Good day. Thank you for standing by, and welcome to the Kingsoft Cloud's third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you wish to ask a question, you will need to press star one on your telephone. I must advise you that this conference is being recorded. I would now like to hand the conference over to your first speaker today, 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 third quarter 2021 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 CFO, Mr. Haijian He. Mr. Wang will review our business operations and company highlights, followed by Mr. He, who will discuss the financials and guidance. They will be available to answer your question during the Q&A session that follows. There will be consecutive interpretation. Our interpretations are for your convenience and reference purpose only. In case of any discrepancy, management's statement in the original language will prevail.
Before we begin, I'd like to remind 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 they 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 statement 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 call are denominated in RMB. It's now my pleasure to introduce our CEO, Mr. Yulin Wang. Please go ahead.
好，谢谢Nicole。大家好，欢迎参加金山云2021年第三季度的财报电话会。公司三季度总收入达人民币24.1亿元，同比增长约40%。其中公有云的收入为16.9亿元，较上季度环比增长绝对值又达到了1.4亿元。行业云收入达到7.3亿元，同比增长78%。2021年年初以来，公司在市场逆风、监管细化、疫情新常态的环境下，仍实现快速发展。作为中国最大的独立的云服务商，公司将以做客户最信赖的云伙伴，携手共创数字未来为使命，继续坚定执行公司的战略，立足中立定位，更深更广的服务优质客户群体，建立多维的生态合作关系，贯彻长期主义，提升发展质量。Thank you, Nicole, and thank you all for joining our third quarter 2021 earnings call.
In the third quarter, we generated RMB 2.41 billion in total revenues, which was an increase of 40% from the same quarter last year. Our public cloud services revenues reached RMB 1.69 billion, an increase of RMB 140 million over the second quarter. Our enterprise cloud services revenues reached RMB 730 million, up 78% over the same period last year. Since the beginning of 2021, we continue to deliver rapid growth despite market headwinds, regulatory changes, and ongoing challenges as everyone adjusts to a new normal as the pandemic continues to evolve. As the largest independent cloud service provider in China, we will continue to execute our growth strategies, strive to become the most trusted cloud partner for our customers, and to create the digital future together.
Our neutral position enables us to develop more in-depth and extensive collaborations with an expanding base of premium customers and further nurture our multidimensional ecosystem.
We believe we will benefit from our long-term thinking and achieve continued and sustainable growth。接下来我向大家具体介绍我们在主要垂直领域的业绩的情况。首先在公有云方面，尽管市场环境存在压力，本季度我们依然取得快于行业的增长业绩。凭借中立定位、领先的解决方案和深厚的优质客户服务经验，在多云部署的趋势下，公司的客户基础及产品服务多元化均得以显著提升。第二季度的业绩会我们介绍到，中国领先的本地生活服务商美团成为公司重要的新客户，那公司近期新客户群体用量的稳步提升将助力公有云收入的增量发展。继第二季度与美团开始合作后，本季度我们再次拓展头部互联网新客户。本季度我们非常高兴地看到中国最大的电商平台之一，拼多多也成为了我们的新客户。我们相信知乎、美团、拼多多这些新客户的发展趋势将会持续助力公有云的增长。那出行领域行业正在发生变化，但我们在变化中灵活应对，快速探寻优质的商机，积极与新的高质量优质客户合作。作为中国领先的移动出行平台，首汽约车提供全套的混合云解决方案，提供计算资源、DevOps和大数据PaaS层的产品。在泛互联网领域，我们在非视频游戏领域进一步推进行业多元化。我们继续为中国领先的在线旅游平台去哪儿网提供公有云的存储服务，并布局了容器、大数据、裸金属等诸多增值产品服务，合作关系进一步深化。在游戏领域，我们覆盖PaaS、SaaS和IaaS的全栈服务，获得客户认可，为爱奇艺的爆款IP手游疯狂原始人2提供了完整的游戏部署及架构方案，支撑千万玩家同时在线。
Now let me walk you through our performance across our major verticals. I'll start off with public cloud. Despite the challenging market environment, we still achieved faster growth than the industry average this quarter. Leveraging our neutral position in solutions and a premium customer experience, we made significant progress expanding our customer base and diversifying our products and services portfolio, especially for multi-cloud deployments. As mentioned in our last earnings call, Meituan, China's leading local lifestyle service platform, have become our new premium customers for public cloud services. Together with other newly engaged premium customers, their steady usage increases contributed to our public cloud revenue growth. Following our success with Meituan in Q2, we continued to expand our customer base among top Internet companies. We are proud to announce that Pinduoduo, one of the largest e-commerce platforms in China, has become our new customer in Q3. We believe such new customer engagement trend will continue and will drive our growth in public cloud services. We proved ourselves to be agile and move quickly to engage with emerging high quality premium clients amidst the regulation changes. We engaged with Shouqi Yueche, a leading player which has been rising amidst the shifting competitive landscape. We delivered a full suite of hybrid cloud solutions, including computing resources, DevOps, and big data products at the PaaS level. In the pan Internet space, we further diversified our offerings beyond video and gaming. We continue to provide public cloud storage services to qunar.com, one of the leading online travel platforms in China. On top of this, we provided them with more products such as containers, big data solutions, and bare metal servers. On gaming front, we are highly recognized by customers for our full stack cloud services, including IaaS, PaaS and SaaS. We signed an agreement with iQIYI Games to support their proprietary blockbuster mobile game The Croods two. We helped them plan and design their cloud architecture to support game development deployment, which resulted in a stable and smooth gaming experience for tens of millions of concurrent players.
