Thank you for standing by. Welcome to Kingsoft Cloud first quarter 2022 earnings conference call. At this time, all participants are in the listen only mode. After the speakers presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. Now I'd like to turn the conference over to Ms. Nicole Shan, IR Manager of Kingsoft Cloud. Thank you. Please go ahead.
Thank you, operator. Hello, everyone, and thank you for joining us today. Kingsoft Cloud first quarter 2022 earnings release was distributed earlier today and is available on our IR website at ir.ksyun.com, as well as on global newswire services. On the call today from Kingsoft Cloud, we have our CEO, Mr. Yulin Wang, and the CFO, Mr. Haijian He. Mr. Wang will review our business operations and company highlights, followed by Mr. He, who will discuss the financials and the guidance. They will be available to answer your question during the Q&A session that follows. There will be consecutive interpretation. All interpretations are for your convenience and reference purposes only. In case of any discrepancy, management's statement in the original language will prevail.
Before we begin, I'd like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding this and other risks, uncertainties, or factors is included in the company's filings with the U.S. SEC.
The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events, or otherwise, except as required under applicable law. Finally, please note that unless otherwise stated, all financial figures mentioned during this conference call are denominated in RMB. It's now my pleasure to introduce our CEO, Mr. Yulin Wang. Please go ahead.
Thank you, Nicole, and thank you all for joining our 2022 first quarter earnings call. In the first quarter, we generated RMB 2.17 billion in total revenues, which was an increase of 20% year-over-year, and above the high end of our revenue guidance range. Our public cloud services revenues reached RMB 1.38 billion, remaining stable year-over-year. Our enterprise cloud services revenues reached RMB 792.5 million, up 89% year-over-year. As previously communicated, starting from the second half of 2021, the Internet sector faced pressures from market headwinds, new regulations, and the epidemic. For public cloud services, traffic-driven demand continued to grow, but at a pace slower than before, as Internet companies focus more on high-quality development.
In response to the market change, we initiated our strategic adjustments in the fourth quarter of last year. We have proactively downsized our CDN services and allocated more resources to core cloud services, including computing, storage, and enterprise cloud, facilitating their fast growth. We are pleased to say that we have completed the strategic adjustments plan for this quarter, which has started to bear fruit. Gross billings from core cloud services increased 61.2% year-over-year and exceeded our guidance. The proactive downsizing adjustments of the CDN services are progressing in an orderly manner. In Q1, the gross billings for CDN services decreased 20.2% year-over-year.
In terms of profitability, our initiatives to cut costs and improve efficiency have delivered substantial results, with our adjusted gross margin improving to 3.8% from 1.2% in the fourth quarter of 2021. In future quarters, we expect to continuously evaluate and dynamically optimize resource allocation, enhancing business agility and promoting gradual improvement of profitability.
关于疫情的影响，三月以来，多地疫情卷土重来，防疫形势很严峻，对市场需求和线下经营造成了显著影响。对于公司业务来说，为应对流量型视频业务增速连续放缓，公司主动调减了CDN服务。但公有云中云计算的需求保持强劲增长，一季度账单收入实现同比45%的增长。整体来看，公有云业务规模保持稳定。行业云方面，市场需求庞大，但疫情导致了项目的招标、交付和验收进度的推迟。在客户方面，得益于优质客户战略，公司客户的自身经营稳健，我们保持与已有客户的稳定合作关系，同时加强拓展细分领域的领先企业。本季度在与Camelot的合作下，公司与零售行业领先的快消饮品公司元气森林首次达成合作。整体来说，短期而言，我们仍然面临宏观环境的挑战。我们将今年的发展重点放在了保持稳健发展，提升盈利水平，重点关注核心垂直行业。长期来看，我们认为随着数字化的进行，通过上云实现降本增效仍将是主要趋势。
Since the beginning of March, the COVID resurgence across China and the corresponding prevention measures adopted significantly slowed down market demand, and severely interrupted offline business operations. For us, in response to the continuous slowdown of the traffic-driven demands in the internet sector, we proactively scaled down CDN services, while the growth of our computing services among public cloud services remained strong, as gross billings of computing achieved 45% year-over-year growth. As a result, our public cloud services remained stable as a whole. In terms of our enterprise cloud services, the market demand potential remained enormous. However, the epidemic did cause delays in bidding, delivery, and acceptance checks of cloud projects.
On customer front, benefiting from our premium customer strategy and the robust business operations that such customers enjoy, we're able to maintain stable relationships with our existing premium customers while strengthening our efforts to expand our customer base with industry vertical leaders. For example, in the first quarter, we teamed up with Camelot to sign our first partnership agreement with Genki Forest, a fast-growing beverage brand in China. Overall, in the short term, we still face challenges from the macro environment. For this year, we plan to focus on quality growth, margin improvements, and core industry verticals. In the long run, we believe that the ongoing trend for digital transformation, where enterprises increase cloud adoption to drive efficiency and save costs, remains intact and will keep driving massive demand for our business.
在公有云方面，我们看到互联网客户越来越多，将非流量型的业务模块迁移至云服务，计算服务需求稳健增长。值得一提的是，在游戏领域，随着部分版号的发放，公司积极探索游戏客户的增量需求，与西山居的云游戏及某头部游戏客户的新游戏合作逐步推进。
Now on to our public cloud services. Internet companies have been transferring more non-traffic- driven business operations from their internal on-premise environment to cloud services. Therefore, computing services growth remains strong. We'd also like to mention that on the gaming front, with the recent release of several gaming licenses, we are actively engaging with our gaming customers on their incremental cloud service needs and are making progress in our cooperation with Seasun Game, along with another top gaming company, to support the launch of their new games.
