Cheetah Mobile, Inc. ADR Class A Aktie

Welcome to China Mobile's Second Quarter 2026 Earnings Conference Call. With us today our company's Chairman and CEO, Mr. Fu Sheng; and our company's Director and CFO, Mr. Thomas [ Ren ]. [Operator Instructions] Please note that the management team will be presented by an AI agent.

Before we begin, I refer you to the safe harbor statement in our earnings release, which also applies to our conference call today, and we will make forward-looking statements. At this time, I would turn the conference call over to our Chairman and CEO, Mr. Fu Sheng. Please go ahead, Mr. Fu.

[AI Agent]

Hello, everyone. Thank you for joining Cheetah Mobile's Second Quarter 2026 Earnings Call. This quarter, we made further progress in changing the mix and improving the quality of our business. Our newer AI businesses are growing quickly and becoming a much larger part of the company. At the same time, our Internet services business remains profitable and is becoming more efficient.

Today, I would like to focus on 3 areas. The accelerated growth of our services of cloud and AI infrastructure business, the progress we are making in robotics, especially in smart mobility, and the continued improvement in the mix and quality of our business. Cheetah Mobile now has 3 reporting segments: Internet services, Robotics and others, and Global Enterprise Services.

Global Enterprise Services include services of cloud and AI infrastructure and our advertising agency services. Let me start with services of cloud and AI infrastructure business, because it is becoming 1 of our most important growth drivers. In the second quarter, services of cloud and the AI infrastructure revenue were RMB 59 million, up 83% year-over-year and 26% quarter-over-quarter. It accounts for 22% of total revenue. The growth in this business is accelerating. Its year-over-year growth rate increased from 68% in the first quarter to 83% in the second quarter.

Gross billings, which reflects the total value of services sold through our company exceeded RMB 500 million during the quarter, compared with about RMB 200 million in the same period last year and about RMB 300 million in the previous quarter. This shows that the scale of customer demand is growing critically. Based on our current business momentum, we expect gross billings from services of cloud and AI infrastructure to exceed RMB 2 billion in 2026, representing year-over-year growth of over 100%. We also expect related revenue to exceed RMB 200 million to exceed representing year-over-year growth of over [ 59% ].

We operate as a connection point between leading global clubs and AI ecosystems and enterprises expanding overseas as enterprises use a broader range of clubs and AI services, the ability to connect and manage these resources is becoming increasingly important. Accessing a model is only the first step. Companies also need to select right models and integrate them into daily workflows, manage their computing and total cost, and keep their services running reliably.

Through our services, we connect customers with cloud infrastructure and model inference services from leading global providers, including Amazon Web Services, Google Cloud, and Microsoft Azure. We also support deployments, cost control, and daily operations. I have personally spent a great deal of time talking with Chinese entrepreneurs and management teams about how to use AI in practical ways. These conversations have shown us that many companies want to use AI, but need simple and effective tools that can truly improve their work. Our goal is not to join the costly race to build foundation models. Our goal is to help these companies make effective use of leading AI models and turn AI into the real productivity.

We will stay disciplined in how we invest and focus on real customer demand, service quality, repeat business, and healthy returns. AI infrastructure also brings us closer to the daily needs of enterprise customers Today, we may help a customer with cloud resources, computing power, or AI model services. Over time, we may also serve the same customer with AI agents, software tools, and other services. This gives us a path to deepen customer relationships and expand the services we provide over time.

Now let me turn to Robotics. Revenue from Robotics and others was RMB 55 million, up 73% year-over-year and 6% quarter-over-quarter. It accounted for more than 20% of total revenue. During the second quarter, we began shipping Smart Mobility products for sale in Europe for product mobility and in China. As a result, smart mobility began contributing revenue during the quarter. Our robotics arm business continued to grow.

While revenue from our voice robot business was broadly stable within robotics, we see smart mobility as a potential growth engine. The long term need is significant as more people face mobility challenges. And once you travel independently, safely, and with dignity, we are designing our products around these needs.

Our smart mobility products weighing less than 16 kilograms can be folded for easier transport, are designed to support air travel, and can operate for approximately 10 hours under specified conditions. These features help users travel independently and with confidence in daily life and on longer journeys. To address unmet needs, we incorporate autonomous [ capabilities moving abilities ] developed through our Robotics work into proven electric mobility products. This helps us control product costs while meeting customers' needs for safety, reliability, and ease of use.

We developed this product with established electric mobility manufacturers, combining our robotics capabilities with their products and market expertise. Some companies in this field have spent several years and raised substantial capital to bring similar products to market. By reusing our existing robotics capabilities and working with established partners, we moved from project initiation to initial mass production and shipments in a little over a year.

With cumulative investment in the range of several tens of millions of RMB, this reflects our disciplined and capital-efficient approach to product development. This business is still at an early stage. Our priorities are to deliver reliable products, meet local standards, and earn the trust of customers and partners. We will move step by step and build the business on solid commercial results. More broadly, we have built a shared robotics platform that brings together voice interaction, autonomous mobility, and robotic arm capability. We do not view our voice robots, smart mobility products, and robotic arms simply as separate product categories. They are different applications of the same underlying platform.

We [ recently ] adapt its capabilities to address specific customer needs and solve real-world problems rather than trying to build an all-in-one robot today by applying and demonstrating these capabilities through individual products. This approach could allow us to bring these capabilities together in more general purpose robots. This is our step-by-step path. We will continue to improve and move the robotics and other segment toward breakeven. Taking together revenue from services of cloud and AI infrastructure and our Robotics and other segment, accounted for about 43% of total revenue this quarter compared with 38% in the previous quarter and 22% in the same period last year. The share of our revenue has roughly doubled in 1 year.

To me, this is the most important change taking place at Cheetah Mobile. Cloud and AI infrastructure connects enterprises, expanding overseas with global cloud and model ecosystems, while robotics brings AI into the physical world. Together, they are building meaningful new sources of revenue and connecting Cheetah Mobile with long-term demand for AI computing and real-world AI products. Our established businesses continue to provide a solid base. The adjusted operating margin of our Internet Services segment improved to 19.4% this quarter compared with 11.3% in the first quarter and 14.1% in the same period last year. This reflects our continuous focus on efficiency and the quality of revenue. We will keep the Internet business stable, profitable, and cash-generative.

Looking ahead, changes in our advertising agency business, which is included in the Global Enterprise Services segment may continue to affect our total revenue and bottom line in the near term. However, revenue excluding advertising agency services increased approximately 10% year-over-year and 5% quarter-over-quarter in Q2. We believe this underlying growth, together with the continuous shift in our revenue mix, better reflects the progress of our business transformation. Our priorities are clear. We will help more companies go global and use leading AI models to improve productivity.

We will turn the early progress in smart mobility into more shipments, more customers, and repeat business. We will also keep our Internet and Global Enterprise Services segments profitable and efficient on an adjusted operating basis while continuing to improve the economics of the Robotics and other segments. Our job now is to turn this change in our revenue mix into sustainable growth and better returns for our shareholders. Thank you to our employees for their hard work, and to our customers and partners for their trust, and to our shareholders for their continuous support. I will now hand the call over to our CFO [ Tom ], who will discuss our financial results in more detail.

[AI Agent]

Thank you, [ Sheng ]. Hello, everyone. Let me begin with our overall performance. For the second quarter, total revenue was RMB 766.1 million, representing an increase of 2.7% quarter-over-quarter and an increase of 9.9% year-over-year. The year-over-year decline was primarily due to lower revenue from advertising agency services within the global enterprise services. Advertising agency services revenue decreased [ 17% ] year-over-year and 15.0% quarter-over-quarter to RMB 22.0 million, mainly due to changes in review policies implemented by a major global advertising platform.

Its contribution to total revenue declined to 8% from 25% in the same period last year. Excluding advertising agency services, revenue was RMB 244.1 million, increasing approximately 10% year-over-year and 5% quarter-over-quarter. This reflected continued growth in services, our cloud and AI infrastructure business, robotics and others and Internet value-added services. Operating loss was around RMB 73.6 million compared with RMB 28.3 million in the first quarter of 2026 and RMB 11.1 million in the same period last year.

On a non-GAAP basis, operating loss was RMB 25.6 million compared with RMB 22.5 million in the first quarter. If compared with a non-GAAP operating loss of RMB 2.1 million in the second quarter of 2025, the year-over-year increase primarily reflected lower advertising agency services, revenue within Global enterprise services. The sequential movements in our non-GAAP operating results reflected higher adjusted operating profit from Internet services offset by lower adjusted operating profit from Global Enterprise services primarily due to the lower advertising agency services revenue as well as a wider adjusted operating loss from robotics and others as we continue to invest in the development and commercialization of our robotics businesses.

Turning first to Internet services. Revenue from Internet services decreased 17.3% year-over-year and 3.4% quarter-over-quarter to RMB 130.5 million. Within the segment, Internet value-added services revenue increased 6.7% year-over-year and 2.9% quarter-over-quarter to RMB 101.2 million accounting 77.6% of segment revenue. This growth partially offset the decline in online advertising revenue, which decreased 53.53% year-over-year and 20.2% quarter-over-quarter to RMB 29.3 million, with Internet value-added services now accounting for nearly 70% of segment revenue and continuing to grow both year-over-year and sequentially.

Adjusted operating profit increased 14.2% year-over-year and 67.2% quarter-over-quarter to RMB 25.4 million. Adjusted operating margin expanded to 19.4% from 14.1% in the same period last year, and 11.3% in the first quarter, including the adjusted operating profit and adjusted operating margin improved despite lower segment revenue reflecting the continued growth of Internet value-added services and stronger operating efficiency.

Turning to robotics and others. Revenue increased 72.5% year-over-year and 6.4% quarter-over-quarter to RMB 54.5 million, accounting for 20.5% of total revenue. The growth was due to an increase in sales volume of our robotic products. The year-over-year increase benefited from the contribution of new factory acquired by the company on July 29, 2025. Adjusted operating loss was RMB 34.0 million, narrowing by 35.5% from RMB 52.7 million in the same period last year and widening from RMB 26.9 million in the first quarter. This sequential widening primarily reflected our continuing investment in development and commercialization of our robotic businesses. As [indiscernible] discussed, smart mobility is a newly launched product line and remains in the investment phase. Our robotics businesses are at different stages of product development and commercialization now.

