Shares of Kingsoft (03888.HK) plummeted 5.69% in early trading on Thursday following the release of its unaudited first quarter 2025 financial results. The cloud services provider reported figures that fell short of analyst expectations, despite showing growth in its artificial intelligence (AI) business segment.

Kingsoft's Q1 revenue increased by 10.9% year-over-year to 1.97 billion yuan ($271.5 million), missing the analyst consensus estimate of 2.24 billion yuan. The company's bottom line remained in the red, with a reported net loss of 316.1 million yuan for the quarter. The adjusted loss per ADS of 11 cents also exceeded the expected loss of 9 cents, disappointing investors.

While the company highlighted a significant 228% year-over-year increase in AI business gross billing to 525 million yuan, now representing 39% of their public cloud services, other areas showed signs of weakness. The adjusted gross margin declined to 16.6% from 19.2% in the previous quarter, attributed to growing investments in AI and delays in high-margin enterprise cloud projects. Despite these challenges, Kingsoft Cloud CEO Tao Zou expressed confidence in cloud services as critical infrastructure in the AI era, even as global supply chain uncertainties persist.