"Key Points":

1. In 2021, Kuaishou debuted as the "first short video stock," distinguishing itself through its unique business model. Four years later, as the tides shift, Kuaishou re-emphasizes its "born different" ethos, redefining its scarcity.

2. The resilience and growth Kuaishou has demonstrated over the past year stem from a "dual-wheel drive" model: a robust user and business foundation coupled with a new AI-centric technology engine that comprehensively enhances efficiency and user experience.

3. Kuaishou's AI narrative extends beyond Keling. The OneRec system, launched in May 2025, is now widely used in core recommendation scenarios. Kuaishou has proven the potential of deeply integrating recommendation systems with large language model (LLM) technology stacks, offering a new paradigm for internet infrastructure iteration.

4. In 2025, Kuaishou's scarcity is no longer solely a business model story but a harder-to-replicate combination: a highly engaging community ecosystem with 400 million daily active users and over two hours of daily usage; a proven, diversified, and continuously growing commercialization loop; a world-class AI engine deeply integrated with its business; and an experienced management team that understands restraint and focus.

Author: Lin Yi

Editor: Key Point Jun

What is the unique ecosystem of Kuaishou? CEO Cheng Yixiao has become increasingly clear about the answer to this question.

"Every creator on Kuaishou has unique talents and can forge their own path. The same is true for Kuaishou. By embracing our unique community atmosphere and user characteristics and pushing them to the extreme, we achieve remarkable results," Cheng Yixiao said at the 2025 Kuaishou Guanghe Creator Conference.

For Kuaishou, these "remarkable results" were evident in the second quarter: revenue reached RMB 35 billion, a 13.1% year-on-year increase, exceeding market expectations of RMB 34.45 billion; adjusted net profit was RMB 5.62 billion, a substantial 20.1% year-on-year increase, also exceeding the expected RMB 5.06 billion.

But even more noteworthy than growth is efficiency. In the second quarter, Kuaishou's gross margin climbed to 55.7%, and its adjusted net profit margin reached 16.0%, both setting new company records. Amidst macroeconomic uncertainties and plateauing internet traffic, this profitability stands out.

Before the financial report's release, JPMorgan Chase significantly raised its target price from HK$71 to HK$88, while UBS increased it to HK$95.37. Capital is reevaluating the value of this company.

The backdrop of this story is the grand narrative driving the entire tech industry—artificial intelligence. In late July, Meta's Mark Zuckerberg attributed its "considerable" advertising growth to AI; in mid-August, Tencent's performance demonstrated AI's systematic empowerment across all businesses except games. AI is no longer a distant vision but a tangible growth engine.

Kuaishou's story is one sample within this grand trend. The star product, Keling AI, no longer needs separate introduction as a "star" at earnings calls. CEO Cheng Yixiao emphasized how large AI models serve as infrastructure, permeating numerous platform ecosystem scenarios to enhance operational efficiency for merchants, influencers, and creators.

Since Kuaishou comprehensively launched its AI strategy in 2023, especially after Keling amazed the world in 2024, technology has coupled deeply with the company's content ecosystem and commercialization engine at an unprecedented speed. It's not only addressing past shortcomings but creating new growth curves.

In 2021, Kuaishou debuted as the "first short video stock," distinguishing itself through its unique business model. Four years later, as the tides shift, Kuaishou re-emphasizes its "born different" ethos, redefining its scarcity. This time, it's rooted in a more solid structure: an irreplaceable community ecosystem, an AI-reshaped commercial engine, and a strategic focus amidst the hustle and bustle.

01 Solid Foundation and Robust New Engine

Any vision for the future must be built on solid ground.

The resilience and growth Kuaishou has demonstrated in the second quarter and over the past year stem from a "dual-wheel drive" model: a robust user and business foundation coupled with a new AI-centric technology engine that comprehensively enhances efficiency and user experience.

An Unshakeable Community Foundation

The short video industry has long bid farewell to its initial wild growth phase and entered a refined competition for user time and attention. At this stage, simple traffic growth is no longer the core; a sticky, trustworthy, and vibrant community ecosystem is the deepest moat.

