud computing industry. This quarter, Xinshanyun continues to firmly promote high-quality sustainable development strategies. On the one hand, Xinshanyun's basic facilities and training and promotion platform capabilities. On the other hand, deepening the industry as the scene falls, a new investment in AI to rebuild the world. First of all, the company continues to grow in high quality. In terms of revenue size, In this quarter, we achieved a revenue of 27.0 billion yuan, which is 37.2% of the total profit growth. The share price and the industry share price achieved the same growth. The share price of the share price reached 20 billion yuan, which is 47.5% of the total profit growth. In terms of profit and loss, the company achieved a net profit of 3.5 billion yuan after adjustment in this quarter. The total profit growth After adjustment, EBITDA increased by 7.5 billion yuan, which increased by 134.7%. After adjustment, EBITDA rate increased by 27.6%, which increased by 11.4%. Secondly, Shizhan continued to drive the company's business growth. This quarter, Shizhan's business account income reached 1 billion yuan, which increased by 90.1%. The first half of Gong Youyun's income is 50.1%. Token business income growth is extremely strong. In April of 2026, it was about 53 times in January. Third, ecological cooperation continues to deepen. This quarter, the income from Xiaomi and Jinshan Ecology is 8.4 billion yuan. The same growth is 68.9%. with a total revenue of 31%. As Xiaomi strengthens its investment in the human car industry and the AI field, it brings more business opportunities. Our top-tier and Xiaomi持续关联交易上限, adjusted to 2025-2027 three-year framework, from Xiaomi Jinshan持续关联收入上限达142亿元,

Good evening, everyone, and welcome to KingsoftCloud's first quarter 2026 earnings call. I am Zhou Tao, CEO of KingsoftCloud. Since the beginning of 2026, the continued adoption of AI coding together with the rapid rise of AI agents have driven AI to evolve from chat-oriented to action-oriented use cases. This shift is fueling concurrent growth in both model inference and training demand. further expanding the setting of the cloud computing industry. This quarter, Kingsoft Cloud remained firmly committed to our high quality and sustainable development strategy. We strengthened our AI cloud infrastructure and enhanced our training inference platform capabilities. In the meantime, we also further deepened our presence in industry specific use cases, fully embracing AI's transformative role in reshaping the world. We sustained our momentum of high quality growth. In terms of revenue, we recorded a total revenue of RMB 2.7 billion this quarter, representing a year-over-year growth of 37.2%. Both public cloud and enterprise cloud services achieved year-over-year growth. Among them, public cloud revenue reached RMB 2.0 billion, a year-over-year increase of 47.5%. In terms of profitability, our adjusted gross profit reached RMB 351 million, up 8.6% year-over-year. Adjusted EBITDA was RMB 748 million, representing a year-over-year increase of 134.7%, with adjusted EBITDA margin reaching 27.6%, a significant year-over-year improvement of 11.4 percentage points. AI Cloud continued to drive the company's business growth. This quarter, AI Cloud growth buildings reached RMB 1.0 billion, a year-over-year increase of 90.1%, accounting for over half of public cloud revenue for the first time, reaching 50.1%. Notably, our token services delivered exceptionally strong growth, with April 2026 revenue skyrocketing to 53 times that of January. Third, Ecosystem cooperation continued to strengthen. This quarter, revenue from Xiaomi and Kingsoft ecosystem reached RMB's $838 million, a year-over-year increase of 68.9%, accounting for 31.0% of total revenue. As Xiaomi reinforces its investments in the human, car, home smart ecosystem and AI advancements, it brings forth more business opportunities for us. We plan to revise the annual caps for the continuing connected transactions with Xiaomi Following the adjustments, the revised annual caps with Xiaomi and Pingsong for the continuing connector transactions under the three-year framework from 2025 to 2027 will reach RMB 14.2 billion.

