Kingsoft Stock

Good day, and thank you for standing by. Welcome to Kingsoft Corporation First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I'd now like to hand the conference over to your first speaker today, Ms. Yinan Li, IR Director of Kingsoft Corporation. Please go ahead.

Thank you, operator. Ladies and gentlemen, good evening, and good morning. I would like to welcome everyone to our 2026 first quarter earnings call. I'm Lean, the IR Director of Kingsoft.

I would like to start by reminding you that some information provided during the earnings call may include forward-looking statements, which may not be relied upon in the future for various reasons. These forward-looking statements are based on our information and information from other sources, which we believe to be reliable. Please refer to the other publicly disclosed documents for detailed discussion on risk factors, which may affect our business and operations.

Additionally, in today's earnings call, the management will deliver prepared remarks in both Chinese and English. A third-party interpreter will provide a consecutive interpretation into English. During the Q&A session, we will address the questions in both English and Chinese with alternating interpretation provided by the third-party interpreter. Onsite translation is always to facilitate communication during the conference call. In case of any discrepancy between the original remarks and the translation, the statements made by the management will prevail.

Having said that, please allow me to introduce our management team who joined us today: Mr. Zou Tao, our Executive Director and CEO; and Ms. Li Yi, our acting CFO.

Now I'm turning the call to Mr. Zou Tao.

Hello, everyone, and thank you all for joining Kingsoft's 2026 First Quarter Earnings Call. In the first quarter, we remain committed to technology empowerment and maintained strategic core focus. Kingsoft Office Group continued to deepen its core strategy of AI collaboration and internationalization and steadily advanced the implementation of AI service capabilities across office scenarios. For the online games business, we focus on premium games and long-term operations. We increased the investment in our stake in core games and actively expanding into new game genres.

In the first quarter, the group recorded revenue of RMB 2.02 billion, representing a year-on-year increase of 3%. Revenue from office software and services business reached RMB 1.61 billion, up 24% year-on-year, maintaining steady growth. Revenue from online games and other business amounted to RMB 804 million, down 22% year-on-year. This was primarily due to the decline in revenue from existing games. Since its launch in January, Goose Goose Duck has focused on growth its user base with monetization in its early stage.

Now I will walk you through the business highlights for the first quarter 2026. During the quarter, the results of the Kingsoft Office Group's R&D investment in AI and collaboration gradually became evident. Together with the improved effect from refined operations, all 3 core business segments achieved growth and the quality of earnings continue to improve. For WPS individual business, revenue reached RMB 975 million, representing a year-on-year increase of 13%.

We continue to upgrade and integrate its AI products will further enhance refined operations in both domestic and overseas markets. The continued enhance of AI features effectively drove simultaneous growth in WPS AI monthly active users, paid conversion rates and average revenue per paying user. This supported stable revenue growth for the business.

For WPS 365 business, revenue reached RMB 244 million, representing a year-on-year increase of 51%. We continue to upgrade our AI and collaboration product capabilities, which further strengthen our growth momentum in the enterprise market. Orders from large-scale customers continue to increase, driving rapid revenue growth. For WPS software business, revenue reached RMB 347 million, representing a year-on-year increase of 32%. Procurement demand for localization continued to grow and the government AI products have been rolled out in orderly manner across government departments. This provides stronger support for customers' digital and intelligent transformation and rapid revenue growth.

For online game segment, our flagship game, JX3 Online continued to operate steadily with its active user base remaining stable. In terms of content, we not only launched innovative in-game event during the Spring Festival and the Lantern Festival, but also released a new expansion park shadow of Solvent Machine in April, continuously enriching our content offerings in terms of product, the flagship version completed refigure the quality of optimization, advanced game player integration and undergate platform technology upgrades.

Going forward, we will increase R&D investment, continue to enhance game quality and further consolidate our core user ecosystem. Our classical GX series IP of PC Games reminded DC committed to long-term operations, continuously innovating content to strengthen the product heritage and [indiscernible] and the community ecosystem to bolster their loyalty.

Goose Goose Duck performance well in the domestic market, gaining their recognization from localized content innovation and social games. Its user base continued to expand. In April, it ended the top of the App Store top growth chart with gross receipts gradually increasing, broadening our strategic presence in the parting and social deduction segments. Moving forward, we will focus on continued product refinement and long-term community operations, enhancing user engagement through high-quality interaction.

Looking ahead, Kingsoft Office Group will continue to deepen its AI capabilities. We will focus on advancing the implementation of AI agent products, empowering intelligent office scenarios through WPS 365 and accelerating our international expansion. The online games business will continue to strengthen R&D investment in core games and leverage AI to enhance content creation, providing players with high-quality gaming experience.

Next, I would like to invite Mr. Li Yi to introduce the financial performance for the first quarter of 2026. Thank you.

Thank you,. Good evening, and good morning, everyone. I will now discuss the first quarter financial results using RMB as currency. Revenue increased 3% year-over-year and decreased 8% quarter-over-quarter to RMB 2,470 million. The revenue split was 67% for office software and services and 33% for online games and others. Revenue from the office software and services business increased 24% year-over-year and decreased 8% quarter-over-quarter to RMB 1,630 million.

The year-over-year increase was primarily attributable to the growth across 3 principal business of Kingsoft Office Group. The steady growth in WPS individuals business was primarily driven by the ongoing enhancement of AI capabilities, which drove growth in WPS AI monthly active users and commercial rate. The strong growth in WPS 365 business was mainly driven by continuous integration of AI and collaboration capabilities as well as the broader and deeper customer penetration in private enterprise and local state-owned enterprises. The growth in WPS software business was primarily supported by increasing demand from localization.

The quarter-over-quarter decrease mainly reflected the seasonal decrease from WPS software business, partially offset by continued growth in WPS 365 business. Revenue from the online games and others business decreased 22% year-over-year and 7% quarter-over-quarter to RMB 803 million. The decreases were mainly due to decline in revenue from certain existing games, partially offset by revenue contributions from new games.

Cost of revenue increased 16% year-over-year and 3% quarter-over-quarter to RMB 487 million. The year-over-year increase was primarily due to higher revenue sharing cost of new games as well as great server and bandwidth costs driven by the growing user base of the office software and services business. Gross profit increased 1% year-over-year and decreased 10% quarter-over-quarter to RMB 13 million. Gross profit margin decreased by 2 percentage points year-over-year and quarter-over-quarter to 80%.

Research and development costs increased 40% year-over-year and decreased 1% quarter-over-quarter to RMB 942 million. The year-over-year increase was primarily driven by increased headcount and AI-related expenditures, reflecting the group's strategic focus of advancing AI capabilities. Selling and distribution expenses increased 60% year-over-year and decreased 5% quarter-over-quarter to RMB 395 million. The year-over-year increase primarily reflected higher personnel-related expenses and increased marketing expenditures for Kingsoft Office Group. The quarter-over-quarter decrease was mainly due to high base effect from promotional activities for Kingsoft Office Group in the prior quarter.

Administrative expenses increased 8% year-over-year and decreased 7% quarter-over-quarter to RMB 188 million. The year-over-year increase was mainly due to higher personnel-related expenses and increased depreciation arising from the completion and operation of Wuhan campus. The quarter-over-quarter decrease primarily reflected a reduction in professional service fees. Share-based compensation costs increased 65% year-over-year and decreased 3% quarter-over-quarter to RMB 89 million. The year-over-year increase was mainly due to the grant of awarded shares to the employees of certain subsidiaries of the company in the past year.

