EB Securities maintains a "buy" rating on Kingsoft Cloud (03896) as AI drives rapid expansion of public cloud.

EB SECURITIES released a research report stating that it maintains a "buy" rating for KINGSOFT CLOUD (03896). The main reasons for this are the accelerated revenue growth and strengthened profitability of the company in 3Q25, with public cloud revenue increasing by 49.1%, AI billing revenue increasing by nearly 120% year-on-year, accounting for 45% of the total. Ecological revenue increased by 84% year-on-year, and AI deeply empowered the industry cloud. With the increase in the proportion of high-margin inference business, the company's profit structure is expected to continue to improve. EB SECURITIES' views are as follows: Performance In 3Q25, KINGSOFT CLOUD achieved a revenue of 2.478 billion yuan, with a year-on-year growth of 31.4% and a quarter-on-quarter growth of 5.5%, mainly benefiting from the continued high growth of AI business. In 3Q25, the company's adjusted gross profit reached 393 million yuan, a year-on-year increase of 27.6% and a quarter-on-quarter increase of 12.0%; adjusted EBITDA reached 827 million yuan, a significant year-on-year increase of 345.9%, corresponding to an adjusted EBITDA profit margin of 33.4%, a year-on-year increase of 23.6% and a quarter-on-quarter increase of 16.1%. In 3Q25, both adjusted operating profit and adjusted net profit achieved double-digit growth, reaching 15 million yuan and 29 million yuan respectively, further clarifying the upward trend in profitability. Public cloud is growing rapidly, with AI engine driving steady revenue expansion. In 3Q25, public cloud revenue reached 1.752 billion yuan, a year-on-year increase of 49.1% and a quarter-on-quarter increase of 7.8%. Among them, AI billing revenue reached 780 million yuan, a nearly 120% year-on-year increase, continuing its triple-digit growth for nine consecutive quarters, accounting for 45% of public cloud revenue, mainly benefiting from the company's continued strengthening of its Zhisuan cloud capabilities (such as releasing model API services, integrating and upgrading online service models, launching data set square) to drive business growth. Looking ahead, the company's performance is expected to be strong AI demand from customers and the proportion of high-margin inference business demand will further increase, with Siasun Robot & Automation and API services becoming new breakthrough points. In 3Q25, ecological revenue grew rapidly, and AI deeply empowered the industry cloud. In 3Q25, Xiaomi & Kingsoft's ecological revenue reached 690 million yuan, an 84% year-on-year increase and a 10% quarter-on-quarter increase, further increasing the proportion of total revenue to 28%. From 1Q25 to 3Q25, the total revenue from Xiaomi & Kingsoft's ecosystem reached 1.82 billion yuan. The company continues to provide high-quality services to ecosystem enterprises, solidifying its rapid response capability to the demand for Zhisuan, and the bank predicts that the company is expected to achieve the goal of 2.78 billion yuan in related transactions for the full year of 2025. In terms of industry cloud, the revenue growth in 3Q25 was steady, reaching 726 million yuan, a year-on-year increase of 2.2% and a quarter-on-quarter increase of 0.2%. Existing partnerships continue to deepen and expand in practical ways: for example, making new progress in the Shanghai state-owned cloud project; assisting Wuhan Union Hospital in reaching level three maturity of DCMM management (steady level), winning the bid for the AI project of Guangdong Provincial Hospital of Traditional Chinese Medicine, and partnering with a clean energy service provider; advancing the second phase of cooperation with a state-owned large bank on credit report automation projects. Profit forecast, valuation, and rating In 3Q25, the company achieved double-digit growth in adjusted operating profit and adjusted net profit, with the adjusted EBITDA profit margin further increasing to 33.4%, a year-on-year and quarter-on-quarter increase of 9.8% and 17.3% respectively. The improvement in multiple profit indicators is mainly due to the accelerated expansion of high-margin AI business and significant cost control effectiveness. Looking ahead, the bank predicts that with the increase in the proportion of inference business, the EBITDA profit margin will be maintained at above 20%. However, the improvement in EBITDA margin and net profit margin in 3Q25 is mainly due to one-time subsidy income, which is expected to return to normal in the next quarter. Overall, the bank believes that against the backdrop of AI-driven growth, KINGSOFT CLOUD's Zhisuan cloud business is growing rapidly and its profit indicators are continuing to improve, indicating that the earlier AI layout has entered the period of reaping rewards and the development logic has been gradually validated. As the only strategic cloud platform in the Xiaomi Kingsoft ecosystem, it deeply benefits from the increasing demand for computing power within the ecosystem, forming a differentiated moat, and the long-term development prospects are promising. The bank maintains its forecast for KINGSOFT CLOUD's revenue in 2025-2027 at 9.5/11/12.5 billion yuan and maintains a "buy" rating for the company. Risk factors Intensified competition in the cloud industry, failure to expand industry cloud as expected, and slower progress in AI.