Kuaishou reported 4Q25 results: total revenue grew by 12% YoY to RMB39.6bn, and adjusted net profit was up by 16% YoY to RMB5.5bn, both 2% ahead of Bloomberg consensus estimates, thanks to the strong revenue growth of core commercial businesses (+17% YoY). FY25 total revenue/adj. net profit grew by 13%/17% YoY respectively. Looking into FY26E, we expect total revenue to grow by 4% YoY, showing a deceleration mainly due to the live streaming business adjustment, overseas business headwinds, and initiatives to support e-commerce merchants. AI monetization momentum remains robust: management expects Kling AI revenue to grow by over 100% YoY in FY26E, but the increased AI investment will drag short-term margin. Thus, we lower our FY26-27E adj. net income forecasts to RMB17.1/20.3bn (previous: RMB23.8/26.7bn), and trim our SOTP-derived TP to HK$80.0 (previous: HK$88.0). Despite short-term margin pressure, we expect the AI investment to gradually bear fruit through accelerating Kling AI monetization and core business growth. Maintain BUY.
Core commercial business maintained solid performance. In 4Q25: 1) online marketing revenue increased by 15% YoY to RMB23.6bn (60% of total revenue). Non-e-commerce marketing services revenue maintained a teens % YoY growth rate, primarily driven by the AI empowerment and increased ad budget from lifestyle services & content consumption sectors. 2) Other services revenue grew by 28% YoY to RMB6.3bn (16% of total revenue), primarily fuelled by the solid growth of e-commerce and Kling AI businesses. E-commerce GMV was up by 13% YoY to RMB521.8bn, mainly supported by the increase in repeat-purchase frequency and ARPPU of active e-commerce users. 3) Live streaming revenue declined by 2% YoY to RMB9.7bn (24% of total revenue). For 1Q26E, we forecast total revenue to grow by 3% YoY, with online marketing/others/live streaming revenue +9%/+14%/-14% YoY respectively.
AI evolves as key growth drivers. Kuaishou made solid progress on AI monetization. 1) Kling AI revenue reached RMB340mn in 4Q25, with annualized ARR surpassing US$300mn in Jan 2026. Management expects Kling AI revenue to more than double YoY in FY26E (>US$300mn). 2) For online marketing: Kuaishou leveraged generative recommendation models and intelligent bidding models to drive c.5% growth in domestic online marketing services revenue in 4Q25. 3) For e-commerce: Kuaishou iterated its generative retrieval architecture OneSearch, driving 3% increase in search order volume in shopping mall in 4Q25.
Increasing AI investment to impact short-term margin. Adjusted net margin improved by 0.5ppts YoY to 13.8% in 4Q25, supported by enhanced operation efficiency, but partially offset by the increase in AI investment. To support AI development, management expects total capex to reach c.RMB26bn in FY26E, up by RMB11bn YoY. Due to the increased capex and talent investment, we expect adjusted NPM to decline by c.3ppts YoY to 11.5% in FY26E.