Operating profit before share-based compensation costs decreased 26% year-over-year and 20% quarter-over-quarter to RMB 484 million. Net other gains were RMB 82 million for this quarter compared with losses of RMB 22 million and gains of RMB 819 million for the first and the fourth quarter of 2025, respectively. The gains in the fourth quarter of 2025 were mainly due to that we recognized the gain on disposal of Kingsoft Cloud as a result of the dilution impact of issuing new shares.

Share of profit of joint ventures were RMB 1,857 million for this quarter compared with losses of RMB 12 million for the first quarter of 2025 and profit of RMB 163 million for the fourth quarter of 2025, respectively. The profit in this quarter were primarily due to the net unrealized gains on equity investments. Share of losses of associates were RMB 111 million for this quarter compared with losses of RMB 153 million and RMB 132 million for the first and fourth quarter of 2025, respectively.

Income tax expenses were RMB 230 million for this quarter compared with expenses of RMB 48 million and RMB million for the first and fourth quarter of 2025, respectively. As a result of this discussed above, profit attributable to owners of the parent was RMB 1,091 million for this quarter compared with profit of RMB 284 million and RMB 975 million for this quarter -- for the first and the fourth quarter of 2025.

Profit attributable to owners of the parent, excluding share-based compensation costs was RMB 1,139 million for this quarter compared with profit of RMB 316 million and RMB 1,026 million for the first and fourth quarter of 2025. The net profit margin, excluding share-based compensation cost, was 47%, 40% and 39% for this quarter, the first and fourth quarter of 2025. The group had a strong cash position towards the end of the reporting period. As at 31st March 2026, the group had cash resources of RMB 27 million.

Net cash generated from operating activities was RMB 89 million for this quarter, and net cash used in operating activities was RMB 102 million for the first quarter of 2025. And net cash generated from operating activities was RMB 1,133 million for the fourth quarter of 2025. Capital expenditure was RMB 81 million, RMB 121 million and RMB 67 million for this quarter, the first and the fourth quarter of 2025, respectively.

That's all for the introduction of our operational and financial results. Thank you all. Operator, now we are ready for the Q&A session. Thank you.

[Operator Instructions] And our first question comes from the line of Liping Zhao of CICC.

I got 2 questions about the gaming business. So the company has undergone some strategic adjustment in your gaming segment. What is the revenue and profit margin outlook for this division? And what do you -- when do you anticipate the gaming revenue returning to growth trajectory? And second, could you walk us through the upcoming game release pipeline?

So I would like to answer the 2 questions. So regarding the first question, that is true that in the Q1 of this year compared with last Q1, it is true that we have like the products for like the JX3 and also for the Snow break, we have a limited drop and this trend is going to continue to the next section. And we're actually doing the internal adjustment. So our general strategy is that for the JX3, we're going to do a further investment and also to reach the more content for this game, and we could be able to further improve the customer experience.

And I can see that the feedback from the customers that is going to be more and more positive, and they can feel our change and also give a pretty high reputation and comments for our games. That is why we believe that for the key point is that we're going to focus on the Q3 and Q4. And also in the future for the Q2, although the customer is going to have a better positive feedback to ours and this e-commerce is going to recover back.

But from the income perspective, we believe that it's going to until Q3 and Q4, we could have a significant increase. And second point is that for the products like brands and categories is that in the Q3 and Q4, we're going to have some new type of products launched. In that, we probably going to reach our expectations financially. But we believe that it's going to until next year or the earliest is going to be Q4 this year.

So the general situation of this year is going to be like we would like to answer -- my third [ quarter ] is that for this first and second [ section ], the Q1, Q2 for the game perspective, we already have some -- got some license. Like for example, we're going to have -- for example, we're going to have like cat and soap and also for like Bird and also like we have like the face of the [indiscernible] for the fourth and the type of products we're going to launch very quickly. And for the others, we didn't get the license, we're not going to talk too much about it. So this is going to be the core products for this year, and that's it.

We will now proceed to the next question from the line of Daley Li of Bank of America Securities.

I have 2 questions here. One is regarding our game business. Management mentioned we're going to have adjustments in last earnings call. And could you update us how is the progress and what results we are looking for? And what will be our strategy for the core game business we have? And in second half of this year, what type of new game we are trying to launch? And my second question is about the office business. And what will be the key growth driver for this year? And for example, like WPS 365 or the video overseas business? And how should we -- what will be our strategy to accelerate the business growth?

So actually, we can answer this question is that we cannot see the whole adjustment. We can say that this actually belongs to the whole section. And we actually did some adjustments. One part is for the Cone section, the other part is others. So we're going to separate into 3 parts. The first is that for the operation perspective, we would like to put more energy and more focusing on the projects which has a future good development potential. For some of the projects which doesn't have a strategic way to have a proper development, we're going to do some adjustment, no matter for the old project or new project. And the second is that we have a solid foundation.

So especially for the JX series, especially for the JX3, this is the most important. So in the past 3 months, we actually have strengthened their investment for the JX3 series. So our customers can significantly fear it. And third is about the new layout. And typically for the game is that for this year, we have launched, but we plan to launch. But right now, at this moment, it's not that convenient to release that information because we didn't receive the yet and the product didn't get into the test section, and we are still doing the internal development. So it's not that convenient for us to release the name.

And second part is about the AI creation, the new creation desire. So actually, in the past 1 month, we have already finished the Phase 1. So based on the AI competition, we actually have a lot of new products come out. We have more than 1,000 colleges actively getting involved, which has submitted more than 300 products. And we have selected all of them. which is like 70 to 80 of the products were accident. So we can expect that this like new category has achieved like results. And so we need to think about it.

The first is that how we could successfully commercialize the excellent works and also we could make this activity into a regular development. And second is that how we can make a pretty successful commercialization for these excellent products. And third is that how we can do a proper adjustment. We could do some further investment for the foundation and also into this AI new way of the creation, how we could be able to create a better content and also provide a better service, better experience for our customers. In that case, we could be able to finish the first stage trial.

So actually regarding this positive fact for the second question for the Kingsoft Office, the general development strategy is that we can call it as 1 horizontal and 3 vertical directions. So the 3 vertical direction, we can call it AI. And since 2023, the Kingsoft Office has about the development of AI from the 1.0 to 2.0. This is actually the name, the master line. And based on like together with the big module, have the new way and then office like collaboration system construction. At the beginning, we have this com and we also have a series of different AI products comes out. And we can see that the whole horental line, the AI actually go through all them.

So from the vertical line, we can see that the personal WPS 365 and also we have like CF Creative. And currently, you see that 365 still keep a 65% -- more than 65% increase. we can see is that more and more companies could accept the WPS 365. And this is actually the core driver to drive the increase. And secondly is about like the self creation. We can see that have kept up for more than 30% increase. So my personal judgment is that in the future, and while we have like new star and also old star to have the transformation in the future, the development space is going to have more and more opportunity. And together with like this year has widely coverage and more and more people is going to recognize it and would like to use it. So the AI is actually for the working efficiency is going to have a tremendously increase. That is why we believe that this is going to have a bigger space for increase in the future.

From the person for the individual perspective, we believe that for the PC users, we can see that for the PC users' perspective, the increase based on the 300 million basic users we have, we still keep a 10% increase. That is why more and more customers have recognized that AI can help them to increase their working efficiency a lot and also the number of the users and also the payer rate is going to be increased quite a lot. That is why we can see that we still have a very big space for the increasement for the office business. And this is actually a very good stage.

