--- title: "Kuaishou: Turnaround Hinges on 'Keling'" type: "Topics" locale: "en" url: "https://longbridge.com/en/topics/41165004.md" description: "$KUAISHOU-W(01024.HK) released its Q1 results after the Hong Kong close on May 27 (Beijing time). Overall, the quarter was broadly in line. The operating profit beat was driven by non-core other gains, which are unlikely to be sustainable.In short, the core biz remains under heavy pressure, leaving little to highlight. The key focus now is 'Kling', including its monetization and the progress toward a spin-off and listing.Specifically: 1) Kling was the only bright spot. Q1 Kling revenue reached RMB 650 mn (+330% YoY), above guidance of RMB 500 mn..." datetime: "2026-05-27T13:20:30.000Z" locales: - [en](https://longbridge.com/en/topics/41165004.md) - [zh-CN](https://longbridge.com/zh-CN/topics/41165004.md) - [zh-HK](https://longbridge.com/zh-HK/topics/41165004.md) author: "[Dolphin Research](https://longbridge.com/en/news/dolphin.md)" --- # Kuaishou: Turnaround Hinges on 'Keling' $KUAISHOU-W(01024.HK) released its Q1 print after Hong Kong close on May 27 Beijing time. Headline results were broadly in line, with OP beat mainly driven by non-core 'other gains', which are not recurring. **Overall, the core biz. remains under pressure with limited positives to highlight, and the key focus is on Kling — its monetization and the spin-off/IPO progress.** In detail: Details as follows. **1) Kling is the only bright spot:** Q1 Kling revenue reached RMB 650 mn (+330% YoY), ahead of the RMB 500 mn guide. The monetization ramp was led by Dec's all-modal instruction editing on Kling O1 and the Feb launch of Kling 3.0, an all-in-one multimodal I/O model. ARR surpassed $500 mn by Mar and kept growing in Apr–May. The spin-off/IPO trajectory of Kling matters most for Kuaishou's valuation, so watch for disclosures on the call. **2) User surprise:** Q1 user metrics looked solid, likely boosted by Chinese New Year campaign programming that lifted engagement in the short term. DAU rose 1.2% to 413 mn, with avg. time spent said to be stable, while MAU accelerated 5% (+31 mn) to 770 mn. However, reported trends differ from some third-party data. Management's color on the call will be key to explain the user growth drivers. **3) Legacy core under pressure as expected:** Growth decelerated in ads and commissions, tied to slower e-comm momentum. Ads saw some lift from external channels (longform/short dramas, AI app ad spend) and AIGC creative assets, while live-streaming is under healthy reset with revenue -14% YoY. GMV is no longer disclosed this year. Based on e-comm-related revenue trends (ex-Kling, 'others' led by e-comm +5.7% with a clear QoQ slowdown), changes in take rate (more influencer rev-share, take rate down) and street models, we estimate GMV growth near ~10%, slower vs. last year. **4) AI spend starts to weigh on GPM:** Q1 GPM fell 4pct QoQ, driven by AI compute costs and ad rev-share for IAA short dramas. The company guided full-year Capex of RMB 26 bn last quarter (incl. PPE and right-of-use), +RMB 11 bn YoY, largely for AI, with Kling's compute the largest piece. Dolphin Research estimates Capex alone could trim full-year GPM by roughly 1–2pct under a 5-year depreciation schedule. This is a directional impact from the stepped-up AI investment. **5) Spend where needed, tighten where possible:** On opex, Q1 promotion spend increased while headcount costs were further controlled. Selling expenses rose 4% YoY on marketing, but sales headcount costs fell 8%. Meanwhile, G&A decreased 7.5%, reflecting team optimization. R&D grew 10%, a slower pace, mainly pulled by an 18% increase in bandwidth/server costs. **6) More room to lift shareholder returns:** The company repurchased 11.4 mn shares in Q1 for HK$562 mn, about half of Q4's pace, with a lower return rate. The slowdown was largely due to the CNY holiday and the earnings blackout period. Short-term net cash stood at RMB 65 bn (cash + short-term investments – short-term borrowings), and available liquidity was RMB 117.7 bn. New long-term borrowings of RMB 13.7 bn were added in Q1 via $600 mn 5Y + $900 mn 10Y senior notes and RMB 3.5 bn 5Y senior notes. Kuaishou spent RMB 12 bn in Q1 on PPE depreciation, right-of-use assets and intangibles, or 47% of the full-year Capex budget. Management reiterated the RMB 26 bn Capex target on the call, and current liquidity still allows headroom for more buybacks. ![图表, 条形图描述已自动生成](https://pub.pbkrs.com/uploads/2026/35b09eff7dc49cb964e8da665dfc3b57?x-oss-process=style/lg) **8\. Financials at a glance** **Dolphin Research View** **Q1 was in line, but the core businesses outside Kling showed weak underlying trends.