Kingsoft Cloud: Transition to AI Cloud Bearing Fruit; MaaS Brings Further Upside
Summaries are public. PDF access requires an active membership; all members have the same access. Sign in
Morgan Stanley initiated coverage on Kingsoft Cloud with an Overweight rating, citing a strategic transition from a mid-tier commodity cloud provider to a focused AI cloud platform. The company holds a 3 to 4 percent share of China's public cloud IaaS and PaaS market, with AI revenue contributing an increasingly significant portion. During 2023 and 2024, total revenue grew 10.5 percent annually, while AI cloud revenue achieved high double-digit growth.
This transformation is underpinned by robust ecosystem support from Xiaomi and Kingsoft Group, providing clear synergies and a defined role as the preferred cloud infrastructure provider. Profitability metrics are also improving. While current gross margins remain relatively low, the company targets exceeding 15 percent over the long term.
A global trend of cloud service price increases presents a meaningful tailwind. In June 2026, Kingsoft Cloud announced price hikes of 15 to 50 percent for AI computing products and 30 to 50 percent for storage products, effective July 12, 2026. This pricing power is expected to drive margin expansion, closely following the profitable trajectory established by industry leader Alibaba Cloud.
Morgan Stanley values the company at 5.5 times 2027 estimated enterprise value to EBITDA. This represents a significant discount to the thirteen times average and ten times median of US neocloud peers. The discount reflects lower asset returns and ongoing supply chain uncertainties. Key upside catalysts include stronger-than-expected AI GPU demand, lower interest rates, and accelerated AI model development within the Xiaomi ecosystem.