Kuaishou 1Q26 First Take: Results were broadly in line; the OP beat was mainly driven by other income unrelated to the core biz., which is not sustainable.

1) Revenue was RMB 33.7bn, up 3.4% YoY. This was slightly above the 2.5% guidance and market expectation.

(1) Kolors was the bright spot, with Q1 revenue of RMB 650mn vs. RMB 500mn guided. ARR had reached $500mn as of Mar, and growth continued in Apr–May.

Media had reported ARR could reach about $1.3bn by Q1 '27. Progress on a potential spin-off/IPO would have the largest impact on Kuaishou’s valuation, so watch for related disclosure on the call.

(2) Growth in ads and commissions slowed, tied to pressure in the e-com biz. From this year, GMV is no longer disclosed; based on e-com revenue trends, take-rate changes and Street expectations, we estimate GMV growth at approx. 10%, a further slowdown vs. last year.

2) The user ecosystem expanded unexpectedly. Q1 user metrics were solid, likely boosted in the short term by CNY campaign programming. DAU rose 1.2% to 413mn, average time spent was said to be stable, but MAU accelerated by 5% (+31mn) to 770mn.

These trends differ somewhat from third-party data. Listen for management’s detailed explanation of user growth on the call.

3) GPM fell 400bps QoQ, driven by AI compute investment and ad rev-share for IAA short dramas. Last quarter, management guided FY Capex of RMB 26bn (incl. PP&E and ROU assets), up RMB 11bn YoY, largely for AI with Kolors taking most of the compute. On a 5-yr depreciation schedule, we estimate Capex alone trims FY GPM by roughly 1–2ppt.

4) Higher marketing spend, tighter headcount costs. Q1 S&M rose 4% YoY, mainly on promotion/marketing, while sales employee costs fell 8%. G&A declined 7.5%, reflecting team optimization; R&D grew 10% with a clear deceleration, largely driven by bandwidth/server costs (+18%).$KUAISHOU-W(01024.HK) $KUAISHOU-WR(81024.HK)