Q2 2026 Cheetah Mobile Inc Earnings Call
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Speaker #3: Revenue from cloud and AI infrastructure services increased 83.1% year over year, and 26.2% quarter over quarter, to RMB 59.1 million. Driven by growing demand from enterprises and expanding overseas for cloud resources, computing power, and AI model services, cloud and AI infrastructure services accounted for 72.8% of global enterprise services and 22.2% of total revenue, compared with approximately 11% of total revenue in the same period last year.
Speaker #3: Adjusted operating profit from Global Enterprise Services was ¥94.3 million, decreasing 80.7% year over year and 32.0% quarter over quarter. The decline primarily reflected lower advertising agency services, partially offset by continued growth of services.
Speaker #3: Our cloud and AI infrastructure, and importantly, global enterprise services, remain profitable on an adjusted operating basis as of June 30, 2026. We have ¥1,271 million, or $187.3 million, in cash and cash equivalents.
Speaker #3: This strong cash position provides us with flexibility to invest prudently in our AI and robotics businesses going forward. As we think about the results, reflecting continued progress in evolving our business mix, total revenue turned to sequential growth.
Speaker #3: Our revenue, excluding advertising agency services, increased both year over year and quarter on quarter. Internet services delivered solid profitability, and global enterprise services remained profitable.
Speaker #3: Despite the decline in advertising agency services, Robotic and others maintained strong revenue growth. As we continue to invest in the commercialization of smart mobility, thank you.
Speaker #3: We are now ready to take your questions.
Speaker #4: Hello, everyone. For today’s call, Manifold will answer questions in Chinese. An AI agent will translate management’s comments into English on another line. Please note that the translation is for convenience purposes only.
Speaker #4: In the case of any discrepancies or management statements in Chinese, for pre-work, if you are unable to hear the Chinese translation, the transcript in English of this call will be available on the company's IR website within seven working days.
Speaker #4: Thank you so much. Okay everyone, thank you. Let's start the Q&A now. In the Q&A, analysts can ask questions in Chinese. Due to time,
Speaker #4: We are only arranging communication with analysts at this time. We will arrange some communication with investors after the meeting. Please understand. Thank you very much. The first question.
Speaker #4: Please go from Jeffrey to Thomas Chong to ask a question. Thomas, please unmute to ask your question. Thank you.
Speaker #3: Thank you, Jeffrey, for your question. As the Spring Festival is approaching, in terms of the performance of the phone and the product, are there any plans?
Speaker #3: Comments, please unmute. Stand by for sharing. We still have a few minutes. Feel free to share your thoughts. Thomas, please unmute. We still have a few minutes.
Speaker #3: Any questions? In the future, the company will, in the product aspect—what are the plans? The plans are expected to grow to a certain level.
Speaker #3: Thank you.
Speaker #5: Okay. Let me answer. First, our company, Smart Wheel, has started to contribute revenue this quarter. First of all, why did we create the Smart Wheel share?
Speaker #5: First of all, from the technical stack, from the technical accumulation, we have been making robots for almost half a year. And we have made great progress in wheel navigation, automatic obstacle avoidance, environmental perception, or in today's popular word, embodied intelligence.
Speaker #5: We have made great achievements. And for intelligent wheelchairs, in fact, in terms of technology transferability, it is very high. In other words, we do not regard intelligent wheelchairs as wheelchairs, but as mobile robots.
Speaker #5: Therefore, the biggest feature of our intelligent wheelchair is to help people sitting in wheelchairs achieve assisted driving. The experience brought by this intelligent wheelchair to users is unprecedented.
Speaker #5: So indeed, to be honest, our progress is quite fast, and it has already started selling overseas. Do I need to disclose the sales revenue?
Speaker #5: Well, we are not ready to disclose that yet, because this project is still in the early stages. It has only been a year since the project was initiated and entered mass production.
Speaker #5: The progress has been quite fast. In terms of technology, various certifications are required, especially if it is for a special group. We have spent a lot of time on this aspect overseas.
Speaker #5: Overall, I think our idea is that with the advent of AI, almost all products can be redefined. I think the significance of intelligence lies in this: regardless of the pace of R&D or the investment in R&D costs, it has been highly efficient.
Speaker #5: Thanks to our past technological accumulation, we have tens of thousands of robots operating in various environments, conducting autonomous obstacle avoidance. Therefore, we have extensive technological reserves in this area.
Speaker #5: Additionally, we have observed that, in recent years, this market has gained popularity. Some VC funds are investing in startups. I think our biggest difference from others in making Smart Wheelchairs is that we don't simply accumulate technologies; we accumulate sensors, chips, and computing power.
Speaker #5: Instead, within a cost acceptable to users, we aim to achieve a highly cost-effective assisted driving capability. This was also the positioning of our product at that time.
