Cheetah Mobile Inc. (NYSE:CMCM) Transcript of the Q3 2025 Earnings Call held on November 26, 2025.
Operator:Hello everyone, and welcome to Cheetah Mobile’s Q3 2025 Earnings Call. [Operator Instructions] This session is being recorded. I’ll now hand things over to Helen from Investor Relations at Cheetah Mobile. Helen, the floor is yours.
Jing Zhu:Hello, and thank you, operator. This is the Cheetah Mobile Third Quarter 2025 Earnings Conference Call. Present today are Mr. Fu Sheng, Chairman and CEO, and Mr. Thomas Ren, Director and CFO. After the prepared statements, there will be a question and answer period. Please be aware that an AI agent will deliver the management’s script. Before we start, I’d like to point out the safe harbor statement in our earnings release, which is also relevant to this call. Management may make predictions about the future. I will now hand the call over to Mr. Fu Sheng, our Chairman and CEO. Mr. Fu Sheng, you may begin.
Sheng Fu:Hello, everyone, and welcome to Cheetah Mobile’s earnings conference call for the third quarter of 2025. I’m Fu Sheng, CEO of Cheetah Mobile, and I’m pleased to announce that our restructuring initiatives are proving successful. We achieved profitability this quarter sooner than anticipated. In the third quarter, we generated an operating profit – a milestone we haven’t reached in six years. We are optimistic that we are on track to achieve breakeven for the entire year of 2025. Furthermore, our growth remained robust in the third quarter, continuing the positive trend from the first half of the year. Revenue for Q3 increased by 50% compared to the same period last year, fueled by both our Internet and our AI and other ventures. Our AI and other sector experienced even more rapid expansion, with a year-over-year increase of 151% and a quarter-over-quarter increase of 6%, now accounting for 50% of our total revenue.
Cheetah’s performance in 2025 has been strong to date. Revenue for the initial three quarters increased by approximately 48%. We achieved profitability in the third quarter and made significant advancements in our two key AI sectors: AI robots and AI tools. We feel this advancement validates the faith our investors placed in our strategy and efforts. I want to express my gratitude to our shareholders for their backing. I understand that many of you invested in Cheetah because you were confident in our capacity to stage a recovery. We are dedicated to making that a reality. I am still completely dedicated to guiding the company’s future, and our achievements this year demonstrate that the turnaround is genuine. Going forward, we will concentrate on stimulating growth by developing new growth drivers through our AI projects, specifically AI robots and AI tools. Today, I will discuss our vision and the progress we’ve made in these domains.
Thomas will then elaborate on our strategy for establishing a streamlined cost structure to ensure sustained profitability. The market opportunities for both AI robots and AI tools are significant, and Cheetah Mobile is well-positioned to develop new growth drivers in these sectors. Furthermore, our minority stakes in several companies within this field have the potential to bolster our organic growth going forward. In the third quarter, our AI robotics division accounted for approximately 15% of our total revenue, demonstrating a year-over-year increase of roughly 100% and a quarter-over-quarter increase of 40%. We attribute this growth to two primary factors. Firstly, there’s robust demand in China for our voice-activated mobile robots. In Q3, for the second consecutive quarter, revenue generated from these robots doubled compared to the previous year. They currently represent about 5% of our overall revenue, fueled by both recurring orders and newly acquired customers.
As of September 30, 2025, the order backlog for these robots in China increased by 32% compared to the prior quarter. Since that time, the backlog has doubled once more, indicating ongoing high demand. These trends give us confidence that we will see continued robust [ UA ] growth in our revenue from these robots during the fourth quarter. What’s driving the increased demand? For one, a greater number of customers are now willing to utilize robots. Currently, wheeled robots represent the most dependable and economical choice for widespread implementation. More significantly, however, the user experience is improving. AgentOS, our AI-agent-driven voice system, provides our robots with enhanced intelligence, enabling them to comprehend and react to people more naturally. This enhanced experience allows us to command a premium price, even in a competitive landscape, though the majority of our revenue growth stemmed from increased shipment quantities.
