Kingsoft Cloud has recently received an upgraded rating from UBS, going from Neutral to Buy. The stock's price target has also been increased significantly, reflecting growing confidence in the company's future prospects.
The upgrade comes after a strong third-quarter performance, which has raised investor expectations for revenue recovery and margin improvements. Kingsoft Cloud's shares are currently trading near their 52-week high, with a remarkable return since the beginning of the year.
The positive outlook is supported by the company's market capitalization and a "FAIR" Financial Health score. Analysts attribute the anticipated recovery to advancements in artificial intelligence (AI) and the supportive ecosystem provided by Kingsoft. The increasing demand for cloud services, particularly in AI applications, is expected to significantly enhance revenue contributions from Kingsoft Corp and Xiaomi.
Projections indicate a compound annual growth rate (CAGR) of 13 percent from 2025 to 2027. Investor concerns about Kingsoft Cloud's cash flow have been alleviated by proposed financial backing from Xiaomi. UBS has revised its revenue forecasts for Kingsoft Cloud, suggesting room for further appreciation in the stock price.
Kingsoft Cloud's third-quarter earnings report showed strong performance, with AI cloud services accounting for a significant portion of the company's revenues. The main growth driver for Kingsoft Cloud has been its online games and other services. The company expects accelerated growth in total revenues for the fourth quarter, driven by its cloud businesses.
Jefferies has also maintained a Buy rating on Kingsoft Cloud's shares, expressing optimism about the company's ability to leverage the expanding AI narrative.