China Software Industry Growth Slows to 8.9% in April, AI Agents Become New Focus

Overview

This is a Goldman Sachs monthly data tracking report on China's software industry, focusing on industry operating trends in April 2026. The core finding is that industry revenue growth has retreated from early-year highs, SME business sentiment fluctuates downward, but AI agents (AI agents) and industry AI platform product innovation have become the most prominent structural highlight. The report also tracks sub-sector performance, profitability changes, overseas market expansion, and key company product dynamics.

Core views

Demand side: China's software industry overall revenue grew 8.9% YoY in April, significantly slower than 11.6% in March and 11.5% YoY last year, with cumulative growth of 10.9% for the first four months. The growth slowdown reflects continued pressure on customer software spending, with some budgets squeezed by AI foundation models and customized AI model projects. May SME PMI fell to 48.5 (50.1 in April), indicating SME business sentiment fluctuations and weakening economic momentum indicators highly correlated with the software market and customer budgets. Structural side: Sub-sector differentiation is significant. Semiconductor design software, IT services, cloud computing and big data three sectors performed better than the industry overall in April, with IT services becoming the largest industry contribution source at 67% revenue share (cumulative revenue of 3.1 trillion yuan for first four months). Security software growth slowed to 5% (10% in March), relatively lagging. On profitability, industry net margin improved to 12.0% in April (only 9.0% in March), with cumulative net margin of 11.4% for first four months, showing operational efficiency improvement. AI innovation side: The acceleration of AI agent commercialization and application scenario expansion is the trend most emphasized in the report. Enterprise side, AI agents are used to retain senior employee expertise and improve multi-production base operational efficiency; consumer side, multimodal AI models support content generation, with personal AI assistant (such as file search, daily conversation) penetration rates increasing. On product dynamics, Meitu will host its annual product launch on June 17, focusing on AI agents and generative AI products; Guanglianda recently released PMLead, PMSmart and other AI products, emphasizing platform strategy to better integrate data. Overseas markets: Overseas revenue share increased to 3.1% in April (2.8% in March), non-China market revenue reached $5.1 billion. In service outsourcing sector, contract value in March increased to 377 billion yuan, with execution amount surging 91% YoY to 284 billion yuan, with AI-related projects becoming the main driver.

Analysis framework

Goldman Sachs adopts a 'macro indicators-industry data-company dynamics' three-layer tracking framework: first using SME PMI as a leading indicator of software market sentiment, establishing correlation between economic momentum and customer budgets; secondly using MIIT monthly data as basis to break down industry total growth, structural distribution (IT services/software products/embedded software/security software) and profitability changes; finally focusing on AI product rollout pace, judging technology commercialization progress through tracking company launches, new product releases and application scenario expansion. This framework cross-verifies macro sentiment, industry operation data and micro product innovation to judge software spending recovery path.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Supply-Demand Framework

  The report judges industry recovery pace by tracking dynamic changes on demand side (customer software spending, SME PMI, outsourcing contracts) and supply side (AI product iteration, new application scenarios). Current demand side pressure but active AI supply innovation creates structural differentiation rather than comprehensive recovery characteristics.

• Industry/Sector Analysis FrameworkUpstream-Midstream-Downstream Industry Chain Transmission

  Industry Chain Sub-Sector Tracking

  The report breaks down the software industry into sub-sectors including IT services, software products, embedded system software, security software, separately tracking growth and contribution. This subdivision helps identify structural opportunities - currently IT services (including cloud computing, big data) and semiconductor design software outperform the market, while security software lags relatively.

• Company Fundamentals and Financial FrameworkProfitability Quality Analysis

  Net Margin Dynamic Monitoring

  Assessing industry operational efficiency improvement by tracking monthly net margin changes (12.0% in April vs 9.0% in March). Net margin is a key indicator for judging software companies' shift from revenue growth to quality growth.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• SenseTime

  AI sector BUY rating, benefiting from AI agent commercialization acceleration

  Strengths

  AI foundation model capability, multimodal technology layout

• Meitu

  AI sector BUY rating, will launch AI agents and generative AI new products on June 17

  Strengths

  C-end AI application rollout, user base and scenario expansion

• Hundsun

  Financial technology sector BUY rating

  Strengths

  Leading position in financial IT sector

• TUYA

  IoT software sector BUY rating

  Strengths

  IoT platform capability, global layout

• Glodon

  Construction industry AI platform strategy, launching PMLead, PMSmart and other products

  Strengths

  Industry vertical deepening, data integration platform strategy

Key data

• April software industry revenue YoY growth8.9%Slowing from 11.6% in March, cumulative 10.9% for first 4 months
• April industry revenue scale1.2 trillion yuan ($163 billion)Cumulative 4.7 trillion yuan for first 4 months
• April net margin12.0%Improving from 9.0% in March, cumulative 11.4% for first 4 months
• May SME PMI48.5Declining from 50.1 in April, business sentiment contracting
• IT services revenue share67%First 4 months cumulative, largest contributing sector
• Overseas revenue share3.1%Improving from 2.8% in March, April overseas revenue $5.1 billion
• Security software April growth5%Slowing from 10% in March
• IT services April growth9%April revenue 79 billion yuan, cumulative 3.1 trillion yuan for first 4 months
• March service outsourcing execution amount YoY growth91%Reaching 284 billion yuan, AI project driven

Impact & implications

The report believes that despite short-term industry growth pressure and SME business sentiment fluctuations, the acceleration of AI agent commercialization provides structural growth momentum for the software industry. While AI foundation models and customized AI model projects form some squeeze on traditional software spending, they will expand the overall IT spending pie in the long term. Sub-sectors such as IT services, cloud computing and big data, and semiconductor design software are expected to continue benefiting from digitization and intelligence trends. The strong growth in service outsourcing (especially AI-related projects) also indicates that Chinese software companies' international competitiveness is improving.

Risks

• SME PMI fluctuating downward, customer software spending continues under pressure
• AI foundation models and customized AI model projects squeezing traditional software budgets
• Security software growth clearly slowing (only 5% in April)

What to watch

• AI product rollout pace and commercialization progress
• SME PMI data changes
• Corporate hiring and profitability recovery situation
• Meitu's annual product launch on June 17
• New developments in foundational AI models in text/image/video content generation