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Kuaishou Technology’s shares experienced a sharp decline following the company’s announcement of increased investments in artificial intelligence and capital expenditure plans, overshadowing a more than 20% rise in net profit last year.
The company, based in Beijing, closed down 14% at HKD45.60 (about USD5.80), extending its losses over the past year. Last year, it reported a net profit of CNY18.6 billion (approximately USD2.7 billion), marking a 21% increase from the previous year. During a conference call following earnings release, the CEO expressed confidence that revenue from Kling AI, their video generator, will more than double this year.
Total revenue increased nearly 13% to CNY142.8 billion (roughly USD20.6 billion), while adjusted net profit rose 17% to CNY20.6 billion, according to the financial report. Revenue from online marketing services went up 13% to CNY81.5 billion, driven largely by faster adoption and innovative use of AI in various marketing scenarios. Live streaming revenue grew 6% to CNY39.1 billion, and revenue from other services surged 28% to CNY22.2 billion, bolstered by growth in e-commerce and Kling AI.
In the fourth quarter, total revenue grew 12% year-over-year to CNY39.6 billion, with net profit jumping 32% to CNY5.2 billion (about USD757 million). Adjusted net profit also increased by 16% to CNY5.6 billion.
Concerns among investors center around the company’s capital spending plans. The CFO indicated that expenditures could reach approximately CNY26 billion by 2026, about CNY11 billion more than in 2025. These investments will primarily fund computing power for Kling AI and other large language models, routine server purchases for data storage and processing, and the construction of data and computing centers.
An analyst commented that while the company’s recent performance was solid, high expectations for tech companies leave investors wary about long-term growth prospects. A prominent investment executive noted that Kuaishou’s stock performance aligns with other major tech stocks like Tencent and Alibaba, which have also weakened after earnings reports. In the short term, share prices might face downward pressure as positive market catalysts fade. The recent rally in Hong Kong tech stocks has been largely driven by AI themes and valuation recoveries, with markets already pricing in strong growth predictions for 2025 and 2026.
One securities firm mentioned that the latest quarterly results slightly exceeded expectations, but growth in commission and advertising revenue has decelerated amidst adjustments to live streaming content planned for 2026. Additionally, profits declined compared to last year due to increased AI investments.
A top investment officer noted that recent reactions to tech earnings have generally been negative. For Kuaishou, investors are primarily concerned about the large expected jump in capital expenditure dedicated mainly to AI, with uncertain returns on these investments.
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