Kuaishou has taken an early initiative, yet the overall outlook remains challenging. Despite posting a net profit of over 20 billion yuan last year, its market capitalization has shrunk by more than 80%, now standing at only a fraction of its peak value. In both e-commerce and AI, Kuaishou has been overtaken by Douyin. What steps should it take next?

With the 618 shopping festival still a month away, Kuaishou has already made its move. On April 22, the company held the "Win 2026" 618 Merchant Conference in Hangzhou, firing the starting gun ahead of schedule. Offering trillions of traffic impressions and resource support comparable to Double Eleven, the typically low-profile Kuaishou has unusually rushed out first.

Behind this move lies deep-seated anxiety. This year's 618 is not only a defensive battle for Kuaishou's e-commerce division but also a test of its AI strategy. Although Kuaishou entered both e-commerce and AI earlier than its competitors, it has been surpassed in both areas after the initial sprint. E-commerce growth has slowed to 15%, while Douyin's scale is now nearly three times that of Kuaishou. Although Kuaishou's Kling AI has seen rapid growth in annual recurring revenue, ByteDance's release of Seedance 2.0 alone caused Kuaishou's market value to fall back to its starting point within two months.

In 2025, Kuaishou delivered its strongest financial report to date, yet its stock price fell by 14% in a single day. The market is no longer rewarding early movers without solid results. Kuaishou must now answer the critical question: Is it still possible to turn the tide?

Kuaishou has decided to stop disclosing its e-commerce GMV separately. Over seven years, e-commerce has become Kuaishou's second growth engine. In 2019, when Kuaishou formally established its e-commerce department, its GMV was only 59.6 billion yuan. By 2025, it had surged to 1.6 trillion yuan, a 27-fold increase, securing a position among the top five in China. E-commerce's contribution to total revenue grew from zero to 15.5%, making it the fastest-growing segment compared to advertising and live streaming.

However, Kuaishou's momentum has slowed. In 2025, its e-commerce growth rate was 15%, continuing a downward trend from 78%, 33%, 31%, and 17% between 2021 and 2024. Compared to its competitors, Kuaishou's progress has been slower. While Kuaishou's e-commerce division was established over a year earlier than Douyin's and was quicker to achieve a closed-loop in live streaming e-commerce, Douyin has since pulled far ahead. According to reports, Douyin's e-commerce GMV grew nearly 30% year-over-year in 2025, reaching 4.4 trillion yuan—almost three times that of Kuaishou. As early as 2024, Douyin's GMV had surpassed 3.5 trillion yuan, overtaking JD.com to rank third in the industry.

Regarding future GMV growth, management appears to have lost confidence in making bold projections. CEO Cheng Yixiao announced that starting in the first quarter of 2026, Kuaishou will cease disclosing quarterly and annual e-commerce GMV separately, aligning with industry practices where Alibaba and Pinduoduo have already stopped such disclosures. The more polished the explanation, the clearer the underlying reality. If a company were still growing at 78%, would it willingly stop reporting such a figure? Cheng Yixiao himself admitted that the e-commerce business will face pressure in 2026.

The source of this pressure is not hard to identify: Kuaishou's user base is both insufficient and increasingly inactive. In the first three quarters of 2025, the year-over-year growth rates for average monthly active users were 2.8%, 3.3%, and 3.4%, respectively. However, in the fourth quarter, growth plummeted to 0.7%, the lowest since its IPO in 2021. Over the longer term, monthly active user growth slowed from 12.68% in 2021 to 2.11% in 2025, nearing stagnation. Although daily active users reached a new high of 410 million for the full year, growth has almost halted, with a loss of 8 million users quarter-over-quarter in the fourth quarter. In 2025, Kuaishou hit a ceiling in user traffic红利, and its growth engine has nearly stalled. The e-commerce segment, built on this foundation, has also ended its rapid expansion.

AI has yet to become a major revenue driver. This year's 618 will see AI move from concept to the heart of e-commerce competition, and Kuaishou has made its stance clear with a发布会 focused on AI. According to official introductions, Kuaishou aims to use technology to reshape the underlying logic of major promotions: upgrading its advertising platform to a full-funnel business growth lever, covering recommended feeds, discovery pages, public domain product shelves, and search. It also enhances AI capabilities in product selection, content creation, audience targeting, and one-click promotions, covering the entire advertising process. This serves both to empower e-commerce and to secure Kuaishou's next growth ticket.

In fact, Kuaishou's bet on AI predated the industry hype. In June 2024, it launched its self-developed video generation model, Kling AI, supporting text-to-video and image-to-video functions. Management's positioning of Kling evolved rapidly from a technical project to a corporate strategy in less than a year. In late April 2025, Kuaishou formally established the Kling AI business unit, elevating it to a first-tier department alongside core businesses like e-commerce and commercialization, reporting directly to CEO Cheng Yixiao. In August 2025, after the departure of former technology head Zhang Di, Senior Vice President Gai Kun took over as head of the Kling AI technology department, also reporting directly to Cheng Yixiao. These organizational adjustments signaled that Kling is a top-priority "project led by the CEO."

