Good day, and thank you for standing by. Welcome to the Kingsoft Cloud's Fourth Quarter and Full Year 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Nicole Shan, IRD of Kingsoft Cloud. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining us today. Kingsoft Cloud's fourth quarter and fiscal year 2025 earnings release was distributed earlier today and is available on our IR 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. Zou Tao; CFO, Li Yi; Senior Vice President, Mr. Liu Tao; Senior Vice President, Mr. Tian Kaiyan; Vice President, Ms. Wang Juan; and Associate Vice President, Mr. Zhang Wei. Mr. Zou will review our business strategies, operations and other company highlights, followed by Ms. Li, who will discuss the financial performance. We will be available to answer your questions during the Q&A session that follows. We will be conducting an interpretation. Our interpretation is for your convenience and reference purposes only. In case of any discrepancy, management statements in our original language will prevail. Before we begin, I'd 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 market 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 these and other risks, uncertainties or factors are included in the company's filings with the U.S. SEC. The company does not undertake any obligation to update any forward-looking statements 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 are denominated in RMB. It's now my pleasure to introduce our Chairman and CEO, Mr. Zou. Please go ahead.

Hello, everyone, and thank you for joining Kingsoft Cloud's Fourth Quarter and Fiscal Year 2025 Earnings Call. I am Zou Tao, CEO of Kingsoft Cloud. Since the start of 2025, the global AI industry has achieved significant milestones, from the democratization initiated by the DeepSeek moment to heightened competition among multimodal software models. We have seen advances in embodied AI making strides into the physical world and OpenCloud exhibiting its capability for understanding and executing tasks. AI is progressively evolving and influencing various sectors through models, agents, and computing power. As an integral part of the AI framework, cloud computing is experiencing an unprecedented surge in demand for intelligent solutions. This year, we have adhered to our strategy for high-quality, sustainable development by seizing opportunities in the AI era and enhancing our capabilities through effective execution. Our efforts have yielded impressive financial results and have fortified our business foundations. We recorded a historic high quarterly revenue of RMB 2.76 billion, marking a 24% increase year-over-year, with revenues from public cloud services rising by 35% to RMB 1.9 billion. Our intelligent computing services continue to propel our growth, with gross billing from our AI business reaching RMB 926 million, a notable 95% increase year-over-year, and contributing 49% to our public cloud services revenue. Both our ecosystem and external business segments are growing in tandem. Our partnerships within the ecosystem remain robust and are deepening. This quarter, revenue from our ecosystem partnership with Xiaomi reached RMB 804 million, a 63% year-over-year increase, accounting for 29% of our total revenue. For the full year 2025, related-party transactions with Xiaomi and our ecosystem partners constituted 94% of our net annual contribution. Concurrently, our external customers, including major enterprises in high-growth industries, have expressed confidence in our products and services, making up approximately 70% of our total revenue. Revenue from our top 5 non-ecosystem customers grew by 44% year-over-year, signifying ongoing robust growth. Profitability has also improved this quarter, with the adjusted gross margin increasing to 17.1% and the adjusted operating margin reaching 2.0%. We have achieved operating-level profitability for two consecutive quarters, and our self-funding capability has shown significant year-over-year improvement. Now I would like to highlight key business developments for the fourth quarter of 2025. In public cloud services, revenue reached RMB 1.9 billion, a 35% increase year-over-year. Customer demand driven by AI is diversifying our customer base, extending beyond leading AI enterprises and Internet giants to sectors such as automotive manufacturing, autonomous driving, embodied AI, and fintech. We continue to strengthen cooperation within the Xiaomi and Kingsoft ecosystem while tapping into new external opportunities. On the product and service front, we are expanding our capabilities to handle large-scale training and inference demands. This quarter, we launched a new inference cluster for a major video streaming platform, serving over 100 million users, and secured a significant fintech client using our token-based inference service, who praised our reliable model and computing power. Despite market uncertainties, our well-established supply chain has enabled us to strategically plan ahead and maintain a dynamic stock of key components for sustainable growth. In enterprise cloud, revenue reached RMB 859 million, reflecting an 18% quarter-over-quarter increase. The AI Plus policy is propelling the demand for specialized solutions, highlighting the vital role of cloud services in advancing industrial intelligence. Our enterprise cloud AI business is positioned for steady long-term growth, representing a $1 trillion market opportunity and pivotal in driving technological advances across various industries. As a B2B cloud service provider with robust technology and service capabilities, we are well-prepared to seize these industrial transformation opportunities. In enterprise services, we have made significant strides in high-end manufacturing, providing reliable and high-performance computing services to top enterprises for their intelligent manufacturing and AI R&D needs. In healthcare, we introduced a data agent-based AI application designed to enhance healthcare operational processes, marking a significant shift towards intelligence. This application allows for natural language insights into cost control, advancing hospital management from retrospective analysis to proactive intervention. We are lowering data application barriers and reinforcing our competitive advantages in valuable medical AI scenarios. We have also collaborated with telecom operators to establish stable, high-performance computing clusters for the public services sector, making inroads into key markets such as Shanghai. We believe that leveraging Kingsoft Cloud's extensive expertise and service experience will unlock substantial intelligent computing opportunities within the enterprise cloud sector, creating synergies with our public cloud operations. In terms of products and technology, we are building a next-generation computing services system for LLM training and industrial intelligence, providing comprehensive capabilities from computing services to model-as-a-service. Our technology is evolving from basic cloud computing to an AI-first architecture, driving digital and intelligent transformations across sectors. We are focused on technologies that cater specifically to model training and inference, aiming to deliver stable, efficient, and readily available intelligent computing services. This quarter, our StarFlow platform has been upgraded with the launch of the Model Context Protocol Cloud (MCP), process optimization, and AI search features to assist enterprises in developing and deploying AI agents through a unified platform, gradually establishing a new ecosystem focused on agent-based operations. For companies requiring private deployment, our Galaxy Stack features heterogeneous GPU management, rookies network, and intelligent container scheduling capabilities, along with complete localization tailored to empower intelligent transformations across different sectors. As we stand at a new starting point, we are genuinely excited about the endless possibilities ahead. We remain dedicated to our strategy of high-quality and sustainable development, capitalizing on the vast opportunities presented by the AI era, growing alongside the industry, and refining our core technologies. We will continue to pursue market opportunities both within and outside our ecosystem, optimizing our operations to enhance profitability and create value for our customers, shareholders, employees, and society. I will now hand the call over to our CFO, Ms. Li Yi, to discuss our financials for the fourth quarter and fiscal year 2025. Thank you.

