[Live Conference] Good performance fails to reverse stock price decline, Kuaishou admits being the "third player" in the industry

"The first short video stock in Hong Kong" $KUAISHOU-W(01024.HK) released an outstanding financial report after the market closed on November 20.

In the third quarter of this year, Kuaishou's total operating revenue increased by 11.4% year-on-year to RMB 31.131 billion; adjusted net profit rose by 24.42% year-on-year to RMB 3.948 billion. Both revenue and net profit growth rates met market expectations.

The company's profitability in both domestic and overseas markets improved. The operating profit of the domestic segment increased from approximately RMB 3.2 billion in the same period last year to RMB 3.5 billion; the operating loss of the overseas segment narrowed significantly by 75.9% year-on-year to RMB 153 million.

In addition, Kuaishou's user base, e-commerce, and online marketing businesses continued to grow steadily. However, this strong performance failed to boost its stock price. On November 21, Kuaishou's stock opened sharply lower, with a decline of 10.66% at the time of writing.

Expanding the Foundation as the Industry's "Third Player"

With $TENCENT(00700.HK) entering the fray, competition in the short video sector has intensified. In its earnings report, Kuaishou indirectly acknowledged that Video Accounts is the industry's runner-up, while it ranks third.

Thanks to the aggressive execution of its "high-quality user growth" strategy, Kuaishou's "laotie" (loyal users) community continues to expand, and its user base keeps growing—a particularly valuable achievement in the fiercely competitive market.

In the third quarter of this year, Kuaishou's average daily active users (DAUs) and average monthly active users (MAUs) reached 408 million and 714 million, respectively, up 5.4% and 4.3% year-on-year. Kuaishou stated that this (user growth) further solidifies its leading position as China's third-largest app (by quarterly average DAUs).

Since its beta launch in 2020, Video Accounts has risen rapidly. Guohai Securities previously estimated that Video Accounts' DAUs reached 450 million in 2023, already surpassing Kuaishou's scale in Q3 this year.

Kuaishou's user growth came at the cost of rising marketing expenses. In Q3 this year, the company's sales and marketing expenses increased by 15.94% year-on-year to RMB 10.364 billion, outpacing revenue growth. As a percentage of total revenue, it rose from 32.0% in Q3 2023 to 33.3% in Q3 2024.

Kuaishou's management stated during the earnings call that the increase in sales and marketing expenses in Q3 was mainly due to higher investments in online marketing services and e-commerce. In Q4, user subsidies for e-commerce and online marketing services are expected to increase, leading to seasonal growth in sales and marketing expenses.

However, Kuaishou continued to "tighten its belt" in other areas: administrative expenses fell by 11.4% year-on-year to RMB 796 million, while R&D expenses grew slightly by 4.5% year-on-year to RMB 3.1 billion.

By increasing customer acquisition costs and deepening the integration and application of large models in content generation, understanding, and recommendations, Kuaishou also enhanced user stickiness. In Q3 this year, the average daily time spent per DAU on Kuaishou reached 132.2 minutes, with total user time spent growing by 7.3% year-on-year. Daily live streams and short video views approached 110 billion.

Strong Marketing Business, Slowing E-Commerce Growth

As its user base continues to expand, Kuaishou has shifted its strategic focus to e-commerce, which, along with online marketing services and live streaming, forms the three pillars of its business.

In Q3 this year, Kuaishou's e-commerce business maintained growth, though the pace slowed compared to the same period last year. Gross merchandise volume (GMV) for the quarter reached RMB 334.2 billion, up 15.1% year-on-year from RMB 290.2 billion, marking the second-best quarterly performance in history.

In Q3 this year, Kuaishou's other service revenue increased by 17.52% year-on-year to RMB 4.159 billion, primarily driven by e-commerce growth.

Kuaishou has ramped up investments in e-commerce. On the supply side, it launched strategic initiatives like the "Doujin Plan," "Qihang Plan," and "Fuyao Plan," along with clearer methodologies for content-driven e-commerce. For influencers, Kuaishou developed marketing tools like "Shopping Groups" and "10,000-Person Groups," as well as the "New Star Plan" and "Hot Product Plan."

During the reporting period, the number of new merchants joining Kuaishou grew by over 30.0% year-on-year, while monthly active e-commerce merchants surged by more than 40%. The number of monthly active e-commerce buyers rose by 12.2% year-on-year to 133 million.

Online marketing remains Kuaishou's core business. In Q3, online marketing service revenue reached RMB 17.634 billion, up 20.0% year-on-year, marking the sixth consecutive quarter of over 20% year-on-year growth.

Kuaishou's live streaming business continued to shrink. In Q3, live streaming revenue fell by 3.92% year-on-year to RMB 9.338 billion, though the decline narrowed compared to the previous quarter.

A positive trend is the further professionalization and institutionalization of hosts on the platform. By the end of Q3, the number of signed agencies and hosts increased by over 40.0% and 60.0% year-on-year, respectively.

AI: Kuaishou's Growth "Hero"?

Kuaishou's in-house AI technology has played a key role in driving growth in marketing services and e-commerce.

Kuaishou stated that its AI large models enable more precise matching of marketing content and product features, improving conversion efficiency.

In video generation models, Kuaishou released the latest "Keling AI" 1.5 version in September 2024, enhancing image quality, dynamic performance, and semantic response speed.

During the earnings call, Kuaishou CEO Cheng Yixiao said that since its launch in June, Keling AI has attracted over 5 million users, generating more than 51 million videos and 150 million photos. In September, Keling AI's MAUs exceeded 1.5 million, with organic user retention steadily improving month by month.

Cheng also stated that Keling AI's current monthly commercial revenue exceeds RMB 10 million, and the company will explore more diversified monetization models, expecting rapid revenue growth next year.

Additionally, management noted that AI large models have been extended to short videos, live streams, comments, ads, and e-commerce, driving improvements in user retention, marketing spend, and GMV.

Author: Yao Yuan