Why Shares of Kingsoft Cloud Holdings Were Declining Earlier Today

Kingsoft Cloud Holdings

After Kingsoft Cloud Holdings reported its results for the second quarter on Tuesday at 1:17 p.m. Eastern Time (ET), shares the company (NASDAQ:KC) were trading down 18.7% then. The cloud services provider based in Beijing announced that its revenues had declined by 12% year over year, with a decrease in demand being the primary contributor to this trend.

In addition, the corporation recorded an adjusted loss of 67 million dollars despite reporting adjusted revenue of 285 million dollars. Following Tuesday’s dip, the stock’s loss for the year now stands at about 84%.

Then what?

The United States is the largest cloud market overall, but China is the second-largest, and Kingsoft Cloud Holdings (NASDAQ:KC) is China’s leading cloud services provider. In comparison to the same period last year, the company’s revenues from public cloud services dropped by 17%, while the enterprise segment reported a loss of less than 1%.

Management’s decrease in revenue from public cloud services was attributed to a scaling back of the company’s content delivery network. The management reported that the company’s revenue from computing and storage services in the public cloud climbed by 5%, although this growth did not include the content delivery network’s contribution.

Through 2020, Kingsoft Cloud Holdings (NASDAQ:KC) annual revenue was constantly expanding at a pace of more than 50%, but this growth rate substantially slowed down in the second half of 2021. This year, not only has the world’s economy been getting worse, but Kingsoft Cloud Holdings (NASDAQ:KC) has also had to contend with persistent interruptions tied to the epidemic. However, shareholders should not consider the company’s recent performance indicative of normal operating conditions because it is not.

What’s Next for Kingsoft Cloud Holding?

According to the projections made by the company, the revenue for the third quarter should climb by between 2.3% and 12.8% year over year. That would be a significant jump up from the company’s performance in the second quarter.

The digital transition that the economy is undergoing is still seen by management as the most significant opportunity for the company in the medium to long term. In addition, the company claims that within the next three years, the public cloud market in China will expand by a factor of three, reaching a total value of $90 billion.

The transition to using cloud services is well underway in the United States, but it took China a little longer to start the process. Because of this, Kingsoft Cloud Holdings (NASDAQ:KC) management believes that there are many prospects in the Chinese economy’s public service, healthcare, and finance sectors.

Featured Image:  Megapixl © Timonschneider

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About the author: I'm a financial journalist with more than 1.5 years of experience. I have worked for different financial companies and covered stocks listed on ASX, NYSE, NASDAQ, etc. I have a degree in marketing from Bahria University Islamabad Campus (BUIC), Pakistan.