(Bloomberg) — Kuaishou Technology’s revenue beat estimates, defying China’s economic slowdown despite intensifying competition with TikTok-owner ByteDance Ltd.
China’s second-largest short video company is joining its peers in embracing a new era of cautious expansion in the country’s giant internet sector. Its online advertising business is coping with Beijing’s broad scrutiny in industries like insurance and edtech, while live-streaming and e-commerce could suffer from shrinking consumer appetite during Covid-19 lockdowns.
Sales rose 35% to 24.4 billion yuan ($3.8 billion) for the three months ended December, versus the 23.1 billion yuan projected by analysts. Its net loss narrowed to 6.2 billion yuan, compared with the 6.3 billion yuan estimated loss, helped by government grants and tax subsidies, typically awarded to up-and-coming Chinese software firms. The company also took a big hit from fair value changes in preferred shares in the year-earlier quarter.
Kuaishou has tried to signal its profitability potential by ramping up monetization while keeping a lid on cost growth – especially in global marketing expenses. Still, it ramped up spending on research and marketing by more than 50% in the quarter, reflecting efforts to get into new businesses. Both now account for a larger slice of revenue than a year earlier.
Apart from pursuing new content in areas like sports and music, Kuaishou is also expanding its reach across China’s digital economy. In December, it teamed up with food-delivery giant Meituan to let Kuaishou users access local services through download-free lite apps inside the short-video platform, a model employed successfully by Tencent Holdings Ltd. and ByteDance.
Those efforts appear to be paying off — monthly active users grew a better-than-expected 21.5% to 578 million in the December quarter, while average daily time spent per person climbed 32% to 118.9 minutes.
One area of uncertainty is Kuaishou’s expansion abroad. The Beijing-based company this month lost its international business leader Tony Qiu due to personal reasons, and Chief Executive Officer Cheng Yixiao now oversees its Kwai and Snack Video apps directly. The two apps have yet to face off against TikTok in major markets like the U.S.
Cheng himself took over the CEO role from fellow co-founder Su Hua back in October. Kuaishou has lost roughly $180 billion of market value since peaking just days after its 2021 Hong Kong listing, but its shares have outperformed many Chinese internet stocks this year.
(Updates with user metrics from the fourth paragraph)
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