Goldman Sachs maintains Buy on Kuaishou Technology, with Kling financing implying a US$15bn pre-money valuation and strengthening the AI asset valuation anchor

Overview

This report focuses on the impact of external financing and valuation for Kuaishou Technology’s subsidiary Kling. Kuaishou announced that Kling signed a capital injection agreement, with initial investors contributing US$2.03bn and 15 new investors committing US$766mn, for a total financing cap of US$3.0bn. The transaction implies a US$15bn pre-money valuation for Kling, and even if financing and the full employee option pool are fully used, Kuaishou would retain 68.33% ownership and continue to consolidate. Goldman Sachs believes the deal unlocks Kling’s asset value, supplements funding for the AI business, and provides a clearer SOTP framework for valuing Kuaishou’s group as a whole.

Core views

Goldman Sachs’ key views include: first, new capital and employee equity incentives will enhance Kling’s competitiveness in model training, inference infrastructure, GPU procurement, global expansion, and talent retention; second, introducing external investors helps share Kuaishou’s future AI spending burden and relieves cash-flow pressure; third, investor participation may bring cloud infrastructure, enterprise software, AI applications, and industrial commercialization synergies; fourth, market-based valuation from the financing provides investors a clearer anchor for assessing the value of both Kuaishou’s main platform and Kling assets.

Analysis framework

The report primarily uses event analysis, financial disclosure interpretation, SOTP cross-checks, P/E valuation, and P/ARR sensitivity analysis to assess the impact of Kling financing on Kuaishou’s valuation and strategic capital allocation. Goldman Sachs maintained a Buy rating on Kuaishou, with a target price of HK$68 based on a target P/E of 15x on the average 2026E-2027E EPS, and cross-checked using Kling valuation and main-platform P/E.

Methodology notes

• Valuation methodsSOTP

  Sum-of-the-parts valuation

  The report separately values Kuaishou’s main platform and Kling AI, using the valuation implied by Kling’s financing to test the distribution of asset value embedded in Kuaishou’s current share price and target price.

• Valuation methodsP/E

  Price-to-earnings valuation

  Goldman Sachs’ 12-month target price of HK$68 is based on a target P/E of 15x applied to the average 2026E-2027E EPS.

• Valuation methodsP/ARR

  Price-to-annual recurring revenue multiple

  The report uses Kling’s assumed end-2026 ARR of US$1.0bn and tests a Kling valuation range using 10x–25x P/ARR.

• risk_profileGS Factor Profile

  Goldman Sachs factor profile

  This framework compares the stock’s growth, financial returns, valuation multiples, and composite indicators versus the broader market and peers in the same sector.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Kuaishou Technology (1024.HK)

  Coverage company and Buy-rated target

  Strengths

  Kuaishou retains control of Kling and continues to consolidate; the core platform still provides cash flow and user ecosystem; external financing lowers the burden of supporting AI investment from Kuaishou’s own balance sheet.

  Weaknesses

  AI spending may pressure near-term free cash flow; 2026E EPS is lower than 2025E; the main platform valuation still depends on ad recovery and user engagement.

  Comparison

  The report separates main-platform valuation from Kling valuation through SOTP and states that current share price implies about 4.5x P/E for the core platform and about US$11.5bn valuation for Kling.

  Risks

  Slower-than-expected recovery in advertising budgets, weaker-than-expected monetization at Kling, slower-than-expected user engagement growth, margins below expectations, and weaker-than-expected AI progress.

• Kling AI

  Kuaishou-controlled AI video generation asset

  Strengths

  Financing implies a US$15bn pre-money valuation; March 2026 ARR is about US$500mn; enterprise APIs and subscription revenue support commercialization; external capital and equity incentives help fund model, compute, and talent investments.

  Weaknesses

  It remains in a heavy investment phase, with net loss in 2025 around RMB1.9bn; profitability depends on inference costs, gross margin, and scale of commercialization.

  Comparison

  The report compares Kling with Chinese video models such as Seedance and uses a 10x–25x P/ARR sensitivity analysis to estimate a valuation range of US$10bn to US$25bn.

  Risks

  Model upgrades may lag expectations, ARR growth may slow, inference cost reductions may be slower than expected, overseas active-user growth may be unsustainable, and potential spin-off progress remains uncertain.

Key data

• RatingBUYGoldman Sachs maintains a Buy rating on Kuaishou Technology.
• 12-month target priceHK$68.00Target price is based on P/E valuation and cross-validated with SOTP.
• Current priceHK$42.60Price disclosed on the cover of the report.
• Implied upside59.6%Based on a target price of HK$68 versus current price of HK$42.60.
• Kling financing capUS$3.0bnThe company reserved a quota for future investors, with total financing capped at US$3bn.
• Committed financingc. US$2.8bnThe company disclosed that initial investors and new investors together have committed about US$2.8bn.
• Kling pre-money valuationUS$15bnImplied valuation from this financing round.
• Kling post-money valuationUS$18bnThe report discusses SOTP using the post-financing valuation.
• Kuaishou ownership after financing68.33%Assuming full financing and full use of the employee option pool.
• Kling 2025 revenuec. Rmb1.1bnFrom company disclosures.
• Kling March 2026 ARRc. US$500mnIndicates relatively fast commercialization pace.
• Kling 2026E total annual revenue forecastUS$576mnFrom report chart explanation.
• Kling 2025 net lossRmb1.9bnLosses widened, reflecting faster scaling of model training, inference, and infrastructure spending.
• Kuaishou 2026E revenueRmb145,323mnGoldman Sachs forecast.
• Kuaishou 2026E EPSRmb3.70Goldman Sachs forecast.
• Kuaishou 2026E P/E10.0xDisclosed in Goldman Sachs forecast table.

Impact & implications

The significance of this financing event for Kuaishou is more than a minority equity raise. On one hand, it supports Kling in continuing to invest in AI video models, inference capabilities, and global expansion through external capital; on the other hand, it reduces group-level future cash-flow pressure by allowing Kuaishou to remain in control while external funds fund AI needs. More importantly, a US$15bn pre-money valuation creates a market-based valuation anchor for Kling, enabling investors to more clearly separate the value of Kuaishou’s main platform from its AI assets. The report notes that under a US$18bn post-money valuation and the assumption of Kuaishou retaining 68.33%, implied market value for the main platform is about US$10.9bn, roughly 4.0x P/E in 2026.

Risks

• Advertising budget recovery is slower than expected.
• Kling commercialization and ARR growth are weaker than expected.
• Kuaishou’s overall user engagement growth is slower than expected, meaning DAU and ARPU are below expectations.
• Group margins and free cash flow are below expectations.
• AI model capability, product upgrade, or ecosystem collaboration progress is weaker than expected.
• Kling remains in a heavy investment and loss-making phase, and spending on training, inference, infrastructure, and global expansion may continue to weigh on near-term profitability.

What to watch

• Progress of Kling’s next-generation model upgrade, with the report suggesting an update could appear within months.
• Kling’s 2026 Q2 ARR trend and full-year revenue realization.
• Potential progress on a future Kling spin-off after completion of this financing.
• Whether external investors can bring cloud infrastructure, enterprise customers, industrial applications, and ecosystem collaboration opportunities.
• Whether Kling’s inference-level gross margin and operating margin can continue to improve.
• Whether Kuaishou’s 2026 free cash flow can remain positive while balancing core platform needs, shareholder returns, and AI investments.