Executive Summary / Key Takeaways

• MicroCloud Hologram Inc. (HOLOW) is a specialized technology company deeply invested in holographic solutions and digital twin technology, positioning itself in high-growth, yet competitive, immersive tech markets.
• The company's core investment thesis hinges on its proprietary holographic LiDAR and digital twin technologies, which offer unique capabilities for 3D capture and intelligent vision systems, potentially creating a strong competitive moat in niche applications.
• Recent financial performance for the first half of 2025 shows significant revenue growth in Holographic Solutions, alongside substantial investment income, even as the company continues to incur operating losses and manage considerable R&D expenses.
• HOLOW is actively pursuing strategic expansion through acquisitions and has signaled future capital raising, indicating a commitment to funding its growth initiatives and technological roadmap.
• Key risks include intense competition from global tech giants, customer and vendor concentration, significant uninsured cash balances, and ongoing litigation, which warrant careful consideration for investors.

Holographic Vision and Strategic Ambition

MicroCloud Hologram Inc. (HOLOW) stands at the forefront of an evolving technological landscape, dedicated to delivering advanced holographic solutions and technology services. Operating primarily in China and expanding internationally, the company's business is segmented into Holographic Solutions and Holographic Technology Service. This dual focus allows HOLOW to address diverse applications, from integrated circuit boards embedded with holographic software for LiDAR to sophisticated Advanced Driver Assistance Systems (ADAS) and proprietary holographic digital twin technology.

The company's strategic ambition is deeply rooted in capitalizing on the burgeoning markets for holographic, augmented reality (AR), virtual reality (VR), and digital twin technologies. These sectors are characterized by rapid innovation and substantial growth potential, driven by increasing demand for immersive experiences and highly accurate digital representations of physical assets. HOLOW's approach emphasizes continuous research and development, complemented by strategic acquisitions, to expand its service offerings and market reach.

In this dynamic environment, HOLOW faces formidable competition from global technology giants like Microsoft (MSFT), Apple (AAPL), and Meta (META), which possess vast resources and established ecosystems. While these larger players often target broad consumer and enterprise markets with their AR/VR platforms, HOLOW carves out its niche through specialized holographic applications. The broader industry is also influenced by trends such as the exponential growth in AI and data center demand, which, while offering opportunities for AI-integrated holographics, may also favor competitors with established cloud infrastructure.

Technological Edge: The Core of MicroCloud's Moat

At the heart of MicroCloud Hologram's investment thesis lies its differentiated technological portfolio. The company's core offerings include holographic LiDAR solutions, which involve the design of holographic LiDAR sensor chips and point cloud algorithms architecture. These are crucial for developing holographic vehicle intelligent vision technology, a key component for advanced driver assistance systems (ADAS). The company has a long history of developing various ADAS software, enabling it to reasonably estimate progress on fixed-price customized contracts.

A significant differentiator is HOLOW's proprietary holographic digital twin technology resource library. This innovative technology captures shapes and objects in 3D holographic form by utilizing a combination of holographic digital twin software, digital content, spatial data-driven data science, holographic digital cloud algorithms, and holographic 3D capture technology. This capability offers potentially greater efficiency in creating digital twins for specific use cases and notably faster processing for specific holographic applications compared to more generalized solutions.

The company's sustained investment in research and development underscores its commitment to technological leadership. While R&D expenses saw a notable decrease to RMB 24.09 million for the six months ended June 30, 2025, from RMB 140.98 million in the same period of 2024, this shift may reflect a transition from foundational research to more targeted development or optimization phases. For investors, this technological edge is critical; it forms the basis of HOLOW's competitive moat, enabling it to command pricing power in specialized markets and drive long-term growth through unique product and service offerings.