Let me turn to Global Enterprise Services. Revenue from this segment decreased 23.3% year-over-year but increased 11.5% quarter-over-quarter to RMB 81.1 million. The year-over-year decline was mainly due to a 70.0% decrease in advertising agency services revenue to RMB [ 2,002 ] million. On a sequential basis. Advertising agency services revenue decreased 15.0%. This was partially offset by continued strong growth in services of cloud and AI infrastructure. Revenue from services of cloud and AI infrastructure increased 83.1% year-over-year and 26.2% quarter-over-quarter to RMB 59.1 million, driven by growing demand from enterprises, expanding overseas for cloud resources, computing power, and AI model services.

Services for cloud and AI infrastructure accounted for 72.8% of global enterprise services and 22.2% of total revenue compared with approximately 11% of total revenue in the same period last year. Adjusted operating profit from global enterprise services, it was CNY 94.3 million, decreasing 80.7% year-over-year and 32.0% quarter-over-quarter. The decline primarily reflected lower advertising agency services, partially offset by continued growth of services, our cloud and AI infrastructure. Importantly, Global Enterprise Services remained profitable on an adjusted operating basis. As of June 30, 2026, we have CNY 1,271 million or USD 187.3 million in cash and cash equivalents. This strong cash position provides us with flexibility to invest prudently in our AI and robotics businesses.

Going forward, as we think about the results, reflecting continued progress in evolving our business mix, total revenue turned to sequential growth. Our revenue, excluding advertising agency services, increased both year-over-year and quarter-on-quarter. Internet services delivered solid profitability. Global Enterprise Services remained profitable. Despite the decline in advertising agency services, robotic and others maintained strong revenue growth. As we continue to invest in the commercialization of smart mobility. Thank you. We are now ready to take your questions.

[AI Agent]

Hello, everyone. For today's call, [ Maddy Fong ] will answer questions in Chinese and AI agent will translate management's comments into English in another line. Please note that the translation is for convenience purposes only. In the case of any discrepancies or management's statements in Chinese for pre-work, if you are unable to hear the Chinese translation, a transcript in English of this call will be available on the company's IR website within 7 working days. Thank you so much.

[AI Agent - Maddy Fong]

[Operator Instruction]. [indiscernible] for analysts [indiscernible] can ask questions in Chinese. Due to time, we only arranged communication with analysts this time. We will arrange some communication with investors after the meeting. Please understand. Thank you very much. The first question, please from Jefferies, Thomas Chong.

[indiscernible] in terms of the performance as [ whole ] as a product, are there any plans? [indiscernible]. We still have a few minutes. Feel free to share your thoughts, comments. Please unmute. We still have a few minutes. Any questions? In future, the company will -- in the product aspect, what are plans combines expected the growth sale throughout in banking.

[AI Agent]

Okay. Let me answer. Our company smart wheel has started to contribute revenue this quarter. First of all, why did we make the smart wheelchair? First of all, from the technical stack, from the technical accumulation, we have been making robots for almost half a year and we have made great progress in wheel navigation, automatic obstacle avoidance, environmental perception, or in today's popular word, embodied intelligence, we have made great achievements. And for intelligent wheelchairs, in fact, in terms of technology transferability, it is very high.

In other words, we do not regard intelligent wheelchairs as wheelchairs, but as mobile robots. Therefore, the biggest feature of our intelligent wheelchair is to help people sitting in wheelchairs achieve assisted driving. The experience brought by this intelligent wheelchair to users is unprecedented. So indeed, to be honest, our progress is quite fast, and it has already started selling overseas. Do I need to disclose the sales revenue?

Well, we are not ready to disclose that yet because this project is still in the early stages. It has only been a year since the project was initiated and entered mass production. The progress has been quite fast. In terms of technology, various certifications are required, especially if it is for a special group. We have spent a lot of time on this aspect overseas. Overall, I think our idea is that with the advent of AI, almost all products can be redefined. I think the significance of intelligence lies in this. Regardless of the pace of R&D, the investment in R&D costs has been highly efficient.

Thanks to our past technological accumulation, we have tens of thousands of robots operating in various environments, conducting autonomous obstacle avoidance. Therefore, we have extensive technological reserves in this area. Additionally, we have observed that in recent years, this market has gained popularity. Some VC funds are investing in startups. I think our biggest difference from others in making smart wheelchairs is that we don't simply accumulate technologies. We accumulate sensors, chips, and computing power instead within the cost acceptable to users.

We aim to achieve a highly cost-effective assisted driving capability. This was also the positioning of our product at that time. By the way, let me take this opportunity to advertise our product is made a full carbon fiber and disposable. Earlier this year, I had a dislocated hip ball [ scheme ]. During the 3 months, I used my own smart wheelchair. I used it around my home and even took it on planes, traveling to Hong Kong and Singapore all by myself. Therefore, I believe its application prospects are quite broad. As for how large this business can grow, I suggest you take a look. Actually, the wheelchair market is quite large. We believe that the high-end wheelchair market is worth over USD 100 million.

Our smart wheelchair combines the lightweight and foldability of today's electric wheelchair while also enhancing comfort and introducing intelligent features. Overall, we are very excited about this product. But since we are currently focusing on the overseas market, there are channels and certifications to consider. I won't go into specific details here. Yes, it should be more than a business scale that everyone is very enthusiastic about now. And we are also cooperating with the world's largest or top traditional wheelchair manufacturers. We have already cooperated formally. They also highly recognize our product. That's about it. That's all for my sharing. [AI Agent]

[AI Agent - Maddy Fong]

Okay. Now let's move on to the second analyst question. It is from Mr. Li Cheng Ru of Guoyuan Securities.

My question is about the AI infrastructure business. This business continues to grow rapidly in this quarter. So could the management please provide further information what are the company's core competitive advantages in this field compared with other computing power and AI infrastructure service providers? In terms of clients, technology capabilities, or cost efficiency, what are our differentiated advantages? Additionally, how do you view the client demand in the coming quarters and the sustainability of revenue growth?

[AI Agent]

All right. Let's answer this question. We are also in Silicon Valley looking at many AI infrastructure here, the infrastructure and technical facilities. Let me answer your question in reverse. First, I think today's AI infrastructure is far from being in place. Demand is still growing rapidly. The number of AI token calls today may be similar to that of generators 100 years ago when we may have thought AI was already very popular. But in fact, it will have a huge impact across all walks of life. As China's open source large language models become more and more powerful, we are also seeing more and more clients willing to use AI, and they have very strong demand. So I am very optimistic about the market demand. This is the first point.

Second, compared with other companies, our advantage, I think the biggest advantage is customer-oriented. Some investors ask me, "Why do I make the use of video accounts?" Essentially, the account itself is the company's asset. And the second is that the core of my doing these accounts is to find our target customers. And then we have launched from training to landing to the entry, first guide STE, we are all practicing. I think our real competitive advantage over our competitors is that we have a certain influence to find our target customers. Second, we started to do AI for all employees 2 or 3 years ago. And last year, all of us had to write code. At that time, the LLM wasn't as good as it is today, but we have already explored the experience.

So today, we have turned this experience into a training course for our clients and continue to train them. The training process is also a process of finding target customers. The training itself enhances their AI capability, and then we assist them in implementing AI locally. For example, we don't just resell APIs or resell business but we also provide services, including a series of enterprise end products based on these services, such as the Lobster we worked with on [ EC ] recently. We also have programming tools like Claude Code and EasyCode, and we also provide AI scoring for each position of our clients. The AI scoring of your entire organization, which we call [ Eagle Effect ], to help you with the diagnosis of AI in your organization it's a whole set of tools.

So I think our biggest competitive advantage is that we have highly differentiated services. The second advantage is that we cooperate with Amazon and Google, including Oracle, for a long time, especially before we take on a client. We were actually one of Amazon's largest clients among Chinese companies at that time. So we have a deep relationship and are also very familiar with their entire technical system. In addition to providing the AI training services just mentioned, we help companies deploy AI clouds they [indiscernible], including Alibaba or Tencent in China, we have the technical capabilities to help you implement it.

Therefore, we have our own technical accumulation in this regard. Our delivery capability is also quite strong. It does take time and manpower to continuously accumulate. Moreover, these overseas cloud vendors have such a large revenue growth rate which in turn proves that our space is still very large. Although our revenue is only 5% [Audio Gap] We have a revenue of $500 million, but we think this only accounts for a very small share of the vendor we cooperate with. So our idea is to help Chinese companies, whether they are going global or landing, if we provide the ultimate service for AI voice, I believe there is still huge growth potential. Thank you.

[AI Agent - Maddy Fong]

The next question is from of [ May San ] of Haitong International.

I would like to add our high-growth business. Currently, there are 2 parts, robotics and AI. They are maintaining rapid growth. And as we [indiscernible] the overall market cap is below the net asset value. So I would like to ask the management, how do we view the current valuation gap between the company and our business, [ that includes revenue ]. Will we consider introducing strategic investment from external companies or even a spin-off and independent listing to provide financial support for these high-growth businesses or to unlock the business commercial value? Thank you.

[AI Agent]

Regarding Jason's question, I'm Thomas and I'll answer it. We understand that investors valuation of our company and the liquidity of stock trading as well as the performance of new businesses in the capital market are a great concern. We are also continuously monitoring the capital market feedback on the company's business transformation and operational progress. For us, the most important focus at this stage is to continue to drive the growth of cloud and AI infrastructure business under robotics and going global enterprise services to improve our operating performance and through more sufficient and transparent disclosure, help investors better understand this business.

At the same time, we are also paying attention to the recent connection and service layer of the large model. And in the robotics field, there have been many financings, strategic investments, M&A, and even IPO. This reflects the capital markets' high attention to the related fields. We will also closely monitor the development of the industry and the capital market, actively evaluating various possibilities that can help business development and enhance shareholder value. This includes, but is not limited to, external financing, introducing strategic investors, industrial cooperation, and even adopting more independent capital operation methods when conditions are appropriate.

