MicroAlgo Inc.

What they do

MicroAlgo provides bespoke central processing algorithm services, integrating algorithms with software and/or hardware to help customers optimize computing power, reduce costs, and improve data processing. The company operates in two segments: central processing algorithm services (including internet advertising and internet games) and intelligent chips and services. It generates revenue through service fees and product sales.

Revenue drivers

• Central processing advertising algorithm services — The largest revenue segment, contributing $16.4 million in Q1 2023 (92% of total revenue), up from $14.7 million in Q1 2022. Revenue is earned through algorithm optimization and data intelligence services for internet advertisers.
• Sales of intelligent chips — Revenue from chip sales dropped sharply to $1.4 million in Q1 2023 from $8.7 million in Q1 2022, due to industry chip control and logistics chain impacts. This segment is smaller but was historically a significant contributor.
• Internet games services — Part of the central processing algorithm services segment; revenue is derived from game-related algorithm solutions. No separate quarterly figures were provided, but it is a stated component of the segment.

Recent performance

In the first quarter of 2023, revenue totaled $17.8 million, down from $23.4 million in the year-ago quarter, driven by a decline in chip sales. Cost of revenue fell to $12.9 million from $18.0 million, reflecting lower product costs. For full-year 2022, revenue was $87.1 million, up $5.1 million from 2021, primarily due to increased implementation of algorithmic services for network video customers. The company reported a net loss of $7.0 million in 2022 versus net income of $8.6 million in 2021. As of December 31, 2025, the balance sheet shows total assets of $350.3 million, cash and equivalents of $174.8 million, and total liabilities of $15.6 million.

Strategy

Management focuses on enhancing one-stop intelligent data management solutions through proprietary central processing algorithm services. The strategy includes integrating algorithms with software and hardware to help customers increase their customer base, improve end-user satisfaction, reduce power consumption, and achieve technical goals. The company intends to leverage public capital market resources to further develop and implement its proprietary services. It is shifting focus toward services, which is reflected in the declining chip sales. Management emphasizes iterative improvement of algorithm offerings to enhance industry value in data intelligent processing.

Risks

• Dependence on China market and regulation — The company operates primarily in China, and its business is subject to Chinese economic, political, and regulatory conditions, which could change and affect operations.
• Chip supply chain disruption — Revenue from intelligent chip sales fell 83% year-over-year in Q1 2023 due to chip control and logistics chain issues, indicating vulnerability to supply chain constraints.
• Revenue concentration in advertising algorithms — Advertising algorithm services account for a majority of revenue (92% in Q1 2023), making the company highly dependent on a single segment and its customer dynamics.
• Historical volatility and losses — The company reported a net loss of $7.0 million in 2022 and $37.6 million in 2023, showing erratic profitability that may continue as it shifts business mix.

Outlook

Management expects continued focus on research and development of algorithmic solutions and intelligent chips and services. They believe access to public capital markets will enable enhanced offerings and further development of proprietary services. The shift toward services suggests revenue mix will continue to move away from chip sales. Forward-looking statements indicate growth strategies aimed at expanding user base and product offerings, but caution is advised due to evolving regulatory and competitive environments.