Market value shrank by 57%! Revenue fell by nearly 80%, and the cloud is struggling to land from technology and AI?

Text/Yang Jianyong

Since the beginning of this year, driven by ChatGPT, artificial intelligence concept stocks have been highly active, and iFLYTEK, as an AI leader in the market, has continuously reached a record high, with a market value approaching the 200 billion mark, and the current market value is 167.8 billion yuan. At the same time, Yuncong Technology, which is regarded as one of the four AI tigers, has also risen sharply, with the highest market value once exceeding 45.7 billion yuan.

Unfortunately, since hitting a record high, it has fallen sharply, and the stock price as of June 26 is 18.69 yuan, which has fallen 57.66% from the high, and the market value has decreased by 26.3 billion yuan. In the author's opinion, the boom brought by ChatGPT in the capital market will eventually return to value investment, and the core of AI technology will ultimately compete with landing capabilities. So, what is the operating capability of Cloudwalk Technology itself?

First, revenue showed a significant decline.

In the first quarter of 2023, the revenue of Cloudwalk Technology was 45.34 million yuan, a decrease of 168 million yuan, or 78.72%, compared with the revenue of 213 million yuan in the same period of the previous year. It was pointed out that it was mainly due to the macroeconomic environmental impact, coupled with seasonal factors, which led to the business expansion of new orders that was not as expected.

It is worth noting that the performance of Cloud Technology fell sharply by 50% last year. Revenue for the full year of 2022 was RMB526 million, a decrease of RMB550 million, or 51%, compared to RMB1.076 billion in 2021. It was pointed out that mainly due to multiple factors such as the slowdown in macroeconomic growth and the intensification of market competition, the decrease in project orders in hand and the delay in the construction of projects already invested, the business could not be effectively expanded, resulting in the revenue recognition amount in 2022 being lower than expected.

Second, the road to the landing of AI unicorns is difficult. Of course, there are also adverse situations such as a significant slowdown in demand in the downstream industry. However, players on the artificial intelligence track ultimately compete in the ability to land technology, which is also an important basis for measuring the strength of AI.

In AI landing scenarios, Cloudwalk Technology is mainly in AI landing scenarios such as smart governance, smart finance, smart travel, and smart business. However, the entire line of products has dropped significantly, of which smart governance, as the core revenue sector, accounts for 80% of the revenue. In 2022, the revenue of this sector will be 421 million yuan, a year-on-year decrease of 51.3%. As the second largest revenue sector, smart finance had a revenue scale of 77.75 million yuan, down 42% year-on-year.

At the same time, the competition in the track of cloud technology is becoming increasingly fierce. In the annual report, it is also mentioned that it is affected by multiple factors such as the intensification of market competition.

The risk warning of a sharp decline in performance claims that if the company has an increase in market competition, business failure to be effectively expanded, benchmark project delivery progress is not as expected, product prices fall, R&D investment continues to increase and R&D results are not transformed in time, artificial intelligence industry policies are adversely affected, downstream industry demand slows down significantly, etc., sales revenue may be at risk of decline.

It should be pointed out that the artificial intelligence market has gathered many heavyweight players, not only Huawei, BAT technology giants, but also traditional giants such as Hikvision and Dahua. There are also AI unicorns of the same type such as SenseTime, Megvii, Yuntian Lifei, and Geling Deep Pupil, and the volume is not as large as SenseTime and Megvii. According to the computer vision application market share of Chinese intelligence released by IDC, SenseTime and Megvii rank among the top two in the industry.

In the previous financial report, Yuncong also pointed out that on the one hand, the artificial intelligence industry is facing the competition of artificial intelligence companies such as SenseTime, Megvii Technology, and YITU Technology, which includes both the competition of core algorithm technical strength, and the competition of artificial intelligence applications and industry solutions.

Finally, the losses have widened and the losses have continued to lose, and it is difficult for Cloudwalk Technology to break the profit dilemma in the short term.

In the first quarter of 2023, Cloudwalk Technology lost 142 million yuan, a loss of 22% larger than the loss of 116 million yuan in the first quarter of 2022. The loss for the whole year of 2022 was 869 million yuan, compared with the loss of 632 million yuan in 2021, an increase of 37.5%. In the past five years (2018-2022), the loss exceeded 3.1 billion yuan.

Cloudwalk claims that in order to ensure high-quality iteration of artificial intelligence algorithm research and customized solutions for various application scenarios, and maintain a technological leading edge in the highly competitive market, it requires continuous large R&D investment. By the end of 2022, the number of Yuncong technology R&D personnel was 552, accounting for 57.08% of the total number, R&D investment accounted for 106.45% of revenue, and R&D investment in 2022 was 560 million yuan, a slight increase of 4.9% year-on-year, and the average salary of R&D personnel was 560,000.

Interestingly, Cloudwalk Technology made profit forecasts in its initial public offering and listing prospectus on the Science and Technology Innovation Board, and expects to achieve profitability in 2025. At that time, it was expected that the revenue would maintain a rapid growth trend from 2022 to 2025, with a compound growth rate of 33.6%, and when the operating income reached about 4 billion in 2025, the comprehensive gross margin level remained at about 50%, and the expense growth rate maintained a continuous and stable downward trend during the period, it could achieve profitability. It is expected to be 177 million yuan (Note: The profit forecast is a preliminary calculation data made by Yun from the assumptions of its own business plan and the specific conditions of turning losses into profits, and does not constitute a profit forecast or performance commitment).

However, from the 2022 data, the revenue showed a sharp decline, and the operating income was previously expected to maintain a rapid growth trend from 2022 to 2025, which obviously overestimated its growth potential.

In the risk warning that has not yet made a profit, Yuncong Technology pointed out that if the company faces fierce market competition in the future, market expansion is not as expected, R&D investment continues to increase and R&D results are not transformed in time, artificial intelligence industry policies are adversely affected, downstream industry demand slows down significantly, etc., short-term performance will decline and profitability will not be made, and uncovered losses will continue to expand, and then there is a risk that cash dividends cannot be paid to shareholders in the short term, which will adversely affect shareholders' investment income.

In addition, it should be pointed out that among the AI unicorns, not only Yuncong Technology, including SenseTime, Megvii Technology, Yuntian Lifei and other AI unicorns are also deeply in the predicament of loss. Interestingly, Geling Deep Pupil is the first manufacturer among AI unicorns to achieve profitability. The annual revenue in 2022 will be 350 million yuan, a year-on-year increase of 20.47%; The net profit was 32.9969 million yuan, turning losses into profits. Unfortunately, there was still a loss of 818,000 yuan in the first quarter of 2023.

epilogue

In the domestic market, ignited by ChatGPT, AI companies such as SenseTime, Cloudwalk Technology, Cambrian, and iFLYTEK, which have been sluggish in the market in the past year, have once again attracted countless attention. For investors, it is necessary not only to beware of rubbing hot spots, but also to pay attention to excessive speculation in the market. At the same time, the revenue of AI unicorns declined, indicating that in the process of commercialization of artificial intelligence, it is facing many challenges and huge market competition pressure.

It is worth mentioning that as an important global artificial intelligence market, with the continuous landing of AI applications, it indicates that players who are deeply engaged in artificial intelligence will usher in greater opportunities. However, persistent losses are one of the biggest problems for AI unicorns.

Jianyong Yang is a Forbes China contributor who focuses on cutting-edge technologies such as the Internet of Things, cloud services, artificial intelligence and smart homes.