Next, I would like to introduce the progress of the business in the first quarter of 2026. In terms of public funds, this quarter achieved a revenue of RMB 2 billion, which increased by 47.5%, 47.5%. First of all, we continue to keep up with the large volume of visible cloud technology needs in Xiaomi Xinshan Ecotourism to promote long-term global strategic cooperation, carefully plan, continue to polish, and create products with long-term competitiveness and solutions. Second, we have received extensive recognition from customers outside of ecology. With solid product technology, rich case experience and good reputation, to quickly expand the breadth and depth of business cooperation covered by customers. In this quarter, in addition to our top five ecosystems, our customer income has increased by 66% and maintained a strong growth trend. We provide financial services to some of the leading self-driving customers to achieve rapid delivery and sales response, and assist in the handling of a large number of data, processing, and high-efficiency training for end-to-end neural networks. In order to take the lead in the market, we also rely on new trends, the outstanding resources of the training platform, flexible expansion and expansion and model scene capabilities, and strongly guarantee the token needs of multiple top Internet companies, and grasp the opportunity for market growth as the push-and-pull business explodes. Third, We have achieved a significant improvement in the customer structure. As we push the application to the ground, our computing business has covered the wide industry, including the Internet, AI companies, manufacturing, logistics, financial technology, games, audio and video, and so on. The customer structure is more balanced. In this quarter, we deeply support some of the top customers in the field of AI for Science. to fully guarantee the rapid development of customer new business and stable operation of the platform. We also successfully supported a leading logistics technology enterprise to develop a large-model code development project. By flexibly mobilizing multiple models to help the customer technology team, drive the efficiency of research and development, and double-improve the innovative ability. It is this multidimensional customer structure with business layout that not only brings an increase in revenue scale, but also makes us more flexible

Now let me walk you through our business highlights for the first quarter of 2026. In terms of public cloud services, revenue reached RMB 2.0 billion this quarter, representing a year-over-year increase of 47.5%. First, we continued to closely align with the large-scale and highly visible cloud computing demand within the Xiaomi and Teamsoft ecosystem. With a long-term and global strategic perspective, we are carefully planning and continuously refining our offerings to build products and solutions with sustainable competitive advantages. Second, we earn broad recognition from customers outside the ecosystem. Leveraging our solid product and technology capabilities, extensive project experience, and strong market reputation, we rapidly expanded both our customer coverage and the depth of business cooperation. Revenue from our top five non-ecosystem customers increased by 66% year-over-year, maintaining strong growth momentum. We provided AI cloud services to a leading autonomous driving unicorn, enabling rapid deployment and responsive operations. This supported large-scale data processing and efficient end-to-end neural network training iterations, helping the customer capture early market opportunities. Through our Starflow training and inference platform, with best-in-class resource scheduling, elastic scalability, and model deployment capabilities, we effectively supported the token demand of many top-tier internet companies, capturing the surge in inference-driven demand. Third, we achieved a meaningful optimization of our customer mix. As inference applications continue to scale, our AI business now spans a wide range of industries. including internet, AI companies, autonomous writing, logistics, fintech, gaming, and video streaming, resulting in a more balanced customer mix. This quarter, we deeply empowered a leading AI for science customer, ensuring its rapid business growth and stable platform operations. We also supported a top logistics technology company in executing large-scale code development projects. enabling its engineering teams through flexible multimodal utilization and significantly improving R&D efficiency and innovation capability. This diversified customer mix and business portfolio not only drive revenue growth, but also enabled us to schedule computing resources more flexibly in off-peak periods, improve resource utilization, and enhance profitability.

