Kuaishou's AI Bet: Kling Soars as Profits and Live Streaming Dip

HONG KONG – May 27, 2026 – Kuaishou Technology today revealed a complex financial picture for the first quarter of 2026, where a blockbuster performance from its artificial intelligence arm was overshadowed by a notable decline in profitability and a continued slide in its traditional live streaming business.

The Chinese social media giant reported a modest 3.4% year-over-year increase in total revenues to RMB33.7 billion. However, adjusted net profit fell to RMB3.4 billion from RMB4.6 billion in the same period last year, signaling that the company's aggressive pivot towards AI is a costly, high-stakes gamble. The results paint a portrait of a company in transition, betting its future on cutting-edge technology while grappling with challenges in its established revenue streams.

User growth remained steady, with average daily active users (DAUs) on the Kuaishou App climbing 1.2% to 412.7 million. The central narrative, however, is the stark contrast between the explosive growth of its AI division and the struggles elsewhere.

The Kling AI Juggernaut

The undeniable bright spot in Kuaishou's report is the phenomenal growth of Kling AI, its flagship video generation platform. The division generated over RMB650 million in revenue during the first quarter, a staggering year-over-year increase of more than 300%. This performance pushed Kling AI to an annualized revenue run rate (ARR) of approximately USD500 million as of March 2026, more than doubling from its USD240 million ARR in December 2025.

"In the first quarter of 2026, by advancing our AI strategy, we continued to foster a thriving content ecosystem and drive commercial growth through technological innovation, achieving a solid start to the year," said Mr. Cheng Yixiao, Co-founder, Chairman, and CEO of Kuaishou. He highlighted that the company's core commercial business, including online marketing and e-commerce, grew 10.7% year-over-year.

Kuaishou's strategy with Kling AI appears to be focused on high-value professional and enterprise applications rather than mass consumer subscriptions. The platform is being integrated into industrial workflows for film, television, and advertising. The press release noted Kling AI's involvement in the Chinese historical drama Swords Into Plowshares and the Hollywood TV series House of David, where it was used to generate hundreds of high-quality shots. This focus on professional use cases, where 60% of its revenue originates, and a strong showing in international markets, which account for 70% of its revenue, demonstrates a clear path to monetization.

A Costly Pivot Amidst Fierce Competition

While Kling AI's success is impressive, it comes at a significant cost that is pressuring the company's bottom line. Research indicates Kuaishou is dramatically increasing its capital expenditure for 2026 to approximately RMB 26 billion (USD 3.6 billion), with nearly all of the RMB 11 billion increase dedicated to building out its AI computing infrastructure. This massive investment is leading to higher depreciation and R&D expenses, directly contributing to the 27% drop in profit for the period.

The heavy spending is necessary to compete in the hyper-competitive AI video generation space. While Kuaishou touts Kling's global leadership, it faces formidable rivals both at home and abroad. ByteDance's Seedance 2.0 and Alibaba's HappyHorse 1.0 have emerged as powerful domestic challengers, while global titans like OpenAI's Sora 2 and Google's Veo 3.1 are setting new benchmarks for quality and realism. The rapid pace of innovation means that maintaining a competitive edge requires continuous, and expensive, investment.

Kuaishou also faces challenges in its overseas business, which recorded an operating loss of RMB31 million, reversing a small profit from the previous year. This suggests that while Kling AI finds success abroad, the broader international expansion strategy for its social platforms like Kwai in Brazil remains a work in progress.

Live Streaming's 'Healthy' Decline

Adding to the financial pressure is the continued erosion of Kuaishou's live streaming business, once its primary revenue driver. Revenue from the segment fell 13.5% year-over-year to RMB8.5 billion. The company attributed the decline to its "continuous efforts to develop a rich and healthy live streaming ecosystem and diverse high-quality content."

This strategic shift towards quality over quantity comes amid a challenging environment. The Chinese live streaming market is facing increased regulatory scrutiny, with authorities cracking down on content and sales practices. Kuaishou itself was reportedly fined in early 2026 for content moderation failures. Furthermore, the market is becoming saturated, with intense competition from rival Douyin, and a cautious macroeconomic climate in China is dampening consumer spending on virtual gifts and live commerce.

While Kuaishou's focus on building a more sustainable ecosystem is a logical long-term strategy, the short-term revenue impact is significant. The live streaming segment now contributes just 25.2% of total revenue, a dramatic fall from its historical dominance, forcing the company to rely more heavily on its other commercial ventures.

AI's Quiet Integration into Commerce

Beyond the headline-grabbing success of Kling AI, Kuaishou is deeply embedding artificial intelligence across its entire commercial ecosystem. This quiet integration is a key driver behind the 9.3% growth in online marketing services, which reached RMB19.6 billion and now represents 58.3% of total revenue.

The company is using AI to automate and optimize the entire advertising lifecycle. AI-generated marketing materials now account for 10% of total short video ad spending on the platform. The company's Universal Auto X (UAX) placement solution, enhanced with an AI agent, has become the dominant tool for advertisers, improving efficiency and results.

In e-commerce, the generative search framework OneSearch V2 is enhancing the shopping experience and drove an incremental GMV growth of approximately 3.0% in the search business. For merchants, AI-powered tools like intelligent shopping assistants and real-time highlight summarization in live streams are generating over RMB10 million in incremental GMV per day. This deep integration is improving efficiency for the 38% year-over-year increase in active marketing merchants and fueling a 42% increase in marketing spend from brands.

Kuaishou is at a critical juncture, navigating a complex transition where the phenomenal growth in its AI division is yet to fully compensate for declining profits and a shrinking live streaming business. The company is making a bold, capital-intensive bet that AI is not just a new product but the foundational technology that will power its next era of growth across all segments. For now, investors and the market are watching closely to see if the massive investment in AI will ultimately pay off, reshaping the company's future and justifying the short-term pain reflected in its bottom line.