在产品技术方面，九月底，国际权威分析机构Frost & Sullivan正式发布2020年中国金融级分布式数据库市场报告。金山云的Dragon Database数据库凭借前瞻性的技术研发、卓越的产品能力和优秀的商业化表现，与其他两家头部友商共同位居领导者象限。这也是继公司大数据云入选2020年中国数据管理解决方案市场报告领导者象限后，我们的核心PaaS产品再次获得行业权威机构的认可。同时，我们也在前瞻技术领域持续加码。根据IDC的数据，2023年将有50%的数据在边缘进行处理。本季度公司提升边缘存储服务能力，并在九月完成江苏边缘存储节点的落地，为边缘场景提供有力的支持。
On product and technology fronts. According to the 2020 China Financial Grade Distributed Database Market Report that was published in September by Frost & Sullivan, an internationally authoritative survey agency, our Dragon Database was placed in the leaders quadrant of their Frost Radar. Along with other two leading competitors in China, our product was recognized for its visionary technology, excellent product performance and outstanding monetization. This once again demonstrates the recognition our core paaS products command in the industry, including among top global industry research firms. Earlier this year, our Big Data Cloud products were also placed in the leaders quadrant by Frost & Sullivan in their 2020 China Data Management Solutions Market Report. At the same time, we continue to ramp up our investments in cutting-edge technologies. According to IDC, 50% of data will be processed at the edge by 2023. During this quarter, we improved our edge storage capabilities and developed edge storage nodes in Jiangsu Province in September, providing strong support for various edge applications.
行业云方面，数字化发展成为企业应对变局的利器，数字化浪潮方兴未艾。
Moving to the enterprise cloud segment, going digital has become essential for many businesses and industries to adapt to new norms.
在金融服务领域，公司继续扩大客户群体，并且加深合作内容。在央行的层面，本季度公司成功中标某国家银行的数字货币大数据平台建设项目。继华夏银行、中信银行等股份制银行合作，本季度我们与某Top股份行加深合作，建设大数据中台，帮助客户实现了业务底层数据的智能化管理，使大数据能力和开发效率提升了65%。此外，我们在八月宣布了战略携手Camelot，以进一步发展行业云业务。随着Camelot的正式加入，公司将覆盖100%的Top二十银行客户，我们将充分融合Camelot在风险管理、金融合规和反洗钱等PaaS产品和行业解决方案，并已经为超过240家金融企业提供服务。
In the financial services sector, we continue to expand our client base and deepen our collaboration with our customers. On the central bank level, we won a bid to build a big data cloud platform to support China's new digital RMB. After winning contracts from Huaxia Bank and China CITIC Bank in Q3, we furthered our cooperation with another top commercial bank and helped it migrate its middle office to the cloud. Our solution enables the smart management of their underlying business data and led to a 65% efficiency improvement in their big data capabilities and development. As we announced back in August, we agreed to acquire Camelot as a part of our efforts to build out our enterprise cloud services business. Now that we have officially joined hands with Camelot, we will be able to cover all the top 20 banks in China.
We will fully consolidate Camelot SaaS products and solutions into our product portfolio, especially in the risk management, financial compliance, and anti-money laundering areas, which have been offered to more than 240 financial institutions.
在医疗健康领域，公司夯实省级医疗云服务平台的行业领导地位，打造江苏、湖北等地的标杆项目。本季度我们正式启动了江苏省影像云项目建设交付，该项目将是全国首个实现省域影像数据共享的云平台，计划于年底实现三十余家医院影像数据汇集及跨院共享。更重要的是，项目建成后，预计每年节约医保资金数十亿。我们为能达成这样强大的社会效益感到骄傲。与此同时，我们继续稳步推进湖北省健康信息平台项目的交付。我们还在生态建设上再次取得突破。公司与某中国领先的医疗数据解决方案服务商达成生态合作，并将以此为契机，不断推进院端服务品牌、资源和能力。目前已经带来中国医院综合排行榜前四、上海首位的上海瑞金医院等顶级项目资源。
In the healthcare sector, we have been pioneering new lighthouse projects in Jiangsu and Hubei provinces, among other provinces. In Q3, we kicked off the delivery of the Jiangsu Province Medical Imaging Cloud. This project will be the first to enable provincial-level medical image data sharing, expected to connect more than 30 hospitals by the end of this year. Once put into operation, it is estimated that the project will save billions of RMB in medical insurance each year. We are very proud to be able to create such positive social impact together with our customers. We are also making steady progress with our Big Data Cloud project in Hubei Province. Meanwhile, we also made significant progress in our healthcare ecosystem. In one case, we have been cooperating with a leading healthcare data solution provider.
This corporation has already introduced us to many premium customers, including Ruijin Hospital, which is the fourth largest hospital in China and the largest in Shanghai. Building on this foundation, we plan to expand our collaboration and strengthen our branding, resources, and service capabilities with more hospitals in China.
在公共服务领域，公司入围北京政务云四期项目，项目额约8,500万元。这是公司连续五年服务北京政务云，持续性收入会持续提升。此外，公司将政务云经验快速复制到各地，成功中标安徽、山东等城市公共服务的云项目，并开始交付工作。公司作为单一来源成功中标湖北省某城市智理云底座项目3,600万元，充分发挥在云计算和大数据领域的优势，推动城市公共服务由职能型向服务型转变。深圳市粤港澳大湾区大数据研究院在政策支持下，凝聚深圳市大湾区和国家的大数据研究成果和资源，发展大数据产业化。目前公司也已开始与其开展项目合作。尽管本季度受疫情和限电等原因，公司的交付工作持续进行中，但我们新项目的投标顺利推进，在手项目保持提升。
In the public services sector, we were selected for phase four of the Beijing City Cloud project. The total contract value is approximately RMB 85 million. This marks the fifth year in a row that we provide services for the same project, exemplifying our ability to secure repeated revenues. In addition, we also quickly replicated our successful experience with public services cloud to other parts of China, and won bids for projects from cities in Anhui Province and Shandong Province, to name a few, which are all in delivery phase. We won the bid to be the exclusive provider of an urban cloud infrastructure for a city in Hubei Province, with contract value around RMB 36 million. It will leverage our leading cloud computing and big data technologies and facilitate the intelligent transformation of the city's public service systems. We also started cooperating with the Shenzhen Research Institute of Big Data.
