And we do not expect that kind of relationship to have any material change in the near-term future. Now, in terms of our responses strategy to this situation, on one hand is that we’re working with some of the firms that have computing powers within China to building a dedicated computing power done together. And the second thing that we do is to follow-up with new products that are within compliance premises they’re allowed to supply in China market. And in terms of growth drivers, there are basically two types of growth drivers. One is old commerce existing or let’s say old customers, which are mainly characterized by the independent AI large language model customers that we have been serving recently. And the second type is new customers, which are typically not the independent AI large language model companies.
However, those companies that are ready to leverage the capability of large language models to empower their existing business, for example, EV customers. Currently, we see that the growth driver coming from existing customers to taking a higher proportion. However, we do expect that in the future, the potential for new customers’ demand has higher growth potential. And Mr. Liu Tao, our SVP also added that there are several types of growth drivers. One is the internet companies training their own models and using their in-house models and by using the inference capability of the computing power to use their in-house models. And secondly is the advance and the launch of Zuora that leading to a wave of demand coming from the video side of things.
And the third part would be the new companies like Mr. Zou Tao mentioned, EV autonomous driving kind of demand.
Haijian He: So I will take on the second question. I appreciate you noticed on the expansion on the margin side. So I think there are a few kind of major directions we’re trying to achieve going forward at the same time. First of all, we’re aiming to keep Q-on-Q expansion on the gross margin side, right? So this actually is driven by the cost cutting on the supply chains and the better automation on the resources we have and cutting certain loss-making computing regions and certain disposal for certain equipments that we don’t think will fit into today’s client requirements. So all the combination of actions were contributing to the margin expansion of the gross margin. And as I explained to the first question, those efforts have already in place, and we’re going to see those impact will be gradually delivered going forward next year quarter as well.
So the first, as I mentioned, is really about expansion on a Q-on-Q basis on the gross margin. So the second part is really about narrow and better managing the expenses and operation expenses, including, for example, the better management of the human capital costs, including the internal efficiency and streaming line order, internal management initiatives that were actually well contributing for the expansion of the EBITDA margin. So as you can see, our expenses between the line of the gross margin and EBITDA margin continue to optimize and reduce as well in the past few quarters. So that has proven the management team has already got some good experience and practiced those skills pretty well, and we think we can carry on that in the next few quarters.
So our second aim is to improve the EBITDA margin on a consumer basis. So, we are confident to see, as we make our efforts, our EBITDA margin will be getting to approaching the breakeven in a short-term of time. And the third is we’re also adding to another KPI for ourselves in terms of the internal management. We’re trying to not only making the EBITDA margin breakeven, but we’re also trying to making the company with a better quality of revenue and continuous optimize the revenue mix and picking the right clients and also expanding the AI exposures, we’ll be in a very good position to have the possibility to see a good trend of OP margin expansion as well. So, I think these are the three goals we are trying to achieve in 2024. While we are not in a position today to give a clear guidance about the timing of the EBITDA margin breakeven as well as the profitability on OP margin side.
We are confident to say that all the initiatives in place, we’ll see that in good results going forward in the next few quarters, probably, we can observe. And to your question with the SBC cost, one thing I want to note is that based on accounting rules, the SBC cost was booked based on the share price at a time when the ESOP and the shares was granted to the employees, not on a vesting period of time. So when the share price was high, those costs will be booked and amortized in next few years. So I don’t think given the volatility of the capital markets for many of the shares today, the SBC line is reflecting the true value, i. e., the market value of the ESOP value we granted to the employees. So those value will be need to be revisited and recalculated if you want to do a model.
But putting all things together, the company has adopted a very prudent way of granting and investing the shares as you may see from the announcements. And also, we’re extending third investing schedules to keep the company employee working a bit longer and with better incentive. So as you can see from 2022 to 2023, our SBC cost has declined from roughly RMB360 million in 2022 to drop about half to RMB180 million in 2023. So I think we are with a prudent attitude from issuing, granting and investing the ESOP. And I think going forward, you’re going to see a better and a narrow line between the GAAP and non-GAAP margin as well.
Nicole Shan: Operator, the last question, please.
Operator: We are now going to proceed with our last question. And the question comes from the line of Yang Liu from Goldman Sachs.
Yang Liu: Could management talk about the strategic planning for enterprise cloud in 2024? And the second question is, we have seen some news on peers price competition in public cloud in early 2024. And could management tell us more about the latest competitive landscape and also looking for cloud’s competitive advantages?