Since 2023, we have a strategic opportunity that AI is going to strengthen the office and from AI to native, it's going to have a step-byferent improvement and also the technology also have a very big improvement. So generally speaking, from the office, either for the BN or CN and also for the overseas, we can also separate into different sections. It's actually the same. You have a very big demand. So we can see that we have a very big space, and we believe that our customer is going to be it together with us, and this is going to be a core like driving power for us to develop in the future.

We will now take our next question from the line of Linlin Yang of Guangfa Securities.

My first question is Goose Goose Duck with the game peaked at #5 on the bestseller chart in April, yet its ranking has fluctuated recently. What's your outlook on its future revenue performance and operational plan?

The second question is about WPS. As agent solutions are deployed on a large scale, the new pay-as-you-go model has impacted the traditional pricing system. So will WPS adjust its pricing model going forward? How will it affect revenue?

So from the game perspective for actually the good back. And basically, currently, we can see that from the income perspective, this is quite stable. And so we can see that in the April and May is quite stable and most probably is that for the product general plan and strategy, we actually separate into 2 parts. The first is that we need to maintain the rich content of this game to provide a better customer service. This is first thing. And second is that we make this judgment of this market is that we still have a lot of customers we didn't get in touch with.

So we would like to continue to make a bigger volume for their customers and increase the volume for the users. This is going to be the priority, and then we could be able to like increase the value. And third is that we plan like based on the different seasons, like each season, we're going to have a tremendous version like launch out. And we're going to constantly reach the playway and content of the game. In that case, we could be able to like have a higher volume of the users. And we hope that and when we could have certain stable and pretty high volume of users, then we could be able to get more income. This is going to be like our target. And in the second stage is that once we're going to have proper stable users and then we can step by step get into the commercialization to increase their income.

So currently, generally speaking, is that after launch of the game, and we can see the performances of this game. And basically, for the 2 core targets, we are quite confident for it. The first is that the users' quantity will be higher and then we could be able to trade the commercialization. So recently that we are actually made the plan for the July version. So currently, for the specific action, it's not convenient for us to release it because we can only say that we are actively prepare the version in July.

So actually -- so regarding the second question that I would like to see from another perspective, the con is that from this mode from the traditional mode is that whether we could be able to affect it. So here is going to get back to just I mentioned for the horizontal and 3 vertical. So I would like to see is that when we are facing to the AI new technology, what exactly the change we have? So this is actually for the new things probably people don't know that much about it. So I would like to firstly describe about the 2B end.

So like for the cohort. So initially for the like Kingsoft collaboration plus co-MI'ing to completely realize the enterprise level of the off mixture. It is not like traditional way. This is actually the product optimization. And all we can see is that privacy you compared with the private part, you already have this AI product matrix. So it means that WPS collaboration plus the AI com. This is actually completely like enterprise level of AIOS. So this is actually we just launched. And internally, they also use it. So this is actually like tightly follow up with the AI technologies improvement. We actually follow up with this and to constantly improve our sales.

This is not like a fixed mode. We are actually -- together with the technology improvement, we are doing the improvement as well. So this is actually helping our customers from the traditional office to the AI office. So this is actually to be. And so we can see that from the Link 1.0 to 2.0 in July, we're going to release some different version. And also from the CN, we also provide a different update the agency to our customers to use it and compared with the previously the content creation sharing and until right now, we have the AI area to have some creation sharing mode. We can see that mostly we can think about is that whether our service could be good enough. So actually, we are constantly reach our content compared with the previous increasement like speed.

We can -- we believe that our customer could be excessive because we can see that this is not just a pricing system strategy and question. This is actually the product service ability where we could be able to follow up with that. So either for the 2B and or 2C, we can not only could follow up with several years, but we can see that in the AI application, the creative mentioned that how we could be able to have a better use for the AI technology in the office area, either for the internally or externally. We can see that we are very suitable for this area.

We have now reached the end of the question-and-answer session. I'd now like to turn the conference back to Ms. Yinan Li for closing comments.

Thank you for joining us today, and this will conclude our presentation for the 2026 fourth quarter earnings call. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.

Thank you for standing by. Welcome to Kingsoft Corporation Fourth Quarter 2025 and Annual Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Ms. Yinan Li, IR Director of Kingsoft. Please go ahead.

Thank you, operator. Ladies and gentlemen, good evening, and good morning. I would like to welcome everyone to our 2025 fourth quarter and annual results earnings call. I'm Li Yinan, the IR Director of Kingsoft. I would like to start by reminding you that some information provided during the earnings call may include forward-looking statements, which may not be relied upon in the future for various reasons. These forward-looking statements are based on our information and information from other sources, which we believe to be reliable. Please refer to the other publicly disclosed documents for detailed discussion on risk factors, which may affect our business and operations.

Additionally, in today's earnings call, the management will deliver prepared remarks in both Chinese and English. A third-party interpreter will provide a consecutive interpretation into English. During the Q&A section, we will accept questions in both English and Chinese with automated interpretation provided by the third-party interpreter. On-site translation is solely to facilitate communication during the conference call. In case of any discrepancies between the original remarks and the translation, the statements made by the management will prevail.

Having said that, please allow me to introduce our management team who joined us today: Mr. Zou Tao, our Executive Director and CEO; and Ms. Li Yi, our acting CFO.

Now I'm turning the call to Mr. Zou Tao.

[Interpreted] Hello, everyone, and thank you all for joining Kingsoft's 2025 First Quarter and Annual Results Earnings Call. In 2025, we remained committed to technology empowerment and focused on enhancing our core capabilities. Kingsoft Office Group continued to prioritize its core strategy of AI collaboration and internationalization, deepen its presence in the AI office market and development of future-oriented intelligent office products tailored to the all scenario office needs of both individual and enterprise users. In the online game business, we further deepened our expertise in classic wuxia IP and actively expanded into diversified game categories and global markets.

In 2025, the group's total revenue reached RMB 9.68 billion, representing a year-on-year decrease of 6%. Among this, revenue from the office software and services business recorded revenue of RMB 5.93 billion, up 16% year on year and maintaining steady growth. Revenue from the online games and others business amounted to RMB 3.75 billion, up (sic) [down] 28% year on year, primarily due to the high base in the same period last year and the decline in revenue from existing games. After release in early 2026, Goose Goose Duck has received positive market reception and has surpassed 30 million cumulative new users. This demonstrated our potential in expanding into new game genres and injected fresh growth momentum into the online games business.

Now I will walk you through the business highlights of the full year and fourth quarter 2025. In 2025, Kingsoft Office Group continued to advance its core strategy of AI collaboration and internationalization. Total annual revenue reached RMB 5.93 billion, up 16% year-on-year. Fourth quarter revenue reached RMB 1.75 billion, also up 17% year-on-year. The company is pursuing a dual-track approach encompassing office AI reconstruction and upgrade and AI office native exploration. On one hand, it is driving a comprehensive intelligent upgrade across its existing WPS component suite to reshape the full scenario office experience.

On the other hand, it is exploring an agent-native office paradigm, with its office AI agent WPS Lingxi evolving into an all-around AI office companion marking an entry into the era of office AI agents. WPS 365 has undergone a comprehensive AI-driven upgrade, establishing a multidimensional framework that spans technology infrastructure, collaboration systems, intelligent search, and digital employee ecosystems comprehensively empowering enterprises in their digital and intelligent transformation while enhancing office collaboration and operational efficiency. The Company's international expansion is progressing steadily with completed product upgrades and overall model development, now offering global integration office capabilities.