Speaker #5: By the way, let me take this opportunity to advertise: our product is made of full carbon fiber. It is foldable. Earlier this year, I had a dislocated hip while skiing.
Speaker #5: During the three months I used my own smart wheelchair, I used it around my home and even took it on planes, traveling to Hong Kong and Singapore all by myself.
Speaker #5: Therefore, I believe its application prospects are quite broad. As for how large this business can grow, I suggest you take a look. Actually, the wheelchair market is quite large.
Speaker #5: We believe that the high-end wheelchair market is worth over $100 million US dollars. Our smart wheelchair combines the light weight, height adjustability, and foldability of today's electric wheelchairs, while also enhancing comfort and introducing intelligent features.
Speaker #5: Overall, we are very excited about this product. But since we are currently focusing on the overseas market, there are channels and certifications to consider.
Speaker #5: I won't go into specific details here. Yes, it should be more than the business scale that everyone is very enthusiastic about now. And we are also cooperating with the world's largest, or top, traditional wheelchair manufacturers.
Speaker #5: We have already cooperated formerly. They also highly recognize our product. That's about it. That's all for my sharing.
Speaker #4: Okay. Now let's move on to the second analyst's question. It is from Mr. Li Chengru of Goion Securities. Mr. Chengru, please go ahead.
Speaker #2: Thank you, Academician Tang, for taking my question. My question is about the AI infrastructure business. This business continues to grow rapidly in this quarter, so could the management please provide further information?
Speaker #2: What are the company's core competitive advantages in this field compared with other competing power and AI infrastructure service providers? In terms of clients, technology, capabilities, or cost efficiency, what are our differentiated advantages?
Speaker #2: Additionally, how do you view client demands in the coming quarters, and the sustainability of revenue?
Speaker #3: All right. Let's answer this question. We are also in Silicon Valley, looking at many AI infrastructures here—the infrastructure and technical facilities. Let me answer your question in reverse.
Speaker #3: First, I think today’s AI infrastructure is far from being fully in place. Demand is still growing rapidly. The number of AI token calls today may be similar to that of generators 100 years ago, but we may have thought AI was already very popular.
Speaker #3: But in fact, it will have a huge impact across all walks of life. As China's open-source large language models become more and more powerful, we are also seeing more and more clients willing to use AI, and they have very strong demands.
Speaker #3: So I am very optimistic about the market demand—this is the first point. Second, compared with other companies, I think our biggest advantage is being customer-oriented.
Speaker #2: Some investors ask me, "Why do I make videos on video accounts?"
Speaker #3: Essentially, the account itself is the company's asset. And the second is that the core of my doing these accounts is to find our target customers.
Speaker #3: And then we have launched from training to landing. To the entry. First guide SDE. We are all practicing. I think our real competitive advantage over our competitors is that we have a certain influence to find our target customers.
Speaker #3: Second, we started to do AI for all employees 2 or 3 years ago, and last year, all of us had to write code. At that time, the LLM wasn't as good as it is today.
Speaker #3: But we have already explored the experience. So today we have turned this experience into a training course for our clients, and continued to train them.
Speaker #3: The training process is also a process of finding target customers. The training itself enhances their AI capabilities, and then we assist them in implementing AI locally.
Speaker #3: For example, we don't just resell APIs, or resell business. But we also provide services, including a series of enterprise-end products based on these services, such as the lobster we worked with on EC recently.
Speaker #3: We also have programming tools like Cloud Code. And Easy Code. And we also provide AI scoring for each position of our clients. The AI scoring of your entire organization, which we call Eagle AI, to help you with the diagnosis of AI in your organization, it's a whole set of tools.
Speaker #3: So I think our biggest competitive advantage is that we have highly differentiated services. The second advantage is that we cooperate with Amazon and Google.
Speaker #3: Including Oracle. For a long time. Especially before we take on a client. We were actually one of Amazon's largest clients among Chinese companies at that time.
Speaker #3: So we have a deep relationship. And are also very familiar with their entire technical system. In addition to providing the AI training services just mentioned, we help companies deploy AI clouds.
Speaker #3: Which no matter used, including Alibaba or Tencent in China, we have the technical capabilities to help you implement it. Therefore, we have our own technical accumulation in this regard.
Speaker #3: Our delivery capability is also quite strong. It does take time and manpower to continuously accumulate. Moreover, these overseas cloud vendors have such a large revenue growth rate.
Speaker #3: Which in turn proves that our space is still very large. Although our revenue is only 5%. We have a revenue of 500 million. But we think this only accounts for a very small share of the vendor we cooperate with.
Speaker #3: So our idea is to help Chinese companies, whether they are going global or landing, if we provide the ultimate service for AI voice, I believe there is still huge growth potential.
Speaker #3: Thank you.
