As an important gripper for the Internet to empower the physical industry, cloud services have matured and stabilized on the demand side in recent years, and the market is also accelerating its penetration into finer-grained scenarios such as the digital economy and AIGC, thus allowing the overall market to continue to expand.

Recently, the latest research report released by foreign research institute Synergy Research Group shows that in the first quarter of 2024, global enterprise cloud infrastructure service spending reached 76.5 billion US dollars, an increase of 13.5 billion US dollars over the previous year, an increase of 21%. This is also the second consecutive quarter of year-on-year growth in this market.

Meanwhile, in the domestic market, artificial intelligence has become an important driving force for a new round of technological revolution and industrial transformation. The cloud computing service business is being comprehensively restructured to accelerate the development of new quality productivity. Based on open market data, from January to April 2024, the entire industry won a total of 727 bids, totaling 3.21 billion yuan, with a year-on-year growth rate of 54.7%.

Although the cloud service industry is beginning to enter a stage of recovery and growth, it is an asset-heavy industry that requires huge data centers to support computing power, and high investment is unavoidable, thus becoming a key factor in “dragging down” profits for many companies in the industry.

In this context, cloud service providers, such as Jinshan Cloud (KC.US), while ensuring the supply of computing power, are also launching strategies to reduce costs and increase efficiency and adjust business structures to improve the quality of growth and improve performance. This trend is also reflected in Jinshan Cloud. The newly disclosed 2024Q1 financial report shows that during the reporting period, Jinshan Cloud continued to achieve both growth in revenue scale and profitability, and adjusted EBITDA was corrected for the first time. Obviously, Jinshanyun has achieved a recovery and continuous increase in hematopoietic capacity and profitability, and has taken the lead in entering a new stage of development.

High quality growth has been proven by performance

At last year's Q3 quarterly results conference call, Jinshanyun outlined its expectations for revenue to “resume year-on-year growth and month-on-month growth” in 2024, and stated that “EBITDA profit margin balance” will be achieved “in the near future.” Judging from the latest financial report, thanks to the optimization of the CDN business revenue structure, improved quality of industry cloud projects, and effective cost control, Jinshan Cloud's goal has already begun to bear fruit.

In the Q1 quarter of 2024, Jinshan Cloud achieved revenue of 1.78 billion yuan, an increase of 3.1% over the previous quarter. While revenue is growing steadily, Jinshan Cloud is also driving the continuous improvement of its own profitability.

The Zhitong Finance App learned that Jinshanyun's adjusted gross profit for the 2024Q1 quarter reached 300 million yuan, an increase of 53.8% over the previous year; the adjusted gross margin reached 16.8%, an increase of 1.6 percentage points over the previous month, and continued to rise steadily for seven consecutive quarters, reaching another record high.

At the same time, the company's adjusted EBITDA performance for the Q1 quarter was also excellent. While adjusted EBITDA was corrected for the first time, the adjusted EBITDA rate reached 1.9%, a significant increase of 8.9 percentage points over the previous year.

Behind the recovery of Jinshan Cloud's key financial indicators, investors should note that the growth of the cloud service business side is that the company closely follows the domestic cloud service policy orientation and industry development pulse, quickly adjusts the business structure, and actively grasps the project opportunities of the government cloud and state-owned cloud with relatively high profits, and achieves a virtuous cycle on the business side by building benchmark projects, thereby improving the profit level of the overall business.

From a policy perspective, in February of last year, the “Overall Layout Plan for the Construction of a Digital China” issued by the State Council clearly proposed speeding up the construction of state-owned clouds; in April of the same year, the State Assets Administration Commission officially announced “comprehensively promoting the construction of cloud systems and big data systems for state-owned central enterprises”, which indicates that the digital transformation of state-owned enterprises has entered an accelerated stage. In response to this, the industry estimates that under policy guidance, the domestic government cloud market is expected to reach 244.9 billion yuan in 2025.

Just as many enterprises in the industry began to switch to the fields of government cloud and state-owned cloud, Jinshan Cloud, which has a first-mover advantage, has developed its own unique development model in this field, that is, implementing standardization work for core application scenarios in the field of public services, thus opening up a closed loop of processes from the front end of the market to operation and maintenance operations.

