The 'AI Implementation Battle' is gradually gaining momentum.

Recently, Fourth Paradigm (06682.HK), a leading provider of AI solutions for Chinese enterprises, released its latest quarterly report.

The report highlights that in the first quarter, Fourth Paradigm's total revenue amounted to RMB 1.077 billion, marking a year-on-year increase of 30.1%. Gross profit stood at RMB 444 million, up 30.1% year-on-year, with a gross profit margin of 41.2%. Both revenue and profit showed substantial growth.

Notably, the revenue from the core business, the Prophet AI platform, reached RMB 805 million, surging 60.5% year-on-year. This remarkable achievement clearly underscores its strong presence in the AI application market.

The market responded positively to this performance upon the earnings announcement. On May 16, when Hong Kong stocks opened, Fourth Paradigm's (06682.HK) share price steadily rose from the opening bell, surpassing 11% by the afternoon before the press release.

'Vertical Gold Mining': AI Agent Soars 60%! Other Businesses Willingly Play the Role of 'Green Leaves'

From an industry perspective, entering 2025, all sectors have fully embraced AI transformation. This has led to a prominent coexistence of 'technology inclusivity' and 'scenario deep cultivation' in the global AI application market. General technology platforms like DeepSeek reduce the threshold for AI development through open-source strategies, while the enterprise-level market accelerates its penetration into vertical fields.

In this context, the Prophet AI platform's explosive growth in the first quarter was particularly noteworthy within Fourth Paradigm's business landscape.

In terms of business segments, Fourth Paradigm's revenue from the 'Prophet AI Platform' amounted to RMB 805 million in the first quarter, a year-on-year increase of 60.5%, outpacing the growth rate of total revenue. With the substantial increase in business revenue, the revenue contribution rate of the 'Prophet AI Platform' business also rose from 60.6% in the same period last year to 74.8%.

Conversely, the revenues of the other two major businesses that support the advancement of the 'Prophet AI Platform' both declined. Specifically, the revenue of the 'SHIFT Intelligent Solutions' business, the second largest contributor, decreased by 14.9% year-on-year to RMB 212 million, accounting for 19.7% of total revenue. The 'ShiShuo AIGS Services' contributed the least, accounting for only 5.6%, but its business revenue also dropped by 22.0% year-on-year to RMB 60 million.

Fourth Paradigm attributed this to the company's strategic expansion, particularly adopting the 'AI Agent + Vertical World Model' strategy.

From a technical standpoint, during the reporting period, based on the existing AI model development tool chain, the upgraded Prophet platform provided full lifecycle support for enterprise-level Agent development. By integrating over 150 mainstream large models and dozens of Agent frameworks, customers can swiftly build a comprehensive LLMOps system encompassing data processing, model training, deployment, and operation and maintenance.

Simultaneously, the Prophet AI platform is equipped with a rich and ready-to-use AI application matrix. By pre-installing intelligent application suites, it covers multiple core enterprise scenarios, including AIGC, intelligent office, analysis and decision-making, large model development tools, model warehouses, and Agent platforms.

This 'low-code, high-reuse' development model significantly lowers the technical barriers for enterprises' intelligent transformation.

Currently, Fourth Paradigm has horizontally ventured into high-frequency enterprise software products by transforming enterprise software with AI Agents. It has jointly released 'Collaborative Operation AI Agent' for OA processes, 'Finance and Tax Empowerment Agent' for finance and tax systems, 'HR Agent' for human resources systems, and 'Sales Manager Assistant Agent' for sales, in collaboration with other leading enterprise software companies in the industry.

In the market, while giants like Baidu Intelligent Cloud and Alibaba Cloud dominate the field of general large models, Fourth Paradigm has successfully demonstrated its market competitiveness in the breadth and depth of industry penetration by deeply cultivating vertical scenarios.

As of 2025Q1, Fourth Paradigm's enterprise-level Agents have been implemented in 14 industries, including finance, aviation, and healthcare, with the number of benchmark users increasing to 59. The average revenue contribution reached RMB 11.67 million, up 31.3% year-on-year.

Notably, these benchmark customers encompass not only traditional industry leaders such as finance, energy and power, and telecom operators but also extend to fields like new energy, pharmaceuticals, and retail, showcasing the company's precise positioning in high-value sectors.