With strong policy support, the institute will integrate big data research resources in Shenzhen, the Greater Bay Area, and further across China to facilitate the nationwide advancement of big data applications. Despite some disturbances from the pandemic and power shortages, we are steadily carrying out our project. We're also making progress with new bids, and our backlog continues to increase. Within our enterprise cloud segment, the integration of Camelot is well underway. As we mentioned in Q2, Camelot has delivery centers in most major cities across China. We have selected six cities to be initial pilot cities for integrated project delivery. In the finance services sector, we have started engaging with nearly 10 banks that Camelot has introduced to us. Our integrated team will provide delivery and services directly to these customers. In terms of ecosystem cooperation, Xiaomi, Kingsoft Group, and WPS have all started working with Camelot in various aspects.
We will focus our efforts on the finance, healthcare, and public services sectors, and we have started with consulting and planning services in the hope of developing a fully integrated one-stop suite of solutions. In terms of regulatory backdrop, we have been paying close attention to all new regulations and policies, including the draft regulation on protecting Internet data security that was published by the Cyberspace Administration of China for public opinion. The regulation has yet to be finalized, and the effective date is still uncertain. As we have always emphasized, we manage our business operations in a localized approach within each jurisdiction, and continue to deliver solid progress with data security, privacy, and ESG programs. Unlike companies that possess data of millions of individual users, we focus on serving enterprise customers. In addition, we have fully complied with regulatory requirements, including around data classification and data security.
Till now, we have successfully obtained ISO 27001, ISO 27017, and ISO 27018, which are the worldwide recognized standards and certifications in terms of data security and personal information protection management systems. I will now pass the call over to our CFO, Henry, to go over our financials for the third quarter. Thank you.
Thank you, Yulin. Now I walk you through our financial performance for the past quarter. Our total revenue reached RMB 2.41 billion in Q3, representing approximately 40% year-over-year growth, which is consistently higher than the growth of the major peers in Greater China. Revenues from public cloud services was RMB 1.69 billion, a quarter-over-quarter increase of RMB 135.2 million, representing the seventh consecutive quarter revenue increase since our IPO. There were a number of drivers. First, our existing client base remained stable, including our top three clients in particular. Our neutral position makes it possible to avoid any potential conflicts of interest with our customers, and we have been able to grow together with our customers. Second, we continue to engage with the new premium customers.
In Q2 this year, Meituan, China's leading internet conglomerate, has become our new premium customers for public cloud services. With the trend continues, we are proud to announce that Pinduoduo, one of the leading largest e-commerce platform in China, has become our new premium customers in Q3. This new client case exemplify two things. Number one, the multiple cloud strategy is gradually more accepted by the market. Number two, these efforts have to diversify our customer base and de-risk the top client concentration risk. And also, clients from non-video related vertical will also help grow our computing business and contribute to the public cloud incremental high-quality revenue growth. Lastly, we were able to dig deeper into the needs of our clients. As Yulin mentioned earlier, we are providing a more diversified portfolio of products and technology through cross-selling, including containers, edge computing, and PaaS solutions.
Revenue from enterprise cloud services was RMB 726.9 million, representing approximately 78% year-over-year growth. We have seen a rapid growth in demand in enterprise cloud markets. As demand grew rapidly in enterprise cloud markets, we built more flagship projects in the financial services, healthcare, and public service sectors, and replicate our success to more customers. As a result, our client base continued to grow steadily. In the short term, however, delivery of our enterprise cloud projects in some regions in Mainland China was affected by the recent wave of pandemic. Although we can deliver technology support of some projects remotely, our team has been unable to deliver on-site tasks at some of our client-owned data center due to travel restrictions. In addition, in Q3, some of our projects were also delayed due to power shortages or limits by local authorities.
As a common practice for enterprise cloud, we implement our public cloud technology to enterprise cloud private environment in their own IDC centers. Although our public cloud IDC were not affected by power shortages, some of our customers saw temporary disruptions to their own private IDC center. This shortened the time available for our team to deliver projects on site and caused certain delays. However, we're happy to see that currently the situation has been improving in the process. In line with the strong top line growth, cost of revenue grew 44% year-over-year- RMB 2.33 billion. IDC cost, the largest cost component representing approximately 60.7% of total cost of revenue, grew 33.1% year-over-year- RMB 1.41 billion. IDC cost consists of cabinets and bandwidth costs.
The costs increased by CNY 155.4 million on a sequential basis, which is due to the preemptive short-term storage of underlying resources. Depreciation and amortization costs increased by 28%- CNY 200 million, representing approximately 8.6% of the total revenue. Adjusted gross profit was CNY 92.2 million, compared with CNY 114.8 million in the same period of last year. Our adjusted gross margin for this quarter was 3.8%, compared with 6.6% in the same period of last year. We would like to offer a bit more color on this short-term volatility.
