Soochow Securities reiterated its "Buy" rating on KUAISHOU-W (01024), citing better-than-expected Q3 results with steady growth in revenue and adjusted net profit. The growth was driven by the successful application of AI models like OneRec in advertising and e-commerce, significantly improving monetization efficiency. E-commerce GMV performed strongly, and the firm remains optimistic about the company’s core business benefiting from AI-driven monetization, as well as the growth potential of Kling, which could emerge as a new growth driver.

Key highlights from Soochow Securities’ report include:

**Q3 Earnings Performance** KUAISHOU-W reported Q3 revenue of RMB 35.55 billion, up 14.2% YoY. Adjusted net profit reached RMB 4.99 billion, a 26.3% YoY increase, with an adjusted net profit margin of 14.0%, up 1.3 percentage points YoY, surpassing consensus expectations.

**AI Models Boost Monetization** The company upgraded its OneRec AI model in Q3, expanding its application from short-video content recommendations to online marketing services and e-commerce, generating incremental revenue. The adoption of OneRec contributed to a 4%-5% increase in domestic online marketing service revenue, while AI-generated marketing materials drove over RMB 3 billion in ad spending.

In e-commerce, the launch of OneSearch, an end-to-end generative search framework, boosted search orders by nearly 5.0%, while OneRec contributed high single-digit GMV growth in the e-commerce feed.

**E-Commerce GMV Exceeds Expectations; Steady Growth Expected in Q4** 1) Live-streaming revenue rose 2.5% YoY to RMB 9.6 billion. 2) Online marketing service revenue grew 14.0% YoY to RMB 20.1 billion. 3) Other services, including e-commerce, surged 41.3% YoY to RMB 5.9 billion.

E-commerce GMV increased 15.2% YoY to RMB 385 billion. With further integration of content and marketplace ecosystems, supported by AI models, Soochow Securities expects Q4 advertising and e-commerce growth to outpace the industry, sustaining steady overall performance.

**Kling’s Growth Potential** Kling AI generated over RMB 300 million in Q3 revenue, with full-year 2025 projections at $140 million. Its 2.5 Turbo model topped Artificial Analysis’ global text-to-video and image-to-video rankings within ten days of launch. Despite short-term pricing pressures, the firm believes technological breakthroughs will drive AI adoption in video production, benefiting leading players like Kling.

**Risks** E-commerce competition, regulatory uncertainties, slower-than-expected commercialization, and intensifying competition in AI video.