But currently, we don't have specific transactions to announce and any arrangements need to comprehensively consider the stage of business development, strategic synergy, transaction conditions, regulatory requirements, and the long-term interest of Cheetah's shareholders. But what is clear is that the management maintains an open attitude towards various possibilities. And if a suitable opportunity arises, we will seriously evaluate and actively promote it. At the same time, we also pay attention to the trading liquidity of the company's stock, the coverage of research, and market recognition. We will also actively take various measures, including strengthening the disclosure of key game information, strengthening communication with investors and analysts in the United States and other markets to evaluate the capital market tools suitable for the company, and help the market to better understand the company's operating performance and business progress.

In summary, the performance of the capital market is actually based on our continuous business growth and profitability. Our current task is still to focus on the Robotics, Enterprise Services, next-generation cloud, and AI infrastructure businesses and make them bigger and healthier. At the same time, we will also actively research various capital market opportunities that support business development and enhance shareholder value.

[AI Agent - Maddy Fong]

Okay. The fourth question is from Mr. [indiscernible] Securities.

I'd like to ask about the profitability of the Robotics business, about the -- hello, can you hear me?

[AI Agent - Maddy Fong]

We can hear you clearly.

There are already robotics companies in the market that have achieved profitability such as Wukong technology. This shows that the robotics business does not necessarily rely solely on long-term investment. It can also continuously form a sustainable business model. So we'd like to ask how far is the robotics business from breaking even? And when can we achieve a quarterly profit?

[AI Agent]

First of all, the profit of [ UB ], I think robots are a very broad concept. And what we are doing is providing robots that can be truly commercialized. If it's a commercial robot that can replace certain jobs, it actually has very high requirements for mechanical durability, product quality, and reliability. When UB can go public, it will also be good for the machinery industry. But I want to say that what we are doing is not the same type of product at all. So I don't think there is such a strong comparability between them. As for how this will develop in the future, we can wait and see. This is the first point.

The second point, I don't think we rely on long-term investments in robots. In fact, in some individual items such as our robotic arms, they are already profitable. Some businesses, like commercial reception or delivery robots, have not been commercialized yet. There is a process of market acceptance and maturity. Third, like the upgrade of wheelchairs just mentioned, because we are just starting, the construction of our sales team and subsequent iterations will continue to increase.

Of course, from the perspective of a single product, each of our products has sufficient gross profit and we do not use a lower price in the best-selling products to seize market share. We definitely won't do that, but the volume needs to keep growing. And I think we have already achieved a very, very efficient level in the investment in robot R&D. We didn't overemphasize it. We only focus on technology investment, not commercial output. So when do you think I can achieve single machine profitability? I definitely hope the sooner the better.

But look at all the real commercial robots today, before landing in commercial scenarios, it's like a 2B business. It needs channels, right? It needs distributors, right? As you just mentioned, like landing and certification, it really takes a certain cycle. But this cycle does not mean that we think as long as we continue to invest, it will naturally succeed one day, right? But what we see now is that the entire business is developing in a relatively way [indiscernible]. I think as for single quarter profit, it is just set as a goal. It may not take long for us to achieve it.

But I don't think it's necessary to simply pursue single quarter profit at this stage. I may ensure sufficient gross profit for a single product and continuously expand our market size and the number of real users. I think this is our real core goal because all our current revenue is market-oriented and all our market entities, to be enterprises. So I think as long as we keep going, making profits is just a matter of time.

[AI Agent - Maddy Fong]

Our last question is from Mr. [indiscernible].

I would like to ask about the planning of the agent product [ 2 CN ] because Cheetah has developed this before such as EasyCode, [ AI Mind map ], AI code, and other tool-like products. With the rapid development of agent processors, is the company still planning to develop new agents for consumers for AI tool-like products? Which application scenarios will be focused on? How can Cheetah use its past experience in product development, global operations, user growth, and monetization to enhance these aspects? How does the management assess whether a 2C AI product is worth continuous investment? I would like to ask this question.

[AI Agent]

You may be concerned about the 2 CN, but today, Cheetah Mobile's 2B business generates the majority of our overall revenue. My view is as follows: First, we believe that the rise of AI today, or its largest real-world application scenario, is currently in the enterprise sector. You've also seen the growth in this area, which is essentially the growth of the enterprise coding market. This has led to a significant increase in its valuation.

I think that AI today, as a tool of the productivity revolution, first and foremost, enhances productivity. Therefore, the demand from the enterprise side will be greater. I believe that within these opportunities, including the products you just mentioned, such as AI code and Easy Code, although you can log in, many of our users today are enterprise users. Of course, this doesn't mean we have given up on the advancement and development of soft products. As I mentioned in the last financial report call, our approach is as follow: we will first advance and improve our own soft products. For example, you may be aware of our Kingsoft document today, which is probably the only product that has been consistently profitable since then among all security software. In fact, we have integrated Kingsoft antivirus into Kingsoft document. I suggest you download it on your computer, and then you can directly talk to it about any computer problems without having to open the menu bar.

For instance, if your device has insufficient storage or slow memory or even if the printer doesn't print paper, it can help you as we have accumulated tens of thousands of computer issues, which have become part of our ACL part. So the first wave is that we think that truly making the original product is a huge progress. We also disclosed our Internet revenue, right? The business scale is also okay. The second is whether we will pay attention to making a [ CN 2 ] product. I think this is the goal for every product person or it is also our division. But I think making a CN 2 today is different from before. The APT era is completely different now. Regarding what you just mentioned, I have to be honest that I think those experiences are not particularly relevant in today's era.

So what are we exploring? We are exploring extremely rapid and lightweight investment, quickly focusing on user demand and rapidly investing to see if we can [ da, da, da ]. You may have noticed that I also mentioned in my video that we are building a negative 3-tier team composed of young people. We have recruited many young people to help us with product innovation. What is 2C? What is the core standard or whether it is worth it or not? I think the standard is very simple. It can form word-of-mouth communication and whether the user retention can be good enough, not like in the past.

To be frank, a few years ago, some of our tool products rely more on the skills of delivery and the familiarity with various advertising networks, a lot of promotion was achieved through these means. I think today, due to the new changes brought by AI, we now focus more on word-of-mouth from users. When users use the software, they are willing to use it and recommend it to others. Of course, our investment in the [indiscernible] must be AI-native. It's no longer the case of a large team with many people but rather very lightweight, highly agile, and we call them special forces. One person can quickly achieve the goal. So I think ultimately, only the entire user experience proven by data can determine whether it is a truly good CN product. We are also constantly exploring.

[AI Agent - Maddy Fong]

Thank you. Okay. Then today's financial results conference is over. If you have any further questions, feel free to contact us at any time. Thank you.

[AI Agent]

Thank you all.

[AI Agent - Maddy Fong]

Goodbye.

Good day, and welcome to the Cheetah Mobile First Quarter 2026 Earnings Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Cheetah Mobile, Investor Relations. Helen, Please go ahead.

Thank you, operator. Welcome to Cheetah Mobile's First Quarter 2026 Earnings Conference Call. With us today are our company's Chairman and CEO, Mr. Fu Sheng, and our company's Director and CFO, Mr. Thomas Ren. Following management's prepared remarks, we will conduct the Q&A section. Please note that the management of [Indiscernible] will be presented by AI agent.

Before we begin, I refer you to the safe harbor statement in our earnings release, which also applies to our conference call today as we will make forward-looking statements. At this time, I would now like to turn the conference call over to our Chairman and CEO, Mr. Fu Sheng. Please go ahead.

2026 remains an important transition year for Cheetah Mobile. We are continuing to evolve from a traditional Internet company into a company focused on the AI-enabled applications for AI agents and robotics. More importantly, we believe we are gradually moving from capability building into early-stage commercial validation. Our focus is not only on developing AI capabilities but on turning these capabilities into practical products for real business scenarios helping customers deliver better ROI. Starting from this quarter, we are separating our robotics and others business into an independent reportable segment.

In the first quarter, revenue from robotics and others business increased 176% year-over-year to RMB 51 million approaching 20% of total revenue. And at the same time, adjusted operating loss from this segment narrowed by 57% year-over-year. Customer demand remained strong, and we expect robotics and others revenue to grow strongly in 2026. In Q2, our robotics and other revenue will continue growing both year-over-year and quarter-over-quarter basis.

Today, our robotics business mainly focuses on commercial scenarios with real customer demand and clear long-term value, including reception, guided tours and intelligent service applications. Our smart personal mobility is another important step for us. This product extends our robotics and AI capabilities into personal mobility and health care-related scenarios. More importantly, it further validates that our robotic platform can expand beyond commercial service robots into broader consumer applications, we are encouraged to see recognition from leading industry partners.

During the second quarter, we started initial product shipments to a top global designer and manufacturer of mobility products as well as the leading elderly mobility scooter manufacturer in China. We are seeing encouraging early market feedback and initial commercial traction.

Moving to our agents. We're seeing strong customer adoption. We worked closely with Google Cloud and AWS, helping enterprises serving international markets access AI models and use multi-cloud environments more efficiently. In 1Q '26 revenue from our cloud and AI infrastructure services as part of global enterprise services revenue increased 68% year-over-year contributing 18% of total revenue.

Daily token usage has increased more than 20x since January 2026 exceeding RMB 400 million in May. We expect this revenue growth to continue. We also kept building EasyClaw -- so early, but we believe it will help customers deploy AI agents and boost productivity. The two fast-growing businesses, namely robotics and others as well as cloud and AI infrastructure already accounted for 38% of our first quarter revenue, and we expect their revenue growth and revenue contribution to continue growing in the coming quarter and to exceed more than 50% of our total revenue in the second half of this year.

During the quarter, revenue from our advertising agency business within the Global Enterprise Services segment was affected by policy changes from certain overseas advertising platforms. We believe this revenue decline was primarily driven by external factors rather than changes in customer demand. This was the primary reason for the company's widening year-over-year operating loss in the first quarter. Our Internet services business continues to provide important profit and cash flow support for the company. In the first quarter of 2026, our Internet service business generated approximately RMB 15 million in adjusted operating profit in 2026.

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Excuse me, there has been an interruption. Just one moment, please.

