Its losses widening and margins shrinking, can DataStory tell an attractive tale?

The AI company, whose shareholders include Xiaomi, plans to list in Hong Kong, delivering a story of strong revenue growth but eroding profitability

Key Takeaways:

• DataStory has applied to list in Hong Kong, reporting its revenue surged nearly 54% in the first quarter as its net loss widened
• The company, which helps businesses grow using enterprise-level large model applications, reported its gross margins continued to decline in the latest quarter

By Bai Xin Rui

The AI sector’s transition from an early phase of technological R&D to a more practical era of commercial application is boosting a new generation of companies, many now selling their AI 2.0 stories to investors. One of those, DataStory Artificial Intelligence Technology Co. Ltd., threw its hat into the IPO ring late last month, pitching itself as a leading provider of AI-native applications. Its planned Hong Kong listing is being underwritten by China Securities International, the international unit of domestic financial giant Citic, indicating it could be mid-sized, perhaps raising up to $100 million.

Founded in 2015 by Xu Yabo, DataStory helps businesses improve their efficiency using enterprise-level large model applications and solutions. Xu is part of a new generation of Chinese with strong AI backgrounds, previously working at Sun Yat-sen University and boasting over 16 years of experience in AI-related research, according to the company’s listing document. His expertise lies in leveraging big data and AI technologies to help companies build comprehensive digital business applications. 

Xu controls his company with about 34.27% of its voting rights, while other shareholders include smartphone giant Xiaomi, with a 6.33% stake.

From a top-level perspective, DataStory falls into an area on the cusp of what many believe is set for a major boom as people look for practical uses for AI. In the past, large model applications were largely confined to simple Q&A or content generation, still requiring significant human participation to make sound decisions and execute on them. But now the core of this technology is undergoing a fundamental evolution, driven by multimodal perception and multi-agent collaboration. That’s giving rise to a new generation of applications that can autonomously execute complex tasks, supplanting the historical reliance on heavy human involvement.

DataStory’s vision addresses business intelligence, which was traditionally limited to retrospective analysis and lacked ability to automatically execute more forward-looking strategies such as decision-making and deployment. Leveraging its proprietary EnlightAI multi-agent and other systems, DataStory is capable of autonomous planning, multi-process coordination and dynamic optimization. Such systems assume direct responsibility for final business outcomes, significantly curtailing the need for human intervention and thereby elevating commercial monetization capabilities.

DataStory says it is well-positioned to capitalize on an enterprise large model-driven business growth market in China that was already worth 8.6 billion yuan ($1.27 billion) in 2025, according to third-party market data in its preliminary prospectus. As enterprises across China improve and perfect their data authorization mechanisms, data acquisition and application are becoming much more seamless. As that happens, the market is projected to skyrocket to 150.1 billion yuan by 2030, representing breakneck annual growth of 77.2%.

Third-ranked

Given the market’s newness and high barriers to entry, it’s not surprising that the enterprise large model-driven business growth market in China is still relatively concentrated. The top five players collectively accounted for 37.8% of the market last year, according to the listing document, with DataStory ranking third at 5.8%. 

The company currently offers two primary service categories spanning key commercial scenarios throughout the full life cycle of business growth. Its enterprise growth AI solutions is the big breadwinner, contributing 70.6% of revenue in the first quarter of 2026. The segment targets the individualized and complex growth needs of large multinational corporations and top brands by providing them with end-to-end AI solutions.

Enterprise growth AI applications are DataStory’s other major business, accounting for 25.8% of revenue. Primarily delivered as standardized software-as-a-service (SaaS) or subscription-based applications, this segment equips businesses with out-of-the-box intelligent tools.

DataStory recorded revenue of 79.6 million yuan in the first quarter of this year, up 53.8% from the same period of 2025. It credited the strong growth to rising revenue from enterprise growth AI solutions. Most notably, the number of key accounts jumped by nine year-over-year to 20, as average revenue per key client rose to 2.3 million yuan — a 53.3% jump from the 1.5 million yuan in the first quarter of 2025.

Surging losses

Despite the strong revenue growth, DataStory’s bottom line remained squarely in the red in this year’s first quarter. Its loss ballooned to 144 million yuan for the three-month period, up around five times from a year earlier. Not surprisingly, a major factor behind the jump was swelling R&D expenses, which roughly doubled year-on-year to 40.18 million yuan in the latest period, jumping to 50.5% of revenue from 37.8% a year earlier. DataStory blamed the increase primarily on mounting direct input costs.

On another front, DataStory’s eroding gross margins also warrant close scrutiny. Its gross margin fell from 57.2% in 2023 to 52.2% in 2024, and tumbled further still to 42.1% in 2025, slipping again to 39.9% in the first quarter of 2026. Management blamed the erosion on expanding contributions from lower-margin solutions to its revenue mix. If the company completes its IPO, investors will inevitably be watching closely to see if this important metric shows signs of stabilizing and returning to a more positive trajectory.

Overall, U.S. giant Palantir (PLTR.US) arguably boasts the most robust operating model among AI software companies today. Reflecting that, Palantir has maintained a far higher gross margin of more than 80% for five consecutive quarters through the first quarter of 2026, leading investors to reward it with an eye-catching price-to-sales (P/S) ratio of 78 times. While riding the same explosive market wave, DataStory’s shrinking gross margins are far less compelling, underscoring a yawning operational chasm with top-tier players like Palantir.

While DataStory is coming to market as AI 2.0 takes off and investors welcome new stories, the growing number of such companies means buyers may become more selective. To replicate a Palantir-style story, the company will need to pivot from its current focus on growth at any cost toward a more refined approach that focuses on monetization and profitability. Only when its heavy R&D investments can build up a defensible position, and its gross margins stabilize and start to recover, will the company be able to deliver on its grand promise of both revenue growth and sustainable profits.

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