在行业云方面，企业与机构将上云作为IT降本增效的重要方式，加快推进数字化，享受云计算带来的高效率和低成本。但由于疫情导致的项目不确定性增强，项目推进和交付成本存在波动。为此，公司对于项目质量和利润要求更加严格。本季度，在公共服务领域，公司助力贵阳产控产业园区建设，面向保障性租赁住房全场景的数字化城市租赁运营管理平台，满足用户各方对保障性租赁住房业务的运营、管理、监管等要求。作为有核心技术能力的云服务公司，我们持续深度参与东数西算工程，包括已交付的全国一体化算力网络国家枢纽节点，甘肃庆阳的展示中心项目。我们也在跟进东数西算、大数据及算力网络项目的机会。
Moving to enterprise cloud services. Enterprises and institutions across the board have been increasingly turning to the cloud as the natural choice of digital transformation. However, the epidemic has disrupted the pace of such demand, causing delays to project timelines and increases in delivery costs. To mitigate the impact, we are implementing higher project quality standards and margin thresholds. In the public services sector, we won the bid to build a one-stop rental housing e-platform for Guiyang Industrial Development Holdings Group. The platform allows users of various roles to operate, manage, and supervise the affordable rental housing services for the city. As a leading cloud company with core technology capabilities, we continue to take part in the national project, transporting data from eastern regions to western regions for storage and calculation, or in Chinese, 东数西算.
Besides the pilot project for the Xinjiang cluster in Gansu Computing Hub, which is one of the 10 national clusters, we expect to see more opportunities in big data and computing projects.
在金融领域，公司持续深挖头部客户多场景下的云服务需求，打造行业标杆案例，不断完善金融解决方案。随着Camelot的加入，公司在头部客户的覆盖率进一步提升。中国Top 20的银行目前已经90%覆盖，并且不断增加合作项目。本季度的重点客户项目包括为工银科技提供数据和云底座产品，与客户共同打造统一的金融服务与管理平台。在保险行业，我们将为龙头企业中国人寿保险提供公有云服务，这也成为更多保险行业客户由原有的私有化部署向混合云转变，提升保险客户对公有云认可度的标杆。
In the financial services sector, we continued to dive deeper into top customers' needs for cloud services in multiple scenarios, deliver industry lighthouse projects, and keep perfecting our solutions offering. With Camelot joining us, we further expanded our coverage of top financial services customers. We now serve 90% of China's top 20 banks and have been continuously adding cooperation dimensions. Take some of our key account projects, for example. During this quarter in the banking space, we won the bid to provide data management and cloud infrastructure products to ICBC Technology to jointly build a unified financial service and management platform. In the insurance space, we will provide public cloud services to China Life Insurance, a leading insurance company in China. This represents an important landmark project as it pioneers insurance companies transitioning from on-premise deployment to hybrid cloud environments by improving their recognition of public cloud.
在医疗行业，疫情以来，提升医疗数字化的水平愈发成为医疗机构、区域卫健体系和智慧健康城市的重要课题。医疗行业具有数据庞大、复杂度高、影像数据存储要求高、区域数字化发展程度不均衡等诸多行业特点。扎实稳定的数字云底座是承载驱动数据价值的基础。云公司成为医疗数字化进程中必不可少的建设者。三月以来，上海和江苏地区疫情防控形势严峻，公司快速响应，紧急调配团队和云基础资源，协助当地共同抗击疫情。其中在苏州昆山搭建疫情防控专题云底座，实现业务数据的采集、汇聚、治理、分析、集成和共享，提供了高质量、稳定的数据支撑服务，提升医疗数字化水平。在湖北省，继湖北省和武汉市医疗健康云项目后，公司承载湖北省专病防治应用信息系统的建设，建设系统中台，实现对专病系统的全面支撑。
In the healthcare sector, digitalization upgrade has become a key topic for medical institutions, regional healthcare networks, and smart health cities since COVID-19 started. Healthcare cloud solutions need to address several challenges, including the magnitude of data size, complicated structure, high storage requirements for image data, and varying digitalization levels among regions. A robust and stable digital cloud infrastructure provides the foundation for the value maximization of data assets. Cloud service companies like us have proved to be an essential component of the digital upgrade for the healthcare industry. As the epidemic resurged in Shanghai and Jiangsu Province since March, we took quick action and urgently deployed our teams together with cloud infrastructure resources to support local containment efforts. We set up a cloud infrastructure dedicated to Kunshan of Suzhou City for epidemic containment.
The infrastructure enables data collection, aggregation, governance, analysis, integration, and sharing, providing high- quality and stable data support. In Hubei Province, following our success with the healthcare project in Hubei Province and Wuhan City, we won another project to build an information system for special disease prevention and control, where we will be building a middle platform.
总体而言，今年复杂的经济形势和反复的疫情带来短期增长压力，但通过去年Q4以来的业务调整，我们为中长期的收入增长和利润提升打下了良好基础。云计算是一个长期赛道，发展空间广阔。公司将坚持稳健高质量发展的战略方向，提升业务稳定性和盈利水平，充分利用公司的技术优势，为优质客户提供稳定高效的云服务。
In conclusion, the complex economic environment and epidemic resurgence this year have put pressure on the short-term growth. Thanks to the strategic adjustments since Q4 last year, we have laid a solid foundation for mid to long-term revenue expansion and margin improvement. Cloud computing carries long-term potential. Looking ahead, we will adhere to our strategic direction and pursue steady and high-quality development, while improving our business stability and profitability. We will fully leverage our technological strengths to provide stable and efficient cloud services to our premium customer base.
