Morgan Stanley has issued a research report downgrading Chinasoft Int'l (00354) from "Equal-weight" to "Underweight." The firm significantly reduced its target price for the stock from HK$6.6 to HK$2.6. The report highlights pressure on Chinasoft Int'l's IT outsourcing revenue, citing profit compression from major clients due to the adoption of AI programming. While management has guided for AI-related revenue to grow over 70% by 2026, non-AI business—primarily IT outsourcing—is still projected to constitute more than 80% of total revenue in 2025. Both revenue and gross profit margin for 2026 are expected to potentially decline. Morgan Stanley has lowered its revenue forecasts for 2026, 2027, and 2028 by 16.7%, 17.3%, and 13.3%, respectively, to reflect potential disruption risks from AI to traditional outsourcing operations. Adjusted EBIT forecasts for the same periods were also cut by 54%, 40.7%, and 14%. Consequently, normalized net profit projections for 2026 through 2028 were reduced by 70.5%, 52%, and 26.3%, respectively.