iQIYI is set to release its fiscal year 2025 third-quarter earnings report pre-market on November 18th. According to projections from Tiger International APP, iQIYI anticipates revenue of RMB 6.615 billion in the third quarter, an approximate year-over-year decrease of 8.68%. The expected loss per share stands at -$0.241, with a year-over-year decline of about 345%.
Review of Last Quarter's Performance
For Q2, iQIYI reported revenue of RMB 6.628 billion, down 11% year-on-year. The company swung from profit to loss, with a net loss of RMB 134 million compared to a profit of RMB 68.7 million in the same period last year. Non-GAAP net profit significantly decreased to RMB 14.7 million, contrasting sharply from RMB 246.9 million a year ago.
Performance of Core Businesses
Member Services Revenue: As iQIYI's primary revenue source, member services revenue was RMB 4.09 billion, a 9% decrease year-on-year. Though this segment constitutes a large part of total revenue, it continues to face downward pressure, particularly regarding content updates and subscription conversions.
Advertising Revenue: Advertising remained weak, with second-quarter revenue of RMB 1.27 billion, down 13% year-on-year. Despite the potential boost from economic recovery, iQIYI's advertising segment continues to struggle with sluggish budget returns and advertisers demanding higher efficiency.
Content Distribution Revenue: Content distribution revenue sharply decreased by 37% to RMB 437 million, impacted notably by rising content licensing costs and weakened external demand.
Quarter Outlook: Member Revenue and Advertising Recovery Remain Critical, Content Cost Control Influences Profitability
Balance Between Member Revenue and Content Costs
Member services remain crucial for iQIYI’s profitability recovery. Market expectations are that iQIYI will maintain strong supply in head content to drive subscription retention and new user conversion. Simultaneously, the content launch pace will directly affect gross margin performance. If the content mix focuses more on self-produced dramas and lower copyright-cost series, gross margin is likely to improve; conversely, overdependence on high-cost series might continue to exert pressure.
Moreover, member ARPU (Average Revenue Per User) and net membership additions will be key metrics investors are watching. If these figures don’t show a significant rebound, the outlook for profit recovery will be questioned.
Recovery and Structural Optimization of Advertising Business
Advertising recovery will be another focal point this quarter. Although last quarter's advertising revenue fell short of expectations, if the macro consumer market rebounds and brand budgets return, iQIYI’s advertising revenue could improve sequentially. Enhanced conversion rates in feed ads and multi-scene ads might boost ad display efficiency and subsequently elevate eCPM (Effective Cost Per Mille).
However, advertising recovery faces challenges, especially in terms of series popularity and ad product matching. Expected improvements in advertising may reflect structural adjustments rather than a long-term trend reversal.
Diversified Business and Cash Flow Management
Besides core businesses, iQIYI's diversified revenue sources (including content distribution, copyright sales, and technology licensing, etc.) have substantial implications for cash flow. This quarter, expansion in overseas copyright sales or distribution through partner platforms might contribute additional revenue and improve cost structure. Furthermore, cost optimization and enhanced production efficiency are expected to aid the company in alleviating depreciation and amortization pressure, improving operating cash flow.
Nonetheless, market expectations for EBIT turning positive remain cautious, with many investors looking for improvements in content mix and commercialization efficiency to gradually narrow losses and reduce net profit volatility.
Analyst Viewpoint: Uncertainty in Profit Recovery Path, Short-term Challenges Persist
Recent analyst opinions reveal substantial uncertainty concerning iQIYI's future outlook. Particularly amid rising content costs and limited advertising budget rebound, many agencies express low confidence in short-term profit improvement. Some analysts highlight that despite the high proportion of member revenue, ARPU increase and membership growth need robust content support, with current content launch pace defining gross margin recovery potential.
Furthermore, advertising recovery depends heavily on market demand revival and iQIYI's innovations in advertising products. Still, market predictions suggest iQIYI’s profit improvement in the short-term is likely to be slow, with EBIT and EPS potentially remaining in negative territory.
This content is generated based on tiger AI data and is for reference only.