Kingdee Int'l (00268) has entered a new phase where the core question is no longer about migrating software from on-premise to the cloud, but about defining the role of ERP in the AI era. In the first half of 2026, the company's strategy crystallized: traditional SaaS continued its upward trajectory, with subscription revenue growing over 20%, while AI-native products began shaping customer procurement decisions and expanding at a rate far exceeding that of legacy businesses.

Two concurrent trends define the company's performance. First, the subscription business from its decade-long cloud transformation maintained growth and began unlocking operating leverage. Second, the AI-native business is expanding at a much faster pace than traditional SaaS, now making a tangible contribution to revenue. This is the key to understanding the company's 2026 interim results. Rather than seeking a new growth curve, the company is steepening its existing SaaS curve, with AI acting as a powerful new catalyst.

From Cloud to AI Monetization

For the first half of 2026, Kingdee Int'l reported solid results. Total revenue reached RMB 3.625 billion, a 13.6% year-on-year increase, accelerating from 11.2% growth in the same period last year. Cloud service revenue climbed 16.6% to RMB 3.116 billion, accounting for 86% of total revenue. Subscription revenue grew 20.4% to RMB 2.028 billion, representing 55.9% of total revenue. The subscription ARR rose 18.3% to RMB 4.413 billion. Notably, AI-native product revenue soared 189% to RMB 296 million, with AI-native subscription revenue surging 282.9% to RMB 146 million. Total contract value signed for AI-related deals reached RMB 605 million, a 159.2% increase.

The company reported a net profit attributable to shareholders of RMB 54.5 million, reversing a loss of RMB 97.7 million in the prior year. Adjusted net profit attributable to shareholders was RMB 116 million, compared to a loss of RMB 51 million. Operating cash flow turned positive, reaching RMB 142 million. The gross margin improved to 67.7%, up 2.1 percentage points, and per-capita revenue increased by 20.8% year-on-year, with an annual target of RMB 700,000. The company's return to profitability was significantly aided by AI. Management noted that approximately two-thirds of new subscription purchases in the large and mid-market segments chose AI-native products, indicating AI is no longer optional but a core decision factor for new customers.

The company's prior cloud transition is now serving as the infrastructure for AI commercialization. Rather than being a standalone addition, AI utilizes the accumulated business data, management processes, and customer relationships built over the years. Without this foundation, AI would be limited to basic tasks like chat and Q&A. With ERP and SaaS as an entry point, AI can now integrate into core business processes such as finance, procurement, supply chain, and manufacturing, creating a step-change in value density.

Lingee: The AI Implementation Anchor

The core of the company's AI-native product is the "Lingee (Lingee) Enterprise Intelligent Agent Operating System," officially launched on May 20, 2026. Positioned as a unified enterprise AI entry point, Lingee transforms accumulated business data, management knowledge, and organizational memory into reusable enterprise context. Its pricing model includes a "seat fee" (ranging from RMB 58 to RMB 1,168 per year) and "usage points," which cover both large model token consumption and the engineering capabilities built on top of those tokens.

Shortly after its launch, Lingee quickly secured 26 clients and deployed over 40 intelligent agents across finance, supply chain, procurement, and manufacturing. By early August, the client base expanded to over 100. The company plans to onboard 10,000 clients to Lingee in the second half of 2026, with approximately 80% from existing clients and 20% from new ones. This ambitious target is supported by the company's vast customer base, including over 40,000 active Xingkong clients and over one million cumulative enterprise service clients. For these customers, Lingee represents an upgrade to their existing ERP and SaaS systems, not a replacement of their vendor.

Kingdee is also focusing on AI applications in eight key industries: automotive and parts, equipment manufacturing, electronics and high-tech, process manufacturing, life sciences, food and beverage, modern services, and wholesale and retail. New clients include Hytera, Boson Quantum, Shuanghui Group, YOULU ROBOT, Kunlunxin, and Mianbi Intelligent. Concrete efficiency gains have been observed: an expense review agent frees up 20% to 30% of manual review time, a bank reconciliation agent operates 24/7, a procurement payment agent reduces matching time from hours to minutes, and a closing agent improves efficiency by 30%.