This quarter, the actual income of 7.0 billion yuan has increased by 14.7%. In the field of public service, we launched the Guoziyun Cloud platform in Shenzhen, focusing on high security, strong compliance, and high confidentiality of state-owned enterprises, the core demand, and the digitalization and upgrade of all aspects of state-owned enterprises, offices, business management, and other scenarios. We are based on Jinshan Cloud technology base, using provincial platform plus multi-directional platform integrated architecture to build public information platform in Hubei, realize resource saving, data interaction, and business coordination. Currently, we are supporting multi-local regional platform to scale up Jinshan Cloud. We are also cooperating with domestic chip manufacturers to build a full-time capital service system from the bottom chip to the top chip. to promote national-made computing cloud and scale up commercial applications to meet the high security and high controllable computing needs. In the field of digital health, we cooperate with the National University of China, the University of China, the University of China, and the Institute of Medical Sciences to coordinate data management projects. By systematizing data control methods, we can assist hospitals to achieve cross-referencing from distributed management to standardized management. for the smart transformation of large medical institutions. We also signed a large integrated platform project. The project data center highlights our comprehensive professional service capabilities in the field of integrated construction, planning, design, construction, and operation. For subsequent medical institutions to use this as a benchmark, a large-scale promotion of the top line is the foundation. In terms of enterprise cloud services, revenue reached RMB 710 million this quarter,

representing a year-over-year increase of 14.7%. In the public services sector, we launched the state-owned cloud platform in Shenzhen, focusing on the core needs of state-owned enterprises for high security, strong compliance, and strict data confidentiality, and fully enabling the digital and intelligent upgrade of office, business, and management use cases. Leveraging Kingsoft Cloud's technology foundation, We adopted an integrated architecture that is provincial platform plus multi-prefecture and county platforms to build a supply chain public information platform in Hubei, enabling resources efficiency, data interoperability, and business collaboration, and have now supported the scaled migration of multiple municipal and county level platforms to the cloud. We also partnered with a leading domestic chief manufacturer to build a full stack intelligent computing service system spanning from underlying chips to upper layer applications, advancing the large scale commercial deployment of domestically developed intelligent computing cloud solutions and meeting the demand for high security and highly controllable computing capabilities. In the digital healthcare sector, we collaborated with Union Hospital affiliated with Tongji Medical College of Huazhong University of Science and Technology, one of the top ranked hospitals in China. on a data governance project. Through a systematic data management framework, we helped the hospital transition from fragmented management to standardized governance, setting a benchmark for the intelligent transformation of large medical institutions. We also signed a contract for a large-scale medical consortium platform project. Based on the data middle platform, this project highlights our end-to-end professional capabilities in planning, designing, construction, and operation within the medical consortium space, laying the foundation for large-scale replication and rollout across healthcare institutions. In the enterprise services sector, we delivered a green energy operations platform for leading clean energy service providers, enabling effective, intensive management of large heavy-duty truck fleets. We further extended into the broader green and low-carbon industrial chain. exploring digital solutions for solid waste management, and driving large-scale business deployment.

In terms of product technology, we continue to stick to the technology industry, closely surround the needs of computing, and fully upgrade product services. In this quarter, in the face of the increasingly diversified model needs, our new platform will greatly expand the model ecosystem, API services, new voice recognition, and voice generation models, expand the image and video generation model, and at the same time bring a more detailed management experience for users. Facing the needs of the smart body, we launched the Agile Engine to assist customers to efficiently complete the development, deployment, and operation of Agile. We have also added the ability to deploy a single Agile for the cloud host, supporting the application of Open Cloud, Hamas, and other mainstream Agile. To implement the deployment within 5 minutes, . . . . . .

In terms of product and technology, we continue to stay committed to a technology-driven approach, closely aligned with AI cloud demands, and have comprehensively upgraded our products and services. During the quarter, in response to increasingly diverse model requirements, our Starflow platform significantly expanded its model ecosystem. We added new API services for speech recognition and speech synthesis, expanded image and video generation models, and delivered a more refined user management experience. To address growing demand for AI agents, we launched Agent Engine, enabling customers to efficiently develop, deploy, and manage agents. We also introduced one-click agent deployment on our cloud hosts supporting mainstream agent applications such as OpenClaw and Hermes, achieving deployment within five minutes and significantly lowering the barrier to adoption. For AI training and inference use cases, KS3 Cache Accelerator now delivers stable millisecond-level low latency, balancing performance and cost efficiency. To meet the rising demand for private deployment of AI across industries, Our Galaxy Stack platform reached a key milestone, adding Starflow and security modules, and completing a full-stack, closed-loop private deployment solution for AI Cloud, covering cloud infrastructure, integrated training and inference, token services, and security guardrails.