Cheng Yixiao's statements during earnings calls have repeatedly emphasized Kling's importance. He first outlined the vision for "Kling AI to become the video generation AI application with the largest global revenue scale as soon as possible," then set a hard target of "achieving over 100% year-over-year revenue growth for Kling in 2026." Combined, these indicate that Cheng is betting on Kling as the decisive factor in the AI revolution. From a data perspective, Kling's performance in 2025 seemed to justify this expectation: full-year revenue exceeded 1 billion yuan, with quarterly contributions of 150 million, 250 million, 300 million, and 340 million yuan, showing steady growth. Cheng also disclosed that Kling's monthly revenue exceeded 300 million dollars in January of this year, with full-year revenue expected to surpass 2 billion yuan.

User scale is also significant, exceeding 60 million by the end of 2025, with over 600 million videos generated cumulatively, serving more than 30,000 enterprise clients and developers via API. In its financial reports, Kuaishou defines AI capabilities as the "core engine driving the company's long-term growth," with Kling bearing the hope of creating a new growth curve.

However, this new narrative is still in its early stages. As of the end of 2025, Kling AI contributed less than 2% to Kuaishou's total revenue, remaining a minor component within the overall revenue structure. For now, it cannot shoulder the burden of driving performance. Furthermore, the industry is not a vacuum. While Kling advanced rapidly, giants like Alibaba, Tencent, and ByteDance have also been actively deploying in the video generation model space.

Taking ByteDance, Kuaishou's longstanding rival, as an example: in February of this year, its video creation model Seedance 2.0 launched, integrated into its AI products Doubao and Jimeng. Leveraging the vast ecosystems of CapCut and Douyin, it gained rapid popularity, hailed as the "DeepSeek moment" for AI video generation, even drawing astonishment from Elon Musk for its "astonishing development speed." According to third-party data, Seedance 2.0's monthly active users reached around 45 million during the Spring Festival period, nearly four times that of Kling AI during the same time.

The capital market's reaction was most direct. Previously, the rapid rise in Kling's ARR had led the market to paint a new AI-driven growth story for Kuaishou, pushing its stock price from around HK$50 to over HK$90. However, the launch of Seedance 2.0 quickly altered expectations. Concerns over intensified competition caused Kuaishou's stock price to fall back to its starting point within two months, wiping out almost all the valuation premium attributed to Kling.

Many institutions have significantly lowered their target prices for Kuaishou. Looking solely at the 2025 performance data, Kuaishou's profitability remains strong. Full-year revenue reached 142.8 billion yuan, a 12.5% increase year-over-year, while adjusted net profit hit 20.6 billion yuan, up 16.5% year-over-year, both setting new historical records. This indeed qualifies as the strongest annual report.

Yet, Kuaishou was met with a sharp setback. The day after the earnings release, its Hong Kong stock price plunged 14.04%, marking the largest single-day drop in nearly 11 months, and its market capitalization fell below HK$200 billion. As of April 27, Kuaishou's stock price closed at HK$43.64 per share, with a total market cap of HK$189.7 billion. This represents a cumulative decline of over 80% from its peak market cap of approximately HK$1.67 trillion during its first month of listing. It is difficult to imagine a company earning 20 billion yuan annually now being valued at only a fraction of its former worth.

Several international investment banks collectively downgraded their target prices for Kuaishou. Jefferies reduced its target from HK$106 to HK$82, a cut of 22.6%. Citi lowered its target from HK$95 to HK$72. HSBC cut its target from HK$89 to HK$65. Morgan Stanley adjusted its target down from HK$73 to HK$55. While most institutions maintained "Buy" or "Outperform" ratings, the overall downward revision of target prices from the pre-earnings range of HK$80-HK$108 reflects a cooling market expectation for Kuaishou's future growth.

The uncertainty stemming from the heavy bet on AI has somewhat dampened market optimism. Kuaishou's CFO, Jin Bing, stated during the earnings call that the company plans to invest approximately 26 billion yuan in the development of the Kling large model and related infrastructure. This means an additional 11 billion yuan on top of the high base of 15 billion yuan invested last year, significantly exceeding market expectations of around 18 billion yuan and directly consuming the entire net profit earned in 2025.

Despite Kuaishou's detailed description in the financial report of how AI is transforming advertising and e-commerce, the decision to commit 26 billion yuan in certain investment to bet on a revenue stream currently valued at around 2 billion yuan gave many investors pause. Furthermore, according to Huatai Securities forecasts, AI investments will lead to increased depreciation and salary expenses, potentially causing Kuaishou's adjusted net profit for 2026 to fall by 15% year-over-year to 17.6 billion yuan.

The times have changed. Over the past decade, the valuation logic for Chinese internet companies was straightforward: simultaneous growth in users, transaction volume, and revenue would command high premiums from investors. When Kuaishou listed in 2021, the market awarded it a PE ratio in the hundreds. But in 2026, the market only pays for demonstrable returns. The fact that Kuaishou delivered its strongest-ever financial report yet suffered a significant stock price drop due to a 26 billion yuan AI bet is itself a clear signal. Kling may represent the future, but the market's immediate concern is: When will the 26 billion yuan investment start paying off?