Kingsoft Corporation (03888.HK) Hot Stock Analysis: AI Transformation Opportunities and Gaming Business Challenges

Kingsoft Corporation (03888.HK) is a leading Chinese software service provider covering WPS Office, online games and cloud services [0]. In 2025, it became a hot Hong Kong stock due to AI strategic transformation and cloud service growth expectations [1], but recent underperformance of the gaming business caused a decline: Q3 2025 revenue was RMB 2.419 billion, down 17% year-on-year, and operating profit dropped by 75.8% [0]. Several investment banks cut target prices: CICC lowered it to HKD 39 [3] (maintaining “Outperform Industry”), Morgan Stanley lowered to HKD 33 [4] (maintaining “In Line with Market”). The company stabilized market confidence via share repurchases: cumulative repurchases in 2025 reached 4.9596 million shares [5]. At the industry level, China’s cloud infrastructure market grew over 20% in Q2 [6], with strong AI-driven demand providing growth space for cloud services.

1. Transformation Growing Pains
   : The long-term growth potential of AI/cloud services contrasts with the short-term decline in the gaming business, reflecting challenges of transitioning from traditional to emerging sectors [0].
2. Repurchase Signal
   : Against target price cuts by investment banks, share repurchases show management’s confidence in long-term value and stabilize stock prices [5].
3. Industry Alignment
   : China’s high-growth cloud market aligns with the company’s AI strategy; effective implementation is expected to become a core growth driver [6].

• Risks
  : Sustained uncertainty in the gaming business continues to affect performance; target price cuts by investment banks may exacerbate market volatility [3][4].
• Opportunities
  : AI technology empowers WPS and cloud services; cloud market growth provides expansion space [6]; repurchases support short-term stock prices [5].

Kingsoft faces a mixed situation during transformation: AI/cloud services are long-term drivers, but the gaming business has significant short-term pressure. Divergent investment bank ratings reflect market differences, and share repurchases and industry trends provide support. Investors need to focus on transformation progress and industry dynamics.