Kuaishou (1024 HK) 2Q26 Review and Analysis
Core Content Summary
Kuaishou reported its 2Q26 financial results, showing total revenue growth of 1% YoY to RMB35.5 billion, aligning with the Visible Alpha (VA) consensus estimate. However, adjusted net profit dropped by 30% YoY to RMB3.9 billion, primarily due to a 35% YoY increase in R&D expenses, especially for AI model training. The company faces a challenging environment with macroeconomic uncertainty and adjustments in the live streaming business, which saw a 13% YoY decline in revenue to RMB8.7 billion. For 3Q26, total revenue is expected to decline by 7% YoY to RMB32.9 billion, with online marketing, other services, and live streaming revenue projected to decrease by 17%, 5%, and 2% respectively.
Kling AI, Kuaishou's AI business, showed strong monetization with revenue surpassing RMB850 million in 2Q26, a 200% YoY increase. The company maintains its FY26 forecast of RMB3.6 billion for Kling AI, with upside potential from model upgrades in 2H26. Kuaishou has developed agent capabilities to enhance marketing ROI and increased spending on AIGC short-video marketing materials by over 70% YoY. The proprietary agent product, MyFlicker, has improved operational efficiency, with 60% of R&D code generated by AI.
Main Points and Key Information
Revenue and Profitability
- Total Revenue: RMB35.5 billion in 2Q26, up 1% YoY.
- Adjusted Net Profit: RMB3.9 billion, down 30% YoY.
- Gross Margin: Declined to 51.6% in 2Q26, down 4.1ppt YoY.
- Adjusted Net Margin: Dropped to 11.0%, a 5.0ppt YoY decrease.
- Earnings Forecasts: Revised to RMB8.9/11.5/13.9 billion for FY26-28E, down from previous estimates of RMB16.9/20.0/23.3 billion.
AI Monetization
- Kling AI Revenue: Surpassed RMB850 million in 2Q26, up over 200% YoY.
- AI Investment: Continues to impact margins, with capex front-loaded in 1H26.
- AI-Generated Code: Reached 60% of R&D team output in 2Q26.
Business Segments
- Online Marketing Revenue: RMB20.6 billion, 58% of total revenue, up 4% YoY.
- Other Services Revenue: RMB6.2 billion, up 19% YoY, driven by Kling AI.
- E-commerce Commission Revenue: Grew mid-single-digit YoY.
- Live Streaming Revenue: RMB8.7 billion, down 13% YoY.
Valuation and Target Price
- Target Price: HK$63.80, down from HK$70.50.
- SOTP Valuation: Composed of HK$5.2 (Live Streaming), HK$19.0 (Online Marketing), HK$34.5 (E-commerce), and HK$5.1 (Net Cash).
- P/E Ratio: 24.5x for FY26, 16.9x for FY27, and 13.1x for FY28.
- Valuation Multiples: EV/Sales of 0.6x, EV/EBIT of 16x, and EV/GMV of 0.08x for FY26.
Business Forecasts Update
| Metric |
Current (FY26E) |
Previous (FY26E) |
Change (%) |
| Revenue (RMB mn) |
137,596 |
146,836 |
-6.3% |
| Gross Profit (RMB mn) |
69,333 |
76,565 |
-9.4% |
| Operating Profit (RMB mn) |
7,332 |
17,008 |
-56.9% |
| Adjusted Net Profit (RMB mn) |
8,899 |
16,938 |
-47.5% |
| Adjusted EPS (RMB) |
2.0 |
3.9 |
-48.3% |
| Gross Margin (%) |
50.4% |
52.1% |
-1.8 ppt |
| Operating Margin (%) |
5.3% |
11.6% |
-6.3 ppt |
| Adjusted Net Margin (%) |
6.5% |
11.5% |
-5.1 ppt |
Peer Comparison
| Sector |
Peer Companies |
EV/Sales |
EV/EBIT |
EV/GMV |
| Live Streaming |
Bilibili, Huya |
0.6x |
- |
- |
| Advertising |
Focus Media, Meta, Alphabet |
16.4x |
- |
- |
| E-commerce |
Alibaba, Pinduoduo |
0.13x |
- |
- |
Shareholding and Stock Data
- Market Cap: HK$163,031.4 million
- Average 3-Month Trading Range: HK$2,619.4 million
- 52-Week High/Low: HK$91.85 / HK$37.80
- Total Issued Shares: 4,313.0 million
- Shareholding Structure:
- Su Hua: 9.8%
- Tencent: 9.4%
Share Performance
| Period |
Absolute Return |
Relative Return |
| 1-Month |
-12.7% |
-15.9% |
| 3-Month |
-22.7% |
-21.7% |
| 6-Month |
-44.7% |
-42.1% |
Analyst Ratings
- Ratings: BUY (Maintain)
- Target Price: HK$63.80
- Current Price: HK$37.80
- Up/Downside: 68.8%
Risks
- Macro Uncertainty: Affects online marketing and e-commerce businesses.
- Intensifying Competition: In the short video sector.
- AI Investment Impact: Pressures margins and reduces profitability.
Financial Summary (Selected Metrics)
| Metric |
2023A |
2024A |
2025A |
2026E |
| Revenue Growth (%) |
20.5% |
11.8% |
12.5% |
-3.6% |
| Gross Profit Margin (%) |
50.6% |
54.6% |
55.0% |
50.4% |
| Operating Margin (%) |
5.7% |
12.0% |
14.5% |
5.3% |
| Adjusted Net Margin (%) |
9.1% |
14.0% |
14.5% |
6.5% |
Analyst Certification
- The analyst certifies that the views expressed reflect personal opinions.
- No part of compensation is directly or indirectly related to the views in the report.
- The analyst and associates have not traded in the stock covered in the report within 30 days prior to the report's issue and will not do so within 3 business days after.
Important Disclosures
- The report is for informational purposes only and not investment advice.
- CMBIGM does not provide individually tailored investment advice.
- Past performance is not indicative of future results.
- The value of investments may fluctuate and is not guaranteed.
- The report is not an offer or solicitation to buy/sell any security.
- CMBIGM is not liable for any loss or damage arising from reliance on the report.
- The report is based on publicly available information and may be subject to change.
