(Yicai) Sept. 17 -- Z.AI’s shares rose after the Chinese large language model developer raised its guidance for annual recurring revenue by 25 percent to USD3 billion, saying a sale of new shares and convertible bonds to raise USD5 billion has alleviated near-term computing constraints. 

Z.AI [HKG: 2513], which in January became the world's first LLM developer to go public, closed up 2.8 percent at HKD740 (USD94.51) per share in Hong Kong today, after gaining 5.9 percent yesterday. The stock began trading on Jan. 8 at HKD116.20 and reached HKD2,980 (USD379.95) on June 26, following a runup of 2,465 percent. They have come down around 75 percent since then.

Following the new financing, Z.AI's computing power reserves now rank among the highest of China's independent AI model developers, while computing power supply is no longer a major constraint on short-term revenue growth, executives told investors on a conference call yesterday.

As a result, the Shanghai-based company increased its year-end ARR guidance to USD3 billion from USD2.4 billion. ARR estimates annual income based on long-term subscription contracts with users, and it is not entirely equivalent to actual annual revenue.

After Z.AI released its flagship foundation model GLM-5 in February, demand for model inference surged, nearly exhausting the company's available computing power capacity and prompting it to temporarily suspend sales of its main product, Coding Plan.

To ease this bottleneck, Z.AI completed a HKD31.4 billion (USD4 billion) share placement in July, after revealing plans in June to raise an additional CNY15 billion (USD2.2 billion) through a secondary listing on Shanghai’s Nasdaq-style Star Market.

Then on Sept. 13, the company said it would place another HKD15.7 billion of new shares in a transaction completed yesterday, and issue about CNY20.1 billion of zero-coupon convertible bonds. These funds will be mainly used to develop the company’s next-generation model and build its computing power infrastructure.

Beyond adding compute capacity, Z.AI is exploring new business models, including partnerships with cloud service providers to deploy models on their platforms on a hosted basis. The strategy is intended to broaden distribution while reducing the firm's reliance on its own computing infrastructure.

Z.AI has already signed revenue-sharing agreements with several leading cloud providers, both domestic and international. Related revenue will start being recognized from next month, the management team revealed during the conference call.

Z.AI is also actively promoting its CoWork business, which integrates models into enterprise workflows as AI agents to complete complex tasks. Since the launch of GLM-5.3 last month, CoWork orders have exceeded CNY1 billion (USD149 million), with cybersecurity emerging as a major application area, the company said.

Editors: Dou Shicong, Futura Costaglione