Is there still a distance from the profitability inflection point? Fourth Paradigm continues to decipher 'scale monetization'

Another notable aspect of the quarterly report is that while revenue grows rapidly, Fourth Paradigm's gross profit has also increased simultaneously, maintaining a stable gross profit margin. This performance suggests the dual logic of technology iteration and business model innovation.

In fact, Fourth Paradigm has demonstrated a promising trend of narrowing losses over the past three years. In the 2024 financial report released earlier, its annual net loss attributable to shareholders narrowed by 70.4% year-on-year, from RMB 909 million in 2023 to RMB 269 million.

This time, the growth in gross profit seems to offer the market a glimpse of the company's inflection point towards a positive profitability period.

In Q1 2025, the company's research and development expenses amounted to RMB 368 million, continuing to increase by 5.7% year-on-year, while the research and development expense ratio decreased from 42.2% in the same period last year to 34.2%.

However, this trend of 'revenue growing faster than cost' precisely reflects the onset of the scale commercialization effect of the AI platform.

It is foreseeable that with the continuous advancement of AI platform commercialization for enterprise ends and the release of market demand scale, Fourth Paradigm's growth potential will exhibit astonishing explosiveness. Next, it is worthwhile to continue tracking its financial indicators such as accounts receivable cycle and cash flow status to gauge the proximity of its profitability inflection point.

It is noteworthy that after more than a decade of efforts, Fourth Paradigm's preliminary achievements in the large-scale commercialization of enterprise-level Agents have given the company's management ample confidence.

As the entire industry is still at a critical juncture of transitioning AI technology from the laboratory to industrial implementation, Fourth Paradigm has already mapped out its next plan – to embark on the era of multiple domains. This represents another growth prospect for the company.

In March this year, Fourth Paradigm announced the establishment of the Paradigm Group and plans to venture into more business areas based on its original enterprise service business.

The consumer electronics business segment, Phancy, serves as the first venture. The company positions its new business as providing AI Agent-based hardware and software integrated solutions for electronic products, empowering the vast consumer electronics terminal market with edge-side AI Agent modules, and launching AI smartwatches in collaboration with brands like Lenovo, Lamborghini, and Bruce Lee.

It is reported that in the future, the Paradigm Group will uphold the ideal of Artificial General Intelligence (AGI) and successively introduce AI intelligent solutions in fields such as new energy, automobiles, healthcare, and smart homes through the technical path of 'AI Agent + World Model'. This will lower the thresholds and costs for launching AI terminal products that are well-loved by respective users.

As the largest player in China's platform-centric decision-making artificial intelligence market, the Paradigm Group's ambition to build a 'vertical scenario deep cultivation + cross-domain ecological expansion' ecosystem is evident. 'Facing the new decade-long journey, the Paradigm Group will leverage the experience of vertical world models accumulated over the past decade to extend artificial intelligence capabilities from the single market of transforming enterprise software to a broader software market, realizing the vision of true AI for everyone.'

The Most Growth-Oriented Hong Kong Stock Target?

The capital market has also extended certain support and attention to the company's growth prospects.

Public information reveals that on the eve of the quarterly report release, Fourth Paradigm was honored on the '2024 New Fortune Magazine Best Hong Kong Stock Company' list.

With its outstanding performance across multiple dimensions, including growth potential and R&D innovation capability, it won three awards simultaneously: 'Most Growth-Oriented Hong Kong Stock Company', 'Best IPO in Hong Kong Stocks', and 'Most Innovative Hong Kong Stock Company'. This makes it one of the few AI technology enterprises to achieve multi-dimensional leadership in this year's list.

Solid revenue growth, forward-looking technology layout, and a clear path to profitability serve as the logical support points for Fourth Paradigm being considered a 'scarce high-growth target'. Some believe that with the deepening of the AI 2.0 wave, Fourth Paradigm may emerge as a long-term value choice that cannot be overlooked in the Hong Kong stock technology sector.

At least for now, as one of the 'definers of AI vertical scenarios', Fourth Paradigm certainly possesses the strength to become a core force leading the 'popularization of AI' in the process of AI transitioning from an industrial tool to a universal application.

Its development path has become one of the 'Chinese paradigms' for validating AI implementation, and it also heralds the commencement of a new AI cycle driven by technology deep cultivation to propel value escalation.

However, the outcome of emerging industries often stems from the long-term tug-of-war between uncertainty and certainty, and no one can predict the future direction of the enterprise with absolute certainty.