Data shows that Kuaishou's moat remains solid. In the second quarter of 2025, the average daily active users (DAU) and monthly active users (MAU) of the Kuaishou app reached 409 million and 715 million, respectively, representing year-on-year increases of 3.4% and 3.3%. Despite its massive user base, DAU still hit a record high, demonstrating the effectiveness of its user growth strategy.

A more crucial metric is user stickiness. In the second quarter, the average daily usage time of Kuaishou's DAU reached 126.8 minutes. Total user usage time increased by 7.5% year-on-year, outpacing user number growth, indicating the platform's increasing attractiveness.

This strong user stickiness didn't emerge spontaneously but stems from Kuaishou's long-term commitment to a community-oriented and differentiated content ecosystem. From the early "Lao Tie culture" to the more generalized community atmosphere today, Kuaishou has always emphasized connections between people rather than pure content consumption. In recent years, Kuaishou's continuous deep dives into vertical categories such as short dramas, sports, and general knowledge have further enriched its content offerings and satisfied users from different circles.

Regarding the creator ecosystem, Cheng Yixiao said, "The integration of short video and live streaming" is Kuaishou's fundamental business philosophy. Data shows that creators proficient in both short videos and live streaming are 4-10 times more efficient at obtaining traffic on Kuaishou compared to those focused on a single content form. Kuaishou uses a differentiated community orientation to encourage creators to stay on the platform and operate long-term.

The solid community ecosystem provides fertile soil for commercialization. Kuaishou's three major business segments—online marketing, live streaming, and e-commerce—are all built on the foundation of this trusted community.

As Kuaishou's largest revenue source, advertising income reached RMB 19.8 billion in the second quarter, a 12.8% year-on-year increase. Behind this growth is the evolution of Kuaishou's advertising business from extensive traffic sales to more refined "brand-effect integration" solutions.

Taking the internal cycle as an example, merchants naturally generate marketing and promotion needs when doing e-commerce on Kuaishou. The growth of this advertising budget segment is highly correlated with e-commerce GMV growth, forming a healthy business closed loop.

The application of AI technology has significantly improved advertising efficiency. AI helps advertisers conduct user insights, automatically generate and optimize advertising materials, achieve more precise audience targeting, and provide real-time effect attribution analysis. This makes it more likely for every penny invested by advertisers to be converted into actual sales, and the improvement in ROI (return on investment) is the core reason why advertisers are willing to continue investing.

Live streaming business revenue was RMB 10 billion in the second quarter, an 8.0% year-on-year increase. As Kuaishou's traditional strength and cash cow, the growth of the live streaming business demonstrates its ability to continuously tap into the value of existing users through product innovation. For example, the introduction of new gameplay such as "group broadcasts" and "multi-person live streaming" enriches the interactivity and entertainment of live streaming, effectively increasing individual users' willingness to pay and tip amounts.

E-commerce holds great imagination for Kuaishou. In the second quarter, e-commerce GMV increased by 17.6% year-on-year to RMB 358.9 billion. The average monthly buyer count reached 134 million, and users' repurchase frequency continued to increase.

More importantly, structural changes are taking place. In the past, Kuaishou's e-commerce was highly dependent on the "content field" of live streaming by anchors. This model had strong explosiveness but less certainty. Now, the "pan-shelf field" composed of malls, search, and stores is becoming the second growth curve that complements the content field.

It's worth noting that pan-shelf e-commerce GMV accounts for over 32% of total e-commerce GMV. During the 618 sales promotion, pan-shelf product card GMV increased by more than 50% year-on-year, and search e-commerce GMV increased by more than 140% year-on-year.

This is a milestone shift. It means Kuaishou e-commerce users' mindset is shifting from casually buying while "browsing" content to actively "searching" and "browsing" stores when they have a clear need. This "omnichannel operation" model makes merchants' operations more certain and the platform's revenue structure healthier and more balanced. To drive this transformation, Kuaishou provides merchants with intelligent tools such as "marketing trusteeship" to help them efficiently reuse content from the content field and complete pan-shelf field operations in one stop, significantly lowering the threshold for merchants' operations.

