Kuaishou Quarterly Earnings Soften as AI Video Model Race Intensifies

By Jason Chau

Kuaishou Technology's profit continued to decline in the second quarter as the Chinese short-video company faced rising spending needs for its artificial-intelligence business and intensifying competition from better-capitalized rivals.

Net profit dropped 36% from a year ago to 3.15 billion yuan, equivalent to $467.1 million, in the three months ended June, narrowly beating market estimates. A jump in revenue sharing costs and higher investment in AI, including model training expenditures, led to the weaker performance, the Beijing-based company said Wednesday.

After adjusting for share-based compensation expenses and net fair-value changes on investments, quarterly profit declined 30%.

Kuaishou's revenue rose 1.4% to 35.54 billion yuan for the period, driven by growth in its online-marketing services and its AI business. By segment, online-marketing and live- streaming revenues grew 56% and 29%, respectively, while revenue from other services rose 15%.

Daily active users averaged 412.3 million from April to June, up 0.8% from a year earlier.

Investors have soured on Kuaishou, China's second-largest short-video platform, amid growing concerns about its ability to raise enough funds for further investments. Its stock has lost over 40% of its value so far this year, underperforming the broader Hong Kong tech gauge.

The company has been sharpening its focus on its AI video and image generator, Kling, as it seeks to capitalize on the global AI boom. In July, it raised about $2.8 billion from private investors for the AI video unit, boosting Kling's valuation to nearly $18 billion.

Analysts remain cautious about Kuaishou's outlook, citing growing competition from rival ByteDance, the Chinese company behind TikTok and its sister app Douyin, which launched its Seedance 2.5 AI video model late last month.

Kuaishou's AI unit is facing "severe operational challenges," with "Seedance 2.5 poised to exert significant competitive pressure" as Kling gears up for an intense battle ahead, Nomura analysts Jialong Shi and Rachel Guo said.

Morningstar director Ivan Su said the July financing doesn't change Kling's long-term trajectory, as the amount raised would cover only roughly a year of capital expenditure.

"ByteDance and Google can easily outspend the entire round in a single quarter of video-generation artificial intelligence capex," Su said. His calculations suggested that nearly all of Kuaishou's valuation is attributed to its core short-video business, with Morningstar assigning little to no value to Kling.

Still, a planned spinoff of Kling may help alleviate some of Kuaishou's earnings dilution from AI spending.

"A potential Kling listing would force the market to rerate that core business toward a higher earnings multiple," Su said.

Write to Jason Chau at jason.chau@wsj.com

(END) Dow Jones Newswires

August 19, 2026 05:44 ET (09:44 GMT)