Xueqing Zhang

Xueqing Zhang asked about Bilibili's financial outlook, specifically inquiring about expected gross margin and net margin trends for Q4 and 2026, given the strengthening profitability. She also questioned the company's plans for cash allocation, considering its strong cash position.

Answer

CFO Sam Fan stated that gross profit margin improved for 13 consecutive quarters, expecting 37% in Q4 and maintaining a midterm target of 40%-45%. Adjusted operating margin is projected to reach 10% in Q4, moving towards a midterm target of 15%-30%. Regarding cash allocation, Mr. Fan outlined plans to support high-quality revenue growth (advertising), invest in new opportunities (like "Duckov" expansion and AI talent), and continue shareholder returns through the existing share repurchase program, with $83 million remaining.

Xueqing Zhang asked about the expected trends for gross margin and net margin in Q4 2025 and 2026, given the company's continuous profitability strengthening. She also inquired about the future allocation plans for Bilibili's substantial cash reserves.

Answer

Sam Fan, CFO of Bilibili, stated that the gross profit margin is expected to reach 37% in Q4 2025, with a midterm target of 40-45%. The adjusted operating margin is projected to improve to around 10% in Q4 2025, with a midterm target of 15-30%. Regarding cash usage, he outlined plans to support high-quality revenue growth (e.g., advertising), invest in new opportunities (e.g., reinventing games, AI talent), and continue shareholder returns through the existing share repurchase program, with approximately $83 million remaining.

Xueqing Zhang of CICC inquired about the primary drivers behind the accelerated growth in Bilibili's DAUs, MAUs, and user time spent, as well as the potential opportunities revealed by the record-breaking attendance at Bilibili World.

Answer

Management, via translator Juliet Yang, attributed user growth to the platform's focus on high-quality content and a supportive community, which they described as scarce resources in the current internet landscape. They noted that as users' content tastes upgrade, it's hard for them to revert, solidifying Bilibili's position. The success of Bilibili World, with over 400,000 attendees, was highlighted as a powerful offline manifestation of the brand's influence and its integration into the lifestyle of China's young generation.

Xueqing Zhang from CICC asked for management's expectations for the anniversary version of the game 'San Mou' and the growth outlook for the game business in the second half of the year, including the new game pipeline.

Answer

Rui Chen, Chairman and CEO, stated that the primary goal for 'San Mou' is a long-term, healthy lifecycle of five years or more, with a focus on user retention. He noted that Season 7 achieved a record DAU for 2025. The upcoming anniversary edition on May 31 is expected to elevate the game to a new level. Beyond 'San Mou,' the strategy includes launching an international version, sustaining legacy titles like 'FGO' and 'Azur Lane,' and developing 4-5 new games that are currently awaiting approval.

Xueqing Zhang from CICC questioned the outlook for Bilibili's gross profit and net margins for 2025 and the mid-to-long term, following the record 36% gross margin achieved in Q4.

Answer

CFO Sam Fan stated that the margin expansion was healthy and sustainable, driven by a higher revenue share from high-margin gaming and advertising businesses (54% of Q4 revenue) and improved operating leverage. He projected continued gross margin expansion in 2025, with a long-term target of 40-45%. Fan also noted that operating expenses have room for further reduction, reiterating a long-term non-GAAP operating profit margin target of 15-20%.

Xueqing Zhang asked about the company's profit margin outlook, specifically regarding the withholding tax issue mentioned by Cathy Peng, and whether this tax change is company-specific or an industry-wide policy shift.

Answer

CFO Cathy Hui Peng explained that MoMo's value-added services might face revenue and gross margin pressure in H2 due to tax scrutiny affecting performers and agencies, though policy adjustments aim to mitigate this. Tang Tang's profitability is expected to improve significantly due to cost savings and resilient revenue. For the group, domestic revenue is projected to decline low teens, offset by strong overseas growth (around 70% for the full year), leading to a flattish group top-line for 2025. Gross margin is expected to be at the lower end of the 36-37% range (compared to 39% in 2024) due to higher payout ratios for domestic agencies and mix shift. R&D will trend lower, while sales and marketing will increase for overseas growth. Operating margin is expected at the lower end of the 13-14% range. Regarding the withholding tax, she clarified that the tax authorities reinterpreted the applicable rate from 5% to 10% for dividends from the Mainland China royalty to its Hong Kong parent. She believes this scrutiny is not unique to Hello Group and could affect other companies with similar structures.

Xueqing Zhang inquired about the revenue outlook for the second half of 2025, potential changes in profit margins, particularly concerning the withholding tax issue, and whether this tax matter is company-specific or an industry-wide policy change.