To support the growth of the public cloud business, cloud company typically purchases servers and leases data centers in advance based on the forecast of demand from our clients and the market in general in the beginning of every year. However, as many of the audience may have seen, starting from middle of this year, the IT demand from many internet clients in China are growing, but slower than previously market forecasts beginning of this year. Therefore, the underlying infrastructure resources has not been fully utilized as targeted, and incremental investment of resources made early this year may not be fully monetized in the short term towards by end of this year, which may impact our business. Due to this reason, for example, the increase of RMB 155.4 million in IDC cost this quarter impact our gross margin this quarter.
Our business model and client base remain very robust, and we believe the utilization pattern will naturally be optimized as we see our public cloud demand continue to grow. Total non-GAAP operating expenses were RMB 451.2 million, representing a 50.3% increase from Q3 last year, mainly due to the ongoing investment into our business and maintain our competitiveness. We have provided our core team with competitive compensation, and therefore increased personnel expenses. Excluding share-based compensation, adjusted R&D expenses were RMB 231.6 million, representing an increase of 51.3% year-over-year. As a percentage of total revenue, it increased slightly from 8.9% in Q3 last year to 9.6% this quarter. Adjusted selling and marketing expences increased by 37.4%- RMB 114.3 million.
As a percentage of total revenues, it decreased a little bit from 4.8% in Q3 last year- 4.7% this quarter. Adjusted G&A expenses were RMB 106.3 million. As a percent of revenue, it increased from 3.7% in Q3 last year- 4.4% this quarter, although the level is among the lowest in the peers. Accordingly, our adjusted EBITDA loss was RMB 140.7 million. Adjusted EBITDA margin was -5.8% this quarter, compared with -2.5% last quarter. The quarter-over-quarter decrease was due to the decrease in gross profit, the increase in personnel expenses, and a one-time acquisition-related Camelot transaction expenses.
Our adjusted net loss was CNY 363.8 million, with adjusted net margin at -15.1%. As of 30th September 2021, we had sufficient cash and cash equivalents amounting to approximately CNY 6 billion. During this quarter, capital expenditures was CNY 96.6 million. Since Q4 2020, anticipating supply chain pressures, we have purchased sufficient servers in advance to support our business growth. Based on our current operation and in pursuit of higher operational efficiency, we will make a very disciplined approach with capital expenditures for the second half of this year. In addition, the server delivery and the payment cycle also led to a relatively low CapEx in Q3. However, we do think the full year CapEx will be at a similar level compared with last year.
In addition, we have received great endorsement from regulators, as evidenced by obtaining unconditional approval for the Camelot transaction from the State Anti-Monopoly Bureau, aka SAMR, State Administration for Market Regulation of China. The approval process was completed within one month, which is significantly faster than the regular review timeframe, especially considering today's market regulation environment. In October, we submitted S-3 filings regarding the registration of shares related to the transaction. We have now completed the transaction and began an integration of the two teams. Camelot bring us over 500 premium customers and a wealth of industry know-how, especially in industries such as internet, financial services, consumer retail, and manufacturing, among others. Camelot has delivery hubs in multiple key cities across China. Their local teams will deliver future enterprise cloud projects directly and improving our execution capabilities of the whole company.
We believe significant synergies will be further unleashed into next year. Looking ahead, we expect our total revenue to be between RMB 2.63 billion and RMB 2.83 billion for the fourth quarter of 2021, representing a year-over-year increase of 37%-47%. This is based on our current and preliminary views on the market and operational conditions, which are subject to change. Lastly, we held our first Investor Day event after IPO on 21st October this year. Representatives from our key accounts, clients, ecosystem partners, industry thought leaders joined our senior executives and discussed industry trends and our business developments, including senior executives and clients from National Health Commission, China Construction Bank, Kuaishou, Zhihu, ByteDance, Camelot, and among others to share diversity of perspectives.
We are committed to improving our business transparency, bringing sustainable values to our stakeholders, and delivering long-term value to our shareholders.
This concludes our prepared remarks. Thanks for your attention. We're now happy to take your questions. Please ask your question 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 keypad and wait for your name to be announced. If you wish to cancel the request, please press the pound or hash key. Your first question comes from Brian Gong from Citi. Please ask your question.
各位管理层晚上好，谢谢接受我提问。我的问题是关于行业云这边的。我明白三季度行业云这块儿受到了疫情和限电的影响。那鉴于现在这个限电和疫情基本上都已经解决了，我们不知道我们有没有看到这个项目的交付有所加速呢？然后就是想问一下，我……
如果看明年的话，我们行业云的这个收入的增速能不能回到一个正常的水准，以及这个增速如果一个正常的增速水准，明年的话大概是在一个什么样的一个level？哦。I will translate myself. Good evening. Good evening management. Thanks for taking my questions. My question is regarding the enterprise cloud. I understand our enterprise cloud segment was impacted by power shortage and the pandemic. Given pandemic largely under control and the power shortage largely eased, have we seen any accelerating projects delivery? Should we see enterprise cloud revenue growth to go back to normalized level for next year?
What growth level we should expect? Thank you.
那我来回答您这个问题吧。就是行业云方面的话呢，其实Q3到Q4主要受到两个因素的影响，一个是Q3的时候的这个限电的政策，然后我们的公有云的机房相对的这个等级和质量较高，所以再加上像有油机这样的这个配套装置，所以其实机房的运行还是比较正常的，能够保证我们的业务的这个正常运行。但是就是行业云的那个客户的机房大部分是私有的，这个IDC所以还是比较参差不齐一些，所以受到的这个限电的影响会比较严重。那目前的情况的话呢，就是这个限电的问题有缓解，但是国家对于双碳的这个进度还是在进行之中，所以其实这一块来说的话呢，我们还是在谨慎地推进，因为可能后续会...
