ByteDance's revenue in the first half of the year was close to that of Meta, but its profits fell to $20 billion due to its investment in AI.

ByteDance is at a crossroads between its expansion and profit pressure. While the company's revenue grew strongly in the first half of the year, nearly matching that of Meta, its massive AI investments are eroding profitability, resulting in a profit decline rarely seen in recent years.

According to a report by tech media outlet The Information, three sources familiar with the matter revealed that ByteDance's net profit in the first half of this year fell by a single-digit percentage year-on-year to approximately $20 billion ; revenue increased by approximately 30% year-on-year, reaching approximately $120 billion . Meanwhile, Meta's revenue also grew by 30% in the first half of the year, reaching $117 billion—the two companies' revenue scales are now almost equal, but their market capitalizations differ significantly: Meta's market capitalization is approximately $1.7 trillion, while ByteDance is valued at $630 billion according to estimates from secondary market trading tracking firm CapLight.

The core driver of the profit decline is the sharp increase in AI spending. ByteDance recently completed its largest-ever bank loan of approximately $30 billion, with some of the funds expected to support its continued expansion of AI infrastructure investment. Meanwhile, TikTok's US operations, following a data security architecture restructuring in January, are accelerating their e-commerce expansion, providing significant support for overall revenue growth.

Revenue growth accelerated, and TikTok's overseas contributions continued to increase.

ByteDance's revenue growth of approximately 30% in the first half of the year is slightly faster than its expansion pace over the past two years. According to sources familiar with the matter, the company's full-year revenue grew by 29% to approximately $200 billion last year, with a similar growth rate expected in 2024; net profit grew by 27% to $42 billion last year.

Overseas revenue is steadily increasing. According to reports, an insider revealed that overseas revenue accounted for over 30% of ByteDance's total revenue in the first half of the year, with the vast majority coming from TikTok; this proportion was only 25% in 2024, and is expected to remain around 30% for the whole of 2025. While Douyin remains ByteDance's largest source of revenue, TikTok's weight in the overall revenue structure is continuously expanding.

In January of this year, ByteDance sold an 80% stake in TikTok's US data security business to a US-controlled joint venture, while retaining the app's revenue-generating operations. According to a previous report by The Information, following this restructuring, TikTok is ramping up its e-commerce efforts in the US, launching new projects to attract established brands to TikTok Shop.

AI investments erode profits, massive loans fuel expansion

AI spending is the direct cause of the current profit pressure. ByteDance has independently developed large language models and video generation models. Its AI assistant, Doubao, is one of the most popular mobile AI applications in China; its Seedance video generation model is a leader in the global AI video market. In addition, the company is actively expanding its AI cloud business, selling its self-developed models to enterprise customers.

At the chip level, ByteDance is continuously striving to secure procurement channels for existing advanced chips. Meanwhile, according to a May report by The Information, the company has been independently developing dedicated chips for AI model inference. To support these investments, ByteDance recently completed approximately $30 billion in bank loans, setting a record for the largest single financing round in the company's history.

On the commercial front, ByteDance launched Work, a workplace AI assistant for professional users, in June this year, offering a paid subscription plan; the company also hopes that the market popularity of Seedance video models will bring more revenue to its AI business and cloud platform.

Domestic AI competition is heating up, and ByteDance is sticking to its self-developed approach.

ByteDance faces strong pressure from domestic competitors in the AI arena. In the past few months, Moonshot, Alibaba, Z.ai, and DeepSeek have successively launched open-source models, demonstrating near-cutting-edge capabilities in programming and intelligent agent tasks at a significantly lower cost than mainstream US models, quickly gaining widespread attention globally. In contrast, ByteDance has lagged behind in this competition.

In response to the gap, ByteDance founder Zhang Yiming made it clear at an internal meeting in July that the company would not adopt the "distillation" method—that is, using the output results of cutting-edge American models to train its own models—even if it means falling behind domestic competitors in the short term.

ByteDance is also the only major model vendor in China that keeps the vast majority of its models closed-source , with enterprise customers primarily accessing the models through its own cloud platform.

Meanwhile, domestic competitors are also accelerating their fundraising efforts to bet on AI: Alibaba is seeking to raise approximately $10 billion through a large-scale share placement for AI infrastructure construction; Z.ai launched a $5 billion equity and convertible bond issuance plan this week.

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