接下来有请我们的CFO Henry为大家介绍一季度的财务业绩，谢谢。
I will now pass the call over to our CFO, Henry, to go over our financials for the first quarter. Thank you.
Thank you, Yulin, and welcome everyone for joining the call. Before diving into the financial details, I would like to walk you through the following highlights for the past quarter. First of all, our total revenue reached RMB 2.17 billion in Q1, above the high end of our guidance, which range from RMB 2.05 billion-RMB 2.15 billion. It represents a growth of 20% year-over-year. Within that, our core cloud services, including computing, storage, and enterprise cloud services, increased by 61.2% year-over-year this quarter. Second, we are pleased to see that we have been making significant progress in our cost control strategy execution. The adjusted gross profit for this quarter increased by 152% quarter-over-quarter to RMB 83.6 million.
Adjusted gross margin increased largely from 1.2% in the previous quarter to 3.8% this quarter. Adjusted EBITDA margin narrowed from -10.5% in the previous quarter to -7.1% this quarter. As we introduced in the last quarter, the new technology budgets from Internet sector clients in general have been increasing at a slower pace than expected. Starting from the second half of last year, the demands on us have been softened and affect our resource efficiency, connected to the bottom line. In response to the market change, since Q4 last year, we proactively downsized our CDN services and allocated more resources to our core cloud services. We have taken active cost control measures and improved overall operational efficiency.
Even though we are still facing the challenging macroeconomic environment, we believe we are on track to achieve the quarterly Adjusted EBITDA margin breakeven in Q4 2022. Third, as of March 31, 2022, we had cash and cash equivalents and short-term investments amounting to RMB 5.6 billion, providing us sufficient liquidity for operations. The CapEx for this quarter was RMB 622.4 million. The increase was primarily due to the procurement of high-performance servers, which cater to our increasing demands from our core computing services, as well as the cash payment for the servers we ordered last quarter. For the full year 2022, we expect to keep our total capital expenditure plan in the range of RMB 1 billion-RMB 1.5 billion.
We firmly executed our high-quality development projects and allocated online server resources prudently to our core cloud service growth. Last, our board of directors has recently authorized the company to repurchase up to $100 million of our ordinary shares in the form of American depository shares during a 12-month period. Today, we are pleased to announce that we have entered into a share repurchase program, which demonstrates our strong confidence in the company's growth and our commitment to generating long-term value for our shareholders. I will now go through our financials in detail. Revenues from public cloud remained stable year-over-year at RMB 1.38 billion this quarter. It was primarily due to 45.1% year-over-year growth of our computing services, and offset by 20.2% year-over-year decrease of our CDN business, which proactively narrowed down.
In terms of enterprise cloud services, even though COVID-19 has disrupted the delivery of certain offline products, market demand from traditional enterprises and organizations remains strong. Our enterprise cloud services achieved a solid increase of 89% year-over-year to RMB 792.5 million. In terms of cost control and optimization, we have achieved effectiveness this quarter. Total cost of revenues decreased by 20% quarter-over-quarter to RMB 2.09 billion. The IDC costs decreased by RMB 221.6 million from last quarter to RMB 1.11 billion this quarter. It remained consistent in bandwidth and cabinet cost, and the decreased trend was in line with our adjustment of the CDN business. Solution development and services cost decreased by 8% quarter-over-quarter to RMB 476.0 million.
It consists of payments to our solution design, development, and services personnel. Depreciation and amortization costs increased by 10% quarter-over-quarter to RMB 246.1 million. Fulfillment costs were RMB 184.5 million this quarter, and it represents the cost of purchasing technologies, products, and services from third parties to fulfill the demands of our solutions. Other costs were RMB 76.9 million this quarter. In terms of expenses, we have completed the preliminary organizational optimization and efficiency improvement, resulting in personnel expenses decreased compared with Q4 last year. Excluding share-based compensation and D&A, total adjusted operating expenses were RMB 532.2 million, decreased sequentially by 9.6% from RMB 578.7 million in Q4 last year.
Adjusted R&D expenses were RMB 221.7 million compared with RMB 246.2 million last quarter. Adjusted selling and marketing expenses were RMB 127.6 million compared with RMB 161.2 million last quarter. Adjusted G&A expenses remain stable at RMB 174.0 million. As of March thirty-first, 2022, we had sufficient cash and cash equivalents and short-term deposits of RMB 5.6 billion. During this quarter, capital expenditures were RMB 622.4 million. The increase was mainly due to the increasing purchase of high-end performance services to meet the incremental demand from strategic core services of computing and storage.
We expect our full- year CapEx to range from RMB 1 billion to RMB 1.5 billion, which will be prudently allocated to meet the demand from our core cloud services. Meanwhile, we have released our ESG, Environmental, Social, and Governance report for 2021, along with our annual report in early May. We would like to highlight that the nominating and corporate governance committee of the board is primarily responsible for overseeing ESG initiatives at a board level. The company has appointed its first independent female board director, enhancing gender diversity and workplace inclusivity. Looking ahead, we keep focusing on the balance between revenue expansion and margin improvement. We expect our total revenue to be between RMB 2 billion and RMB 2.2 billion for the second quarter of 2022, representing a year-over-year increase of about -8% to +1.2%.
