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Kuaishou (SEHK:1024) Stock Can AI Revenue Outrun A Sharp Profit Squeeze?

Simply Wall St · 1d ago

Kuaishou Technology stock closed at HK$33.64 on Thursday, capping a tough run with the share price down about 26% over the past three months. Yet the latest earnings headline is not about collapse. It is about a deliberate profit squeeze as Kuaishou pours money into artificial intelligence.

Second quarter revenue came in at RMB 35.5b with group net profit of RMB 3.1b, while research and development spending jumped to RMB 4.6b. The trade off is clear: short term margins are under pressure. The bigger question for you is whether this AI spending reshapes Kuaishou over the next few years.

Is Kuaishou Technology at HK$33.64 a genuine value opportunity, or is it simply optically cheap because earnings quality is under pressure? Compare its 7.9x P/E, peer gap and DCF fair value using the valuation analysis for Kuaishou Technology.

Q2 2026 Earnings Summary

  • Revenue (Q2 2026 vs Q2 2025): RMB 35,535m vs RMB 35,046m (up about 1.4%)
  • Net Income (Excl. Extra Items, Q2 2026 vs Q2 2025): RMB 3,146m vs RMB 4,922m (declined about 36.1%)
  • Basic EPS (Q2 2026 vs Q2 2025): RMB 0.73 vs RMB 1.15 (declined about 36.7%)
  • Adjusted Net Margin (Q2 2026 vs Q2 2025): 11.0% vs about 14.1% (margin compressed)

Prefer clear charts instead of reviewing another dense set of earnings tables? See Kuaishou Technology's full financial picture with a visual valuation and earnings breakdown in the company report for Kuaishou Technology.

SEHK:1024 Trailing 12-Month Revenue & Expenses Breakdown as at Aug 2026
SEHK:1024 Trailing 12-Month Revenue & Expenses Breakdown as at Aug 2026

Kuaishou’s AI Promise Meets Mixed Profit Reality

The bullish story on Kuaishou Technology is that heavy AI spending today will reshape the business and widen monetization over time. Q2 gives some tangible proof points. Kling AI is now a real business line, with revenue above RMB 850m and very large year on year growth, and it sits inside the RMB 6.2b “other services” bucket that rose 18.5% YoY. Merchant adoption of free AI tools passed 850,000, new merchant onboarding improved about 10% quarter on quarter, and Net Transaction ROI products reached 55% of advertising clients. These are the kind of usage milestones that AI bulls wanted to see.

At the same time, the earnings print shows the cost of this push. R&D climbed 34.7% YoY and gross margin slipped to 51.6% from 55.7%, while adjusted net margin narrowed to 11%. Profit is growing more slowly than AI ambition, which keeps the thesis partially proven rather than confirmed.

Compare that internal momentum with how institutions are framing the risk reward. See the consensus price target analysis for Kuaishou Technology to check whether Wall Street is raising or cutting its expectations for Kuaishou Technology.

Kuaishou Bear Case: Profit Squeeze Looks Real

The bearish story on Kuaishou Technology is that heavy AI spending erodes earnings power faster than new AI revenue can offset it. This quarter leans in that direction. Group revenue inched up about 1.4% year on year while net income excluding extra items fell about 36%. Basic EPS also fell about 37%. That is a meaningful profit drop for a social and video platform that is still spending heavily.

Bears also worry that competitive and regulatory pressures will cap margins. Gross margin slipped from 55.7% to 51.6% and adjusted net margin narrowed to 11%. R&D jumped 34.7% while live streaming and marketing remain highly contested in China. Kling AI delivered very large revenue growth and helped “other services” rise 18.5%, which challenges the idea that AI cannot monetize. Even so, the profit drag and 3 month share price drop of about 26% show that earnings quality, not just sentiment, is under strain.

After a 26% share price fall and a visible profit squeeze, are these pressures isolated or early signs of deeper structural fragility? Review our risk analysis for Kuaishou Technology which shows 2 important warning signs

Stay Ahead Of Your Next Move

Kuaishou Technology now faces a real trade off between AI investment and earnings pressure, which makes timing your entry even more important. Register for free with Simply Wall St and add Kuaishou Technology to a Watchlist to track its share price against fair value and watch how the AI thesis evolves before deciding when to act. Once you are invested, use the Portfolio Command Center to cut through market noise and focus only on the most important developments that affect your holdings. Over the longer term, tap into crowd insight through the Community so you can spot potential catalysts or emerging risks early and stay a step ahead of the market.

Seeking Alternatives Beyond Kuaishou?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.