iQIYI Inc. Earnings Call: Growth Amid Challenges

Iqiyi Inc ((IQ)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call of iQIYI Inc. painted a generally positive picture, highlighting robust revenue growth across various segments, particularly in membership services and international markets. Despite these gains, the company faces challenges with declining advertising revenue and rising costs, alongside financial constraints affecting its overseas business expansion.

Sequential Revenue Growth

The first quarter of 2025 saw iQIYI’s total revenues climb to RMB7.2 billion, marking a 9% sequential increase. This growth underscores the company’s ability to enhance its financial performance, even amid challenging economic conditions.

Strong Performance in Membership Services

Membership services emerged as a key driver of iQIYI’s success, with revenues rising by 7% sequentially to RMB4.4 billion. This increase was largely fueled by the popularity of long-form dramas, which continue to attract and retain subscribers.

Content Ecosystem Expansion

The expansion of iQIYI’s content ecosystem has been significant, particularly in the micro drama segment. The company has grown its portfolio to over 15,000 titles, resulting in a remarkable increase in daily viewing time and unique visitors, up by over 300% and 110%, respectively.

International Revenue Growth

International markets have become an increasingly important revenue stream for iQIYI, with a year-over-year revenue increase of over 30%. This growth is accompanied by a rise in the average daily number of subscribing members, indicating successful penetration in regions outside Mainland China.

Debt Reduction and Financial Management

In a strategic move to strengthen its financial position, iQIYI reduced its outstanding principal balance of convertible bonds from RMB2.9 billion in Q1 2023 to RMB1.17 billion. This reduction has led to a 30% decrease in net interest expenses year-over-year, reflecting effective financial management.

Advertising Revenue Decline

Despite overall revenue growth, iQIYI experienced a 7% sequential decline in advertising revenue, which fell to RMB1.3 billion. This decrease is attributed to macroeconomic pressures and seasonal factors affecting the advertising sector.

Increased Content and Operating Costs

The company’s content costs rose by 10% sequentially to RMB3.8 billion, driven by an increase in premium drama productions. Additionally, total operating expenses saw an 8% sequential rise due to heightened marketing spending, reflecting iQIYI’s commitment to expanding its content offerings.

Limited Overseas Financial Resources

While iQIYI’s overseas business has shown rapid growth, it faces limitations due to financial resource constraints. This challenge underscores the need for strategic financial planning to support continued international expansion.

Forward-Looking Guidance

Looking ahead, iQIYI is focused on enhancing its content ecosystem, particularly through long-form and micro dramas, and leveraging AI to improve user experience. The company remains optimistic about its overseas market growth, which saw a 30% year-over-year revenue increase, though its contribution to total revenue is still modest. iQIYI plans to continue investing in content and user acquisition to sustain future growth.

In summary, iQIYI’s earnings call highlighted a positive trajectory in revenue growth and membership services, alongside strategic content expansion and international market penetration. However, challenges in advertising revenue and cost management, coupled with financial constraints in overseas operations, present areas for careful navigation. The company’s forward-looking strategies aim to capitalize on its strengths while addressing these challenges.