It's mainly due to the offline fulfillment delay of enterprise cloud business in the middle of the short-term COVID-19 resurgence. We will continue to embrace opportunities post-pandemic. We are also in the view that our profitability will keep its upward trend. The adjusted gross margin will continuously to be higher in the second quarter compared with Q1. Under the stable market condition assumptions, we believe we are on track to achieve quarterly Adjusted EBITDA margin breakeven by Q4 2022. All these forecasts and comments above are based on our current and preliminary views of the market and operational conditions, which are subject to change. In addition, based on the capital market condition, we have already commenced a share repurchase program, which was authorized by the board in March to purchase up to $100 million of the shares during a twelve-month period.
We will closely heed the feedback from shareholders and deliver long-term value to our shareholders. Finally, we are moving forward with our Hong Kong Stock Exchange listing plan, and we are on track with this progress. We seek to maintain independent listing status in both Hong Kong and the U.S. to maximize protection of our shareholders. Given the recent positive progress in the negotiation on the Sino-U.S. auditing cooperation, combined with fluctuation in the global capital markets, we will carefully monitor and proactively adjust our execution timeline to safeguard the interests of our existing shareholders. We will closely monitor the market and the regulatory dynamics and proceed prudently at the right time. The final listing decision and timeline are subject to both regulatory approvals and market conditions. Thank you.
Thank you. This concludes our prepared remarks. Thanks for your attention, and we are now happy to take your questions. Please ask your questions in both Mandarin and English if possible. Operator, please go ahead. Thank you.
Thank you. As a reminder, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to withdraw your request, please press the pound or hash key. Please stand by while we compile the question- and- answer roster. Once again, if you wish to ask a question, please press star one on your telephone. Our first question comes from the line of Thomas Chong from Jefferies. Please ask your question.
Thanks, management, for taking my questions. My question is about the Q2 revenue guidance. Can management comment about the monthly trend that we are seeing in April, May, and June, respectively? Given right now we have already passed the first week of June, I just want to get a sense about our confidence level in terms of the guidance. Under what scenario would we be hitting the low end and the high end? Because I think the low end, we are talking about negative growth. Just want to get some color about our thoughts at this point. Thank you.
谢谢。问到是Q2的这个问题，其实Q2的主要的情况还是受到疫情的影响，然后大概分两部分吧。第一部分就是公有云相关的业务，其实受到的影响还是很有限的。那因为唯一的可能就是我们在华东和华北的增量的数据中心的这个进入受到疫情的一些限制，可能受到一些影响，但整体上带来的这个业务的影响的幅度还是比较小的。对，然后行业云的话，在Q2的话受到的影响是比较大的。其实虽然Q1就已经有在华南就已经有这个疫情的情况，但是因为我们还是做了一些准备，但是Q2的疫情的这个情况和突发程度还是超出预期。另外一个，这个管控的这个范围和时间的话呢，也比预期要长。所以这样的话使得我们的行业云的项目的招标、实施、交付受到了比较大的影响。那这样的话，因为现在，但到上周结束吧，我觉得随着上海北京的疫情的缓解呢，有一些的这个项目，一些客户都已经又重新开始，所以还有一个月左右的时间。那我们现在呢，力争利用这个月的时间能够把之前的进行中的这些项目的实施和交付能够把这个进度追回来一些。所以目前看到的这个guidance就是刚刚Henry给到的大家的那个Q2的那个情况，然后具体的情况到这个月底吧，我们现在和客户都还在努力。谢谢。
Thank you very much for your question. Essentially the second quarter is mainly impacted by the COVID situation. As you definitely see, I just elaborate according to the two services. In terms of public cloud services, we think the impact is limited. There is some small impact for the increased amount in our data centers in the eastern China and northern China for their increasing business operations. But it's not any material impact. The impact on the other hand, on the enterprise cloud side, is relatively large, especially in Q2, because basically the control measure in terms of the scope and the timing that it spans have exceeded our expectation.
That situation has impacted the bidding, the implementation, deployment and the delivery of our enterprise cloud projects. As far as we can see, since the end of last week, some of the projects that are ongoing, we have already started to resume those projects that have been impacted. We're still having, you know, several weeks towards the end of June. We are trying to catch up with the time to, you know, to meet the progress target as much as possible. That leads us to the guidance that Henry has provided towards the end of the prepared remarks. Thank you.
Thank you. Our next question comes from the line of Xiaodan Zhang from CICC. Please go ahead.
This is Xiaodan from CICC, and thanks to management for taking my questions. So, we've heard about the news of headcount cutting across many top-tier Internet companies. I just wonder, like, many of which are KC's key customers, so do we expect any change in their demands? And how will the dollar value of those core customers change? And accordingly, shall we expect any headcount adjustments within KC?
