Investment Analysis Report of Yonyou Network (600588): Over RMB 4 Billion in Losses in Three Years, Growing Pains of Cloud Transformation Coexist with New AI Opportunities

Based on the above data analysis, I will provide you with an in-depth investment research report on Yonyou Network:

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Yonyou Network Technology Co., Ltd. is a leading Chinese enterprise software and cloud service provider, founded in 1988 and listed on the Shanghai Stock Exchange in 2001. Its core products include enterprise management software and cloud service solutions such as Yonyou BIP (Business Innovation Platform), NC Cloud, and U8 Cloud.

:

Indicator	Value
Market Capitalization	$46.33 billion
Stock Price	RMB 13.26
P/E	-23.12x
P/B	6.25x
Beta Coefficient	0.40

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According to the prospectus and public financial report data, Yonyou Network has experienced a sharp shift from profitability to huge losses in the past three years [1]:

Fiscal Year	Operating Revenue (RMB 100 million)	Net Profit (RMB 100 million)	YoY Change
2022	88.90	+2.25	Net Profit +3.4%
2023	94.43	-9.33	Switched from profit to loss
2024	88.17	-20.70	Loss expanded by 122%
2025 First Three Quarters	55.84	-13.98	Loss continues

:

• 2023 was a turning point for Yonyou Network; after maintaining profitability for consecutive years, it fell into a quagmire of losses ever since
• In 2024, the loss reached RMB 2.07 billion, expanding by 122% compared to 2023, a staggering loss magnitude
• In the first half of 2025, the loss was RMB 981.3 million, which has exceeded the full-year loss of 2023, and the loss trend has not been effectively contained [1]

Yonyou Network attributes its losses to two core factors in its prospectus [1]:

• The complex business needs of top-tier customers have significantly increased the complexity of implementation and delivery
• Delivery cycles have been extended, and project payment collection cycles have been prolonged
• Increased customized demand from large enterprise customers has driven up labor and time costs

• During the promotion of new-generation cloud service products, R&D and promotion expenses remain high
• R&D costs in the first half of 2025 reached RMB 1.125 billion, accounting for 32.8% of total revenue [1]
• The gross profit margin of the cloud service business (accounting for 77% of total revenue) has continued to decline, dropping from 54.8% in 2022 to 45% in 2024

Indicator	2022	2023	2024	H1 2025
Overall Gross Profit Margin	55.0%	51.0%	46.0%	YoY down 4pct
Cloud Service Gross Profit Margin	54.8%	49.5%	45.0%	YoY down 2.9pct

The continuous decline in gross profit margin reflects the “growing pains” during the cloud transformation: although the cloud service business accounts for 77% of revenue, its profitability is actually lower than that of the traditional software business, forming the awkward situation of “the more we transform, the more we lose” [1].

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From the perspective of revenue structure, Yonyou Network’s cloud transformation has indeed made remarkable progress:

Time Node	Proportion of Cloud Service Revenue
2022	56%
2023	67%
2024	77%
2025 First Three Quarters	77%
H1 2025	80%

This data indicates that Yonyou has transformed from a traditional software company to a technology company focused on cloud services [1]. As of June 30, 2025, the company has accumulated 6,065 large enterprise customers, 13,837 medium-sized enterprise customers, and 491,043 small and micro enterprise customers for cloud services, with a solid customer base.

However, cloud transformation is not a smooth road:

• In 2024, the revenue of the cloud service business was RMB 6.804 billion, a year-on-year decrease of 3.4% (2023: RMB 7.048 billion) [1]
• In the first half of 2025, the revenue of the cloud service business was RMB 2.747 billion, a year-on-year decrease of 3.6%

• In 2024, the gross profit margin of cloud services was 45%, 11.6 percentage points lower than that of the software product business
• The cloud service business should be a high-margin business, but its current profitability has instead become a drag

• Free cash flow in 2024 was -$2.033 billion (approximately -RMB 14.7 billion) [0]
• As of June 30, 2025, cash and cash equivalents decreased by approximately 51% compared to the end of 2024 [1]

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Wang Wenjing, founder of Yonyou Network, resumed the position of chairman in March 2025, marking his third time at the helm of the company [1]:

Time	Tenure Status	Background
Early Years	First tenure as chairman	Led Yonyou to become China’s ERP leader
2023	Resigned as chairman	Handed over to professional managers
2024	Chen Qiangbing → Huang Chenhong	Frequent leadership changes, unstable strategy
March 2025	Wang Wenjing returns for the third time	Reverse the loss trend

The multiple changes in management within less than one and a half years reflect the company’s strategic confusion and performance pressure during the critical period of cloud transformation.

• The number of employees was reduced to 21,313 by the end of 2024, a decrease of 3,666 compared to the beginning of the year
• It further dropped to 19,135 by the end of June 2025, a decrease of 2,178 compared to the beginning of the year
• A total of 5,844 employees have been laid off in the past one and a half years, controlling costs by improving labor efficiency [1]

• Announced the intention of a secondary listing in Hong Kong in April 2025
• Submitted the prospectus for the first time in July 2025
• Updated the prospectus to supplement performance at the end of 2025, accelerating the listing process [1]

• Launched the enterprise application large language model YonGPT in 2023
• Launched the AI application suite Yonyou BIP Enterprise AI in 2025
• Released the BIP “Ontology Agent” in January 2026 [1]

After Wang Wenjing returned to the helm, the company has indeed shown some positive signs:

Indicator	Change	Explanation
Revenue Growth Rate	Q1 YoY -21.22% → Q2 +7.1% → Q3 +3.65%	Revenue resumes growth
Gross Profit Margin Decline	Slowing magnitude	Improved product maturity
Backlog Orders	Increased from RMB 6.017 billion to RMB 6.322 billion	5.1% increase

However, these improvements are still insufficient to reverse the loss situation, with a loss of RMB 1.398 billion in the first three quarters of 2025 [1].

