Zhihu’s Earnings Call: Mixed Results Amid AI Progress

Zhihu, Inc. ((ZH)) has held its Q3 earnings call. Read on for the main highlights of the call.

Zhihu’s Latest Earnings Call: A Mixed Bag of Achievements and Challenges

During Zhihu, Inc.’s latest earnings call, the sentiment was a blend of optimism and caution. The company celebrated significant strides in narrowing non-GAAP operating losses and advancing AI integration, alongside a notable increase in high-quality content creation and paid memberships. However, these achievements were tempered by declines in total revenues, marketing services revenue, and gross profit, coupled with an increase in GAAP net loss. While there is confidence in achieving full-year profitability, the current quarter presents a mixed picture of strengths and weaknesses.

Narrowing Non-GAAP Operating Loss

Zhihu reported a 16.3% year-over-year reduction in non-GAAP operating loss for the third quarter. This improvement highlights the company’s enhanced cost control and operational efficiency, reflecting its strategic efforts to optimize its financial structure.

Increase in Daily High-Quality Content Creation

The company saw a substantial 25% year-over-year increase in the daily creation of high-quality content. This growth was even more pronounced in AI-focused content, which surged by over 30% compared to the same period last year, underscoring Zhihu’s commitment to content excellence.

Growth in Paid Membership

Zhihu experienced an 8.1% sequential rise in average monthly paid members, reaching 14.3 million. This growth translated into a revenue of RMB 386 million, indicating a successful expansion of its paid membership base.

AI Integration Advancements

Significant progress was made in AI integration, with the penetration rate of Zhihu Zhida surpassing 15%, nearly quadrupling from the same period last year. This advancement highlights Zhihu’s focus on leveraging AI to enhance user engagement and platform functionality.

Increase in Creator Activity

The number of verified honored creators grew by 29% year-over-year, with a 7.5% quarter-over-quarter increase in creator activity within the humanities category. This uptick reflects a vibrant and active creator community on the platform.

Decrease in Total Revenues

Total revenues for the quarter fell to RMB 658.9 million from RMB 845 million in the same period of 2024. This decline was primarily attributed to decreases in marketing services and paid membership revenue.

Decrease in Marketing Services Revenue

Marketing services revenue decreased to RMB 189.4 million from RMB 256.6 million in the same period of 2024. Despite this decline, the year-over-year decrease showed signs of narrowing, suggesting potential stabilization.

Decrease in Gross Profit and Margin

Gross profit for the quarter was RMB 403.6 million, down from RMB 540.1 million in the same period of 2024. The gross margin also fell to 61.3% from 63.9%, indicating challenges in maintaining profitability levels.

Increase in GAAP Net Loss

The GAAP net loss for the quarter increased to RMB 46.7 million compared to RMB 9 million in the same period of 2024, highlighting ongoing financial challenges.

Forward-Looking Guidance

Zhihu’s financial outlook remains positive, with expectations to achieve full-year non-GAAP profitability in 2025. The company continues to focus on enhancing its community ecosystem, AI integration, and content governance mechanisms, while exploring new monetization avenues. This forward-looking guidance reflects Zhihu’s strategic priorities and confidence in its growth trajectory.

In summary, Zhihu’s latest earnings call presented a complex picture of achievements and challenges. While the company has made significant progress in several areas, including AI integration and content creation, it faces ongoing financial hurdles. The forward-looking guidance suggests optimism for future profitability, but the current quarter underscores the need for continued strategic focus.