Increasing revenue for two consecutive years without profit growth, why hasn't the AI story of "Edge Cloud's First Stock" Cloud Factory been monetized yet?

YunGongChang has fallen into a cycle of “thinner profits with greater expansion.”

On March 26, YunGongChang Technology (02512.HK), known as the “first stock of edge cloud,” released its performance report for the fiscal year 2025. During the reporting period, the company’s revenue was 944 million yuan (RMB, the same below), a year-on-year increase of 33.3%; net profit attributable to the parent was 11.8 million yuan, a year-on-year decrease of 4.8%; basic earnings per share were 0.02 yuan.

The Times Weekly reporter noted that this marks the second consecutive year that YunGongChang has been in a situation of increasing revenue without increasing profits since its listing in 2024. In 2024, YunGongChang’s revenue grew by 1.68% to 708 million yuan, while net profit attributable to the parent decreased by 13.16% to 12.091 million yuan.

Angel investor and senior AI expert Guo Tao analyzed to The Times Weekly reporter that the main reason for YunGongChang’s increasing revenue without increasing profits lies in the company’s traditional IDC business facing a growth ceiling and intense industry homogenization competition.

Founded in 2015, YunGongChang Technology Holdings Limited started with IDC (Internet Data Center) solutions and gradually developed into a leading enterprise in the domestic edge cloud sector. In June 2024, YunGongChang was listed on the main board of the Hong Kong Stock Exchange, being dubbed the “first stock of edge cloud.”

YunGongChang stated in its financial report that revenue growth was mainly attributed to the continuous expansion of business scale, with rapid development in IDC solution services and smart computing segments; the profit decline was mainly due to increased initial investments in intelligent computing centers, rising R&D expenses, and pressure on the gross profit margin of IDC business. During the reporting period, the company’s gross profit margin dropped from approximately 12.7% in 2024 to about 10.2%.

“The construction costs of data centers are high, and the return cycle is long. Coupled with clients having increased bargaining power over cabinet rental fees, this has led to sustained pressure on gross profit margins. Two years of increasing revenue without increasing profits is precisely because revenue growth relies on scale expansion, but unit profits are diluted, falling into a cycle of ‘thinner profits with greater expansion,’” Guo Tao stated.

The Times Weekly reporter called YunGongChang but received no response by the time of publication.

IDC business gross profit margin drops to 8.8%

Due to intensified market competition, YunGongChang, with its single revenue structure, is facing pressure on gross profit margins.

On the business front, YunGongChang’s core strategy for 2025 is to focus on “edge cloud + AI services.” Its core brand, “Lingjing Cloud,” provides edge computing and AI computing power services through edge nodes covering more than 2,000 districts and counties nationwide. The company’s customer base includes leading internet companies, as well as sectors such as government, telecommunications, finance, energy, and transportation.

From the revenue composition disclosed in the 2025 financial report, the company’s income mainly comes from IDC solution services, edge computing services, and smart computing.

YunGongChang’s traditional core business, IDC solution services, contributed 759 million yuan, accounting for 80.4% of total revenue. This segment remains the backbone of the company’s income, with a year-on-year growth of 15.2% and 16 new customers added during the year. Although IDC business revenue has grown, the gross profit margin dropped from 11.6% in 2024 to 8.8%. The company stated that to capture more market share, it proactively expanded some lower-margin businesses, resulting in a higher proportion of thin-margin sales, which led to a decline in overall profit levels.

First Shanghai Securities analysis believes that benefiting from the development of cloud computing, blockchain, and Internet of Things technologies, along with flexible business models, the Chinese IDC solutions market will grow at a CAGR (Compound Annual Growth Rate) of 17.0% to reach 53.032 billion yuan from 2024 to 2028, but competition will become more intense. Compared to traditional IDC, edge computing services have value-added advantages, with the Chinese edge computing market achieving a CAGR of 33.8% from 2019 to 2023, expected to rise from 99.4 billion yuan to 310.2 billion yuan from 2024 to 2028.