AI Engine Reshaping Efficiency and Imagination

If the robust foundation is Kuaishou's solid chassis and body, then AI is the new engine providing it with surging power. For Kuaishou, AI is no longer an "innovative business" that needs separate reporting but an underlying infrastructure permeating all business processes like water and electricity.

The recommendation system is the "heart" of a content platform, responsible for efficiently distributing massive amounts of content to hundreds of millions of users. Traditional recommendation systems mostly adopt a cascading architecture, like a multi-link "assembly line," where models perform recall, rough ranking, fine ranking, and other operations step by step. The drawback of this architecture is that information is gradually lost during link transmission, and each link's optimization objectives are not fully consistent, which can lead to conflicts, ultimately restricting the overall recommendation effect's ceiling.

The OneRec system proposed by the Kuaishou technology team in May 2025 is a bottom-up reconstruction of this "heart." It abandons the complex assembly line and uses an end-to-end generative AI architecture for the first time to complete the entire recommendation process. Simply put, it's no longer "screening" but "generating"—the model directly predicts and provides a video list that best matches user preferences from the full video library in a generative manner.

The disruptive advantage of this architecture lies in significantly increased efficiency and enhanced effects. It better utilizes preference alignment methods such as reinforcement learning to make the model understand users better. At the same time, its architecture greatly improves the efficiency of compute power usage for training and inference. According to Kuaishou data, through architectural innovation, the effective compute volume has been increased by 10 times, while operating costs are only 10.6% of traditional solutions. Currently, OneRec is widely used in core recommendation scenarios such as short videos and live streaming on Kuaishou, achieving significant improvements in user time and retention rate.

The significance of OneRec lies not only in elevating Kuaishou's recommendation efficiency to a new level but also in proving through practice the potential of deeply integrating recommendation systems with large language model (LLM) technology stacks, offering a brand new paradigm for internet infrastructure iteration.

If OneRec reshapes efficiency internally, then Keling AI represents the expansion of imagination externally. Since its release in early 2024, Keling has become one of the top models in the global video generation field due to its cinematic generation quality, ultra-long generation duration, and deep understanding of the physical world.

In the second quarter, Keling AI maintained rapid iteration. On April 15, the Keling 2.0 version was released, with comprehensive improvements in semantic response, dynamic quality, and picture aesthetics, as well as upgrades to controllable generation and editing capabilities for videos and images. Soon after, on May 29, the Keling 2.1 series of models was launched. The introduction of new features such as "video sound effects," "multi-image reference," and "Linghua Canvas" transformed it from a mere "generator" into a powerful "creation suite."

More importantly, Kuaishou has planned a unique path for Keling: not to be an isolated tool but an empowerer deeply integrated into the ecosystem.

Keling has emerged as the go-to tool for Kuaishou's professional creators. The success of the groundbreaking AI-generated short story collection "New World Loading" underscores not only technical prowess but also showcases a seamless integration of "AI technology -> content creation -> commercial monetization." This sets Kuaishou apart from other pure technology companies in the AI race. AI-generated video content is also gaining traction in advertising, enabling advertisers to produce high-quality marketing materials efficiently and cost-effectively.

Gai Kun, Senior Vice President of Kuaishou, head of the Keling AI Business Unit, and head of the Community Science Line, revealed that since April this year, Keling AI's monthly paid turnover has surpassed RMB 100 million, consistently leading in the video generation sector. Jin Bing, CFO of Kuaishou, anticipates that the company's full-year revenue in 2025 will double the initial target, signifying a strong market demand for high-quality AI video generation services.

OneRec and Keling, one optimizing existing resources and the other driving incremental growth, together constitute Kuaishou's robust AI engine.

02 Maintaining Focus and Restraint Amidst the Hustle and Bustle

With a solid user base and advanced AI technology, how will Kuaishou navigate future challenges? Judging by the company's management statements and resource allocations, Kuaishou has opted for a more challenging yet potentially rewarding path: restraint and focus.

This choice stems from the company's recent experiences. From reaching a peak market value of trillions of yuan at its 2021 IPO to subsequent share price declines, Kuaishou underwent a disillusioning period. This prompted the company to reassess its strategy, move away from blind scale expansion, and adopt a more pragmatic and stable approach. This experience has shaped Kuaishou's current stance.

