Q4 2024 Kingsoft Cloud Holdings Ltd Earnings Call
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Speaker Change: Good day, and thank you for standing by welcome to King South clouds fourth quarter and full year 'twenty 'twenty four earnings conference call.
Speaker Change: At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
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Speaker Change: 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 IL director of King soft cloud. Please go ahead.
Nicole Shan: Thank you operator, Hello, everyone and thank you for joining US today, you saw clubs first quarter and fiscal year 'twenty earnings release was distributed earlier today and is available on our IR website at IR day. Okay. That's why you Wouldnt dotcom as well as on global Newswire services on the call today from Kings Hill.
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Todd Howe: Hello, everyone and thank you and welcome all for joining kings of cloud fourth quarter and fiscal year 2024 earnings call I am told how see all options at cloud.
Todd Howe: This quarter, our high quality and sustainable development strategy continues to bear fruit for results.
Todd Howe: Our non-GAAP operating profit.
Todd Howe: Profitability for the first time.
Todd Howe: And a serious of our key financial performance measures reached all time highs.
Todd Howe: First our revenue growth rate has climbed to a new level building almost 16% year over year growth in Q3, we achieved total revenue of RMB, two 3 billion this quarter doubling year over year growth rate to 30%, leading the industry's growth rate.
Todd Howe: Among this public cloud revenue grew by 34% year over year and enterprise cloud revenue grew by 23% year over year.
Todd Howe: Cheating a balance that development with dual growth engine.
Todd Howe: Second our profitability improvement accelerated.
Todd Howe: This quarter, we achieved both revenue growth and profitability improvement.
Todd Howe: A turnaround from the company's long standing history of operating losses.
Todd Howe: And marching towards the goal of net profit breakeven.
Todd Howe: non-GAAP operating profit turned positive for the first time with non-GAAP operating margin, which at one 1% representing a 12 percentage point improvement compared to a loss of 10, 9%.
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Todd Howe: non-GAAP gross profit reached a record high of RMB $427 7 million.
Todd Howe: 63% year over year.
Todd Howe: non-GAAP gross margin was 19, 2%.
Todd Howe: Our non-GAAP EBITDA margin also reached a new high at 16% representing a year over year increase of $17 seven percentage points and a sequential increase of six three percentage points.
Todd Howe: These are gratifying results of our comprehensive efforts to improve revenue quality optimized business structure and implement multiple cost reduction and efficiency enhancement measures simultaneously.
Todd Howe: Third we continue to lead our transformation with AI this quarter, our AI related business achieved a gross billing of RMB $474 million, representing nearly 500% year over year growth and 31% year over quarter over quarter growth.
Todd Howe: Its contribution to a public cloud revenue further increased to 34%.
Todd Howe: Fourth as the sole strategic cloud platform of the Xiaomi Kingsolver ecosystem, we continue to fully embrace the opportunities brought by the AI era within the ecosystem.
Todd Howe: Thanks to that unique historical opportunity is driven by Xiaomi EV mobile phones, Iot devices, smart manufacturing and WPS AI initiatives. This quarter, our revenues from shall maintain yourself ecosystem amounted to RMB $493 million up 78% year over year with.
Todd Howe: Its share of total revenues further increasing to 22%.
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Matt: Now, let me walk you through the key business highlights for the fourth quarter of 2024 in.
Matt: In terms of public cloud services revenues reached RMB, one 4 billion this quarter, representing a year over year increase of 34%.
Matt: Capitalizing on the opportunities presented by Xiaomi human car home smart ecosystem and the WPS AI penetration.
Matt: As the sole strategic cloud platform within the Xiaomi Kingsolver ecosystem, we are seeing strong growth potential in the AI era.
Matt: In December 2024, the shareholders approved a significantly increased revenue contribution from Xiaomi and teens up from 2025 to 2027 to a total of RMB 11, 3 billion, representing 10 times the amount in 2023.
Matt: This quarter revenue from Xiaomi and cleans up increased by 76% year over year, and we are steadily advancing and executing our business cooperation.
Matt: We expect the growth momentum to continue in 2025.
Matt: Meanwhile, our AI related business continues to gain momentum as well this quarter. The gross billing of AI related business reached RMB $474 million, increasing by 31% sequentially and contributing 34% of public cloud services revenue leading the industry.