那我自己翻译一下。感谢管理层接受我的提问。那我的第一个问题是关于我们的这个互联网大客户今年的情况。那我们看到进入到2022年，很多的这个互联网大厂也开启了新一轮的人员的优化。那么作为金山云的这个大客户，那这些客户他们今年在公有云的这个需求上有什么样的变化？那这些核心客户的这个dollar value是呈现一个怎么样的趋势？好，然后我第二个问题是关于我们内部自己的这个人员调整的计划。谢谢。
好，谢谢。我们的头部的客户的话，我觉得还是分两部分吧，因为大家都关注的现在可能是互联网的头部客户会多一些。我刚才您提到的这个，我看成本和人员优化的问题，应该也是指这个互联网的这个头部客户。其实这个变化是，包括客户，包括我们都是在去年就已经基本上都是在计划之中的，所以我们去年Q4的时候就已经主动地对我们的业务的今年的这个规划做了调整。所以目前的情况从Q1和包括现在Q2进行的一部分看的话，基本上跟我们的预期是吻合的。那第一个呢，就是这个相关的整个的行业和客户的话呢，大部分都在做针对政策，针对自己的业务在做一些调整期，所以目前能看到的，就比如说第一个CDN的业务的话呢，其实整体的流量还是存在特别大的波动性，这是我们之前预计到的，所以我们主动调减了CDN的这个业务的供给量。那目前的情况这部分来说，跟我们的预期是一致的。第二个客户在目前在做业务调整，和尤其是在有降本、降低成本的需求的时候，其实反而促进了大部分的客户开始把原有的一些业务向云上迁徙，因为这个对于成本是有利的。
所以这个能看到就是说我们的大的客户的非CDN的这个用量其实是还是有进展的。那此外还有很多这个新增的这个互联网的客户，目前在Q1和Q2的进展也都已经有不错的进展。然后行业内的行业云的客户的这个头部客户，包括这个大客户的话，那目前主要还是受到疫情的影响吧，就是这个可能不是您刚刚问到的那个问题，这是第一个。第二个是我们自己的那个headcount的问题。对，那我们去年其实和Camelot，从去年Q3开始和Camelot一起对业务做了整合，然后对整个的产品研发架构都做了一些优化，所以我们自己的组织结构的人员调整的话，那目前在去年就基本上完成了。所以整个我们和Camelot的人数大概可能差不多加在一起差不多一万人左右的一个规模。那预计今年的话呢，可能大概还在这个规模的差不多吧，可能会稍稍略有一些下降，那整体上不会有太大的变化。谢谢。
Thank you very much for your question. In terms of public cloud, we know that the market is predominantly, you know, focusing on the internet conglomerates, which some of them are our customers. For the changes and adjustments that you mentioned, actually, we had already expected that. What we see that's happening in this quarter is exactly unfolding according to what we had expected. As mentioned in the expectation of those changes, we had proactively downsized our CDN business due to the increased volatility of the CDN business. Now, by adjusting downwards the CDN supply, you know, we're able to command a more profitable business, which again is consistent with our expectation.
You know, another part of the non- CDN business for those customers of ours is that when they are focusing on reducing their costs, it is also an incentive for them to increase the cloud adoption, which is good for their cost savings. Therefore, we are observing increased amounts for non- CDN business cloud usage. Thirdly, we have also made progress in the first quarter in terms of new customers for public cloud services. In the enterprise cloud space, I know you didn't particularly ask that, but as we discussed earlier, it's mostly impacted by the COVID situation and control measures.
For the second question, you asked about the KC headcount adjustments. Since the completion of the acquisition of Camelot last year, we have started the integration with Camelot, which includes the integration of the employees, which has largely been completed by the end of last year. As of now, we have a combined headcount of roughly 10,000 people for KC and Camelot combined together, and we expect that number to remain relatively stable or with a small decline throughout this year, but largely stable. Thank you.
好的，谢谢管女士。
Thank you. Our next question comes from Kyna Wong from Credit Suisse. Please ask your question.
谢谢，谢谢管女士让我接着提问。就是有个问题是跟刚才Thomas的问题有些关联，就是玉林总讲过这个企业云受到的一些影响，那我想要再请教一下，这个影响就是受到疫情影响，在一季度跟二季度这边都出现，然后现在在逐步在catch up的，就是在追回来之前一些这个项目的一些进度。但是呢，从整个全年的角度来看，其实会不会有些项目其实没有办法，就是能达到一个最后年底之前的一个完成的一个进度，然后也有一些项目可能是受到客户的一个这个预算的一个调整的影响，因为我们也就是了解到一些政务的，政务云或的一些政府的有些项目，他们也在调整一些预算，所以也想了解一下整个企业云这一块受到的一个，从全年的角度，一个是一个怎么样情况，是否就是还是能维持原来的一些目标。然后第二个问题呢，是在整个公有云的这个行业的一个变化，因为我们也看到公司也主动在降下来这个CDN的这个部分，但是我们也看到有不少的这些非互联网的这个云的厂商也在公有云这边有不少的进展，除了英建的，但是也有一些是这个运营商这边也主动在提升自己的一些能力等等，所以想要再了解一下今年怎么看这个公有云的这个市场的一个变化，还有未来的一些趋势。
Now let me translate myself. The first question is actually a follow-up question that I wanted to seek out more details about the impact on the enterprise cloud, because perhaps some projects cannot be completed by the end of this year due to the pandemic impact in the first quarter and second quarters. Some are actually impacted by the adjusted budget from the government, or like public service projects. The second question is about the public cloud industry trend, because I do see some landscape change here, and I wanted to hear the sharing from the management. Thank you.
