Kingsoft Cloud's 2Q26 revenue growth may slow, but valuation recovery and re-accelerating growth in 2H still support a Buy rating
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Kingsoft Cloud's 2Q26 revenue growth may slow, but valuation recovery and re-accelerating growth in 2H still support a Buy rating
Goldman Sachs expects Kingsoft Cloud's 2Q26 revenue to rise 27% year over year to Rmb30亿元. AI cloud and capex visibility are key to whether growth can re-accelerate in 2H, while the firm adjusts its 12-month target price to US$17 and maintains a Buy rating.
- The stock has fallen 23% since the 1Q26 earnings release. Goldman Sachs believes the pullback may be excessive, as revenue growth of more than 30% year over year in 2026 should still be the base-case scenario.
- 2Q26 revenue is expected to rise 27% year over year to Rmb30亿元, about 2% below the Visible Alpha consensus; public cloud revenue is expected to rise 37% year over year, and AI cloud revenue is expected to rise 62% year over year.
- If management's Rmb150亿 to 200亿元 capex outlook is delivered, it could support about 35% year-over-year revenue growth in 2026, but rising prices for advanced chips and servers are also increasing long-term capex needs.
- Goldman Sachs largely maintains its 2026E-2028E revenue and adjusted EBITDA forecasts, raises adjusted operating profit forecasts by 85%/6%/4%, but lowers the target price from US$19.5 to US$17.
Report interpretation
Overview
This report is Goldman Sachs' preview of Kingsoft Cloud's 2Q26 results. The report believes that Kingsoft Cloud's near-term revenue growth will slow versus 1Q26 due to a more normalized base and chip constraints, but AI cloud demand, contributions from Xiaomi and Kingsoft ecosystem customers, capex deployment, and improved operating expense efficiency still support the path of revenue and profit improvement from 2026 to 2028.
Core views
The core views include: first, 2Q26 revenue is expected to rise 27% year over year to Rmb30亿元, with public cloud and AI-related revenue remaining the main growth drivers; second, investor focus will center on AI cloud revenue growth, the path to re-accelerating growth in 2H, supply and pricing of advanced chips and servers, gross margin and operating margin trajectory, and profitability improvement of MaaS relative to GPUaaS; third, the current valuation is attractive, with KC trading at about 1.5x 2026E price-to-sales, about two standard deviations below the historical mean since 2025; fourth, Goldman Sachs maintains a Buy rating, but lowers the DCF target price from US$19.5 to US$17 due to higher long-term capex needs.
Analysis framework
The report uses a combination of earnings preview, business-segment revenue forecasting, margin tracking, customer mix analysis, and DCF valuation, focusing on changes in growth, profitability, and capex between 2Q26 and 1Q26, 2025, and 2026E-2028E forecasts.
Methodology notes
Discounted cash flow valuation
Goldman Sachs calculates the 12-month target price using a WACC of 10.3% and a terminal growth rate of 3%. The parameters themselves remain unchanged, but after incorporating higher long-term capex needs, the target price is lowered to US$17.
Growth, financial returns, valuation multiples, and composite percentile
This framework uses Goldman Sachs forecasts to standardize rankings of the company's growth, financial returns, and valuation multiples, and forms a composite indicator for comparison with the market and industry peers.
Potential acquisition probability tiers
Goldman Sachs classifies covered companies into tiers 1 to 3 based on acquisition probability. KC's M&A Rank is 3, indicating a lower probability of M&A and that it is typically not included in the target price.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- KC.USResearch target
- Strengths
- High AI revenue mix, strong visibility on growth from Xiaomi and Kingsoft ecosystem customers, improved operating expense efficiency, and valuation below the historical average.
- Weaknesses
- Near-term revenue growth is slowing versus 1Q26, business growth depends on capex and high-end chip supply, and net debt and capital investment pressure are rising.
