Summary of Key Points
The stock price of Kunlun Wanwei has risen significantly recently (over 20% in 5 trading days), mainly due to the annual revenue target (ARR) of its TianGong AI business exceeding $800 million. However, the company has been in losses for two consecutive years (2024 and 2025), with another loss of 887 million in Q1 of 2026, accumulating a total loss of over 4 billion yuan. The traditional valuation methods (PE based on profit or PS based on revenue) are no longer valid. The market now uses the ARR from the AI business as a new benchmark for valuation. Additionally, Kunlun Wanwei owns the Opera browser (which provides stable cash flow) and the StarMaker community (an overseas social platform), so its market value needs to be calculated separately for these segments. Although there are debates about the valuation logic of the AI business's ARR (since short-term dramas do not have fixed contract agreements), the rapid growth and strong user payment habits make it acceptable to the market. The reasonable overall market value is conservatively estimated to be between 41.7 billion and 63.4 billion yuan. If the AI business's ARR meets the expected target of 1 billion yuan, there is still room for a 30% increase in value, but the risk of verification through the mid-year report needs to be considered.
Detailed Analysis
1. The "Trigger" for the Stock Price Rise: What Exactly Is the $800 Million in ARR?
In simple terms, ARR represents the money that can be reliably earned over the next 12 months. For example, if you pay 100 yuan per month to watch short-term dramas and continue doing so for half a year, the platform can estimate that you will likely pay around 1,200 yuan in the next 12 months; this amount contributes to your ARR. Kunlun Wanwei's $800 million in ARR means that, if the current payment pattern persists, the AI business could generate $800 million (about 5.6 billion yuan) in revenue over the next year.
Why has this figure caused such a surge in the stock price? Previously, due to consecutive losses, investors lacked a reliable valuation standard. Using profit-based metrics (PE) was ineffective because of losses, and using revenue-based metrics (PS) was problematic due to fluctuations in revenue. Now that the AI business's ARR has doubled from 400 million to 800 million in just half a year, it provides a new basis for valuation. The market recognizes this growth as legitimate.
2. Kunlun Wanwei's "Three Business Segments": Which Is Profitable, and Which Is Losing Money?
Kunlun Wanwei is not solely an AI company; it has three main segments:
- Opera Browser (68.68% stake): With 284 million monthly active users globally, it generates revenue from search and advertising, earning 4.379 billion yuan in 2025 (a 28% increase year-over-year), providing a stable source of cash flow.
- TianGong AI Segment: The entire $800 million in ARR comes from this segment, which includes short-term dramas, AI tools for businesses and developers, and games. Revenue in 2025 was 2.369 billion yuan (a 251% increase year-over-year), but it is also the most capital-intensive, with expenses such as acquiring new users and developing AI models.
- Starmaker Community: The overseas version of a karaoke platform with a focus on Southeast Asian and Middle Eastern users generated 1.059 billion yuan in 2025 (a slight decrease), representing a stable but slow-growing revenue stream.
These three segments contribute 75% of the company's total revenue, with Opera and StarMaker forming the foundation, while the AI segment is the growth driver. Although it currently does not generate profit, it has the potential to become the main source of earnings in the future.
3. Is Valuing the AI Business Based on ARR Reliable?
There is debate about whether short-term dramas, which do not have fixed contract agreements, should be included in the ARR calculation. The arguments in favor are:
- User Payment Habits: Monthly revenue from short-term dramas has increased significantly, with prepaid payments also rising (by 166 million yuan in Q1), indicating user willingness to continue spending.
- International Examples: AI companies listed on the US stock market (such as C3.ai and SoundHound) use ARR for valuation, and even though they are loss-making, they still have a market value. For example, SoundHound's high ARR growth due to long-term contracts with car manufacturers contributes to its market value.
- Domestic Acceptance: In China, companies like Zhipu AI, despite losing 470 million yuan, had a market value of over HK$1 trillion when its ARR reached 1.7 billion yuan, showing that the market accepts this valuation method.
However, since Kunlun Wanwei's short-term drama revenue is not secured by contracts, its valuation needs to be adjusted downward.
4. How Much Market Value Can the $800 Million in ARR Support?
The market value needs to be calculated for each segment:
- AI Business Valuation: Comparing with similar companies, C3.ai (with negative growth) has a PS of 5.6 times, SoundHound (with high growth and long-term contracts) has a PS of 17 times, and the Indian short-term drama platform Kuku (subscription-based) has a PS of 10.8 times. Kunlun Wanwei's short-term dramas have moderate certainty, so its PS would be between 6 and 10 times. With $800 million in ARR, the valuation would range from 32.5 billion to 54.2 billion yuan.
- Other Business Valuations: The Opera browser segment is valued at 8.4 billion yuan, and the StarMaker segment at 800 million yuan.
Overall Reasonable Market Value: Conservatively estimated at 41.7 billion to 63.4 billion yuan. If the AI business's ARR reaches the expected target of 1 billion yuan, the total market value would be between 49.8 billion and 76.9 billion yuan. The current market value of 59.3 billion yuan leaves room for a 30% increase.
5. Is It Time to Invest Now? Two Risks to Consider
- Expectations Being Met Too Soon: The market is already speculating about the $1 billion in AI ARR, which may have driven up the stock price prematurely. If subsequent data (such as the mid-year report) shows increased losses or higher spending, the valuation could be adjusted downward.
- Data Verification Risk: Is the growth of the AI business sustainable? For example, could users suddenly stop paying? Will the content continue to attract new users? These questions need to be answered by the mid-year report. If sales expenses (for acquiring new users) continue to rise or losses do not improve, the stock price might fall.
In summary, there is potential for short-term gains, but investors should closely monitor the mid-year report and avoid making hasty decisions based on unverified information.
Disclaimer: This article is for reference only and does not constitute investment advice. Investment should be made with caution.