Kuaishou Technology released its first-quarter 2026 financial results on May 27. Total quarterly revenue reached 33.72 billion yuan, slightly surpassing the Bloomberg consensus estimate of 33.41 billion yuan. Revenue breakdown includes online marketing services at 19.64 billion yuan, live streaming at 8.49 billion yuan, and other services at 5.58 billion yuan.

Profit performance presented a mixed picture of exceeding expectations while facing year-over-year pressure. Adjusted net profit was 3.37 billion yuan, higher than the expected 3.03 billion yuan. Adjusted EBITDA was 6.23 billion yuan, also exceeding the forecast of 5.63 billion yuan. However, due to rising sales costs, increased AI investments, and continued contraction in the live streaming business, adjusted net profit declined by 26.3% year-over-year. The gross profit margin was 51.2%, slightly below the estimated 51.5%. R&D expenses were 3.62 billion yuan, lower than the expected 3.67 billion yuan. Sales and marketing expenses were 10.33 billion yuan, largely in line with expectations.

The AI business emerged as the most significant structural highlight this quarter. Kling AI generated over 650 million yuan in single-quarter revenue, with a year-over-year growth rate exceeding 300%. Its annualized revenue run rate (ARR) as of March had approached $500 million. The company has clearly positioned it as the "second growth curve," maintaining globally leading model capabilities and achieving commercial implementation in professional scenarios such as film and television, advertising, and e-commerce.

The user base continued its steady expansion. Daily active users (DAUs) of the Kuaishou app reached 412.7 million, while monthly active users (MAUs) reached 771.7 million, an 8.4% year-over-year increase. DAU peaked at a record high during the Spring Festival period. Online marketing service revenue per DAU increased year-over-year to 47.6 yuan, indicating stable user engagement.

Kling AI Emerges as "Second Growth Curve," ARR Approaches $5 Billion The standout feature of this quarter's earnings undoubtedly came from the AI business. In Q1 2026, Kling AI generated revenue exceeding 6.5 billion yuan, representing a year-over-year growth of over 300%. As of March 2026, Kling AI's annualized revenue run rate (ARR) had neared $5 billion, demonstrating strong commercial potential.

Kling AI not only maintains technological leadership in the global video generation field, but its 3.0 series models now support full-modal input and output, with deep penetration into professional sectors like film/TV, advertising, and e-commerce. For instance, it contributed to visual effects and scene generation for the domestic historical drama "The Peaceful Year" and the Hollywood series "The Great Balance Dynasty." On the product side, the "Team Plan" supports real-time multi-user collaborative creation, and the "Baseball Live" effect helped it top the App Store charts in 42 countries and regions.

Core Commercial Revenue Grows 10.7%, But Overall Profit Declines Significantly Although total revenue increased slightly by 3.4% year-over-year to 337 billion yuan, the profit side faced significant pressure. Operating profit fell 15.6% year-over-year to 3.6 billion yuan, and net profit declined 27.0% year-over-year to 2.9 billion yuan.

The profit decline was primarily driven by three factors: first, the gross profit margin dropped from 54.6% to 51.2%, mainly due to rising bandwidth, server hosting, and depreciation costs; second, R&D expenses grew 9.8% year-over-year to 3.62 billion yuan, which the company explicitly attributed to increased AI investments; third, sales and marketing expenses also saw a modest increase of 4.4%.

However, core commercial revenue—comprising online marketing services and other services dominated by e-commerce—grew 10.7% year-over-year, indicating resilience in the main business.

Online Marketing: AI Pervades the Entire Funnel, AIGC Material Accounts for 10% of Consumption In Q1 2026, online marketing service revenue reached 19.64 billion yuan, a 9.3% year-over-year increase. Domestic online marketing service revenue growth exceeded 10%.

AI has been fully integrated into the pre-, during-, and post-campaign cycle: - Pre-campaign: AIGC short video marketing material consumption accounted for 10.0% of total short video marketing consumption on the platform. - During campaign: The UAX fully automated campaign solution added intelligent agent functionality, becoming a mainstream campaign tool. - Post-campaign: AI automatically analyzes campaign data and provides feedback, with digital employees enabling 24/7 automated responses.

By industry, content consumption (especially short dramas), lifestyle services (over 20 verticals including healthcare and education), and the AI application industry were the primary growth drivers. As of the end of March, the peak daily marketing consumption for short dramas exceeded 20 million yuan.

E-commerce: Deepened All-Channel Synergy, AI Drives Search and Live Streaming Increment E-commerce business performed steadily in Q1. While GMV was not disclosed separately, several operational metrics showed improvement: - The number of active merchants using paid traffic grew 38.0% year-over-year, and marketing spend by brand merchants grew 42.0% year-over-year. - Search scenario: The new-generation generative search framework OneSearch V2 was fully launched, driving e-commerce search GMV growth by approximately 3.0%. - Live streaming scenario: AI-powered real-time product highlight summaries and auto-reply features brought merchants over 10 million yuan in incremental GMV daily.

Furthermore, purchase frequency among users of the pan-shelf e-commerce model increased. New buyers and returning buyers on the mall page grew approximately 36.0% in March. The penetration rate of the net transaction ROI product among clients reached 45.0%, significantly reducing return rates.