Financial Performance: A Transformative Period

MicroCloud Hologram's financial performance for the first half of 2025 reflects a company in a period of significant transformation and investment. Total revenues for the six months ended June 30, 2025, reached RMB 159.60 million (USD 22.22 million). This represents a notable increase from RMB 128.67 million in the prior-year period. The growth was primarily driven by the Holographic Solutions segment, which saw its revenues surge from RMB 7.57 million in the first half of 2024 to RMB 65.31 million in the first half of 2025. Conversely, the Holographic Technology Service segment experienced a decline in revenues, from RMB 121.10 million to RMB 94.29 million over the same period.

Despite the revenue growth, the company continues to operate with negative profitability margins on a trailing twelve-month (TTM) basis, with a gross profit margin of 18.21%, an operating profit margin of -104.22%, and a net profit margin of -93.83%. The gross profit for the six months ended June 30, 2025, improved to RMB 35.74 million (USD 4.98 million) from RMB 23.43 million in the corresponding period of 2024. This indicates some operational leverage at the gross level, even as the company manages substantial operating expenses, including the aforementioned R&D investments.

Liquidity remains a key strength, with significant cash and cash equivalents. As of June 30, 2025, the company held substantial cash balances across financial institutions in China, Hong Kong, the US, and Singapore, totaling over RMB 1.6 billion. Additionally, short-term investments grew considerably to RMB 1.32 billion (USD 183.79 million) from RMB 725.66 million at the end of 2024, generating RMB 214.87 million (USD 29.91 million) in investment income during the first half of 2025. This strong cash position provides a buffer for ongoing operations and strategic initiatives, although a significant portion of these balances is subject to credit risk as they exceed local insurance coverage limits. The company also had RMB 52.69 million (USD 7.36 million) in convertible bonds outstanding as of June 30, 2025, which were subsequently converted into ordinary shares without incurring interest expense.

Competitive Dynamics: Niche Innovator Against Tech Behemoths

MicroCloud Hologram operates in a highly competitive landscape, where it contends with both specialized holographic firms and diversified technology giants. Direct competitors such as Microsoft with its HoloLens, Apple with its Vision Pro and broader AR/VR initiatives, and Meta through its Oculus ecosystem, represent formidable forces. These companies boast extensive resources, global brand recognition, and integrated hardware-software platforms.

HOLOW's competitive standing is characterized by its specialized focus and proprietary technology. While Microsoft's HoloLens offers a broad enterprise AR ecosystem, HOLOW's holographic digital twin technology may provide notably greater efficiency in creating digital twins for specific use cases, potentially offering a unique value proposition. Against Apple's consumer-centric AR/VR, HOLOW's research-oriented strategy and emphasis on industrial applications differentiate its market approach. Similarly, while Meta leverages vast social networks for metaverse development, HOLOW's specialized technology library could enable notably faster processing for specific holographic applications, carving out a distinct niche.

However, HOLOW's smaller scale and potential dependence on Chinese markets present competitive disadvantages. Its operational execution and financial health, as evidenced by negative operating and net profit margins (TTM), lag behind the consistent revenue expansion and robust profitability of its larger rivals. For instance, HOLOW's TTM P/B ratio of 0.03 is significantly lower than Microsoft's 11.21, Apple's 55.70, and Meta's 10.03, reflecting a substantial difference in market valuation and investor perception of asset value. The high R&D costs and regulatory hurdles inherent in the holographic industry act as barriers to entry, which can protect HOLOW's specialized position but also demand continuous investment. Furthermore, customer and vendor concentration risks, with two customers accounting for 13.60% and 10.80% of H1 2025 revenues, and five vendors accounting for 10.20% to 17.30% of purchases, highlight potential vulnerabilities in its market position.

Outlook and Strategic Initiatives: Fueling Future Growth

MicroCloud Hologram is actively pursuing strategic initiatives to bolster its market position and drive future growth. A key aspect of its expansion strategy is through targeted acquisitions. On March 1, 2024, the company's subsidiary, Haiyun Xingchen, acquired 100% of Yichang Ji Yue, a provider of advertising services, which aligns with the Holographic Technology Service segment. Following the reporting period, on July 1, 2025, HOLOW further expanded its reach by agreeing to acquire 100% equity of Shanghai Kuosou Technology Ltd., signaling continued inorganic growth.

