Haijian He: It’s Henry here. I’ll probably take on the first question and I’ll translate myself briefly, and Zou can comment as well. So regarding the AI business contribution, the first point is on the CapEx. So last quarter, we spent — in my script I mentioned it’s about RMB415 million, or RMB400 million level on the third quarter. But I’ll go back to your first point regarding the contribution and revenue margin, a few things to share. First of all, as you know, following very fundamental and basic economic principle, right, it’s really driven by two things. One is the supply-demand balance, and the second is about the technology we offer and the products we offer, right? So as we all know that today really is about the buyers — it’s all a seller’s market, right?
So if you do have a very robust infrastructure and resources and can provide a very robust service and products to the clients, clients are definitely willing to pay. And for the clients, it’s also giving them a cutting-edge advantage when they try to compete, training their model to a certain level, they can compete in a world-class stage. So that actually convert to a very good logic for us to have a better margin compared with other kind of resources-driven ICE services historically. So we also observed the second phenomenon is the client also willing to pay for a value-added part of the services, not only by charging them on a fundamental resource usage basis. So by giving them the best practice and giving them a value-added service and products, we can share certain value with the client, and that gets embedded into part of the pricing after a given time.
So those are the two fundamental reasons that we believe the higher margin from AI business will carry out for the future as well. This is the second point. And the third point is really about contribution, right? So the reason we didn’t give a percentage for this quarter is every day counts for this quarter. So given we have a strong client demand and given we also provided enough sufficient resources for our client — and each quarter, we do see a very good growth trajectory at this moment. But when you look at — because the third quarter means from 1st of July until the 30th of September. And right now, we’re already end of November. So today’s situation is very different with the 1st of July. And we do believe if we look at the tail impact of the third quarter, the growth trajectory and the incremental revenue even on a weekly basis is a very significant contribution to Kingsoft Cloud total revenue.
But if you combine as a total quarter for the third quarter alone, I think this number will be really misleading to a certain way that definitely does not account the full credit of the AI business for us. So this is my second point. And third point regarding the CapEx direction and the guidance. So as we probably talked last quarter as well, we do believe this part of the CapEx is a very good growth driver for us. So the more we spend, the more incremental revenue will come for sure and the more and better gross margin will come to follow as well. So even you see we spent about RMB400 million in this quarter for CapEx, we’re seeing the trend for next quarter and maybe the early part of next year, this number will continue to increase. And mathematically, you will have a direct linkage for those spending converted to a new revenue for next year.
I think you can do the math, but — I’m not going to give an answer, but you can see that trend is very visible as well. So I think these are the three parts. I just want to give you color. Given the importance of this question, I will translate myself as well.
Tao Zou: [Foreign Language]
Haijian He: Okay. So let me quickly translate. So in relation to your second question about the CDN strategic adjustments, we have actually started the adjustment in October 31 this year, and we have an internal deadline of June 30, 2024. As I can see this, we’re continuing to do some adjustment according to the market conditions. Currently, we’re getting CDN revenue on a quarterly basis around RMB500 million. And it might continue to scale down to somewhere between RMB300 million to RMB400 million per quarter, and thereby reaching a relatively stable status till after June 30 next year. And in relation to your question about the profit margins for the public cloud services business, it’s of two components: one is CDN and one is the so-called pan-Internet sector.
For the CDN sector, as mentioned, as to the third quarter next year we expect the strategic adjustments to have completed. And by then, we would hope the margin of this business line to revert to the relatively healthy level that was as of the fourth quarter of 2022. Now for the pan-Internet space, we are still seeing the margin, including both the GP margin and as well as the operating profit margin steadily and gradually improving. I mentioned one of the uncertainties is the GPU supply. And obviously, in the AI space the demand significantly outpaces that of demand — outpaces of supply. And if that can be — if the supply chain issue can be resolved completely, obviously, the improvement of our business as well as margin in the AI and thereby the pan-Internet space will be much faster.
But even with that uncertainty, we are already seeing relatively good progress in terms of margin improvement and business scale expansion.
Operator: Your final question comes from the line of Katrina Chiu from Citi.
Katrina Chiu: This is Katrina Chiu asking on behalf of Brian Gong from Citi. Can management share with us the overall revenue outlook in 2024 and whether we can expect positive revenue growth next year?