For WPS individual business, the user base continued to expand steadily, with both domestic and international operations achieving quality growth. Total annual revenue reached RMB 3.63 billion, up 10% year-on-year. The growth trend continued in the fourth quarter with revenue reaching RMB 918 million, the year-on-year growth rate accelerating to 14%. The cumulative number of annual paid individual users in domestic reached [indiscernible] million, up 11% year-on-year. By the end of 2025, WPS AI's monthly active users surpassed 18 million, representing a year-on-year increase of 307%. Overseas market, the cumulative number of paying users grew substantially with particularly stronger growth among large-scale users. The monthly active devices for the overseas PC version reached 42.5 million, up 54% year-on-year.

WPS 365 business, we maintain high quality and rapid growth. Total ad revenue reached RMB 720 million, up 65% year-over-year. Fourth quarter revenue was RMB 210 million, also up [indiscernible] the fourth consecutive quarter of year-on-year growth about 16%. We continue to advance products and service upgrade guided by the core principle of integration, intelligence [Audio Gap] industries specifically additions. The company further consolidated its advantage among central and state-owned enterprises, while accelerating expansion into private enterprises, foreign-invested enterprises, and local state-owned enterprises, while also advancing channel ecosystem development to further enhance its market presence.

In 2025, WPS 365 continued to improve the implementation of AI technology in office scenarios. Our official digital employer has already achieved a large-scale standardized delivery. In early 2026, WPS 365 officially integrated enhancing our core capabilities, injecting growth momentum to improving the quality and [indiscernible] enterprise collaboration and office work. This intelligence further enrich our AI office ecosystem.

For WPS software business, total annual revenue reached RMB 1.46 billion, up 15% year-on-year. Fourth quarter revenue reached RMB 530 million, up 15% year-over-year. We actively participated in bids for domestic office software by central and local government. We continue to maintain a leading share in both flow-layout and fixed-layout document software market. We continue to advance the implementation of government digitalization projects support the development of digital platforms in multiple regions and effectively empower the intelligent upgrading of government office operations.

In the fourth quarter, our flagship PC game JX3 Online enhanced its costume design through technological upgrade and its aesthetic style was widely praised by players. The version optimization and service upgrades completed at the end of 2025 have received positive market feedback, and we will further increase investment in game play and narrative experience. Our classic JX series PC games and its inherited mobile games like World of Sword: Origin continued to iterate on content and versions, maintaining stable operations in both domestic and overseas markets.

Social deduction game Goose Goose Duck officially launched in January 2026. It recorded over 5 million new users on launch day, surpassed 30 million cumulative new users, and ranked #1 on the iOS free chart for most of the past two months. Driven by word-of-mouth and organic traffic, it penetrated the broader social circle. Two casual games from the Angry Birds series also received publishing licenses and are expected to launch in China in 2026, further enriching our casual games portfolio.

Starsand Island, our cozy pastoral life simulation game began early access in February 2026. With its unique art style and game play, the game established a strong reputation among core players worldwide. Going forward, we will actively optimize the products based on player feedback to lay a solid foundation for the official version launch in the second half of the year.

Looking ahead, Kingsoft Office Group will deepen the application of AI agent technology across full-scenario office environments, strengthen the core competitiveness of WPS 365 as an intelligent collaboration platform, and accelerate the execution of its internationalization strategy. For online games business, we will continue to focus on premium content development and global publishing, sustain the vitality of classical IPs, and foster the growth of new game genres to achieve sustainable growth. We will deepen technological innovation and commercial expansion, actively expand global market opportunities, and create long-term value for our shareholders.

Next, I would like to invite Ms. Li Yi to introduce the financial performance for the fourth quarter and annual.

Thank you, Zou and Yinan. Good evening, and good morning, everyone. As for the financial results, I'm starting for the Q4 use RMB as a currency. Revenue decreased 6% year-on-year and increased 8% quarter-on-quarter to RMB 2,618 million. The revenue split was 67% for office software and services and 33% for online games and others. Revenue from the office software and services business increased 30% year-on-year and 50% quarter-on-quarter to RMB 1,750 million. The increases were primarily attributable to the growth across 3 principal business of Kingsoft Office Group. The steady increase of WPS individual business was primarily driven by the expanding number of paying subscribers attributable to continuous interaction of AI capabilities and improvement in intelligent office experience. The strong growth in WPS 365 business was mainly driven by the deep integration of document AI and collaboration capabilities, along with continued customer expansion among private and local state-owned enterprises.

The growth in WPS software business was mainly supported by sustained demand from government and enterprise clients, further consolidating our leading position in the flow-layout and fixed-layout document market. Revenue from the online games and others business decreased 33% year-on-year and 3% quarter-on-quarter to RMB 868 million. The decreases were mainly due to decline in revenue from certain existing games. Cost of revenue increased 5% year-on-year and decreased 1% quarter-on-quarter to RMB 471 million. Gross profit decreased 8% year-on-year and increased 10% quarter-on-quarter to RMB 2,148 million. Gross profit margin decreased by 2 percentage points year-on-year and increased by 2 percentage points quarter-on-quarter to 82%.

Research and development costs increased 30% year-on-year and 6% quarter-on-quarter to RMB 953 million. The increases were primarily driven by increased headcount and AI-related expenditure, reflecting our strategic focus on advancing AI and collaboration capabilities. Selling and distribution expenses increased 36% year-on-year and decreased 18% quarter-on-quarter to RMB 462 million. The year-on-year increase was mainly due to high marketing expenditures in both office software and services and online games business. The quarter-on-quarter decrease was mainly due to high base from promotions for new game launches in the prior quarter, partially offset by increased spending on marketing activities for Kingsoft Office Group.

Administrative expenses increased 33% year-on-year and 40% quarter-on-quarter to RMB 202 million. The increases were mainly due to higher personnel-related expenses and increased depreciation arising from the completion and operation of our Wuhan campus. Share-based compensation costs increased 55% year-on-year and 15% quarter-on-quarter to RMB 92 million. The increase was mainly due to the grants of awarded shares to the selected employees of certain subsidiaries of the company.

Operating profit before share-based compensation costs decreased 48% year-on-year and increased 70% quarter-on-quarter to RMB 606 million. Net other gains for the fourth quarter of 2025 were RMB 819 million compared with losses of RMB 74 million for the fourth quarter of 2024 and gains of RMB 13 million for the third quarter of 2025, respectively. The gains in this quarter were mainly due to that we recognized a gain on deemed disposal of Kingsoft Cloud as a result of the dilution impact of the issue of new shares of it. Share of losses of associates were RMB 132 million for the fourth quarter of 2025 compared with losses of RMB 148 million and profit of RMB 5 million for the fourth quarter of 2024 and the third quarter of 2025, respectively.

Income tax expense was RMB 220 million for the fourth quarter of 2025 compared with expenses of RMB 212 million and RMB 66 million for the fourth quarter of 2024 and the third quarter of 2025. As a result of the reasons discussed above, profit attributable to owners of the parent was RMB 975 million for the fourth quarter of 2025 compared with profit of RMB 460 million and RMB 213 million for the fourth quarter of 2024 and the third quarter of 2025. Profit attributable to owners of the parent, excluding share-based compensation costs was RMB 1,026 million for the fourth quarter of 2025 compared with the profit of RMB 496 million and RMB 277 million for the fourth quarter of 2024 and the third quarter of 2025. The net profit margin, excluding share-based compensation costs, was 39%, 18% and 11% for this quarter, the fourth quarter of 2024 and the third quarter of 2025, respectively.