In general, the wave of AI, from writing to modeling, from training to reasoning, from chatting to work, From Agile to Longxia, it is constantly innovating and deepening, making us more confident that AI will repeat the judgment of the 1,200 billion yuan. Xinsheng Yun will continue to uphold the strategy of high-quality development, increase investment, deep-rooted core products and solutions, continue to improve operating capacity, and create greater long-term value for customers, shareholders, employees, and society. Next, please let CFO Li Yi introduce a number of financial performance for you. Thank you.

Overall, in this wave of AI innovation, from text generation to multi-modal capabilities, from training to inference, from chatting to real-world text execution, and from agent to course, the pace of innovation and deepening applications continues to reinforce our conviction that AI will fundamentally reshape industries across the board. Kings of Cloud will continue to uphold its strategy of high-quality and sustainable development, increased investment, deepened its focus on core products and solutions, and continuously enhanced profitability, creating greater long-term value for customers, shareholders, employees, and society. Next, I will hand over to our CFO, Ms. Li Yi, who will walk you through our first quarter financial results.

Thank you. Thank you, Mr. Zhou and Clark. And thank you all for joining the call today. I will now discuss the first quarter financial results using RMB as currency. Before we walk through the details of financial results for the first quarter, I would like to highlight the following aspects. First, our revenue has been consecutively achieved year-over-year growth for eight quarters, reaching $2,704 million this quarter. For the first time, our AI business became the majority revenue driver. contributing over 50% of our public cloud services revenue and marking a pivotal structural shift in our growth mix. This quarter, our AI business growth increased 91% year-over-year, amounting to $998 million. Second, our adjusted growth profit was $351 million, increased by 7% year-over-year. despite overall supply chain challenges. Our adjusted EBITDA margin was 28%, increased by 11 percentage points year-over-year, thanks to our AI revenue growth. Third, in light of strong demand across diverse sectors, we remain steadfast in investing our infrastructure And our capital expenditures and leased assets obtained in combination grow 38% year-over-year to $3 billion this quarter. And we expect to continue to invest to facilitate further business expansion throughout the year. Now, I will walk you through our financial results for the first quarter of 2026. This quarter, total revenue was $2,704 million. Of these, real news from public cloud sources were 1,996 million, up 47% from 1,353 million in the same quarter last year. Real news from enterprise news sources reached 707 million, up 50% from 616 million in the same quarter last year. Total cost of renewals was $2,358 million, up 43% year-over-year, which was mainly due to our investment into AI computing resources. IDC cost increased by 26% year-over-year, from $723 million to $911 million this quarter. This increase was mainly due to increase of RAC services, which served the expanding AI business. Deprivation and amortization costs increased from $370 million in the same quarter of 2025 to $890 million this quarter. The increase was mainly due to the depreciation of newly acquired and leased servers and network equipment, which were mainly related to AI business. Solution development and services cost increased by 40% year-over-year from $505 million in the same quarter of 2025 to $565 million this quarter. The increase was mainly due to the solution personal expansion of Camelot. 4 million cost and other cost was $2 million and $51 million this quarter. Our adjusted gross profit for the quarter was $351 million, increased by 7% year-over-year and decreased by 25% quarter-over-quarter. Adjusted gross margin decreased from 70% last quarter to 30% this quarter. The decrease was mainly due to the higher cost of the server along with the expansion of our AI business, as well as upfront costs incurred for future revenue-generating activities with certain customers. On the expense side, excluding share-based compensation expenses, our total adjusted operating expenses were $455 million, remaining stable compared with the same quarter last year and last quarter, of which our adjusted R&D expenses were $184 million, decreased by 80% from the same quarter last year. Adjusted selling and marketing expenses were 112 million, increased by 4% year-over-year. Adjusted general and administrative expenses were 159 million, increased by 34% year-over-year. Our adjusted operating loss was 60 million, increased by 7% from adjusted operating loss of 56 million in the same period last year. The improvement was mainly due to the expansion of revenue scale. Adjusted operating loss margin decreased from 3% in the same period last year to 2% this quarter, representing a decrease of 0.6 percentage points. Our long gap in data profit was $748 million, increased by 135% from $390 million in the same quarter last year. Our long gap in digital margin achieved 28%, compared with 60% in the same quarter last year. It was mainly due to our strong commitment to AI cloud computing development and the strategic adjustment of business structure. This quarter, our capital expenditures, including those financed by third parties and the right of use assets obtained in exchange for financial disabilities, were 2,985 million. Looking ahead, we aim to capitalize on the explosive growth in demand by further investing in infrastructure, enhancing services stability, managing liquidity risk, and improving operating efficiency. We remain focused on AI-driven strategy, providing customers with high-value added cloud services. That's all for the introduction of our operational and financial results. Thank you all.

