A：The main focus of Kingsoft's second-quarter 2026 earnings call is to discuss the company's business performance and key developments, as well as to review the financial results with the participants.

A：Profitability has improved with an adjusted gross margin of 15.4%, up 2.4 percentage points year over year. The adjusted operating profit margin reached 4.0%, reflecting the company's efforts to capture AI opportunities, improve revenue quality, and drive greater operating efficiency.

A：The customer mix has continued to improve, with stronger momentum both within and outside the ecosystem. Revenue from the Sony and Kings Health ecosystem grew 28% year over year to RMB 810 million, accounting for 26% of total revenue. Revenue from the top five non-ecosystem customers grew 61%.

A：Kingsoft's AI cloud business serves a broad range of industries including internet services, frontier AI labs, embodied AI, autonomous driving AI, and online video, among others. This diversified customer base supports continued growth and allows for more practical allocation of computing resources, strengthening pricing power and business resilience.

A：Hybrid cloud revenue reached RMB 2.36 billion, up 45% year over year, driven by continued expansion of AI across the humani home ecosystem with Xiaomi and advancement of Wcs AI as the strategic cloud platform for the xmi engine self ecosystem.

A：Kingsoft signed an agreement with the Nanjing Communications Administration of the Yangtze River to build Jianghai Cloud, a dedicated digital infrastructure platform for Yangtze River shipping.

A：Kingsoft is in the process of upgrading its full-stack AI capabilities for intelligent computing and AI application deployment. This includes model deployment optimization for high concurrency inference, the launch of agent kits, and general-purpose cloud products like database and storage becoming easier for AI agents to access and use.

A：Going forward, Kingsoft will continue to capture opportunities both within and outside its ecosystem, improve the operating efficiency of computing assets, and strengthen profitability and cash generation capability. The company remains committed to creating long-term sustainable value for customers and shareholders.

A：Kingsoft achieved several financial milestones in the second quarter, including revenue reaching over 3 billion for the first time, AI cloud growth bill increasing 82% year over year, adjusted gross margin reaching 15.4%, adjusted EBITDA margin of 36%, and breakeven at the operating income level with a positive operating profit margin of 4%.

A：The total revenue for the second quarter of 2020 was 3070.2 million, up 31% year over year, and included 40% from party club revenues. Compared to the same quarter last year, these revenues grew from 2000.625 million to 2244.358 billion. Additionally, 740 million from 85 close 70, which is a slight decrease of 1% year over year.

A：The total cost revenues increased by 30% year over year to 2000.606 million, primarily due to continued investment in cloud infrastructure. IDC costs increased by 23% to 803 million, mainly from a 75% rise in the cost of services provided to education and organizations, which rose from 552 million to 964 million. Solution development and service costs also rose by over 18 million due to higher costs in AI configuration and solution development.

A：The adjusted operating expenses were 391000030 degrees, down from 560 million in the same quarter last year and from 455 million in the last quarter. Expenses such as share-based compensation were excluded. Research and development expenses were up 11% year over year to 184 million, while adjusted selling and marketing expenses decreased by 7% to 102 million, and general and administrative expenses fell by 61% to 107 million, largely due to lower critical loss expenses. Adjusted operating profit was 124 million, which is an improvement from the same quarter last year.

A：The adjusted operating profit margin was over 166, which represents a significant improvement from 7.1% in the same quarter last year and from -3.2% last quarter. The adjusted net income was 6 million, down from 300 million in the same quarter last year and 237 million in the prior quarter. Non-GAAP net income was 1.100 million, which is a substantial increase from 406 million in the same quarter last year.

A：The company plans to capitalize on the existing growth in AI demand by further investing in infrastructure, expanding product and service offerings, managing increasing and liquid risk, and enhancing operating efficiency. It remains committed to its all-in AI strategy and aims to deliver high-quality growth to its shareholders.

A：The development in open source model capabilities has had a positive impact on the company's smart business. There is significant demand from Bicos and traditional models, and mainland China has adopted 'made in China' larger average models. The use of 'agent scenarios' has also benefited the company's car business. The launch of the agent kit product has standardized session aid. Chinese models are chosen for their value and efficiency in routine tasks, supporting a broad range of model development.

A：The company operates different models for its computing power and math businesses. For computing power, the utilization is 100% with long-term contracts ensuring consistent use. For the math business, factors such as token price fluctuations, model launches, and operational efficiency influence its performance. The company aims to balance these models, allowing each to complement the other, and dynamically evaluates them to decide resource allocation.

A：The progress of ship procurement and the outlook for zero CapEx were not explicitly provided in the transcript; however, the text implies that these topics were part of the discussion.

A：The market has been facing challenges due to a limited supply, which has now become a new norm. These supply difficulties are long-term and have not restricted the Chinese quantum computing AI industry's development.

A：The impact of volatility in CapEx numbers is that they are not linear and can be quite volatile from month to month due to large amounts spent in a relatively small number of purchases. However, the company's full-year CapEx estimate remains in line with expectations and past samples.

A：The enterprise cloud segment's growth is expected to be impacted in the short term due to a change in government spending, causing SOE companies and government agencies to adjust their budgeting and delay decision-making processes. The segment's revenue recognition is usually concentrated in the second half of the year, and there is a strong pipeline for delivery.

A：The company's competitive advantage in the mass services market comes from not having an in-house or proprietary model, allowing them to sell various models preferred by customers and having their own computing power to secure significant profitability.

A：The latest trend in overall pricing is characterized by price increases for storage and computing power. The company was able to pass on the increase in costs to customers and improve profitability through these price hikes.

A：The company's long-term positioning in the market and sustainable margin level should be thought of in terms of offering top models and stable services to customers, maintaining good relations with major model providers, and optimizing model inference with these providers. The company aims to provide highly available and reliable services and improve profitability through continuous improvement and optimization.

A：The company does not disclose the ROIC for computing power leasing and model as a service separately, but they have seen continuous improvement in operating leverage as their airi business scales, resulting in a trend of positive model adjusted operating profit. The LSC is expected to keep improving over time.