from Internal Project to $2 Billion Valuation: Kuaishou's KL AI to Spin Off and Seek Funding
Reported by Wu Yujia, Cover Reporter
On May 12, market sources indicated that Kuaishou plans to spin off its video generation large model project, KL AI, aiming for a $20 billion financing round at a $20 billion valuation, and is currently in talks with investors including Tencent. According to insiders close to the transaction, Kuaishou is indeed in communication regarding the $20 billion valuation financing. As of publication, neither Kuaishou nor Tencent has officially responded.
As a core project in China’s video generation large model sector, KL AI’s spin-off financing move reflects the development trend of the AI video generation industry and the deeper logic of capital deployment by internet giants.
KL AI is a video generation large model independently developed by Kuaishou's AI team. Since its launch in June 2024, it has rapidly iterated. The product uses a 3D spatiotemporal joint attention mechanism, supporting 1080p resolution and up to 2-minute video generation. It was the world’s first real-image-level video generation large model open to the public. In July 2024, KL launched public testing and introduced paid memberships, officially starting commercialization; in November of the same year, it launched an independent APP. In 2025, the model iteration accelerated significantly, successively releasing versions 2.0, 2.1, 2.5 Turbo, O1, and 2.6, and by January 2026, the 3.0 series model was already launched.
With product evolution, KL AI's strategic position within Kuaishou has continued to rise. In April 2025, Kuaishou established the KL AI Business Unit, upgrading it to a first-tier department on par with e-commerce, commercialization, and other core businesses, under the leadership of Senior Vice President Gai Kun, directly reporting to founder and CEO Cheng Yixiao.
From a commercialization perspective, KL has shown significant growth. Financial reports show that its revenue has continued to grow across all four quarters of 2025, totaling approximately 1.04 billion RMB (about 150 million USD) for the year, significantly exceeding the initial target of 60 million USD. Public data shows that by the end of April 2026, KL's ARR (Annual Recurring Revenue) had reached 500 million USD, doubling since the Spring Festival. Cheng Yixiao previously stated at the earnings meeting that KL's revenue is expected to double in 2026.
Currently, the global video generation large model industry has entered a critical phase of accelerated technical iteration and gradual commercial implementation. The video generation large model track shows a trend of market leadership consolidation and competition among giants. KL AI, with its rapid technical iteration and commercial implementation, has taken a leading position in both domestic and global markets, forming its own technical and user ecosystem barriers. Meanwhile, other domestic internet giants' video generation AI products and mainstream overseas video generation models are also leveraging their resources and technical advantages to capture the market. Industry competition is intensifying, with technical strength and commercialization capabilities becoming core competitiveness. KL AI, relying on Kuaishou's short video ecosystem, data resources, and creator base, has a natural advantage in industry competition, which is why its valuation and financing plans are closely watched by the capital market.
Notably, among the financing rumors, Tencent as a potential investor has drawn considerable attention. Industry analysts believe the investment logic mainly involves three considerations: first, strategic complementarity—although Tencent has its own large model, HunYuan, its market influence still lags behind KL, and investing can quickly bridge the technical gap and seize high-growth sectors; second, ecosystem synergy—Tencent is an early investor in Kuaishou, and both parties can form a closed loop of "Tencent's social ecosystem + Kuaishou's short video ecosystem + KL AI technology" to compete against ByteDance; third, B-end empowerment—KL's video generation technology can be applied to Tencent's advertising, gaming, and enterprise services, boosting its B-end growth.
From an internal project to achieving a $500 million ARR in two years, and now rumored to be seeking funding at a $20 billion valuation, KL's rapid growth reflects the current heat in the AI video track. However, the financing rumors still await confirmation. Whether Tencent will enter the picture, whether the valuation will be recognized by the market, and whether KL can maintain its leading position in technology and commercialization after independence—these are just the beginning of KL's challenges.
