Yonyou Network, which lost 4.4 billion yuan in three years, struggles to pivot like 'a big ship hard to turn' as it returns to the Hong Kong stock market

When an elephant turns, its bones break first.

On December 29, 2025, Yonyou Network, the leading domestic ERP (Enterprise Resource Planning) industry company, submitted its prospectus to the Hong Kong Stock Exchange, intending to go public on the main board of the Hong Kong Stock Exchange. CMB International and CITIC Securities are its joint sponsors. This is the second time Yonyou Network has attempted a Hong Kong IPO after submitting its prospectus for the first time on June 27, 2025.

According to the equity structure disclosed in the prospectus, Wang Wenjing, the founder and actual controller of the company, holds 41.59% of the shares through Beijing Yonyou Technology, Shanghai Yonyou Technology, and the Yonyou Research Institute, making him the controlling shareholder of Yonyou Network. In 2019, during the 30th anniversary of Yonyou Network’s founding, Wang Wenjing stepped down as CEO of the company. However, in response to the decline in Yonyou Network's business performance, Wang Wenjing returned to active involvement multiple times and promoted the company's plan to list in Hong Kong.

In August 2020, Wang Wenjing proposed the BIP (Business Innovation Platform) strategy to drive Yonyou Network's transformation towards digital intelligence. With the maturation of emerging technologies such as artificial intelligence, big data, and cloud computing, cloud ERP has gradually become the preferred choice for most enterprises. Yonyou Network also began transitioning from selling software to providing cloud services, shifting from a one-time purchase model to a subscription-based business model.

However, the cloud service business is no different from a cash-burning machine. Under heavy cost investments, Yonyou Network has accumulated losses of approximately 4.4 billion yuan over the past three years. Its market value has dropped from a peak of 180 billion yuan to 64.9 billion yuan, and its operating cash flow turned negative at 274 million yuan in 2024. The massive investment has yet to translate into tangible profits at this stage. After its capital reserves became critical, a secondary listing to raise funds for the transformation has become imperative for Yonyou Network.

Three years of losses totaling 4.4 billion yuan, Yonyou Network faces a cash flow crisis

After entering the 'cloud transformation' phase, Yonyou Network's financial reports began to show signs of trouble. In 2023, Yonyou Network experienced its first annual loss since going public, and its performance continued to decline afterward. In 2022, 2023, and 2024, Yonyou Network's revenue was 9.262 billion yuan, 9.762 billion yuan, and 9.153 billion yuan respectively. Although revenue fluctuations were not significant, the revenue decline in 2024 was 6.57%, marking the first negative revenue growth for Yonyou Network since 2020. More revealing of the problem is Yonyou Network's net profit attributable to shareholders.

In 2020, Yonyou Network's net profit attributable to shareholders was 985 million yuan, but by 2023 and 2024, this figure had become negative 967 million yuan and negative 2.061 billion yuan, respectively. In 2023, Yonyou Network’s net profit plummeted by 541.28%, while in 2024 it narrowed to 113.13% but remained deeply mired in losses. On December 29, 2025, Yonyou Network released its 2025 annual earnings forecast, showing that the company expects a full-year net loss between 1.3 billion and 1.39 billion yuan, meaning that Yonyou Network's total losses over the past three years have reached approximately 4.4 billion yuan.

From the perspective of revenue composition, Yonyou Network's transformation has been quite effective. By now, the contribution of cloud services to Yonyou Network’s revenue has risen from about 40% in 2020 to around 80% in the first half of 2025. At the same time, the scale of Yonyou Network’s customer base is also expanding. As of Q3 2025, the cumulative number of paying customers for Yonyou Network's cloud services exceeded one million, reaching 1.011 million, with new paying cloud service customers numbering 138,000.