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profit and cash, while agency revenue was hit by policy changes, which impacts our financial results in the near term.

Due to a stronger base for growth. Moreover, our USD 186 million that also supports our AI agents and robotics. Thank you.

Thank you, Fu Sheng. Hello, everyone, and thank you for joining us. Unless otherwise stated, all financial figures are presented in RMB. During the first quarter of 2026, we continue focusing on operating discipline, improving revenue quality and maintaining financial flexibility as we invest in AI and robotics initiatives, total revenue remained relatively stable year-over-year at RMB 259 million during the quarter, while Internet service revenue declined due to continued weakness in online advertising. The quality of our revenue mix continued improving.

Within the Internet Services segment, revenue from Internet value-added services continue to grow steadily and 8.2% year-over-year, contributing 72.8% of segment revenue given a larger portion of internet value-added services. Our Internet service revenue is becoming increasingly predictable. More importantly, the Internet service business remained profitable and continue generating stable cash, which provides an important financial foundation for our long-term AI and robotics investment. Turning to our robotics and other segments.

Starting from this quarter, we began recording the robotics and others business as a separate segment to present the operating progress of this business. Historical results previously reported on AI and others are now presented as robotics and others as well as global enterprise services. During the first quarter, revenue from robotics and others increased significantly year-over-year with revenue increasing 175.9% year-over-year to RMB 51.2 million, accounting for 19.8% of total revenue, adjusted operating loss from this segment narrowed by 57.1% year-over-year, reflecting continued improvement in operating efficiency and commercial execution.

Turning to Global Enterprise Services. This business remains strategically important to the company in addition to profitability contribution, it provides us with valuable enterprise customer relationships, overseas operating experience and real-world deployment scenarios for AI-related services.

During the quarter, Revenue from the advertising agency business was affected by policy changes from overseas advertising platforms, which impacted year-over-year segment revenue performance. However, revenue from our cloud and AI infrastructure services business increased by 68.3%, supported by increasing advertise demand for AI-related cloud and token management services. Moving to profitability. Operating loss was RMB 28.3 million during the quarter compared with RMB 26.5 million in the same period last year. The increase mainly reflected lower profitability from Internet and global enterprise services business following revenue declines in online advertising and advertising agency services as well as our continued investments in AI and robotic initiatives.

More importantly, the Internet service and Global Enterprise Services business remained profitable during the quarter. The Internet service business generated approximately RMB 15.2 million in adjusted operating profit, while our Global Enterprise Services generated approximately RMB 13.8 million in adjusted operating profit. We also maintained a strong balance sheet. As of March 31, 2026, we had approximately $186 million in cash and cash equivalents as well as over $100 million in long-term investments.

We believe our financial position provides sufficient flexibility to continue investing in the area and robotics with a disciplined and sustainable approach. Looking ahead, our financial priorities remain consistent: a, maintaining operating discipline; b, improving revenue quality and operating efficiency; c,supporting long-term investments while preserving financial flexibility. Overall, we believe the company continues moving toward a more sustainable and balanced operating structure as our AI and robotics businesses gradually scale. Thank you. We are now ready to take your questions.

[Operator Instructions] We will The first question comes from Thomas Chong with Jefferies. Please go ahead.

Thanks for management to accept my question. Recently, we can see that the market is attracting more and more attention to robot [Indiscernible] that the real value of robots is not only [Indiscernible] I would like to ask in the past few years, Cheetah has been in multiple commercial and operating robots for a long time. From your perspective. During this operation, do you have to simulate the dynamic data? Thank you for taking over so that we can move to robot. This is the most important foundation capability to develop.

Okay. Let me answer. Thanks, Thomas, for your question. I think you also pointed out a very important issue in the robotics industry, which is the issue of insufficient training data today. The rapid development of AI has given us very high expectations for the robotics industry. Believing that today's AI capabilities have improved. And robots should soon be able to achieve various behavioral capabilities. But in fact, I don't think so because the development of AI agent including the development of large language models is actually built on the development of the Internet for 2 or 3 decades.

The Internet essentially forms the basic training data of large language model. It is a very high-quality data set and the various problem in the robotics industry today is the lack of data. And many ways are being tried today with many manufacturers trying to use training data, including data migration, simulation training and so on. However, there is a very serious problem. The physical world is much more complex than the laboratory environment and the simulator environment. So today, whether it's data migration, collection or truly migrating to different ontologies, this adaptability will be a huge challenge.

Let me give you an example. Today's Tesla's FSD is already very good. But in fact, some older versions of Tesla's own cars cannot install the latest FSD. So indeed, data is a very big problem. I also very much agree with what he said. The data continuously generated in the real deployment environment is actually very important for the robotics industry from our own experience. Let me give you two examples.

One aspect is our voice interaction capability in different environments, which is actually closely related to our long-term exploration in various scenarios. Different noises, different environments, multiple people and so on, we have made some optimizations and training on the data. Therefore, the interaction effect of our interaction robots, including reception are leading in the industry today.

We have a reputation of our own in the industry. Another example is the mechanical mobility, a very simple robot can navigate indoors from point A to point B. It is similar to a small low-speed driverless vehicle, how to use cheap chips and sensors to achieve automatic obstacle avoidance in different environments. In fact, all of these can only be achieved based on massive amounts of data. We recently launched a smart wheelchair, which we just mentioned, we started mass production in May. And now it seems that in overseas markets, especially in Europe, the sales momentum is quite good.

In fact, for a traditional wheelchair product like this to achieve obstacle avoidance and assisted driving, many manufacturers, including some start-up manufacturers, want to achieve this kind of assisted driving capability, but to create a prototype and truly achieve good passing ability in many environments, it actually requires quite a lot of effort. This is related to the fact that we have deployed many robots in many environments over the years, regardless of the surface conditions such as carpets or floors.

We have also enhanced the reflection of walls, all of which have accumulated over time, there is also continuous algorithm optimization based on actual scenarios. Therefore, our wheelchair can truly achieve lower cost, highly assisted driving capability. It has also received...

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So at this stage, the value chain is definitely in this regard. But I want to say the first is why I think it is not the model layer because although the model, there is very fierce competition. But what we see now is that the gap between models is not too wide, and it is not easy to widen. Today, for example, the models of China and the United States, we think there is probably a gap of about half a year. And this gap is probably such a process. And there is no sign that pulls the other side away.

And among large manufacturers, I think the gap is a bit like ebb and flow. Of course, today's models are also in the early stage. And in the future, I think with the continuous increase in production of inference chips and training chips, the training costs will gradually decrease. So I think the model layer will be an infrastructure, but in the long run, it will not be monopolized. And with the continuous improvement of the model's capabilities, now we can see that many models, even if they are not top models but adapted to some daily tasks, have actually achieved very good results.

For example, some open source models in China this year have seen a significant increase in the amount of calls. And I think the core reason is that they offer great cost effectiveness. -- they have achieved high completion rates in some tasks. Therefore, I even think that in the future, various specialized models will continue to emerge. Of course, this will take some time. The second infrastructure layer, we do not fully participate in, but we also see that because we have our own cloud business and we have tokens clients consuming here, the growth is also very fast.

So I think this is a state of mismatch between supply and demand at this stage. But eventually, the infrastructure will also enter an economy of sale. And for applications, today, AI can actually reshape almost all applications. So there are huge opportunities in the application layer today, whether it is the industry we are doing like robots, we have been doing it for a long time, but we are still very firmly optimistic and the capabilities of the models continue to improve and the application of robots is wider, there are many things that it may be a bigger industry than the automotive industry.

There are also many opportunities at the software level, which I will not expand on here. Even today, when we look at some large model companies, their valuations are very high or excellent. In fact, they have truly delved deep into a certain application such as the programming of Stable Diffusion and the rise of Claude is actually an application. Its application is a coding application. It has made the coding application good enough rather than just providing an API for you to consult, but its agent has been well developed including OpenCloud that emerged at the beginning of this year, we have also developed products like EasyClaw.

So I think there is still a large room and opportunities in the application layer. Well, thank you.

The next question comes from the [Indiscernible] please go ahead.

This is my question. I also want to ask you about robotics industry. Has a lot of discussions about the future of technology, for example, can you tell [indiscernible] the people think it's product operation, or the product deployment. What do you think is the core competitive barrier of robots in the future? Which capabilities are the most difficult to replicate?

From my understanding of the robotics industry today, I believe that in the short term or within the next 2 to 5 years, the possibility of a particularly versatile robot appearing is very low. This is limited by both the so-called model capabilities and the entire hardware industry chain. The update on the hardware industry chain is actually relatively slow, and it involves some of the most basic physics and materials as well as the underlying logic of physical laws and materials.

So I believe today that the core skill barriers in the integrated industry in the future still lie in the true scenario operation capabilities. And in terms of client network, if today, we can have enough scenarios and have a good client network so that our products can really be used in these scenarios. We can accumulate our own unique experience or data. The first question has been answered, which is that we can optimize it.

And this optimization enables the product to provide better cost effectiveness to truly meet users' needs. The machinery industry is very high. But when it comes to business implementation, clients don't care whether you are a robot, a machine or a human. What they care more about is cost effectiveness, ROI, input and output. This has been very significantly reflected in our operations in recent years. So whether it is in the media, you've seen a lot of amazing things before, but you will find that it in a really an actual scenario, very few. Without going through actual scenarios. Let me reiterate this.

The operation of robots in the physical environment whether it is actions or work, its complexity is actually much higher than that of autonomous driving of cars. So in this case, a very high complexity, I think in practical application scenarios today, in the operational scenarios and customer networks, a vertical and penetrating points can be formed. It is much more important than a generalized machine and model because today, I don't think the generalized models and machines can quickly complete the ROI required in these vertical scenarios. Okay. Thank you.

Operator

The next question comes from Nancy Lu with JPMorgan. Please go ahead.

We see that recently basic model capabilities converge and API cost continue to decline are driving the acceleration of the commoditization of the underlying model, but enterprises generally adopt a multimodal strategy and no longer rely on a single model supplier has shifted from model performance to model application. I would like to ask in the future enterprise AI market. Where is the irreplaceable scarce capability and for future enterprise level AI products, where is the ultimate moat?

