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The burgeoning demand for artificial intelligence (AI) is reversing the prolonged slump experienced by Chinese cloud providers. In the fourth quarter of 2025, Kingsoft Cloud posted revenue of 2.76 billion yuan, marking a year-on-year surge of 23.7%. Notably, its adjusted operating profit turned positive for two successive quarters. Similarly, Tencent Cloud achieved its first substantial profitability in 2025, after years of operating in the red. Previously, the profitability of China's cloud computing sector was hampered by cutthroat price competition. However, the landscape has shifted dramatically with the explosive growth in AI demand. Although cloud service providers are now grappling with upward pressure on supply chain prices from upstream suppliers, their bargaining power is anticipated to strengthen.
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