To fund these initiatives and its ongoing technological development, the company filed a registration statement on July 15, 2025. This filing indicates an intention to offer and sell up to US $300.00 million in various securities, including Class A ordinary shares, debt securities, warrants, rights, and units. This capital raising effort is crucial for sustaining its R&D, supporting acquisitions, and scaling operations in a capital-intensive industry. The company also anticipates recognizing RMB 570,812 (USD 79,738) in contract liabilities as revenue over the next 12 months, providing a near-term revenue stream.

Management has adopted a cautious outlook, stating that "The results of operations for the six months ended June 30, 2025 are not necessarily indicative of results to be expected for any other interim period or for the full year of 2025." This standard disclaimer underscores the inherent uncertainties in forecasting performance within a rapidly evolving technological sector. However, the strategic moves in acquisitions and capital markets demonstrate a clear intent to execute on a long-term growth roadmap, leveraging its technological strengths.

Key Risks: Navigating a Complex Landscape

Investing in MicroCloud Hologram involves a distinct set of risks that warrant careful consideration. As an emerging growth company (EGC), HOLOW has elected to utilize an extended transition period for new accounting standards. This decision, while offering certain compliance benefits, may make direct financial comparisons with other public companies challenging due to potential differences in accounting standards.

A significant financial risk stems from the company's substantial cash balances held in financial institutions across China, Hong Kong, the US, and Singapore. A considerable portion of these funds, including RMB 421.97 million (USD 58.95 million) in China and RMB 761.38 million (USD 106.36 million) in Hong Kong as of June 30, 2025, exceeds local insurance coverage limits, exposing the company to credit risk. Furthermore, HOLOW is exposed to foreign currency exchange risk, as a majority of its expenses and a significant portion of its assets and liabilities are denominated in RMB, which is not freely convertible. Fluctuations in exchange rates could adversely impact the company's financial position and its ability to convert funds for various business purposes.

Operational risks include customer and vendor concentration. For the six months ended June 30, 2025, two customers accounted for 13.60% and 10.80% of total revenues, respectively, while five vendors accounted for a significant portion of total purchases (ranging from 10.20% to 17.30%). Such concentrations can lead to increased vulnerability to changes in demand or supply from these key partners. The company is also involved in ongoing litigation in the New York Supreme Court against Greenland Asset Management Corporation, including a countersuit. The outcome of this legal proceeding remains uncertain and could have a material impact on the company's financial and operational results. Lastly, restrictions on the ability of HOLOW's PRC entities to transfer funds to the parent company, due to statutory reserve requirements and foreign exchange regulations, could limit its financial flexibility and dividend-paying capacity.

Conclusion

MicroCloud Hologram Inc. presents a compelling, albeit high-risk, investment proposition centered on its specialized holographic and digital twin technologies. The company's strategic focus on deep R&D, coupled with a proactive approach to acquisitions and capital raising, positions it to capture opportunities in the rapidly expanding immersive technology markets. While HOLOW's proprietary holographic LiDAR and digital twin capabilities offer a distinct technological edge, enabling potentially greater efficiency and faster processing in niche applications, it operates in the shadow of much larger, more financially robust competitors.

The recent financial performance, marked by strong revenue growth in Holographic Solutions and significant investment income, demonstrates progress, but the company continues to navigate operating losses and substantial R&D expenditures. Its robust liquidity provides a foundation for future growth, yet the inherent risks of customer/vendor concentration, uninsured cash balances, and ongoing litigation cannot be overlooked. For discerning investors, HOLOW represents a play on the future of holographic technology, where technological leadership and strategic execution will be paramount in determining its long-term success against a backdrop of intense competition and evolving market dynamics. The ability to translate its innovative technology into sustained profitability and expand its market footprint beyond its current niche will be the ultimate test of its investment thesis.