Terminating cloud services! Oneconnect Financial Tech: Strategic business relationship with Ping An Group remains unchanged

Recently, Oneconnect Financial Technology Co., Ltd. (referred to as "Oneconnect Financial" or "the Company") announced that the board of directors decided on July 11, 2024, to gradually terminate the operation of cloud services starting from July 2024 and will discuss transition arrangements with customers (if any). Regarding the decision to terminate cloud services at this time, Oneconnect Financial stated that it is mainly due to the intensive usage model of cloud services, the decline in economies of scale due to the termination of purchases by related customers, and the unsustainable level of operating costs, which hinder the company's efforts to continuously reduce costs and increase efficiency. Oneconnect Financial also emphasized that the company continues to allocate strategic resources to create high-value, high-threshold products and deepen its presence in overseas markets, expecting to drive revenue growth from high-quality customers, especially third-party revenue growth. In May of this year, Oneconnect Financial previously announced that due to adjustments in the purchasing strategies of some related customers, they intended to terminate the company's cloud services. In fact, Oneconnect Financial mainly focuses on providing technological solutions to financial institution clients, including digital banking solutions, digital insurance solutions, and other digital infrastructure provided to financial institutions through the Gamma platform. Annual report data shows that in 2022 and 2023, Oneconnect Financial's cloud service revenue was 1.316 billion yuan and 1.246 billion yuan, accounting for 29.5% and 34% of the company's revenue, respectively, with over 99% of the revenue coming from subsidiaries and affiliated companies of Ping An Group, known as the "Ping An Group". Will the termination of cloud services business affect performance? Oneconnect Financial stated that the board of directors expects a significant decrease in revenue from cloud services in the second half of this year and for the full year due to the termination of operations. However, the company has been developing and providing comprehensive and customized technological solutions to meet the needs of Ping An Group and improve its operational efficiency, maintaining unchanged strategic business relationships with Ping An Group. Furthermore, the Financial Insurance Center noted that Oneconnect Financial is continuously expanding its overseas business, with third-party overseas customer revenue from sustainable business in the first quarter of 2024 increasing by 14.8% year-on-year. The company may continue to enhance its product competitiveness in the future and implement the second stage of strategic advancement by "deepening customer relationships" to achieve revenue growth, especially by prioritizing revenue from third-party customers. At a previous first-quarter performance briefing, executives of Oneconnect Financial also emphasized, "We will continue to focus on three areas: deepening customer relationships, standardizing products, and overseas business."