This concludes our prepared remarks. Thank you for your attention. We are now happy to take your questions. Please ask your questions in both Mandarin and English, if possible. Operator, please go ahead.

Thank you. We will now begin the question and answer session. If you wish 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 take our first question, and the question comes from Liping Zhao from CICC. Please go ahead. Your line is open.

Good evening, President Zhou and President Li. Congratulations on the company's success. I have two questions. The first question is about the new trend marketing platform. Mr. Zhou mentioned that the new trend revenue increased by 53 times in April and January. The growth is still very strong. Mr. Zhou, please tell us about the current business. What are our thoughts on it? How is its revenue volume and profit rate? How do we look at the revenue scale of the entire business in the future? How do we look forward to what kind of level it wants to achieve? The second question is about the income of AI in the public domain. Because we all know that the price of chips and storage on the market has risen a lot. At the same time, the demand for downstream Good evening, Mr. Zhou and Ms. Li. Thanks for taking my questions and Congrats on another strong quarter. So I have two questions. The first one is relating to your Starflow mass platform. Ms. Zhou mentioned that the revenue of the mass platform increased 53 times from January to April. Could you share the current revenue scale and margin levels and what's management's outlook on this business? And the second question is about the AI pricing. Compared to the fourth quarter of 2025, have there been increases in the average pricing for the newly signed public cloud contracts in the first quarter and second quarter of this year? If so, by how much?

Thank you. Uh, because today the two branches of SVP are all here Uh, I'll ask them to answer these two questions. The first question, please answer Liu Tao.

Okay, let me talk about the new flow. In fact, we started doing this business from the end of last year, and then it really started. The technology is relatively small, so in fact, by the beginning of this year, our technology is relatively small. Yes, but this is our company, because it has always been serving customers of larger scale, so in fact, we have been In the beginning of the year, we received a large number of top Internet clients and clients in various industries. The number of clients is relatively large. In fact, we are now in the first place because of the delivery of resources, so we have not fully released the potential of this business. But under these relatively limited conditions, the business has gained a huge growth. But because of the uncertainty in it, it's relatively high, so it's just that you let us look forward to doing this business all year round. In fact, we can only say that it is still a relatively optimistic state of growth, so we may see a clearer state of this in operation in one or two stages. From the perspective of profitability, this business is compared to our traditional cloud computing business and our traditional computing business. The power level is relatively high, and it is a process that will be optimized as our technology improves. In the past month or so, we have also experienced a huge efficiency improvement due to the optimization of our own algorithms and algorithms, and we have also seen an improvement in the improvement of power efficiency, including its operating model. The profit optimization space is relatively large, so overall, we are relatively optimistic about the subsequent power maintenance at a relatively high level, but because the business is also Okay, so quickly translation.

