Morgan Stanley, UBS, and other institutions are optimistic about Kuaishou (01024) regarding growth in AI and gaming: model upgrades and new game performances serve as potential catalysts.

After Kuaishou (01024) released its Q2 2026 performance, UBS, Bank of America Securities, and Morgan Stanley subsequently published research reports. The institutions believe that, although the core business is still affected by macroeconomic conditions and industry factors in the short term, the accelerated commercialization of Keling AI, robust free cash flow, and good performance following the launch of new games are providing new growth support for the company. Keling AI has become a common focus for several institutions. In Q2, Keling AI's revenue exceeded 850 million yuan, a year-on-year increase of over 200%. UBS pointed out that Keling's enterprise API services and professional user subscription business are both maintaining steady growth, with a continuous expansion of paid users and relatively stable ARPPU. Institutions believe that Keling's next model upgrade is expected to further enhance command understanding, multimodality, image quality, agent capabilities, and short drama generation ability, becoming an important catalyst for promoting subsequent ARR growth and enhancing CKH HOLDINGS' valuation. Beyond the core business, Kuaishou's gaming division has also seen new growth. Morgan Stanley noted that Kuaishou's new game "Master of Mysterious" has consistently ranked between 15th and 20th on the iOS bestseller list since its launch on August 21. If current performance continues, the games annual revenue could reach approximately 2 billion yuan and contribute significant incremental profits. As Kuaishou's previous performance guidance did not account for the contributions of this game, it could bring upside potential for Q3 and the full years results. While AI and gaming are creating new growth opportunities, Kuaishou's community ecosystem is also continuously deepening into more vertical and segmented interest circles. From August 29 to 30, the 2026 Kuaishou Phototrophic Creator Conference will be held in Wuhan, where the platform will showcase its ecological progress over the past year in creator growth, interest circle development, and short and direct cycle system construction. As the foundation of Kuaishou's content and commercial ecosystem, the continually active community and creator supply also provide fertile ground for the rollout of new technologies, products, and commercial scenarios. While continuing to invest in AI, Kuaishou still emphasizes cash flow discipline and shareholder returns. UBS pointed out that Kuaishou has completed AI capital expenditures of 17 to 18 billion yuan in the first half of 2026 and expects a decrease in capital expenditure intensity in the second half. The company plans to maintain free cash flow at breakeven to slightly positive for the year and to further enhance cash flow flexibility in the future through computing power leasing. Bank of America Securities also mentioned that most of Kuaishou's annual capital expenditures have been completed in the first half, and the company plans to maintain positive free cash flow in the second half. Additionally, from the beginning of the year to now, the amount used by the company for stock repurchases and dividends totals approximately 5 billion Hong Kong dollars, corresponding to a shareholder return rate of about 3%. In terms of valuation, UBS believes that Kuaishou's current market value is nearly 40% discounted compared to the sum of its parts valuation, maintaining a "Buy" rating with a target price of 60 Hong Kong dollars; Bank of America Securities similarly maintains a "Buy" rating with a target price of 53 Hong Kong dollars, corresponding to about 40% upside potential compared to the stock price at the time of the report's publication. Institutions generally believe that as the pressure on the core business gradually eases, the accelerated commercialization of Keling AI and the incremental release from new businesses such as gaming are expected to provide more support for future valuation recovery for Kuaishou.