Speaker #4: All right. Thank you. The next question is from Ni Fan of Haitong International. Ni Fan, you can ask your question now.
Speaker #2: All right. Thank you, Pan and Yihong. I would like to ask for our high-growth business. Currently, there are two parts: robotics and AI. They are maintaining rapid growth.
Speaker #2: And as we know, the overall market cap is below the net asset value. So I would like to ask the management, how do we view the current valuation gap between the company and our business?
Speaker #2: And for Xiaonyu, would we consider introducing strategic investment from external companies, or even a spin-off, an independent listing, to provide financial support for these high-growth businesses or to unlock the business commercial value?
Speaker #1: Thank you. Regarding Nathan's question, I'm Thomas, and I'll answer it. We understand that investors' valuation of our company and the liquidity of stock trading, as well as the performance of new businesses in the capital market, are of great concern.
Speaker #1: We are also continuously monitoring the capital markets' feedback on the company's business transformation and operational progress. For us, the most important focus at this stage is to continue to drive the growth of cloud and AI infrastructure business under robotics and going global enterprise services, improve our operating performance, and through more sufficient and transparent disclosure, help investors better understand this business.
Speaker #1: At the same time, we are also paying attention to the recent connection and service layer of the large model and in the robotics field, there have been many financings, strategic investments, M&A, and even IPO.
Speaker #1: This reflects the capital markets' high attention to the related fields. We will also closely monitor the development of the industry in the capital market.
Speaker #1: Actively evaluating various possibilities that can help business development and enhance shareholder value. This includes, but is not limited to, external financing, introducing strategic investors, industrial cooperation, and even adopting more independent capital operation methods when conditions are appropriate.
Speaker #1: But currently, we don't have specific transactions to announce, and any arrangements need to comprehensively consider the stage of business development, strategic synergy, transaction conditions, regulatory requirements, and the long-term interests of Cheetah's shareholders.
Speaker #1: But what is clear is that the management maintains an open attitude towards various possibilities, and if a suitable opportunity arises, we will seriously evaluate and actively promote it.
Speaker #1: At the same time, we also pay attention to the trading liquidity of the company's stock, the coverage of research, and market recognition. We will also actively take various measures, including strengthening the disclosure of key game information, strengthening communication with investors and analysts in the United States and other markets, to evaluate the capital market tools suitable for the company, and help the market to better understand the company's operating performance and business progress.
Speaker #1: In summary, the performance of the capital market is actually based on our continuous business growth and profitability. Our current task is still to focus on the robotics, enterprise services, next-generation cloud, and AI infrastructure businesses.
Speaker #1: And make them bigger and healthier. At the same time, we will also actively research various capital market opportunities that support business development and enhance shareholder value.
Speaker #4: Okay. The fourth question is from Mr. Zhang Guangpeng of Gouhai Securities, Mr. Zhang, you can ask a question now.
Speaker #2: Hello, Mr. Lin. I'd like to ask about the profitability of the robotics business, about the path and timeline. Hello. Can you hear me?
Speaker #4: Mr. Zhang, we can hear you clearly.
Speaker #2: There are already robotics companies in the market that have achieved profitability, such as Yuncong Technology. This shows that the robotics business does not necessarily rely solely on long-term investment.
Speaker #2: It can also continuously form a sustainable business model. So we'd like to ask, how far is the robotics business from breaking even, and when can we achieve a quarterly profit?
Speaker #2: Thank you.
Speaker #3: First of all, the profit of UAZ, I think robots are a very broad concept. And what we are doing is providing robots that can be truly commercialized.
Speaker #3: If it's a commercial robot that can replace certain jobs, it actually has very high requirements for mechanical durability, product quality, and reliability. When you treat can go public, it will also be good for the machinery industry.
Speaker #3: But I want to say that what we are doing is not the same type of product at all. So I don't think there is such a strong comparability between them.
Speaker #3: As for how this will develop in the future, we can wait and see. This is the first point. The second point, I don't think we rely on long-term investment in robots.
Speaker #3: In fact, in some individual items, such as our robotic arms, they are already profitable. Some businesses, like commercial reception or delivery robots, have not been commercialized yet.
Speaker #3: There is a process of market acceptance and maturity. Third, like the upgrade of wheelchairs just mentioned, because we are just starting, the construction of our sales team, and subsequent iterations, will continue to increase.
Speaker #3: Of course, from the perspective of a single product, each of our products has sufficient gross profit. And we do not use a lower price than the best-selling products to seize market share.
Speaker #3: We definitely won't do that. But the volume needs to keep growing. And I think we have already achieved a very, very efficient level in the investment in robot R&D.
Speaker #3: We didn't overemphasize it. We only focus on technology investment, not commercial output. So, when do you think I can achieve single-machine profitability? I definitely hope the sooner the better.