Thank you, Lu. I think this is a very broad question. I think the ultimate moat of enterprise level AI products should come from a deep understanding of user needs and a deep understanding of the industry. and then form an extremely high level organizational capability because the points you mentioned today are also realistic in terms of the capabilities of the model itself, it seems that one thing rises and the other falls. Then cost effectiveness is also increasingly being brought up. So what is the essence today?

It actually allows enterprises to save a lot of money that used to be spent on noncommercial insights, user insights and truly focus on understanding user needs. So the real moat comes from keen insight into user needs and quickly launching new products and services and improving your products and services. So we often talk about the AI-AT5 organization. Its essence is to use AI to reconstruct the internal organizational processes of the enterprise and to quickly and efficiently achieve the operation of the enterprise and to launch its own products and services more efficiently and quickly.

For example, if you pay attention, we have launched various product services in the past year, much more than in the past. But our investment in R&D has decreased a lot from the perspective of cost, although there is still room for improvement, this is an example. So when you launch products and services so quickly, where is your real moat? it comes from users' demand. You can really find users' demand and quickly launch -- and quickly respond to users' demand.

By the way, we have also launched some corresponding services and courses for the organizational construction of AI for the enterprise version and shared some of our experiences with our clients. Now some big clients have started to sign contracts. Operations have also begun. The essence of business competition lies in efficiency and insight into user demand. And I believe AI products can accelerate the arrival of these two points.

The next question comes from Qiong Yang with Guoyuan Securities. Please go ahead.

Hello, you just mentioned our company is investing in enterprise AI projects. We would like to know currently a large number of enterprise projects still rely on customized development and manual services compared to the standardized interaction model of traditional large products. The LLM moat will remain a mixed model of software and services for a long time. What's a key change in this process?

I think the core reason why there is still such a large amount of customization and manual services today is that AI is still in its early stage although we are seeing the moments of various media that most people's understanding of AI and its use is still insufficient. I think only a few people today can really make good use of AI. So this is a generation gap. Today's AI projects in a historical enterprise need to do customized development and manual services for the traditional SaaS has been developing for many years, and it has condensed many things in the code. So it seems that in many cases, it belongs to standardized delivery.

I think as everyone actually understand the AI, the entire staff are getting more and more proficient in AI application. The proportion of this service model will continue to decline. Our company has already achieved a model where all employees are using AI to write code and some of our internal systems are also starting to use AI to be written directly by the business department rather than relying on SaaS software and the service department. So the most critical change in this process is, on the one hand, I think the model capabilities are constantly increasing.

And today, for example, a very important feeling we have this year is that today, the business department is writing some internal software and services. And when using the model, we feel that the model capabilities have been improved a lot compared to last year, and many of them may have been more of a demo before or a demo level products that can already be used internally. The model capabilities will continue to increase. Another thing is that our organizational structure today is still based on the traditional one based on industrial software.

I think with the continuous emergence of emerging companies, new AI native organizations are emerging. And the traditional standardized SaaS model will be broken. So what we provide to our customers today is no longer the traditional type of service, but more of training, training for our clients' employees and assessment of AI capabilities to help them transform their AI organization. I think this change is the most critical, which means that companies need to change their organizational structure and demand for employees based on AI.

I'm Qiong Yang from Guoyuan Securities. I understand the question.

[indiscernible] Please go ahead.

I would like to ask -- in terms of the commercialization, the wheeled robots and robotic arms are still the most widely deployed and the most mature functionality. I'd like to ask Mr. Fu, what's your opinion? What will be the development structure of robots in the coming years?

I believe I've made my view on humanoid robots quite clear in media. I think humanoid robots will not be able to replace humans. In commercial applications, beyond performances in the next 3 to 5 years, no matter in factories or service industry or even in households. The difficulty of developing humanoid robots is extremely high. We have wheeled robots and robotic arms, like xArm in UFACTORY. Those robotic arm products have been steadily growing in recent years and has shown good growth in Q1 this year.

The wheeled robots are also doing well with practicality, cost effectiveness and indoor navigation technology already in a mature stage. Therefore, I believe we will also see rapid growth. This is in my view. I believe robots should evolve from specialized vertical model that continuously grow and gather data until they are advanced now. And then maybe integrate to gradually take a more general form. As for bipedal robots, I don't think they are needed in most scenarios. There's no need to add such cost and complexity, including its reliability. So this is my opinion, and we have reiterated it many times that what we care most about in making robots is the commercial landing that can really be accepted by the market and is really paid by the market entity, not just on project lending or some integrated projects.

So I think, the wheeled robots will gradually be matched with product fee in the future and for a long time, it will be the main form of humanoid robot development.

The next question comes from [ Guang Tao Jang ] from Bohai Securities.

I want to ask the domestic service worldwide is considered to be the largest market for robot in the long term, but at the same time, it is also the most complex in demand, and it is also the same with the highest challenges. In the past quarter, you also launched your own intelligent wheelchair [indiscernible] in the next 2 to 3 years?

Yes. Actually, home robots are a broad concept. If you really talk about home robots, the only breakthrough is a sweeping robot.It's also called a robot, right? But if you consider the robot that can do more household tasks like adults. I think the first reason why we make intelligent wheelchair is that in our view, intelligent wheelchair is a robot. But previously, our robots were used for delivery and intelligent wheelchairs can also be understood as delivering people. So I think the first type of family application is mobility, the ability to move from A to B.

The second is to add some functions on this mobility such as adding the ability to sweep the floor for a sweeping robot. What we see now is companionship, helping you achieve some family control, controlling a voice and integrating it into robots, helping you make some friend, and being a good companion. These are all part of the same direction. Actually, it can also be said that our wheelchair products have such functions, including the companionship function or the elderly, which will soon be launched on our HTP. I think it is like what everyone imagine such as the ability to do housework.

I don't think it's possible to achieve it within 2 to 3 years because we have our own robotic arm company. And our robotic arms are used in many scenarios, whether in industrial or commercial settings. I think in the scenarios like commercial dishwashing, we have seen such cases. Today, it's important to note that interacting with the physical world is extremely complex for robots, not because they can perform certain actions, but because of the stability that follows and the success rate, even the success rate of picking up a cup today is not 100% for any company, even in a kitchen environment or the home use.

If the success rate is 99%, we'll still accumulate broken cups. This negative impact is quite significant, not to mention if it enters a household, there will be issues like falling, bumping into things or hitting people. There's also the reliability of its quality. We expect the home appliance to work fine for several years after purchase. But for a complex robot, ensuring quality over a long period of time without malfunctioning is a tough challenge for many robotics companies today. Therefore, I believe that when it comes to home robots, we should be more pragmatic.

Our view is that robots should be able to truly provide companionship for the family and assist the elderly and people with disabilities in moving around. I think this is a great breakthrough direction. Thank you.

Operator. please check if there are any further questions. And if not, we can conclude the meeting.

Thank you. Seeing there are no further questions, this concludes both our question-and-answer session and today's conference. Thank you for attending today's presentation. You may now disconnect.

Thank you. Bye-bye.

Thank you.

And the conference has now concluded. We thank you for attending today's presentation. And you may now disconnect your lines.

Good day, and welcome to the Cheetah Mobile Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Helen Jing Zhu, Investor Relations of Cheetah Mobile. Please go ahead.

Thank you, operator. Welcome to Cheetah Mobile's Fourth Quarter 2025 Earnings Conference Call. With us today are our company's Chairman and CEO, Mr. Fu Sheng; our company's Director and CFO, Mr. Thomas Ren. Following management's prepared remarks, we will conduct the Q&A section. Please note that the management's prepared remarks are presented by AI agent. Before we begin, I refer you to the safe harbor statement in our earnings release, which also applies to our conference call today as we will make forward-looking statements.

At this time, I would now like to turn the conference call over to our Chairman and CEO, Mr. Fu Sheng. Please go ahead, Fu Sheng.

Good evening, everyone. Thank you for joining us. In 2025, we finished stabilizing the business and build a stronger foundation for Cheetah Mobile. During the year, our total revenue grew 43% year-over-year, driven by continued growth in both our Internet business and AI and other segments. In the fourth quarter, AI and others already accounted for half of total revenues, reflecting the increasing contribution of our new growth initiatives. More importantly, we achieved full year non-GAAP operating profitability, our first time in 6 years.

Our Internet business remained resilient in 2025, generating approximately RMB 460,000 in adjusted operating profit every working day. This consistent operating cash flow forms the financial backbone of the company and allows us to invest in robotics and AI in a disciplined and sustainable way. Our second highlight is robotics, which is emerging as a key structural driver. For full year, robotics revenue grew approximately 31% in the fourth quarter alone, robotics revenue reached about RMB 60 million, up 94% year-over-year and 43% quarter-over-quarter.

A voice robot in China achieved 100% year-over-year growth for 3 consecutive quarters, accounting for high single digits of the fourth quarter's total revenues. This progress is driven by our strategic focus on core strength in voice robotics and the integration of AI technology to enhance product experience. We are now seeing our voice robot become a must-have solution in resection, guided tours, retail environment, hospitals and service costs as they deliver proven measurable value. We recently introduced a new version of our voice robots, which comes with building skills like guiding, patrolling and advertising, enabling end customers to start using them right away, our robotic business mainly in serving overseas markets is making up high single digit of the first quarter's total revenues.

We focused on long-term demand from research institutions and the R&D teams that value openness and the customization. This customer base is fitting and repeatable, supporting long-term demand, building on our proven indoor autonomous mobility technologies. We are introducing a smart wheelchair, targeting developed regions such as Western Europe and North America. This product is positioned as a premium solution for users who value safety, independence and confidence in daily mobility. We are seeing a clear shift in demand as users increasingly value safety, assistance, and intelligent features in mobility products, while scalable solutions in the market remain limited. By applying our experience in service robots we are able to meaningfully improve the user experience.

During my own recent recovery, I personally use our smart wheelchair and saw a clear improvement in safety and convenience. Importantly, we can deliver these benefits without significant increasing the costs compared to traditional high-end electric wheelchairs making this a more practical and accessible product for users. We have entered into framework agreements with established mobility brands who will manage branding, distribution and aftersales services. Initial shipments are expected to begin in the second quarter of 2026, representing an early-stage commercial validation of this product category.

