The market may have misread Kuaishou's financial report.

On the afternoon of May 27th, after Kuaishou released its Q1 financial report, I browsed through my WeChat Moments. Someone posted a crying face emoji with the caption: "The net profit has plummeted by 26%. Is there any hope for this company?" Someone shared a screenshot of the stock price in a group: HK$45, and the market value fell below HK$200 billion. Some people even made a direct conclusion: "The short - video dividend is over, and Kuaishou will be the first to fall behind."

After going through this information, I had a strong feeling: Are we being a bit too hasty?

Yes, the data speaks for itself. In the first quarter, the revenue was 33.7 billion yuan, with only a 3.4% year - on - year increase. The adjusted net profit was 3.4 billion yuan, a drop of 26.3%. The live - streaming revenue was 8.5 billion yuan, a year - on - year decline of 13.5%, and it has been on a downward trend for the fifth consecutive quarter. The gross profit margin dropped from 54.6% in the same period last year to 51.2%. After - hours, the stock price once fell below HK$45, and the market value was less than HK$200 billion, more than halved compared to the peak two years ago.

But can you say that this company is on the verge of decline? The fact is not so.

Looking back at the financial reports of the past few years, Kuaishou started to make large - scale profits in 2023, with the adjusted net profit exceeding 10 billion yuan that year. In 2024, the profit continued to rise, with the annual adjusted net profit reaching 20.6 billion yuan. In 2025, although the growth rate slowed down, it still made money on the books.

It makes sense to say that a company losing billions of yuan per quarter is in decline. But for a company that makes a net profit of 20 billion yuan a year, you need more evidence to claim that it is doomed.

This is more like an industry in transition, shifting from full - throttle acceleration to coasting through a turn. The entire industry is going through this process. It's just that Kuaishou released its financial report first, so people are blaming Kuaishou for the industry cycle.

To put it bluntly, it's not Kuaishou that hit the ceiling of live - streaming rewards; it's the entire industry. The slowdown in the growth rate of short - video advertising is not just Kuaishou's problem. If you look at Douyin, Video Account, and Bilibili, each has its own difficulties. It's just that none of them, except listed companies like Kuaishou, show their financial situation to the market every quarter. An interesting detail is that Kuaishou's monthly active users in Q1 reached 772 million, a record high, with an 8.4% year - on - year increase, and the daily active users of 413 million also increased.

The users are still there, so why is it getting harder to make money?

Because the logic of making money has changed. In the past, it relied on live - streaming rewards. When a generous viewer was in a good mood and sent a virtual rocket, the platform would take half of it. The money came quickly but also went quickly. Now that the live - streaming boom is fading, and advertising and AI haven't fully taken over, there is a gap in between. During this gap period, it will be tough. The gross profit margin will decline, the profit will drop, and the stock price will face pressure.

But this doesn't mean the company is failing. It just means that Kuaishou has grown from a "teenager" to an "adult" and can no longer cover up problems by simply growing. Adults have their own difficulties, but they also have their advantages - knowing what they can and cannot do and no longer making random moves. Next, let's take a look at what this financial report is really saying item by item.

The live - streaming revenue dropped by 13.5%, but it's not a collapse

The live - streaming revenue was 8.5 billion yuan, a year - on - year decline of 13.5%. This figure is not good - looking, and it has been declining for the fifth consecutive quarter.

Looking at the timeline makes it even more glaring: In Q1 2025, there was still a 14.4% growth rate, which dropped to 8.0% in Q2, only 2.5% in Q3, turned negative to - 1.9% in Q4, and directly jumped to - 13.5% in Q1 2026. It's a steep downward curve.

So many people's first reaction is: Kuaishou's "Laotie economy" is failing, the anchors have all left, users are no longer willing to give rewards, and the platform is doomed. Is this judgment correct?

Partially correct. The "Laotie economy" is indeed on the decline. The glorious days of Kuaishou's live - streaming in the early years, when a wealthy viewer would send a virtual rocket and the anchor would shout "Laotie", are gone. At that time, the reward amount for a PK between top anchors could reach over a million yuan, and the platform would take a 50% cut, making money effortlessly. However, the foundation of this model was "impulse consumption" and "emotional coercion", which was inherently unhealthy.

