AI can't save growth forever at Kuaishou
As AI investment scales, TikTok's majojr competitor in China saw revenues edge forward—but profit remains elusive and competition is heating up
Kuaishou’s AI video model “Kling” generated over RMB 100 million in revenue, driven primarily by consumer users.
Despite its strong user base, Kuaishou’s Q4 revenue and profit growth slowed to single digits for the first time since 2021.
The company faces rising R&D and marketing costs in its AI segment while its core businesses—ads, e-commerce, and livestreaming—show signs of fatigue.
A bright AI story, but a dimmer financial one
Kuaishou’s 2024 Q4 results paint a tale of two trajectories. On the one hand, AI is taking center stage. On the other, traditional revenue engines are decelerating.
Revenue reached RMB 35.4 billion (up 8.7% YoY), and adjusted net profit hit RMB 4 billion (up 11%). Impressive at first glance—until you zoom out.
This was the first time since 2021 that quarterly revenue growth dropped below 10%. Kuaishou’s stock responded accordingly, falling 1.67% post-earnings. Investors aren’t just looking for profitability—they’re watching for acceleration. And that’s missing.
Kling: impressive traction, unclear path to profit
The breakout AI star in Kuaishou’s ecosystem is Kling, a video-generation model launched just three months after OpenAI debuted Sora. Kling now serves as a cornerstone of Kuaishou’s AI strategy—one that CEO Cheng Yixiao says is “company-level.”
It’s gained traction fast:
Kling’s domestic iOS app hit 448,000 MAUs in February 2025, with monthly revenue of USD 430,000 and ARPMAU of USD 0.96.
The international app, launched in January, reached 630,000 MAUs and USD 100,000 monthly revenue.
Web traffic is even stronger, with domestic and global users reaching 990,000 and 3.76 million unique visitors respectively.
All told, Kling has generated over RMB 100 million (~USD 14 million) in cumulative revenue—most of it from consumer-facing channels.
Kuaishou is also experimenting with B2B monetization via Kling APIs and customized enterprise solutions. Partners reportedly include Xiaomi, AWS, Freepik, and others. But for now, enterprise revenue is minimal.
Scaling Kling is expensive—and getting pricier
Kling’s rollout has been aggressive. While its early launch gave it a first-mover advantage, maintaining that lead is costly.
1. Inference cost
Kuaishou claims Kling’s gross margin is positive—revenue covers inference cost. That’s good news, but barely the beginning. Industry benchmarks suggest Kling’s pricing (~$0.10/second) is competitive, but it's unclear how much room remains for margin expansion, especially with models like Google’s Veo2 pricing at 5x higher.
2. Marketing cost
To fend off rivals like ByteDance’s Dreamina and MiniMax’s Hailuo, Kling has poured resources into promotion. In its first three months, it reportedly spent $332,000 on web-based ads—outpacing even sector leaders like Runway and Pika.
Despite this, Kling’s MAU still lags Dreamina’s by over 75%. Competitive marketing will only intensify in 2025, meaning costs will likely rise before they fall.
3. R&D cost
Model quality is make-or-break in generative AI. CEO Cheng says Kling updates biweekly to maintain its edge. But with AI video generation still evolving, sustaining leadership will demand continuous investment.
Training compute alone can be astronomical—Sora’s training was reportedly $440 million. While Kling likely operates leaner, Kuaishou’s rising R&D spend signals that AI remains a financial sinkhole, not a growth engine—yet.
AI's indirect value: boosting the core
AI isn’t just about direct monetization. It’s also quietly transforming how Kuaishou operates.
AIGC marketing and virtual livestreaming now burn through over RMB 30 million daily.
Generative tools have cut short video ad production costs by 60–70%.
AI also powers upgrades to recommendation engines and ad targeting.
These downstream effects may help shore up core businesses—but they don’t negate the pressures.
What’s happening to the core business?
1. Advertising: growth losing steam
Once the primary revenue driver, advertising is now cooling. Q4 ad revenue rose just 13.3% YoY—down from 27.4% in Q1.
Kuaishou’s “external circulation” ads (short dramas, mini-games, novels) are still growing, but broader ad growth is slowing, especially as e-commerce-driven “internal circulation” weakens.
2. Livestreaming: glimmers of hope
Q4 livestream revenue fell 2% YoY to RMB 9.8 billion but showed sequential recovery, buoyed by gaming livestreams. Livestreaming’s revenue share fell below 30% for the first time, indicating structural change.
3. E-commerce: steady, but slowing
E-commerce revenue hit RMB 4.9 billion in Q4 (up 14.1% YoY), supported by 14.4% GMV growth. But the broader Chinese e-commerce market is decelerating. Kuaishou will need to fight harder to maintain momentum.
4. Overseas: growing, but unprofitable
International revenue rose over 50%, and overseas losses narrowed by 57.2%—thanks largely to cost control in key markets like Brazil.
There, DAUs rose 9.3% and engagement topped 75 minutes/day. The Kwai Shop e-commerce model is also showing early signs of traction.
The road ahead: AI can’t be the sole savior
Kuaishou deserves credit for acting fast and decisively in the AI space. Kling is technically strong, commercially active, and clearly differentiated.
But AI isn’t a magic wand. To become a real growth engine, Kling needs to:
Rapidly expand B2B monetization to diversify revenue
Reduce acquisition and R&D costs to approach profitability
Sustain technical lead in a brutally fast-moving field
Until then, Kuaishou must hedge its bets. It’s doing so with regional ad strategies, overseas expansion, and short drama content—but none are guaranteed wins.