Matt: Both xiaomi ecosystem and external AI customers increase their usage and we made breakthroughs in customer acquisition, including large language model customers and expansion of use cases, including AI application for Internet company customers.
Matt: In the era of AI cloud computing with in depth industry insights advanced R&D investments and substantial computing power, we have been highly priced in terms of customer service technology capabilities and quality assurance by our customers and industry experts.
Matt: Moreover, our competitive strengths have gained recognition by top tier in the industry.
Matt: In this wave of intelligent computing cloud the company's market share and industry reputation have significantly improved securing a top position in the industry.
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Matt: In terms of enterprise cloud services revenue amounted to RMB 822 million, increasing by 22 seven year over year in public services space, We promote solutions with standardized operations leveraging a foundation of motto capabilities Big data and the collaborative opic to us.
Matt: This quarter, we completed the construction of that uptick valley cloud platform.
Matt: As a joint operating partner, we will be fully responsible for the original equal monetization operation and maintenance strengthening the management and application development of data resources, so as to achieve and unified plenty construction and management of digital optics value.
Matt: In digital health care space.
Matt: December 2024, we completed a significant milestone of the system construction of each health Central hospital in the K G X, which stands for Kinks out the cloud data <unk> data Mito platform has been put into operation with.
Matt: We adopted a cloud native micro services architecture to solve that multi campus business collaboration and real time data integration difficulties of each on central People's Hospital with a unified data platform supporting more than 866 hundred data operations.
Matt: In addition in collaboration with Kings off the office, we jointly developed an electronic medical record product based on WPS, which has supported 61 medical departments daily operations of the hospital.
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Speaker Change: In terms of products and technology, we uphold the principle of building success based on technology and innovation.
Speaker Change: Focusing on delivering best in class customer experience across our core product offerings.
Speaker Change: This quarter, we continued to enhance the product capabilities of our intelligent cloud computing services.
Speaker Change: We launched the ninth generation cloud server, which efficiently supports high performance computing use cases, such as AI machine learning and in Paris.
Speaker Change: It also effectively meets the demands of large scale databases real time data analysis and have strengthened data security and encryption processes.
Speaker Change: We officially released.
Speaker Change: Proprietary training and inference platform, namely seeing the old platform, which supports customers me Pud development training and complementary and customizing images.
Speaker Change: Meanwhile, our intelligent computing network has significantly reduced the troubleshooting time to launch motto training from hours to minutes, ensuring service stability.
Speaker Change: We will continue to strengthen our intelligent cloud computing product and technology to provide customers with stable and fast computing services.
Speaker Change: In addition, both our public cloud and enterprise cloud solutions use cases have achieved compatibility with Pete seek.
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Speaker Change: In summary, led by the high quality and sustainable development and strategy, our fundamentals have substantially improved and we have entered into a new era of healthy growth.
Speaker Change: Looking ahead, we aim to simultaneously expand our revenue scale and improve profitability deepened cooperation with Xiaomi and kingsolver ecosystem comprehensively understand and explore AI opportunities, thereby continuously creating value for our customers shareholders employees and.
Speaker Change: Other stakeholders.
Speaker Change: I will now pass the call to our CFO Harry to go over our financials for the fourth quarter 2024. Thank you.
Speaker Change: Hey, guys at all thank you all methods all and thank you all for joining the call today.
Speaker Change: We are very pleased to come to 2024 with strong financial performance.
Speaker Change: Now I'll walk you through the financial results for the fourth quarter of 2024.
Speaker Change: I would like to highlight the following four areas of the progress.
Speaker Change: Regarding the performance of this quarter.
Speaker Change: Of all the overturned from loss to profit a non-GAAP operating profit for the first time since our inception in 2012.
Speaker Change: Demonstrating our strong execution and our high quality and a sustainable development strategy in the past two years.
Speaker Change: Second.
Speaker Change: Our revenue has been growing for three consecutive quarters year over year and this quarter. We outpaced all other listed public Internet companies and achieved a very good speed growth rates of 30% in total revenue.
Speaker Change: Reaching $2232 1 million RMB.
Speaker Change: Sure.
Speaker Change: AI gross billing increased by around 500% year over year to 474 million.
Speaker Change: Accounting for as high at 34% of the public cloud revenue.
Speaker Change: It has achieved a three digits, yes, yes.
Speaker Change: Growth for six consecutive quarters.
Speaker Change: Fourth.
