CICC has issued a research report stating that considering the increased investment gains for ZHIHU-W (02390), it maintains its outperform industry rating. Due to the upward shift in industry valuation center, the target price of HK$16/US$6.1 is maintained, both corresponding to 1.25x FY25 target P/S ratio, with upside potential of 25%/24% for Hong Kong/US shares respectively.

The company reported Q2 FY2025 revenue of 717 million yuan and Q2 FY2025 adjusted net profit of 91.34 million yuan, which exceeded expectations. This outperformance was primarily attributed to fair value changes related to the company's investment gains and effective cost control.

**Business Adjustments Show Initial Results, Potential Turnaround Expected in Upcoming Quarters**

Regarding marketing services, the company indicated that targeted structural adjustments have shown initial effectiveness. The optimization between advertising commercialization and community user experience has been achieved. Focus should be placed on the progress of advertiser structure optimization, with expectations that advertiser structure improvements and low base effects could drive year-over-year growth next year.

For paid membership services, ARPPU is expected to grow 3% year-over-year. The company emphasized during the earnings call that its strategic focus is on acquiring users with long lifecycle value. Attention should be paid to how new content formats such as voice live streaming, audiobooks, and audio dramas drive user engagement and payment conversion.

In professional training business, the company stated that operations are transitioning from a traditional model focused on core categories to a new model driven by social interaction and knowledge sharing.

**Deepening AI Integration into Community Ecosystem, Focus on Content Community Value in AI Era**

In Q2 FY2025, the company further upgraded its core AI product Zhihu Zhida, with the product's knowledge base function now supporting subscription and sharing features. The company reported significant improvement in Zhida's active usage penetration rate during the first half of the year.

Zhihu Zhida has evolved from a relatively independent AI search product to one that enables the integration of AI content with overall community content through multiple upgrades. Additionally, the company's content community value in the AI era is gradually emerging: 1) In AI content, the company mentioned during the earnings call that 3.65 million professional creators continue to participate in discussions about technology and AI. 2) Regarding overall community content, high-quality answer content is expected to become valuable data assets. According to Quantum Bit, AI intelligent assistants reference Zhihu more frequently than other content communities, suggesting potential monetization opportunities for quality content.

**Three Consecutive Quarters of Profitability with High Share Buyback Ratio**

In Q2 FY2025, the company's operating expense ratio decreased by 4 percentage points year-over-year. Investment gains of 140 million yuan were realized through fair value changes in invested enterprises, resulting in adjusted net profit of 91.34 million yuan, marking three consecutive quarters of adjusted profitability.

During 1H FY2025, the company repurchased 7.42 million shares, representing approximately 3% of total outstanding shares.