Kingsoft Cloud Turns Operating-Profit Positive as AI Cloud Billings Surge 82% and MaaS Revenue Jumps 12x Quarter-on-Quarter
Q2 2026 earnings call, held August 19, 2026
Kingsoft Cloud delivered its strongest quarter on record, with total revenue crossing RMB 3 billion for the first time and, more notably, posting a positive adjusted operating margin for the first time in the company's history. The results mark an inflection point for a company that has spent years subsidizing growth with losses, and management now argues the AI cloud business has reached a scale where profitability and growth can coexist.
AI cloud billings and MaaS provide the real story
Total revenue reached RMB 3.07 billion, up 31% year-over-year and 40% quarter-over-quarter. The more important number sits underneath: AI cloud gross billings rose 82% year-over-year to RMB 1.33 billion, now accounting for 56% of public cloud revenue and over 43% of total revenue, up from 31% a year ago. CFO Yi Li called this "a continued structural shift in our business mix towards AI," and the numbers back her up.
The standout line item was Model-as-a-Service revenue, which grew more than 12 times sequentially from a small Q1 base. The company's StarFlow platform now supports 120 models and serves more than 230 enterprise customers, with new models added to the platform in sync with their market release. Management was explicit about why this business exists in its current form: Kingsoft Cloud does not have proprietary large language models of its own, unlike many full-stack cloud peers, and executives framed this as a competitive advantage rather than a gap. "We do not have to sell those large language models that our affiliated companies have to offer," one executive said, arguing this neutrality lets the sales team push whichever model — GLM or otherwise — the customer actually wants. CFO Li Yi added that MaaS "delivers much better profitability than AI computing power services at this stage," a direct signal to investors about where incremental margin dollars are coming from.
Profitability inflection is real, but margin quality needs scrutiny
Adjusted gross margin rose to 15.4%, up 2.4 points quarter-over-quarter, and adjusted operating margin hit a record 4.0%, versus negative 7.1% a year ago and negative 2.2% last quarter. Adjusted net loss narrowed to just RMB 6 million from RMB 300 million a year earlier — effectively breakeven. Non-GAAP EBITDA rose 171% year-over-year to RMB 1.1 billion, though the EBITDA margin actually compressed to 36% from 82% last quarter, reflecting heavier depreciation and financing costs as the AI infrastructure buildout accelerates. Depreciation and amortization costs jumped 75% year-over-year to RMB 964 million, a reminder that the capital intensity of this business is rising even as unit economics improve. Investors should read the operating-margin inflection as genuine progress, but the EBITDA margin deceleration is a useful counterweight to the more bullish framing on the call.
CapEx guidance held steady despite chip supply constraints
Management reiterated full-year CapEx guidance of RMB 15 billion, with first-half capital expenditures, including leased assets, already at RMB 6.2 billion — over 75% of last year's full-year total. On chip procurement, SVP Kaiyan Tian was candid that supply tightness is now structural rather than transitory: "Since 2023, it's been three years, and the market has always been hearing voices about the limited supply... I would say this is actually a new norm." The company's response has been to diversify suppliers and increase compatibility with domestic Chinese chips, which Tian noted are "particularly good in use cases such as model inference." This is a meaningful disclosure for investors tracking China's chip self-sufficiency narrative — Kingsoft Cloud is positioning its Galaxy Stack platform around deep integration with multiple domestic AI chips rather than waiting for foreign supply to normalize.
Enterprise cloud weakness explained away, not fully resolved
Enterprise cloud revenue was roughly flat year-over-year at RMB 714 million, down slightly from RMB 724 million, and has decelerated for two consecutive quarters. Management attributed this to three factors: upstream pricing hikes that have delayed SOE and government budget decisions, normal seasonality that concentrates enterprise delivery in the second half, and a deliberate shift from project-based to operating-based contracts, which get reclassified into public cloud revenue once made. This last point is worth flagging — it means the enterprise cloud segment's apparent softness partly reflects an accounting reclassification rather than genuine demand loss, but it also means the enterprise segment as reported will likely continue to look weak by design.
Pricing power emerging in storage and compute
A less obvious data point: Kingsoft Cloud has been raising prices on both storage and computing power tied to intelligent computing demand, and customers are reportedly absorbing the increases with limited pushback. Management said storage price hikes represent a small enough share of overall AI cloud ticket sizes that customers accept them readily, while computing power hikes have been passed through thanks to the company's PaaS and network operations capabilities. In some cases, the company said it has actually expanded margin rather than merely passing through cost inflation — a signal of pricing power that is unusual for a cloud infrastructure provider and worth watching for read-through to peers.
Ecosystem ties to Xiaomi remain a growth anchor, not a constraint
Revenue from the Xiaomi and Kingsoft ecosystem rose 28% year-over-year to RMB 810 million, or 26% of total revenue, while top-five non-ecosystem customers grew 51%, evidence that growth outside the captive ecosystem is outpacing growth within it. Shareholders approved an increase in annual caps for connected transactions with Xiaomi in June, lifting the combined 2026-2027 cap to RMB 10 billion, 39% higher than before. Public cloud revenue from Xiaomi and Kingsoft grew 54% year-over-year in the first half, driven by Xiaomi's expansion of AI across its "Human x Car x Home" ecosystem and continued WPS AI development.
Analysts on the call — from CICC, CLSA, Goldman Sachs, UBS and Morgan Stanley — probed repeatedly on margin sustainability and competitive positioning against full-stack cloud providers with proprietary models. Management's answer was consistent: neutrality is a feature, not a limitation, and the combination of computing power's contractual stability with MaaS's higher-margin flexibility gives the company two complementary levers to manage through cycles. Whether that thesis holds as larger, well-capitalized peers push further into neutral MaaS offerings remains the key swing factor for the stock from here.