Speaker Change: Last December our shareholders approved the rent revenue from connected parties of Xiaomi and it keeps up good for next three years.
Speaker Change: 7.28 billion RMB around 10 times over the revenue of 2023.
Speaker Change: Providing solid support for our company's revenue and profit growth.
Speaker Change: We believe we are well on track to support ecosystems fast growing demands and a build up solid cloud infrastructures to support ecosystem AI development.
Speaker Change: Particularly in this quarter, we are very pleased to see that our revenue from Xiaomi and a king yourself increased by 76% year over year.
Speaker Change: Very fine the effectiveness of it.
Speaker Change: Our ecosystem strategy.
Speaker Change: In terms of outlook.
Speaker Change: <unk> been executing our strategy.
Speaker Change: Xiaomi ecosystem strategy.
Speaker Change: Going forward, we're expecting our improvements in both revenue scale as well as profitability.
Speaker Change: First of all we believe the revenue growth of our both public solid at enterprise child will accelerate in 2025.
Speaker Change: Second we expect our profit profile, while continuing to expand.
Speaker Change: And I would expect to deliver a positive non-GAAP operating profit in the full year of 2025.
Now, let me dive into the details of our financials.
Speaker Change: Charter revenue of this quarter were $2232 1 million RMB, reflecting a 29, 6% year over year increase.
Speaker Change: Of this revenue from public cost services, while 1400 zero 9.8 million RMB up 34% from 1050 2 million RMB in the same quarter last year.
Speaker Change: This growth was primarily driven by a significant increase in AI related business.
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Speaker Change: 74 million RMB revenue is from enterprise top evidenced reached $822 3 million RMB up from 673.
Speaker Change: 3 million RMB in the same quarter last year.
Speaker Change: Mainly driven by increased demand in silica verticals and a growth in the Camelot <unk> services.
Speaker Change: Total cost of revenues was 1800, <unk> 6.2 million RMB up 22, 9% year over year, which was in line with our revenue expansion.
Speaker Change: How do you see costs dropped by 2.6% year over year from 744 million RMB, two $721 5 million RMB this quarter, reflecting the strategic scaling down of our CDN services and a better utilization.
Speaker Change: Depreciation and amortization cost increased from $146 9 million RMB in the same period last year. She was $343 1 million RMB this quarter, mainly due to the depreciation of newly acquired GPU servers.
Speaker Change: <unk> development and our service costs rose by 10, 8% year over year from $502 9 million RMB, two 557 million RMB driven by expansion in catalog personnel to support revenue growth.
Speaker Change: Fulfillment costs and other costs, while 100 zero 2.4 million RMB and $82 2 million RMB this quarter respectively.
Speaker Change: We have recorded a higher growth rate gross profit than the industry.
Speaker Change: Our adjusted gross profit for the quarter were 427.7 million RMB.
Speaker Change: Up 6% to 3% increase year over year with an adjusted gross margin was 19, 2%.
Speaker Change: On the expense side, excluding share based compensation and impairment of long lived assets or total adjusted operating expenses were $446 4 million RMB, a decrease of nine 8% year over year, and a nine 1% quarter over quarter.
Speaker Change: Of which our adjusted R&D expenses were $169 6 million RMB narrow by 27% from last quarter.
Speaker Change: Adjusted selling and marketing expenses were 107 8 million RMB down from 110.6 million RMB last quarter.
Speaker Change: Representing four 8% of total revenues.
Speaker Change: Adjusted G&A expenses were $169 1 million RMB slightly increased compared with last quarter due to a fluctuation of credit loss.
Speaker Change: Our adjusted operating profit for the quarter turned into profit.
Speaker Change: Was 24 point Formula RMB compare it with a negative $187 6 million.
Speaker Change: Neil at RMB in the same period of last year.
Speaker Change: Our non-GAAP EBITDA profit was $359 7 million RMB compared with NEC Kiss plenty of 7.7 million RMB in the same quarter last year.
Speaker Change: Our non-GAAP EBITDA margin achieved a 16, 1% compared with Mac, just one 6% in the same quarter last year, we believe that our strong commitment to AI cloud computing development strategic adjustments of business structure at our strict control of our costs and expenses bear fruits.
Speaker Change: We are all well on track to further improve our profitability as well as scalability.
