Fitch Publishes Kuaishou's 'A-'/Stable IDR; Rates Proposed USD and Offshore CNY Notes 'A-'

About this update from Kuaishou Technology Class B

Fitch Ratings has published China -based Kuaishou Technology's Foreign- and Local-Currency Long-Term Issuer Default Ratings (IDRs) of 'A-'. The Outlook is Stable. The agency has also assigned the company a senior unsecured rating of 'A-' and assigned the proposed US dollar and offshore Chinese yuan senior unsecured notes ratings of 'A-'. The ratings reflect our expectation that Kuaishou will maintain strong positions in short-video, live-streaming and content-based e-commerce services in China. Its user engagement, content ecosystem and differentiated market positions should help its expansion. The company should benefit from the increasing online advertising and marketing budgets allocated to short-video platforms, as well as the robust growth in content-based e-commerce. The ratings are also supported by Kuaishou's conservative capital structure and substantial net cash. Nevertheless, its relatively short record of profitable growth is weighing on its ratings, especially in light of the keen competition in China's rapidly evolving internet sector and the presence of stronger competitors in Kuaishou's businesses. The recent large-scale automated cyberattack on Kuaishou also reflects the potential operational risks from an increasingly complex environment, where cyberattacks can pressure content-safety controls and incident- response capacity. Fitch views this as an isolated event, which is unlikely to have a material impact on Kuaishou's financials or business, but any significant recurrence may undermine user confidence in the platform and trigger more stringent regulatory intervention. The proposed notes are rated in line with Kuaishou's IDRs, as they represent the company's direct, unsecured and unsubordinated obligations and rank pari passu with all its other unsecured and unsubordinated debt. The proceeds will be used for general corporate purposes. Key Rating Drivers Solid Positions: Kuaishou's ratings are underpinned by its strong market positions. It is the second-largest short-video company by user base globally, while in China , it is ranked as the third-largest app in terms of total user time spent. Kuaishou is the fifth-largest online marketing company in China and the second-largest live-streaming platform by 9M25 revenue. It is also the fifth-largest e-commerce company in China by gross merchandise value (GMV). Shorter Profitable Growth Record: Kuaishou's short record of profitable growth relative to its peers is a constraint on its ratings. Kuaishou only began achieving Fitch-defined EBITDA breakeven in 2H22. Intense competition from stronger rivals, such as Douyin, Tencent Holdings Limited (A/Stable, Standalone Credit Profile (SCP): a+) and Alibaba Group Holding Limited (A/Stable, SCP: a+), in Kuaishou's businesses may require continued spending to defend its market positions. Targeted Ecosystem: The ratings reflect our belief that Kuaishou has built strong community engagement with a vibrant content ecosystem that should reinforce its platform strengths and create more avenues for business growth. Kuaishou's average daily active users (DAUs) reached 416 million in 3Q25 while average monthly active users were 731 million. Average daily time spent per DAU was 134 minutes. Average monthly uploads of short videos exceeded 1.3 billion. Differentiated Niche: Competition in China's social media services will remain keen, but Kuaishou's stronger foothold in lower-tier cities and rural areas differentiate it from Douyin, Xiaohongshu and Weixin Video Accounts. There is some user base overlap, but competitors' apps vary in demand and positioning. Kuaishou offers a variety of content themes with an advantage in areas such as agriculture, mini dramas and regional sports. Its e-commerce services are primarily content-driven and have stronger advantages for non-standard products, while major e-commerce giants' model is more search-based. Advertising Share Gains: Kuaishou is set for further market share gains, driven by the growing allocation of online marketing budgets to short-video platforms. Chinese internet users spent over 30% of their internet time on short videos. Consumers' increasing engagement with short videos encourages marketers to utilise these channels for broader and more visually engaging audience reach. We expect Kuaishou's online marketing revenue to increase at a CAGR in the high single-digit range in 2026-2029, although the market could be volatile. Robust E-Commerce Growth: We expect Kuaishou's content- and pan-shelf-based commerce (on-platform storefronts and product links beyond short-videos and live streams) to grow robustly in the next few years. Content-based e-commerce has a higher conversion rate, allowing these platforms to capture market share progressively. Kuaishou's pan-shelf-based e-commerce, which offers a wide product range, accounted for over 32% of total e-commerce GMV in 3Q25 and is increasingly complementing its content-based e-commerce offerings. We expect Kuaishou's GMV to increase at a low-teen CAGR in 2026-2029. Rising AI Contribution: Kuaishou is making progress in AI capabilities and monetisation. It is upgrading its flagship AI video generation platform, Kling AI, and rolling out features to address diverse creator needs. Management expects Kling AI revenue to reach USD140 million in 2025, against an initial target of USD60 million . Its AI large models, including OneRec and G4RL, have extended beyond short videos into online marketing and e-commerce, driving 4%-5% of domestic online marketing-service revenue growth and high single-digit shopping mall GMV growth in 3Q25. Improving Profitability: We expect further revenue growth in online marketing and e-commerce while live- streaming revenue should remain stable. We expect market share and efficiency gains to widen Kuaishou's Fitch-defined EBITDA margin gradually to 20% (2024: 15%) and free cash flow (FCF) margin to stay above 8% in the next three years even with higher capex