From AI Pioneer to Perpetual Loss Machine: CloudWalk Technology Trapped in an Idealistic Vision

Not long ago, SenseTime, Megvii, CloudWalk Technology, and Yitu Technology were collectively known as China’s “AI Four Dragons,” carrying boundless expectations for the AI industry. As time passed, various groupings like “AI Six Dragons” and “Hangzhou Seven Dragons” emerged, gradually diluting the original quartet’s prominence in the tide of technological advancement.

Financial data tells a sobering story about these once-celebrated AI champions. SenseTime’s 2024 annual report revealed total revenue of 3.772 billion yuan, accompanied by a staggering net loss of 4.306 billion yuan, with cumulative losses exceeding 54.6 billion yuan since 2018. Meanwhile, CloudWalk Technology reported 2024 revenue of approximately 398 million yuan, with net losses attributable to the parent company reaching 663 million yuan.

The Fallen Stars of China’s AI Landscape

Layoff controversies have further exacerbated the already challenging situation for these AI companies. Yitu has reportedly cut over 70% of its workforce, virtually shutting down its medical business division, while closing branch offices in Wuhan, Xi’an, and other locations, dramatically shrinking its operational footprint. CloudWalk has allegedly implemented a 20% salary reduction across all employees, coupled with the resignation of key technical team member Zhang Ling.

Undeniably, the “AI Four Dragons” have lost their former glory. Whether CloudWalk Technology—once celebrated as the “first AI platform stock” on China’s STAR Market—can overcome its predicament and carve out a sustainable path in this challenging marketplace has become a focal point of interest both within and outside the industry.

The Persistent Challenge of Profitability

Once adorned with the halo of a star enterprise, CloudWalk Technology carried numerous expectations from both the industry and investors. However, despite substantial R&D investments, the company’s losses have continued to mount, creating a significant commercialization dilemma.

Statistics reveal that in 2024, CloudWalk achieved total operating revenue of 398 million yuan, a 36.60% year-on-year decline. Operating profit stood at negative 649 million yuan, compared to negative 655 million yuan in the previous period. Net profit attributable to shareholders of the parent company was negative 637 million yuan, versus negative 643 million yuan in the prior year. After excluding non-recurring gains and losses, the net profit attributable to parent company shareholders was negative 663 million yuan, compared to negative 689 million yuan previously.

From a broader timeline perspective, CloudWalk appears trapped in a bottomless pit of losses since 2017, with cumulative deficits exceeding 4.5 billion yuan. Looking back to the company’s 2022 IPO, management confidently promised profitability by 2025. With that deadline approaching, losses have not only continued but intensified, disappointing investors and significantly damaging the company’s credibility in capital markets.

Strategic Transformation: A Fight for Survival

The explosive growth of generative AI technologies has fundamentally altered the competitive landscape. Against this backdrop, CloudWalk has accelerated its strategic pivot, searching for a breakthrough amidst challenging circumstances.

The company has demonstrated awareness of the crisis, promptly initiating deep adjustments to its product lineup and customer structure. This transformation’s core logic involves shifting from pursuit of scale expansion to building a sustainable revenue system. By focusing on core businesses and optimizing resource allocation, CloudWalk attempts to regain solid footing amid fierce competition.

Since repositioning from an AI operating system platform supplier to a provider of Agent products and services, CloudWalk has achieved measurable progress. In 2024, expense control showed significant results with combined management and sales expenses decreasing by 16% year-on-year. Excluding share-based compensation, losses narrowed, per capita revenue increased, and orders in the broad AI field grew by 36% compared to the previous year.

During its earlier phase of blindly pursuing technological leadership, CloudWalk became trapped in a cycle of “heavy research, light implementation,” creating a severe disconnect between technological achievements and commercial value. The current strategic contraction resembles a self-imposed “cutting off the tail to survive,” attempting to break free from the vicious cycle of high investment and low returns.

The Huawei Alliance: Opportunity or Dependency?

Facing enormous pressure from technological iterations, CloudWalk has chosen to deeply align with Huawei’s Ascend platform, jointly launching an integrated training and inference machine for large language models, supporting trillion-parameter model training, and building hybrid model cloud services.

This partnership addresses CloudWalk’s technical limitations while seeking differentiation in an increasingly competitive market. Huawei’s formidable capabilities in chips and computing power provide CloudWalk with technological support, offering certain competitive advantages in large model development and applications.

However, excessive reliance on external technical support may weaken the company’s internal core R&D capabilities, placing it at a disadvantage in future competition. More critically, the current AI large model market has already become a “red ocean” of intense competition, with internet giants like Baidu, Alibaba, and Tencent having secured advantageous positions through vast data resources and ecosystem benefits. Whether CloudWalk can carve out a meaningful share in this giant-dominated market remains highly uncertain.

A Three-Pronged Strategy for Revitalization

In the brutal elimination game of the AI industry, every decision CloudWalk makes is potentially existential. To achieve a genuine breakthrough, the company needs more radical transformation—first ensuring survival, then pursuing profitability.

First, CloudWalk must reconstruct its business model, moving away from reliance on customized projects toward standardized products and subscription services to reduce delivery costs and improve revenue stability. For example, vertical technologies in smart cities and intelligent finance could be transformed into modular software products, generating continuous revenue through subscription fees.

Second, the company should increase investment in technological R&D, especially establishing moats in core technical domains to avoid the awkward position of “making wedding dresses for others.” For instance, in vertical fields like intelligent security and medical imaging, CloudWalk could build insurmountable barriers by deeply mining industry data and training more precise specialized models, creating tight bindings between “technology-data-scenarios.”

Currently, the continuous decline in R&D investment sounds a warning bell. Financial reports show that CloudWalk’s R&D expenses reached 560 million yuan in 2022, dropping to 491 million yuan in 2023, a 12.32% year-on-year decrease. In the first three quarters of 2024, R&D expenses stood at 289 million yuan, another 8.08% decline compared to the same period in 2023.

Third, CloudWalk needs to actively expand into consumer markets, leveraging the enthusiasm for generative AI applications to develop consumer-grade products for individual users, creating new profit growth points. The generative AI explosion provides CloudWalk with an excellent opportunity to not only open new profit channels through the development of consumer products like intelligent assistants and creative tools, but also to accumulate massive user data to feed back into technological development.

There is no retreat in this AI survival battle. CloudWalk must tear through its predicament with radical changes and reconstruct competitive logic with breakthrough thinking to secure a place in a market surrounded by giants.