Client case studies further validate the impact. Yike Group developed a device management system using Lingee, boosting R&D efficiency by over 65% and cutting delivery cycles from weeks to days. Shuanghui Group reduced dealer sales order delivery time by about 30%. Wens Group shortened its development cycle by 50%. The company's market position in AI has been recognized by multiple independent bodies. It is the only Chinese vendor named in the Gartner "Voice of the Customer for Product-Centric Cloud ERP," achieving the highest customer recommendation willingness globally. It is also the only Chinese company in the Gartner "Magic Quadrant for PLM Software for Discrete Manufacturing." In IDC market rankings, the company leads in multiple segments, including top position in China for AI-enhanced enterprise-level ERP public cloud revenue and market share. Lingee was also included in the Gartner "Innovation Insight: Enterprise Agent Capabilities" report.

The Growth Curve is Steepening

While the traditional SaaS moat was built on products and customer relationships, the AI era may create a new moat derived from "enterprise context." As AI learns business data, management rules, and long-term memory, and becomes deeply embedded in ERP, switching costs naturally increase over time. Company Chairman Xu Shaochun, citing "The Art of War," stated, "Invincibility lies in the hands of oneself, vulnerability in the hands of the opponent. Kingdee does its own thing: it uses agents to close the loop of end-to-end business processes with AI." This logic is being validated by data. The company presented a comparison: achieving RMB 1 billion in product revenue took 15 years in the software licensing era, 6-7 years for cloud SaaS subscriptions, and an estimated 1-2 years for AI-native products. With AI-native revenue already approaching RMB 300 million in the first half and the second half being a peak season, the full-year target of RMB 1 billion appears achievable.

In global expansion, the company has established local service networks in six markets: Malaysia, Thailand, Vietnam, Indonesia, Singapore, and Qatar, enabling direct delivery of financial and tax compliance. It has signed approximately 140 international enterprise clients, including Yongqing Group, Hong Kong Treasury, and CUCKOO International. During the period, the company made investments totaling approximately RMB 775 million in AI companies like Moonshot AI, StepFun, and SiliconFlow. Net cash reserves stand at about RMB 3.5 billion, and the company has repurchased and canceled about 1% of its total shares for approximately HKD 350 million.

Management acknowledges that AI products are still in rapid iteration and customer demand is not yet fully stable. The current gross margin for Lingee, measured on a per-point basis, may not be higher than traditional products due to token costs. However, as model inference costs decrease and platform engineering capabilities improve, the AI product margin is expected to improve. The company maintains its full-year guidance: group revenue with double-digit growth, AI-native product revenue exceeding RMB 1 billion, subscription revenue growth of around 20%, adjusted net profit margin improving from about 3.3% to 7%, and operating net cash flow growth of over 20%. The long-term goal remains to "recreate Kingdee with AI" by 2030, with AI-native and AI+SaaS revenue each contributing 50%.

Currently, the company is operating on a proven subscription model, accelerating its AI-native business, and enhancing its organizational efficiency. The combination of these three factors is pushing the growth and profit ceiling of this mature SaaS company higher. The most significant change in the 2026 interim results is not the return to profitability, the 13.6% revenue growth, or even the 189% growth in AI-native revenue. The truly noteworthy development is that AI-native product revenue has reached a scale of nearly RMB 300 million, becoming a major new growth driver. The decade-long cloud transition has built the customer base, data, subscription model, and enterprise service capabilities that now serve as the foundation for the next wave of AI commercialization. The company spent a decade migrating from traditional software to cloud SaaS. Now, it is reintegrating AI into the enterprise management system in a much shorter timeframe, opening a much larger market for AI-powered enterprise management.