Kuaishou Technology has delivered a second-quarter performance that broadly matched market consensus, yet the standout highlights lie in its rapidly expanding AI business and user base growth that outpaced projections, signaling continued momentum in platform scale.
According to the company's announcement, for the three months ended June 30, 2026, total revenue rose 1.4% year-on-year to RMB 35.54 billion, essentially in line with the Bloomberg consensus estimate of RMB 35.51 billion. Net profit reached RMB 3.15 billion, while adjusted net profit came in at RMB 3.91 billion, both slightly surpassing market forecasts.
During the second quarter, Kling AI generated revenue exceeding RMB 850 million, representing a year-on-year surge of over 200% and a notable acceleration from the first quarter. The company attributes this growth to a dual-engine approach combining model capability iteration and the expansion of commercialization scenarios. Kuaishou's average monthly active users reached 800 million, significantly exceeding the market estimate of 740 million.
Meanwhile, the company's intensified focus on AI is reshaping its cost structure. Research and development expenses surged 34.7% year-on-year to RMB 4.58 billion in the second quarter, well above the projected RMB 4.07 billion. Gross margin contracted to 51.6% from 55.7% in the same period last year, while operating profit declined 29% year-on-year to RMB 3.76 billion. Management stated that amid a complex macroeconomic environment, the company will maintain a cautious stance on near-term business prospects while reaffirming its long-term strategic commitment to deepening AI investment.
Kling AI's impressive growth emerges as the strongest performance driver
The commercialization progress of Kling AI stands as the most closely watched aspect of this quarter's results. Kling AI's revenue surpassed RMB 850 million in the second quarter, growing more than 200% year-on-year, which propelled "other services" revenue up 18.5% to RMB 6.21 billion, exceeding the market projection of RMB 5.83 billion. This segment has now become the fastest-growing revenue stream among the company's three major business lines.
On the product front, Kuaishou introduced the industry's first video generation model supporting native 4K output within the Kling AI 3.0 series this quarter, alongside the launch of the Kling 3.0 Turbo model designed to optimize both creative efficiency and cost. Kling AI also rolled out MCP and CLI interfaces, enabling AI agents to perform batch content creation and further expanding applications in workflow automation. In terms of creative industry recognition, two advertising films generated by Kling AI won one Silver Lion and two Bronze Lions at the 2026 Cannes Lions International Festival of Creativity.
Per Kuaishou's financial report, Beijing Kling Intelligent Technology Co., Ltd. signed a capital increase agreement with several investors on July 2, 2026, aiming to secure external funding of up to USD 3 billion in total. Upon completion of the associated restructuring, Beijing Kling's financial results will continue to be consolidated into the group's financial statements.
Marketing revenue sees modest growth while live streaming business continues to contract
Online marketing services revenue grew 4.4% year-on-year to RMB 20.64 billion, slightly below the estimated RMB 21.01 billion. Content consumption, lifestyle services, and the AI application industry were the primary drivers of non-e-commerce marketing growth this quarter. Notably, short-drama marketing spending surged over 100% year-on-year, while AIGC-generated short video marketing material spending grew more than 70% year-on-year.
In e-commerce marketing, the T2000 brand program has shown initial results, with brand merchant marketing spending growing faster than the overall market. The customer penetration rate for net transaction ROI products improved from 45% in the first quarter to 55%, helping merchants reduce return rates.
Live streaming revenue declined 13.5% year-on-year to RMB 8.69 billion, largely in line with expectations. Kuaishou attributes this to its ongoing efforts to promote a healthier live streaming ecosystem, with the previous restructuring of high-income streamer structures continuing to exert pressure. This quarter, users sent over 6 million AI-powered virtual gifts, reflecting deeper integration of AI technology in live streaming recommendations and interactive scenarios.
User scale exceeds expectations with steady core monetization metrics
The user data this quarter surpassed expectations by a notable margin. Kuaishou app's average daily active users reached 412.3 million, while average monthly active users hit 797.3 million, both growing from 408.9 million and 714.8 million respectively in the same period last year. Monthly active users came in approximately 8% higher than the Bloomberg consensus estimate of 740 million, demonstrating the platform's robust user appeal amid intensifying competition for market share in a saturated market.
From a monetization efficiency perspective, average online marketing services revenue per daily active user improved to RMB 50.1 from RMB 48.3 in the same period last year, reflecting steady enhancement in user monetization capabilities. Core commercial revenue, encompassing online marketing services alongside other services primarily comprising e-commerce and Kling AI, grew 7.4% year-on-year, notably outpacing the 1.4% growth in total revenue and indicating that higher-value businesses are accounting for a growing share.
AI investments drive up costs, putting near-term pressure on profit margins
Kuaishou's profitability came under pressure this quarter, primarily due to the rapid expansion of AI-related investments. Research and development expenses jumped from RMB 3.4 billion in the same period last year to RMB 4.58 billion, while cost of sales grew 10.7% year-on-year to RMB 17.2 billion, driven mainly by higher revenue-sharing costs. Gross profit consequently declined 6% year-on-year to RMB 18.3 billion, with gross margin narrowing by 4.1 percentage points to 51.6%.
Operating profit fell 29% year-on-year to RMB 3.76 billion, with domestic segment operating profit declining from RMB 5.4 billion to RMB 3.73 billion. The overseas segment swung to an operating loss of RMB 25 million, with revenue down 9.3% year-on-year. Net profit decreased 36% year-on-year to RMB 3.15 billion, while adjusted EBITDA dropped 7.7% year-on-year to RMB 7.12 billion, though this still exceeded the estimated RMB 6.79 billion.
As of June 30, 2026, Kuaishou's total available funds, including cash, time deposits, and financial assets, stood at RMB 121.3 billion, up from RMB 117.7 billion at the end of the previous quarter, maintaining a solid balance sheet position.
Cautious outlook with sustained long-term AI commitment
Looking ahead, Kuaishou's management has explicitly stated that it will maintain a cautious stance on near-term prospects for the second half of the year, citing the complex and challenging macroeconomic environment. The company simultaneously emphasized that it will continue to expand Kling AI's model capabilities, deepen its commercialization applications in professional creative scenarios, and advance the deployment of large model technology across broader use cases to help merchants and marketing clients improve operational efficiency.
In terms of shareholder returns, Kuaishou has repurchased a cumulative 43.3 million Class B shares, spending approximately HKD 1.97 billion as of the latest practicable date. The board has resolved not to declare an interim dividend for this period. In the second quarter of 2026, the AI code contribution rate reached 60%, and over 92% of employees use the company's self-developed AI agent products, indicating that AI has become deeply embedded in the company's internal operations.
Further updates will continue to be provided as more information becomes available.
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