Shares of Kuaishou Technology (1024.HK) cratered 14.6% to HK$33.62 on August 20, erasing roughly $4 billion in market value after the Chinese short-video giant disclosed second-quarter results that revealed a painful cost squeeze. Revenue came in at RMB 35.5 billion, up just 1.4% year over year, while net income plunged 36% to RMB 3.15 billion. The question for investors is blunt: is the company spending its way into the future, or spending its way into irrelevance?
Costs Surged While Revenue Barely Grew
R&D expenses jumped 34.7% year over year to RMB 4.6 billion, driven by AI investments.
Gross profit margins shrank by 410 basis points — roughly four percentage points — to 51.6%, down from 55.7% a year ago. When a company's costs rise seven times faster than its revenue, margins inevitably compress, and that is exactly what spooked the market. Short-selling turnover hit HK$982 million on August 19, with the short-selling ratio reaching 31.3% — a sign of aggressive bearish bets.
The AI Business Is Growing Fast but Remains Too Small to Matter
Kuaishou's AI-powered video generation tool brought in over RMB 850 million in Q2, up more than 200% year over year. That sounds impressive, but it represents less than 2.5% of total revenue. The AI unit posted net losses in both 2024 and 2025 due to high computing costs.
Plans for a spin-off listing in Hong Kong within 12 months could eventually unlock value, but that timeline is not guaranteed.
The Core Platform Is Maturing
Daily active users rose just 0.8% to 412.3 million , and live-streaming revenue — once a growth engine — fell.
Kuaishou is in a classic "transition period": new businesses are growing fast but aren't large enough to offset the slowdown in traditional segments.
A Cash Cushion Buys Time, Not Confidence
Cash and equivalents totaled RMB 121.3 billion as of June 30.
Management pledged to keep free cash flow positive in the second half.
Full-year capital spending is projected at roughly RMB 26 billion — up sharply from 2025. The balance sheet can absorb it, but investors are asking whether the return will ever come. With the stock down nearly 19% in five sessions, the market's verdict is clear: show us the payoff.