ByteDance’s first-half profit dips as AI spending soars

ByteDance's net profit in the first half of 2026 declined by a single-digit percentage to roughly $20 billion, even as the TikTok parent company's revenue surged approximately 30% year over year to $120 billion, according to The Information, which cited three people with knowledge of the financial results.theinformation

The profit compression underscores the mounting cost of ByteDance's push into artificial intelligence, a campaign that is reshaping the economics of one of the world's most valuable private technology companies.

AI Spending Eats Into Record Revenue

ByteDance's capital expenditures have ballooned as it builds out AI infrastructure at a pace rivaling American tech giants. The company spent roughly $20 billion on capex in 2025, most of it directed at AI development, and plans for 2026 are far more ambitious — potentially reaching $70 billion, according to Bloomberg. To help fund the buildout, ByteDance closed a $29.6 billion unsecured syndicated loan in September 2026 involving 28 banks.cryptobriefing+1

The first-half figures follow a bruising 2025, in which ByteDance's full-year net profit plummeted more than 70% from the prior year as it ramped up spending on computing power, infrastructure, and research across the AI chain, according to reports from Securities Times and Yicai. ByteDance had reported $33 billion in net profit in 2024.yicaiglobal+1

Token Rationing Hits Employees

The cost pressure is filtering down to rank-and-file workers. China's leading internet companies, including ByteDance, Baidu ↘ 0.11%, Alibaba ↗ 4.33%, and Tencent, have begun rationing AI tokens — the basic units of computing power used to process text or write code — after earlier encouraging heavy usage as a productivity metric, according to the South China Morning Post.scmp

At ByteDance, employees using closed-source AI models must now co-pay out of pocket. The company reimburses roughly half of external tool costs, capping annual payouts at around $1,000 for technical staff and interns, and $300 for non-technical employees, according to a staff member who spoke to the SCMP on condition of anonymity.scmp

A Bet on Long-Term Competitiveness

Despite the margin squeeze, ByteDance's top line continues to grow at a healthy clip, driven by strong international advertising and e-commerce growth from TikTok. The company was valued at $550 billion in a proposed share sale by General Atlantic in February 2026, a 66% increase from a previous valuation, according to Reuters.reuters+2

The tension between surging revenue and shrinking profits reflects a deliberate strategic choice — one shared across China's tech sector — to treat AI investment as essential to long-term competitiveness, even at the expense of near-term earnings.