And now on the year 2025. Revenue decreased 6% year-on-year to RMB 9,683 million. Office software and services made up 61% increased 60% year-on-year to RMB 5,929 million. Online games and others made up 39% and decreased 28% year-on-year to RMB 3,754 million. Gross profit margin decreased by 2 percentage points year-on-year to 81%. Operating profit before share-based compensation costs decreased 47% year-on-year to RMB 2,072 million. Profit to owners of the parent was RMB 2,004 million for the year of 2025 compared with a profit of RMB 1,552 million for the last year. The group had a strong cash position towards the end of 2025. As at 31st December 2025, the group had cash resources of RMB 27 billion. Net cash generated from operating activities was RMB 2,292 million and RMB 4,787 million for the year ended 31st December 2025 and 31st December 2024, respectively. Capital expenditure was RMB 342 million and RMB 426 million for the year ended 31st December 2025 and 31st December 2024.

That's all for the introduction of our operational and financial results. Thank you all. Now we are ready for the Q&A section. Thank you.

[Operator Instructions]

We will now take our first question from the line of Liping Zhao of CICC.

[Interpreted] I have 2 questions on the gaming business. So first, after Mr. Zou recently took on the role as the CEO of Xishanju, what strategic adjustments have been made regarding to the future development of the gaming business? And are there any opportunities or possibilities for implementing AI to improve efficiency in the game development? And second, we have observed that Goose Goose Duck is performing well in terms of popularity. Could you share some insights on the current user base and retention metrics? I'd also like to understand the time line for future monetization and potential incremental contribution to the overall revenue and profit.

[Interpreted] So first off, I'd like to talk about the Goose Goose Duck. And so actually, since we have launched on the 7th of January, we [Audio Gap] research of over 30 million new users. And up to now, generally speaking, and the total users could be quite stable at the 3 million up and down. So we are actually doing this planning started from the spring festival up till the summer holiday. We're going to prepare a series of different versions and with different stages, and we would like to have a stable and continuous stable game. And this is actually for the mid- and long consideration for this game is that firstly, through this launch, we could actually have some of the remaining data, and we have confidence that for the continuous version, we could [indiscernible] generation. And so we could make the BAU higher.

This is actually the most important priority for us. And it means that we need to make enough users. And once the product has launched, for the income perspective, we didn't do that much work on it because for the industry -- for the game industry, the average performance in the future, we will consider about the payable rate and also the up value. We still have a very big space for it. But for this game, since launch up to now, the total performances is more than like over our expectations. In the future, we still have a very big space for the growth. And in the future, we also would like to launch in the game space. And from the users' perspective, like we would like to make it stable and make it continuously stable. And then step-by-step digging the commercialization possibilities.

This is the first stage is that we need to make sure this version is stable, have a good quality service and also with different version, make sure that the total quantity of the users online is good enough and then furthermore, make it higher. So in the long-term perspective for this IP, we're going to consider how to have like expand different surroundings products and also for the other accessories, we have different ideas for it. So let's put it in the future. But currently, the most important thing is that have a stable operation and make the users like to have a higher user quality.

So actually, for this first question, it is quite complex. I would like to make it simplified is that since I become the CEO on the 1st of December last year, [indiscernible] is already 3 months past. So generally speaking, firstly is for the service of the [ fit of the thought ] and also for the JX3 for the business is actually the basic of our business. So we would like to continue for the investment of the basic space. And in the past few years, we always have a lot of very like [indiscernible]. And although we have collected some infections of the external competition and infection. But generally speaking, the customers are quite -- the customer quality is quite stable. That is why we believe that -- so currently, the customer service, we're going to provide a better service for our customers and higher quality for them, especially for the content. This is actually our guarantee, the basic guarantee.

Second is that we need to make some projects which doesn't have like strategic way. We need to do some adjustment and also maybe shrink that business. It means that we could have enough space, enough ability to make it into the middle and long-term strategy, especially for we're going to have some strategic value. So currently, it's not that convenient for me to release some of the information about it. But probably in May, when we do this seasonal report, it's going to be more convenient for me to have an official introduction for it. And thirdly is about relevant to the second part of the question is that the AI is going to be a completely new area. It's already arrived, especially for our sales. And we can see is that for the industry of their game, actually for the manufacturing and production of the game, in many years, we have a lot of like a revolution.

It's not just to have a high efficiency, but this is actually completely changed the way of the mode production. And since I became the CEO on the 1st of December last year, and we could completely carry out of the AI, the different policies, especially not only for their staff thinking and also the platform of the AI building. In the future, we're going to based on this platform to doesn't have that much like identification for the position, but we're going to like to highlight the innovation through the platforms of AI construction in the future, mostly that the creator is going to create the game on the platform. They're going to have a lot of the creation. They're going to have some meaningful content. And internally, we're going to select some excellent projects and commercialize and promote it into this market.

So simplified is that we think in the whole industry organization, the content creation organization will completely change and also the way of working will be completely changed. So basically, based on the platform's creation on the AI, everybody is going to be a producer and everybody is going to be the creator for the content. And this is actually everybody could do the creation. This is the time. The time has arrived. So I have strong confidence for it. And in the past few years, the AI tools have completely like become more mature. And especially this year, the whole industry for the products, we have no doubt about it, AI has already come. That is why I think that the time is already matured.

And thirdly is for the positions, they have actually a strategic meaning. And the last year for the game, we [indiscernible] has launched, it doesn't have reached our expectation and also the performances of old game is a little bit slow. But this is actually we make analyze internally and make a conclusion. And this is actually a good point for us because we could deduct some of the old things and also we are conducting new. I think that when we move forward on this, we're going to have more space, and this is going to be our opportunity for season. And in the future under this mode, we're going to have a higher product efficiency. And so that is why I think that sometimes the bad news is not actually a bad thing. So like from the challenges and difficulties last year, we actually have some challenges facing, but this is going to let us get to welcome this a new page for Seasun.

We will now take our next question from the line of Linlin Yang of Guangfa Securities.

[Interpreted] I have 3 questions. The first is what is the progress of our AI business as well as the development and commercialization of industry-specific models and products. The second question is about the AI industry. Recently, the view that AI will display traditional software while the core business of Kingsoft WPS has not been materially affected so far. But there is uncertainty regarding the expansion of value-added service. What is your opinion about this question? And when you serve enterprise customers, what are their key demand for AI? And what capabilities do you need to strengthen? And recently, Xiaomi has MiMo with a trillion parameter large language model as well as a line of associated models. In what ways will the MiMo model further empower and enhance the WPS business?

[Interpreted] So we would like to answer the first 2 questions, and then Mr. Lei is going to answer the third question. And so this is actually quite busy that since last April, we have set up the AI product center. And this year, we actually have the full hub. We would like to cooperate with the Kingsoft Cloud to have some collaborations altogether. So actually, the Kingsoft Cloud, we already have delivered some of the products like, for example, the Kingsoft [indiscernible] and also internally the target for the like assessment, we already used some of the products. And we made a conclusion since last year that we would like to really get into the typical industry and trying to figure out the way of the road AI hold to have this empowered for different industries. So the key point of this year is that we need to target for the element -- the target the aim, especially like we can see that this year, the open cloud is show that appeared and it's very popular the whole world.

So this is actually a great remind for us. AI is going to have empowered for different person. AI could be able to empower for enterprises, and they have different ways to show up. And all of this could be able to be realized. So we will not only need to based on the initial thinking, actually, the key things of this year is that we [indiscernible] scenario and also to focus on different industries to get into that industry. And this is actually the biggest differences between last year and this year is that last year, we are trying different roles and trying to localize in different ways. Maybe that AI works for that industry. But this year, we have to get deeply into typical industries in probably 1 to 2 different regions and then make actual work. This is actually like the AI product center development and also progress.

