Bairong-W (06608.HK), once hailed as a pioneer in AI-driven financial technology, has reported a dramatic reversal in its financial performance. The company forecasts its unaudited net profit for 2025 to be between 66.5 million yuan and 79.8 million yuan, representing a significant decline of 70% to 75% compared to the 266 million yuan recorded at the end of 2024.

According to unaudited results, Bairong-W achieved a net profit of 201 million yuan in the first half of 2025. This implies a net loss of approximately 121 million yuan to 135 million yuan in the second half of the year, effectively erasing over 60% of the profits earned earlier in the year. Since its initial public offering in March 2021, the company has maintained profitability except for the year of its listing. However, its profit levels have now declined for two consecutive years in 2024 and 2025.

The disappointing results triggered an immediate negative reaction from investors. On February 27, the day following the announcement, Bairong-W's share price closed at HK$9.6, down 18.78% for the day. By March 4, the share price had further decreased to HK$9.06, a drop of 1.52% from the previous day, bringing the company's total market capitalization to approximately HK$4.24 billion.

Bairong-W attributed the profit slump primarily to two factors in its announcement. The first is a substantial increase in investment directed towards artificial intelligence (AI) initiatives. The second is the negative impact on its BaaS financial industry cloud revenue following the implementation of new regulations governing assisted lending.

The company now faces a dual challenge. On one hand, the "Document No. 9" regulations for assisted lending, effective from October 2025, have imposed stricter standards on industry collaboration models and risk-sharing mechanisms. On the other hand, Bairong-W continues to channel significant resources into its strategic pivot towards AI. With its core business under pressure, the question remains: when will this self-proclaimed AI fintech leader overcome its current financial difficulties?

**Increased AI Spending Drives Profit Decline, with Marketing Costs Outpacing R&D**

Founded in 2014 with legal representative Zhang Shaofeng, Bairong-W is a leading enterprise-level intelligent platform company in China. It serves over 8,000 corporate and institutional clients, including most state-owned banks, 12 joint-stock commercial banks, more than 1,000 regional banks, as well as major consumer finance companies, insurers, wealth management firms, and numerous internet technology companies. As of the end of June 2025, the company reported total assets of 5.61 billion yuan, total liabilities of 859 million yuan, and total equity of 4.751 billion yuan.

Bairong-W listed on the Hong Kong Stock Exchange in March 2021. Its public offering was oversubscribed by 150 times, issuing approximately 124 million shares and raising nearly HK$4 billion in its IPO. At the time, it was the fourth mainland Chinese company to list in Hong Kong with a weighted voting rights structure, following Meituan, Xiaomi, and Kuaishou.

In its listing year, the company reported revenue of 1.623 billion yuan, a 43% year-on-year increase. However, it recorded a loss of 3.604 billion yuan for the year, a 32-fold expansion of its loss primarily due to changes in the fair value of redeemable convertible preferred shares. Subsequently, in 2022 and 2023, Bairong-W demonstrated steady growth, with revenues of 2.054 billion yuan and 2.681 billion yuan, representing increases of 27% and 31% respectively. The company returned to profitability in 2022 with earnings of 229 million yuan, which grew by 46% to 335 million yuan in 2023.

In 2024, Bairong-W's operating revenue reached 2.929 billion yuan, up 9% year-on-year. However, its net profit experienced its first decline since listing, falling 21% to 266 million yuan. The downward trend continued into 2025, with the forecasted net profit indicating a steep 70-75% decrease.

This is particularly notable given that the company's interim results for the first half of 2025 had shown a strong recovery. Revenue for H1 2025 was 1.612 billion yuan, a 22% increase, and net profit was 201 million yuan, up 41%. This confirms that the company incurred losses during the second half of the year.

Bairong-W stated that the profit decline is due to a significant year-on-year increase in its investment in the AI sector during 2025. This investment is aimed at adapting to the rapid development of AI technology and includes focused recruitment of AI talent to strengthen its foundation and enhance core competitiveness, increased data algorithm costs, higher expenses related to IDC data center investments, and associated costs.

The company's board explicitly stated that these strategic deployments are intended to lay the groundwork for long-term sustainable value growth and represent forward-looking, foundational investments.

The 2025 interim report shows that Bairong-W's R&D expenses increased by 33% to 302 million yuan in H1 2025, up from 226 million yuan in H1 2024, primarily due to increased corporate-level AI investment. The proportion of R&D expenses to revenue rose by 2 percentage points to 19%.