According to information, Jinshan Cloud currently uses industry models, data element markets, and office collaboration as important scenarios. Using Beijing, Wuhan, and Zhuhai as bases, it radiates other large and medium-sized cities through benchmark projects, and stands out in domestic government cloud and state-owned cloud project cooperation. This quarter, the company successively reached cooperation with Wuhan Optics Valley Cloud, Shanghai Digital Production Cloud, and Yunnan State-owned Enterprise Cloud to assist local governments and enterprises in digital transformation.

However, the continuous improvement in gross profit for 7 consecutive quarters not only shows that Jinshan Cloud's ability to control costs has improved, but also shows that the scale effect of Jinshan Cloud's business is gradually showing, from the side, the competitiveness of the company's products in the market is steadily increasing.

Strategy focuses on artificial intelligence to build an intelligent cloud service ecosystem

In recent years, “artificial intelligence” has become a frequently appearing term in Jinshanyun's financial reports. The strategic focus on artificial intelligence also seems to have become an important issue in the development of Jinshan Cloud. In fact, the vigorous development of artificial intelligence stems from the urgent needs of the current market.

The Zhitong Finance App learned that with the development of big models of artificial intelligence, etc., all walks of life are using artificial intelligence to process big data in the cloud, which is gradually becoming a reality. In this process, changes in enterprise users' demand for the cloud are mainly reflected in the ability to obtain AI applications on the cloud, tools supported by AI on the cloud, and the implementation of intelligence-driven application innovation on the cloud.

Looking at the horizontal data comparison of the global cloud computing industry, in the first quarter of 2024, AWS accounted for 31% of the global cloud service revenue market share, down from the historical average, while Microsoft narrowed the gap with AWS with a 25% share. According to Synergy Research, Microsoft is expected to become an important global cloud provider like AWS. One important factor is Microsoft's deep layout in artificial intelligence.

Simply put, global industry trends indicate that the next generation of cloud services will be “smart clouds” adapted to the intelligent development of enterprises as needed. As a soil for the implementation and development of AI, intelligent cloud services have therefore become an important strategic direction of Jinshan Cloud today.

Currently, Jinshan Cloud is actively building an “artificial intelligence+cloud computing” service ecosystem through two major ports of technology and application. Seize the edge of the next-generation cloud service market by increasing investment in the field of artificial intelligence.

At the level of technical services, the domestic cloud computing market is currently fiercely competitive. Many cloud computing vendors are continuously iterating on high-performance cloud servers to accelerate “internal volume” at the hardware level, and Jinshan Cloud is no exception.

In order to better assist users to achieve one-stop deployment of “computing power+model” in the cloud, Jinshan Cloud released the 8th generation cloud server. Looking at horizontal comparisons, in addition to having the ability to standardize fast deep learning workloads, it can also provide customers with functions such as visual database management and development, making it easy for customers to use and operate databases, reduce operation and maintenance pressure and costs, and help customers reduce costs and increase efficiency.

In fact, while continuing to upgrade its hardware service system, Jinshan Cloud is also continuously expanding AI cloud service application scenarios to “combine software and hardware” to build an intelligent cloud ecosystem. For example, the company is continuing to deepen the strategic ecological cooperation between Xiaomi and Jinshan, actively grasping the cloud requirements for scenarios such as smart driving and WPS AI in the training and reasoning side, and tightly grasping the business opportunities of enterprises within the Jinshan ecosystem to use the cloud.

In addition, relying on the differentiated “neutral advantage” established by the company under the multi-cloud deployment trend, Jinshan Cloud is also adhering to its neutral position, continuously refining technical capabilities in different scenarios in response to artificial intelligence needs, meeting the diverse needs of customers, and actively expanding big model service capabilities in the vertical field with the positioning of big models as helpers.

For example, in the financial sector, Jinshan Cloud continues to focus on the field of big data, which has unique advantages. This quarter, the company signed a contract with a joint stock bank to meet the customer's requirements for large-scale data storage capabilities for artificial intelligence applications, support the rapid development of its business, and effectively reduce the total cost of ownership.

In addition, Jinshan Cloud also released the KDX industry DaaS platform for business scenarios such as intelligent enterprise transformation, new quality manufacturing, digital finance, and digital health. It has a built-in large model assistant, DataCopilot. It is positioned as an OS-level data infrastructure supported by the big model, and provides supporting production processes.

It is also under the market trend where artificial intelligence technology is being implemented at an accelerated pace, and Jinshan Yun, which has a “neutral advantage”, is unleashing its potential at an accelerated pace. With the further improvement and implementation of technology, Jinshan Cloud will continue to “practice internal skills” around customer needs and stand on the new cusp of cloud computing development as a market supporter.