So our token business actually started off at a relatively small base, let's say, end of last year and the beginning of this year. However, traditionally, we have already maintained a very strong customer base of very large-scale leading customers. So at the beginning of this year, we're starting to meet huge demands coming from such customers in light of the surge of agent demand, the surge of back cooling demand in such use cases. So obviously, the demand was huge and very strong, but in a way, our business was restricted by the underlying resources that is available to us. So I would say that obviously we're optimistic about the growth of this business. However, we need to, due to that uncertainty we just mentioned, we would like to, let's say, see a couple more quarters before disclosing more details to the market of how that business grows. And secondly, in terms of margin levels, I would say that the margin levels for this token business and inference business in general is higher than traditional cloud computing business And we do see a lot of improvement in margin from certain perspectives, for example, coming from technology advancement, coming from the optimization of algorithms, coming from optimizing that algorithm with the Raman models, and also optimization and improvement coming from operating models. So I would say we're cautiously optimistic about the margin, but again, due to still currently in a quickly expanding phase, it's not in a static phase, so we will not at this stage talk more about the specific margin numbers.

Thank you.

Second question, let's have Mr. Tian answer it. Second question, let's answer it. From what we've seen so far, from the bottom line, In terms of customer demand, it should be in a state of increase in QE. At the same time, the price of our supply is also increasing. Whether it's from the component or from the whole machine to the raw materials, it's all in a process of growth. So everyone actually thinks that the trend of growth may continue in Q2 this year, or even longer. So even if the price rises, But our customers still think that it is a good time to buy the corresponding products as soon as possible to meet their production and development needs. So at this stage, the price of our upstream can basically be completely covered by the customer's bill. So overall, the average price of our AI rental contract has been significantly increased. Thank you.

So in relation to the second question about the selling and purchasing price in relation to our business, so yes, as widely recognized, the demand for our cloud computing services have been surging tremendously. So is the pricing from our upstream, which includes from components to holistic servers to other raw materials. So the current consensus of the market, including our customers, is that the price hiking, the price surge trend will actually continue, not only happening, already happening in Q1, but also will continue in Q2 and maybe some quarters to follow. So they would believe that the current time point to secure more computing power is actually the right moment to do so. And because of that, the pass-through of the price of the cost pressure coming from our upstream is actually doable and would not affect our negatively. It would not negatively affect our margin levels in this current market situation.

Thank you. Okay. Thank you, Mr. Liu and Mr. Tian.

Thank you. We will take our next question. Your next question comes from the line of from CLSA. Please go ahead.

Your line is open. I have two questions to ask. The first one is about our low-intensity hair loss rate. We see that the same ratio is still a bit low. I would like to ask about the main factors behind this. And among them, has it caused the growth of this product to cause a positive effect on our hair loss rate? The first question is regarding the gross margin in the first quarter. We noticed that the gross margin trouble fit in the first two and what are the main reasons? Has the positive effect of the product price increase have been factored in already? And the second question is, with the ongoing high demand for computing power, large model companies are adapting their resource allocation and forming partnerships beyond public stock vendors to GPU rental companies and telcos. How does management see the key to cloud competitive position and advantages in this landscape? Thank you.

Thank you for your question. For the first quarter, the fourth quarter margin, we can see a 3% percentage decrease. I think the first factor is because there's a 30% revenue come from the public cloud, the public enterprises cloud. So that is the first reason. And the second one is the upfront cost incurred for future revenue-generated activities with certain customers. For the coming courses, we expect the export margin will recover to a nominal level. Thank you.