还会有相关的IDC的一些政策，我们也在看。
但目前的话呢，这个电的影响基本上可以在Q4可以正常推进了。然后现在Q4的主要问题是疫情的问题，因为国内的疫情在Q4又开始有反弹，包括北京在内的很多省的这个防疫工作的压力还是蛮重的，这个对我们的项目的交付构成了一定的delay。所以现在整个的情况就是行业云的需求依然非常旺盛。我们的项目，我们的在手订单，我们东西其实都是还在保持高速增长的，现在主要就是看这个交付的这个情况。然后我们现在的解决方案就是说，一方面呢，这个发挥Camelot它本地服务团队的这个优势，就是这样的话避免去出差，尽量利用本地的团队去解决这个问题。第二一个的话呢，就是尽可能地这个赶时间，加快项目的这个进度，争取能够把项目的有的一些delay的项目能够在，把它的进度往回追一下。然后如果从未来看，如果行业云这边这个没有大的行业问题的话，其实还是在保持，国内的行业云还是在保持一个非常高速的增长。好，谢谢。
Okay. The response from the CFO, the CEO Mr.
Wang pointed out, there are two key factors affecting our cloud segment, one of which is the power shortage or curtailment, the other is the pandemic. In terms of the power shortage, as you know, in Q3 that was the main factor, and in our two business segments, respectively, I'll talk about them. In the public cloud segment, because the IDCs enjoying relatively high grade of protection and priority, and then most of them have reserve or backup power generators. Those were not negatively affected. In terms of enterprise cloud, industrial cloud, because of the IDCs, in most cases are their private IDCs, which are designated by the customers. It's generally case by case and have been affected by the power shortage. I have to agree with you that currently the power shortage situation has largely been alleviated. However, we do see that in the midterm to long term, the carbon emission control will continue, the pressure will continue to be there, and there might be more policies in relation to IDC construction and IDC power consumption. In any case, the power shortage we expect in the short term has been alleviated and then we're able to progress our deliveries for enterprise cloud in Q4. The second factor about pandemic, obviously it is still going on in some cities because of the very stringent measures the government takes, which causes the delay of our delivery. However, we do see that overall speaking, the demand in the industrial or enterprise cloud remains very strong. Our backlog continues to grow. While there's impact to delivery, we also have proactively tried to find solutions to this impact. One is we have been proactively utilizing the Camelot's local teams, which are distributed across China to help with delivery and increase delivery efficiency. The second part is that we proactively manage our timetable of delivery and try to make up for some of the time that was lost because of the power shortage and pandemic control. Overall speaking, we do see the industrial cloud enjoying a very high growth rate coming from the demand. This very strong demand. Thank you.
Thank you. That's very helpful.
Our next question comes from Liping Zhao, from CICC. Please ask your question.
玉林总、Henry、Nicole，晚上好，感谢接受我的提问。我这边有三个问题。第一呢，就是从全行业来看的话，今年这个公有云增速还是趋缓的趋势比较明显，包括友商也是。那么我们对于未来两到三年市场，就公有云市场这个增长的预期是怎么样的？然后相应的我们应该怎么看，就是金山云自身的一个增长的目标以及这个驱动力。然后第二个问题是关于margin的。那今年呢，我们在一些资源的前置投入上，包括和这个整体市场的一个逆风下吧，收入就是放量的这个预期，就是比我们预期的这个节奏要慢，那么给那个利润率带来了一定的压力。我们就是将来怎么看这个资源控制率消化的一个时间需要多久？那么展望明年的话，我们在这个基础设施上面投入的一个计划是怎么样的？然后最后一个问题是想问一下和那个字节那边火山引擎合作的一个进展。我自己快速翻译一下。Good evening, management. I have three questions here. We've seen a cool down in public cloud space this year. My first question is what's your opinion on the next two to three years' market growth? And what will be the company's organic growth drivers and targets to achieve? Second question, this year our gross margin has seen some pressure caused by upfront infrastructure investment and our delay in revenue recognition. My question is, when will the utilization rates catch up and what's your budget for next year's CapEx? And lastly, we do wonder how is the collaboration with ByteDance going so far? Thank you.