Thank you, Mr. Zou, and thank you all for joining the call today. Before we walk through the details of financial results for the fourth quarter and fiscal year 2025, I would like to highlight the following aspects. First, our revenue has achieved record high, RMB 2,761 million this quarter, representing a year-over-year growth rate of 24%. Within that, revenue from public cloud services was RMB 1,902 million, increased by 35% from RMB 1,410 million in the same quarter last year. Unprecedented explosive demand for our AI business drove a 95% year-over-year billing growth, which totaled RMB 926 million. Second, profitability has seen substantial improvement. Driven by a shift in our revenue structure, our adjusted gross margin continued its upward trend, rising to 70% from 60% in the previous quarter. Adjusted EBITDA margin reached 28%, up 12 percentage points from 16% in the same quarter last year, though down from 33% last quarter. The year-over-year growth was fueled by a large contribution from AI-related business, where personnel costs represent the primary cost component. The sequential decrease was mainly due to a nonrecurring subsidiary received last quarter, which established a high baseline. Notably, we have achieved adjusted operating profit for 2 consecutive quarters, reaching RMB 55 million this quarter, which was a 2% margin. These results validate our ability to monetize intelligent cloud opportunities and our strategic focus on high-quality enterprise services. Third, our cash and cash equivalents achieved RMB 6,018 million, strengthening our ability to further support the investment into AI business. Now I will walk you through our financial results for the fourth quarter of 2025. This quarter, total revenue was RMB 2,761 million. Of this, revenues from public cloud services were RMB 1,902 million, up 35% from RMB 1,410 million in the same quarter last year. Revenues from enterprise cloud services reached RMB 859 million during this seasonally strong quarter, which was characterized by a high volume of project completion. Total cost of revenues was RMB 2,296 million, up 27% year-over-year, which was mainly due to our investment in infrastructure to support intelligent cloud business growth. IDC costs increased by 30% year-over-year from RMB 725 million to RMB 812 million this quarter. The increase was mainly due to the increasing needs of infrastructure, which serve the expanding AI business. Depreciation and amortization costs increased from RMB 323 million in the same quarter of 2024 to RMB 741 million this quarter. The increase was mainly due to the depreciation of newly acquired and leased servers and network equipment, which were mainly allocated to our AI business. Solution development and service costs increased by 50% year-over-year from RMB 557 million in the same quarter of 2024 to RMB 642 million this quarter. The increase was mainly due to the personnel expansion. Fulfillment costs and other costs were RMB 40 million and RMB 61 million this quarter. Our adjusted gross margin for the quarter was RMB 471 million, increased to 10% year-over-year and 20% quarter-over-quarter. It was mainly due to the expansion of our revenue scale, the enlarged contribution from AI business, and the cost control of IDC racks and servers. Adjusted gross margin increased from 60% last quarter to 70% in this quarter, which was mainly due to the high contribution from enterprise cloud. On the expense side, excluding share-based compensation costs, our total adjusted operating expenses were RMB 459 million, increased by 3% year-over-year and increased 9% quarter-over-quarter, of which our adjusted research and development expenses were RMB 181 million, increased by 7% from same quarter last year. Adjusted selling and marketing expenses were RMB 111 million, increased by 3% year-over-year. Adjusted general and administrative expenses were RMB 168 million, decreased 1% year-over-year. Our adjusted operating profit was RMB 55 million, increased by 124% from adjusted operating profit of RMB 24 million in the same period last year. The improvement was mainly due to the expansion of our revenue scale and gross profit as well as the expense control. The total expense as a percentage of revenue keeps decreasing. Adjusted operating profit margin increased from 1% in the same period last year to 2% this quarter. Our non-GAAP EBITDA margin was RMB 785 million, increased by 180% from RMB 360 million in the same quarter last year. Our non-GAAP EBITDA margin achieved 28% compared with 24% in the same quarter last year. It was mainly due to our strong commitment to AI cloud computing development, strategic adjustment of business structure, strict control over costs and expenses. This quarter, our capital expenditure, including those financed by third parties and right-of-use assets obtained in exchange for finance lease liabilities, were RMB 496 million. For the full year 2025, our total revenue achieved RMB 9,559 million, increased by 23% from RMB 7,785 million in 2024, among which revenues from public cloud services were RMB 6,634 million, increased by 33% year-over-year. Revenues from enterprise cloud services were RMB 2,925 million, increased by 5% year-over-year. Adjusted gross profit was RMB 1,542 million, increased by 40% from RMB 1,358 million last year. Adjusted gross margin was 60%, decreased from 70% last year, which was mainly due to the high cost for servers and other hardware equipment. Adjusted operating loss was RMB 152 million, narrowed significantly from RMB 431 million. Adjusted operating profit margin was minus 1.6%, narrowed from minus 12.5% last year. Adjusted EBITDA profit was RMB 2,336 million, increased by 266% from RMB 639 million last year. The adjusted EBITDA margin was 24%, improved by 60% from 8% last year. Looking ahead, we aim to capitalize on the explosive growth in demand by further investing in infrastructure, enhancing service stability, managing liquidity risk, and improving operating efficiency. We remain focused on an 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.