Across the industry, more companies are starting to test and deploy service robots. We believe the next 1 to 2 years will be a validation phase, where ROI and reliability will matter most. You don't need a robot that looks like a human. You need a robot that works every day, delivers measurable value and it's easy to operate at scale. This is exactly where our current products are positioned.

Our Internet business remains strong, generating steady cash flow, which allows us to invest in AI in a disciplined and sustainable way. For more than a decade, we have built utility applications serving hundreds of millions of users, described DNA, how we approach AI rather than competing in more development we focused on turning AI capabilities into practical tools that help users complete real task.

During the Chinese New Year, I spend a lot of efforts experimenting with an AI agent system built on the open cloud framework starting from a single agent that could barely complete basic test, the system evolved into a multi-agent team capable of running tests continuously. In one scenario, the system generated personalized New Year messages for more than 600 colleagues and manage the entire sending workflow automatically.

What we see emerging is not simply a new AI tool but a new way to organize digital work. AI agents can automate entire workflows from information gathering to processing and distribution, significantly improving productivity. Giving our new learnings, we introduced EasyClaw based on open cloud and open source agent framework for both domestic and overseas markets. EasyClaw is our AI coworker platform that helps users create and deploy task-oriented AI agents capable of executing real-world tests autonomously.

At this stage, we focus on execution capability rather than scale. We are already seeing a continued increase in user engagement as reflected in the rapid growth of our total token usage. We are building EasyClaw into an agentic operating system that changes how users interact with software and teams. By integrating EasyClaw into our PC products, we are improving user experience and driving higher conversion and ARPU.

In robotics, EasyClaw allows users to program and customize robots using natural language, including customization barriers. This helps us deploy faster, reduce cost and scale more easily, making our products more competitive. Some investors may ask how we compete with our training foundation models. It is the real advantage in the agent era, that is not in the model itself, but in the systems built on top of it, including top orchestration, tool usage and cost management. By leveraging open ecosystems and leading APIs, our product can evolve as models continue to improve.

Finally, our global DNA remains a core competitive advantage. We continue to expand both our AI tools and robotics businesses internationally with a disciplined approach. Looking ahead to 2026, we do not provide specific financial guidance, but we see continued structural improvements. We believe our robotics business will maintain strong growth momentum as commercial validation even and become a more important part of our revenue mix. At the same time, AI-enabled products will gradually enhance engagement and monetization efficiency across our software ecosystem.

We will increasingly apply internally to accelerate the development aiming to further improve operational efficiency. As we grow, we will continue improving transparency and disclosure, credibilities to data and our focus remains clear. Execute discipline and those results compound over time. Cheetah is entering its next phase of development combining digital coworkers through AI agents and physical coworkers through service robots supported by real operating cash flow and disciplined financial management. We are building the foundation for our next stage of growth. Thank you.

Thank you, Fu Sheng. Hello, everyone, and thank you for joining us. Unless otherwise stated, all financial figures are presented in RMB. 2025 marked a year of meaningful operational recovery and improved financial discipline for Cheetah Mobile. During the year, we continued improving operating discipline and cost structure across the company. We also created resources on commercially validated use cases in robotic products and practical AI applications, while leveraging open source ecosystem and third-party models to improve want efficiency and optimize infrastructure costs. This approach allows us to accelerate its operation without significantly increasing fixed costs. For the full year 2025, total revenue grew approximately 43% year-over-year to RMB 1,150 million.

Although we reported a GAAP operating loss of RMB 179 million for the year, this represented a substantial improvement compared with operating loss of RMB 437 million in 2024. On a non-GAAP basis, operating profit reached RMB 14 million compared with a non-GAAP operating loss of RMB 232 million, in the prior year, reflecting improved operating leverage. We ended the year with USD 215 million cash and cash equivalents.

Turning to our segment performance. Our Internet business continued to serve as a stable cash generating platform for the company in 2025. Revenue from Internet business increased 19% year-over-year to RMB 615 million with Internet revenue, Internet value-added services revenue increased 21% year-over-year in 2025, contributing 65% of segment revenue, supported by both paying user growth and ARPU expansion.

In addition, we observed that many users subscribe for periods longer than 12 months, reflecting the recurring nature of our utility locations and strengthening revenue visibility. In terms of profitability, the Internet business generated approximately RMB 115 million in adjusted operating profit in 2025, maintaining healthy margins and strong operating cash flow.

As Fu Sheng mentioned earlier, the Internet of business generates roughly RMB 460,000 in adjusted operating portfolio per working day which provides predictable cash flow to support strategic investments in new initiatives. Looking ahead, we expect the Internet business to remain stable and profitable while continuing to provide financial flexibility for the company to invest in long-term growth opportunities.

Turning to our AI and Others segment. Revenue from this segment increased 85% year-over-year to RMB 535 million in 2025, as a result, this segment accounted for 46.5% of our total revenue compared with 35.9% in 2024, reflecting the growing contribution from our emerging businesses. Within the segment, the robotics business continued to scale since the second half of 2025, making up 27% of the segment's revenue and 13% of total revenue in 2025. Robotics revenue increased 31% in 2025 driven by deployment of voice robot in China and continued demand for robotic arms in overseas markets, other businesses, overseas advertising agencies, service and multi-cloud management platform within this segment also contributed significantly to revenue growth, benefiting from increasing overseas expansion by Chinese enterprises.

At the same time, we continued to improve operating efficiency to more selective investment and disciplined cost control. For the full year, adjusted operating loss from the AI and Other segments reduced by 42% year-over-year to RMB 274 million as we continue scaling the business while maintaining disciplined investments.

Turning really to the first quarter performance. Total revenue reached RMB 309 million representing a 30% year-over-year increase and a 7% quarter-over-quarter increase, while Internet revenue declined slightly year-over-year, in the fourth quarter it increased quarter-over-quarter as we continue shifting toward a subscription-driven business model.

In addition, our subscription revenue within the Internet segment increased 32% year-over-year and 16% quarter-over-quarter as we chose to focus on subscription business model, which supports a healthier product and user experience. Revenue from the AI and Other segment reached RMB 153 million, accounting for nearly half of total revenue in the quarter. With this segment, robotic revenues increased by 94% year-over-year and 43% quarter-over-quarter to about 19% of the fourth quarter's total revenue.

Other than that, our revenues from overseas advertising agency service and multi cloud management platform also contributed to this segment's year-over-year growth. On a non-GAAP basis, the company generated operating profit of RMB 15 million in the fourth quarter compared to RMB 42 million operating losses in the same period last year. We believe the improvement we achieved in 2025 reflected structural improvements in both our cost structure and revenue mix.

Looking ahead, our priorities remain clear: disciplined growth, continued improvement in operating efficiency and disciplined capital allocation with stronger financial discipline, clearer strategic focus and increasing contribution from our emerging businesses, we believe the company is entering a more stable and predictable operating phase.

Thank you. We are now ready to take your questions.

[Operator Instructions] The first question today comes from Thomas Chong with Jefferies.

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Operator, can we move to the next question?

The next question comes from [ Nancy Lu ] with JPMorgan.

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Operator, please move to the next question. Thank you.

The next question comes from [indiscernible] Securities.

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Operator, please move to the next question. Thank you.

The next question comes from [ Yongping Diao ] with Guotai Haitong.

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Thank you, operator. Please move to the next question.

The next question comes from [ Jiji Zhu ] with GF Securities.

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Operator, please move to the next question.

The next question comes from [ Wei Feng ] with Mizuho Securities.

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Operator, please move to the next question.

The next question comes from [ Lydia Lin ] at Morgan Stanley.

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Operator, please move to the next question.

The next question comes from Vicky Wei with Citi.

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Operator, please move to the next question.

The next question comes from Zeping Zhao with ICBC.

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Yes. Thank you. Operator, please check if we have any further questions.

We have no further questions at this time, which concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you so much for joining our conference call today. And if you have any further questions, please do not hesitate to let us know. Thank you so much.

Bye-bye.

The conference has now concluded, and we thank you for attending today's presentation, and you may now disconnect your lines.

Good day, and welcome to the Cheetah Mobile Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note today's event is being recorded.

I would now like to turn the conference over to Helen, Investor Relations for Cheetah Mobile. Please go ahead, Helen.

Thank you, operator. Welcome to Cheetah Mobile's Third Quarter 2025 Earnings Conference Call. With us today are our company's Chairman and CEO, Mr. Fu Sheng; and our company's Director and CFO, Mr. Thomas Ren. Following management's prepared remarks, we will conduct a Q&A section. Please note the management's script will be presented by an AI agent.

Before we begin, I refer you to the safe harbor statement in our earnings release, which also applies to our conference call today. Management will make forward-looking statements.

At this time, I will now turn the conference call over to our Chairman and CEO, Mr. Fu Sheng. Fu Sheng, please go ahead.

Good day, everyone, and thank you for joining Cheetah Mobile's Third Quarter 2025 Earnings Call. I'm Fu Sheng, the CEO of Cheetah Mobile. I'm very happy to report that our turnaround efforts are paying off. We hit quarterly breakeven ahead of expectations. In Q3, we made an operating profit -- first time in 6 years. We believe we are well positioned to approach breakeven for the full year 2025. At the same time, our growth stayed strong in Q3, building on the momentum from the first half of the year.

Q3 revenue rose 50% year-over-year, driven by both our Internet business and our AI and other businesses. Our AI and other segment grew even fast, up 151% year-over-year and 6% quarter-over-quarter and now presenting 50% of total revenues.

So far, 2025 has been a solid year for Cheetah. Revenue in the first 9 months rose around 48%. We became profitable in Q3 and took important steps in our two AI focus areas, AI robots and AI tools. We believe this progress shows our investors were right to trust our vision and work. I want to thank our shareholders for their support. I know many of you invested in Cheetah because you believed in our ability to deliver a comeback. We are working hard every day to make that happen. I remain fully committed to leading the company forward and our results this year show that the turnaround is real.

Looking ahead, we will focus on driving growth by building new growth engines through our AI initiatives, AI robots and AI tools. Today, I will talk about our vision and progress in these areas. Thomas will follow with more on how we are building a lean cost structure to support long-term profitability.

