Everbright Securities' overseas research team has released a report indicating that CHINASOFT INT'L's (00354) profitability is under short-term pressure in 2025. This is primarily due to one-time costs associated with business restructuring and staff optimization during its strategic transition period, as well as phased investments made to secure key major clients and develop priority business areas. Looking ahead, the company is expected to continue deepening its strategic AI deployment, accelerating the implementation and expansion of AI-related software and hardware services to unlock medium-to-long-term revenue growth potential. Considering persistent pricing pressure from core clients and the company's continued investment in AI R&D, the profit forecasts for 2026 and 2027 have been revised down to 630 million yuan and 720 million yuan respectively (from previous forecasts of 750 million yuan and 870 million yuan). A new net profit forecast of 810 million yuan has been introduced for 2028. The "Add" rating on the company's stock is maintained.
In 2025, the company reported revenue of 17.027 billion yuan, a slight increase of 0.5% year-on-year. Service revenue amounted to 16.686 billion yuan, growing by 2.3%. However, net profit declined by 36.7% to 324 million yuan, and attributable net profit fell 37.3% to 321 million yuan, impacted by one-time severance compensation and goodwill impairment losses. After adjusting for these special items, the adjusted pre-tax profit was 682 million yuan, marking a marginal increase of 0.2%, with the adjusted pre-tax profit margin remaining stable at 4.0%.
The full-stack, full-scenario AI business more than doubled its revenue, becoming a core growth driver. In 2025, the company firmly advanced its "One Body, Two Wings" AI strategy, centering on AI with Physical AI and Digital AI as the two wings, focusing on AI Harmony and AI Intelligent Business OS as key growth engines. Revenue from full-stack, full-scenario AI products and services reached 2.0 billion yuan, surging 109.2% year-on-year.
Regarding the AI Harmony business, a key component of Physical AI, the company leveraged its KaihongOS and Meta platform to participate deeply in the large-scale deployment of Harmony-powered smart cities. It established new paradigms for smart city construction in key locations like Xi'an, Shenzhen, and Beijing. Furthermore, in partnership with Shenkaihong, it launched the nation's first open-source Harmony learning platform for developers (the Kaihong Bot series) and released the country's first robot operating system based on open-source Harmony (M-RobotsOS). Its code contributions to the OpenHarmony community main repository exceeded 6.7 million lines, ranking first among ecosystem partners outside of Huawei.
Concerning the AI-native Enterprise Intelligent Operating System (allmeta), after five years of sustained investment in AI-native ERP, the company successfully launched the allmeta Enterprise Intelligent Business OS. Designed with AI as a core principle, it features a three-layer product architecture comprising a Data Foundation, Cognitive Hub, and Execution Network to build actionable business ontologies that empower enterprises to self-evolve.
The company's foundational business is undergoing transformation and upgrading, with AI enabling cost reduction and efficiency gains. Internally, management efficiency is being enhanced through the full adoption of AI Coding and intelligent development tools, facilitating a shift in workforce structure towards AI talent. Technology-driven efficiency improvements are optimizing costs and boosting per-capita output, transitioning the foundational business from labor-intensive operations to high-margin, AI-enhanced services. In overseas market expansion, the company is steadily advancing its international strategy. In Hong Kong, it provided an integrated smart venue solution for the Kai Tak Sports Park and undertook the Hong Kong Police Force's CDIP project. In Saudi Arabia, through a joint venture, JAT Company, established with 3F Technology, it is contributing to the digital infrastructure development for the NEOM project.
Profitability faced short-term headwinds, but cost control measures showed significant results. The company's gross profit for 2025 was 3.469 billion yuan, down 7.3% year-on-year, with the gross margin declining by 1.7 percentage points to 20.4%. This was mainly attributed to increased one-time costs from business restructuring and staff optimization during the strategic transition, alongside phased investments for securing major clients and key business initiatives. On the expense side, the company continued to strengthen budgetary control and utilized self-developed AI tools, such as recruitment and operational agents, to enhance operational efficiency. The full-year sales and administrative expense ratios were 5.1% and 6.4% respectively, down 0.1 and 0.8 percentage points year-on-year. In R&D, the company maintained strategic focus, increasing investment in AI technology and products. The R&D expense ratio rose by 0.8 percentage points to 6.1% in 2025, laying a solid foundation for enhancing medium-to-long-term competitiveness.
Potential risks include intensified competition in the IT services industry and slower-than-expected development of AI and cloud intelligence businesses.