Kuaishou's artificial intelligence unit, Kling AI, may have seen a dramatic surge in revenue, but this success has not been enough to counter the company's declining earnings in the second quarter.

On August 19, the tech firm released its financial results for the second quarter. During the period, the company generated RMB 35.5 billion in revenue, marking a year-over-year increase of 1.4%. However, profit for the period came in at RMB 3.2 billion, a significant drop of 36% compared to the same period last year.

The standout achievement in this earnings report was the commercialization of Kling AI. In the second quarter, Kling AI's revenue exceeded RMB 850 million, a year-over-year growth of over 200%. By the end of June, the number of global users for Kling AI had surpassed the 100 million milestone, a rise of about 67% from the end of 2025.

Meanwhile, online marketing services contributed RMB 20.6 billion to Kuaishou's revenue, up 4.4% year-over-year. On the other hand, the company's live streaming business contracted, with revenue dropping 13.5% year-over-year to RMB 8.7 billion.

It has been noted that in May this year, KUAISHOU-W (01024.HK) announced plans to invest RMB 800 million in revenue sharing funds, RMB 200 million in incubation cash, and RMB 1 billion in exclusive traffic to support short drama and comic drama content. Following these substantial investments, the supply of related content on the platform grew exponentially.

As per the financial report, by the end of June, the supply of short dramas on Kuaishou's platform had increased more than fivefold compared to January. In the second quarter of this year, total advertising spending on short dramas through online marketing services more than doubled year-over-year.

However, for players like Kuaishou who are intensifying their focus on short dramas, the challenges ahead remain daunting. One of the most pressing issues currently facing the short drama industry is that the growth in supply far outpaces the growth in user attention.

Mixed Financial Results with Slight Revenue Growth and a 36% Profit Decline

According to Tianyancha, Kuaishou was listed on the main board of the Hong Kong Stock Exchange in February 2021. On August 19, the company released its performance announcement for the second quarter and the first half of 2026. The financial data paints a picture of both achievements and setbacks.

On a positive note, the second quarter saw Kuaishou's revenue maintain its growth trajectory, with quarterly revenue reaching RMB 35.5 billion, a 1.4% year-over-year increase. However, compared to the 13.1% growth rate seen in the second quarter of the previous year, the company's revenue growth has clearly decelerated.

On the downside, Kuaishou's profit indicators have worsened. The report shows that in the second quarter, the company's gross profit stood at RMB 18.3 billion, a 6% year-over-year decrease. The gross margin fell to 51.6% from 55.7% in the same period last year, a decline of 4.1 percentage points.

During the same period, profit for the period was RMB 3.2 billion, down by RMB 1.7 billion from the RMB 4.9 billion recorded a year earlier, a year-over-year drop of approximately 36%.

Dragged down by the second-quarter results, the company's performance in the first half of the year was also less than satisfactory. In the first half of this year, Kuaishou generated cumulative revenue of RMB 69.3 billion, a year-over-year increase of 2.4%, but recorded a profit of RMB 6.1 billion, a 32% decrease from the RMB 8.9 billion seen in the first half of the previous year.

In terms of user base, the average daily active users in the second quarter grew from 409 million in the same period last year to 412 million. The average monthly active users increased from 715 million to 797 million year-over-year.

Kuaishou stated that for new user acquisition, it has enhanced efficiency through AI-driven intelligent investment methods, while also improving the overall retention of new and returning users. Furthermore, thanks to the continuous improvement of its social features, the number of users engaging in dual-screen private messaging grew by over 15% year-over-year in the second quarter.

During the reporting period, Kuaishou also strengthened its differentiated, high-quality content ecosystem that reflects its community core. For example, from June to July, centered around the World Cup, Kuaishou not only created its original IP "Kuaishou Tieli Shenbei" but also launched several original series such as "Kuaishou Xiangyashan Football Tournament" and "Dream Chaser Youth Football Match."

According to Kuaishou, related content achieved a total exposure of 68.2 billion on the app, with live event viewership nearing 360 million.

Regarding expenses, sales and marketing expenses in the second quarter decreased by 5.5% year-over-year to RMB 9.9 billion, primarily due to reduced promotional activities. Administrative expenses were around RMB 895 million, roughly flat year-over-year. Research and development expenses rose to RMB 4.6 billion, a 34.7% year-over-year increase, mainly due to increased investment in AI, including related training costs.

Kling AI's Revenue Soars While Live Streaming Business Contracts

Based on the financial report, Kuaishou's business can be divided into three main segments: online marketing services, live streaming, and other services. Among these, online marketing services contributed RMB 20.6 billion in revenue in the second quarter, a 4.4% year-over-year increase, mainly due to its provision of scenario-based marketing content generation capabilities to meet the needs of different industries and clients, driving an increase in online marketing consumption.

Driven by factors such as the growth of the Kling AI business, revenue from other services grew from RMB 5.2 billion in the same period last year to RMB 6.2 billion, a year-over-year increase of 18.5%.

Kuaishou revealed that in the second quarter of this year, Kling AI's revenue exceeded RMB 850 million, a year-over-year growth of over 200%, continuing to lead the commercialization process in the global AI video generation industry.

During the reporting period, to further consolidate Kling AI's global leading position in multimodal video generation large models, Kuaishou made continuous efforts in frontier model capabilities, professional product feature upgrades, and the international creative ecosystem.

For professional clients in sectors like film and advertising, Kling AI, based on its 3.0 series models, launched a native 4K video direct output feature. This function can directly produce high-resolution footage without complex post-processing, achieving film-industry-level visual effects.