Answer

Cathy Peng (CFO) outlined that MoMo's H2 VAS revenue may face pressure from tax scrutiny and macro factors, while Tang Tang's revenue is stabilizing with improved profitability. Group-level 2025 revenue is expected to be flattish or slightly down YoY, with domestic declines offset by strong overseas growth. Gross margin is projected to be at the lower end of the 36-37% range (vs. 39% in 2024) due to mixed forces including higher payout ratios for domestic agencies and mix shift towards overseas. Operating margin is also expected at the lower end of the 13-14% range. Regarding the withholding tax, Cathy explained an additional RMB 547.9 million was accrued due to a new interpretation by tax authorities requiring a 10% rate instead of the previously applied 5%. She believes this scrutiny is not unique to Hello Group and could affect other companies with similar structures.

Xueqing Zhang inquired about potential changes in profit margins, specifically regarding the withholding tax issue mentioned by the CFO, and whether this issue is company-specific or indicative of broader industry policy changes.

Answer

CFO Cathy Hui Peng discussed expected pressure on MoMo's VAS gross margins due to tax scrutiny on performers/agencies and adjustments to revenue sharing, while Tang Tang's profitability improved due to cost savings. She provided a group-level revenue outlook (low teens domestic decline, ~70% overseas growth, flattish group top-line) and updated gross margin guidance to the lower end of the 36-37% range for 2025, with operating margin also at the lower end of 13-14%. Peng elaborated on the withholding tax issue, explaining the shift from a 5% to 10% rate for dividends, and stated her belief, based on dialogues with advisors and authorities, that this scrutiny is industry-wide and not unique to Hello Group.

Xueqing Zhang from CICC inquired about the revenue growth slowdown for the Sochou app in Q1, asking about contributing factors like competition and consumption, and requested future revenue and profit guidance for the app.

Answer

A company representative, likely COO Sichuan Zhang, explained that the slowdown was due to a high prior-year comparison base, political unrest in the Middle East, and the timing of Ramadan. They noted that the market remains fragmented without significant competitive pressure. For profitability, the focus will remain on reinvesting profits into user acquisition with strict ROI control rather than prioritizing margin expansion in the near term.

Xueqing Zhang inquired about the significant sequential drop of 1.2 million paying users on Core Momo in Q4, its impact on revenue and profit, and the outlook for user recovery. She also asked about the effectiveness of past product adjustments and the overall financial forecast for Core Momo in 2025.

Answer

COO Sichuan Zhang explained the user drop was a deliberate strategy to cut spending on acquiring low-ROI users, which will benefit long-term profitability. She stated that major product adjustments are complete and the focus is now on cost savings. CFO Cathy Peng added that the core business remains resilient, supported by stable mid-tier users. She projected a low-teens revenue decline for the cash cow business in 2025, but a low single-digit decline for the group due to overseas growth, and guided for a group-level non-GAAP operating margin of 12-13%.

Xueqing Zhang from CICC inquired about shareholder return plans, specifically regarding the potential for a special dividend this year and future share buyback strategies, as the current program is nearing exhaustion.

Answer

CFO Cathy Peng stated that given the stock's significant undervaluation, share buybacks are a higher priority than dividends. However, since buyback volume is constrained by market liquidity, the company will consider a cash dividend for excess cash. She assured that if the current buyback authorization is used up, the board will likely approve a new program to continue enhancing shareholder value.

Xueqing Zhang of CICC inquired about the revenue and profit outlook for the core Momo app for the second half of 2024, its long-term strategy for live-streaming and value-added services (VAS), and the potential for top-line growth in 2025.

Answer

CEO Yan Tang explained that the company will continue its strategy of de-emphasizing revenue-oriented competition events in favor of a healthier ecosystem, which has impacted revenue as expected but yielded better-than-expected profits. He noted it is too early to comment on 2025 growth. CFO Cathy Peng added that the cash cow business is on track to meet its annual profit target, with a full-year adjusted operating margin in the high teens. She projected the Momo segment's full-year revenue decline to be in the 10% to 12% range, partially offset by robust growth in new overseas applications.

Xueqing Zhang from CICC inquired about Zhihu's future plans for its AI and large language model products, such as Zhihu ZhiDA, and their current progress.

Answer

CEO Zhou Yuan explained that Zhihu's AI progress is accelerating with industry-wide model innovation. He detailed the evolution of their AI agent, Zhihu ZhiDA, from an AI search tool to an AI search tool combined with a knowledge base. He noted that ZhiDA's penetration and usage are growing, and a significant experience update is planned for Q4 to further integrate AI into community scenarios.

