By Sherry Qin

Kuaishou Technology shares jumped after the company showed progress in monetizing its key AI tool in the first quarter, and management said that it expects the technology to become a new growth engine for the Chinese short-video operator.

The company's Hong Kong-listed stock rose as much as 6.5% in early Wednesday trading, outperforming the Hang Seng Index, which was 0.3% lower.

Kuaishou late Tuesday reported broadly in-line earnings, with net profit falling 3.4% to 3.98 billion yuan, equivalent to about $553 million, on revenue that climbed 11% to 32.61 billion yuan.

A highlight of the results was the company's accelerated commercialization of Kling AI, its generative AI model for creating videos and images. The Beijing-based short-video app operator said Kling AI generated more than 150 million yuan in revenue during the first quarter, with paid consumer subscriptions accounting for almost 70% of Kling AI's revenue.

"In the medium to long term, we believe AI can become one of the second growth curve of the company, contributing to both our top line and bottom line," the company's management said in an earnings call.

Daiwa raised its forecast for the tool's monetization, expecting Kling AI to generate revenue of 700 million yuan this year, up from the previously projected 500 million yuan, after the company rolled out Kling 2.0 in April.

Despite the company's AI momentum, however, its sales from online marketing services--the largest segment, accounting for more than half of revenue--grew only 8%, the weakest rate over the past 10 quarters.

Analysts at Barclays said Kuaishou's advertising growth in the first quarter was the slowest among Chinese internet companies they cover, except Baidu.

Although management expects ad growth to pick up speed in the current quarter, "this bullish outlook may ultimately prove too optimistic," they said in a research note.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

May 27, 2025 23:39 ET (03:39 GMT)

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