(Yicai) Aug. 29 -- SenseTime Group, a Chinese artificial intelligence company, said its gross profit margin narrowed more than 20 percentage points to 45.3 percent in the first half from a year ago because of rising sales costs for hardware and AI data center products.

SenseTime’s costs surged 63 percent to CNY780 million (USD107 million) in the six months ended June 30, the Beijing-based firm’s financial report showed yesterday.

About 86 percent of the costs were subcontractor fees and hardware costs, with the latter rising because of the intense competition between tech firms on large language models.

SenseTime’s first-half net loss shrank 2 percent to CNY3.1 billion (USD425.6 million), and revenue rose 1.3 percent to CNY1.4 billion.

Revenue from the LLM and AI-generated content business segment skyrocketed 670 percent, with AIGC alone generating income of CNY280 million.

SenseTime pared investment in research and development by 12.4 percent to CNY1.8 billion in the period, mainly because of lower staff welfare outlays and operating and cloud service costs.

SenseTime adjusts its strategies based on market and development changes and optimizes its organizational and talent structure to better develop its business, the firm told Yicai after media reports yesterday said it is laying off employees from multiple business departments.

The company is operating well and will continue to bring in experienced talent and outstanding college graduates, it added.

Shares of SenseTime [HKG: 0020] climbed 2.7 percent to end at HKD1.54 (20 US cents) today. The Hong Kong market rose 2 percent.

Editor: Futura Costaglione