Morgan Stanley backs Kingsoft Cloud as pure AI cloud play with 64% upside potential

This Chinese cloud name offers a new way to play the AI boom, Morgan Stanley says

Kingsoft Cloud is refashioning itself into an artificial intelligence cloud player -- a move that should drive its shares higher, according to Morgan Stanley. The investment bank initiated coverage of Kingsoft Cloud with an overweight rating. It also put a $15 price target on shares, suggesting 64% upside from Monday's close. "We like Kingsoft Cloud's early and firm transition from a mid-tier commodity cloud player to AI cloud, with rapidly accelerating AI revenue and improving profitability, anchored by powerful ecosystem support from Xiaomi and Kingsoft Group," analyst Yang Liu said in a note to clients. "KC's timely transition and early all-in AI strategy have positioned it well in the AI era among the ten major public cloud players in China." Kingsoft Cloud has demonstrated strong pricing power amid a global chip shortage that has roiled other AI players, positioning it to continue adding upside to its shares, Liu said. KC YTD mountain KC year to date The company also stands to benefit from its strategic partnerships with several AI giants, including its agreement to provide the core infrastructure to Xiaomi's AI ecosystem and smart home platforms, per the bank. On top of that, it has recorded revenue growth from a variety of major customers, which should eventually translate into share gains, Liu added. More broadly, the cloud company has strong cash flow, which should "ease balance sheet constraints," keeping its stock price elevated, the analyst wrote. Morgan Stanley's call falls in line with consensus on the Street. All 11 analysts covering Kingsoft have a buy or strong buy on the stock, LSEG data shows. Shares have fallen nearly 12 % in the year to date. The stock climbed 3% in the premarket following the bullish call.

Morgan Stanley initiates Kingsoft Cloud stock with overweight rating By Investing.com

Investing.com - Morgan Stanley initiated coverage on Kingsoft Cloud Holdings Ltd (NASDAQ:KC) with an Overweight rating and set a price target of $15.00. The target represents a 64% upside from the current stock price of $9.13, though analysts' consensus suggests even greater potential with a high target of $26.09. The firm views Kingsoft Cloud as a pure AI cloud play and its preferred name in Greater China IT services and software coverage. The company reported that AI contributed 34% of revenue in the fourth quarter of 2025. Morgan Stanley forecasts a 35% revenue compound annual growth rate and a 79% adjusted EBITDA compound annual growth rate for Kingsoft Cloud over 2025-2028, driven by the AI cloud business. The firm projects AI will account for more than 40% of revenue in 2026 and exceed 60% by 2028. The firm expects adjusted operating margin to reach 6.9% in 2028 compared to negative 1.6% in 2025, supported by favorable unit economics of GPU cloud and potentially model-as-a-service. The company currently operates with a gross profit margin of 14.87% and remains unprofitable with an EPS of -$0.49 over the last twelve months. Morgan Stanley derived its price target from a 5.5x 2027 enterprise value-to-EBITDA multiple, at a discount to the U.S. neocloud peer median of 10x to reflect greater uncertainty around supply chain availability. Morgan Stanley identified downside risks including supply-side restrictions leading to procurement shortfall, higher-than-expected interest rates leading to higher cost of funding, and slower-than-expected AI model developments in China.For deeper insights into Kingsoft Cloud's valuation and growth prospects, InvestingPro subscribers have access to comprehensive analysis including Fair Value estimates and exclusive ProTips. The platform's Pro Research Report offers actionable intelligence on KC and 1,400+ other US equities. In other recent news, Kingsoft Cloud Holdings Ltd reported impressive earnings for the first quarter of 2026, surpassing market expectations. The company achieved an earnings per share (EPS) of -0.08 USD, which was significantly better than the forecasted -0.5 USD, resulting in an 84% positive surprise. Additionally, Kingsoft Cloud's revenue reached 2.7 billion USD, exceeding the anticipated 2.08 billion USD by 29.81%. Despite these strong earnings and revenue results, the stock experienced a decline in premarket trading, continuing a downward trend from the previous close. Investors appear cautious despite the company's robust financial performance. No new mergers or acquisitions were reported in this period. There were also no recent analyst upgrades or downgrades noted for Kingsoft Cloud. These developments highlight the company's current financial landscape and investor sentiment. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.