The second question, I'll answer it first. I'll take a look at it later. Actually, this is a very good question. We have also noticed that we have entered the self-sufficiency cloud, especially into the second half of last year. You will find that this should be from last year. You will find that this whole market pattern has developed a very interesting phenomenon. Some of the past competitive relationships are now cooperating partners. I'm not going to talk about the name of the company in detail. In the past, some companies were not up and down, but now they have become up and down. Some of them used to be on different terrains. We are a private enterprise. Some of them belong to the state-owned enterprises. The financial and economic era is also a close cooperation. In fact, I think there are a few problems behind this phenomenon. I think the first one is actually a complement of ability. Of course, it can also be said to be a complement of system. In fact, I have talked about this myself. I said, in fact, this may be a lot of questions. Don't look at it with competitors. I think whether it is from the system or from the ability, it is a cooperative partner. As a result, it has become very, very obvious in the computing era. The second one actually also explains the abundance of the entire computing market. and supply is not enough for this contradiction. So, this is what we need to join together. Let's put this customer service together. Yes, so that's what I know. You just talked about this problem. This is more like a competitive angle to look at this problem. But what we experience and feel is actually more of a kind of a kind of facing an era of development. We all have the ability to short-circuit. We all have the short-circuit system. We also have this of course also includes other resources of the short version We are today, on the contrary, this is the abandonment of the past, this is the gatehouse of the sword Ah, in fact, together in the positive embrace of this era and together is in this supply of such a period Okay, so this is our understanding. In essence, it is the protection of ability and then the protection of resources. Ah, we are not competing. We, we, we are more cooperative So this is a very interesting question, a very good question.

So in fact, we observed a relatively interesting change in market landscape. starting the second half of 2025. That is, some of the used-to-be competitors are actually becoming cooperation partners in this wake of strong AI demand. And what you mentioned in your question also exemplifies the close cooperation between private enterprises and state-owned enterprises. And we think that this demonstrates a couple of things. Number one, this is fundamentally complementary capabilities from, or I would say, complementary institutions coming from different backgrounds of enterprises, which we have mentioned back in the general CPU computing age, and this is actually manifesting itself again in this new AI or intelligent cloud era. And secondly, we would think that this fundamentally reflects the strong discrepancy between, or the strong gap, the big gap between supply and demand in today's market. So everybody actually needs to come together and to overcome shortcomings that each one of us has to form a holistic and overall solution to serve the end customers. So again, so your question is more from a competition perspective, but from our understanding and experience, we're actually seeing a more kind of cooperative perspective of the story. So everybody has its shortcomings and we work together to serve the needs of the end customers.

Thank you. We will take our next question.

Your next question comes from the line of Daily Li from Bank of America Securities. Please go ahead. Your line is open.

Good evening, everyone. Thank you for accepting my question. I would like to ask two questions. This is also related. The first is about the needs of customers. Our first quarter growth is still very fast. I would like to share with you about our second quarter or the demand for the next half of the year. Which types of customers are stronger? What is the ratio of reasoning and training? The second question is about a small detail question. How long is the contract period between us and the customer? Is it because of the current price, the change in the current price, the period may be shortened or adjusted? Assessment management is taking my question. I have two questions here. First question about the demand outlook for the public cloud. The one key result is pretty strong. And how do we see the demand trend in Q2 and the second half of this year? Regarding the demand mix, how's the trend for inferencing and model training and the second question is about the contract term with our clients um as the upstream costs are in a rising trend are we taking like a shorter term account for any change for in terms of the contract terms uh thank you okay uh

First of all, as mentioned in the previous content, our demand is extremely high. Currently, in the backlog of the company's meeting, the demand is very high, but it is limited to the change of supply chain, so the demand may still be extremely high. In addition, in terms of the industry, the customer industry is actually very rich. There are both Internet customers and specific AI companies, The demand for customers who want to drive automatically is also exploding, including the demand for robots. Yes, so in general, the demand for multiple industries is growing in an explosive way. Well, if you look at which training is pushed here, you can see that the demand for automatic driving robots is obviously training, including the demand for data processing prepared for training. Well, for some companies, we still see some new players in the market who are training and entering the market. Ah,

