iSoftStone's 2024 H1 Report: Significant Revenue Growth, Q2 Income and Profit Substantial Improvement, Overall Business Stabilizing and Improving

On the evening of August 29, 2024, iSoftStone Information Technology (Group) Co., Ltd. (301236.SZ) released its 2024 H1 Report. Facing multiple challenges and opportunities for transformation, iSoftStone has clarified its growth strategy around four core business areas for the new era. While ensuring the market competitiveness of its software and digital technology services, the company completed the acquisition of Tongfang Computer in February 2024, thereby building a new growth segment for computing products and digital infrastructure. Simultaneously, it has made long-term plans for its digital energy and AI computing services as emerging business areas and is actively expanding into international markets. Through long-term strategic investments, the company has strengthened forward-looking initiatives and innovative research and development to create new growth points.

In the first half of 2024, the company's "Integrated Software-Hardware" strategy drove significant business growth, with operating revenue reaching 12.526 billion yuan, a year-on-year increase of 45.98%, though net profit attributable to the parent company decreased compared to the same period last year. In the second quarter of 2024, the company achieved operating revenue of 7.076 billion yuan, a year-on-year increase of 61.66%, and a quarter-on-quarter increase of 29.86%. Net profit attributable to the parent company was 123 million yuan, a quarter-on-quarter increase of 144.38%, reversing previous losses and showing significant improvement. In addition, the company improved its collection efficiency and strictly controlled expenditure management. Cash outflow from operating activities in the first half of the year decreased by 510 million yuan compared to the same period last year. In the second quarter of 2024, net cash flow from operating activities reached 1.012 billion yuan, a quarter-on-quarter increase of 173.17%.

During the reporting period, the company's core strategic large client business was the first to recover, with some key clients and industry segments showing strong resilience. Moreover, the company has strengthened its innovation-driven and marketing-driven approach, accelerating its transition and upgrade to intelligent, autonomous, green, and internationalized operations.

Enhancing Strategic Investments to Create New Growth Points

Driven by innovation, iSoftStone is committed to achieving sustainable business growth and long-term development through a series of strategic initiatives. First, the company continued to expand its business scope through the strategic acquisition of Tongfang Computer, establishing a comprehensive self-sufficient service capability centered on software and hardware products to create new growth points.

In terms of innovative research and development, the company has strengthened its group innovation and technology research institute, establishing a robotics research institute and an AI PC research institute. It has partnered with AGIBOT to enter the Humanoid Robot business. In the software and hardware product segment, the company has further increased its investment in the development of its proprietary foundational software brand, achieving significant breakthroughs in critical industries with the openHarmony. iSoftStone Computing launched the next-generation general-purpose servers and Ascend AI server products, while also collaborating with Intel to introduce the first batch of green PC models, the "Beyond A7000". AIStone also launched a high-performance mobile AI PC solution. iSoftStone has rolled out a series of innovative products, strengthening its breakthroughs in core technology areas and providing strong support for the incubation of new businesses.

In terms of forward-looking industrial layout, iSoftStone has strengthened the construction of its three main bases in Wuxi, Suzhou, and Tongzhou, covering the Yangtze River Delta and Beijing-Tianjin-Hebei regions, to build intelligent manufacturing and supply chain management capabilities. Through an OEM+ODM model, the company has established close ecosystem partnerships with global technology manufacturers. By integrating intelligent manufacturing with ICT software and hardware infrastructure capabilities and combining them with productivity-enhancing products, the company has created a complete industrial chain loop, promoting improvements in societal production efficiency.

In addition, iSoftStone has strengthened its marketing drive, increasing its strategic large client and regional marketing resource investments to achieve Integrated Software-Hardware promotion. In the domestic market, the company has solidified its regional city marketing organization, while in the international market, it has steadily advanced its North American and Japanese businesses and accelerated its expansion into Southeast Asia and the Middle East.

Focusing on the "Four Transformations" Strategy to Drive Value Enhancement

As a leading Chinese digital technology product and service innovation company, iSoftStone has been deeply involved in industries such as ICT, finance, internet and telecom operators, high-tech, and manufacturing for many years, building comprehensive ICT software and hardware service capabilities, ranging from chips to operating systems and system software to product design.