Speaker Change: As of December 31st 2024, our cash and cash equivalents was totaled 2648 point in many RMB, providing a strong liquidity position to support operations and AI.
Speaker Change: Meanwhile, with healthy accounts receivable arrangements for AI business in this quarter, we have achieved a net inflow.
Speaker Change: Operating cash flow, reaching 570.
Speaker Change: Point 2 million RMB, we are able to generate cash internally and organically and to support part of our further capital expenditure.
Speaker Change: Looking ahead, we remain committed to the principle of high quality and a sustainable development, we expect accelerated revenue growth on annual basis, and a higher and more stable profitability in the coming years. Thank you.
Speaker Change: Okay.
This concludes our prepared remarks, Vince by allocation and we are now happy to take out questions. Please ask your question in Belgium, angry Chinese and English if parcel operator. Please go ahead. Thank you.
Speaker Change: As a reminder to ask a question you will need to press star one on one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one on one again.
Speaker Change: Yeah.
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Ali: So what Ajay will go into government Melinda younger there. Thank you.
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Ali: Thanks management for taking my questions and my first question is regarding the industry outlook.
Ali: So could management share your views on how the recent industry trends and AI are impacting the supply and demand structure.
Ali: And also the market landscape of the cloud computing industry.
Ali: <unk> challenges.
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Sean: General last night with model, but the reason that it has caused us such widely received discussion is because.
Sean: Is because it has both.
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Sean: In the work content can also achieve such high in terms of technology.
Sean: And the product and therefore has helped.
Sean: The revaluation.
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Sean: The fact I'll be quick.
Sean: The advantage of <unk> is that greatly decrease the deployment cost and these four are kicked off the cloud is also a beneficial factor.
Sean: As we have seen that this round of <unk>.
Sean: He has also caused the share price to increase along.
Sean: So I have actually talked about this back in 2023, where I used to say that the advent of AI.
It removes the glass ceiling of cloud business and therefore be.
Sean: We released our Pipsqueak are one.
Sean: Akshay will accelerate the deployment of a lot of time with models.
Sean: In China, and therefore, more enterprises and more individuals will stocks to use.
Sean: Last night with the model and then therefore it is a wider.
Sean: <unk> kind of power for the advancement and development of AI.
Sean: AI and the cloud industry in China, and can help the crowd at the active and proactive participant up the market will definitely benefit.
Sean: So in summary, I would say that this is essentially a rather sort of education to individuals and industries about the strategic value.
Sean: The last time that model then of AI.
Sean: So and therefore people are increasingly getting to know can you help the crowd as well in that regard and secondly at our <unk> Mill, Paul mentioned, so from technology perspective.
The events of Keepsake has achieved optimization and.
Sean: Our optimization in engineering methodologies, which enabled the lowering cost and increasing the penetration of applications. We have been seeing a lot of them.
Sean: Potential customers, both from the governments and enterprises as well as from the Internet space have increasing application and adoption of.
Sean: AI and dipstick models and.
Sean: And secondly, the diptych success has essentially increased the applications to help enhance the learning in the last language model in AI industry in China in general So we are seeing increasing competition and increasing technological improvement in the in the AI space in China.
Sean: That could enhance the learning.
Sean: Automotive multi model.
Sean: Okay.
Sean: Okay.
Sean: Okay.
Sean: Yes.
Sean: Thank you.
Sean: Henry.
Sean: Happy to answer your second question regarding the capital expenditures on our Pennsylvania corner, one control many of the.
Speaker Change: Investors and analysts so probably they are probably a few points I want to address here.
Sean: First of all before I go into the numbers I want to mention.
Sean: Our total investment into AI.
Sean: Is comprised by two parts first part is our opex, which primarily spending to that data centers, which include the Rex rental electricity payments and other related expenses.
Sean: On this part Kingcup cloud adopt a very efficient asset light model, which means that we don't have to spend huge amount of money upfront to build the warehouse and our real estate properties, our shelf, but we have a very good partnership with a long term high regimen for example, with telecom companies and other.
Sean: IDC companies, which can reduce our leverage and increase the efficiency. So it is the first part on the second part which is our capital expenditures, we buy efficiently acquire the necessary computing powers I E. The servers and other network equipment.
Sean: It basically is a plus b. So I can share some numbers in the past four quarters. We have already spent on the part eight which is opex on that date.
