AI Emerges as a Mid-to-Long-Term Growth Engine; Kling 2.1 Sets New Standard for Cost-Efficient Video Generation

Kuaishou: A Leading Short-Video Platform in China with Strong User Engagement and Robust E-commerce Growth. It operates one of the most prominent content and social platforms globally, striving to become the most customer-centric company in the world. Backed by robust AI capabilities, Kuaishou continues to innovate and expand its service offerings to enhance user experience and value creation. In 1Q25, Kuaishou reported total revenue of RMB 32.6 billion, up 10.9% year-over-year, with adjusted net profit reaching RMB 4.6 billion and an adjusted net margin of 14.0%. Notably, the company achieved its first-ever quarterly operating profit for the overseas segment. Monthly active users (MAUs) reached 712 million, and daily active users (DAUs) stood at 441 million, with an average daily usage time per DAU of 133.8 minutes. E-commerce continued its strong momentum, with gross merchandise volume (GMV) rising 15% year-over-year to RMB 332 billion.

AI Fuels the Short Video Boom. China’s short video sector remains in a high-growth phase, increasingly driven by AI. The online audiovisual market reached RMB 1.2 trillion in 2024, up 6.1% year-over-year. As of December 2024, short video users in China surpassed 1 billion, with average daily usage per user ranking highest among all internet applications. By capturing fragmented attention spans through compelling visuals, algorithmic distribution, and ease of consumption, short videos quickly command user engagement. Kuaishou is at the forefront of this AI-powered transformation. Kuaishou’s proprietary AI video generation platform, “Kling AI” (可灵), is China’s first paid AI video tool designed for both consumers and professional creators. The underlying AI infrastructure supports various applications including dynamic ad delivery, AIGC (AI-generated content), AI virtual anchors, and intelligent customer service.

Kling AI Has Rapidly Become A New Growth Engine in Kuaishou’s AI Monetization Strategy. As China’s first paid AI video generation tool for professional users, it has achieved early commercialization success. The product prioritizes model quality and targets the “prosumer” segment—users who combine consumer influence with professional-grade purchasing power, such as content creators and digital marketers. In 1Q25, Kling AI generated over RMB 150 million in revenue, with nearly 70% contributed by paid subscriptions from prosumer users. The platform’s global user base has exceeded 22 million, with enterprise clients (via API integration) surpassing 10,000. Kling AI now serves multiple verticals including content creation, advertising, film and animation, gaming, and smart devices—with a high enterprise renewal rate.

Kling AI Continues Rapid Iteration, Delivering High Visual Quality with Exceptional Cost Efficiency. Kling AI continues to iterate rapidly, enhancing both quality and efficiency. Following the April launch of Kling 2.0—with major improvements in semantics, motion, and aesthetics—the new 2.1 series raises the bar on cost-effectiveness and speed. Kling 2.1 generates 5-second videos for just 20 Inspiration Points (720p) or 35 Points (1080p)—offering high performance at no added cost. In high-quality mode, videos render in under one minute, well ahead of industry peers. As a global leader in visual AI, Kling now offers a broader, more efficient solution set, meeting diverse content creation needs with superior value and speed.

MVL Framework Unlocks Broad Commercial Potential. Kuaishou’s newly launched MVL (multi-modal visual language) framework enables richer expression by integrating various input formats—text, images, videos, sounds, and motion data—into the creative workflow. This approach better captures and realizes creative intent compared to text alone. Kling AI 2.0 adopts this framework to support more precise and expressive content creation. Commercial applications span advertising, professional content creation, film and television production, and entertainment. With the official launch of Kling 2.0 on April 15, AI monetization is expected to accelerate significantly in FY2025.

AI Enhances E-commerce Efficiency. AI-generated content is also empowering Kuaishou’s e-commerce operations. AIGC improves merchant efficiency by reducing operating costs through automated content creation, intelligent matching, and virtual customer service. Using video recognition and DeepSeek’s semantic understanding, Kuaishou can automatically generate highlight clips from livestreams to showcase product features and capture long-tail traffic. As of 1Q25, daily GMV from AI-generated livestream clips has increased by over 300% year-over-year.

Attractive Valuation Supported by AI and E-commerce Momentum. With continued GMV growth exceeding 15% year-over-year and rapid AI business expansion, Kuaishou’s valuation appears attractive. Among its three core segments, “Other Services” is expected to be the fastest-growing, driven by Kling AI and e-commerce synergies. We forecast revenue from “Other Services” to grow 18% year-over-year in FY2025. Kuaishou is typically valued using the EV/EBITDA method. The stock currently trades at HK$51.65 per share, with a market capitalization of approximately HK$221.6 billion. Market consensus expects EBITDA of HK$32.0 billion and HK$37.7 billion for FY2025 and FY2026, implying EV/EBITDA multiples of 5.5x and 4.7x, respectively—well below the industry average of 9.8x and 8.3x. Please refer to the valuation section for further details.