** The strategy is to drive efficiency and tilt resources toward Kling. After last quarter's surprisingly weak Q1 outlook, Kuaishou fell 15% that day, signaling a value reset. Shares rebounded in mid-May on reports that Kling sought a spin-off at a $20 bn valuation. But as headlines faded and Hong Kong markets softened, the stock gave back gains. At Kuaishou's current ~$25 bn valuation, using an SOTP framework and a 50% holdco discount (for reduced ownership and internal cross-selling), the implied value of legacy core is under $15 bn (Kling's fair value post-IPO should exceed $20 bn). That leaves scope for positioning and upside debates. **(1) Kling valuation:** A $20 bn mark on \>$500 mn ARR implies ~40x P/S, well below leading foundation-model comps, though a discount is reasonable as Kling is not a base model. The multiple looks conservative vs. peers. If, per media, ARR reaches $1.3 bn by Mar-27, forward implies ~15x P/S, which looks attractive. That said, it requires a high execution bar for Kling's own growth path. Kling sits in the global top tier of video models, with domestic rivals mainly ByteDance's Seedance and Alibaba's HappyHorse, and global peer Google Veo. **Despite strong peers, no price war has emerged amid demand spikes for AI short dramas, and competition intensity has even eased at the margin recently.** Under cost pressure, Seedance raised prices multiple times since Mar (removing low-price options, cutting discounts, upping credits required for premium, and hiking annual fees). This shift makes Kling's monetization and scaling more straightforward near term. **(2) Core biz. valuation:** Excluding the incremental RMB 11 bn compute-related Capex tied to Kling implies core OP would be ~RMB 2 bn higher this year (via higher depreciation). We also trim our e-comm revenue forecasts and now expect ~RMB 15.5 bn in GAAP core OP (ex 'other gains'). Applying a 15% effective tax rate yields net profit of ~RMB 13.2 bn, and a $15 bn implied value would be under 8x P/E. We have not carved out Kling-specific opex or included 'other gains', making this a conservative take; hence, despite near-term growth headwinds, absolute valuation looks undemanding. **Bottom line: Kling's spin-off is a rerating catalyst for Kuaishou.** Just like BIDU's Kunlun Chip spin-off plan last year, once the listing process progressed, AI revenue materialized and shareholder returns stepped up, its valuation rose nearly 50%. **Charts below** ![图表, 条形图描述已自动生成](https://pub.pbkrs.com/uploads/2026/2bfe6a661bb7ec4ce1774a3133fd8fb7?x-oss-process=style/lg) ![图表, 条形图描述已自动生成](https://pub.pbkrs.com/uploads/2026/3780a27356a988a06b15754d04b05793?x-oss-process=style/lg) ![图表, 折线图描述已自动生成](https://pub.pbkrs.com/uploads/2026/28ffe94c67dabc3f6171eb2d327ac24d?x-oss-process=style/lg) ![图表描述已自动生成](https://pub.pbkrs.com/uploads/2026/f319377829bef826bfffa2874cbb7b62?x-oss-process=style/lg) ![图表, 瀑布图描述已自动生成](https://pub.pbkrs.com/uploads/2026/70f8de515e76458dd18eb13b587714b5?x-oss-process=style/lg) ![图表, 条形图描述已自动生成](https://pub.pbkrs.com/uploads/2026/ae71ed7cfcb08fd1ccc365d8c5def8bb?x-oss-process=style/lg) ![图表, 条形图描述已自动生成](https://pub.pbkrs.com/uploads/2026/7bdd71a92995c1edc2dd38395cb75512?x-oss-process=style/lg) ![图表, 条形图描述已自动生成](https://pub.pbkrs.com/uploads/2026/052540ccde142eb065098789702099b8?x-oss-process=style/lg) ![图片包含 图表描述已自动生成](https://pub.pbkrs.com/uploads/2026/00056983d278501e1fe279c6de32159a?x-oss-process=style/lg) ![图表描述已自动生成](https://pub.pbkrs.com/uploads/2026/1c607582f9c14e8f08b9e87a950920c3?x-oss-process=style/lg) ![图表描述已自动生成](https://pub.pbkrs.com/uploads/2026/9d64c8500effdd78890bf709889cdae2?x-oss-process=style/lg) ![图表描述已自动生成](https://pub.pbkrs.com/uploads/2026/0f284390eb525168a21fb5ad1977b59e?x-oss-process=style/lg) **** Risk disclosure and statement:[Dolphin Research Disclaimer and General Disclosure](https://support.longbridge.global/topics/misc/dolphin-disclaimer) ### Related Stocks - [01024.HK](https://longbridge.com/en/quote/01024.HK.md) - [81024.HK](https://longbridge.com/en/quote/81024.HK.md) - [HKUD.SG](https://longbridge.com/en/quote/HKUD.SG.md)