Intelligence: Strengthening Consulting-led Growth to Drive Stable Business Development

iSoftStone, leveraging its professional capabilities and extensive experience in the software and digital technology services sector, has responded actively to market demand and continued to lead the IT services market. In the 2023-2024 China IT Services Market Research Annual Report released by CCID Consulting, iSoftStone ranked first in the 2023 China IT services market and as the top domestic leader in IT consulting. In the cloud intelligence field, the company was among the first partners of the Pangu Large Model and an innovation partner of the Ascend AI Large Model. It has cooperated with Huawei Cloud to focus on retail and manufacturing sectors, winning bids for several large model projects from major companies, including a large steel group, a leading retail company in Shanghai, and Guangzhou Kangaroo Mommy. In the industrial internet field, the company launched the iSS-Works, Tianyu Industrial Financial Platform, and Intelligent Manufacturing MOM Platform, signing a major industrial internet application platform software development project. In the enterprise management software services field, the company conducted comprehensive cooperation in the ERP sector with a major ICT leader.

Innovation: Promoting Software and Hardware Collaboration to Achieve Business Scale Growth

iSoftStone is building a product matrix around localized computing power infrastructure and providing full-stack services. As a partner for the Kunpeng and Ascend full machine platforms, iSoftStone Computing is driving breakthroughs and innovations in enterprise-grade product technology, with nearly 30 landmark projects secured. The PC terminal business continues to lead in the government and education sectors. AIStone has launched several popular products, including the MECHREVO Genesis, Wyvern, and Aurora series gaming laptops, ranking in the top three in sales on JD.com and Tmall, and second on Pinduoduo. Additionally, it was the first to release a high-performance mobile AI PC solution. In the foundational software sector, the company's SwanLinkOS operating system was among the first to achieve interoperability with HarmonyOS. The Tianhe enterprise-grade server operating system completed mutual certification and pre-installation adaptation with iSoftStone Computing servers, while the iSSEDB commercial database version launched the Tianhe multi-database middleware platform product. This combined with iSoftStone Computing's integrated solution serves numerous central government and state-owned enterprise clients. In terms of digital infrastructure and system integration business, the company has deepened cooperation with central government and state-owned enterprises, as well as in manufacturing, finance, education, and other sectors, creating multiple benchmark projects worth over one billion yuan.

Green Development: Deepening Industrial Cooperation to Accelerate the Launch of Emerging Businesses

Under the "dual carbon" backdrop, green development is an inevitable requirement for achieving high-quality growth. iSoftStone, focusing on the strategic layout of building a new national energy system and intelligent infrastructure, has deepened cooperation with local governments and industry ecosystems. In the digital energy field, the aggregation capabilities of the provincial virtual power plant in Liaoning have rapidly improved, and several dual-use charging and swapping stations are now ready for operation. In the intelligent computing services field, the company has actively deployed important AIDC computing hubs in Guangzhou, Huangpu and Wuhu, while also independently developing an AI computing services platform. It has reached strategic cooperation with several industry-leading companies.

Internationalization: Accelerating Overseas Expansion to Drive Global Business Development

iSoftStone is gradually building effective marketing and delivery teams overseas, advancing both "going global" with Chinese enterprises and local market expansion: In Southeast Asia, the company made significant breakthroughs, winning a five-year long-term project with a multinational transportation group in Singapore. It also signed a memorandum of cooperation with a major ICT leader for Middle East and Central Asia cooperation, and established long-term partnerships with several large Turkish conglomerates in digital application development and operations. AIStone continues to push forward both its self-owned "MECHREVO" brand business and computer ODM business: "MECHREVO" has made breakthroughs in Kazakhstan and Germany, while the ODM business has established new cooperation with several internationally renowned brand clients.

Future Outlook

In the future, iSoftStone will accelerate the construction of a new development pattern, focusing on the four strategic directions of intelligence, autonomy, green development, and internationalization. The company will continue to lead with consulting and drive business growth through innovation, products, technology, capabilities, and marketing. It will make forward-looking investments in intelligent manufacturing, ICT software and hardware infrastructure, and productivity-enhancing products, striving to create a closed-loop industrial chain and become a technology company with significant market influence.