Profits soared by 400%, but the stock price was halved. Where did Kingsoft's "Microsoft dream" shatter?
In this magical Hong Kong stock market, you never know which will come first, tomorrow or a thunderbolt.
Compared with the extremely eye - catching "more than 400% surge in net profit attributable to the parent company" in the first - quarter financial report of 2026, the sharp decline in the stock price of Kingsoft Corporation Limited (03888.HK) this year and the dismal reality of being nearly halved from its historical high are particularly glaring.
What's even more discouraging is that Kingsoft was mercilessly removed from the Hang Seng Tech Index at the end of May.
Many retail investors, staring at that three - digit profit growth rate, were full of grand narratives like "performance reversal" and "revaluing the Chinese Microsoft", fantasizing about making a full - position bottom - fishing.
But the capital market is never stupid. Institutions rushed out of the market on the trading floor. Behind the real - money selling is a silent protest against this "watered - down" financial report.
When the tide recedes, we can't help but ask: What exactly is the capital selling? In the era of the galloping AI, after the sharp decline, can Kingsoft, stripped of the cloak of financial tricks, still live up to the ambition of being the "Chinese Microsoft"?
Piercing the "400% Profit Myth", the Hidden Dangers in the Financial Report
Looking at financial statements is like looking at the retouched selfies in your WeChat Moments. They look beautiful, but once you remove the makeup, there are all flaws.
Let's dissect this seemingly explosive performance layer by layer. The extremely high - proportion profit growth conceals an extremely embarrassing reality: this money is not earned by working hard on the main business, such as writing code and selling software.
When you look at the notes to the financial report, you'll find that most of the profit surge comes from external investment fund projects, especially the one - time non - recurring investment income generated by the appreciation and dilution of Kingsoft Cloud's equity.
In 2025, there was a net other income of up to 1.253 billion yuan. This was mainly due to the dilution effect caused by the issuance of new shares by Kingsoft Cloud, which forced the recognition of a "deemed disposal of shares" income on the books.
It's like you own a noodle shop. You didn't make much money from selling noodles this year and even suffered a loss. But the valuation of the milk tea shop you invested in years ago suddenly skyrocketed, and you counted this money as your annual profit on the books. Has the business of the noodle shop improved? No.
It directly pierced through the veil and clearly pointed out that in the fourth quarter of 2025, Kingsoft's operating profit actually dropped by 54% year - on - year, but the net profit increased by 51% year - on - year to 1.3 billion yuan, thanks to the approximately 800 million yuan of deemed disposal income.
After removing the "financial tricks" of these investment incomes and asset disposals, the real picture of the net profit attributable to the parent company after deducting non - recurring items of the main business is actually quite weak.
The game business, once the cash cow, is now going through a painful period. In the fourth quarter of 2025, game revenue decreased by 32.8% year - on - year. The revenue of old games declined. Although the newly launched "Goose Goose Duck" has exceeded 30 million registered users and has a DAU of 3 million, it currently only focuses on user growth, and the commercialization is still in its early stage, making a negligible contribution to profit. Kingsoft even directly defined 2026 as the "adjustment year" for its game business, and it is expected that game revenue will record a double - digit year - on - year decline.
As long as you compare the real situation of the main business with the book profit, this sense of disconnection can no longer be hidden.
On one hand, the core main business is sluggish, and the real revenue has been struggling in the past few quarters, almost stuck in a quagmire of stagnation. On the other hand, there is a false excitement in the book profit, which suddenly soars in a certain quarter under the stimulation of one - time investment income.
This contrast between the main business in winter and the side business in summer is the real reason why the capital market dare not join the financial report - induced celebration.
The Alienation of the SaaS Model and the Erosion of the C - end User Base
After talking about the illusory profit, let's take a look at Kingsoft's foundation: WPS.
Back then, WPS used the bold strategy of "free + advertising" to break through the iron curtain of Microsoft Office and became the dragon - slaying hero.
But now, with the peak of the mobile Internet dividend, this once dragon - slayer seems to have grown the scales of a dragon.
