Kuaishou Shares Slide After Strong 2025 Results as Investors Reprice Its Costly AI Pivot
Kuaishou Technology delivered stronger-than-expected 2025 earnings, but investors focused on what comes next: a sharp jump in 2026 capital expenditure to fund large models, reframing the company from a cash-generating short-video platform into a high-burn AI infrastructure story.
The market reaction was immediate. Shares in Hong Kong fell more than 14% the day after results—the steepest one-day drop in about 11 months—pushing Kuaishou’s market value below HK$200 billion and extending a near-90% decline from its post-IPO peak.
The selloff highlights a broader 2026 reset in how Hong Kong-listed internet stocks are valued. Investors who once rewarded “AI narrative” optionality are now anchoring on near-term cash flow durability—particularly for platforms where core traffic and monetization have plateaued.
Capex Surge Reprices Cash Flow Expectations
Kuaishou said 2026 capex will rise to about RMB 26 billion (US$3.61 billion), up from RMB 15 billion in 2025, with most of the increase directed to compute for its Kling video-generation model and other foundation models, including training and inference capacity.
That figure landed poorly against the company’s profit base. Kuaishou reported 2025 revenue of RMB 142.8 billion (US$19.83 billion), up 12.5% year-on-year, and adjusted net profit of RMB 20.4 billion (US$2.86 billion), up 16.5%.
In other words, planned 2026 capex would exceed last year’s adjusted profit—compressing the margin of safety investors typically expect from a mature traffic platform.
CFO Jin Bing told analysts the spending is largely compute-related. For equity holders, that effectively converts discretionary growth investment into a quasi-fixed cost structure, with depreciation and R&D intensity rising even if ad demand softens.
User Plateau Shifts the Model From Growth to Retention
The company’s 2025 user metrics point to a late-cycle platform dynamic. Average daily active users reached 410 million, up 2.8% year-on-year, while monthly active users were 725 million, up 2.1%.
Quarterly data showed slippage in the back half: DAU fell from 416 million in Q3 to 408 million in Q4.
For advertising, livestreaming, and e-commerce, that shift matters. Incremental monetization is now driven more by efficiency gains than traffic expansion. Kuaishou said AI-driven targeting and bidding contributed about five percentage points to 2025 online marketing growth—but such gains are harder to compound than user growth.
Livestream and E-commerce Slowdowns Weaken Legacy Pillars
Kuaishou’s traditional monetization engine continues to lose momentum. Livestream revenue in Q4 2025 declined 1.9% year-on-year to RMB 9.655 billion (US$1.34 billion). Full-year livestream revenue rose 5.5% to RMB 43.3 billion (US$6.0 billion), lagging other segments.
E-commerce growth also slowed. Kuaishou reported 2025 GMV of RMB 1.6 trillion (US$222.2 billion), up 15%. The company said it will stop separately disclosing GMV from 2026—a move often interpreted as a signal that the metric will become less supportive.
With competition from ByteDance’s Douyin, Alibaba Group’s Taobao, and PDD Holdings’ Pinduoduo, Kuaishou’s e-commerce business is entering a phase where share gains require heavier subsidies and content spending—pressures that now collide with rising AI compute costs.
Kling Scales Fast—but From a Small Base
Kuaishou is positioning Kling as its next growth engine, elevating it to a first-tier business unit reporting directly to CEO Cheng Yixiao. Product iteration accelerated from Kling O1 and 2.6 in late 2025 to Kling 3.0 in February 2026.
Kling generated about RMB 1.04 billion (US$144 million) in 2025 revenue, implying an annualized run rate of roughly US$240 million. By January 2026, Kuaishou said ARR exceeded US$300 million.
Global users surpassed 60 million by end-2025, with more than 600 million videos generated. API services reached over 30,000 enterprise customers and developers.
The gap investors are now pricing is the mismatch between near-certain spending and still-emerging revenue scale. Even if Kling doubles revenue in 2026—as management targets—it would reach roughly RMB 2 billion (US$278 million), still far below the incremental cost implied by RMB 26 billion in capex.
Rising Competition Complicates the Monetization Path
Competitive pressure is intensifying. ByteDance’s Volcano Engine launched Seedance 2.0 in February 2026 and began integrating it into products like CapCut, targeting global creators—where Kuaishou says about 70% of Kling revenue originates.
If pricing competition accelerates, unit economics for inference-heavy video generation could deteriorate just as Kuaishou’s compute costs ramp, tightening the path to profitability.
Bottom Line
Kuaishou’s 2026 narrative is no longer about whether AI can drive growth—but whether that growth can outpace the capital intensity required to sustain it.
The stock’s repricing reflects a shift in investor focus from AI optionality to cash flow discipline, with Kling now at the center of that trade-off.
Related Coverage:
Kuaishou's AI Ambitions Face a Reality Check from Slowing Core Businesses
Kuaishou's Kling AI Revenue Hits $240 Million Annual Run Rate