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Yonyou Network is actively embracing the AI wave:

Time	AI Progress
2023	Launched the enterprise application large language model YonGPT
2025	Launched the AI application suite Yonyou BIP Enterprise AI
January 2026	Released the BIP “Ontology Agent”

AI technology is mainly integrated into Yonyou BIP series products, embedded in enterprise business processes and management scenarios.

• AI is the next growth engine for the enterprise software industry
• The 700,000 enterprise customers accumulated by Yonyou provide natural scenarios for AI applications
• YonGPT has been implemented in scenarios such as finance, human resources, and supply chain

• Continuous increase in AI R&D investment further exacerbates capital pressure
• Intensified competition with tech giants such as Huawei, Alibaba, and Tencent
• Tight book funds; as of June 30, 2025, the book funds cannot cover short-term debts [1]

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Yonyou Network’s stock price has experienced a deep correction:

Period	Change Rate
Past 1 Year	+34.26%
Past 3 Years	-44.31%
Past 5 Years	-69.02%

Indicator	Value	Signal Interpretation
20-Day Moving Average	RMB 12.93	Short-term support level
50-Day Moving Average	RMB 13.96	Medium-term resistance level
200-Day Moving Average	RMB 14.39	Long-term resistance level
KDJ	K:75.3, D:62.9, J:100	In overbought zone
MACD	No crossover	Bullish-leaning signal
Beta	0.40	Low correlation with the broader market

: [0]

• The stock price is in a sideways consolidation pattern with no clear trend direction
• Trading range reference: support level at RMB 12.93, resistance level at RMB 13.43
• The short-term KDJ indicator is in the overbought zone, potentially facing adjustment pressure

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Yonyou Network faces multi-dimensional competitive pressure:

Competitor	Advantage Areas	Competitive Situation
Kingdee International	SME ERP	Traditional strong competitor, continues to erode market share
Huawei	Government and enterprise market	Strongly enters based on HarmonyOS ecosystem
Alibaba Cloud/DingTalk	Enterprise collaboration	Price war and ecosystem advantages
SAP/Oracle	High-end market	Advantages in multinational enterprise customers

Based on 2024 revenue, Yonyou is the largest player in China’s enterprise software and service market with a 4.1% market share, but it faces continuous challenges from competitors such as Kingdee and Huawei [1].

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Risk Type	Specific Description	Risk Level
Performance Risk	Losses continue to expand, timeline for loss reversal is uncertain	High
Cash Flow Risk	Rapid cash consumption, liquidity pressure	High
Valuation Risk	Negative P/E, profit model not yet verified	High
Competition Risk	Continuous competition from Huawei, Kingdee, etc.	Medium
Technology Risk	High investment in AI transformation, uncertain returns	Medium

Indicator	Value	Evaluation
P/E	-23.12x	In loss status, cannot use P/E for valuation
P/S	5.15x	Higher than historical average
P/B	6.25x	Higher than the software industry average

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Yonyou Network is in the deep-water zone of cloud transformation and the initial stage of AI transformation, facing “three major challenges”:

1. Performance Pressure
   : Accumulated losses of over RMB 4 billion in three years, losses continued to expand in 2024-2025
2. Transformation Pains
   : Although the proportion of cloud service revenue has reached 77%, the gross profit margin has continued to decline, falling into the dilemma of “increasing revenue without increasing profits”
3. Capital Pressure
   : Tight cash flow, secondary listing in Hong Kong is key to “capital infusion”

:

• After Wang Wenjing returned for the third time, management stability has improved
• Revenue resumed growth in the second and third quarters of 2025, indicating an initial inflection point
• Leading layout in AI transformation, which may become a new growth engine
• Solid customer base (700,000 enterprise customers)

Dimension	Rating	Explanation
Short-term	Wait-and-See	Losses continue, technical indicators are overbought
Medium-term	Cautious	Pay attention to the progress of Hong Kong listing and performance improvement
Long-term	Under Observation	The effectiveness of AI transformation and timeline for loss reversal are key

:

• Whether the 2025 annual report can achieve a narrowing of losses
• Whether the secondary listing in Hong Kong can successfully complete fundraising
• Whether the AI business can contribute substantial revenue in 2026

The growing pains of Yonyou Network’s cloud transformation cannot be completely eliminated in the short term, but Wang Wenjing’s return and the advancement of the AI strategy have brought new hope for the company’s transformation. The success of the secondary listing in Hong Kong will be a key variable for the company to weather the current difficulties. If it can successfully raise funds and effectively control costs, the company is expected to reverse losses in 2026-2027; if fundraising is not smooth or losses continue to expand, the company will face more severe survival challenges.

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[1] Eastmoney.com - Caifuhao. “Sprinting for Hong Kong Listing, Yonyou Urgently Needs ‘Capital Infusion’” (January 5, 2026). https://caifuhao.eastmoney.com/news/20260105214755427834490

[2] Jinling AI Financial Database. Yonyou Network (600588.SS) Company Overview and Technical Analysis Data (January 7, 2026).

[3] Jinling AI Financial Database. Yonyou Network (600588.SS) Financial Analysis Data (January 7, 2026).