But you have to view this in the context of the industry - it's not that there are more obstacles for Kuaishou; it's that the overall industry level is dropping. Since 2024, the regulatory authorities have tightened the rules on live - streaming rewards, including protecting minors, setting limits on rewards, standardizing PK and co - hosting, and restricting high - value reward rankings. After a series of measures, the ceiling of the entire industry has been firmly held down. The growth rate of Douyin's live - streaming revenue is also slowing down. It's just that Douyin has a large enough scale and a thick enough foundation, and its other businesses can make up for it. Although Video Account hasn't released specific figures, live - streaming rewards have never been a major part of the WeChat ecosystem, so they don't really care.

More importantly, the proportion of live - streaming revenue in Kuaishou's total revenue has dropped from over 50% a few years ago to 25.2% now. What does this mean? It means that Kuaishou's dependence on live - streaming has been cut in half. Three years ago, if the live - streaming business collapsed, the whole company would be shaken. Now, even if the live - streaming business collapses, there is still advertising to support it, and there is also the AI blueprint.

This is not a collapse; it's an optimization of the revenue structure.

The optimization process will surely be painful, but the direction is right. An insider in the live - streaming guild transferred one - third of his Kuaishou anchors to Douyin last year, another one - third to e - commerce live - streaming, and simply disbanded the remaining one - third. He said something quite interesting: "Now, doing pure entertainment live - streaming is like selling ice - cream in winter. It's not that the ice - cream is not delicious; it's just that the season has passed."

The season has passed. This statement applies to the entire live - streaming industry. The golden age of the reward economy is over, but live - streaming as a content form will not disappear. It has just changed from a "money - printing machine" to an "infrastructure" - used to increase user time, retain users, and guide traffic to advertising and e - commerce.

Look at Kuaishou's user data in Q1. The daily active users are 413 million, and the monthly active users reached a record high of 772 million. The users are still there; they just don't want to spend as much on rewards. This is actually a healthy sign. A platform's revenue cannot always rely on users' impulse consumption. The cooling - off of rewards precisely shows that Kuaishou is transforming from a "casino" to a "shopping mall".

A shopping mall surely doesn't make money as fast as a casino. But a shopping mall can last longer. There is also an aspect that many people haven't noticed. With the decline of live - streaming revenue, Kuaishou can allocate more traffic to advertising and e - commerce. In the past, the live - streaming rooms were full of content aimed at getting rewards. Now, it can promote brand advertising, e - commerce live - streaming, and short dramas. For the same user, if they watch half an hour of entertainment live - streaming, the platform earns 50 cents from the reward cut. If they watch half an hour of e - commerce live - streaming, the platform can earn a 3% commission plus advertising fees, which may be more than 50 cents.

Comprehensive data from Tianyancha Media shows that Kuaishou's brand GMV increased by 25% year - on - year, and the consumption of advertisers participating in the Chengfeng Plan increased by 42% year - on - year. This shows that the pool of brand advertising is expanding, and the traffic freed up by live - streaming is being used more efficiently. So, the short - term decline of live - streaming is a negative factor, but it may not be in the medium - to - long - term. The key is whether Kuaishou can monetize the freed - up traffic more efficiently. This process won't happen overnight. But at least the direction is correct.

KeLing AI is very powerful, but it's not a lifesaver

The most eye - catching figure in this financial report is KeLing AI.

In the first quarter, the revenue was 650 million yuan, with a year - on - year increase of over 300%. The annualized revenue run - rate (ARR) is close to $500 million. You know, in March last year, this figure was only $100 million. It has quadrupled in one year. There are 60 million users globally, with a cumulative generation of over 600 million videos, and there are more than 30,000 enterprise customers. There have been continuous hits on the C - side. The "Baby Dance" and "Pet Dance" trends driven by the Motion Control function have swept across global social media. The "Korean Baseball Fan Cam" became a huge hit in South Korea, and the daily mobile - end revenue reached a peak of $220,000 globally.

The B - side is also not bad.

KeLing was responsible for the special effects of the TV drama "Taiping Nian" and the scene generation of "The Dynasty of David". The single - day marketing peak consumption of AI comic dramas exceeded 20 million yuan, indicating that advertisers have started to use the content generated by KeLing for commercial promotion, and the link from content generation to advertising monetization is being established. Kuaishou has also launched an AI tool called MyFlicker for the workplace, trying to open up a new commercialization track on the B - side.