Both AI robots and AI tools have enormous market potential, and Cheetah Mobile has strong advantages to build new growth engines in these areas. Additionally, we hold minority investments in several companies in this space, which could extend our organic growth in the future. In Q3, our AI robotic business contributed about 15% of total revenue, growing about 100% year-over-year and 40% quarter-over-quarter.

We see two drivers of this growth. First, strong demand for our voice-enabled wheel robots in China. In Q3, for the second quarter in a row, revenue from these robots doubled year-over-year. They now make up around 5% of our total revenues, supported by both repeat orders and new wins. As of September 30, 2025, the contract backlog for these robots in China was up 32% from the previous quarter. Since then, the backlog has doubled again, reflecting sustained demand. These trends make us comfortable for a continued strong [ UA ] growth in our revenue from these robots in the fourth quarter.

Why is demand rising? First, more customers are open to using robots. And today, wheel robots are the most reliable and cost-effective option for large-scale deployment. But more importantly, product experience is getting better. AgentOS, our voice system powered by AI agents, gives our robots a smarter brain to understand and respond more naturally to people. That improved experience allows us to charge a premium even in a competitive market, but most of our revenue growth came from higher shipment volume. We believe AgentOS not only enhances user experience but also strengthens our leadership in voice-enabled robots.

Our voice-enabled wheel robot, which integrated with Google's Gemini 2.5 Flash was recently featured by Google Cloud at its AI Asia Conference. We believe this is a strong sign of endorsement. We are continuously upgrading our AI agent capability and applying it to our products.

Looking forward, we think these robots can do even better overseas as we combine third-party genAI and multimodal models with our strength in voice AI and autonomous mobility to drive real-world applications. Second, our robotic...

[Technical Difficulty]

Sorry for the interruption, everybody. This is the conference operator. Looks like we've lost the main speaker connection. I will place hold music in the call, and we will get them connected again. Please standby.

Thank you for holding, everyone. This is the operator. I've reconnected the main speaker line. Please proceed with your call.

Hello, everybody, this is Helen from Cheetah Mobile. I think there are some tech issues then our call disconnected. I will just replay our CEO's prepared remarks. Very sorry for the inconvenience.

Good day, everyone. And of this growth, first, strong demand for our voice-enabled wheel robots in China. In Q3, for the second quarter in a row, revenue from these robots doubled year-over-year. They now make up around 5% of our total revenues, supported by both repeat orders and new wins. As of September 30, 2025, the contract backlog for these robots in China was up 32% from the previous quarter. Since then, the backlog has doubled again, reflecting sustained demand. These trends make us comfortable for a continued strong [ UA ] growth in our revenue from these robots in the fourth quarter.

Why is demand rising? First, more customers are open to using robots. And today, wheel robots are the most reliable and cost-effective option for large-scale deployment. But more importantly, product experience is getting better. AgentOS, our voice system powered by AI agents, gives our robots a smarter brain to understand and respond more naturally to people. That improved experience allows us to charge a premium even in a competitive market, but most of our revenue growth came from higher shipment volume. We believe AgentOS not only enhances user experience but also strengthens our leadership in voice-enabled robots.

Our voice-enabled wheel robot, which integrated with Google's Gemini 2.5 Flash was recently featured by Google Cloud at its AI Asia Conference. We believe this is a strong sign of endorsement. We are continuously upgrading our AI agent capability and applying it to our products.

Looking forward, we think these robots can do even better overseas as we combine third-party genAI and multimodal models with our strength in voice AI and autonomous mobility to drive real-world applications. Second, our robotic arm business is growing steadily supported by three key industry trends.

Number one, in manufacturing, collaborative robotic arms are becoming more and more popular because they're smaller, easier to install and more affordable, they're also safer to work with. So they help fill many unmet needs in factories like doing tasks that need flexible movement, careful and precise work or real-time feedback. These tasks now rely on human workers today.

Number two, in commercial spaces like coffee shops and smart retail, because of advances in lightweight design and easy programming and building vision of feedback, we are unlocking new use cases. Our team's ability to understand real-world needs and build practical products gives us an edge.

Number three, robotic arms are a core part of embodied AI. As global demand for physical AI grows, we believe robotic arms will play a key role in bringing AI into the real world. We strengthened our robotic arm business through an acquisition, demonstrating our strategy of combining organic growth with M&A. This business is a great fit for us. It is already profitable with tens of millions of RMB in annual revenue, most of it from overseas customers.

By bringing this company into our group, we've expanded our product line and strengthened our presence in global markets. More importantly, we started testing how to combine our wheel robots with robotic arms to create embodied AI that can handle more complex real-world tasks. It's still in early days, but our solid foundation in both technology and product development puts us in a strong position to grow in this space in the long run.

Moving on to AI tools. This is another area where we see long-term potential. We're using AI agents to quickly build a variety of new tools for both PC and mobile, and we're also upgrading some of our existing products with AI features. For example, in one of our legacy products, Duba Antivirus users can now interact with their PCs through natural language to complete tasks like system settings. No need for complex manual steps. And small-scale testing of other tools like meeting summarizers, we've also seen strong user engagement and good willingness to pay.

What makes this space exciting is that AI coding apps have greatly reduced the time and cost it takes to build and launch new products. This gives us the flexibility to test many ideas quickly and focus on what works. While we're still in the early stages, we believe our strength in building user-friendly tool-based apps, especially with the help of AI agents, puts us in a good position. And since subscriptions already make up more than 60% of our Internet revenue, we're confident in our ability to monetize future products through the same model.

To close, I believe Cheetah has moved beyond the turnaround phase. Looking ahead, our focus is on building long-term value by scaling our AI robot business and capturing the upside of AI-native tools. While we're still early, both segments have real momentum and strong potential to drive growth in the years to come.

Thank you, Fu Sheng. Hello, everyone, and thank you for joining the call. Unless otherwise stated, all financial figures are presented in RMB.

In the third quarter of 2025, we are pleased to reach an important milestone. We reported our first quarterly operating profit in the past 6 years. This achievement reflects the disciplined execution of our teams and the continued improvement in our operational efficiency. Operating profit was RMB 4 million in the quarter. On a non-GAAP basis, operating profit reached RMB 15 million compared with an operating loss of RMB 60 million in the same period last year and an operating loss of RMB 2 million in the previous quarter.

Let me walk you through the key financial results in the quarter. Total revenue reached RMB 287 million, up 50% year-over-year, driven by 151% growth in our AI and other segment. This segment accounted for 50% of total revenue compared with 30% in the same period last year. Our Internet business remained stable with revenue increasing 6% year-over-year in Q3.

Gross profit increased by 64% year-over-year and gross margin improved to 75%, up from 68% in the year-ago quarter. Operating profit improved to RMB 4 million compared with an operating loss of RMB 72 million a year ago. On a non-GAAP basis, operating profit was RMB 15 million compared with an operating loss of RMB 60 million last year.

By segment, our Internet business delivered approximately RMB 21 million in adjusted operating profit in this quarter, up 55% year-over-year. Adjusted operating loss for our AI and other segment narrowed by 82% year-over-year and 53% quarter-over-quarter to [ RMB 15 million ] in this quarter.

On the balance sheet side. Our financial position remains strong. As of the 30th of September 2025, the company has cash and cash equivalents of about USD 224 million and long-term investments of USD 107 million. We continue to maintain discipline in cash flow management and capital allocation.

Looking ahead for our Internet business, we will continue to deliver robust operating profits. We want to be clear that we prioritize operating profit growth over revenue growth.

For our AI and other business, we also aim to further manage our cost and expenses to a more focused and efficient approach. First, we are focusing on high potential use cases for our robotics business, that is the only way to build sustainable and profitable business models. We concentrate on AI-powered, voice-enabled wheel robots, products that have proved to deliver a highly competitive ROI, [ a cheaper ] alternative for reception, museum and exhibition scenarios.

Second, we leverage third-party and open source models and tools to enhance our robotic experience. This approach allows us to accelerate product updates, thereby increasing our overall efficiency. Third, for our advertising agency service and multi-cloud management services, we are taking a more disciplined approach, strengthening contract control [indiscernible] and customer value to better manage our costs and expenses.

Overall, at the corporate level, we will continue to invest in AI robots and AI tools as we believe these two areas will drive our long-term revenue growth. However, we will stay disciplined and ROI focused in every decision. I believe Cheetah has entered a much better phase compared with a year ago. In product development, as we shared in the previous calls, we encourage our employees to use AI tools such as [ coding ] apps to build their own AI, not only to improve productivity, but also to enhance decision-making. Leveraging AI allow us to develop products faster and operate them with fewer people than before.

Most importantly, with the AI opportunity, the business improvements we have achieved over the past year and growing recognition from the capital market, we are seeing renewed confidence and momentum across our teams. I personally believe these changes, stronger execution, disciplined investments, improved efficiency and an inspired team form the foundation for Cheetah to rebuild its success in this new chapter.

Thank you. We are now happy to take your questions.

Operator, please open the call for...

[Operator Instructions] And our first question today comes from Thomas Chong from Jefferies.

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Our next question comes from Vicky Wei at Citi.

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Our next question comes from [ Lydia Lin ] at Morgan Stanley.

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Our next question comes from [ Zhang Heng ] with Everbright Securities.

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Our next question today comes from [ Alicia Soh ] with JPMorgan.

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Our next question comes from Zeping Zhao with ICBC International.

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Our next question today comes from Joanna Ma with CMBI.

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Our next question comes from [ Jing Wan ] with CICC.

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Our next question comes from [indiscernible] from [ CYN ] Securities.

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Our next question comes from [ Yongping Diao ] with Guotai Haitong.

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And our final question today comes from [indiscernible] Securities.

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Okay. Operator, please check if we have any further questions. If not, we will end the call.

Yes, ma'am. We have no further questions in queue at this time. [Operator Instructions] I'm showing no questions, ma'am. You may proceed with any closing remarks.

Okay. And then we can end the call. Thank you so much for joining our earnings conference call today. Thank you so much.

Thank you, and thanks, everyone, for connecting to today's call. You may now disconnect your lines, and have a wonderful day.