So I would like to answer the second question is that based on my understanding is that the AI is the influence for the AI [indiscernible] if they are saying that -- if we are saying that AI is going to eat up software is not -- so I don't personally agree on this statement because as we know is that for the big language model, AI has to bring that I would like to using like digitalization system to have like restructured the AI currently. So this trend is quite significantly recently. And since 2023, we have the restructure. I can see that AI is the core thing. And as developed in the past few years, AI has constantly strengthened and more and more be recognized by people and simplified saying that this is actually the whole restructure for the [indiscernible] so AI could actually -- if we are seeing that AI is going to eat up the software, the description is not accurate because the software is compared with hardware.

So what is exactly software and hardware. So like this year, you can see that the AI scale, I would like to using like the digital system to expand that, especially for the basic on the AI risk structure for the software and compared with the hardware, like, for example, [ Doba ] this is software, right? But today, we can see is that -- and compared with the previously, they have a bigger function. They have the better interaction and also have more like different multiple functions and abilities, which we cannot imagine previously. So this is actually our understanding. But additional software, they are different because the AI software could be replaced the traditional software. That is for sure. But AI is not going to eat up the software because that is not scientific. This is my opinion since 2023. And also the influence for the office is that since 2023, AI has showed up. I discussed about my opinion.

So during that time, we can say is that AI could be strengthened, like keep strengthen the ability in the future. That is why right now, we have changed the name as office because 2023, we initially used office AI, and then we used the change name as AI office. So this is constantly of my first question answer is that initially, the AI ability is not that strong enough. That is why we need to use office to strengthen the AI ability. But as the AI ability has become stronger and stronger, like, for example, we have the native AI office development since 2023, then WPS 1.0, 2.0 and 3.0, especially last year, we have launched Lingxi, and this is actually a constant development. And up to now this year, 2026, it's significantly clear that Office AI is going to be the big part. And all of us is going to use. All of that is like AI office.

So this is the second point, which is super for this time since 2023. And also for the WPS AI membership since last year, we could increase 307% since last year. The reason is that last year -- the first -- last year, we have launched the Lingxi that version. So this is actually the second part I like to answer this question.

And third part is about Xiaomi. So Xiaomi has launched MiMo-V2-Pro. So no matter for the communication meeting with Kingsoft or the cloud communication meeting, that is based on One Plus and that is the Xiaomi's big model for MiMo. And for Kingsoft and Xiaomi, we are actually AI like mixer. And Xiaomi would like to do this big model but Kingsoft we are not. So as time when we have AI launched, especially recently, Xiaomi has launched that our own AI and the performance is actually quite good. So we can see that the ability of Xiaomi is increasing all the time. And the key thing is that we need to make our competition ability stronger and also to have our own [indiscernible] strengthen their AI ecosystem construction. As time goes by, the whole like Kingsoft series products could have like a very competitive ecosystem together like development together with Xiaomi.

[Interpreted] Hello. Thank you for joining us today, and this will conclude our presentation for the 2025 Fourth Quarter and Annual Results Earnings Call. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good day, and thank you for standing by. Welcome to Kingsoft Corporation's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I'd now like to hand the conference over to your first speaker today, Ms. Yinan Li, IR Director of Kingsoft. Please go ahead.

Thank you, operator. Ladies and gentlemen, good evening and good morning. I would like to welcome everyone to our 2025 third quarter earnings call. I'm Li Yinan, IR Director of Kingsoft. I would like to start by reminding you that some information provided during the earnings call may include forward-looking statements, which may not be relied upon in the future for various reasons. These forward-looking statements are based on our information and information from other sources, which we believe to be reliable. Please refer to the other publicly disclosed documents for detailed discussion on risk factors, which may affect our business and operations.

Additionally, in today's earnings call, the management will deliver prepared remarks in both Chinese and English. A third-party interpreter will provide consecutive interpretation into English. During the Q&A session, we will accept questions in both English and Chinese with alternating interpretation provided by the third-party interpreter. On-site translation is solely to facilitate communication during the conference call. In case of any discrepancy between the original remarks and the translation, the statements made by the management will prevail.

Having said that, please allow me to introduce our management team who joined us today: Mr. Zou Tao, our Executive Director and CEO; and Ms. Li Yi, our acting CFO.

Now I'm turning the call to Mr. Zou Tao.

[Interpreted] Hello, everyone, and thank you for joining Kingsoft's 2025 Third Quarter Earnings Call. This quarter, we continued to prioritize strengthening our core businesses with AI collaboration and internationalization as its strategical priorities. Kingsoft Office Group continued to deepen AI application scenarios and strengthen its brand and ecosystem development. Our online games business advanced general experience and extended its global reach, notably with the global launch of the sci-fi game, Mecha BREAK.

In the third quarter, Kingsoft's total revenue reached RMB 2.419 billion, representing a year-on-year decrease of 17% and a quarter-on-quarter increase of 5%. Specifically, our office software and services business maintained a steady growth momentum. This growth was supported by robust momentum in WPS software business, rapid growth of WPS 365 business and steady growth in the WPS individual business.

Revenue from online games and other business decreased primarily due to low revenue contributions from certain existing games and because the new game is still in its early development phase and gradually build its market influence.

Now I will walk you through the business highlights of the third quarter 2025. In the third quarter, Kingsoft Office Group demonstrated overall improvement in its financial indicators with continuously optimized profitability and a significant acceleration in revenue compared to the previous 2 quarters. For WPS individual business, the rollout and promotion of new AI-powered products together with refined operations in both domestic and international markets drove a steady increase in WPS AI monthly active users, paying subscribers and user value.

Revenue reached RMB 899 million, up 11% year-on-year. As of 13th September 2025, WPS Office global monthly active devices reached 669 million, an increase of 9% year-on-year. Specifically, WPS Office PC version monthly active devices grew by 14% to 316 million, while the mobile version monthly active devices increased by 5% to 353 million.

WPS 365 business, we continuously enhanced our collaboration and AI product offerings, achieving significant progress in expanding our customer base among private enterprises and local state-owned enterprises and strengthen our product competitiveness and industry influence. This segment continued its high-growth trend with revenue reached RMB 201 million, a significant increase of 72% year-on-year.

WPS software business saw acceleration progress in localization projects. Our AI-enabled products for government scenarios continue to integrate and deploy across government agencies, supporting the digital and intelligent transformation of localization customers. Revenue for this segment reached RMB 391 million, up 51% year-on-year.

In the third quarter, for our online games business, our flagship game, JX3 Online celebrated its 16th anniversary in August, followed by the launch of its annual expansion pack in October, which delivered innovative new game player. The anime shooter game, Snowbreak: Containment Zone maintained its core user base through long-term content updates and user operations. Sci-fi mech game Mecha BREAK has been continuously optimizing its gameplay and operations to enhance the player experience. Additionally, to international IP games, Goose Goose Duck and Angry Bird are expected to launch this and next year in China, respectively.

Looking ahead, Kingsoft Office Group will stay committed to its core strategy of AI collaboration and internationalization, meeting the scenario needs from individual user to enterprises through its core product portfolio. The online games business will focus on developing high-quality content and expanding global publishing, enhancing the long-term vitality of its classic franchises while driving the growth and the sustainable development of new genres.

