Chinese short-video app operator Kuaishou Technology reported slightly better-than-expected quarterly results as its advertising business regained momentum and its video-generation tool, Kling AI, continued to gain traction.

The Beijing-based internet company will pay a HK$0.46 special dividend per share — the first since its listing. It weighs further share repurchases and dividend payments, while maintaining strong investments in AI, according to a Thursday filing.

Kuaishou shares jumped 4.1% in Hong Kong.

The Beijing-based company said Thursday that its second-quarter net profit rose 24% to 4.92 billion yuan, equivalent to $685.6 million. That beat the 4.41 billion yuan expected in a FactSet poll. Adjusting for share-based compensation expenses and net fair-value changes on investments, net profit increased 20%.

Kuaishou’s quarterly revenue climbed 13% to 35.05 billion yuan, marginally ahead of analysts’ expectations of 34.46 billion yuan.

The company has accelerated the application of AI in its content and commercial ecosystem as competition in China’s saturated short-video industry continues to intensify. It is currently China’s No. 2 short-video platform, behind Douyin, TiKTok’s sister app in China.

Kuaishou has centered its AI effort on Kling, a self-developed video-generation tool it hopes will help creators and businesses produce more attractive and engaging content and ads.

Revenue from the AI tool surpassed 250 million yuan in the second quarter, higher than 150 million yuan mark crossed in the first quarter.

Kuaishou in June said Kling AI’s monthly subscription bookings exceeded 100 million yuan in April and May. Its latest Kling 2.1 model boasts improved motion precision, more natural dynamic details and better cost efficiency. The tool is a major contender in the video-generation field alongside ByteDance’s Seedance and Google’s Veo 3.

Analysts consider Kling’s monetization ramp-up to be decent and see a huge addressable market, which could help revenue generated by the tool surpass the management’s previous guidance of $100 million for 2025.

Investors have rewarded Kuaishou for the progress made on its AI efforts. The company’s Hong Kong-listed stock has risen more than 70% year to date, far outperforming the benchmark Hang Seng Index’s 25% gain that came amid a broad rally in Chinese tech stocks.

In the second quarter, Kuaishou’s average daily active users rose to 408.9 million from 395.3 million in the same period last year.

Its sales from online marketing services, which account for more than half of revenue, rose 13%. Segment revenue returned to double-digit growth during the quarter, thanks to the optimization of marketing product solutions with large AI models.