So, there is a voice in the market: KeLing is Kuaishou's lifesaver, AI video is Kuaishou's second growth curve, and Kuaishou is going to transform into an AI company.

This judgment is also overly optimistic. Although 650 million yuan has a significant increase, when you put it into the total revenue of 33.7 billion yuan, it accounts for less than 2%. A business line accounting for less than 2% can't save anyone. Then, let's talk about the valuation of $20 billion. The market rumors that KeLing will be spun off for financing, with a valuation of $20 billion, which is close to 80% of the parent company's market value. It is given a multiple of 40 times ARR, and investment banks say that OpenAI has a similar multiple.

Is this valuation reasonable? To be honest, this valuation is questionable. OpenAI has ChatGPT as a super - entry point, with hundreds of millions of users globally chatting, searching, and writing code on it every day, and products like GPT - 4 and GPT - 5 that represent an epoch - making iteration. What is KeLing? It's a video - generation tool. There is still a long way to go between the tool and users' habits. After you use KeLing to generate a video and post it on Douyin or Kuaishou, what's next? Most likely, you'll close the app. But you'll open ChatGPT more than a dozen times a day to write emails, look up information, program, and make PPTs. This is the essential difference.

The valuation logic for tool - type AI and application - type AI should not be the same. Giving a 40 - times ARR to a video - generation tool shows that the market is a bit too excited.

Then, there is the issue of competition. Alibaba has Tongyi Wanxiang, ByteDance has Jimeng, Baidu has Wenxin Yige, and Meituan and Xiaomi are also deploying in the field of AI video. Are there any big companies not involved in AI video? None of them are sitting on the sidelines. KeLing is currently in the lead, but no one knows how long this leading advantage can be maintained.

Moreover, there is a deeper problem. The technical route of AI video generation is still changing rapidly. The diffusion model is being used today, but it may be replaced by a new architecture tomorrow. The training cost is decreasing, the inference efficiency is increasing, and the entry threshold is getting lower and lower. What does this mean?

It means that the first - mover advantage in this track may not be as solid as in the search engine or social media fields. The technology in the AI video - generation track is iterating too fast. You may be half a year ahead today, but if your competitor releases a new model tomorrow, your advantage may disappear.

Runway was considered an industry benchmark last year, but it has been left behind by KeLing this year. But can KeLing guarantee that it won't be left behind by others next year?

Kuaishou itself is aware of this. So, in the financial report, they said that the capital expenditure in 2026 is expected to be 26 billion yuan. What does 26 billion yuan mean? Kuaishou's annual adjusted net profit in 2025 was only 20.6 billion yuan. In other words, Kuaishou is investing all the money it earned last year and still has to add more than 5 billion yuan. This shows the determination to bet on AI and the pressure of a last - ditch battle.

So, the positioning of KeLing is simple: it's not a lifesaver; it's an option. What does this mean? It means that Kuaishou has spent 26 billion yuan to buy a lottery ticket. If it wins, the company's value will be re - evaluated, transforming from a short - video platform to an AI company, and it's not surprising for the stock price to multiply several times. If it doesn't win, it's like working in vain for a year, and it still depends on whether the main business can hold up.

But is this lottery ticket worth buying? From a strategic perspective, this investment is reasonable. Because if it doesn't buy, it will be even more difficult for Kuaishou to tell its story in the capital market. With its position as the second - largest short - video platform, the market is asking "what's next", and it has to have an answer. Buying an option at least gives it a chance to turn the tables.

Cheng Yixiao said at the earnings conference that KeLing plans to conduct an IPO on the Hong Kong Stock Exchange in 2027. The price that the market will give at that time will be the real test.

Currently, the $20 - billion valuation is half supported by performance and half by expectations. The spin - off is a good thing as it can give KeLing independent financing ability and provide Kuaishou's shareholders with an additional monetization channel. But don't expect the spin - off to solve all problems.

The real problem is: Can KeLing transform from a "useful tool" into an "indispensable platform"? This transformation is much more difficult than increasing the ARR from $100 million to $500 million.

Kuaishou's real opponent is time

When many people talk about Kuaishou,