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Kuaishou's Revenue Grows Despite ByteDance's Attempts to Compete

Kuaishou Technology's revenue beat estimates, despite a slowing Chinese economy and competition from TikTok owner ByteDance Ltd. This is a testament to the company's strength in the face of adversity.

November 22, 2022
4 minutes
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Kuaishou Technology's revenue beat estimates, despite a slowing Chinese economy and competition from TikTok owner ByteDance Ltd. This is a testament to the company's strength in the face of adversity.

Revenue for the three months ended September was 23.13 billion yuan ($3.2 billion), compared with the average analyst projection of 22.6 billion yuan. Net loss for the period came in at 2.7 billion yuan, versus the estimated loss of 3.7 billion yuan.

China's second-largest short-video company is struggling to compete with Tencent Holdings Ltd.'s WeChat and Bilibili Inc., as well as to attract customers amid sluggish consumer spending and strict Covid restrictions. Chinese retail sales contracted 0.5% in October, their first decline since May, falling short of expectations for slight growth.

Kuaishou has followed in the footsteps of its bigger internet rivals and initiated aggressive cost-cutting measures in recent quarters. The Beijing-based company has scaled down marketing expenses, especially in overseas markets, and is now targeting making its domestic division break even on an adjusted net income basis this year.

Daiwa Capital Markets analysts believe that the weak macroeconomic environment will continue to weigh on Kuaishou's stock in the near future. The key focus for the company remains on improving margins in its domestic market and making progress in monetizing its overseas markets, particularly in Brazil.

Chinese tech stocks have been on the rise this month, as investors have been encouraged by signs of policy changes in the Communist Party's stance on a number of issues, from its response to the pandemic to real estate prices and relations with the White House. Kuaishou's market value has declined by more than 80% from its 2021 peak, and the stock is now trading at around 2 times sales, compared to about 4 times at Tencent.

Tencent, one of Kuaishou's earliest backers, announced last week that it is distributing $20 billion of Meituan stakes as a special dividend. This has led to speculation that Tencent will further divest its Chinese internet portfolio and focus on overseas gaming assets.

Kuaishou has been relying less on a traffic boost from Tencent's WeChat platform and has instead teamed up with Meituan to provide food-delivery services to its social media users. This move is part of a broader trend of realignment in the Chinese internet ecosystem.

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