Workers who have used WPS in recent years probably have a common pain point: it is too eager to make money. Not to mention all kinds of pop - up ads, the most maddening thing is the "matryoshka - style" charging traps.
Do you think that opening an ordinary membership can smoothly convert a PDF? How naive. There is a super membership above the ordinary membership, and now there are also AI memberships and premium memberships.
If you want to use a specific template or some advanced typesetting functions, you will hit a new pay - wall at any time.
Why does Kingsoft adopt such a strategy that is extremely off - putting and even a bit radical in terms of charging?
Actually, I think it's more about the business helplessness behind it. To be honest, although the payment habits of domestic C - end Internet users have been cultivated to some extent, the ceiling is extremely obvious. Everyone is holding on to their wallets, and the pressure of the macro - economy makes every worker think twice before subscribing to software.
Under the anxiety of stagnant or even peaking total user growth, the management can only choose to fish out all the fish in the pond, forcibly increasing the lifetime value (LTV) of individual users.
The revenue of WPS's personal business reached 979 million yuan in the fourth quarter of 2025, with a year - on - year growth of 13.5%. How was this growth squeezed out? Actually, it was "squeezed" from existing users through a more complex membership matrix. The financial report also mentioned that 3% of the growth in personal subscription revenue was driven by the recovery of ARPU (Average Revenue Per User).
However, this approach is seriously eroding Kingsoft's moat. In this era of super - collaborative apps, WPS is facing a dimensionality - reduction strike.
Tech giants like DingTalk, Feishu, and Enterprise WeChat don't rely on a document editing function to make money. In their ecosystems, document collaboration is just a free underlying component, a tool to attract enterprise users.
While you're setting up ten pay - walls for a PDF conversion function, the giants next door are offering a warm welcome, not only for free but also seamlessly integrating chat, video conferencing, and approval processes. In the long run, why should C - end users still tolerate your matryoshka - style charging?
It's okay to treat users like leeks, but the problem is that these leeks not only have no money but also know how to compare prices.
What's the Quality of the "Water Seller" in the AI Era?
Of course, Kingsoft has its own story, which is AI.
Human productivity is undergoing a reshaping from "carbon - based" to "silicon - based". The consumption of computing power, electricity, and even copper ore resources by AI infrastructure indicates that an irreversible silicon - based consumption era is coming.
Under this logic, large models are the engines, and office software is the perfect application scenario. Microsoft's Office 365 Copilot has proven with practical actions that the monetization path of "AI + office" is feasible.
Kingsoft's WPS 365 and WPS AI have quickly caught up. As of the end of 2025, the monthly active users of WPS AI in China have exceeded 80.13 million, nearly tripling in half a year, and the daily call volume has exceeded 200 billion times, surging by 12 times year - on - year.
Meanwhile, the revenue of WPS 365 for the B - end reached 210 million yuan in the fourth quarter of 2025, with a year - on - year growth rate as high as 62.7%.
It looks great, right? However, we need to look beyond the surface.
First, there is the real demand of B - end government and enterprise customers. In the past few years, Kingsoft has reaped a huge "informatization innovation" dividend, and government and enterprise procurement has supported the foundation of its software business. In the fourth quarter of 2025, the software business revenue was still 528 million yuan, with a year - on - year increase of 16.2%.
However, as the informatization innovation dividend enters the second half, the basic replacement demand of government, military, and state - owned enterprises is visibly slowing down.
Kingsoft's current strategy is to try to transform the past business of "selling software licenses once" into a SaaS subscription model of "charging per - head fees annually" through "government AI" and customized knowledge bases.
But domestic B - end bosses are used to the one - time purchase system. When you talk to them about SaaS and cloud collaboration, they first care about whether data security can be privately deployed, and second, whether this can really cut costs by laying off two clerks.
In the current situation where corporate balance sheets are shrinking, the resistance to promoting the B - end subscription system is much greater than expected.
The more fatal core risk lies in the evolution of AI technology itself. What will disrupt WPS is definitely not a better - used Word or Excel, but an AI native agent that can directly complete the final work results through natural language instructions.