Good day, and welcome to the Cheetah Mobile Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Helen Zhu, Investor Relations of Cheetah Mobile. Please go ahead.

Thank you, operator. Welcome to Cheetah Mobile's Second Quarter 2025 Earnings Conference Call. With us today are our Chairman and CEO, Mr. Fu Sheng; and our Director and CFO, Mr. Thomas Ren. Following management's prepared remarks, we will conduct the Q&A section. Please note that the management's script will be presented by an AI agent.

Before we begin, I refer you to the safe harbor statement in our earnings release, which also applies to our conference call today as we will make forward-looking statements.

At this time, I would now like to turn the conference call over to our Chairman and CEO, Mr. Fu Sheng. Please go ahead.

Thank you, everyone, for joining us today. In the second quarter, we delivered our best results since Q1 2021. Revenue grew 58% year-over-year, driven by a 39% year-over-year increase in Internet business and an 86% year-over-year increase in AI and other segments.

Our operating loss decreased 86% year-over-year, while non-GAAP operating loss was down 97% from last year, almost breakeven.

In the first half of 2025, our revenue grew by 47% year-over-year. We believe we can maintain fast growth in the second half of 2025, driven by about 100% year-over-year revenue growth in our AI and other segments, along with a stable Internet business. This shows our turnaround is working and gaining momentum.

What is even more important is how we work today. We have made AI a core part of our process working in an AI native way. Our R&D teams are small and flexible using AI every day to design, test and build products, much like open source developers. This helps us move faster and use fewer resources, ensures AI allows one person to do what once took a whole team. We have been investing in AI since 2016. And at the intersection of AI and robotics today, we now have advantages and experience that are hard to replicate. For example, GreetBot, our AI tool that turns video, audio and documents into summaries and apps runs with only 3 full-time employees.

Our core Internet business remains solid, thanks to our shift from advertising to a subscription model, which has improved user engagement and retention. Today, subscriptions make up about 60% of our Internet revenues. This healthy base gives us the room to invest in new AI products out staying financially disciplined. We are enhancing existing apps like Duba Anti-virus Wallpaper apps and PDF tools with AI agents. For example, in Duba Anti-virus, we are testing a new AI feature that helps users fix PC issues, especially long tail problems, it couldn't solve before and early feedback is encouraging while we are still in the launch and improvement phase for most AI utilities. We believe Cheetah has a natural advantage utility applications.

At the end of the day, the core value of AI utilities is to help people work more efficiently and productively. If we can deliver on that, we believe users will be willing to use our products. On the service robotics side, we made solid progress. Revenues from service robots continue to contribute to growth in the AI and other segment. In late July, we completed the acquisition of UFACTORY, one of the few robotic arm companies, that is already profitable and earns most of its revenue overseas, combining UFACTORY strengths with Cheetah's distribution network and 100-plus global partners give us a clear advantage to scale globally. UFACTORY arms are already being used at scale in real-world scenarios. From assembly picking, fixing and expensing tasks in factories, to grabbing beverages, making coffee and beers and commercial applications, strawberry harvesting in agricultural setting and even in universities for robotic research.

We now have a broad range of robots and our piloting wheel robots with arms that can handle more physical tasks in more places. We believe the true breakthrough in robotics is not just in using the most advanced lab technology, about finding technologies that match real-world use cases, which can scale and generate earnings for the company. While the future of robotics is exciting, our years of experience tell us that real commercial adoption depends on delivering sustainable ROI that customers can clearly see. Our strategy is to stay optimistic, yet patient, moving forward steadily. We will continue to identify scalable use cases and grow the business gradually.

That said, we want to caution investors that it is not something that will reach mass deployment in the coming quarters. The service robotics market is still developing, but AI agents are making robots smarter and easier to use since adding agent OS, our next-generation voice system powered by AI agents. Earlier this year, our voice enabled robot revenue in China grew by about 100% in Q2, both driven by recurring demand from our existing channel partners alongside expansion into new high-quality customers in health care, education, elder care and cultural institutions, such as the national center for the performing arts.

In addition, this growth does not rely on 1 of large orders, but comes from steady and repeat demand, especially in use cases like poor guiding and reception, which shows it is sustainable. Few companies have both our global experience in consumer Internet products and use of real-world robotics operations. This unique combination allows us to apply AI agent technology across both software and hardware, creating synergies that are hard to replicate, supporting our goal to become a leading service robot company in the coming years.

Looking ahead, our core Internet business remains healthy and profitable. We will keep investing in AI tools and robotics with discipline, and we are on track to reach profitability in the near term. Our strong cash position and zero debt give us the flexibility to grow while keeping our finances strong. The transformation is just getting started, but it is already producing results.

We are building 2 growth engines, AI-powered utility apps and AI robots that work together as synergistic forces, combining software and hardware to create a stronger moat, expand our market reach and open new growth opportunities. At the same time, our solid Internet business and strong cash resource provides a stable base with over 7 years of R&D in AI focused strategy and a culture of innovation, we are confident about the road ahead.

Thank you, Fu Sheng. Hello, everyone, and thank you for joining the call. Unless otherwise stated, all financial figures are presented in RMB.

In the second quarter of 2025, we continue to make meaningful progress narrowing our losses and improving probability as we remain focused on execution, efficiency and financial discipline. In fact, on a non-GAAP basis, we almost reached a breakeven point on the operating level in Q2.

Let me walk you through the key financial results in the quarter. Total revenue reached RMB 295 million, up 58% year-over-year and 14% quarter-over-quarter, marking a strong acceleration. Gross profit increased by 85% year-over-year and 19% quarter-over-quarter to RMB 225 million. Gross margin improved to 76%, up from 65% in the year ago quarter and 73% in the previous quarter. Operating loss narrowed to RMB 11 million, an 86% year-over-year decreased and 58% quarter-over-quarter decrease. On a non-GAAP basis, our operating loss declined RMB 2 million, down 97% year-over-year and 86% quarter-over-quarter.

Net loss attributable to Cheetah Mobile shareholders decreased by 82% year-over-year and 32% quarter-over-quarter to RMB 23 million. Non-GAAP net loss attributable to Cheetah Mobile Shareholders now by 87% year-over-year and 35% quarter-over-quarter to RMB 14 billion. These probability improvements reflect our ongoing efforts to sharpen the focus, improve the efficiency and optimize our cost structure, particularly as we attribute from early-stage experimentation to ROI, focused execution in our AI initiatives, in our AI robotics business, we have exited certain compute-intensive directions, such as creating our own foundation models, a strategic shift that significantly reduced infrastructure spend.

At the same time, we have streamlined our R&D process by levering AI tools and refocused resources on AI utility applications that generate user value. For example, R&D expenses accounted for 24% of our AI and other segment revenue in the quarter, down from 39% in the year ago quarter and 28% in the previous quarter. These efforts have materially improved the operating profit of our AI and other segments where adjusted operating losses decreased 63% year-over-year and 32% quarter-over-quarter.

Looking ahead, we remain confident in our ability to achieve profitability with a clear and disciplined strategy. We see 2 key drivers for this path. First, our Internet business continues to deliver steady profits and serves as a solid financial foundation in Q2. Adjusted operating margin for this segment was 14%, up from 12% in the year ago quarter. Our transition from an app-centric model for user subscription-driven model is showing good momentum. We believe this momentum is sustainable, supported by loyal user cohorts and diversified distribution channels, particularly in RA and Other segment.

We are building for long-term probability by growth in both our consumer-facing AI tools and enterprise-facing robotics. For our robotics business, we are prioritizing salable use cases with clear user demand and engagement, emphasizing our core competence in AI powered voice interaction, including natural conversation capabilities similar to our LLM-based agents and AI-based indoor mobility, which we believe offers the most reliable and cost-effective solution for scalable robot deployment, continuously improving our robot intelligence and product experience through AI agents maintaining a lean and agile team structure.

A recent milestone was our acquisition of UFACTORY, one of the few profitable robotic arm companies globally. UFACTORY brings a proven track record of profitable growth, clear market position and consistent value creation, fully aligned with our vision to scale differentiated robotic solutions over time. On the AI tools front, GreetBot, an AI tool that summarizes video, audio, PDF and other documents into concise takeaways and mind maps, has shown encouraging early user adoption, validating product market fit.

Our balance sheet remains strong. As of the 30th of June 2025, we have USD 282 million in cash and cash equivalents and USD 110 million in long-term investments. We generated RMB 362 million in operating cash flow during the quarter. This financial strength gives us the flexibility to continue investing in high potential AI growth opportunities while maintaining capital discipline. We will also remain open to strategic M&A that can accelerate capability building in targeted verticals.

To summarize, this was another quarter of measurable progress on our path to breakeven. We are encouraged by early signs of sustainable profitability supported by: one, our profitable and resilient Internet business; two, a disciplined ROI focused AI strategy; and three, strong capital flexibility to invest in long-term growth.

Thank you. We are now happy to take your questions.

[Operator Instructions] The first question today will come from Thomas Chong of Jefferies.

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Thank you. Operator, please move to the next question.

Our next question will come from Vicky Wei of Citi.

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Thank you, operator. Please move to the next question.

Our next question is from Nancy Liu of JPMorgan.

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Operator, please move to the next question. Thank you.

Our next question today will come from Brenda Zhao of CICC.

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Our next question today will come from [indiscernible] Securities.

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Operator, please move to the next question. Thank you.

Our next question today will come from [indiscernible] Securities.

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The next question today will come from [indiscernible] Huang of Everbright Securities.

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Our next question today will come from [indiscernible].

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Our next question today will come from [indiscernible] Haitong Securities.

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Our next question today will come from Joanna Ma of CMBI.

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Our next question will come from Jack Yang of Mizuho.

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Operator, can you please check if we have any further questions?

Certainly. [Operator Instructions] At this time, I am not showing any additional questions in the question queue.

Okay. And then we can just end up the call.

Thank you.

Thank you so much for joining our conference call today. So if you have any further questions, please just let us know. You can send us email or just give a call. Thank you so much.

The conference has now concluded. We do thank you for attending today's presentation. And you may now disconnect your lines, and have a nice day.