- Comparison
- Relative to China's cloud service peers, the report highlights KC as more prominent in AI revenue contribution and visibility of Xiaomi-related revenue growth.
- Risks
- Insufficient supply of high-end chips, intensifying competition, AI investment by key customers below expectations, insufficient financing capacity, and potential dilution.
- Xiaomi Corp.Key customer and ecosystem growth driver
- Strengths
- Xiaomi's new models and AI investment improve Kingsoft Cloud's revenue visibility. The report expects the combined revenue of Xiaomi and Kingsoft to deliver a 2025-2028E CAGR of 43%.
- Weaknesses
- There is dependence on the growth and AI investment pace of a single ecosystem customer.
- Comparison
- Revenue growth from Xiaomi and Kingsoft customers is expected to be significantly higher than the 18% CAGR of revenue from other customers.
- Risks
- If Xiaomi's AI investment or model launch pace falls short of expectations, it will weaken Kingsoft Cloud's AI cloud revenue growth.
Key data
- 2Q26E total revenueRmb30亿元, up 27% year over yearGoldman Sachs forecast, about 2% below the Visible Alpha consensus.
- 2Q26E public cloud revenueUp 37% year over yearSlower than the 47% year-over-year growth in 1Q26, due to a more normalized 1Q25 base.
- 2Q26E AI cloud revenueUp 62% year over yearBelow the 90% year-over-year growth in 1Q26, but Goldman Sachs expects growth to recover to 71% in 2H26E.
- 2Q26E non-GAAP gross margin14.3%The year-over-year decline is expected to narrow, but preferential pricing for major customers may still be a drag.
- 2Q26E adjusted EBITDARmb9.09亿元Roughly in line with consensus expectations.
- 2Q26E adjusted operating profitRmb1300万元Driven by operating expense control, non-GAAP operating profit is expected to turn positive.
- 2026E-2028E adjusted operating profit revision+85%/+6%/+4%The upward revision mainly reflects better operating expense efficiency.
- 12-month target priceUS$17Previous value was US$19.5, lowered due to higher long-term capex needs.
- Implied upside69.5%Corresponding to a current price of about US$10.03.
- 2026E AI-related revenue mixMore than 40%Goldman Sachs expects this to be above 31% in 2025.
- Combined revenue mix of Xiaomi and Kingsoft40% in 2028EAbove 27% in 2025; related revenue is expected to deliver a 2025-2028E CAGR of 43%.
Impact & implications
If Kingsoft Cloud can obtain sufficient advanced chips and servers and expand computing capacity in line with management's capex outlook, AI cloud and Xiaomi ecosystem demand could drive revenue re-acceleration in 2H and improve market confidence in the visibility of 2026 growth. Conversely, if supply chain conditions, financing, or AI investment by key customers come in below expectations, then high capex needs could weaken the valuation and profitability improvement path.
Risks
- Supply chain disruptions and inability to obtain high-end chips.
- Intensifying competitive pressure from peers.
- AI investment by key customers, including Xiaomi, coming in below expectations.
- Inability to obtain sufficient financing to support capex.
- Financing activities may lead to equity dilution.
- Rising prices for advanced chips and servers increase long-term capex needs.
What to watch
- Whether the 2Q26 results release timing, revenue, AI cloud revenue, and public cloud revenue meet Goldman Sachs forecasts.
- Whether 2H26 AI cloud revenue growth rebounds from 62% in 2Q26 to the 71% expected by Goldman Sachs.
- Management's visibility, execution pace, and funding sources for Rmb150亿 to 200亿元 of capex.
- Whether supply of high-end chips and servers improves, and progress in domestic chip breakthroughs.
- Whether non-GAAP gross margin, non-GAAP operating margin, and operating expense control continue to improve.
- Progress of MaaS services and their profitability improvement relative to GPUaaS.
- AI catalysts such as Xiaomi's new model launches and the Xiaomi-Robotics embodied foundation model.