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The Kuaishou Technology app download page is seen on a smartphone in front of the company's website on a laptop computer in this arranged photograph taken Feb. 2, 2021. Photo: Bloomberg

Kuaishou posts 7 billion yuan loss in second quarter as it continues to burn cash amid regulatory crackdown

  • The Beijing-based company reported quarterly revenue of US$2.95 billion, representing a 48.8 per cent year-on-year increase
  • The short video platform had 293 million average daily active users on its main app, up 11.9 per cent compared with 262 million a year ago

Kuaishou Technology said its short term revenue will be affected by Beijing’s ongoing regulatory crackdown on the tech sector as the operator of China’s second largest short video-sharing platform reported worse-than-expected losses of 7.04 billion yuan (US$1.1 billion) in the second quarter.

The earnings results come at a time when the company’s share price has fallen to one-fifth of its peak in February amid a broader crash of Chinese tech stocks triggered by the tighter regulatory environment.

“In the short term, our revenue will be affected... at this point we are basically in line with the industry,” Kuaishou chief executive Su Hua said on the earnings call.

“We have maintained active and smooth communications with regulatory authorities, and have carried out compliance preparation very early in response to the bottom line and red line requirements related to business operations, including those relevant to data security,” he said.

The company reported a net loss of 7.04 billion yuan in the second quarter, missing analysts’ consensus estimates compiled by Bloomberg, which was for a net loss of 6.25 billion yuan. The latest second quarter number compares with a huge 37.6 billion yuan net loss for the same period in 2020.

Kuaishou retreats from US market after failing to take on TikTok

Kuaishou’s shares recovered somewhat over the past week, with a more than 10 per cent gain since Friday, although the stock closed down 3.55 per cent to HK$77.5 on Wednesday, after losing more than a third of its value over the past month.

The Beijing-based company reported revenue of 19.1 billion yuan (US$2.95 billion) last quarter, representing a 48.8 per cent year-on-year increase, beating the 18.7 billion yuan market estimate.

Gross profit increased by 89 per cent to 8.4 billion yuan from 4.4 billion yuan for the same period last year.

The short video platform reported 293 million average daily active users on its main app, up 11.9 per cent compared with 262 million a year ago.

Earlier this month Kuaishou shut down its overseas app Zynn after it failed to challenge the dominance of TikTok.

The logo of Kuaishou Technology is seen at the China Digital Entertainment Expo and Conference in Shanghai, July 30, 2021. Photo: Reuters

Kuaishou said sales and marketing expenses for the second quarter doubled to 11.3 billion yuan, from 5.6 billion yuan in the same period last year.

During the conference call, a company executive said the overseas business accounted for one-third of the total sales and marketing expenses, adding that the company hopes to grow its international share when competition is not intense, which would “lay a solid foundation for future commercialisation”.

China’s tech sector could see regulatory pressure build further after the country’s Ministry of Commerce released draft regulations for the live-streaming industry, declaring that anyone under the age of 16 will no longer be allowed to live-stream, and that live-streamers should speak Mandarin during their sessions.

China had 818 million short video users as of the end of June 2020, according to a report released in October by the China Netcasting Services Association. Kuaishou faces fierce competition from ByteDance, the owner of TikTok and its Chinese sister platform Douyin, with the latter being a potential initial public offering candidate, reporting 600 million daily active users as of August 2020.

This article appeared in the South China Morning Post print edition as: Kuaishou posts wider loss than forecast