好，谢谢。那第一个问题就是关于疫情的影响，因为刚刚提到，疫情对公有云的影响其实是不大的，而且目前看起来跟去年的情况差不多，因为疫情的影响，其实公有云的用量还甚至存在一些短期内的增量，就跟去年和前年的情况类似。那现在主要就是行业云的问题。目前我们看到的一Q的情况呢，基本上还可控，因为我们其实一quarter是在差不多春节回来之后，从华南开始才受到一些影响，不是整Q。那Q二的话，差不多从四月、五月一直整个就是一个疫情的情况是比较严峻的。那目前我们看到的情况呢，第一就是目前都是项目的一个delay的情况，就是包括在进行中的项目的实施和交付出现了delay。第二个，原本在Q二要准备进行的一些新的项目的招标和进展也出现了一些delay。目前就是项目进展中的这个delay的话呢，我们自己现在因为现在才五月份，我们自己认为还是全年能够追得回来的，就是就算Q二追不回来的话呢，那Q三、Q四还是有时间的。对，然后这个计划中的，比如招标中的或者未来的这种项目的话呢，我们目前在跟客户的沟通的过程中呢，还没有出现这种大的变化。就是至于说整个全年的，尤其是在公共服务和医疗服务领域的话，那是否会出现比如说大的这种偏差的话呢，目前我们看到的这个风险不大。
所以整体的话，全年的预期我们现在还是在按照我们自己既定的这个预期向前在进行，所以目前应该没有什么大的调整。然后第二个就是您提到的这个公有云的业务的情况的话，其实目前就是大家从去年Q四开始呢，互联网厂商对业务都在做调整，那这个的话我们跟客户的沟通还是比较通畅的，所以没有什么特别的突发性的变化。从我们的业绩上也确实能够看得到我们的客户的，无论是存量的、原有客户的存量业务的增长，还是新客户和新业务的增加，其实在我们Q一刚公布的数据中还是有非常非常快速的增长。那从目前看的话呢，全年这个趋势还是比较明显的。然后从竞争格局上看的话呢，因为我们所专注的这几个行业，比如说互联网、金融、医疗和公共服务的话呢，都还是门槛和技术门槛壁垒，和客户服务的相当高的壁垒的行业。我们经过这么多年的持续经营吧，我们在这几个领域来说，我们自己认为我们的优势是在不断加强的。所以从目前我们看到的情况，在我们所专注的这几个行业里面来说，行业竞争的情况没有什么特别明显的变化，然后我们自己觉得我们自身的竞争优势还是在不断的增强之中。好，谢谢。
So, um-
Impact-
Yeah, thank you very much for your question. I think to answer the first question about the COVID impact, essentially, the impact is pretty much concentrated on the enterprise cloud side. While on the public cloud side, the COVID situation does not have any material impact on our business. Especially, we do think maybe there is actually some short-term upside of the public cloud usage, just for that COVID factor, per se. For the enterprise cloud side, for the first quarter, actually, the impact is limited because it's mainly after the Chinese Spring Festival that the impact has started to show, the resurgence of the COVID situation starting to take place.
The second quarter impact was almost covering the full quarter, so it's relatively severe. There are two kinds of situations. One is that some of the projects that's already in process and we're essentially you know seeing delays on those projects. For those sorts of projects, because we're currently still in June, in the early June, we think if you take a look at the full year perspective, we do think there's still time to catch up with the time that's lost, during you know, during the quarter due to the control measures.
For the second type, which is essentially the bidding process that got delayed during the control measure, we think that you know, according to our communication with our prospective customers, there's no material change in that respect, especially in terms of public service customers and healthcare customers. We think the risk of missing the full year guidance currently, as we can see it, is not material. We think generally speaking, on a yearly basis, we're still on track to deliver the full year guidance right now. We don't think of any necessity to adjust for that guidance for the enterprise cloud business.
Now, for the public cloud side, our communication with our key premium customers, those internet customers included, has been very smooth, and we have a very open and smooth channel for communicating with them. Despite all the changes and challenges that you mentioned, those are things that's not outside of our expectation. For both as you can see, and also evidenced by the numbers that we just disclosed in the first quarter, for both existing customers and new customers, there has been a relatively faster growth for the usage of the non-traffic driven demand. That's something nice to know.
Also in terms of competitive dynamics, we think that, for the industry verticals that we're focusing, namely the financial services, the internet, the public service and healthcare, the barrier to entry in those particular verticals actually are relatively high. We think after this many years of operation, our competitive edge has been reinforcing. We think we do not see really, you know, material change in the enterprise cloud competitive dynamic. Thank you.
Yeah. Kyna, if I may, I also happy to offer a few more data points to help and triangulate this.
First of all, if you remember, in the recent disclosed annual report, our dollar retention rate for the public cloud clients for last year was around 114%. Even consider the active decrease of the CDN revenue contribution, this number, if you are doing a rolling basis into the Q1 this year, we still believe it's above 100%. That's actually as a base of the growth of the revenue opportunities for across the board of the public cloud clients. The second point is, if you look at our previous mix of the revenue of the CDN versus the computing business, in Q1, our computing business itself actually deliver a very solid growth, around 40% on a year-over-year basis. I think this number is also above the industry average in Q1, especially in a very difficult market conditions. If you're putting the two numbers together, you may see a relative flat number, but the fundamental demand of the computing demand for from our Internet client base actually pretty okay.
If you cross-check the number with our CapEx expenditures in Q1 this year, we spent about RMB 600 million. You can tell that the money we spent, basically the servers and the high-end infrastructures, already started to producing revenue in Q1 immediately. If there is a lot of risk and issues regarding the demand of the client, then our CapEx expenditure will not be converted into the revenue so quickly and efficiently in Q1, especially for the storage and computing business. I think these are the few numbers you probably can help and form a foundation of the growth, especially from computing and storage and the relatively high-end business from our public cloud clients.
Thank you.
Thank you. Ben very helpful. Thank you. Our next question comes from Joel Ying from Nomura. Please go ahead.
感谢管理层给我提问的机会。我有两个小问题。第一个就是follow上面一个问题，就是想问一下，一季度我们的这个CDN业务占整体公有云业务的比例大概是多少？然后可能跟过去可以比较一下。然后第二个问题是，就我们现在短期来看，今年的业务是不是重心会更多地放在这个企业云上，但是我们还是会就是两条腿走路，两个轮子，就是public cloud和enterprise cloud都会继续去deliver，继续会去focus on这个R&D，然后就是如果随着行业回暖，我们还是会有更多的这个进展，是不是我这样理解？I have two questions.
