Yonyou IPO tests whether AI will rewrite the software business

The Chinese enterprise software pioneer is pitching AI as its next growth engine, even as the technology forces investors to rethink the future of the global software industry

Key Takeaways:

• Yonyou is seeking a Hong Kong listing after years of weak revenue growth and heavy losses, as AI reshapes the economics of enterprise software worldwide
• The Chinese enterprise software leader argues AI will make enterprise software more valuable, even as some bet AI will eventually make traditional software vendors irrelevant

By Hu Minghe

When Wang Wenjing borrowed 50,000 yuan – a huge sum at the time – to start his accounting software company in Beijing in 1988, his mission was straightforward: replace paper ledgers with computers.

Nearly four decades later, the founder of Yonyou Network Technology Co. Ltd. (600588.SH) faces a much bigger challenge. Instead of persuading companies to adopt his software, he must now convince investors that software itself will remain indispensable in the age of artificial intelligence.

The challenge arrives at a delicate moment. Yonyou, China’s largest enterprise software and service provider by revenue, filed its third Hong Kong listing application last week, after two previous applications lapsed, following several difficult years. Its revenue rose only marginally to 8.86 billion yuan ($1.24 billion) in 2025 from 8.82 billion yuan a year earlier, after falling from 9.44 billion yuan in 2023. Meantime, its net loss narrowed to 1.35 billion yuan last year from 2.07 billion yuan in 2024. At the same time, the company says aggregate AI-related customer orders jumped from essentially zero two years ago to 1.88 billion yuan by the end of this year’s first quarter.

Yonyou is hardly alone in navigating the transition to an AI era that could either make or break the company. Enterprise software companies worldwide are confronting their biggest disruption since cloud computing. For decades, software vendors enjoyed one of technology’s most attractive business models: recurring subscriptions, high switching costs and predictable customer retention. AI is beginning to challenge all three assumptions.

Rather than logging into enterprise software, company employees may increasingly ask AI agents to retrieve data, prepare budgets, reconcile accounts or approve purchases – functions traditionally handled by software developed by companies like Yonyou.

Nearly every major enterprise software company is racing to adapt. Domestic rival Kingdee (0268.HK) is rolling out AI-powered enterprise resource planning (ERP) products, while global competitors Salesforce (CRM.US) is betting on Agentforce, SAP (SAP.DE) has launched Joule, and Oracle (ORCL.US) is integrating generative AI throughout its enterprise applications. Even Microsoft (MSFT.US) has embedded Copilot across much of its software portfolio. The race reflects a growing belief that the next-generation of enterprise software will revolve around AI agents instead of menus, dashboards and forms.

Investor caution

Investors have responded cautiously. Software stocks have lagged the broader technology sector for much of this year as money flowed instead toward companies supplying AI infrastructure such as chips, servers and memory. Traditional software vendors have come under pressure as investors debate whether AI will weaken their subscription-based models and make it easier for companies to build customized internal applications that skirt the need for third-party software.

Yonyou also faces additional challenges as AI arrives before it finishes tackling older problems. Unlike many software companies now grappling with the AI disruption, Yonyou’s performance was already deteriorating years earlier as its transition from traditional enterprise software to cloud services proved slower and more expensive than expected.

Management says increasingly complex projects for large enterprise customers have lengthened implementation cycles and delayed revenue recognition. Continued investment in its YonBIP cloud platform, AI development and higher depreciation and amortization costs have further weighed on the company’s profits. Those traditional challenges were facing software enterprises before. Now, AI simply raises the stakes.

The transformation is already reshaping Yonyou itself. The company’s workforce fell from 24,949 employees at the end of 2023 to 17,747 by the end of March this year, a reduction of nearly 30%. Chinese media also reported multiple rounds of layoffs this year, affecting implementation, sales and other business units as the company streamlined operations and accelerated its AI strategy. Rather than simply cutting costs, the restructuring reflects a broader effort to reduce the labor-intensive model that has long characterized China’s enterprise software industry.

That restructuring highlights one of AI’s biggest implications for enterprise software. Historically, companies like Yonyou generated much of their revenue through labor-intensive implementation, customization and maintenance services. AI-assisted coding, automated testing and customer support could reduce the need for thousands of engineers and consultants, making enterprise software companies more scalable. But the same technology also makes it more practical for customers to develop their own software or rely on AI-generated workflows instead of buying traditional third-party products like Yonyou’s.

On the winning side of history

Yonyou is telling investors it can stay on the winning side of that equation.

The company launched its YonGPT large language model in 2023 and introduced Yonyou BIP Enterprise AI last year. Rather than replacing traditional enterprise resource planning (ERP) systems, management argues AI agents will need trusted enterprise data, business rules and workflow engines that ERP platforms like itself already provide. In that vision, ERP becomes the operating system behind enterprise AI.

Whether customers agree with that vision remains the million-dollar question.

AI is arriving at a pivotal moment for China’s enterprise software industry. For years, the sector has lagged its U.S. counterpart in both software spending and profitability. Chinese companies have generally invested less in IT, relying on relatively inexpensive labor instead, and preferred highly customized systems over standardized subscription software. As a result, many domestic software vendors have operated more like consulting firms as opposed to software companies, relying on large, customized implementation teams that are difficult to scale.

Yet AI could also become the industry’s biggest opportunity. China’s enterprise software market remains less mature than those in developed economies, leaving considerable room for digitalization as companies adopt AI. HSBC analysts recently argued investor concerns that AI will replace software vendors may be overdone. They said Chinese companies such as Yonyou could instead benefit because they already possess deep expertise in enterprise workflows, regulatory requirements and business data that large language models alone cannot provide.

Yonyou sits at the nexus of those competing narratives. Its prospectus highlights many of the industry’s long-standing challenges, including increasingly customized projects that have slowed product delivery, and weaker IT spending by government and public-sector customers. But it is also betting those same enterprise relationships will become an advantage as companies deploy AI across finance, manufacturing and supply chains. The company says 78% of Fortune China 500 companies use its products, while its 3.8% market share still makes it China’s largest enterprise software provider in a highly fragmented market.

That leaves investors to decide the answer to a question facing software companies worldwide, well beyond China.

For nearly 40 years, Yonyou has successfully navigated one technological transition after another, from paper bookkeeping to PC software, and from software licenses to cloud subscriptions. Its pitch to Hong Kong IPO investors is that it can survive one more such challenge.

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