However, from a profit standpoint, Yonyou Network's transformation pain persists. Though the earnings forecast indicates some improvement in Yonyou Network's operations in 2025 — with narrower losses and estimated annual revenue between 9.17 billion and 9.27 billion yuan, reversing from the previous year’s negative growth to stabilize and return to positive territory — the reasons behind this improvement are complex. Over the past two years, Yonyou Network accelerated its 'streamlining'; by 2024, its employee count decreased by 3,666 compared to the end of 2023, and in the first three quarters of 2025, it further reduced by 2,173 employees compared to early 2025.

Looking ahead at ongoing operations, several consecutive years of losses and depletion have critically strained Yonyou Network's capital reserves. Financial reports show that Yonyou Network's operating cash flow slid from 1.613 billion yuan in 2020 to negative 274 million yuan in 2024. Although the latest earnings forecast stated that Yonyou Network achieved positive net operating cash flow in 2025, exceeding 700 million yuan and improving by 1 billion yuan compared to 2024, in the long run, this remains insufficient for its cash-intensive cloud service business.

Against the backdrop where alleviating cash flow pressure has become an urgent priority, Yonyou Network's move to list in Hong Kong ultimately seeks financial opportunities. However, setting aside whether this listing will succeed, it is questionable whether the Hong Kong stock market has sufficient confidence in Yonyou Network. At its peak, Yonyou Network's market value once exceeded 180 billion yuan, but now it stands at 64.9 billion yuan, down more than 60%. In 2020, Yonyou Network's stock price reached a high of 53.99 yuan, whereas today it is 19.01 yuan.

Transitioning from selling software to offering cloud services, securing a new ticket for the AI era is imperative.

In recent years, with the development of emerging technologies such as artificial intelligence, big data, and cloud computing, the ERP industry has encountered new opportunities and challenges. An increasing number of enterprises have started migrating to the cloud to reduce IT costs, making cloud ERP the preferred choice for most companies, while the traditional ERP market has entered a bottleneck phase. This implies that Yonyou Network must actively embrace the AI wave, transforming from selling software to providing cloud services to secure its ticket in the AI era.

However, as the saying goes, 'When an elephant turns around, it breaks its bones first,' and the high cost of transformation is unavoidable. Firstly, the cloud service business requires enormous upfront capital investment. Currently, the core platform of Yonyou Network's cloud service market is the Yonyou BIP, an enterprise digital intelligence foundational platform. The official definition of Yonyou BIP by Yonyou Network is 'a fusion service cluster and product matrix combining a digital intelligence platform, scenario-based services across ten key areas, and a large-scale ecosystem.' As of Q3 2025, Yonyou BIP has been iterated to 'Yonyou BIP5'.

The prospectus shows that in 2022, 2023, and 2024, Yonyou Network’s R&D expenses were 1.754 billion yuan, 2.106 billion yuan, and 2.122 billion yuan respectively, accounting for 19.7%, 22.3%, and 24.1% of the revenue during the same period, with most of these costs going towards the development and iteration of Yonyou BIP. In 2025, Yonyou Network's R&D costs accounted for as much as 32.8% of the revenue for the same period. Under such high costs, Yonyou Network's gross profit margin also dropped from 54.8% in 2022 to 45% in 2024.

Yonyou Network's poor profitability is influenced by multiple factors: firstly, cost; secondly, the competitive landscape of the domestic ERP market, where overseas vendors dominate the high-end sector and domestic vendors focus on the mid-to-low end. According to Zhiyan Consulting, overseas vendors like SAP and Oracle remain dominant in the high-end market, while the advantage of domestic ERP leaders Yonyou and Kingdee lies in the mid-tier market, which is characterized by price-performance competition, leading to lower gross margins compared to the high-end market. Thirdly, after transitioning from a one-time perpetual license model to a subscription-based model, Yonyou Network's front-loaded costs and longer return cycles have further impacted the company's gross margin.