Sean: Data centers around 2.9 billion RMB on AI data center and it we spend on the part B of the capital expenditures around $5 6 billion RMB to acquire the necessary computing equipment in our network equivalents, so if you're putting those two numbers together.
Sean: In addition to the research and development investment as well so in the past probably four quarters. We spent around eight to 10 billion RMB in total.
Sean: Going forward I think for the entire investments into the capital expenditures and also on Opex going forward I think the 1 billion sorry, the 10 billion RMB.
Sean: RMB total AIA investment for the full year 2025 is just a start.
Sean: So my third point is given the strong important support from our shareholders, including both Xiaomi and Keith a group as we have already disclosed and approved by the shareholders in December 20th on your four we have a range.
Sean: Leasing and other off the balance sheets of regiment to support our ongoing and growing investment into AI on both Opex and Capex.
Sean: And we also want to remind.
Sean: The audience is that the existing cash on our balance sheet. It is not the limit of our capacity into AI investment because of the leasing and other attorneys your financing I regiments, we arrange directly with our shareholders. So I think we are in liquid position with a strong demand we basically on par.
Sean: To increase the investment and I think given the revenue growth rates, we have already deliver above the industry average I think our spending will also catch in pace and it may be at OXXO accelerated and above industry average going forward.
Sean: Especially for the 25, thank you.
Sean: Yeah.
Speaker Change: Thank you operator.
Sean: Gradually.
Sean: Thank you.
Sean: Please standby.
Speaker Change: Our next question comes from the line of Brian Gong from Citi. Please go ahead. Your line is open.
Speaker Change: Hey, Joseph Henry Clark nickel, According golf courses get I'll call. It the year, Joe Oh, what's failed Gwen Chicago, one tissue Guangzhou are twofold.
Speaker Change: So the Borgata trichet you cheat.
Speaker Change: Tackling charges are beholding to the crowd control, Virginia actual woman journal conduct a bushel.
Speaker Change: Wholesale xiaomi, which is ambitious for credentials companion Xing Qi, that's required for switches Union uncle Shannon.
Speaker Change: Excellent.
Speaker Change: So Steve Lindsey Calvin with nutrition shall come quite a ways out women particular margin.
Speaker Change: Our Polish it weighs a woman that I consider to be noncore that a bushel.
Speaker Change: What is it financial measurements.
Speaker Change: Thanks for taking my question and congratulations on the solid results regarding the expectation for 2017.
Speaker Change: Revenue growth will do.
Speaker Change: Kind of share your thoughts and breakdowns travelers and like how much growth, we expect for AI related revenue.
Speaker Change: And how much stronger contribution from Sheldon and clean Salt group.
Speaker Change: And also second question raised regarding marketing.
Speaker Change: Our profit.
Speaker Change: Our marketing from quite well post quarter end.
Speaker Change: I imagine the share you are salts or our long term profitability trend. Thank you.
Speaker Change: Okay.
Speaker Change: Okay.
Henry: Thank you Brian This is Henry happy to share some color.
Speaker Change: So as I mentioned in my prepared.
Prepared remarks, I think a few things are just wanted to emphasize first of all.
Speaker Change: In Q4 2020 for the <unk>.
Speaker Change: 30% topline on a Y O Y growth has exceeded even the top players in the industry I think that demonstrates all the verticals.
Speaker Change: Including both public cloud enterprise cloud kind of within the public cloud AI and <unk> are all growing at a very healthy rate without.
Speaker Change: These fundamentals support it is very difficult to achieve that high growth rate. So that's actually the first point I want to mention.
Speaker Change: The second part is given.
Speaker Change: Uh huh.
Speaker Change: We already completed.
Speaker Change: Our.
Speaker Change: Business strategy adjustments in the first half of 'twenty 'twenty four.
Speaker Change: We do have a very healthy splits in the mix of the climate structure.
Speaker Change: And as you May know that for example.
Speaker Change: Yes.
Speaker Change: The CDM business used to contribute to much higher rates and right now is only probably 10% to 15% or even lower going forward in terms of how you're.
Speaker Change: Looking at that so I think our growth has been built on a very solid foundation. So thats why in the prepared remarks I also mentioned that the gross rate the keywords for 'twenty 'twenty four is acceleration on a full annual basis and AI is going to be a very important driver, but other verticals as I.
Speaker Change: Mentioned in different product lines will contribute healthy growth going forward as well. So it is actually the first question I just wanted to share that.
