"China Sample" in the SaaS industry: Crossing the Profitability Inflection Point, How Does Kingdee International (00268) Reshape the AI Valuation Anchor?

In 2025, a year with lingering uncertainty in the macro environment, the enterprise software industry is at a crucial turning point: on one side, there is the certainty of growth brought about by the maturation of the SaaS business model, and on the other side, there is the uncertainty impact of the AI wave reshaping industry logic. At this intersection, Kingdee handed in a financial report of "turning from loss to profit," which clearly signifies more than just an improvement on the numerical level, but rather a stage of verification for its business model and technological path. Over the past five years, Kingdee has almost completely experienced the most typical path of Chinese SaaS companies transitioning from traditional software to cloud subscriptions, and then exploring the second growth curve driven by AI. Throughout this process, profit pressure, valuation fluctuations, and market skepticism have been persistent. However, in 2025, these variables began to show directional changes: the company not only achieved a turnaround from losses, but more importantly, the quality of growth and future potential began to improve concurrently. From a financial perspective, the company's annual revenue was approximately RMB 7.006 billion, a year-on-year growth of 12%; the net profit attributable to the parent company was around RMB 93 million, successfully turning losses into profits; adjusted net profit reached RMB 2.32 billion; operating cash flow further increased to RMB 1.097 billion. More worthy of attention are the two main threads reflected behind these numbers: the thorough realization of the subscription business model, and the transformation of AI strategy from concept to implementation. 2025 was designated by Kingdee's management as the accelerating year of "AI transformation." As Xu Shaochun, Chairman of Kingdee Group, stated, the AI transformation will no longer be as lengthy as the cloud transformation. The goal for Kingdee in the next three to five years is to "reinvent" itself with AI. With the financial turning point of turning losses into profits, what is supporting Kingdee's ambition for this "self-reinvention"? With profit and cash flow both increasing, Kingdee's model succeeds If one word could summarize Kingdee's operational changes in 2025, it would be "structure" being more important than "scale." It was reported that the company achieved revenue of approximately RMB 7.006 billion in 2025, a year-on-year growth of about 12%. This growth rate may not be aggressive in the current macro environment, but it is stable enough. What truly deserves attention is the internal changes in revenue: subscription revenue grew by 20.9% year-on-year, reaching RMB 3.556 billion, accounting for more than half, signifying the company's core transition from one-time software sales to recurring revenue model. The essence of the subscription model is to convert uncertain transactions into sustainable relationships. Compared to traditional software models, its advantage lies not in short-term explosive power, but in long-term stability. From the financial report data, this characteristic has gradually emerged. The company's annual recurring revenue (ARR) is close to RMB 4.1 billion, maintaining a growth rate of nearly 20%; the contract liability continues to grow, providing high certainty for future revenue. In terms of profitability, in 2025, the company achieved net profit attributable to the parent company of about RMB 93 million, successfully turning losses into profits, with adjusted net profit of about RMB 2.32 billion. The improvement in profit mainly comes from the increased proportion of high-margin subscription business; the overall gross profit margin of the company has exceeded 67%, while the gross profit margin of the subscription business is close to an extremely high level of 96.5%, giving profits a natural amplification effect. On the expense side, both the sales expense ratio and research and development expense ratio have decreased, but revenue still maintains growth, indicating that the company has crossed the stage of "high investment for growth" and entered the period of "efficiency-driven growth." This is a critical turning point in the development of SaaS companies. Once a positive cycle is formed, profit elasticity tends to continue to be released. Furthermore, the company's cash flow performance further confirms this point: the company's operating cash flow in 2025 reached approximately RMB 1.097 billion, a year-on-year increase of 17.6%. From a customer perspective, structural optimization is also evident. In the large enterprise market, the core product renewal rate reached 110%, meaning that customers are not only renewing but also expanding usage; the renewal rate in medium-sized enterprises is close to 100%; and in small and micro enterprises, it remains at a high level. This high renewal rate essentially reflects the continuous realization of customer value. It is worth mentioning that