Shares of Kingsoft Cloud Holdings Ltd (KC) tumbled 5.37% in pre-market trading on Thursday, despite the company reporting strong fourth quarter 2024 results that beat expectations. The sharp decline suggests investors may be concerned about increasing competition in the artificial intelligence (AI) cloud computing space and management's cautious outlook on the competitive landscape.

During its earnings call, Kingsoft Cloud highlighted several positive developments, including a 29.6% year-over-year revenue growth to RMB2.23 billion, outpacing industry peers. The company's AI-related business surged nearly 500% year-over-year to RMB474 million, and it achieved non-GAAP operating profit for the first time. However, these strong results were overshadowed by concerns about the company's ability to maintain its growth and profitability in an increasingly competitive market.

CEO Tao Zou noted that while demand for AI inference is growing rapidly, especially within the Xiaomi ecosystem, large-scale deployments from individual customers are still limited. This cautious tone, combined with CFO Haijian He's reluctance to disclose pricing strategies due to "business secrecy" concerns, may have spooked some investors. The market reaction suggests that despite Kingsoft Cloud's current strong position, there are worries about its ability to maintain its competitive edge as more players enter the AI cloud market and pricing pressures potentially increase.