What will the future workflow look like? The boss directly shouts at the computer: "Generate a PPT analysis of Kingsoft's first - quarter financial report in 2026 for me. It should be in a dark business style, and also include a 5000 - word in - depth research report."
The AI agent will automatically retrieve data, analyze logic, and format the content in the background. In this process, humans don't need to open any document editor to adjust font sizes or insert charts.
If the traditional workflow of "typing, typesetting, and formatting" is completely deconstructed, the underlying value of Kingsoft as a "shovel seller" and "water seller" will face an unprecedented revaluation.
The scariest thing is not that you can't make a good - used typewriter, but that the era has evolved to voice input, and people don't type anymore.
Crossing the Cycle, Finding the "Value" Sweet Spot
As traders in the capital market, after all the scolding and complaining, we still have to return to valuation and pricing.
I've always advocated the philosophy of value investment - looking for high - quality assets in the extremely cold areas of the cycle bottom, valuation bottom, and sentiment bottom. Has Kingsoft, whose stock price has broken through the support line for so long, fallen into that sweet spot?
After two consecutive years of valuation contraction, the market sentiment has returned from the extremely enthusiastic "AI belief" to the cold reality.
For a research - intensive company with an extremely high proportion of R & D expenses, it's important to get results! We need to see the revenue and profit multiply. But this is a difficult thing. Kingsoft doesn't show this sign for now.
Moreover, in the Hong Kong stock market with a lack of liquidity, without the expectation of high - speed growth, companies without growth are often given a valuation of 10 - 15 times. Even if we consider the valuation premium brought by future growth recovery (such as increasing to 20 times PE), the growth value is unlikely to have an explosive growth in the short term. The current valuation can only be said to be reasonable, but an obvious safety margin is still not in sight.
Now, let's look back at the predictions of major securities firms. GF Securities gave an 8 - times PE for the game business, a 25 - times PE for the office business, and a 2.5 - times PS for the cloud business in 2026, and calculated a reasonable value of HK$33.42. Guotai Junan Securities gave a target price of HK$32.12. Currently, Kingsoft's stock price is around HK$21, and its market value is about HK$30 billion.
Combined with the global liquidity restoration brought by the expected Fed rate cuts and the style rotation in the A - share/H - share markets, Kingsoft currently does have some characteristics of left - side position building. Is it cheap enough? Compared with the price of nearly HK$50 last year, it is definitely cheaper, but it may still be a bit short of being an extremely undervalued price.
In the next few quarters, we don't need to pay attention to those fancy AI press conferences. We only need to closely monitor the reversal catalysts of three core indicators:
First, can the penetration rate of B - end WPS 365 really be converted into continuous cash flow?
Second, can new games like "Goose Goose Duck" and the upcoming "Star Sand Island" take over the declining business of "JX3 Online" and pull the game business out of the quagmire?
Third, when will the R & D expense ratio of up to about 38% reach a downward inflection point, and truly release profits to shareholders instead of being used for crazy internal trial - and - error?
Catching a falling knife when trying to bottom - fish is like thinking you're in a value depression, but in fact, you're just a target to be cut.
Abandoning the Microsoft Obsession, Returning to the Business Essence
Kingsoft can't become Microsoft. This is not only because of the gap in market value but also because it lacks the dominant underlying OS hegemony like Windows. Microsoft can seamlessly embed Copilot into every system - level operation, while Kingsoft is just an application software running on others' systems.
However, this doesn't mean the end for Kingsoft. The sharp decline is a good thing. It mercilessly squeezes out the false valuation bubble inflated by large models in the past two years, forcing the management to face the harsh reality.
What Kingsoft really needs to do is to completely get rid of the path dependence on "investment income" and "financial tricks", and steadily hold on to its ecological niche as a "shovel seller" in the wave of AI computing power reshaping the workflow. It doesn't need to subvert the world. It just hopes that in the silicon - based era, workers still need a useful tool that doesn't pop up annoying ads and can help with some dirty and tiring work.