However, R&D was not the largest expense item. In the first half of 2025, the company's sales and marketing expenses amounted to 606 million yuan, a 20% increase year-on-year, mainly driven by a 116 million yuan rise in information technology services, promotion, advertising, and other related costs. Bairong-W attributed this to efforts aimed at efficiently acquiring new users to improve conversion rates and enhancing brand and business promotion to boost brand awareness.

In fact, since its listing, both marketing and R&D expenses have grown steadily, but marketing costs have consistently been more than double the R&D spend. From 2021 to 2024, marketing expenses were 576 million yuan, 785 million yuan, 1.073 billion yuan, and 1.119 billion yuan, respectively. R&D expenses for the same period were 252 million yuan, 367 million yuan, 379 million yuan, and 509 million yuan.

Some industry analysts suggest that Bairong-W faces a dual squeeze from its financial structure. On one side, AI investments covering high-end talent recruitment, data algorithm development, and IDC data center construction create rigid cost pressures. On the other side, the absolute value of marketing expenses remains high. As the AI-based marketing business experiences product shortages, the cost of maintaining market position has not decreased proportionally.

Other experts point out that as the fintech industry transitions from being "traffic-driven" to "technology-driven," companies must carefully balance maintaining short-term market position with long-term technological infrastructure investment. The key lies in establishing a flexible budget allocation mechanism that ensures short-term market competitiveness through targeted marketing and optimized user experience, while continuously investing in technological innovation to build a foundation for future growth. Typically, such a transition period requires 2 to 3 years to yield positive returns, though this depends on the specific pace of industry development and technological breakthroughs.

**Financial Industry Cloud Business Contributes 53% of Revenue; New Regulations Cause "Product Shortage"**

The second factor cited for the profit decline is the impact of "Document No. 9" – the "Notice on Strengthening the Management of Commercial Banks' Internet Assisted Lending Business and Enhancing Financial Service Quality and Efficiency" – issued by the National Financial Regulatory Administration in April 2025. Bairong-W stated that this led some of its partner financial institutions to prudently adjust their product strategies and remove certain products from their offerings. Consequently, the company's AI-based marketing specialists faced a short-term product shortage, requiring a reconfiguration of the product supply structure. This ultimately had a significant negative impact on the revenue from its BaaS financial industry cloud business.

The new regulations aim to standardize the internet-assisted lending market and prevent financial risks. They explicitly require commercial banks and their partner institutions to standardize marketing practices, fully disclose key information to borrowers – including the loan entity, annualized interest rate, credit enhancement service provider, credit enhancement fee, annualized comprehensive financing cost, and potential fees after loan default – and stipulate that no fees beyond those disclosed may be charged.

Industry observers note that under the new regulations, fintech platforms face core challenges in restructuring their product systems. These include a significant increase in compliance costs, requiring the establishment of isolated mechanisms for funds, data, and risk management throughout the process; the difficulty of redefining product value, shifting from relying on licensed traffic to delivering quantifiable risk control capabilities and compliance tools; and the need to rebuild customer trust, as previous traffic-driven models resulted in low customer loyalty, necessitating a shift towards technology-value-based partnerships.

The affected BaaS financial industry cloud business is described in Bairong-W's financial reports as a service that helps various financial institutions acquire new users while managing existing ones. Primary clients include banks, consumer finance companies, and internet finance platforms, with fees primarily based on the scale of credit transactions facilitated.

This business segment has seen its contribution to total revenue grow consistently over the past two years, accounting for 44.2% in 2023 and 48.17% in 2024. In the first half of 2025, revenue from the BaaS financial industry cloud reached 857 million yuan, a 45% year-on-year increase, elevating its share of total revenue to 53.17%. The company attributed this growth to strong credit demand, improved operational efficiency, and increased asset transaction volume driven by enhanced generative AI capabilities.

It is noteworthy that Bairong-W's BaaS financial industry cloud business includes operations related to well-known lending brands such as "Rongshu Loan" and "Qian Xiaole," which are personal consumer loan platforms. According to its website, the operating entity for both Rongshu Loan and Qian Xiaole is Shanghai Jiashu Technology Co., Ltd., which is wholly owned by Bairong-W. Both platforms offer maximum loans of 200,000 yuan with revolving credit lines. Their app interfaces show that current partner lending institutions on Rongshu Loan include Du Xiaoman (Youqianhua), JD.com's Jintiao, Niwodai, Kuaiyihua, and Xiaoying Kardai. Partner institutions on Qian Xiaole include Shurong Xiao Dai, Jiejianhua, Ying Xiaohua, Bai Mao Dai, and Jie Xianghua.

