Kuaishou beats 1Q26 estimates as Kling AI revenue surges to RMB650M

Kuaishou Technology (01024.HK) reported first-quarter revenue of RMB33.7 billion, beating the market's 1% growth forecast.

"The results confirm our AI-led content ecosystem reshaping and commercialization value release," China Merchants Securities analysts wrote in a note, maintaining an overweight rating with a HKD64 price target. Kuaishou's stock rose 3.6% on the day.

Online marketing revenue, the company's largest segment, reached RMB19.6 billion, up 9.3% year over year and 1% above expectations. Large AI models contributed an incremental 34% to domestic marketing revenue, with explosive growth in AI-generated short dramas and strong advertising demand from AI applications. Other services revenue climbed 15.9% to RMB5.6 billion, 2% above consensus, as Kling AI generated more than RMB650 million in the quarter — 29% above expectations. Live-streaming revenue fell 13.5% to RMB8.5 billion, in line with estimates, reflecting continued regulatory tightening on entertainment live-streaming.

E-commerce revenue recorded mid-single-digit growth, with gross merchandise value rising steadily though commission rates declined because of merchant subsidies and tax compliance impacts. The number of active merchants investing in traffic acquisition jumped 38% year over year, while GMV from shelf-based search scenarios rose about 30%. Gross margin contracted 3.4 percentage points to 51.2%, weighed by higher AI computing power investment and a greater contribution from lower-margin businesses such as short dramas. Net profit and earnings per share for the quarter were not yet disclosed.

Kuaishou's AI push is gaining traction beyond advertising. Kling AI's March annualized revenue run rate approached $500 million, according to broker estimates, positioning it as a meaningful second growth engine. The company maintains ample cash reserves and an annual shareholder return rate of about 4%, balancing AI investment with financial discipline.

The results drew a range of analyst responses. Jefferies and UOB Kay Hian each maintained buy ratings with HKD82 targets, while Goldman Sachs cut its target to HKD70, citing higher AI spending and a slowdown in advertising and live-streaming prospects. Nomura kept a neutral rating at HKD57, noting that non-IFRS operating profit missed expectations and second-quarter guidance came in below market forecasts.

The strong Kling AI performance shows that Kuaishou's AI monetization is accelerating faster than expected, providing a buffer against headwinds in its core advertising and live-streaming businesses. Investors will watch the second-quarter earnings call for updated margin guidance and further Kling AI revenue disclosures.

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