China’s Kingsoft Cloud Holdings (NASDAQ: KC) was under something of a cloud with investors on Wednesday. They traded out of the niche tech company’s U.S.-listed American Depositary Receipts (ADRs) after the release of its first-quarter results, leaving the securities with an almost 8% decline in price at market close. That was a far steeper drop than the S&P 500‘s (SNPINDEX: ^GSPC) 0.6%.
A deep red number
For the quarter, Kingsoft Cloud came in at 1.97 billion yuan ($274 million), a nearly 11% increase from the same period of 2024. Management attributed this to higher take from the business of top Chinese tech company Xiaomi and that from artificial intelligence (AI) consumers, among other factors.
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However, the company still landed rather deeply in the red. Its net loss was nearly 314 million yuan ($44 million) against the year-ago deficit of 359 million yuan ($50 million). On a per-ADR basis, it only managed to trim the shortfall to 0.08 yuan ($0.01), versus first quarter 2024’s loss of 0.10 yuan ($0.01).
At least that net loss was narrower than expected, as analysts tracking Kingsoft Cloud stock were modeling a far steeper per-ADR figure of 0.62 yuan ($0.09). However, they were also anticipating higher revenue of 2.03 billion ($282 million).
In its earnings release, management touted the emergence of AI technology and its effect on the company’s fundamentals. It pointed out that billing for AI services increased by 228% on a year-over-year basis (to 525 million yuan, or $73 million). That accounted for 39% of the company’s draw from public cloud services.
Profitability wanted
With that kind of potential, I’d imagine that many Kingsoft Cloud investors are growing impatient for their company to drag itself out of the red on the bottom line, as it continues to consistently post bottom-line losses. Like many of them, personally, I’d stay away from the stock until those numbers start to meaningfully improve.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Xiaomi. The Motley Fool has a disclosure policy.