My first question is about CDN business. Can we release the, you know, the CDN business as percentage of total public cloud for 1Q 2022? Second one is for short term, because of the public cloud market situation, maybe we are focused on enterprise market, enterprise cloud, but in the long term, I guess we are still based on the two-wheel strategy, we'll, you know, focus on both, public and enterprise cloud and put the R&D into both sector to deliver business. Is my understanding correct? Thank you.
Yeah, sure, Joel, happy to take on the first question. There are a few important considerations when we think about planning and budgeting. We want to use the opportunity to balance not only the CDN revenue contribution, but also the top client concentration risk as well. There are a few important dimensions we'll track on annual basis. First of all, for 2022, we are assuming no single client will contribute in more than 20% of the total revenue of Kingsoft Cloud. Point number two is we want to assume around 25% or around the range of the CDN business as a total revenue of Kingsoft Cloud financial year 2022.
When we look at that strategy in Q1, I think we're happy to see that the CDN revenue as a contribution of total revenue of Kingsoft Cloud has decreased from historically, let's say above 50% right, in historical years, to around 30% already, below 30% in Q1. The trend is very clear. In following quarters, I think the absolute dollar value of the CDN revenue will remain relatively stable, because it will affect our total efficiency of the networking and the infrastructures. As a percentage of total revenue, we'll see gradually coming down the next few quarters. I think the two important dimension numbers, as I mentioned in the beginning, will be important guidance for when we think about the whole year, mix of the combination. Thank you.
Thank you. Our next question comes from Alex Yao from JP Morgan. Please ask your question.
谢谢玉林、Henry。我想跟进一下关于企业云的一个问题，就是咱们现在看到企业云的他们的预算投放是比较刚需的，企业就是现在一定要推进这个数字化转型，不管有没有疫情，不管它的业务受到经济的影响有多大，它一定要上马，一定要做的一个事儿，还是说是相对比较有弹性的，如果有疫情，如果有这个经济的疲软的话，这个是可以放一放的。我想这个问题可能进一步的是涉及到他们上了云以后，是不是可以立竿见影地就看到降本增效的这个效果反馈，还是说他们也需要摸着石头过河，有了这个云的设备以后，还要慢慢再琢磨怎么把自己的业务部署到云上面，怎么实现降本增效的这样的一个进程。那我自己翻译一下。So my question is to follow up the enterprise cloud demand in this year.
Based on your observation, is the budget allocation to adopt enterprise clouds very strong demand from the corporate that, with or without the COVID impact, with or without the economic slowdown impact, they will be very strongly committed to the adoption of the cloud? Or put another way, digitization of their own business? Or do they have more flexibility on cloud adoption? If the top line is facing pressure from macro, from COVID impact, they are likely to slow down the budget allocation to adopt those cloud solutions. I guess the answer has a lot to do will they be able to see immediate efficiency improvements or more monetization right after their adoption of these cloud solutions?
Are they still in the trial- and- error stage to figure out how to use the cloud solution to make their operation more efficient? Thank you.
Okay. Just to add on one of the prior questions, which was about whether we continue to do the two-wheel kind of driven business model going forward, and the answer is for sure, certainly. And for the public cloud side, we see that the demand continues to be actually very strong, being it driven by the cost reduction incentive of those customers or driven by the multi-cloud demand. So we continue to be committed to this type of business. And for the enterprise cloud side, it actually differs among across the vertical stack with specializing.
For example, in financial services sector, although the sector has been developing for many years, and we have, as Henry mentioned in the prepared remarks, have been covering 90% of the top 10 banks in China, there continues to be inelastic demand from those customers. That demand comes from the demand and requirements for technology and for their business. So it's not even, you know, related to, you know, their budgeting. So this is obviously an inelastic demand. This can also be evidenced by the fact that the COVID doesn't have any, you know, impact to this kind of project. The second one is healthcare industry, which, as you can understand, the COVID situation actually increased the demand for healthcare projects.
You know, that also increased the granularity of a lot of the healthcare institutions and government agencies management process and thereby driving more projects as well. The public services side, from our communication with the potential customers, we haven't really heard about the insufficiency of, you know, budgeting and therefore, you know, changing or cancellation of those projects. That's basically the situation. Thank you.
Operator.
All right. Thank you. Our next question comes from Thompson Wu from UBS. Please ask your question.
晚上好，各位，Good evening，谢谢您给我机会问一个提问。我有两个问题，第一个就是根据这个Alex的提问，其实很像，就是现在这个国内的中国这个宏观也是不太稳定，比较多呢，只是会好奇，就是这个因素在这个公有云这一部分，这个会不会对就是两到三年这个公有云的这个渗透率还是采用率，会有什么一些因素？这个是第一个提问。然后第二个提问就是跟释放一个线上的这个投资人问，他就是想要了解，就是现在全年，公司现在给什么一些指引啊，除了这个四Q这个adjusted这个net profit breakeven这个点，全年公司现在要给什么guidance。那我就用英文翻译，就是my first question asked is relationship with what Alex just asked about, a lot of investors are asking how China's macro situation and will impact enterprise cloud adoption over the long term, if there is any impact, and if so, what vertical specifically? And then the second question is asking on behalf of investor on the call, he/she would like to know what full year guidance the company has given beyond reaching an Adjusted EBITDA breakeven point in fourth quarter.
Has the company given full year 2022 guidance? Thank you.
