Kuaishou in a dilemma: time for 'decluttering' again
The battle in the AI video sector has reignited.
After OpenAI launched Sora2, Sora APP is no longer just a tool but is also interpreted as the prototype of the next-generation AI social network, marking a new turning point for AI applications.
Across the ocean, Meta has achieved explosive growth in user data with its AI short-video platform "Vibes"; domestically, the competition is equally fierce, with Kuaishou's Keling 2.5Turbo and Alibaba's Tongyi Wanxiang Wan2.5 being released on the same day, ushering in the "2.5 era" of domestic AI video.
However, the market doesn’t seem to be buying it. Since October, Kuaishou's market value has dropped by over 13%. This indicates that the market is not optimistic about Kuaishou's ability to win the future battle of AI video and commercialization amid its turbulence.
Although Kuaishou's "Keling" has over 22 million global users, its commercialization achievements cannot mask the hidden risks brought by recent personnel changes at Kuaishou.
Recently, Zhang Di, the technical lead of Kuaishou Keling AI, moved to Bilibili, while Xiaogu, the Senior Vice President and head of local life services, stepped back to an advisory role. The company announced another round of internal adjustments just before National Day, refocusing market attention on commercialization, suggesting a strategic shift under regulatory and growth pressures.
So, can this change, interpreted as a "unified commercialization system," optimize Kuaishou's monetization efficiency? And can the AI business, burdened with high expectations but facing numerous challenges, become a solid new growth story?
Kuaishou: Struggling to Adapt
The capital market is snapping out of the long-term narrative of AI and re-examining Kuaishou's fundamentals. The short-video giant is facing challenges of a slowing core engine, with its content ecosystem and business model seemingly weighed down by resistance.
In September, the platform was summoned by the Cyberspace Administration for promoting celebrity gossip and trivial content, and it recently received an 89.1 million yuan copyright fine. This reliance on gray-area traffic reflects Kuaishou's dilemma: choosing between short-term traffic growth and long-term health at the risk of user retention.
The problem is, the traffic Kuaishou gained by sacrificing its "laotie culture" hasn’t brought much commercial return, and the backlash came swiftly.
Growth stagnation is Kuaishou's most immediate challenge. Online marketing services, its revenue backbone, showed weakness, with only 8.0% YoY growth in Q1 2025, falling below double digits. This occurred against the backdrop of a record-high average daily user time of 133.8 minutes, indicating that high engagement hasn’t effectively translated into strong commercial growth—a concerning signal.
Beyond online marketing, its second growth curve, e-commerce, is also facing a dual crisis of slowing growth and rising risks.
In Q2 2025, Kuaishou's e-commerce GMV was 358.9 billion yuan, with a YoY growth of just 17.6%. Over time, the slowdown is more evident: its GMV growth has decelerated from 78% in 2021 to 17% in 2024. This slowdown reflects the platform's content ecosystem and business model.
The risks of Kuaishou's "white-label product expansion model" are intensifying. The platform's reliance on unbranded products with weak quality control has led to a vicious cycle of "low-price traffic attraction—declining quality—rising complaints—further price cuts."
In September, the State Administration for Market Regulation announced an investigation into Kuaishou's wholly-owned subsidiary Chengdu Kuaigou Technology (operator of "Kuaishou Shop"), citing illegal practices like "false marketing and counterfeit goods" in the live-streaming e-commerce industry.
While its core revenue streams struggle, Kuaishou's AI business, seen as a new growth driver, is still in its infancy.
In Q2 2025, Keling AI revenue was 250 million yuan, accounting for less than 1% of Kuaishou's total quarterly revenue of 35 billion yuan, while R&D expenses reached 3.4 billion yuan. CFO Jin Bing revealed that Keling AI's annual revenue is expected to double the initial target, but its 2025 Capex will also double. In absolute terms, R&D growth far outpaces revenue, forcing Kuaishou to keep funding its AI business.
The convergence of content risks and commercial challenges has prompted Kuaishou to rethink its strategy. Has the platform spread itself too thin with AI, e-commerce, and finance? With Keling AI's commercialization still distant," how can Kuaishou sustain growth?
