Kuaishou Q2 profit falls 36% as Kling AI revenue jumps 200%

Kuaishou Technology reported Q2 net profit of 3.15 billion yuan, down 36% from a year earlier, as AI investment pushed costs higher.

"Kling's long-term prospects remain challenging, as the funds raised are likely to cover only about one year of spending," Ivan Su, director at Morningstar, said.

Revenue rose 1.4% to 35.54 billion yuan, in line with the 35.51 billion yuan Bloomberg consensus. Adjusted net profit of 3.91 billion yuan and adjusted EBITDA of 7.12 billion yuan both topped estimates. Kling AI revenue exceeded 850 million yuan, up more than 200% year over year, lifting "other services" revenue 18.5% to 6.21 billion yuan, above the 5.83 billion yuan forecast. Average monthly active users reached 797.3 million, about 8% above the 740 million consensus, while daily active users rose to 412.3 million.

The Beijing-based short-video platform is spending heavily to defend its AI lead. Research and development expenses jumped 34.7% to 4.58 billion yuan, above the 4.07 billion yuan estimate, and gross margin narrowed to 51.6% from 55.7% a year earlier. Operating profit fell 29% to 3.76 billion yuan. Management struck a cautious tone on the second half, citing a complex macro environment, while reaffirming its long-term AI investment strategy.

Online marketing services revenue rose 4.4% to 20.64 billion yuan, slightly below the 21.01 billion yuan estimate, while live streaming revenue fell 13.5% to 8.69 billion yuan. Short-drama marketing spend more than doubled year over year, and AIGC short-video marketing spend rose more than 70%. Beijing Kling Intelligent Technology signed a capital increase agreement on July 2 for up to $3 billion in external funding, with the unit's results to remain consolidated.

Kuaishou held 121.3 billion yuan in available funds at quarter end, up from 117.7 billion, and declared no interim dividend. It has repurchased 43.3 million B-shares for about 1.97 billion Hong Kong dollars. AI code now accounts for 60% of contributions, and more than 92% of employees use the company's self-developed AI agents.

The results show Kuaishou's AI bet is generating revenue but squeezing margins, a trade-off investors will weigh against the $3 billion Kling funding round. Tencent's July reduction of its stake to below 10% has added to pressure on the stock, which trades near the low end of its 52-week range. The next catalyst is the second-half outlook, with management flagging macro headwinds as it deepens AI investment.

This article is for informational purposes only and does not constitute investment advice.