Kingsoft Cloud Holdings Limited (NASDAQ: KC) (“Kingsoft Cloud” or the “Company”) is the largest independent cloud service provider in China, according to Frost & Sullivan, a third-party industry research firm commissioned by the Company. Kingsoft Cloud has built a comprehensive and reliable cloud platform consisting of extensive cloud infrastructure, cutting-edge cloud products and well-architected industry-specific solutions across public cloud, enterprise cloud and AIoT cloud services, based on which it has achieved a leading position in the cloud market in China. The Company is the third largest internet cloud service provider in China with a market share of 5.4% in terms of revenue from Infrastructure as a Service, or IaaS, and Platform as a Service, or PaaS, public cloud services in 2019, according to Frost & Sullivan.
Cloud offers a wide variety of benefits, primarily including cost reduction, flexibility, scalability and reliability, and technology innovation, to enterprises compared with the traditional on-premise IT models. As a result of these benefits, global IT spending has seen a structural shift from traditional on-premise IT models to a cloud-based model. In 2018, China s became the second largest cloud market globally in terms of revenue, following the United States, according to Frost & Sullivan. The market size of China’s cloud services grew at a CAGR of 37.7% from 2015 to 2019 and is expected to grow at a CAGR of 28.3% from 2019 to 2024, outpacing the CAGR of 21.3% and 20.3% for the respective periods in the United States, according to Frost & Sullivan. Based on the industries and verticals of customers, China’s cloud service market could be divided into (i) services for internet enterprises, or internet cloud market, and (ii) services for traditional enterprises and public service organizations. The market size of China’s internet cloud market was RMB53.8 billion in 2019 and is expected to reach RMB217.5 billion in 2024, while the market size of China’s cloud market for traditional enterprises and public service organizations is even larger, which was RMB108.0 billion in 2019 and is expected to reach RMB345.9 billion in 2024, according to Frost & Sullivan. In addition, based on the fee model of services, China’s cloud service market could be divided into (i) services charged based on utilization and duration, or public cloud market, and (ii) services charged on a project basis. China’s public cloud market is one of the fastest growing markets in the world. According to Frost & Sullivan, the market size of China’s public cloud market was RMB81.4 billion in 2019 and is expected to reach RMB368.1 billion in 2024, while the market size of cloud services charged on a project basis was RMB80.4 billion in 2019 and is expected to reach RMB195.2 billion in 2024.
Moreover, China’s cloud market is at an early stage with tremendous growth potential as reflected by the lower market penetration rate when compared with that in the United States. Being among the existing market leaders who have built significant competitive advantages in a market that has high entry barriers, Kingsoft Cloud is well positioned to capture the large and growing market opportunities brought about by the increased penetration of cloud services into traditional enterprises and public service organizations, application of 5G, AI and IoT, demand for multi-cloud and neutrality, and support by favorable government policies.
Being an independently operated company, focusing on cloud services since our inception, Kingsoft Cloud is able to fully mobilize its resources towards the innovation of its business models and provide high-quality services to businesses and organizations of all kinds. With its full dedication to the cloud business, Kingsoft Cloud is able to avoid potential conflicts of interest with its customers and enhance its neutral position, which in turn gains additional trust from more and more customers.
Leveraging its profound industry insights, the Company saw significant growth prospects in selected verticals, such as game, video and financial services. The Company has strategically expanded it footprint into fast-growing verticals as a first-mover and has established a leading market position through relentless execution. Kingsoft Cloud has inherited the “enterprise service DNA” from Kingsoft Group, the widely trusted leading software franchise in China, and has established superior enterprise service capabilities. Benefiting from Kingsoft Group’s over 30 years of experience in providing enterprise services, the Company values each customer and provides best-in-class customer service that spans the entire life-cycle. Such a customer-centric service philosophy enables the Company to achieve increasing brand recognition and a loyal customer base while improving unit economics. Kingsoft Cloud also adopts a premium-customer strategy, focusing on leading enterprises within selected verticals to establish its market presence efficiently.
Kingsoft Cloud stays at the forefront of cloud technology development and has built prominent research and development capabilities. The Company enjoys a skilled talent pool and will continue to invest in research and development to enhance its technology leadership and upgrade our cloud solutions.
The Company is dedicated to providing safe, reliable, stable and high-quality cloud products and solutions to its customers, covering (i) public cloud services from which it generated the majority of its revenues, (ii) enterprise cloud services which experienced fast growth, and (iii) AIoT cloud services which was launched in 2019. Kingsoft Cloud offers public cloud services primarily to internet enterprises and charges its customers based on utilization and duration. The Company offers enterprise cloud services primarily to traditional enterprises and public service organizations and charges its customers on a project basis.