At the same time, Kling AI also launched the Kling 3.0 Turbo model, Kling MCP, and Kling CLI, which not only greatly improve creative efficiency and lower creative costs but also expand its application in workflow automation and intelligent orchestration scenarios.

It is worth mentioning that at the 2026 Cannes Lions International Festival of Creativity, two advertising films generated by Kling AI won one Silver Lion and two Bronze Lions. Additionally, at the 2026 Beijing International Film Festival, several works created using Kling AI were shortlisted in the AIGC category.

Data shows that as of June this year, Kuaishou's Kling AI global user base had surpassed 100 million, an increase of about 67% compared to the end of 2025, covering 224 countries and regions. The number of enterprise clients approached 50,000, also a year-over-year increase of about 67%.

In contrast to Kling AI's stellar performance, Kuaishou's live streaming business saw its revenue shrink in the second quarter. During the reporting period, this segment contributed RMB 8.7 billion in revenue, a 13.5% year-over-year decrease. Kuaishou explained this was primarily due to its continued efforts to build a rich and healthy live streaming ecosystem and diversified high-quality content.

On the live streaming supply side, Kuaishou launched the "Baichuan Plan," which, through recruitment incentives, cold-start support, and healthy ecosystem governance, steadily increased the supply of new streamers from guilds, improving the cold-start efficiency of new broadcasters.

In terms of product technology, Kuaishou uses AI to empower live broadcast rooms, such as using Kling AI's video generation capabilities to create custom AI gifts with special effects, thereby increasing users' willingness to pay. It was revealed that in the second quarter of this year, users on Kuaishou sent over 6 million AI gifts in total.

Additionally, AI-driven content understanding capabilities continue to optimize Kuaishou's live streaming recommendation strategies, strengthening precise matching between streamers and users and helping to increase the scale of paying users. Furthermore, the live streaming intelligent gift recommendation and sorting function based on real-time multimodal signals has effectively improved the user payment experience and efficiency. The iterative upgrades of features like AI interactive assistants and digital avatar services are also continuously enhancing the service efficiency of streamers.

Intensifying Investment in Short Dramas Amidst Growing Industry Competition

During the second-quarter earnings call, Kuaishou's founder and CEO Cheng Yixiao stated that AI is continuously lowering content production costs and creation barriers, driving rapid growth in content supply for formats like comic dramas and short dramas.

A report from DataEye's "2026 First Half AI Drama and Comic Drama Industry Comprehensive Strength City Data Report" indicates that in 2026, the domestic AI drama and comic drama market is expected to exceed RMB 40 billion, with a year-over-year growth rate of up to 138%. The number of creators nationwide has surpassed 500,000, making it a burgeoning track for entrepreneurship and employment.

Kuaishou is also intensifying its efforts in this potential field. In May of this year, at the 2026 Magnetic Engine Content Consumption Business Conference, Kuaishou announced an investment of RMB 800 million in revenue sharing funds, RMB 200 million in incubation cash, and RMB 1 billion in exclusive traffic. Leveraging its full-chain AI capabilities, it aims to support short drama and comic drama content, creating a stable income-generating content operation ecosystem.

These investments are already yielding results. According to data from Kuaishou's Content Consumption Center, revenue sharing for original short drama copyright holders in July doubled month-over-month, reaching a record high for a single month. Among them, the top 10 copyright holders received RMB 13 million in revenue sharing, a 113% month-over-month increase. It is reported that in August, Kuaishou will further increase policies and resources for short dramas, with revenue sharing expected to double again.

With these significant investments, the supply of short dramas on Kuaishou has seen a surge. The financial report shows that as of June this year, the supply of short dramas, including both live-action and AI-generated ones, had increased by more than fivefold compared to January 2026. In the second quarter of this year, total advertising spending on short dramas through online marketing services grew by over 100% year-over-year.

Regarding comic dramas, Cheng Yixiao revealed that in 2025, Kuaishou had 60,000 comic drama titles. It is projected that this number will reach 500,000 in 2026, a year-over-year increase of over sevenfold.

It is worth noting that the immense potential of the short drama sector has also attracted the attention of major internet companies like ByteDance. At the first Short Drama Industry Conference held in May this year, Hua Yuesheng, head of content cooperation at Douyin Group's short drama copyright center, stated that for core categories of live-action dramas, the platform will comprehensively increase content revenue sharing ratios and provide more substantial return mechanisms. Additionally, Douyin will establish a top incentive policy of up to RMB 1.5 million per drama and RMB 200 million in special funds, while also launching a sequel incentive of up to 20%.

However, despite the explosive growth in production capacity in the rapidly expanding short drama industry, the rate of hit shows and viewership for new dramas has not increased correspondingly. According to data from DataEye-ADX cited by 文娱价值官, among the 221,900 works on the network in the first half of the year, only 1,055 achieved over 100 million views, a hit rate of merely 0.47%. More than 12,000 works surpassed 10 million views, a rate of only 5.8%.

From January to June 2026, existing older dramas formed the foundation of native viewership on Douyin, consistently accounting for over 70%, making it increasingly difficult for new dramas to break through.

However, in Cheng Yixiao's view, the short drama industry still has room for further growth. It will gradually evolve from quantitative expansion to qualitative improvement in content, developing into an ecosystem-based business that combines content consumption value with advertising capacity. In terms of content formats, short dramas and comic dramas may also extend in the future towards IP derivatives, interactive dramas, virtual companionship, and the integration of cultural tourism and creative industries.

Through revenue sharing incentives, full-site traffic support, and high-quality content copyright cooperation, Kuaishou will help quality content achieve more stable traffic and commercial returns. Radar Finance will continue to monitor the future development of Kuaishou.