Speaker #3: But look at all the real commercial robots today. Before landing in commercial scenarios, it's like a 2B business. It needs channels, right? It needs distributors, right?
Speaker #3: As you just mentioned, like landing in certification, it really takes a certain cycle. But this cycle does not mean that we think as long as we continue to invest, it will naturally succeed one day, right?
Speaker #3: But what we see now is that the entire business is developing in a relatively healthy way. I think, as for single-quarter profit, if it's just set as a goal, it may not take long for us to achieve it.
Speaker #3: But I don't think it's necessary to simply pursue single-quarter profit at this stage. I may ensure sufficient gross profit for a single product and continuously expand our market size, and the number of real users.
Speaker #3: I think this is our real core goal. Because all our current revenue is market-oriented. And all our market entities to be enterprises. So I think as long as we keep going, making profits is just a matter of time.
Speaker #4: Okay. Thank you. Our last question is from Mr. Dao Yunpeng of Goutai Junan, Mr. Dao, you can ask your question now.
Speaker #2: Okay. Thank you to the management for giving me the opportunity to ask a question. I would like to ask, about the planning of the Asian products and the QCN, because Cheetah has developed this before.
Speaker #2: Such as easy cloud, AI mind map, AI code, and other tool-like products. With the rapid development of Asian products, is the company still planning to develop new agents for consumers, or AI tool-like products?
Speaker #2: Which application scenarios will be focused on? How can Cheetah use its past experience in product development, global operations, user growth, and monetization to enhance these aspects?
Speaker #2: How does the management assess whether a QC AI product is worth continuous investment? I would like to ask this question. Thank you.
Speaker #3: You may be concerned about the QCN, but today Cheetah Mobile's 2B business generates the majority of our overall revenue. My view is as follows.
Speaker #3: First, we believe that the rise of AI today for its largest real-world application scenario is currently in the enterprise sector. You've also seen the growth in this area.
Speaker #3: Which is essentially the growth of the enterprise coding market. This has led to a significant increase in its valuation. I think that AI today as a tool of the productivity revolution, first and foremost, enhances productivity.
Speaker #3: Therefore, the demand from the enterprise side will be greater. I believe that within these opportunities, including the products you just mentioned, such as AI code and easy code, although you can log in, many of our users today are enterprise users.
Speaker #3: Of course, this doesn't mean we have given up on the advancement and development of top products. As I mentioned in the last financial report call, our approach is as follows.
Speaker #3: We will first advance and improve our own top products. For example, you may be aware of our Kingsoft document today. Which is probably the only product that has been consistently profitable since then.
Speaker #3: Among all security software. In fact, we have integrated Kingsoft antivirus into Kingsoft document. I suggest you download it on your computer, and then you can directly talk to it about any computer problems.
Speaker #3: Without having to open the menu bar. For instance, if your device has insufficient storage or slow memory, or even if the printer doesn't print paper, it can help you, as we have accumulated tens of thousands of computer issues, which have become part of our A-skilled part.
Speaker #3: So the first wave is that we think that truly making the original product A-skilled is a huge progress. We also disclosed our internet revenue, right?
Speaker #3: The business scales are also okay. The second is whether we will pay attention to making a CNP product. I think this is the goal for every product person, or it is also our vision.
Speaker #3: But I think making a CND today is different from before. The APP era is completely different now. Regarding what you just mentioned, I have to be honest that I think those experiences are not particularly relevant in today's era.
Speaker #3: So what are we exploring? We are exploring extremely rapid and lightweight investment, quickly focusing on user demands. And rapidly investing to see if it can dot, dot, dot.
Speaker #3: You may have noticed that I also mentioned in my video that we are building a negative three-tier team, composed of young people. We have recruited many young people to help us with product innovation.
Speaker #3: What is QC? What is the core standard for whether it is worth it or not? I think the standard is very simple. It can form word-of-mouth communication, and whether the user retention can be good od enough.
Speaker #3: Not like in the past. To be frank, a few years ago, some of our tool products relied more on the skills of delivery, and the familiarity with various advertising networks.
Speaker #3: A lot of promotion was achieved through these means. I think today, due to the new changes brought by AI, we now focus more on word-of-mouth from users.
Speaker #3: When users use the software, they are willing to use it and recommend it to others. Of course, our investment in the CNP must be AI-native.
Speaker #3: It's no longer the case of a large team with many people, but rather very lightweight, highly agile. And we call them special forces. One person can quickly achieve the goal.
Speaker #3: So I think ultimately, only the entire user experience proven by data can determine whether it is a truly good CN product. We are also constantly exploring
Speaker #4: Thank you. Okay. Then today's financial results conference is over. If you have any further questions, feel free to contact us at any time. Thank you.
Speaker #2: Thank you all.
Speaker #4: Goodbye.