好，谢谢。那第一个问题我来回答吧，就是目前的这个宏观经济的情况，其实大家都在关注，然后我们的公有云相关的部分，其实主要客户还是以这个互联网业务，互联网公司和企业客户的互联网业务为主。那从目前这个情况看起来的话呢，我们自己认为，不会受到太大的影响，就如果这个国家的相关的政策方面没有大的波动的话，那目前看到的情况是业务的这个发展还是非常稳健和强劲的，所以这个不会受到太大的影响。然后行业里的部分的话呢，虽然我们刚刚也有这个同事提到说这个是不是会有影响，那我们现在看到的就是，客户那边的话，并没有目前对项目和预算啊有什么这种改变。然后我们也看到了，其实也，更多的看到，就是政府这端对于下半年的这个经济发展，反而有很多新的这个政策和机会出来，所以我们自己认为呢，可能反而会有一波，可能这个原有的这个新的增量这个体现出来，这是我们自己现在的这个目前的情况，然后只是因为可能 Q2 的疫情的控制情况，可能会对整个业务的发展的节奏会产生一定的这个不确定性，然后整体的行业的发展的话，我们自己还是非常乐观的。然后那个 guidance 的话，那个 Henry 来解释一下。
We think that we understand that, you know, people in the market really care about macroeconomic situation in China. From our experience, you know, for our company in the public cloud service side, our customers are mainly internet sector customers, we feel like it's not going to be materially, you know, impacted as long as the general policy of the government remains stable. From what we can see our business for the public cloud side remains robust and with strong growth. We're relatively, you know, optimistic with that. On the enterprise cloud side, as mentioned just now, there hasn't been any, you know, significant sign of potential customers canceling projects or changing, you know, materially their budget.
We also see that the government has some incentivizing, you know, macroeconomic policies for the second half of the year, and we expect there might also be a wave of opportunities for us to seize. Admittedly, the COVID control measures in the second quarter have had some impact, but those impacts are mainly about the pace and uncertainty for that particular period of time. We don't think that.
Overall speaking, for enterprise cloud services part of the business, we remain optimistic.
Yeah, thank you, Thompson. On the second question, on the buckets of the profitability. You're right, I think we are expecting to hit the quarterly breakeven of the non-GAAP EBITDA margin in Q4 2022. As we also mentioned, given we are already in week one of June, so in Q2, I think our gross margin will be likely higher than Q1 2022. Hopefully we can keep an upward trend in general of the gross margin. On the second part, you know, given we're doing a lot of work on the cost control, mix and diversification of the clients, so hopefully our core cloud services, including computing, storage and enterprise SaaS as a whole, the total revenue of that bucket will be generally grow at a higher pace compared with the industry average and the major peers.
The third, while we are not providing official guidance for the full year total revenue, as CEO Yulin Wang mentioned, I think we are executing on track of our total budget internally. While there is a one-time and quarterly impact in Q1 given the COVID-19, hopefully on the full year basis will remain the same in terms of the total target internally and we are executing that based on that and there's no change of the total budget. Thank you.
Right. Thank you. Our final question comes from Timothy Zhao from Goldman Sachs. Please ask your question.
Thank you, management, for taking my question. My question is on the cost control side. Especially as we see in the first quarter, there was a big decline in IDC cost. How much further decline can we expect from IDC cost for Q2 and full- year? What other cost control initiatives are we going to implement for the rest of this year? Thank you.
Yes, thank you, Tim. Very quickly on this. Thanks for pointing it out. I think even in a very short period of time, we do see a great and a solid trend on the results. So you're right. We're approximately saving about RMB 200 million on IDC cost. As you know, within the IDC cost item, there are the leasing expenses we paid to rent the cabinets, and there are the bandwidth costs, which are a majority of the portion on the IDC cost. The major reason was our adjustment of the CDN business strategy since Q4 last year. Going forward, we are still assuming there are a few things we are working on.
We'll have further leverage to decrease the IDC cost, including there are better planning of rental of the IDC locations, including our budgeting and a more advanced technology to saving the energies, including a few initiatives we're taking to optimize the downloading upstream of the bandwidth capacities, and there are a few things we're working on that. I frankly don't think the D&A cost will go down because as you know, we're spending the CapEx to buying high-performance GPUs and infrastructures. I think assuming that is a good CapEx that will drive the good revenue. The D&A expenses, I don't think we're affecting a lot, and that mathematically, we're not affecting the EBITDA margin, as you understand, because the D&A expenses was adding back.
The fulfillment cost and the development of the solutions, those two items, I think given the further integration with Camelot, we may have further room to reduce the cost of those two items. Those two items are also benefiting, given we are selling more recurring business and products, we're also converting into a higher margin. As we are seeing, there are a few important clients, especially in the financial services and healthcare, who are doing already the phase II and phase III. The initial fulfillment and R&D expenses will be reduced given the scalability and the recurring basis of those revenue. Regarding the R&D, I think we may have some potential room to see a dollar value decrease going forward, while we continue to spend time and resources on the core strategy and technologies.
The sales and the marketing and the G&A, I think will be remain relatively flat, but I think the G&A will also have some flexibility to adjust on that. We have a very, strict, prudent internal approach to navigate and prioritize a few different initiatives, but I think those things will be unfolded in the next few quarters. Majority of the work has been completed and already in place. Thank you.
Great. Thank you very much for all your questions. I'll now turn the call back to Nicole for closing remarks.
Thank you, Amber, and thank you once again for joining us today. If you have any further questions, please feel free to contact us. Look forward to speaking with you again next quarter. Have a nice day. Thank you.
Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.