We are confident that AgentOS improves user interaction and solidifies our position as leaders in voice-controlled robotics. Our voice-activated wheeled robot, powered by Google’s Gemini 2.5 Flash, was recently showcased by Google Cloud at the AI Asia Conference, which we see as a significant validation. We are constantly improving our AI agent capabilities and incorporating them into our product line. Going forward, we anticipate even greater success for these robots internationally by leveraging third-party genAI and multimodal models alongside our expertise in voice AI and autonomous movement to create practical, real-world solutions. Second, our robotic… [Technical Difficulty]
Operator:Apologies for the disruption, everyone. This is the conference call administrator. It appears we’ve lost contact with the primary speaker. I’m going to put some hold music on the line while we reconnect them. Please wait. Thank you for your patience, everyone. This is the operator speaking. The main speaker’s line is now reconnected. You may continue with the call.
Jing Zhu:Hi everyone, this is Helen from Cheetah Mobile. We seem to have had some technical difficulties that cut us off. I’m going to proceed by reading our CEO’s prepared statement. Apologies for the interruption.
Sheng Fu:Hello everyone. Regarding our progress, firstly, there’s been a significant surge in demand for our voice-activated wheeled robots in China. In the third quarter, for the second consecutive quarter, income from these robots has doubled compared to the same period last year. They currently account for about 5% of our overall income, fueled by both recurring orders and new acquisitions. As of September 30, 2025, the order backlog for these robots in China increased by 32% compared to the previous quarter. Since then, the backlog has doubled once more, indicating consistent demand. These patterns give us confidence that we’ll see continued robust [ UA ] growth in our revenue from these robots during the fourth quarter. What’s driving this increased demand? Primarily, more customers are willing to adopt robots. And currently, wheeled robots represent the most dependable and economical choice for widespread implementation.
Beyond that, the quality of our products is improving. AgentOS, our AI agent-driven voice system, provides our robots with enhanced intelligence, enabling them to comprehend and interact with individuals more organically. This enhanced user experience enables us to command a higher price point, even amidst market competition, although the majority of our revenue gains stemmed from increased shipping quantities. We are confident that AgentOS not only elevates the user experience but also solidifies our position as a frontrunner in voice-activated robotics. Our voice-enabled wheel robot, incorporating Google’s Gemini 2.5 Flash, was recently highlighted by Google Cloud at their AI Asia Conference, an event we view as a significant vote of confidence. We are constantly refining our AI agent capabilities and implementing them across our product line. Moving ahead, we anticipate even greater success for these robots internationally, as we leverage third-party genAI and multimodal models alongside our expertise in voice AI and autonomous navigation to facilitate practical, real-world applications.
2. Our robotic arm division is experiencing consistent growth, fueled by three significant industry shifts. 1. Firstly, collaborative robotic arms are gaining traction in manufacturing due to their compact size, simplified installation, affordability, and enhanced safety. They effectively address previously unmet factory needs, such as tasks requiring adaptable movement, meticulous precision, or immediate response, which are currently performed by human employees. 2. Secondly, advancements in lightweight design, user-friendly programming, and integrated visual feedback are opening up new applications for our robotic arms in commercial environments like coffee shops and intelligent retail spaces. Our team’s proficiency in identifying real-world requirements and developing functional products provides us with a competitive advantage.
3. Robotic arms are fundamental to embodied AI. With the increasing global need for physical AI, we anticipate that robotic arms will be instrumental in integrating AI into practical applications. We bolstered our robotic arm division by acquiring a company, which aligns with our approach of blending internal growth with mergers and acquisitions. This venture is well-suited to our organization. It’s already generating profit, with yearly revenue in the tens of millions of RMB, primarily from international clients. Incorporating this company into our structure has broadened our product offerings and reinforced our international market position. Crucially, we’ve initiated experiments on integrating our wheeled robots with robotic arms to develop embodied AI capable of tackling more intricate real-world challenges. While it’s still early in the process, our robust foundation in both technology and product innovation positions us favorably for sustained growth in this sector.
Let’s shift our focus to AI tools, another field brimming with future possibilities. We’re leveraging AI agents to rapidly develop a range of new tools for both desktop and mobile platforms, and we’re also enhancing some of our current offerings with AI-powered functionalities. Take, for instance, our established product, Duba Antivirus, where users can now use everyday language to communicate with their computers to perform actions such as adjusting system settings, eliminating the need for complicated manual procedures. Furthermore, initial trials of other AI-driven tools, such as meeting summarization software, have demonstrated significant user interest and a strong inclination to pay. The exciting aspect of this domain is that AI coding applications have drastically cut down the time and expense associated with creating and releasing new products. This allows us to experiment with numerous concepts swiftly and concentrate on those that prove successful.