Speaker Change: Second part regarding the module a while we don't have official guidance for the margin, but as you can see our gross margin has been improving very costly.
Speaker Change: Consistent for the past few quarters and also.
Speaker Change: Also want to mention our operating cash.
Speaker Change: Cash flow in the past three quarters, starting from Q2 plenty of Fannie four has been also positive as well that is going to be a very important leading indicator for our margin expansion and giving the AI contribution of a.
Speaker Change: Margin profile, especially for the EBITDA and <unk> side.
Speaker Change: We think the EBITDA and operating profit will grow at more fast pace compared with a gross margin and we're happy to see that our EBITDA margin actually already exceeded the industry average and it may be on the top tier of industry peers. So I think the EBITDA margin improvements, which is also a leading indicator of the op cash.
Speaker Change: As well as the free cash flow will drop down to the operating profit side. So I think our intention for management is two things first of all we're our intention is to keep a healthy steady pace of margin expansion for all three key indicators from gross margin EBITDA margin <unk> margin and the EBITDA margin the op margin.
Speaker Change: It will be accelerated and improved a little bit faster than the gross margin and a third points given the cash flow is also important and we're going to keep a very close eye on the cash flow margin expansion that would also give us a good momentum in the support to recycle the cash to input.
Speaker Change: Investments into the new incremental AI investment as you know these are probably a few points I just wanted to measure. Thank you Brad.
Speaker Change: Thank you very helpful.
Speaker Change: Thank you.
Speaker Change: We will now move on to next question.
Speaker Change: Our next question comes from the line of Linlin Yang from GF Securities. Please go ahead. Your line is open.
Speaker Change: Okay.
Speaker Change: So long.
Speaker Change: Tom.
Speaker Change: Understood.
Speaker Change: No Joseph.
Speaker Change: Please go.
Speaker Change: Go ahead.
Speaker Change: With Xiaomi Jan Kees has from Pasco Vishal.
Speaker Change: Massimo Cathy will AI training schedule.
Andrew: Go ahead Andrew.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Oh.
Speaker Change: Diego and tissue client needed to handle women trend of Douglas Shelby.
Speaker Change: Ladies and gentlemen.
Speaker Change: With us Joe Jolson, and Shanghai Jewelers have dwell on that.
Speaker Change: <unk>, probably touched on I'm sure we will.
Chantal Guillermo: Chantal Guillermo <unk> from Dawson.
Speaker Change: Now agenda item <unk>.
Chantal Guillermo: My first question.
Chantal Guillermo: Yes.
Chantal Guillermo: C&I in Permian.
Chantal Guillermo: You think about the demand.
AI inference and how much how.
Chantal Guillermo: How much.
Chantal Guillermo: Sure.
Chantal Guillermo: Got it.
Chantal Guillermo: And my second question.
Chantal Guillermo: After the equal.
Chantal Guillermo: Legacy public cloud business is pony.
Chantal Guillermo: Okay.
Chantal Guillermo: Okay.
Chantal Guillermo: With revenue.
Chantal Guillermo: Sure.
Chantal Guillermo: <unk>.
Chantal Guillermo: While these parks.
Chantal Guillermo: Thank you.
Chantal Guillermo: What's not clear that the ego and Ti.
Chantal Guillermo: Okay.
Chantal Guillermo: And you've kind of tightened balances have taught us army just emphasis and that's the way.
Chantal Guillermo: So you can go to the treaty.
Chantal Guillermo: Sure.
Chantal Guillermo: Susan Macau.
Chantal Guillermo: Yeah.
Congrats patent on that Nick.
Speaker Change: So sorry, you're going to get a canonical people see crystal.
Speaker Change: So you will see quite a bit.
Speaker Change: So you boy you didn't wait jostle superpower motion.
Speaker Change: Got it.
Speaker Change: Sure how about you.
Speaker Change: The song.
Speaker Change: <unk>.
Speaker Change: Due to electrical woman to send out.
Speaker Change: Cornelia Haag, Shanghai Swanson, our CFO.
Speaker Change: Cook with hook.
Speaker Change: J B and the.
Speaker Change: What's the tons from core short I don't think it's out with what she said.
Speaker Change: So you'd have to consider.
Speaker Change:
Speaker Change: Some of the Apollo guar, but since you couldn't ship should have bleeding. So it seem to have growing cohorts you Couldnt go to Marshalls.