Thank you, Tao Zou and Yinan. Good evening, and good morning, everyone. I will now discuss the third quarter operational and financial results using RMB as currency. Revenue decreased by 17% year-over-year and increased by 5% quarter-over-quarter to RMB 2,419 million. The revenue split was 33% for office software and services business and 37% for online games and others business.

Revenue from the office software and services business increased by 26% year-over-year and 12% quarter-over-quarter to RMB 1,521 million. The increases were mainly attributable to the growth of WPS software, WPS 365 and WPS individual business of Kingsoft Office Group. The remarkable increase of WPS software business was primarily driven by the robust orders of localization projects.

The rapid growth of WPS 365 business was mainly due to our continuous improvement in collaboration and AI products as well as expansion of our customer base among private and local state-owned enterprises. The steady growth of WPS individual business was primarily attributable to increased number of paying subscribers, supported by our active promotion of AI features and refined operations. Revenue from the online games and others business decreased by 47% year-over-year and 6% quarter-over-quarter to RMB 898 million. The decreases primarily reflected lower revenue from certain existing games, partially offset by the revenue contribution from newly launched games.

Cost of revenue increased by 3% year-over-year and 5% quarter-over-quarter to RMB 475 million. The year-over-year increase was primarily due to higher server and bandwidth costs, greater channel costs as well as increased service costs of institutional clients, along with the business growth of Kingsoft Office Group, partially offset by the lower channel cost of online games business. The quarter-over-quarter increase was primarily due to higher channel costs and increased server and bandwidth costs, both associated with online games business.

Gross profit decreased by 21% year-over-year and increased by 5% quarter-over-quarter to RMB 1,944 million. Gross profit margin decreased by 4 percentage points year-over-year and kept flat quarter-over-quarter to 80%. The year-over-year decrease was mainly due to the decline in the revenue contribution from certain self-development high-margin games.

Research and development costs increased by 4% year-over-year and 5% quarter-over-quarter to RMB 900 million. The year-over-year increase was mainly attributable to higher investments in AI and collaboration products, partially offset by lower accrued performance-based bonus. The quarter-over-quarter increase was mainly driven by the increased headcount and AI-related expenses of Kingsoft Office Group.

Selling and distribution expenses increased by 55% year-over-year and 33% quarter-over-quarter to RMB 564 million. The increases primarily reflected higher promotional and advertising expenditures associated with online games business.

Administrative expenses increased by 7% year-over-year and 2% quarter-over-quarter to RMB 178 million. The year-over-year increase was mainly due to higher personnel-related expenses and increased depreciation arising from the completion and operation of our Wuhan campus, which was constructed to support the Group's long-term development.

Share-based compensation costs increased by 37% year-over-year and 13% quarter-over-quarter to RMB 80 million. The increases were mainly due to the grant of awarded shares to the selected employees of certain subsidiaries of the company.

Operating profit before share-based compensation costs decreased by 70% year-over-year and 21% quarter-over-quarter to RMB 357 million. Net other gains were RMB 13 million for this quarter compared with losses of RMB 63 million and gains of RMB 443 million for the third quarter of 2024 and the second quarter of 2025, respectively.

Share of profits of associates of RMB 5 million were recorded for this quarter compared with losses of RMB 428 million and RMB 170 million for the third quarter of 2024 and the second quarter of 2025.

Income tax expense was RMB 66 million for this quarter compared with income tax expense of RMB 31 million and RMB 104 million for the third quarter of 2024 and the second quarter of 2025, respectively. As a result of the reasons discussed above, profit attributable to owners of the parent was RMB 213 million for this quarter compared with profit of RMB 413 million and RMB 532 million for the third quarter of 2024 and the second quarter of 2025.

Profit attributable to owners of the parent, excluding share-based compensation costs was RMB 277 million for this quarter compared with profit of RMB 453 million and RMB 570 million for the third quarter of 2024 and the second quarter of 2025, respectively. The net profit margin, excluding share-based compensation cost, was 11%, 16% and 25% for this quarter, the third quarter of 2024 and the second quarter of 2025.

The Group had a strong cash position towards the end of the reporting period. As at 30th September 2025, the group had cash resources of RMB 26 billion. Net cash generated from operating activities was RMB 494 million, RMB 1,387 million and RMB 767 million for this quarter, the third quarter of 2024 and the second quarter of 2025. Capital expenditure was RMB 72 million, RMB 109 million and RMB 81 million for this quarter, the third quarter of 2024 and the second quarter of 2025.

That's all for the introduction of our operational and financial results. Thank you all. Now we are ready for the Q&A section. Thank you.

[Operator Instructions] We will now take our first question from the line of Xiaodan Zhang from CICC.

[Interpreted] And my first question is regarding the gaming business. Games revenue for the quarter is down both year-on-year and quarter-on-quarter. So could management elaborate on the operational strategies for existing games as well as the new game pipelines? And also, could you share some color on the updated progress of Mecha BREAK? And regarding the office business, what are the main drivers behind the accelerated growth in Q3? And will this momentum be sustainable?

[Interpreted] So firstly is regarding the question for the games. We have discussed previously for the future and future strategy of the different versions. And so we currently have already obtained the version numbers, and we're going to be launching different games, including like Mecha BREAK and Goose Goose Duck and also the other products. But for the old games, we mainly focusing on the like the Fate of Sword and also the Snowbreak: Containment Zone, and we're going to have like the target for the customer, for the operation service.

We're going to have the long-term like upgrading the generations, including the new play way, including new content, we're going to continue to upgrade that. This is the regular way. And target for the technology and operation, we're going to have some new improvement, so this is relevant to the strategy of the game. And for the Mecha BREAK, because it just launched for 1 season roughly and the target for this game for the play way, for the operation and also the rich content, we are still doing the operation and improvement. We think that we need longer time to give the answer.

So actually, regarding the growth factors, we think that we could take a look from 3 perspectives. What I can say is that basically, they are all good, but I would like to separate into like personnel for the enterprise and also the information innovation, 3 aspects to the introduction. For the personnel, actually, the growth rate of the members is -- we have the basic number and including like the payment for the up value. And for their PC growth rate is actually out of -- exceeded our expectations. So this is going to be the key thing, which is the members.

The secondly is the AI. Once we have released the 3.0 version, so through the AI, we have this monthly activity. Members compared with last year is going to increase 20%, especially launch 3.0 version. So compared with the first half year, we have realized doubled. And this is the second point.

Another thing is that from the basic for the membership grows, so we can see that the feedback from the users are quite good. So we can see that basically it's exceeded than what we expected. It means that more and more enterprises customers, they started to accept us. And also for our product and service are quite satisfied. That is why we have increased like the industry's competitiveness.

And third is about the software and information, the information innovation. So regarding this part is that we can see that since Q3 is quite smooth, and it has increased like 51%, no matter for the personnel or information innovation. So basically, it's going to be a very, very positive situation. So the growth element, whether we could be sustainable development, we would like to talk through 3 perspectives: personnel, enterprise and information innovation.

And firstly, for the information innovation, that is kind of policy-oriented. So basically, we can realize more than 90% of the growth rate. This is from the short-term perspective. We can see that like Q4 is quite good, probably because we're going to complete in 2027, but the acceleration is quite good. Unless we have the big policy direction is going to have some adjustment. Otherwise, we have the confidence that we could realize this much growth constantly.

For the personal business, regarding the growth rate for these 3 business, we have realized like more than 10% increase. So from the increasement of the membership and secondly is the payment like conversion rate and also the UP value. So up till now, we can see is that the users membership growth is quite good. And especially for the AI members is growth rapidly. So generally speaking, we have confidence. And -- but of course, it's a little bit lower than the expectation and then the enterprise membership growth.

