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2026-11-04 12:03:28 The 3Q results of China's AI application companies delivered a clear lesson: AI revenue comes with costs, JPMorgan said in a research report. In the SaaS business, almost all incremental revenue translates into incremental profit; however, in the AI business, every task consumes tokens, meaning revenue and profit growth can diverge starkly. The broker believed investors should shift their focus from how much AI revenue a company can add to how much of that revenue ultimately converts into profit. By this standard, MEITU (01357.HK) strengthened monetization on the consumer side, while management also controlled enterprise-side spending. Meanwhile, KINGSOFT OFFICE (688111.SH) saw profit growth lag revenue growth because AI functions were bundled into existing customer fees. JPMorgan upgraded MEITU from Neutral to Overweight and raised its 12-month TP from HKD4.5 to HKD5. It downgraded KINGSOFT OFFICE from Overweight to Neutral and cut its TP from RMB325 to RMB251. The broker maintained Neutral on KINGDEE INT'L (00268.HK) and Underweight on YONYOU (600588.SH). Token prices are broadly similar across companies, with the key difference lying in pricing power, the broker noted. If AI provides customers with a new reason to pay, is priced based on labor cost savings, and charges heavier users more, companies can pass through costs. However, if AI is merely bundled into existing fees to retain customers, companies must absorb the costs themselves. JPMorgan therefore places greater emphasis on incremental gross profit, growth in paying users, and cost discipline, rather than AI usage volume or token counts. ~ AASTOCKS Financial News Website: www.aastocks.com | |