Speaker Change: Yes, China.
Speaker Change: Visits from coastal attentions from Cui muscle.
Speaker Change: You sound like a shooting yet to solve.
Speaker Change: So your boss into our Nielsen that oxygen Teng <unk> mode, particularly because somehow like Honda.
Mayo Kendall: <unk>, Hi, Mayo Kendall.
Speaker Change: So in that.
Mayo Kendall: You said something about <unk>.
Mayo Kendall: Qualify towards Omega choose question, that's from Cui Muslim sheet cohort at all.
Mayo Kendall: All of them with you.
Mayo Kendall: The male condom.
Mayo Kendall: <unk>.
Mayo Kendall: How should it change.
Mayo Kendall: Youll see some this year.
Mayo Kendall: I really hope.
Mayo Kendall: So you know.
Mayo Kendall: What Luke.
Mayo Kendall: <unk> got you got you got you got a pundit fanning.
Charlie Campbell: Charlie Campbell.
Mayo Kendall: Jeremy Hudson Chinanet.
Charlie Campbell: Hi, Peter.
Speaker Change: She's a hydro it paid off in a box shield Chico soil, the xiaomi that someone had a timeshare.
Charlie Campbell: What have achieved crossover.
Speaker Change: Because you've had a long time.
Speaker Change: <unk> this year.
Charlie Campbell: Will it always so cheap.
Charlie Campbell: 2220.
Charlie Campbell: But I'm going to conclude our single oriented nickel.
Charlie Campbell: Yes.
Speaker Change: Yeah, Jeff and then.
Charlie Campbell: You've got <unk>.
Charlie Campbell: <unk>.
Charlie Campbell: She says.
Charlie Campbell: Some of it yes, yes, it's been quiet.
Charlie Campbell: Hello.
Charlie Campbell: Yes, <unk> higher nature.
Charlie Campbell: Theater.
Charlie Campbell: Okay.
Charlie Campbell: Okay.
Charlie Campbell: Okay allow me to very quickly translate so.
Charlie Campbell: For those demands of influenced outside of the Xiaomi <unk> top ecosystem, what we have been seeing is on one hand.
Charlie Campbell: I was responding to the deep sea question earlier.
Charlie Campbell: Advent, a dipstick, obviously accelerated the application of blackjack with models.
Charlie Campbell: AI to various sectors that we have been seeing a huge amount of inquiry going in customer.
Charlie Campbell: Numbers as well as the spa desire and willingness for them to adopt and applying AI applications. However on the out of hand.
Charlie Campbell: If you look at the number of.
Charlie Campbell: The amount of actual business for example for one single customer we might be meeting.
Charlie Campbell: A cluster of 128 units for 256 units or even 512 units Costa did kind of single customer demand, we have not seen yet.
Charlie Campbell: The trend of penetration of AI and big ticket very clear inference, but we think it might take some time for that too.
Charlie Campbell: To be shown on the financial statements now secondly for your question about the interest demand within the Xiaomi in terms of the ecosystem. The answer is that it's.
Charlie Campbell: It's going to be very strong.
Charlie Campbell: Essentially all of the products and services across the xiaomi ecosystem, including the cell phones, and Iot is including the electric vehicles all of them are going to be supported by AI at lunchtime with models.
Charlie Campbell: And for all the teams at the sites.
Charlie Campbell: Needless to say actually the team across all states.
Charlie Campbell: AI the WPS AI user.
Charlie Campbell: <unk> has also been increasing quite quite quite strong.
Elliot: Thank you Elliot so regarding your question of <unk>.
Speaker Change: Asset and the depreciation that is with Henry.
Elliot: Happy to offer also some colors.
Elliot: So.
Elliot: I think first of all.
Elliot: If our audience and investor.
Elliot: Do some analysis and a comparison.
Elliot: Amazon AWS, including Google and Microsoft are all using five years off the M&A policy for the servers and computing powers. So janesville caller, we are conservative conservatism in terms of managing the financial policies right now.
Elliot: Regarding regardless of the servers type in equipment, we are using four years of getting your policy, which means that we basically.
Elliot: If a compared with five year, we actually overestimate certain costs.
Elliot: <unk> there is a potential to release certain profitability down the road. So that's actually my first point.
Elliot: My second point is.