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

Our first question comes from Liping Zhao from CICC.

Congrats for the very good 4Q results. I have 2 questions here. First, Xiaomi recently launched the MiMo-V2 series models, which have received positive market feedback. How should we view our role and positioning within Xiaomi's AI strategy? And what strategies will be implemented around Xiaomi and Kingsoft service going forward? And secondly, how does the management view the current pricing uptrend in the cloud service industry? Has the company already adjusted prices for AI computing services? Or are there any related plans in place? To what extent are those price adjustments driven by demand or driven by the upstream procurement cost pass-through?

The answer comes from our CEO, Mr. Tao Zou. Back in August 2024, we had an internal discussion regarding the development of AI and models for the Xiaomi and Kingsoft ecosystem. The goal was to create a comprehensive portfolio of solutions, where Kingsoft would focus on its core strengths and allow Xiaomi to develop large language models. The MiMo model, known for its performance, reflects our overall AI strategy within this ecosystem. Additionally, in 2025, following that discussion, we established a strategy called 1+N. The "1" refers to the Xiaomi MiMo model, which is essential to our inference strategy. Moving forward, we will maintain this strategy, supporting both the Xiaomi and Kingsoft ecosystem and exploring monetization of our model as-a-service capabilities for external customers, driving revenue and profits in training and the upcoming inference era.