好，那我先来回答您这个第一个问题，就是关于这个公有云，还有行业云的这样的一个未来的两三年的发展的问题。今年的整个的大家都能看到，就是公有云的，这个目前看起来增速是放缓的。我们自己认为这主要是两个原因吧。第一个就是，去年疫情导致国内对于，其实全球来讲对公有云的需求是大幅增长的，所以其实是公有云的一个高速成长期。然后今年的话，在这个需求的这个增长没有去年那么明显，所以相比较去年的高增长的话呢，今年其实有一些放缓。然后另外一个就是说国内今年在Q一、Q二、Q三，其实包括现在一直还在出一些行业的相关的规范和监管的政策，那这个对于整个行业内的，我们的客户合作伙伴来说呢，其实大家需要去做，比如说到一些影响，比方要针对性地去做一些业务的梳理，去研究这些政策监管，怎么去符合它，那这个可能确实是需要一定的时间的。但是我们认为这个其实应该是一个短期影响吧，就是随着这些监管细化的这些政策越来越清晰，然后大家完成这个阶段性的工作之后呢，这个影响也就逐渐的消除了。然后从长期来看，目前在公有云，无论是在娱乐视频还是在游戏上，现在大家都已经开始更快地在新的技术和产品上做布局了。比如大家现在看到的像元宇宙、云游戏，和AR、VR相关的一些东西，无论是硬件的出货量还是相关技术的迭代都是非常快的。这个随着国内5G的成熟，整个行业看起来还是非常乐观的。所以因为互联网本身是有周期性的，所以其实我们认为是在可能很快在未来一两年会是一个新的大周期的到来，那这个的增速其实会超过这个行业的平均增长。那对我们，对我们金山云而言的话呢，我们其实今年有大量的新增客户的进入，所以尤其是基于我们的这个中立性的地位，而且在目前的这种国家的这个反垄断的这样的一个态势下，就是在大客户在构建多云的时候，其实我们几乎成为他们这个首选的这个新的合作伙伴。所以我们自身的这个业务的这个虽然增速上有放缓，但是客户的数量，客户跟我们的合作关系这方面其实进展还是非常快的，基本盘是很好的。然后行业云的话，目前就是刚刚讲到还在非常快速的增长期，其实需求还是很多的，各行各业的数字化是目前现在是刚需，只是今年受到像限电、像疫情、像一些大的这个因素影响，可能有一些项目会受到一些delay。但是目前看起来我觉得在很长一段时间内，包括尤其在我们专注的金融、医疗和公共服务领域，这个会是一个非常快速增长的领域，我们自身的这个优势也会越来越强。那这是第一个。然后那个第三个，您刚才问到就是我们跟这个字节的这个合作的这个问题。其实我们跟金山云和字节应该算是非常长期的合作伙伴，我们算是字节最早的合作伙伴，就是在这么多年的中国的短视频的行业的发展过程起来，我们一直是跟字节一起在合作，所以他们的核心产品，包括抖音、西瓜，包括头条，其实在他们构建的这个多云服务的体系里面，我们应该一直算是一个非常值得信赖的一个合作伙伴，所以我们的合作应是目前看起来是这个长久和这个稳固的。然后第二个在字节做的这个To B的业务的探索中的话，其实我们也是一直在紧密地沟通和合作。他们之前做的这个飞书的业务里面，我们自己，包括小米都是这个用户和合作伙伴，包括在推广的时候，我们其实也在提供这个定制化的这个云存储、这个加密服务这样的服务。然后像火山推出的时候，其实我们也是火山，也签署了全面合作伙伴协议，这也是火山第一次签署这样的一个全面合作。所以借助这个他们的这个要做的技术产品的能力，包括我们自己的这个很强的IaaS的能力，还有遍布全国的运维交付这样的能力，其实双方一直在探索这个合作的双赢的这样的一个格局。然后包括这个他们现在的一些新的产品，比如像这个飞连的这个合作，这是一款新的基于身份权限管理这样一个合作，那我们也是跟火山引擎的技术研发的人员一起进行调整和这个测试，现在在做这个推广。所以整个整体上看起来，这个我们和字节的各个业务和各个产品的这个合作还是非常紧密的。然后包括这个像我们整个金山的WPS与飞书的合作，然后我们像金山的游戏世游和字节的这个合作。所以其实不光是金山云和字节，包括整个我们的生态和字节系的生态，大家的合作是这个非常非常紧密的。然后您提到的那些财务的那个问题，可能由Henry直接来做一些解答。
Okay, I just quickly translate for your reference. In relation to your question about the growth prospect in public cloud and enterprise cloud. I'll start with public cloud. Obviously we have noted that this year the public cloud demand has decelerated, and from our perspective, we think it's due to two reasons. One is that there was a high base, it was actually a high base for last year, as a result of the pandemic, so the demand for cloud service has surged a lot and actually shifted to a great extent. Obviously, that is not a new factor for this year.
Now, the second reason is like, as you have all noticed, that since the beginning of this year, actually even till now, new regulations have been coming out from the government to regulate a lot of the customers and industries that we engage with. Accordingly, our customers in such industries will need to comb through those new regulations and to be compliant, which we believe takes some time. We do think that this is going to be a short-term impact, as the regulations become more and more clear and more visible from the government perspective. Also looking at the long-term picture, we do see that these customers have already started to make new arrangements in new potential verticals or markets in the spaces of entertainment, video, and gaming.
This, we have to say that this actually happened together with the further penetration of 5G technology. We're seeing the new concepts like the Metaverse and the hardware in terms of those for those applications has been launching and increasing in volume. The technology iteration has also been accelerating. We do think that the internet sector is a cyclical sector, which we do think that in the future, one to two years to come, we're entering into a new large cycle, which we'll reasonably expect to have a higher growth rate than average growth rate of the sector. As you Kingsoft Cloud ourselves, we actually have engaged a significant amount of new customers in this quarter and amid the market headwinds, as mentioned before.
We believe those are really benefiting from our neutrality, and also from the multi-cloud deployment trend, whereby we have essentially become the top choice for our customers, whenever they want to engage a new cloud vendor. We think that our customer base in terms of volume and the depth of relationship remain robust, and then that serves as a very strong fundamental for the company. In terms of industry cloud, as I answered in the first question that was asked by Citi, the market demand remains very strong. We think the demand of digitalization is actually inelastic. For a long time to come, we also expect this demand to remain strong.
also in the verticals that we have chosen to be focused on, we'll continue to have this benign cycle of gaining more customers and developing our advantages, and as a result of that, increasing our revenue. In terms of the third question of cooperation with ByteDance, we actually have a very long-term partnership and cooperation history with ByteDance, actually starting from basically the explosive growth of short video clips in China. That includes a lot of applications like Xigua, like Kuaishou, and Douyin, which essentially made us a trusted partner of ByteDance. That is a very solid relationship with them.