So from the enterprise perspective, my personal judgment is that if we could realize the delivery, if the delivery is on time in the future, we have a pretty big space to improve. So in the next 2 years, we're going to have -- we believe that we have more and more enterprise members to use our product. So we can see is that our productivity is quite good and our service is going to have a reputation.

For our team, we need to strengthen their internal and external cooperation to strengthen our delivery ability. We believe that this has a certain pressure for us. But generally speaking, so from this report, we can see a lot of data was renewed, including our R&D and our staff percentage and also the investment of the R&D could reach to 35%, 36%. Previously, it was 32% to 33%.

So we can see that we continue to do a further bigger investment for the R&D. This is -- we believe that it is going to be the very basic reason we could have such increase, especially like Wuhan Industrial Center and started the construction work in 2018 and up to now it's become the largest industrial base for Kingsoft. And this is going to be a very solid foundation for us.

We will now take our next question from the line of Wenting Yu from CLSA.

[Interpreted] So my first question is, how does the company view the opportunities for WPS Office and 365 in international markets, and which countries or regions will be the strategic priorities? And how does management assess the competitive dynamics overseas, particularly against the Microsoft Office?

And the second question is about the online game. So over the next 2 years on top of the 2 IP titles mentioned in our pipeline, which game genres will be the main focus in the company's pipeline? And how does management view the opportunities for games to expand into the overseas market?

[Interpreted] So regarding the first question, this is actually a very good question from the strategic perspective. Since last year, we have reached the concept that AI collaboration plus overseas. So from the business perspective, the growth rate overseas is quite good from the users, members' perspective and also the other perspectives. So since -- started from this year, we have increased the overseas R&D investment. We actively did a lot of preparations for to go overseas. So from my perspective, especially when we talk about the competition with Microsoft because our main competitors is Microsoft.

So our competition strategy overseas is that I think I would need to separate it from 2B and 2C, 2 perspectives. So for WPS in domestic market, we have actually go through with the competition with Microsoft for almost 30 years up to now is a long term. So several key points. The first is that from the edit tool to the content service platform, we have did this transformation because everybody really know that if they're going to use our product, we're going to provide a module.

So our members target for the content and to have this PDF content transformation and also to like search the content information, et cetera. So this is actually very early stage, we did this. And except for very early stage, we have the document edit tool. We also have provided the content, the document content service to convert it into a platform. So actually, this is the first point.

And secondly, is that since 2013, we started the like mobile end. So this is actually early -- 2 years earlier than Microsoft. So actually, for us, it's just an app would be solve all of the problems. But for Microsoft, it's going to be more complex. And so our -- that our -- like their package, the installation package is smaller for the mobile end. So that is why in overseas, a lot of customers, they actually know about us through the mobile end. Then we have the mobile end, we have these advantages. And in the past 10 years, we have collected a pretty good foundation.

And then from the technical perspective, from the mobile end, we have some certain advanced than Microsoft. This is going to be the core things. And this time, we have the AI and especially we have released 3.0 version since 2023. After 2 years optimization, our sales together with our users, they're going to give us the feedback and we constantly do the practice, and we have a very good like both parties both end interaction. So we think that from the AI's perspective, target for the content application, we are stronger than Microsoft.

So this is actually from the 2C's perspective. And we are actually a platform to do -- to provide the content and also the service, not just a simple document edit tool. And also from the mobile end, we have advantages together with our technology, we have the correct way. So we have the difference from the technical route. So for the 2B's perspective, I think we have a bigger advantage. And actually, all the domestic members are all clear, especially we have this -- the first package released to the market.

Our WPS 365 is not just a content treatment platform. This is actually an office platform, especially we have the AI edit. And so not just -- we are not just like document treatment set compared with Microsoft. We are actually the whole office platform. And this platform in our company internally, we have used for 2 years. And in domestic market, we also have a lot of enterprises. They are seeing they actually could -- this software could have a very perfect integration with the enterprise OA system. This actually are significant advantages.

So we can see that at least for our Office platform and to compete with Microsoft, this is actually very early stage. We have this module. We're going to have different components. So we have different module. It's very flexible and also the layout are also quite flexible. This is from the 2B's perspective. So this is actually -- we make a conclusion is that we have 2 perspective from 2C and 2B.

And in the past few years, especially for the mobile end has been released. In the past 10 years, we have a very good like public members foundation through the mobile end. So on the other hand, they would like to actively download the PC end to remake the promotion and layout. So -- and secondly is from the national perspective, and we have a lot of Chinese friends, they would like to do the promotion and development. So I think that this is the core thing.

So the second is regarding the games. Actually, we have a pretty good like foundation. Currently, we have some of the games already obtained their version numbers and including the JX4 and Angry Birds and Goose Goose Duck, and also the Snowbreak: Containment Zone. And we also have some games, which didn't get their certification yet, but probably we're going to launch it next year. So we think that from the overseas, the overseas opportunity is quite good.

So including when we did start the -- launched the game in the -- for the Snowbreak: Containment zone and also the Mecha BREAK, we tried several times, especially for the mobile end. So we realized that in domestic market, some of the companies, they did a pretty good performances overseas. So we believe that this direction is correct. So we're going to continue to optimize our product, our technical ability, operation ability.

We will now take our next question from the line of Linlin Yang from Guangfa Securities.

I have 2 questions. The first question is could you share us the progress of our AI business? How do you think about its commercialization pace and market potential? My second question is the expenses. We see sales and marketing expenses was relatively high in the short term. As the business stabilized, will it return to normal by next quarter or Q1 in 2026?

[Interpreted] So I would like to answer the first question, and Li Yi is going to answer the second question. So regarding the AI business improvement progress, actually, since April this year, when we found the [indiscernible] to collaborate with Kingsoft Cloud target for the enterprises and different application services from the strategic way we're going to do the support and actually, including Zhuhai, we have local big model, and we have the feasibility report regarding the transportation, we have different projects delivery and also in different industries like the low industries, et cetera, with different regions, we all started all of the development.

And so for the more details, it's not convenient for us to disclose at this moment. But why we would like to set up an AI product center because we strongly believe that the whole industry, when we do this practice for the big module, it's going to get into the specific application for different industries.

So simplified -- make it simplified is that we think that in the future, different industries is going to have like restructured system for the big module, including the internally of the enterprises, for the organizations way is going to have some change. So the main job of this year is to this part. And we -- for Kingsoft Cloud, we have some progress. So at this moment, at this stage, the business is still in a very early stage. So because of a comprehensive reason, it is not convenient to disclose too much details at this moment.

[Interpreted] So regarding the second question for the expenses for the marketing actually when we promoted into -- launched it into market, and we believe that for the long-term perspective, it's going to get back to a normal situation. When we have promoted the launch of different products, and we think that the cost is going to -- different season is going to have slightly changed. And the previous season, it was 15% to 16% and also this season is going to reach to 20% and more than 20%.

So from the whole year's perspective, this is going to get -- we think that's going to be a reasonable level because we need to have all of the cost for the R&D, especially for the AI in the -- specifically in the early stage, we need to have more investments, but that is for the long-term sustainable development. So we believe that in the long term, we're going to control the rate, the investment rate and finally get a reasonable profit level.

I am showing no further questions. Thank you all very much for your questions. And with that, we conclude our conference call for today. Thank you for participating. You may now disconnect your lines.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]