Kuaishou's Kling AI Raises $2 Billion as Cheng Yixiao Carves Out Its Video Bet

Why it matters

Kling AI is being valued as a standalone AI infrastructure and media-production company, while Kuaishou's filings still show it as a fast-growing but small piece of the parent. The raise tests whether investors will fund AI video on future workflow control rather than current contribution to group revenue.

Cheng Yixiao's Kuaishou Technology has raised an initial $2 billion for Kling AI, Bloomberg Technology reported Thursday, giving the Chinese short-video company outside capital for the video-generation operation it has been preparing to separate from the parent.

The financing turns Kling AI from an internal growth project into a separately funded vehicle with its own capital needs. Kuaishou said in a May 12 Hong Kong exchange filing that its board was assessing a restructuring of the group's Kling AI assets and businesses and that the plan could involve external financing. At the time, Kuaishou said the proposal was preliminary and that no definitive agreements had been signed.

For Cheng, the carve-out is a familiar product move at a much larger capital scale. Kuaishou's board biography says he launched the original GIF Kuaishou app in 2011 after engineering roles at Hewlett-Packard and Renren, then built Kuaishou with co-founder Su Hua into one of China's major short-video and live-streaming platforms. Cheng now serves as co-founder, chairman and CEO, responsible for long-term strategy, operations, product matters and strategic investments, according to Kuaishou's board page. Kling AI is the next version of that creator-platform thesis: if Kuaishou won distribution by giving users short-video tools and feed-based reach, Kling tries to sell the production layer itself.

The number is large because video AI burns capital

Kling AI is expensive in a way Kuaishou's older businesses are not. Video generation requires heavy model training, inference capacity and creator-facing product iteration. Kuaishou's public filings show why the parent wants a different financing structure for the unit.

In the first quarter of 2026, Kuaishou reported that Kling AI generated more than RMB650 million in revenue, up over 300% from a year earlier. The company said Kling's annualized revenue run rate was about $500 million in March 2026, up from the $240 million run rate it had disclosed for December 2025. Kuaishou also reported 412.7 million average daily active users and 771.7 million monthly active users on its main app in the same quarter, giving Kling a parent company with distribution that standalone AI video labs usually lack.

Kuaishou's January disclosure put earlier traction in more concrete terms: Kling AI had more than 60 million creators worldwide, more than 600 million generated videos and partnerships with more than 30,000 enterprise users as of December 2025, according to a company release. Those are company-reported figures, and Kuaishou has not broken out what share of Kling's usage converts into paid recurring revenue. The disclosed revenue path still explains why investors are willing to underwrite a large round before a possible listing.

The financing details remain messy. Bloomberg's Thursday report said Kling AI had raised an initial $2 billion. The South China Morning Post reported on July 1, citing people familiar with the matter, that Kuaishou-backed Kling AI was close to a fundraising round of about $3 billion at an $18 billion post-money valuation and that Tencent was among the investors. SCMP also reported that the valuation had narrowed from an earlier $20 billion target and that Kuaishou expected to start a Hong Kong listing process for Kling AI within 12 months.

The $2 billion and $3 billion figures may refer to different pieces or stages of the same financing process. Kuaishou's own May filing is narrower than either report: it confirmed only that the board was assessing a restructuring that may involve external financing. That distinction matters because an $18 billion valuation would put Kling AI near the value of established public internet companies despite Kuaishou's own filing showing Kling remains a small share of group revenue.

Kling's product pitch has moved from novelty to workflow

Kling AI's fundraising follows a year in which the product moved beyond a model demo. The current Kling AI site presents the product as a creative studio with video generation, image generation, sound generation, effects, API access, pricing, documentation and native apps. Kuaishou says the Kling 3.0 model series, launched in February 2026, supports multimodal inputs and outputs across text, images, audio and video, with video understanding, generation and editing built into a single workflow.

That workflow framing is central to the investment case. Kuaishou says Kling is being used in marketing, e-commerce, film and television, animation and gaming. In its first-quarter report, Kuaishou said Kling supported virtual scenes and visual effects shots in the Chinese historical drama Swords Into Plowshares and generated hundreds of shots for the Hollywood series House of David. Those are company-supplied examples, but they show the category Kuaishou wants investors to price: professional video production budgets, rather than casual consumer experimentation.

Kuaishou has also put executives around Kling in public view. Gai Kun, a senior vice president at Kuaishou and head of the Kling AI Division, said in a May company release that AI breakthroughs have lowered production barriers so individuals or small teams can produce cinematic footage on phones or computers. At the Kling AI 2.0 event in April 2025, Kuaishou said Gai described the mission as helping everyone tell stories with AI, while Zhang Di, a Kuaishou vice president then identified as head of Kling AI, launched a creator support program tied to AIGC short films.

Kuaishou is separating the asset before the market decides how to value it

The spinoff structure gives Kuaishou two benefits. It raises dedicated money for compute and talent without forcing the entire cost through the public company's income statement, and it lets investors value Kling AI on an AI growth multiple instead of Kuaishou's core mix of advertising, e-commerce and live-streaming revenue.

That structure also introduces pressure. A separately capitalized Kling AI will have to show that its run-rate revenue is durable, that creators and enterprises renew paid usage, and that generation costs fall fast enough to support margins. Kuaishou's distribution can help seed usage, but AI video companies are competing on model quality, latency, price, IP controls and integration into production workflows. OpenAI's Sora, Google DeepMind's Veo family and ByteDance's Seedance make the same budgets more contested.

For Cheng, the $2 billion raise buys time and independence for the most closely watched product inside Kuaishou. It also puts a number on the market's willingness to fund China's AI-video companies even as their cost curves remain unresolved. Kling AI has revenue, usage and a parent with distribution. The financing asks investors to believe those advantages can become a standalone company before the public market applies the harsher math of AI infrastructure costs.