Elliot: In the late <unk> 'twenty to 'twenty three in early 2024, we already at that time, our forecast that the industrial will have a major shift from the traditional ice to the AI cloud. So that's why at that time, we did a full round of internal review of the asset distribution and our internal risk.
Speaker Change: Yes, I know, we decided to really filter out certain assets from Cpus in the traditional assets, So where did the asset impairments in the some of the changes in provisions of iteration and the right now all the assets on our balance sheets, including.
Speaker Change: The 5 billion capital expenditures required for the computing power in the past few quarters.
Speaker Change: Which card just sitting on our balance sheets are all healthy and their revenue at a profit at the generating assets and <unk> and.
And it actually can match with our revenue incremented opportunities. So I think right now we do have a kind of healthy asset balance sheets on the left hand side and also have a good potential to improve shareholder return and the profitability and the cash out on the return, especially the op cash on a return on the right hand side. So we I think we are there.
Speaker Change: Good balance on the.
The left to the right antibody to improve but the foundation.
Speaker Change: Business model and efficiency going forward. Thank you.
Speaker Change: Great.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of <unk> from <unk>.
Speaker Change: CLSA. Please go ahead your line is open.
Speaker Change: Sorry, John.
Speaker Change: Can you call, Russia, Holly She's got a great Duffy issuance I guess again, what you would have to go take associated company as you know what your daily Glenn Keith Johnson, Jonathan Joe Shan woman, Toledo carcinoma, asking which it appears your <unk> earnings.
Speaker Change: Exactly she also played down the volatility at Wuxi <unk> It sounds like industrial tool now Jay Goldstein, John Paul Desantis, I, just want to die GPU shoulder Zambian the Jacob Javits.
John Legere: John Legere fortunate.
John Legere: Jakob do you want my AI mutual route with attention to that the Isa <unk>.
Speaker Change: I'll translate the question.
Speaker Change: We've seen that prices for high performance as others have been falling in 2024, while interest service are reasonably well supplied and how will this affect our pricing strategy for chips in your revenue and its impact <unk> revenue and earnings. Thank you.
Speaker Change: Alright.
Speaker Change: Okay.
Speaker Change: Thank you Owen.
Speaker Change: First of all thanks for the very good question and.
Speaker Change: As you will know on this quarter with deliver.
Speaker Change: Billy say, probably put a big disclaimer, but may be true.
Speaker Change: The highest growth rate in the industry or the public companies and Internet sector, which has club business.
Speaker Change: Given.
Speaker Change: The gross profit we already had region.
Speaker Change: Probably also on a pop here across all leading players on this quarter. So you may understand that we want to remain relatively cautious about our business of secrecy and Larry sensitivity information. So we don't want to hurt investor interest because with shared too much information on our success tips.
Speaker Change: So on that backdrop, what I can share is.
I think we do have a higher margin compared with traditional CPU centric services. So I think its kind of first topic first point the second point is.
Speaker Change: It depends on the client demands we do have a good mix of all kinds of different competing formats, which can fit into the client demands and we're charging them tested as demand goes up so it's a supply demand, which actually favor kings of cloud as a very important supplier in this current market.
Number three is.
Speaker Change: The pricing on the GPU.
Speaker Change: You'll know it actually link to a call production requirements of all our major clients. They use AI in a computing as the important production and productivity tools and important embedded functions in their workflow. So in that sense as you understand is always at a value.
Speaker Change: I think our value proposition has been lifted from a traditional ice services, which may have limited the ceiling of profitability to a much higher potential in our current market because the GPU because of the GPO AI services becomes so important for our client internal workflow and afford that final product.
Speaker Change: So they are willing to pay a much higher fee than the pricing because of the necessity of the technology value. So putting all things together as I mentioned I think we do have a very different pricing model for the AI related services, which are higher than the CPU and the traditional AI and we already shifted our strategy from a traditional it closer.
Speaker Change: Versus company to an AI cloud and our solution and services company going forward. So I think that's actually providing a very fundamental different changes in approach for the pricing, but as I mentioned, because the pricing is so sensitive and right now we're doing so good compared with the industry average. So we don't want to say too much regarding all the strategy because it is a business confidential as the only honest.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Thank you and this concludes our earnings call today. Thank you all once again for joining us.
Speaker Change: Any further questions. Please feel free to contact US look forward to speaking with you again next quarter have on that day.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect speakers. Please standby.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.