Kuaishou Technology, a major rival to ByteDance Ltd. that owns a popular short-video platform in China, said it expects tighter regulations to hurt its revenues, adding that it would try to weed out undesirable content that authorities have frowned upon.
The Hong Kong-listed shares of Kuaishou tumbled 10% on Thursday, after the Beijing-based company reported a loss equivalent to $1.1 billion for the second quarter, which ended in June.
While Kuaishou’s revenues jumped 49% to nearly $3 billion in the second quarter, firm Chief Executive Su Hua warned during an earnings call Wednesday that cyberspace regulations, including China’s newly-passed privacy law, could dent Kuaishou’s revenue in the short term as the company adapts to the changes.
Kuaishou, which means “fast hand” in Chinese, operates a namesake app that allows users to share short videos, stream live broadcasts and shop online, similar to ByteDance’s Douyin and TikTok apps. Kuaishou said 293.2 million people used its flagship app at least once a day during the second quarter, and each daily user spent an average of 107 minutes on it.
The company, which counts Tencent Holdings Ltd. as one of its main backers, went public in February after raising $5.4 billion from global investors in one of the largest initial public offerings by a Chinese technology company in recent years.
After surging early on, Kuaishou’s shares have been on a long decline, losing more than three-quarters of their value over the past six months—placing them among the worst performing Chinese internet stocks this year.
As of Thursday, Kuaishou’s market capitalization was about $37 billion, down from more than $220 billion in mid-February, according to FactSet. The company has been accumulating red ink and its loss in the recent quarter was mainly a result of expenses that it incurred for sales and marketing as well as research and development.
Last month, China’s cyberspace regulator summoned Kuaishou and several other internet companies and chastised them for having sexually suggestive videos of minors and other inappropriate content on their platforms. The firms were fined, ordered to rectify the problems and close illegal accounts. In May, the cybersecurity watchdog also found that Kuaishou’s apps were illegally collecting users’ personal data.
On Wednesday, Mr. Su said Kuaishou will rein in live-streaming broadcasters who he said “seek quick profits and are unfriendly to the public, their followers, the platform and the merchants.”
“We will resolutely crack down and educate them on these behaviors. This work will take lots of time,” he said. The company will also comply with China’s data-security requirements.
Following the results, analysts at China Renaissance Securities lowered their revenue forecasts for Kuaishou, and said new regulations would likely result in slower growth in advertising revenue and e-commerce sales.
Kuaishou is among the tech companies that are challenging the dominance of Alibaba Group Holding Ltd. and JD.com Inc. in China’s online retail sector. Overall e-commerce transactions via Kuaishou’s app doubled in the second quarter to the equivalent of $22.45 billion, the company said.
Both Kuaishou and ByteDance have been trying to lure more merchants to sell products on their respective platforms, whose large user numbers have proved a big draw. ByteDance achieved roughly the equivalent of $77 billion in e-commerce sales in 2020 and both companies are expecting to double their numbers this year, according to people familiar with the matter.
This story has been published from a wire agency feed without modifications to the text
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