Kuaishou (KSHTY) AIGC Ad Spend Grows Over 70% While Group Revenue Adds 1.4%

Kuaishou (KSHTY) disclosed on its 2026-08-19 earnings call that advertising spend on AI-generated short videos grew more than 70% year over year and that more than 92% of employees were using internal AI agents. Neither has yet shown up in group revenue or gross margin [1].

Kuaishou is a Chinese short-video and livestreaming platform with three revenue lines: online marketing services, meaning advertising; livestreaming gifting; and other services, which include e-commerce commissions and Kling AI. Group revenue grew just 1.4% year over year in the second quarter, with advertising up 4.4% [2].

Content production on one side, engineering on the other

The external deployment is content production. AIGC lowers the cost and skill threshold of making short videos and short dramas. Short-drama supply grew more than fivefold between January and June, and that additional content is itself advertising inventory. Management tied the growth in ad spend directly to this chain.

The internal deployment is engineering and operations. MyFlicker, a general-purpose agent, passed 92% employee usage in June, 60% of new code was written by AI, and the R&D team's average delivery cycle shortened by more than 10% in the second quarter versus the first. A second agent, AgentX, iterates on the recommendation system itself, automating the idea-to-production loop that algorithm engineers previously ran by hand [1].

These are unusually granular disclosures, particularly the employee usage rate and the code share. They are also not new this quarter. The AI share of new code was previously reported as more than 40%, then more than 50%, and now 60%, and the AIGC advertising figures form a similar quarter-by-quarter series.

The revenue line does not yet carry it

Advertising as a whole grew 4.4% while the AIGC portion grew more than 70%. That implies the non-AIGC advertising base is shrinking, which makes AI look more like a replacement for the existing creative production method than a source of net new advertising budget [2]. Group revenue grew about 1% [2].

The only AI revenue with an absolute figure this quarter is Kling AI, at more than RMB 850 million and up more than 200% year over year. Its year-over-year increase is larger than the group's entire revenue increase, but Kling is a product Kuaishou sells rather than an internal AI application, so it falls outside this analysis [2].

The cost evidence points the other way

Second-quarter gross margin was 51.6%, down 410 basis points from 55.7% a year earlier. R&D expenses grew 34.7% year over year and rose from 9.7% to 12.9% of revenue, which the company attributed to AI investment including training costs. Operating profit fell 45% [3]. The shorter delivery cycle and code automation have left no observable saving in the income statement, and the CFO signaled that AI spending will continue to weigh on profit in the second half [3].

What can be checked next

Kuaishou has put AI into both content production and its own engineering, and it has disclosed progress on a consistent basis for several quarters, with the metrics themselves improving each quarter.

The economic value of those improvements is not established. The advertising growth is a rate on an undisclosed base, inside a segment that is barely growing. The internal efficiency metrics have no matching reduction in headcount or expenses, and arrive alongside higher R&D spending and a falling gross margin. Judging whether the approach works requires watching whether advertising returns to growth at the segment level, and whether gross margin recovers once AI investment peaks.

Application: Revenue and cost Stage: Scaled Value realized: Moderate Confidence: Medium

Sources

[1] Drillr · Kuaishou (KSHTY) · 2026-08-19 · earnings call

"we achieved over 70% year-over-year growth in AIGC short video marketing spend in Q2. ... By June, over 92% of employees were using our AI agents, and the AI code contribution rhythm on R&D engineers reached 60%. ... in the second quarter of 2026, our technological R&D team's average delivery cycle was shortened by more than 10% compared with the first quarter"

[2] Drillr · Kuaishou (KSHTY) · revenue trend verification

[3] Drillr · Kuaishou (KSHTY) · profit and expense verification