As you have also seen that we have signed the comprehensive partnership agreement with Volcano Engine, which is under the ByteDance umbrella, where we are working to explore ways to combine our advantages in terms of high capabilities and nationwide delivery capabilities with Volcano Engine to create a win-win situation. More recently, the cooperation we have with a software that's called Feilian, which is an identity authentication software where we have been tweaking and trying to find ways to promote the application of this software. You know, beyond the two companies, if you look at wider, zoom out into our ecosystem partners, there's also a cooperation between WPS and Kingsoft and ByteDance.
I would say that across our two ecosystems, we have always maintained multidimensional and strong relationships with ByteDance. Thank you.
Thank you, Brenda. I will take on the second question, very briefly. A few points. First of all, you can probably observe this year, the pricing environment, especially not only on the supply side, but also from client side has been very stable. So when you look at our major products, our product level contribution margin or gross margin has been very stable. So that's actually not the reason that affecting our gross margin in Q3. Point number two, if you also know that in most of the enterprise service or 2B industry in China, the procurement arrangement, will be negotiated on an annual basis, which means that right now we're already in the Q4.
We're already getting into the process to negotiate the pricing terms, the volume and the quality and all the key terms with our major suppliers. We're right now in the process to collecting the IT budgeting insight information from our key accounts. That's why we do believe for next year we can do a good kind of analysis and matching the demand and the supply and further improving the utilization. That's why I think the mismatch on the result side can be gradually mitigated by the end of this year. For next year, it's going to be a new annual contract for some of the key clients and also some of the key vendors, as a supply. The pricing and gross margin impact can be further mitigated.
It's going to be a short-term impact. Point number three, for next year, as you're asking about CapEx, even for the same dollar, we will definitely prioritize that into a high-quality potential revenue streams.
When we look at that dollar, when we consider to spend on the CDN service rather than the CPUs, the high-end CPUs or the GPU will for next year prioritize that into the high quality procurement arrangement. We believe that will indirectly and directly convert it into a potential of a high quality revenue stream going forward. Also if you remember in the recent Investor Day, actually Intel has been partnered with us to host the Investor Day event. That actually also a good information that we are partnering with the key vendors, and we're going to have a direct arrangement with the key vendors to secure the high quality fundamental infrastructures. The last point, I think for next year, we also will continue to build our own infrastructures. In the recent quarter, we have closed very successfully on time for the Tianjin data center for the first phase. For the second phase, for another 3,000 cabinets, we will basically plan for starting to plan for next year, and that will add to a new revenue streams for the public cloud revenue opportunity. As a summary, we are second in a row to see net incremental revenue over RMB 100 million of the public cloud business. I think that will contribute and naturally to mitigate the impact of the mismatch of the IT resources, and then will gradually improve the gross margin going forward. Thank you.
Thank you.
Your next question comes from Thomas Chong from Jefferies. Please ask your question.
晚上好，谢谢 Bonnie Chang 介绍我的提问。我的第一个问题呢，是想问一下我们今年新增的新的大的客户，比方说，美团啊，拼多多。想问一下的都是在未来几年的话呢，他们在我们收入的占比呢，我们有没有一个 KPI，或者是有一个大概的一个想法了。另外一个问题呢，是想问一下，就是在这个大环境呢，就是一个不确定的情况下，对我们长期的对收入啊跟 margin 的看法呢，会不会就是有一些改变，就是从这个 long term 的 margin 的 target 的时间，我们大概会是什么时候？然后再想问一个 near term 一点的问题，就是我们也提到，就是北京的疫情呢，我们也是受到一个影响。想问一下就是，北京那边呢，会不会大概是有一个收入的一个占比，或者是影响会是有多大呢？ Thanks, management, for taking my questions. My first question is regarding our new customers for this year. We have added 美团 和 拼多多, the Internet giants. Just want to get a sense about their revenue contribution over the next couple of years as they ramp up in things of cloud. My second question is regarding our long term assumptions in terms of the revenue and the margin as well as the mix between corporate and enterprise cloud. On the near term side of the story, given that the Beijing epidemic affects a lot of the different business, just want to get a sense about any color about the contribution coming from Beijing or any qualitative color would be great. Thank you.
好，谢谢。那我先回答您这个前面两个问题，就是您刚刚提到的一些互联网的大的客户，包括美团、拼多多，我们刚才提到包括像知乎，这些大的互联网客户，他们在就是构建多云的服务，是他们的，无论是从他们的技术的，还是从他们的业务的这个需求来说，其实是一个必然的选择。那在这个过程中的话，也像我们之前提到的那样，就是金山云作为一个专注和中立的云公司，一定会成为这些客户的这个必然的选择。所以其实这是我们在未来也还会有更多的这样的客户进来。对，然后他们的收——目前的产品和收入的增长都是很稳定的。但具体说，比如说这个预算或者是KPI，这个我们现在还没有。然后第二个就是整个的需求的变化方面的话呢，就刚刚提到就是公有云的话，我们觉得今年还确实是受行业的，比如宏观的一些政策呀、监管这个东西受到的影响还是比较大。但是我们觉得可能就是一个短期的一个行为吧。一旦这个调整结束，中国的互联网，包括公有云的相关的发展还是会进入到一个大循环。然后行业云的话呢，这个需求其实是非常强烈的，其实主要是受到今年的限电和疫情的这个影响。那目前限电的影响基本上已经过去了。那然后疫情的情况的话，现在也在缓解中，所以我们现在也在这个加快进度，和包括跟Camelot的本地服务和他们本地的知识团队一起呢能够尽量避免，这个就尽量避免对这些不利的这些因素吧。然后您刚刚提到的那个北京的这个疫情的话，确实在Q3末和Q4的时候，其实北京的疫情还是有反弹。对，但是这个只是对我们的出差和这个实施构成了影响，对本地的项目的影响是反而是这个还好。所以其实北京这边的这个业务的进展其实是正常的。然后那个您刚提到的长期的利润的问题，那个Henry再这个回答一下。
Thank you very much for your question. I think as you pointed out the larger internet names, like you mentioned Meituan and Pinduoduo and Zhihu. The multi-cloud deployment for them is an inevitable choice, both from a technology perspective and from a business or commercial perspective. I've mentioned Kingsoft Cloud as professional and neutral cloud provider, we're also their inevitable and top choice. We do think, you know, currently, the revenue and the growth of these customers have been very stable. Unfortunately, we don't have like detailed numbers as for, you know, a percentage of revenue, but we do see them to continue to grow very stable and on the good trend.
