Kuaishou Technology is planning to spin off its Kling AI video generation unit at a valuation of $20 billion and raise approximately $2 billion in a pre-IPO financing round, according to reports by Chinese technology outlet LatePost and The Information, both published Monday. The news sent Kuaishou’s Hong Kong-listed shares surging as much as 10% on Tuesday morning, before closing up nearly 2% at HK$52.6.
The company confirmed the broad outlines of the reports in a filing to the Hong Kong Stock Exchange on Tuesday, May 12, stating that its board is “evaluating a proposed restructuring” of Kling AI that “may involve introducing external financing.” The proposal remains at a preliminary stage, Kuaishou said, and no final decisions have been made.
Kuaishou is in talks with potential investors including Tencent Holdings, according to LatePost. An official IPO is planned for 2027, with The Information reporting that the IPO process is expected to open in the first quarter of that year.
The Numbers Behind the Valuation
Kling AI’s current annualized revenue run rate (ARR) stands at $500 million, roughly double what it was before Chinese New Year, according to LatePost. JPMorgan, which characterized the spin-off as a “significant value-unlocking event for Kuaishou,” projects that ARR will climb to $1.3 billion by the first quarter of 2027. Applying a 40x multiple to that projected figure produces the $20 billion pre-IPO valuation being discussed, and JPMorgan’s sum-of-the-parts analysis suggests Kuaishou’s target share price could reach HK$73 if Kling ultimately achieves a $52 billion valuation.
That 40x multiple is rich by global standards but modest by Hong Kong’s current AI market pricing. Kuaishou itself trades at roughly 1.3x on 2026 revenue estimates. By contrast, Hong Kong investors have been paying 100x to 200x revenue for AI labs at the top of the stack, MiniMax and Zhipu AI have both traded above 150x. Aaron Zhou, CIO of a US dollar family office and co-host of the Voice of Context podcast, put it plainly: “Runway raised at a $5.3 billion valuation on $300 million-plus ARR, roughly a mid-to-high teens multiple. Palantir is the only US large-cap above 50x PS, near 60x today. Hong Kong is paying 150x-plus for AI labs like MiniMax and Zhipu. 40x on Kling looks rich globally but cheap inside Hong Kong, and that’s the only number that matters for this deal.”
Goldman Sachs had modeled Kling at only $5 billion earlier this year, making the private-market $20 billion a 4x re-rating in a matter of months.
Kling’s Commercial Profile
Kling AI’s full-year 2025 revenue was 1.04 billion yuan (approximately $152.7 million), accounting for just 0.73% of Kuaishou’s total revenue. The gap between that figure and the $20 billion valuation has prompted questions about whether capital markets are pricing in a bubble, but analysts argue the valuation reflects a bet on Kling as AI content production infrastructure, not a conventional revenue multiple.
The business model is notable. Nearly 70% of Kling’s revenue comes from professional creators on the paid tier, not casual consumer users. Its most expensive Diamond membership, priced at 666 yuan per month, is the best-selling product, a counterintuitive result that reflects the willingness of self-media operators, advertising professionals, and film and television workers to pay consistently for efficiency tools. Revenue from overseas markets accounts for 70% of the total, with North America as the primary source.
In the first quarter of 2026, Kling AI’s revenue was approximately $75 million, predominantly from overseas. On April 23, Kling launched the industry’s first native 4K direct output feature, signaling a deliberate pivot toward professional-grade tools and away from the consumer viral hit category. The product serves over 30,000 enterprise clients and has been deeply integrated into Kuaishou’s main app and its editing tool KuaiYing.
A Competitive Market Getting Crowded
Kling’s trajectory has unfolded against a fast-changing competitive landscape. The product was ranked as the world’s top model for image-to-video generation and second in the text-to-video category by consultancy Artificial Analysis earlier this year. But the rankings have since shifted. Alibaba’s HappyHorse 1.0 now tops both the text-to-video and image-to-video leaderboards on Artificial Analysis, followed by ByteDance’s Seedance 2.0. Kling 3.0 currently ranks third in text-to-video and sixth in image-to-video.OpenAI’s exit from the video generation market, Sora was shut down on March 24, has removed one major competitor, but Chinese rivals have moved quickly to fill the gap. China’s AI video generators have been filling the void left by Sora’s departure since the shutdown, with Kling, HappyHorse, and Seedance all competing aggressively for the same professional creator market.
Orient Securities analysts, led by Xiang Wenqian, argued in a Monday research note that Kling is well-positioned to capitalize on the booming AI-generated drama market. “As a high-performance, cost-effective model, Kling is well-positioned to see sustained commercial growth as it expands into new use cases” in AI drama, they wrote. Kling’s pricing makes it more cost-effective than its rivals, and the 4K output feature in its latest version addresses the high-fidelity demands of professional creators in advertising and film.
Kling’s spin-off is part of a broader trend among China’s major tech companies of carving out their proprietary AI assets and introducing them individually to capital markets — a pattern that reflects both the premium valuations available for standalone AI businesses and the desire to give investors a cleaner way to price AI exposure without the drag of legacy platform businesses. Kuaishou had already bet 26 billion yuan on AI in its most recent annual results, signaling that the company views Kling as its primary growth vehicle for the years ahead.