Image source: Zhiyan Consulting

Objectively speaking, traditional ERP vendors must endure losses for future growth at this stage. The only question is whether the ultimate outcome of the transformation will meet expectations—namely, overcoming the painful adjustment period and converting technological advantages into tangible profits. For Yonyou Network, the answer remains shrouded in uncertainty. In 2024, Yonyou Network's cloud services revenue was 6.804 billion yuan, down 3.4% year-over-year from 7.048 billion yuan in 2023. In the first half of 2025, this figure stood at 2.747 billion yuan, marking a 3.6% decline compared to the same period in 2024.

Admittedly, Yonyou Network occupies a top position in China's ERP industry. According to IDC and CCID reports, as of Q3 2025, Yonyou holds the largest market share in China’s enterprise application and ERP markets, as well as in SaaS for enterprise applications, ERP cloud, and supply chain SaaS. However, surrounded and pressured by competitors like SAP, Oracle, Kingdee, Alibaba Cloud, and Huawei Cloud, there are simply too many players dividing the pie, making it challenging to maintain its lead.

The ambitious overseas business struggles to become a new growth curve in the short term.

Amid fierce competition in the domestic ERP market, Yonyou Network has accelerated its overseas expansion over the past year or two. Several fundraising purposes listed in this prospectus also target globalization, such as global capability building, system establishment, potential strategic investments, and acquisitions. Looking back, Yonyou Network’s international journey can be divided into two phases: prior to 2023, focusing on 'Establishing in Hong Kong, serving Asia-Pacific,' and since 2023, the 'Globalization 2.0 Strategy' centered on 'Establishing in Asia-Pacific, serving globally.'

In Q3 2025, Yonyou Network established new subsidiaries in Vietnam, Japan, Mexico, Germany, and the UAE, accelerating its business layout in Southeast Asian countries like the Philippines, Cambodia, and Myanmar, while beginning to expand into the Americas, Europe, and the Middle East. As of Q3 2025, Yonyou Network had delivered products and services to more than 1,300 large and medium-sized enterprise clients across over 40 countries and regions worldwide. Among these, 60% were local overseas clients, and 40% were Chinese enterprises expanding abroad.

From this perspective, Yonyou Network's overseas business momentum is indeed significant, but the financial reports tell a different story. According to the 2024 annual report and the 2025 mid-year report, there has been no substantial change in the share of Yonyou Network's domestic and overseas businesses. In 2024 and the first half of 2025, the company’s domestic business revenue was 8.769 billion yuan and 3.398 billion yuan respectively, accounting for 95.8% and 94.88%, while overseas business revenue was 218 million yuan and 94.4148 million yuan respectively, accounting for 2.38% and 2.64%.

The international ERP market does offer considerable room for imagination. On one hand, from 2016 to 2024, the global ERP software market experienced steady growth, increasing from $30.15 billion to $53.13 billion. On the other hand, with domestic companies accelerating their overseas expansion, the prospects for ERP—one of the three essential tools for companies going abroad—are predictable. However, like the domestic market, the international ERP market presents both opportunities and challenges, particularly in facing the leading advantages of international giants and the capital costs required to deeply penetrate overseas markets.

According to a report by Zhiyan Consulting, the current leading companies in the global ERP software market are primarily SAP, Oracle, and Infor, followed by Deltek, Workday, and Abas in the second tier, and smaller ERP software firms such as Vantis and CAC in the third tier. Over the past decade, the competitive landscape of the global ERP market has remained relatively stable, with SAP and Oracle consistently ranking among the top two. In the third quarter of 2025, Yonyou Network accelerated its expansion into Southeast Asia and the Middle East, essentially capitalizing on the insufficient coverage of mid-range markets by international giants like SAP and Oracle in those regions.

However, in the short term, it will be difficult for Yonyou Network's overseas business to become a new growth curve that meets capital market expectations. Given the current state of Yonyou Network's overseas layout—characterized by considerable breadth but insufficient depth—and considering the heavy pressure on its domestic business, even if it successfully lists in Hong Kong, the funds available for global capability building, system development, potential strategic investments, and acquisitions will remain limited. Betting heavily on both domestic and overseas businesses simultaneously is not realistic for Yonyou Network at this stage.

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