What happened Shares of Kingsoft Cloud Holdings (NASDAQ: KC) slumped on Friday, two days after the company reported its second-quarter earnings results. The Chinese cloud service provider was down as much as 13.8% on the day. As of 1:27 p.m. EDT, the stock is down 5.5%. So what On Wednesday, Aug. 25, Kingsoft Cloud Holdings released its Q2 earnings report. Revenue grew 41.6% to $336.7 million in the period, with its enterprise cloud segment growing a whopping 152.8% to $96.4 million in the quarter. While the top-line numbers looked good, Kingsoft Cloud Holdings has terrible gross margins. In Q2, gross margins were only 5.5%, meaning that the company only brought in $18.4 million in gross profit over the last three months. Compared to its market cap of $6.7 billion, those are not very good numbers. Image source: Getty Images. Kingsoft Cloud Holdings is also unprofitable. In the second quarter, it had an operating loss of $49.6 million, which was 25% better than the same period last year. With such low gross margins, Kingsoft Cloud Holdings will likely struggle to achieve profitability unless it really scales its business. Now what Management is guiding for 49% to 56% year-over-year revenue growth in the third quarter of 2021. While these numbers look great, investors shouldn't get too excited. For one, if you do not understand the Chinese economy (like many Western investors), buying shares of Chinese stocks adds a layer of uncertainty compared to American businesses. And with Kingsoft having less than $20 million in gross profits generated last quarter compared to a market cap north of $6 billion, it is hard to find a reason why someone would want to own its shares, even if they understood the ins and outs of the Chinese economy. 10 stocks we like better than Kingsoft Cloud Holdings LimitedWhen our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* They just revealed what they believe are the ten best stocks for investors to buy right now... and Kingsoft Cloud Holdings Limited wasn't one of them! That's right -- they think these 10 stocks are even better buys. See the 10 stocks *Stock Advisor returns as of August 9, 2021 Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.Source