However, on the consumer complaint platform Hei Mao Tou Su, the Rongshu Loan merchant page has accumulated 3,336 complaints. Issues raised by users include allegations of "usurious interest rates," "refusal to issue refunds," and "harassing debt collection practices."

Regarding such complaints, experts suggest that assisted lending platforms should adopt a multi-pronged approach. This includes optimizing product design and user interfaces to improve fee transparency, utilizing AI technologies like intelligent customer service systems to enhance user communication and education, and establishing rapid response mechanisms to address user inquiries and complaints promptly. Such measures can help reduce friction and achieve a balance between compliance and user experience.

**MaaS Business Grows 19%; What Are the Odds for the New Strategic Pivot?**

Bairong-W's overall business is divided into two main segments. The first is MaaS (Model-as-a-Service), which provides data query services. The second is BaaS (Business-as-a-Service), which the financial reports describe as facilitating transactions for clients. Within the BaaS segment, besides the financial industry cloud business already discussed, there is a separately listed insurance services cloud business.

In the first half of 2025, revenue from the insurance industry cloud business was 253 million yuan, a decrease of 19% year-on-year. In 2024, this business facilitated premiums totaling 5.442 billion yuan, a 63% annual increase, yet its revenue actually declined by 3% to 586 million yuan.

In contrast, Bairong-W's MaaS business continued to grow. The company highlighted that its self-built MaaS cloud platform boasts 99.99% stability and handles over 300 million daily query requests of various types. The MaaS business charges fees based on query volume or through annual subscriptions.

As of June 2025, revenue from the MaaS business increased by 19% year-on-year to 502 million yuan. The number of core clients reached 167, with the average revenue per core client growing 14.18% compared to the same period in 2024, reaching 2.279 million yuan. The core client retention rate was 98%. The company defines core clients as those who have contributed more than 300,000 yuan in total revenue since the start of the year.

In terms of comparable companies, Bairong-W's business has a composite nature, leading to competition from various players across different segments. In the AI platform space, one of its competitors listed in Hong Kong is Pivot Intelligent (06682.HK).

In terms of performance, for the first half of 2025, Pivot Intelligent reported revenue of 2.626 billion yuan, a year-on-year increase of approximately 40.7%. Revenue from its core business, the "Pivot AI Platform," grew about 71.9% to 2.149 billion yuan, accounting for approximately 81.8% of total revenue. Meanwhile, Pivot Intelligent's adjusted net loss narrowed by 71.2% to 43.7 million yuan.

Comparing Bairong-W to Qifu Technology (03660.HK), which positions itself as an "AI-enabled credit technology platform," reveals a significant performance gap. Qifu Technology has not yet disclosed its full-year 2025 results, but for the first three quarters, it reported total net revenue of 15.112 billion yuan, a 19.16% increase year-on-year, and a net profit of 4.97 billion yuan, up 14.31%.

However, the new assisted lending regulations have also impacted Qifu Technology. At an investment summit organized by Huatai Securities, Qifu Tech indicated that after the implementation of the new rules, the higher-priced segment of its loan volume might be gradually phased out, leading to a decrease in total loan volume. Due to potential fluctuations in loan quality possibly increasing credit costs, and a potential contraction in business scale, the company expects its profitability to face short-term pressure.

Returning to Bairong-W, which anticipates a 70% drop in net profit for 2025, the company is seeking new growth drivers. In December 2025, it officially launched its enterprise-level AI Agent strategy, explicitly proposing an RaaS (Result-as-a-Service) business model. It introduced the "Results Cloud" and a suite of enterprise-level Agent products targeting various business functions.

In an interview, Bairong-W's founder, Zhang Shaofeng, expressed strong belief in the RaaS model. He suggested that the potential scale of RaaS is at least several dozen times larger than that of SaaS, particularly in China. He argued that Chinese companies have a very low willingness to pay for "buying a tool" but a very strong willingness to pay for "getting the job done." Once a company achieves end-to-end delivery, it transitions from being a software cost item to a profit-sharing partner.

Experts note that the RaaS model places higher demands on a company's technical capabilities compared to traditional SaaS or BaaS, as it directly relates to the effectiveness and reliability of business outcomes. This requires robust data analytics capabilities, algorithm development prowess, and real-time decision support systems. Additionally, companies need agile product iteration capabilities and a deep understanding of customer needs to respond quickly to market changes and provide customized solutions. These requirements present new challenges for R&D capacity, team collaboration efficiency, and cross-departmental communication.