Amidst the AI wave, even with a powerful tool like Keling, the management team exhibited no radical aggression, viewing AI as an area requiring long-term, sustained, and efficient investment.

During recent earnings calls, the management team struck a delicate balance: showcasing AI's business impact and potential to boost investor confidence while reassuring the market about potential profit erosion from AI investments.

During the second-quarter earnings call, CFO Jin Bing's statement was illustrative. He rarely expressed such firmness in AI investment, confirming mid-year enhancements to Keling AI's inference compute power and expecting related capital expenditures (Capex) in 2025 to double the year-beginning budget.

This sends a clear signal: in terms of core strategy, Kuaishou is not sparing in investment but also provides investors with reassurance:

Talent costs are manageable: The initial budget fully considered attracting and retaining AI talent, with expenses in this area expected to remain stable.

Inference costs are controllable: Through algorithm and engineering optimizations, Kuaishou's AI achieves a positive gross margin at the inference level, with stable gross margins for subsequent upgrades and iterations. This ensures that increased compute power investments do not become unsustainable.

Overall impact is manageable: The company anticipates that overall AI investments will impact the annual profit margin by approximately 1%-2%, a restrained figure indicating Kuaishou's ability to maintain current profits while increasing future investments.

Behind this financial prudence lies strategic focus. Unlike giants like ByteDance, Tencent, Alibaba, and Baidu pursuing full-stack AI strategies, Kuaishou has chosen a more focused path. Instead of developing general large models, chips, or cloud platforms, it concentrates limited resources on areas where it excels and aligns closely with its main business: building the world's best video generation model and an application ecosystem around it. This avoids direct attrition with giants and positions competition within its most familiar terrain.

At this year's Guanghe Conference, another noteworthy detail was Cheng Yixiao's first disclosure of Kuaishou's user base. He emphasized the company's strong foundation in the north, with monthly active penetration reaching 73% in the northwest and 85% in the northeast. Additionally, the south has achieved growth exceeding the overall market, with user penetration in eastern and southern China increasing by about 9 percentage points year-on-year.

Today's Kuaishou management team understands its roots, emphasizes strengths, sets clear directions, maintains strategic focus, and exhibits long-term patience in exploring new markets. This patience reflects confidence in the future, conveyed to shareholders through a direct action – the first dividend distribution since going public.

Upon releasing its second-quarter earnings, Kuaishou announced a special dividend of HK$0.46 per share, totaling approximately HK$2 billion. For a growing technology company, dividend distribution signifies the end of money-burning for scale expansion. It indicates stable and abundant cash flow, with shareholder returns now on par with business growth in importance.

This move will also reshape Kuaishou's investor base, attracting long-term investors focused on intrinsic value and stable returns, helping the company better navigate cycles and embrace long-termism.

03 Value Reassessment, Returning to Scarcity

When Kuaishou went public in 2021, its scarcity lay in being the first short video target in the capital market, representing a novel media and business model, which garnered investor excitement.

Four years later, with consistent performance delivery and industry growth nearing saturation, Kuaishou's value has reverted to its core user group – those "user groups whose voices were once overlooked by the mainstream market."

Today, with the advent of Kuaishou's AI, OneRec's algorithm reconstruction, and AI's comprehensive empowerment of commercialization and e-commerce, Kuaishou is regaining the attention of mainstream investors.

This time, its scarcity embodies a new dimension. It's no longer just a business model story but a harder-to-replicate combination: a highly engaged community ecosystem with 400 million daily active users and over two hours of average daily usage; a proven, diversified, and continuously growing commercialization closed loop; an AI engine leading the world in video generation and deeply integrated with its business; and a seasoned management team that understands restraint and focus after cyclical tests.

This is Kuaishou's new scarcity in 2025, built on solid performance, technological barriers, and strategic certainty, rather than concepts and expectations.

The capital market is repricing accordingly. As of August 28, Kuaishou's share price has surged over 80% this year. Major investment banks' upward revision of target prices marks the beginning of a value reassessment process.

The scarce Kuaishou of four years ago seems to be back.