On May 27, Kuaishou released its Q1 2025 financial report. The report showed that the company's total revenue during the period was 33.7 billion yuan, an increase of 3.4% year-on-year; the adjusted net profit was 3.4 billion yuan, a significant decline of 26.3% year-on-year; and the gross profit margin dropped to 51.2%. Core data reveals that Kuaishou is facing dual pressures: "the top of core business growth" and "heavy investment in AI."

1. Performance Slowdown: Profit Growth Turns Negative

Kuaishou's core business growth has been weak this quarter, with even more significant setbacks in the profit segment:

  • Revenue Growth Slows Down: The revenue of 33.7 billion yuan grew by only 3.4% year-on-year, reflecting the reality of declining traffic dividends and intensified competition in the advertising market.

  • Profit Shrinks Significantly: The adjusted net profit fell by 26.3% year-on-year, mainly due to Kuaishou's continued heavy investment in AI infrastructure, which has severely eroded the company's profitability in the short term.

2. The "Double-Edged Sword" of AI: Ke Ling Business Grows Rapidly but Hides Losses

As the core of Kuaishou's AI strategy, the Ke Ling large model business has shown strong explosive power, but it has also become a huge burden on the financial statements:

  • Impressive Growth: Ke Ling achieved revenue of 650 million yuan in Q1, a year-on-year increase of 300%, with an annualized revenue run rate approaching 500 million US dollars.

  • Cost Black Hole: Despite the surge in revenue, the current revenue level of Ke Ling still cannot cover its high R&D and operational costs due to the massive leasing of computing clusters, chip procurement, and top-tier R&D talent. The "blood loss" caused by AI investments directly lowered the overall gross profit margin.

3. Life-or-Death Transformation: Spin Off Ke Ling, Compete for a New AI Path

Facing the situation where core profits are continuously being "drained" by AI R&D, Kuaishou's management has shown a strong desire for transformation:

  • Spin-Off Plan: Kuaishou is accelerating the process of spinning off "Ke Ling" as an independent financing entity, aiming to share the huge computing and R&D costs through external capital injection.

  • Strategic Reorientation: This is a "life-or-death transformation" for Kuaishou. The company hopes to completely transform from a traditional traffic distribution platform into a technology-driven AI tech company. Through the spin-off, Kuaishou aims to maintain the health of the parent company's financial statements while giving Ke Ling more space for capital operations.

Industry Commentary

Kuaishou's current situation is a reflection of the transformation of China's leading internet platforms today: the traffic logic can no longer support the high cost of AI computing. For Kuaishou, Ke Ling is the "ticket" it has obtained in the AI video sector, but the price of this ticket is too expensive. The key to the future is whether Kuaishou can further enhance Ke Ling's ability to generate revenue through product commercialization before the independent financing plan is implemented, otherwise relying solely on the spin-off for funding will be difficult to conceal the ongoing financial challenges Kuaishou faces in AI infrastructure.