Now in terms of the macro environment uncertainty that you mentioned, I also split into public cloud and enterprise cloud spaces then to discuss briefly, respectively. In the public cloud space, as mentioned, I do think it's going to be a short-term impact, and once this is over, it is going to enter into a larger business cycle where we expect to see growth to accelerate. In the industry cloud space, the demand remains very strong. As two of the affecting factors, one is power shortage and the other is pandemic. The power shortage has already been largely resolved. The pandemic impact has been alleviated.
Our way to fight this negative impact are leveraging Kingsoft's local teams to try our best to catch up with the progress and to deliver revenue. Now, as I mentioned, for the impact on Beijing, actually, because we are locally based in Beijing, so we do not really have any material impact, you know, in the Beijing projects due to the pandemic control measures. Thank you. I'll leave the margin questions for Henry to answer. Thank you.
Thank you, thomas Thank you, Clark. Very quickly on the margin. First of all, I wanna mention that we still keep the same intention to deliver improving margin profile for the long term. Both gross margin and the non-GAAP EBITDA margin are one of the priorities when we think about next year's budget. That's why, as I just mentioned, when we think about the demand, supply side, pricing environment and also how we optimize our personnel expenses, these are the key priorities for next year's budgeting process as we are doing today. That's why we probably at this moment, for this earnings call, will not give a very clear guidance for the EBITDA margin breakeven timing.
As some of the audience may remember, we did have intention to have that margin improvement to be delivered in the near term. This first point. Second point, I think, given the high-quality revenue opportunities is also our key areas to focus for next year. When we think about the capital expenditures and how they're converted into the revenue opportunity and how that impact both on the gross margin, D&A expenses, we will do a very thorough analysis and looking at that impact for the margin improvement. As a result, what we want to say at this moment is, I think for next year, hopefully we will see on annual basis both gross margin and non-GAAP EBITDA margin will see improvement compared with this year on annual basis. I think we remain confident on that objective.
However, the timing and the scale of that, hopefully we can communicate once we complete the prudent budgeting process for next year. Thank you.
Thank you.
We will take the final question from Kyna Wong from Credit Suisse. Please ask your question. Thank you for taking my question.
The first question is actually we are looking for more visibility or idea from the company on the path and capability enhancement in the future. I mean, even after our cooperations with Baidu. The second question is about what kind of like IDC policy change that may impact the public cloud. I would say the IDC service from the vendor as well, or your own business like enterprise clouds. Thank you.
好，谢谢。那我快速回答一下，就是基于PaaS的业务，其实我们在今年就有大量的，比如在金融，在医疗，在大数据领域，我刚才提到我们的一些PaaS里的产品，其实在目前在国内已经开始越来越处于一个领先的地位，并且它的收入占比和对我们整体利润的提升也是比较明显的。所以这块跟我们跟火山引擎的自研的合作其实并不冲突，所以这是一个。然后今年的话，我们还会在持续的，比如在这些领域，尤其是在行业领域的PaaS的服务，这是我们的重点发力的方向。第二个您提到的关于IDC的业务，其实公有云的IDC的选择和部署其实会更等级更高，更有规范性，包括我们自己建设的数据中心，无论是它的电力的规划，还是它的指标，都是符合国家的相关规定的。所以其实公有云的业务受到这个影响是比较小的。然后行业云的话呢，其实主要是今年的限电的政策来得比较突然，所以这个对大家的影响会比较大。那现在有了新的政策指引之后，大家其实开始可以去做快速的调整。所以整体上来说，对于行业云的发展我们认为也是一个短期的影响，大家也会重新去规划自己的关于数据中心相关的部署。好，谢谢。
In terms of PaaS capabilities, in fact, our PaaS capability in terms of particular verticals, for example financial services, healthcare and big data capabilities, we have actually becoming more and more leading, among our peers. Also we have seen increasing our revenue percentage, and the promotion of margin it has brought to us, to our business. Now, we do believe that we will continue to increase our investment and development of PaaS capabilities, in those areas, in those verticals that we choose to focus on. However, we don't think this is in any way in conflict with our cooperation with Volcano Engine or ByteDance. In relation to your question about IDC policy, we do not really think any policy changes will have any material impact to the public cloud IDCs. As explained earlier, we do think the public cloud IDCs, they generally, have relatively high standards and they have been built according to the latest, government policies and guidelines, including the IDCs that we built ourselves. We do not think they are going to be negatively affected. In terms of the IDCs for enterprise, cloud customers, the impact mainly came because of the abruptness of the, policy change, from the government, i.e., the power shortage. We do think that in the future they will be able to adjust to any policy changes in that space as well. Thank you.
At this point, I would now like to hand the call back to Nicole Shan for the closing remarks.
Thank you, Peter. Once again, thanks everyone for joining us today. If you have any further questions, please feel free to contact us. We look forward to speaking with you again next quarter. Have a nice day. Bye bye.
Thank you. That does conclude our conference for today. Thank you for participating. You may now all disconnect.