Kanzhun's Q1 2025 Earnings Surprise: Signal or Noise in a Tight Revenue Market?

The online recruitment sector in China has long been a bellwether for labor market health and corporate confidence. Kanzhun Limited (NASDAQ: BZ; HKEX: 2076), the operator of BOSS Zhipin—the country’s leading recruitment platform—delivered its Q1 2025 earnings on May 22, 2025, offering a critical snapshot of this dynamic sector. While the results included a notable non-GAAP earnings beat, the revenue performance raised red flags. This dichotomy—profit outperformance amid muted revenue growth—demands scrutiny. Is Kanzhun’s margin-driven success sustainable, or is the company papering over structural challenges in a slowing job market? Let’s dissect the data.

The Earnings Surprise: Margins, Not Miracles

Kanzhun’s Q1 2025 results revealed a stark contrast between its top and bottom lines. Revenue of RMB1.91 billion (US$262 million) barely matched the low end of its guidance range, marking a mere 11.5% year-over-year (YoY) growth, a sharp deceleration from its historic 70% CAGR. Meanwhile, non-GAAP adjusted net income surged 43.9% YoY to RMB763.9 million (US$105 million), driven by a 36% adjusted operating margin, up 13 percentage points from Q1 2024.

The key takeaway: Profitability gains are structural, not one-time. Unlike many peers that rely on temporary gains (e.g., asset sales, tax benefits), Kanzhun’s margin expansion stems from operational discipline—not tricks. The exclusion of share-based compensation (a recurring non-GAAP adjustment) highlights cost control and efficiency in its AI-driven platform. As CFO Phil Yu Zhang noted, the margin jump reflects “operational leverage and disciplined expense management.”

Revenue: The Elephant in the Room

While margins shine, revenue growth has stalled. The 11.5% YoY increase falls far short of the company’s historical growth trajectory. This raises two critical questions:
1. Is the slowdown a temporary reflection of China’s post-pandemic labor market volatility, or a sign of structural saturation in the online recruitment space?
2. Can Kanzhun’s expansion into Southeast Asia and emerging sectors (e.g., healthcare, education) offset domestic headwinds?

Analysts point to sector-wide challenges. China’s job market, while stabilizing, remains cautious. Companies are prioritizing cost-cutting over hiring, with the government’s focus on tech innovation and manufacturing over service-sector expansion. Meanwhile, Kanzhun faces intensifying competition from incumbents like Zhaopin and 51job, which are also investing in AI and data analytics.

Margin Strength: A Double-Edged Sword

The margin expansion is undeniably impressive. The adjusted operating margin of 36%—up from 23% in Q1 2024—suggests Kanzhun is monetizing its user base more effectively. Its AI-driven platform reduces sales costs by automating candidate-employer matches, while direct communication features boost user engagement.

However, this efficiency comes at a cost. Revenue growth is inherently tied to market demand. If China’s job market weakens further, Kanzhun may face a trade-off: maintain margins by cutting costs (e.g., marketing, R&D), or reinvest to grow revenue at the expense of profitability.

The Non-GAAP Debate: Why It Matters

Critics argue that excluding share-based compensation—RMB252 million in Q1 2025—paints an overly optimistic picture. GAAP net income rose only 2.9% YoY to RMB512 million, underscoring the reliance on non-cash adjustments. Yet, share-based compensation is a recurring expense tied to talent retention, not a one-time blip.

The company’s defense holds weight: these adjustments isolate operational performance from equity incentives. Still, investors must ask: Can Kanzhun sustain margin gains if revenue growth remains tepid?

The Buy Case: Margins as a Lifeline

Kanzhun’s earnings signal a strategic shift: prioritizing profitability over growth. This could be prudent in a slowing economy. Its 36% operating margin now rivals global peers like LinkedIn (Microsoft), which operates at similar levels. Meanwhile, its Southeast Asia expansion—already live in Hong Kong and Singapore—offers a new revenue stream, insulated from China’s volatility.

Analysts’ “Buy” ratings (UBS, Morgan Stanley) and a median $16.50 price target reflect this optimism. At its May 22 close of $14.20, the stock trades at a 12.5x forward P/E, well below its IPO price of $21.50.

The Risk: Revenue Stagnation

The risks are clear. If China’s job market weakens further, or if Kanzhun’s expansion falters, revenue could stagnate indefinitely. A prolonged slump would force the company to choose between eroding margins or shrinking market share.

Final Verdict: A Cautious Buy

Kanzhun’s Q1 results are a mixed bag. The margin expansion is real and sustainable, but revenue execution leaves much to be desired. For investors, this is a high-risk, high-reward call:

• Buy if:
• China’s labor market stabilizes.
• Southeast Asia expansion gains traction.

• Margins hold above 30% despite revenue headwinds.

• Avoid if:

• Revenue growth slips below 10% YoY in 2025.
• Regulatory hurdles (e.g., data privacy, job-posting compliance) escalate.
• Competitors undercut pricing aggressively.

Final Thought

Kanzhun’s earnings reveal a company in transition: from growth-at-all-costs to profitability-first. This shift could pay off if the job market stabilizes, but it’s a gamble. Investors should consider a small position, with stops below $13.50 and an eye on Q2 revenue trends. For now, the margins are the signal—but the revenue noise remains deafening.