in the past year, Kingdee's efforts in the large enterprise market have entered a harvest period. By signing new contracts with state-owned enterprises such as the National Energy Group, CRRC Group, China Life Insurance, and other Fortune 500 companies, Kingdee has not only enhanced its brand endorsement but has also leveraged the data intelligence needs of these "chain-leading" enterprises to drive the subscription transformation of the entire industry chain. Now, Kingdee's subscription model has shifted from "logical establishment" to "financial realization." The completion of this phase provides the company with a more stable growth foundation and space for future technological investments. What more can Kingdee earn in the future? If the subscription model addresses "how to continue making money," then AI answers "what more can we make money from in the future." In the past year, the impact and imagination of AI on the enterprise software industry have coexisted. On one hand, there is market concern that AI will weaken the value of SaaS; on the other hand, some views believe that AI will reshape the form of software. In the case of Kingdee, its choice is not passive but rather proactive integration. In 2025, the company fully upgraded "Kingdee Cloud" to "Kingdee AI," and launched an AI-native entry "Little K" and nearly 20 intelligent body products covering various scenarios such as financial analysis, contract review, and recruitment. The significance of this move is the transition from "functional stacking" to "system restructuring." More importantly, AI is beginning to generate actual revenue. During the reporting period, the company's AI-related contract amount reached RMB 356 million. Although the scale is still limited, this step represents a critical transition from technological exploration to commercial validation. For any new technology, its ability to convert into revenue determines its long-term value. In terms of strategy, Kingdee's AI strategy has obvious "scenario-oriented" characteristics. Compared to general large models, the company emphasizes building intelligent bodies based on actual enterprise business processes. Although this approach progresses steadily, it is more likely to create stickiness and barriers. Supporting this strategy is the long-term accumulation of data and industry experience. With service to over millions of enterprises, the company has accumulated a vast amount of business data and process models. In the AI era, this data is not just a resource but an infrastructure. It determines whether AI can truly understand enterprise operations rather than remain at the surface level. It is also understood that AI has a significant impact on the company's internal efficiency. As disclosed by the company, over 40% of new code is generated by AI, and some scenarios even achieve full automation development. This means that AI is not only a new source of revenue but also optimizes cost structures and improves R&D efficiency in reverse. From a broader perspective, AI is changing the role of enterprise software. Traditional ERP systems are more of "recording tools," while AI-driven systems are gradually acquiring "analysis and decision-making capabilities." This shift pushes software from execution layers to decision-making levels, signifying higher value potential. During the 2025 annual performance release conference, the company set a goal to achieve equal revenues from "AI-native business" and "AI+SaaS business" by 2030. This goal presents a challenge, but the path is gradually becoming clear: on the one hand, promote AI penetration among existing customers to increase single customer value; on the other hand, develop new markets through AI-native products. It is important to note that AI is still in its early stages, and there is uncertainty in its commercialization pace. However, what can be confirmed is that AI is becoming a key variable impacting the industry landscape. Those who can complete the transformation from "tool provider" to "intelligent platform" earlier are more likely to take the lead. In conclusion Looking back at Kingdee's development trajectory over the past few years, a clear logic can be observed: enduring transformation costs, reaping model dividends, and adding technological variables. In 2025, at the intersection of the second and third stages, the subscription model began to release profitability, and the AI strategy opened up new growth opportunities. The fusion of the two allows the company to transition from "recovering growth" to "rebuilding logic." The real value of this financial report lies not in the improvement of profits in a single year, but in validating a path: enterprise software companies can achieve continuous leaps from traditional models to cloud subscriptions and then to AI-driven growth through long-term transformation. Although uncertainties about the future still exist, what can be confirmed is that Kingdee is no longer stagnant in "catching up with change" but is attempting to define change itself. In this sense, 2025 is not the end but more like a starting point for a new beginning.