Kuaishou is now reallocating resources.
Strategic Retreat: A 'Middle-Aged' Company Seeks a New Rhythm
Amid content governance issues, e-commerce trust-building challenges, and uncertain AI commercialization, Kuaishou's internal organization is undergoing profound restructuring.
Personnel changes are the first sign. Following the departures of data platform head Dong Xicheng, Magnet Engine VP Yuan Shuai, and compliance head Yu Haibo, Keling AI lead Zhang Di and local life head Xiaogu exited within a month.
The leadership shuffle signals a strategic shift.
Key changes announced before National Day include: the Local Life Division was renamed the "Life Services Division" and merged with lead advertising under Liu Xiao, reporting to SVP Wang Jianwei; meanwhile, former head Xiaogu became an advisor.
The reorganization reflects strategic contraction. Once a top-tier division reporting directly to CEO Cheng Yixiao, local life is now a second-tier unit under commercialization.
Clearly, Kuaishou is ending its "expansion mode" of parallel initiatives and shifting to a "unified commercialization" framework led by Wang Jianwei.
Wang took over commercialization in November 2022, e-commerce in November 2023, and now life services—consolidating control over Kuaishou's three commercial pillars.
This centralization aims to focus limited resources on shorter, more certain monetization paths.
Undoubtedly, Kuaishou is at a critical juncture, restructuring to find a new rhythm amid uncertainty.
With internet traffic growth peaking, how should a platform allocate resources? Kuaishou's answer: shift from "growth-driven" to "efficiency-driven."
But focus comes at a cost.
Facing growth limits, Kuaishou is doubling down on monetization—a pragmatic move that may also narrow its strategic vision.
For instance, in the AI arms race, losing key talent could slow progress or derail direction.
Tech leaders are crucial in this marathon. While Meta, Alibaba, and Tencent splurge on AI talent, Keling AI's ex-tech lead Zhang Di and over ten VP-level tech departures in two years raise concerns about continuity. This may explain the stock drop.
Focusing on monetization is rational, but can Kuaishou sustain AI innovation amid a talent exodus? That’s the market's real concern: imagination.
The 'Letting Go' Moment: A Path in AI's New Ecosystem
This year, AI video has been central to Kuaishou's market appeal.
But as global competition intensifies, Kuaishou's tech edge is eroding fast.
AI video matters because it shapes future social, entertainment, and information consumption—a key internet trend.
Thus, AI video generation is now a battleground in the U.S.-China AI race, with OpenAI's Sora2 and Meta's Vibes targeting future content ecosystems, while Alibaba Cloud and ByteDance's JIMENG AI catch up.
With limited resources, Kuaishou must make tough choices. Winning isn’t about outspending rivals but finding niches where AI can validate business models quickly and feed its core.
Kuaishou is blending AI with its unique ecosystem. SVP Wang Jianwei's "Generative New Commerce" vision at the 2025 Magnet Summit reflects this: AI shouldn’t be standalone but a core force reshaping commerce.
Thus, Keling AI's 22 million users matter less as a standalone metric than as a catalyst for Kuaishou's broader ecosystem.
AI's integration with short-video shows promise:
For content creation, AI is purging low-quality content.
Beyond Keling, AI aids Kuaishou's core. For example, the OneRec recommendation model optimizes content distribution, while AIGC tool "Kwali" lets users generate scripts and avatars cheaply.
This boosts efficiency and compliance by reducing subpar content at the source.
For e-commerce, AI lifts conversion and lowers barriers.
AI-generated product images via smart cropping improved conversions by 10%, while avatar livestream platform "Nuwa" enables 24/7 broadcasts with real-time Q&A, boosting sales.
As AI empowers content and commerce, Kuaishou is rebuilding its infrastructure—monetizing beyond Keling.
Retreating fists strike harder. Kuaishou is transforming from a traffic seller to an AI-driven commerce system reshaping creation, distribution, and transactions.
In the global AI race, this reinvention will decide if Kuaishou fades into mediocrity or rises as a new titan.$KUAISHOU-W(01024.HK)
Source: HK Stock Research Society
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