Cheetah Mobile Inc. American Depositary Shares, each representing fifty (50) Class A Ordinary Shares 2026 Q2 Earnings Call

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 three 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 three 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 one of our most important growth drivers. In the second quarter, services of cloud and AI infrastructure revenue were RMB59 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 RMB500 million during the quarter, compared with about RMB200 million in the same period last year and about RMB300 million in the previous quarter. This shows that the scale of customer demand is growing quickly.

Based on our current business momentum, we expect gross billings from services of cloud and AI infrastructure to exceed RMB2 billion in 2026, representing year-over-year growth of over 100%. We also expect related revenue to exceed RMB200 million, representing year-over-year growth of over 50%. We operate as a connection point between leading global clouds and AI ecosystems and enterprises expanding overseas. As enterprises use a broader range of clouds 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 the right models and integrate them into daily workflows, manage their computing and total costs, 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 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 RMB55 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 Pride Mobility and in China through SWIP. As a result, smart mobility began contributing revenue during the quarter. Our robotics arm business continued to grow. While revenue from our voice robots 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.

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 living capabilities developed through our robotics mark 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 a 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 reuse and 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 segments toward breakeven. Taking together revenue from services of cloud and AI infrastructure and our robotics and other segments accounted for about 43% of total revenue this quarter, compared with 38% in the previous quarter and 22% in the same period last year. Their share of our revenue has roughly doubled in one 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 a 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, who will discuss our financial results in more detail.

Thank you, Shaoxiang. Hello, everyone. Let me begin with our overall performance for the second quarter. Revenue was RMB266.1 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 70.0% year-over-year and 15.0% quarter-over-quarter to RMB22.0 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 RMB244.1 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 RMB73.6 million, compared to RMB28.3 million in the first quarter of 2026 and RMB11.1 million in the same period last year. On a non-GAAP basis, operating loss was RMB25.6 million, compared with RMB22.5 million in the first quarter. It compared with a non-GAAP operating loss of RMB2.1 million in the second quarter of 2025. The year-over-year increase primarily reflected lower advertising agency services revenue within global enterprise services.