The answer comes from our Senior Vice President, Mr. Liu Tao. To provide some context, in the third quarter of last year, we anticipated a significant increase in pricing from the supply chain. As a result, we strategically stocked up on key components to prepare for this situation. Concerning the price hikes you mentioned, we adhere to two principles. Firstly, for customers and businesses with existing contracts and enough resources stocked, we typically do not raise prices. However, for new customers and contracts, especially those with a substantial increase in usage, we will implement significant price increases. Secondly, regarding profitability, we aim to pass some of the cost increases from upstream to our customers and will raise prices to reflect demand and enhance profitability.

Our next question comes from the line of Wenting Yu from CLSA.

The first question is about whether Kingsoft Cloud plans to shift its cloud business toward a different model, moving away from the traditional server rental and subscription approach, and how this trend might affect industry competition and long-term profit margins. The second question concerns the impact of a particular engine that is adopting a low-price strategy, and how that might influence the industry and our business this year.

Okay. Regarding your question about the transition to a model as a service strategy, we've observed some of our peers releasing their results earlier and mentioning this shift. However, I believe this concept is not new. It's part of the natural evolution in AI and large language models, moving from training to practical application in everyday work and life. Concerning our own model as a service initiatives, we launched the StarFlow platform last year, as mentioned in our previous remarks. Being a neutral platform allows us to host all open-source models, including one from Xiaomi, to provide a model as-a-service offering, which is our fastest-growing segment in Kingsoft Cloud's history. Regarding competitors using low pricing strategies, I haven't come across specific news on that. However, the current market dynamics suggest significant growth in demand along with rising prices from the supply chain. I don't think reducing prices in this context is feasible. My focus is more on the information about increasing prices from companies like AliCloud. We've partnered with them for many years, and this is the first time we've seen them raise their prices. Additionally, as our Senior Vice President Mr. Liu Tao pointed out, there's a distinction between catalog prices and the actual prices set by cloud providers, where catalog prices serve marketing purposes and don't necessarily reflect the prices that companies actually pay.

Our next question comes from the line of Timothy Zhao from Goldman Sachs.

My first question is on your financial outlook. Just wondering if you can share some insight on how we should think about the revenue, EBITDA, and operating profit growth outlook for this year? Secondly, on the capital expenditure plan, what are your thoughts and considering the balance sheet and the prepayments from certain customers? Do you think it's possible to further raise your CapEx plan given the rising AI demand? Lastly, regarding third-party revenue in the AI outlook, can you share more detailed insights on what specific products or what type of customers are driving the third-party AI growth? Additionally, what is the breakdown and outlook between the mix of AI training versus AI inferences?

Alright, I will take the CapEx first. For 2026, we expect total CapEx and controlled assets to exceed RMB 10 billion, representing expansion from 2025 levels. On the funding structure, we expect approximately half of our CapEx to be covered by customer prepayment arrangements, which will significantly reduce funding requirements. Additionally, we plan to access more assets through short and long-term leases with payment structures and operating cash flows to minimize upfront capital encumbrance. We currently have no equity finance plans. Our 2026 capital expenditures will be secured through 4 channels: proceeds from our 2025 financing; customer operating receipts; strategic customer prepayments; and commitment credit facilities from banks and financial institutions. Incremental resource requirements will be met primarily through leasing to preserve balance sheet flexibility. For guidance for 2026, we expect our growth rate to accelerate and the EBITDA rate to improve significantly.

If you look at the past results discussed in the prepared remarks, the combined revenue for the top five non-ecosystem customers achieved year-over-year growth of 44%, which is remarkable growth. This includes internet companies, autonomous driving, and robotics. Looking ahead into 2026, we see extremely large demand coming from outside the ecosystem, which may surpass demand from within the ecosystem. The final revenue or financial results will depend on how many resources we can secure and deliver to such customers. In terms of products and solutions, we are seeing over half of the potential demand coming in for inference versus training. For our StarFlow platform, which we discussed earlier, it is growing rapidly, and we also observe better profit margins from that particular business due to its strong applications and increasing penetration for agents and core applications. Thank you.

Thank you. Due to time constraints, this concludes our Q&A session. Thank you once again for joining us today. If you have any other questions, please feel free to contact us. We look forward to speaking with you again next quarter. Have a nice day. Thank you all.

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