UOB Kay Hian
Report Date: 23 July 2025

Kuaishou Technology: Accelerated Ad Revenue Growth and Kling AI Monetisation Set to Drive Strong Upside in 2025

Overview and Investment Highlights

Kuaishou Technology, a leading global short video and content community platform, is set to deliver robust earnings growth in 2025. Backed by significant adtech upgrades and the earlier-than-expected monetisation of Kling AI, the company’s outlook has strengthened, prompting UOB Kay Hian to maintain a BUY rating with a raised target price of HK\$80.00, representing a 10% upside from the current share price of HK\$72.75.

• Market Cap: HK\$313.3 billion (US\$39.9 billion)
• 52-week high/low: HK\$74.10 / HK\$37.55
• Major Shareholders: Tencent Holdings (19%), Morningside Venture Capital (15.7%), DCM (5%)
• Sector: Communication Services

Strong Earnings Momentum and Upgraded Guidance

Kuaishou’s 2Q25 results are poised to showcase accelerated ad revenue growth, primarily driven by internal adtech enhancements and incremental contributions from Kling AI. The company anticipates 2Q25 revenue growth of 11.5% year-on-year, underpinned by resilient online marketing performance and the rapid monetisation of Kling AI.

• 2Q25 revenue growth: 11.5% YoY
• Gross margin: 54% (flattish YoY, despite higher AI investments)
• Sales & Marketing expenses: Rmb10.8 billion (S&M ratio: 31%)
• Adjusted net profit guidance: Rmb5.1 billion (+9% YoY), net margin: 14.5%

E-commerce Surge During 618 Shopping Festival

Kuaishou’s e-commerce segment delivered an impressive performance during the June 618 shopping festival:

• General shelf-based e-commerce GMV: +53% YoY
• Search GMV: +143% YoY
• Kuaishou Mall Brand Super Deals: +124% YoY in number of items with single-product GMV exceeding Rmb1m
• GMV from short videos with product links: +29% YoY
• SME GMV: +30% YoY

2025 Outlook: Kling AI Monetisation and Segmental Growth

Kuaishou projects overall revenue growth of 11–12% in 2025, with Kling AI as a pivotal driver. The company expects Kling AI revenue to reach US\$142 million in 2025, exceeding previous targets, and to soar to US\$400 million by 2027, representing a two-year CAGR of 68%.

• Online marketing revenue growth: +14.5% YoY (2025)
• Live-streaming revenue growth: +3% YoY
• Other services revenue growth: +19.5% YoY
• Adjusted net profit (2025): Rmb20 billion (+11–12% YoY), net margin: 14%

Kling AI’s revenue is primarily generated from user subscriptions, API-based business solutions, and scenario-tailored offerings. The launch of the Ketu 2.1 image generation model in July 2025, supporting over 180 artistic styles and featuring advancements in portrait and cinematic quality, is expected to further boost Kling AI’s adoption and monetisation.

Key Financials Snapshot

Retail Sector Trends and Strategic Partnerships

Recent National Bureau of Statistics (NBS) data showed retail sales of physical goods growing at a steady 6.4% YoY in May-Jun 2025. Key categories such as home appliances (+43%), communication equipment (+24%), and furniture (+29%) all benefited from frontloaded demand during the 618 festival. Kuaishou is well-positioned to capitalize on this, especially after announcing a strategic collaboration with JD Retail to leverage JD’s Super Rmb10b Subsidy programme and expand into high-demand categories like smartphones, home appliances, beauty, and alcohol.

Breakdown of 2Q25 Segmental Guidance

• Online marketing revenue: +13% YoY
• Live-streaming revenue: +5% YoY
• Other services revenue: +20% YoY
• E-commerce GMV growth: +13–14% YoY
• R&D and G&A ratios: Stable at 10% and 2.4% respectively
• Expected DAUs: 412 million (low single-digit YoY growth)
• DAU/MAU ratio: Stable at 57%

Kling AI: Rapid Growth and Expanding Applications

Kling AI, the world’s first DiT video generation model available to users, has undergone over 20 iterations in a year. It now boasts a global user base exceeding 22 million and provides API services to more than 10,000 enterprise clients. Its applications are rapidly expanding across professional segments, including video production, media, and gaming. Notably, Kling AI’s technology is now integrated with NetEase’s Justice Mobile, powering dynamic character animation and UGC customisation.

Valuation and Sum-of-the-Parts (SOTP) Analysis

The new target price of HK\$80.00 implies a 15x PE for 2025, aligning with sector peers. Kuaishou is currently trading at 14x 2025F PE, supported by a projected 21% EPS CAGR over the next three years.

Potential Catalysts and Risks

• Higher monetisation rates across all segments
• Reduced competition from peers
• Favourable government policies to stimulate consumption
• Potential regulatory easing for internet platforms

Key risks include weaker advertisement demand due to macroeconomic pressures, intensifying competition from Douyin, potential restrictions on minors’ screen time, and continued losses from overseas and local life services initiatives.

Conclusion: Strong Buy on Adtech and AI Upside

Kuaishou Technology stands out as a compelling buy in the Communication Services sector, thanks to its accelerated ad revenue growth, surging e-commerce momentum, and rapid progress in Kling AI monetisation. With robust financials, strategic partnerships, and a clear path to AI-driven growth, Kuaishou is well-positioned to deliver strong returns for investors in 2025 and beyond.