Kuaishou released its Q2 2026 financial results today. Total quarterly revenue reached RMB 35.535 billion, up 1.4% year-on-year, with a net profit of RMB 3.152 billion, down 36%, and an adjusted net profit of RMB 3.913 billion, down 30.3%. Research and development expenses climbed 34.7% to RMB 4.581 billion, reflecting a period of heavy investment.

The standout performer in this earnings report is Kling AI, the company's AI video generation arm. Kling AI generated over RMB 850 million in revenue for the second quarter, marking a remarkable 200% year-on-year growth and a 30.8% quarter-on-quarter increase. This strong momentum helped drive Kuaishou's core commercial revenue, which includes online marketing services and other services such as e-commerce and Kling AI, up 7.4% year-on-year to RMB 26.845 billion.

However, the gains from online marketing and Kling AI were partially offset by a significant decline in live streaming revenue and a surge in AI-related R&D spending, leading to a considerable drop in net profit. Kuaishou's co-founder and CEO, Cheng Yixiao, acknowledged the company is navigating short-term pressures on profitability as it balances revenue headwinds with substantial AI investments.

Kling AI completed an independent financing round earlier this year. During the earnings call, CFO Jin Bing noted that following the separation, Kling AI will adopt more flexible cash flow management strategies, including leasing computing power, with the majority of capital expenditures already concentrated in the first half of the year.

Breaking down Kuaishou's Q2 revenue structure: online marketing services contributed RMB 20.639 billion, up 4.4% year-on-year and representing 58.1% of total revenue. Live streaming revenue fell 13.5% to RMB 8.690 billion, accounting for 24.5%. Other services revenue, which includes Kling AI, surged 18.5% to RMB 6.206 billion, making up 17.4% of the total.

User metrics remained robust, with average daily active users reaching 412.3 million and average monthly active users hitting 797.3 million. The average online marketing service revenue per daily active user increased to RMB 50.1 from RMB 48.3 in the same period last year.

The AI integration within Kuaishou's advertising business is accelerating. AIGC short video marketing material spending grew over 70% year-on-year in Q2. Since January, the supply of short dramas, including both live-action and AI-generated content, has increased more than fivefold, with total short drama marketing spending up over 100% year-on-year.

Adoption of AI tools is widespread across the platform: over 850,000 merchants now use Kuaishou's free AI business tools, more than 92% of employees utilize the company's proprietary AI agent products, and AI code contribution among R&D staff has reached 60%.

The 13.5% decline in live streaming revenue was the primary drag on overall performance, which the company attributes to ongoing efforts to cultivate a more diverse and healthy live streaming ecosystem.

Kling AI's product developments are the highlight of this quarter. The company introduced native 4K video generation in its Kling AI 3.0 series, marking the industry's first video generation model to support direct 4K output. This feature allows professional clients in film and advertising to produce cinematic-quality visuals without complex post-processing. Additionally, the Kling 3.0 Turbo model was launched, offering enhanced creation efficiency and lower costs while maintaining high-quality output and precise audio-video synchronization. The company also rolled out Kling MCP and Kling CLI, enabling AI agents to orchestrate batch content creation through Kling AI.

Overseas, Kuaishou's international segment generated RMB 1.179 billion in revenue for Q2, recording an operating loss of RMB 25 million. As of August 19, the company has repurchased approximately HK$1.97 billion worth of shares this year, totaling about 43.3 million shares, representing roughly 1% of its share capital at the start of the year.

Kling AI dominated discussions during the earnings call. Addressing the competitive landscape in AI video generation, Cheng Yixiao observed that the sector is in a flourishing phase with multiple players exploring differentiated strategies based on their platform ecosystems and vertical applications. Unlike the more fragmented large language model market, AI video generation is characterized by a clear leader position and concentrated top-tier competition, as it demands significantly higher resources in computing power, data, talent, and technology.

Beyond Kling AI, Cheng highlighted progress in Kuaishou's general large model research, including the release of the upgraded multimodal model Keye-VL-2.0-30B-A3B and the introduction of AgentX, an autonomous AI agent for industrial recommendation systems that enables self-directed model design, evaluation, and knowledge accumulation to accelerate algorithm iteration.

Kuaishou appears to be at a critical inflection point. While short-term profitability faces pressure from declining live streaming revenue and aggressive AI investment, Kling AI's quarterly revenue exceeding RMB 850 million with 200% year-on-year growth demonstrates that a viable commercial loop for video generation has been initially established.