Business Demand for Analytics, AI Offer Promise for Gridsum Holding

After reporting its fourth consecutive quarter of strong, double-digit revenue growth, Gridsum sees great potential in the enterprise market.

Author: James Rubin   

If being part of the right trend is a key to growth, then Gridsum Holding is well positioned.

Just a few weeks ago, the provider of analytics and artificial intelligence services reported its fourth consecutive quarterly revenue increase of over 40 percent. The company reported a nearly 53 percent rise for its third fiscal quarter, largely on the strength of its burgeoning enterprise and e-government business. That followed a 43 percent jump in the second quarter. 

"We delivered another strong quarter of growth driven by our continued effectiveness at attracting new clients, and others, to our core marketing automation business, and cross selling and up-selling additional products and features," said Guosheng Qi, the company's chief executive officer. "Overall, our strategy remains the same - to leverage our leading big-data analytics and enterprise-focused artificial intelligence platform to help companies and other organizations make better decisions and drive an immediate and quantifiable KPI (key performance indicators) impact for our clients," he continued. 

This success is not to suggest the company hasn't hit some potholes.

To be sure, Gridsum (Nasdaq: GSUM) missed its earnings per share target by 7 cents. In addition, Gridsum's stock price has halved since launching its IPO 15 months ago. Shares dropped roughly $2 in the week after the earnings announcement, but were rebounding nicely since then. The stock, however, took a hit on Friday, closing down more than 7 percent at $8.84 per share.


But in recent months, Gridsum has added several big brands to its client portfolio, including Viking Cruises and tools manufacturing giant Stanley Black & Decker. 

Moreover, analytics and artificial intelligence remain among the fastest growing sub-sectors within technology. A 2017 study by Gartner, a research and advisory firm, forecast that worldwide revenue from analytics and business intelligence software would near $23 billion, an approximately 35 percent increase over the total for 2016. The report predicted that organizations would need to analyze increasingly complex data sets and faster access to information and diagnosis to make decisions. 

In a separate report, Gartner also predicted that "AI technologies will be virtually pervasive in almost every new software product and service." The report noted that in January 2016, the term artificial intelligence was not among the top 100 search terms on, but ranked No. 7 by May 2017. 

"As AI accelerates up the hype cycle, many software providers are looking to stake their claim in the biggest gold rush in recent years," said Jim Hare, research vice president at Gartner. "AI offers exciting possibilities, but unfortunately, most vendors are focused on the goal of simply building and marketing an AI-based product rather than first identifying needs, potential uses and the business value to customers."

Gridsum Ready for Greenfield Expansion

Gridsum's Qi touted the company's ability to grow its average revenue per customer by meeting client needs even as it expanded its number of customers. That dual success stemmed from its ability to create new products and services that address companies' needs. He sees the Chinese enterprise market for AI solutions as particularly promising.

"The enterprise software market in China remains relatively greenfield with few well developed domestic players," Qi said in his third-quarter remarks. "As companies in China become increasingly sophisticated, we believe that our intelligent cloud-based solutions can help them make important data-driven decisions that will be vital to their future growth."

The company announced two days ago that it would launch an intelligent customer relationship management system using AI and has said it was focusing intently on developing products and services targeting the industrial internet of things (IIoT).

In a recent interview with CNBC, the company's co-CFO Ravi Sarathy said that IIoT and Made in China 2025, the initiative designed to upgrade Chinese industry, would "turbocharge" the need for more sophisticated solutions. Sarathy described enterprise AI as "much more focused vertically to understand the things that drive industries and solve industry and enterprise issues, which rely on much more complex mathematical correlations between variables."

He added: "Once you start having big data platforms for manufacturing and industry, you'll see an increase in productivity. You'll see an interaction of devices from a manufacturing as well as a consumer basis that is going to revolutionize our lives but also the structure of our economies."