So in terms of AI demand, as we mentioned, it's exceedingly strong. And looking at the second quarter, we currently actually have a very long list of backlogs, which is mainly subject to the supply chain restrictions. Now, for the sectors that drive this growth, we're currently covering quite a few sectors, which we have all seen simultaneously having explosively strong demand. you know, starting from the internet, from large language model AI labs, from autonomous driving and from, you know, robotics. And I would say that out of which the autonomous driving and robotics generally tend to have very strong model training requirements and demands. And particularly for robotics, they have also, and also for autonomous driving actually, they have also a lot of data processing or data treatment requirements or demands for the training of their models. And for the inference side of the story, we have the internet companies and large language model companies coming from their demand for vibe coding and agents, such use cases. So this is the general overview of the demand side of things. Now, since you also mentioned about the contract period, we had relatively standard contract periods in the past, but then now in light of this new, you know, the supply chain, the price surge, we currently have more flexible kind of contract period arrangements, which maximizes our profits and benefits.

Thank you. Thank you, Mr. Liu, for your answer. Thank you.

Thank you. We will take our final question.

Your final question comes from the line of Timothy Zhao from Goldman Sachs. Please go ahead.

Your line is open. I want to ask about the big model of Xiaomi this year, especially since the release of V2.5, what changes did the company see in Xiaomi's resources, including training and reasoning usage? 那我们也宣布了在26年和27年和小米的这个关联交易的额度 那想请教一下我们对整个额度的使用率 相对于25年是怎么去判断的 这个是第一条问题 那第二条问题是关于我们的资本支出和我们的这个租赁的资产 那我看到在一季度我们整体是大概花了30亿人民币左右 那想请关系层更新一下 我们对于今年整体资本支出或者是资本支出当量的这个全年的展望是怎样的 Thank you, management, for taking my question, and congrats on the very strong results. My first question is regarding your revenue from Xiaomi and the Kingsoft ecosystem. I noticed that the revenue growth accelerated compared to the fourth quarter of last year. Just wondering, is this related to Xiaomi after the MIMO large junction model launch, and especially MIMO v2.5? Have you observed any specific change on the demand for Keynote Cloud resources and the breakdown between training and inferences? And after you announced the rate of hardly transaction revenue cap with Xiaomi for this year and next, just wondering how do you think about the utilization rate versus last year? My second question is regarding your CapEx and also lease assets. I noticed that the total amount spent was around $3 billion in the first quarter. Just wondering if you can provide us an update on how you think about this total capacity number for this year. Thank you.

Okay, let me answer the first question. I'm Liu Tong. First of all, it's related to our training and reasoning with Xiaomi. Because most of the training work is done at our home, we can also see, including in the paper, the demand for resources brought by training is still increasing. On the other hand, the push business, especially after the release of VR, there is a lot of computing power in this entire group that will be converted into push resources to use, right? Then in the future, it will be replaced by new generation resources to do training. So the demand for push is also growing very fast. Of course, in fact, you have to predict how big the growth of push will be. It depends on the return of Xiaomi's business. If its return is very positive, it will actually let go and push, then the demand will not be predictable. So on the training side, the vast majority of the resources come from Kingsoft Cloud, so we continue to see growth of growing demand in that respect.

In inference demand, especially since the launch of MIMOv2, a lot of underlying resources have been reallocated to do the training for that, to do the inference for that model. In terms of the prediction for future growth of inference coming from MIMO, we are relatively optimistic. However, it's ultimately subject to the return on Xiaomi's side. personally comment on that, but we generally remain optimistic about that.

For Capstone Detroit, actually the AIO role presented huge opportunities for us. Fortunately, we launched our intelligent computer business back in 2023. We have really established our supply chain capabilities, and our supply network is in place now. And as Mr. Liu Tao has mentioned, we have seen a surge in demand from our strong customer demand. But we have to admit the supply chain capacity is the primary limiting factor for the capital staging for the 2026. And we estimate that our best estimate is to say for the 2026 is around 15 billion to 20 billion at this moment. Thank you.

Thank you.

Thank you. This concludes today's question and answer session. I will now hand back for closing remarks.

Thank you, operator. Thank you very much for joining us today. If you have any further questions, please feel free to contact us. Looking forward to speaking with you again next quarter. Have a nice day.

This concludes today's conference call. Thank you for participating. You may now disconnect.