Megvii Technology Ltd (曠視科技) for the first time revealed the stunning growth fueled by a nation’s obsession with security.
The start-up backed by Alibaba Group Holding Ltd (阿里巴巴) tripled its revenue to 949 million yuan (US$133 million) in the first half of the year.
It generated more than 73 percent of those sales from artificial-intelligence (AI) services for major clients, such as government agencies, hospitals and real-estate developers, the company said in a filing to the Hong Kong Stock Exchange.
Seven-year-old Megvii is said to be angling to raise as much as US$1 billion in its initial public offering (IPO), becoming the first of China’s fast-rising AI stars to debut and beating Sensetime Group Ltd (商湯科技) to the punch.
However, its share sale will run up against a host of uncertainties from violent pro-democracy protests that have gripped Hong Kong to US President Donald Trump administration’s increasingly aggressive campaign to contain China’s tech champions.
Megvii generates the bulk of its revenue from products that combine software and sensors to help government agencies and other clients enhance public safety and optimize traffic management.
Sales from that business, which it labeled “city IoT solutions,” jumped 270 percent to 694.8 million yuan in the first six months.
Megvii said it served 112 cities in China, 38 percent of the nation’s total, as of June. It posted 5.2 billion yuan in losses for the first half, while adjusted profit reached 32.7 million yuan.
In a list of risk factors, Megvii warned of possible economic and trade restrictions similar to curbs imposed on Huawei Technologies Co (華為). Should that happen, it would prevent the company from procuring technology and impair its ability to develop solutions.
The company added that it has made sure it is compliant with relevant restrictions, while making contingency plans to minimize the negative impact of potential curbs.
Megvii also warned that sanctions on sales of US technology to Huawei might roil industries from consumer electronics to telecommunications.
“Prolonged restrictions against Huawei could cause a turmoil to all such industries, which may in turn materially and adversely affect our business,” it said.
Megvii also sells face-scanning systems to companies from iPhone maker Foxconn Technology Group (富士康) to Lenovo Group Ltd (聯想) and Ant Financial Services Group (螞蟻金服), the payments affiliate that supports Alibaba’s e-commerce business.
The company generated 207.2 million yuan from the segment it dubs “personal IoT solutions,” or 21.8 percent of its revenue.
Its third major business line, solutions for logistics that deploy AI-empowered robots and sensors, made up about 5 percent of revenue.
Megvii counts Alibaba and its financial affiliate Ant Financial, Lenovo and China Mobile Ltd (中國移動) as strategic investors.
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