However, the edge computing business, which is highly regarded by brokerages, has not supported YunGongChang’s revenue growth, instead showing a decline. Financial reports indicate that YunGongChang’s edge computing services generated revenue of 4.2 million yuan for the year, a year-on-year decrease of 15.1%, accounting for 4.4% of total revenue, which the company attributed to phase changes in usage by major clients.

The new smart computing business, represented by AI computing power services, started from zero revenue in 2024 and contributed approximately 140 million yuan in 2025, accounting for 15.2% of total revenue.

Guo Tao believes that the key for YunGongChang now is to balance “conservatism” and “innovation.” YunGongChang needs to explore differentiation in its traditional IDC business, such as focusing deeply on customized services for specific industries to enhance the added value per cabinet. The AI computing power business needs to identify niche scenarios for entry, avoiding a broad rollout. It could initially bind to the computing power leasing needs of small and medium-sized tech companies, accumulating experience and cash flow with small orders before gradually expanding.

The dilemma during the transformation period

The industry transformation triggered by AI has made it inevitable for IDC companies to undergo transformation.

The Zhongyan Puhua Industrial Research Institute believes that the explosive evolution of generative AI technology is reshaping demand patterns, with intelligent computing demand becoming the core engine driving market growth, leading to a surge in demand for the deployment of high-density cabinets and heterogeneous computing architectures, accelerating the evolution of existing data centers into AI Data Centers (AIDC).

In other words, generative AI has changed users’ computing power needs, and traditional IDC’s ordinary server rooms can hardly meet them; they must upgrade to intelligent computing centers capable of running AI to avoid being eliminated by the times.

According to data from KZ Consulting, the market size of China’s intelligent computing center is expected to reach 128.9 billion yuan in 2025, a year-on-year increase of 18.7%, and is expected to reach 288.6 billion yuan by 2028, with a CAGR exceeding 30%. AI computing power demand has become the core engine for industry growth.

While stabilizing traditional businesses, steadily expanding AI computing power services is a common challenge faced by IDC companies.

According to The Times Weekly reporter’s analysis, leading IDC firms like Runze Technology and GDS Holdings are accelerating their layout in AI computing power. In 2025, Runze Technology will deliver AI computing power cabinets on a large scale, while GDS Holdings has signed long-term computing power leasing agreements with model manufacturers like ByteDance and Zhipu AI.

KZ Consulting has previously pointed out that small and medium-sized IDC businesses face significant challenges in transformation due to funding and technology constraints.

YunGongChang is also accelerating its transformation layout. In 2025, YunGongChang made multiple investments around “edge cloud + AI services”: the company established a heterogeneous computing power cluster in Wuxi Intelligent Computing Center in collaboration with AMD, constructing a synergetic platform between domestic and internationally advanced GPUs, and launched industry large model solutions targeting sectors such as transportation, government, and industry to expand AI application scenarios.

In March of this year, YunGongChang announced its collaboration with the China Academy of Information and Communications Technology to jointly build the OPC large model public service platform, integrating diverse GPU computing resources from NVIDIA, AMD, and Ascend to provide elastic computing power scheduling, model deployment, and API calling services, reducing the threshold for AI entrepreneurship.

While YunGongChang frequently lays out in AI computing power and platform ecology, the long layout cycle and slow monetization of new businesses have further exacerbated the pressure during the transformation period.

Guo Tao believes that AI computing power centers require substantial upfront investment, and continuous funding is needed for server deployment, power supply support, and heat dissipation technology upgrades. Additionally, customer cultivation and order ramp-up require time, making it difficult to contribute substantial increments to revenue and profits in the short term, leading to a gap in the transition between old and new businesses.

“If we continue to engage in low-margin businesses or blindly ramp up new businesses resulting in pressure on the cash flow, YunGongChang’s situation may become even more passive,” Guo Tao said.