KUAISHOU's performance in the second quarter is stable, and Wall Street is hotly discussing "Keling AI": the revenue performance exceeds the reported income, and the full-year guidance seems a bit low?

The latest financial report shows that KUAISHOU's Q2 performance exceeded expectations, with revenue increasing by 13% year-on-year to 35 billion yuan, and adjusted net profit growing by 20% year-on-year, driven by strong growth in core advertising and e-commerce businesses. The most noteworthy aspect is that its AI video generation application "Keling" achieved revenue of 250 million yuan in Q2, a quarter-on-quarter increase of 67%. KUAISHOU also raised its full-year revenue guidance for Keling in 2025 to 125 million USD, doubling the previous expectation. Several investment banks believe that KUAISHOU's profit guidance for Keling remains overly conservative. JP Morgan stated that although this guidance implies relatively moderate growth in the second half of the year, there is a delay in revenue recognition for Keling, and actual cash receipts for this quarter may exceed 300 million yuan. Goldman Sachs expects Keling's total revenue to continue to climb rapidly over the next two years, projecting that it will reach 250 million USD and 365 million USD in the next two years, respectively. Delay in Keling's Revenue Recognition, Guidance Appears Conservative JP Morgan believes that Keling's revenue of 250 million yuan in Q2 "seems somewhat disappointing," falling short of its forecast of 300 million yuan. The bank pointed out that there is a delay in revenue recognition for Keling, with cash recharge to actual AI consumption resembling a mobile game model, estimating that actual cash receipts in Q2 may exceed 300 million yuan. Goldman Sachs believes that the key to assessing Keling's potential should not only focus on the annual guidance figures but also pay attention to its current growth momentum. Their report indicates that Keling's revenue continues to accelerate into Q3, and this strong quarter-on-quarter growth trend is the core basis for their forecast being significantly higher than the company's guidance. The bank expects Keling's total revenue to continue to climb rapidly over the next two years, reaching 250 million USD and 365 million USD in 2026 and 2027, respectively. Bank of America is relatively optimistic about Keling's performance, believing that the 250 million yuan revenue aligns with its expectation of 240 million yuan, emphasizing that Keling has become the highest-grossing AI video generation platform globally, and the bank expects Keling's Q3 revenue to continue to grow quarter-on-quarter. Barclays, on the other hand, expressed caution regarding the revenue guidance, believing that based on the Q2 operating rate, the full-year target of 125 million USD indicates "relatively moderate growth in the second half of the year." Core Business Performance Exceeds Expectations, Dual Drivers of Advertising and E-commerce While the market's attention is focused on AI, KUAISHOU's main business has demonstrated strong resilience, providing a solid financial foundation for the company's long-term investment. The financial report shows that KUAISHOU's core business online marketing service revenue grew by 13% year-on-year, significantly accelerating from the 8% growth in Q1. JP Morgan stated that this was mainly driven by external circulation advertising (digital content, local services) and e-commerce business. The e-commerce business has become another highlight, with GMV increasing by 18% year-on-year, higher than the 15% in Q1. Bank of America pointed out that the growth in e-commerce was primarily driven by over 40% growth in shelf-style e-commerce GMV and over 30% growth in short video e-commerce GMV. The company has achieved an increase in monetization rate by providing more value-added services to live streamers and merchants Barclays analysis believes that KUAISHOU has achieved growth above the industry average in both advertising and e-commerce. The advertising business benefits from AI-optimized smart marketing solutions, with strong demand in content consumption, local services, and the automotive industry. However, the bank warns that due to changes in Brazil's payment policies, overseas advertising revenue may decline year-on-year in the third quarter. Goldman Sachs analysis states that a solid core business ensures that KUAISHOU has ample "ammunition" to support continued investment in high-potential new businesses like Keling AI, without having to bear profitability pressure too early. AI Investment and Profitability Balance Draws Attention KUAISHOU has shown a proactive attitude towards AI investment, raising its annual capital expenditure to 12 billion yuan, primarily for Keling-related investments. The company stated that it will double down on AI-related investments but commits to controlling the impact of AI investments on annual profitability within 1-2 percentage points. JP Morgan believes that KUAISHOU maintains stable profit margins while investing in AI, reflecting good execution capability. Adjusted operating profit margins increased by 2.2 percentage points both quarter-on-quarter and year-on-year, mainly due to a shift in revenue structure towards higher-margin advertising and e-commerce businesses, as well as a year-on-year decrease of 2.4 percentage points in sales and marketing expense ratios. Bank of America emphasizes that although Keling has achieved gross profit profitability, the company expects the incremental investment in reasoning computing capabilities to have a controllable impact on the profit and loss statement. From a medium to long-term perspective, KUAISHOU believes that Keling still has further room to save on training and reasoning costs, and AI investments will release sustainable growth momentum for the entire business ecosystem