While we’re still in the early stages, we believe our strength in building user-friendly tool-based apps, especially with the help of AI agents, puts us in a good position. And since subscriptions already make up more than 60% of our Internet revenue, we’re confident in our ability to monetize future products through the same model. To close, I believe Cheetah has moved beyond the turnaround phase. Looking ahead, our focus is on building long-term value by scaling our AI robot business and capturing the upside of AI-native tools. While we’re still early, both segments have real momentum and strong potential to drive growth in the years to come.
Thomas Jintao Ren: Thank you, Fu Sheng. Hello, everyone, and thank you for joining the call. Unless otherwise stated, all financial figures are presented in RMB. In the third quarter of 2025, we are pleased to reach an important milestone. We reported our first quarterly operating profit in the past 6 years. This achievement reflects the disciplined execution of our teams and the continued improvement in our operational efficiency. Operating profit was RMB 4 million in the quarter. On a non-GAAP basis, operating profit reached RMB 15 million compared with an operating loss of RMB 60 million in the same period last year and an operating loss of RMB 2 million in the previous quarter. Let me walk you through the key financial results in the quarter.
Total revenue reached RMB 287 million, up 50% year-over-year, driven by 151% growth in our AI and other segment. This segment accounted for 50% of total revenue compared with 30% in the same period last year. Our Internet business remained stable with revenue increasing 6% year-over-year in Q3. Gross profit increased by 64% year-over-year and gross margin improved to 75%, up from 68% in the year-ago quarter. Operating profit improved to RMB 4 million compared with an operating loss of RMB 72 million a year ago. On a non-GAAP basis, operating profit was RMB 15 million compared with an operating loss of RMB 60 million last year. By segment, our Internet business delivered approximately RMB 21 million in adjusted operating profit in this quarter, up 55% year-over-year.
Adjusted operating loss for our AI and other segment narrowed by 82% year-over-year and 53% quarter-over-quarter to [ RMB 15 million ] in this quarter. On the balance sheet side. Our financial position remains strong. As of the 30th of September 2025, the company has cash and cash equivalents of about USD 224 million and long-term investments of USD 107 million. We continue to maintain discipline in cash flow management and capital allocation. Looking ahead for our Internet business, we will continue to deliver robust operating profits. We want to be clear that we prioritize operating profit growth over revenue growth. For our AI and other business, we also aim to further manage our cost and expenses to a more focused and efficient approach.
First, we are focusing on high potential use cases for our robotics business, that is the only way to build sustainable and profitable business models. We concentrate on AI-powered, voice-enabled wheel robots, products that have proved to deliver a highly competitive ROI, [ a cheaper ] alternative for reception, museum and exhibition scenarios. Second, we leverage third-party and open source models and tools to enhance our robotic experience. This approach allows us to accelerate product updates, thereby increasing our overall efficiency. Third, for our advertising agency service and multi-cloud management services, we are taking a more disciplined approach, strengthening contract control [indiscernible] and customer value to better manage our costs and expenses.
Overall, at the corporate level, we will continue to invest in AI robots and AI tools as we believe these two areas will drive our long-term revenue growth. However, we will stay disciplined and ROI focused in every decision. I believe Cheetah has entered a much better phase compared with a year ago. In product development, as we shared in the previous calls, we encourage our employees to use AI tools such as [ coding ] apps to build their own AI, not only to improve productivity, but also to enhance decision-making. Leveraging AI allow us to develop products faster and operate them with fewer people than before. Most importantly, with the AI opportunity, the business improvements we have achieved over the past year and growing recognition from the capital market, we are seeing renewed confidence and momentum across our teams.
I personally believe these changes, stronger execution, disciplined investments, improved efficiency and an inspired team form the foundation for Cheetah to rebuild its success in this new chapter. Thank you. We are now happy to take your questions.
Jing Zhu: Operator, please open the call for…
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