for Kling AI and advertising technologies, though FCF margin may temporarily ease to 7%-8% in 2025. Conservative Capital Structure: We expect Kuaishou to maintain a modest EBITDA gross leverage of 1.0x-1.5x and retain a large net cash position over the medium term. Kuaishou does not have aggressive budgets for M&A, overseas expansion and investments, and has a measured approach to shareholder returns. We expect its FCF to be more than sufficient to fund the company's investment needs and shareholder returns. VIE Structure Neutral: Kuaishou's variable interest entities (VIEs) structure is neutral to the rating unless regulatory risk increases. VIE structures are the typical mechanism for foreign investors to participate in Chinese sectors that are subject to foreign ownership restrictions. Peer Analysis Kuaishou's credit profile is weaker than that of Alibaba and Tencent , which are significantly larger and have greater revenue diversification and stronger platforms. Kuaishou's EBITDA and cash generation ability are also weaker than that of Alibaba and Tencent . Kuaishou's Fitch-defined EBITDA was CNY20 billion in 2024, compared with over CNY252 billion for Tencent and over CNY196 billion for Alibaba . Baidu, Inc. (A/Negative) has a broadly similar credit profile to Kuaishou's , but with a longer record of facing market and technology challenges. Baidu's rating is underpinned by its leading position in China's search market and a substantial net cash position. It has delivered resilient profitability through macroeconomic, industry and regulatory cycles. However, advertising budgets have increasingly shifted towards short-video platforms such as Kuaishou's , pressuring Baidu's core search revenue. Baidu is also navigating a strategic transition to AI-driven search, with execution risks and uncertainty around the pace and scale of monetisation. These trends have led to Baidu's Negative Outlook. Kuaishou's credit profile is stronger than that of Weibo Corporation (BBB/Stable) and the 'bbb+' SCP of Tencent Music Entertainment Group (TME, A-/Stable). Kuaishou and Weibo both operate in social media, but Kuaishou's short-video and live-streaming services have a significant market share, with larger revenue and EBITDA scale. TME, while dominant in China's digital music market, has smaller revenue and EBITDA scale than Kuaishou , primarily due to challenges in balancing monetisation and user experience, especially given the restrictions on exclusive music deals in China . TME's social entertainment service revenue has also been under pressure. Fitch's Key Rating-Case Assumptions High single-digit revenue CAGR in 2025-2028 (2024: 12%). Operating EBITDA margin of 17%-20% in 2025-2028 (2024: 15%). Capex/revenue of around 10% in 2025-2028 (2024: 6%). Annual share repurchases of CNY3 billion-5 billion in 2025-2028 (2024: CNY4.9 billion ). Corporate Rating Tool Inputs and Scores Fitch derived the SCP using the Corporate Rating Tool (CRT) as follows. The business and financial profile factors (assessment, relative importance): management (bbb, low); sector characteristics (bbb, moderate); market and competitive positioning (a-, high); diversification and asset quality (bbb+, moderate); company operational characteristics (bbb+, moderate); profitability (a, moderate); financial structure (aa-, low); and, financial flexibility (aa-, low). The quantitative financial subfactors are assessed based on standard financial period parameters of 20% weight for the financial year 2024, and 40% for the forecast years 2025 and 2026. The governance assessment of 'Good' results in no adjustment. The operating environment assessment of 'bbb-' results in no adjustment. The SCP is 'a-'. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: Major loss of market share in key products and services; Decline in operating cash flow for a sustained period; Significant M&A that negatively affects the operations or business profile; Evidence of greater government, regulatory or legal intervention, leading to an adverse change in Kuaishou's operations, profitability or market share; A shift to more aggressive financial policies that result in, for example, a sustained period of EBITDA gross leverage at above 2.0x; however, in itself, EBITDA gross leverage rising above this level is not likely to lead to a downgrade if Kuaishou retains a strong net cash position and a high FCF margin. Factors that could, individually or collectively, lead to positive rating action/upgrade: Longer track record of profitable growth, providing further evidence that management can successfully execute its medium-term plan for EBITDA growth, while maintaining EBITDA gross leverage below 1.5x and a net cash position for a sustained period. Liquidity and Debt Structure We expect the company to maintain strong liquidity, with a large net cash position over the medium term. At end-September 2025 , Kuaishou had about CNY91 billion in readily available cash. This compares with total debt of CNY28 billion , which includes note payable arrangements with its suppliers and banks. In addition, we expect the company to maintain robust FCF generation, which should be more than sufficient to fund the company's investments and shareholder returns. Issuer Profile Kuaishou is one of the world's largest short-video platforms by user base and is among the top apps in China by total user time spent. Its apps offer online marketing, live-streaming and e-commerce services. It has also rolled out its multi-model video generation tool, Kling. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS Click here to access Fitch's latest quarterly Global Corporates Sector Forecasts Monitor data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included. Climate Vulnerability Signals The 2024 revenue-weighted Climate.VS for Kuaishou for 2035 is 15 out of 100, suggesting low exposure to climate related risks in that year. ESG Considerations The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores . (C) 2026 Electronic News Publishing, source ENP Newswire

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