Performance "Overstated" Behind the Scenes: Kingsoft Software's Gaming Sector Faces a Setback

Ask AI · Kingsoft Software’s profits look inflated—when will its gaming business turn things around?

The “engine stalls” at Xishanju, weighing on Kingsoft Software’s 2025 revenue.

On the evening of March 25, Kingsoft Software released its full-year 2025 performance report. Based on the figures on the books, total revenue for the year was 9.683 billion yuan, down 6% year over year; gross profit was 7.864 billion yuan, down 8% year over year; but attributable net profit surged 29% year over year to 2.004 billion yuan.

It is worth noting that this seemingly impressive growth in profit is not driven by improvements in core business operations or cost-cutting and efficiency gains, but is closely tied to a sharp increase in other net gains, such as investment income from selling equity-method investees. According to the financial report, in 2025 it recorded gains from selling equity-method investees of 1.181 billion yuan, compared with a loss of 163 million yuan in the same period last year.

Meanwhile, looking at the revenue mix, Kingsoft Software’s business is mainly divided into two segments: office software and services, and online games and others. What cannot be ignored is that over the past year, these two core businesses have shown further signs of divergence.

The financial report shows that full-year revenue from office software and services was 5.929 billion yuan, up 15.78%, accounting for about 61% of total revenue; while online games and other business clearly “dragged their feet,” with revenue falling 27.77% year over year to 3.754 billion yuan, accounting for about 39%. Among them, the game business recorded 868 million yuan in the fourth quarter alone last year, down 33% year over year, and down 3% quarter over quarter.

In response to the decline in game-business revenue, Kingsoft Software explained in the financial report that the drop in fourth-quarter revenue was mainly due to lower earnings from several existing games; fluctuations in full-year revenue were related to the high base of game-business earnings from the previous year and the pullback in earnings from some existing games.

Public information shows that as early as 2020, Kingsoft Software split and consolidated game studios in various locations to form two game segment companies—Xishanju and Kingsoft Shiyou. The former focuses on an integrated model of R&D, publishing, and operations; the latter is built around an “IP-based strategy,” with a focus on bringing in classic IP, localization adaptations, and operating IP across the entire industrial chain.

Tracing the development of Kingsoft Software’s past game business, Xishanju is undoubtedly the main force behind that segment. However, its market performance over the past year has clearly fallen into a slump. Specifically, “Sword and Fairy” series, Xishanju’s most classic game IP, once enabled the company to rake in huge profits. But as the operation of its core products has entered its 16th year, its performance has hit a bottleneck, with both the cash flow performance of《Sword and Fairy 3》and overall game popularity showing a downward trend.

Xishanju《Sword and Fairy 3》 Cai Shumin / photo

At the same time, the sci-fi mecha game《Jiexianji》developed under the direct leadership of Guo Weiwei, the former chief executive officer of Xishanju and a well-known game producer, has also fallen far short of expectations.

It is understood that the game went through a long R&D cycle, with preparation lasting nearly 10 years. It began formal production at the end of 2021, but since it launched last July, its performance has been bleak. According to data from the mobile game comprehensive service platform Xiaohulu, on the day《Jiexianji》opened its Steam public test, the maximum number of online players reached 132,800; three days after launch, the number of online players dropped to 70,000. The latest data as of March 26 this year shows that the online peak of《Jiexianji》is below 1,000. In terms of ratings, the total number of reviews is about 28,000, and the approval rate is only 59%.

Especially noteworthy is that Kingsoft Software has placed high hopes on《Jiexianji》，investing “real money” to support it. In the quarter when the game launched, the marketing expenses that Kingsoft Software “burned” (sales and distribution expenses) reached 564 million yuan, up 55% year over year and up 33% quarter over quarter. At that time, the company stated in its financial report: “The main reflection of this growth is the increase in promotional and advertising spending related to the online game business.”

Looking at the full year, sales and distribution expenses totaled 1.791 billion yuan, up 33% year over year. The reason for the growth was also linked to increased marketing expenses resulting from the launch of new games, as well as growth in related expenses for employees of Kingsoft Office Group.

At the financial results call held last night, Kingsoft Software CEO and Chairman and CEO of Xishanju, Zou Tao, also frankly acknowledged that after《Jiexianji》launched last year, it indeed failed to meet expectations. Some older games also saw certain declines. The company’s internal analysis believes that this may be precisely an opportunity to usher in the new and move away the old.

In stark contrast to Xishanju’s lack of momentum, the other game segment company under the “Kingsoft Group”—Kingsoft Shiyou—has performed well since the start of the year. Previously, in January, the social deduction mobile game《Goose Goose Kill》that Kingsoft Shiyou exclusively distributed and that Huya co-published quickly caught on after its public test. Within 24 hours of launch, it saw more than 5 million new registered users and quickly topped the iOS free chart.

To outsiders, Kingsoft Shiyou’s frequent moves may signal a shift in the internal strategic weight of the group. However, what cannot be ignored is that although《Goose Goose Kill》has successfully opened the market, its true test lies in long-term operating capability and retention rate; at the same time, its success path has a degree of happenstance and may be difficult to replicate in subsequent new games.

In addition, controversy around related collaboration activities involving《Dust White》has not yet fully died down on social platforms.

At the end of February this year, the game’s official account announced a cooperation with China Post, launching offline pop-up postal office activities and a limited-edition commemorative gift box featuring the collaboration. The collaboration was originally scheduled to roll out in postal offices across cities such as Chengdu, Nanjing, Shenzhen, Beijing, and Shanghai from February 28 to March 6. However, after the collaboration news was released, it quickly triggered resistance from some netizens.

The main focus of the controversy centers on the game’s art style and content boundaries. Some netizens pointed out that《Dust White》contains many female characters with revealing outfits and exaggerated body features, showing a tendency toward “vulgar borderline content” and “sexual content.” Meanwhile, they also questioned why an “adult-oriented” game would collaborate with a brand with public attributes like China Post. However, at the aforementioned phone conference, when Zou Tao discussed the game business, he did not mention any related matters regarding《Dust White》.

In short, at a time when《Sword and Fairy 3》is aging,《Jiexianji》has fallen flat, and《Dust White》is mired in controversy, the “Kingsoft Group” games still rely solely on a single title,《Goose Goose Kill》，to break through. The road to transformation remains long and arduous.

Reporter Qin Mingwei

Text editor Ma Yunfei