Long-term growth trajectory remains clear, maintaining "Buy" rating. We maintain our forecasts for the company's net profit attributable to shareholders for 2025-2027 at RMB 1.879 billion, RMB 2.187 billion, and RMB 2.540 billion respectively, corresponding to EPS of RMB 4.06, RMB 4.72, and RMB 5.48 per share. At current stock prices, the corresponding P/E ratios are 74.2x, 63.7x, and 54.9x. Considering the continuous upgrades to the company's WPS AI products, which are expected to unlock growth potential, we maintain our "Buy" rating.

Q2 revenue growth showed significant recovery, while increased AI investment impacted profit growth. (1) In the first half of 2025, the company achieved operating revenue of RMB 2.657 billion, up 10.12% year-over-year; net profit attributable to shareholders of RMB 747 million, up 3.57% year-over-year; and adjusted net profit attributable to shareholders of RMB 727 million, up 5.77% year-over-year. For Q2 alone, operating revenue reached RMB 1.356 billion, up 14.14% year-over-year; net profit attributable to shareholders was RMB 344 million, down 2.83% year-over-year; and adjusted net profit attributable to shareholders was RMB 337 million, up 0.57% year-over-year. (2) From a revenue structure perspective, in the first half, WPS personal business revenue was RMB 1.748 billion, up 8.38% year-over-year, with Q2 growth rate declining compared to Q1; WPS365 business revenue was RMB 309 million, up 62.27% year-over-year, with Q2 growth rate maintaining pace with Q1; WPS software business revenue was RMB 542 million, down 2.08% year-over-year, though Q2 growth rate recovered significantly, which we believe is mainly due to the recovery in information technology innovation growth. (3) In the first half, the company's gross profit margin was 85.03%, up 0.11 percentage points year-over-year; sales expense ratio, administrative expense ratio, and R&D expense ratio were 18.01%, 8.24%, and 36.07% respectively, with year-over-year changes of -0.31, -0.82, and +2.6 percentage points. R&D expenses grew rapidly, mainly due to the company's significant increase in AI R&D investment. As of the end of June 2025, the company had 3,533 R&D personnel, up 18.12% year-over-year. (4) As of the end of June 2025, the company's total contract liabilities + other current liabilities + other non-current liabilities amounted to RMB 3.281 billion, up 2.99% from the beginning of the year. Additionally, the company's net cash flow from operating activities in the first half was RMB 738 million, up 17.51% year-over-year, showing strong performance.

WPS AI monthly active users approach 30 million, launches WPS Lingxi transforming from tool-based applications to collaborative intelligent agents. In the first half of 2025, the company released WPS AI 3.0 and launched native Office intelligent agents. Based on WPS AI 3.0, the company introduced new features including AI document editing, Lingxi voice assistant, WPS AI PPT, and WPS knowledge base. Notably, the company's WPS AI monthly active users reached 29.51 million. With AI benefits continuing to reach users and new AI products being launched and promoted in the first half, we expect AI monthly active users to achieve rapid growth in the second half.

Risk factors: AI product market acceptance may fall short of expectations; macroeconomic conditions may impact downstream customers' payment capabilities.