Xueqing Zhang inquired about Zhihu's strategic AI plans beyond the 'Zhida' product, asking what other initiatives can be expected both within and outside the community.

Answer

CEO Zhou Yuan explained that Zhihu's AI strategy is centered on the formula: trustworthy content multiplied by the community expert network and AI capabilities. He stated that 'Zhida' is an initial entry point and the next steps involve integrating more experts through attribution features and aggregating content via public knowledge bases, starting with the Gaokao (college entrance exam) season. He also noted that agent-based technology could evolve the expert network's value beyond content.

Xueqing Zhang of CICC inquired about Zhihu's future AI initiatives beyond its 'Juda' product, asking what other developments can be expected both within the Zhihu community and for broader applications.

Answer

Founder, Chairman & CEO Zhou Yuan explained that Zhihu's AI strategy centers on the formula: trustworthy content multiplied by the community expert network and AI capabilities. He stated that upcoming initiatives will focus on integrating more experts into the network and aggregating high-quality content by launching public knowledge bases, with an initial focus on the Gaokao (college entrance exam) season.

Xueqing Zhang inquired about Zhihu's ability to maintain a stable user base while reducing promotional spending and asked for an update on the progress and potential commercialization of its AI search product, Zhihu Zhida.

Answer

CEO Zhou Yuan explained that the stable user base is a result of a quality-focused strategy that prioritizes core user retention through in-depth content cultivation. Regarding the AI search tool, Zhihu Zhida, he noted its successful PC launch and positive user retention trends. The current focus is on optimizing the model and user experience, with commercialization not being an immediate priority.

Xueqing Zhang of CICC inquired about Zhihu's timeline to achieve quarterly breakeven and the latest progress toward this financial target.

Answer

CFO Wang Han reaffirmed that Zhihu's profitability target remains unchanged, with the company expecting to achieve a quarterly non-GAAP net profit in the fourth quarter of 2024. He explained that the strategy prioritizes user quality over scale, leveraging Zhihu's high-quality content and creator base in the AI era to confidently make strategic adjustments and drive a notable reduction in losses, with more pronounced improvements expected from Q2 onwards.

Xueqing Zhang of CICC asked for more details on the shift in Yalla's user acquisition strategy during the quarter and the rationale behind the specific adjustments made.

Answer

COO Jianfeng Xu explained that following strong MAU growth in Q1, the company adjusted its Q2 strategy to focus on acquiring and retaining highly engaged users by refining channel evaluation. He stated that MAU growth is expected to normalize at 2-3% quarter-over-quarter starting next quarter, with a full-year target of around 10% year-over-year growth.

Xueqing Zhang inquired about the primary drivers behind the significant year-over-year increase in Yalla's Q1 net margin and asked for guidance for the upcoming quarter and the full year.

Answer

CFO Yang Hu attributed the strong net margin to revenue growth from game services and a significant decrease in selling and marketing expenses, which was enabled by an innovative AI model for user acquisition. Hu stated that a net margin of around 40% is a sustainable level for the business going forward.

Xueqing Zhang of China International Capital Corporation inquired about the development progress and commercialization expectations for Yalla's new gaming products.

Answer

Chief Operating Officer Jeff Xu responded that two self-developed mid-core games have completed initial development and are now in a fine-tuning phase. He noted the company is also actively pursuing external collaborations and anticipates these new games will begin contributing to revenue streams in 2025, with specific financial guidance to be disclosed in due course.

Xueqing Zhang from CICC inquired about Yalla's game business, asking for details on the new game pipeline, including testing and launch schedules, and the performance outlook for 2025. She also asked about the forward-looking strategy for flagship products Yalla and Yalla Ludo, and their expected revenue trends for Q4 and the upcoming year.

Answer

Jianfeng Xu, COO, addressed the gaming pipeline, stating that three self-developed mid-core games are in development, with some entering testing in Q4 2024. He projected stable, single-digit percentage growth for Yalla Ludo in 2025, with further upside dependent on new products. CEO Tao Yang added that both flagship products will continue to receive new features and events, and are expected to maintain their current scale with potential for single-digit growth in 2025.

Xueqing Zhang inquired about the latest operational developments in iQIYI's micro-drama business and the key strategic focus for its future.

Answer

CEO Yu Gong explained that iQIYI is successfully cultivating a user base for its 15,000+ micro-dramas, using a dual-app strategy: the main app for paid content and the iQIYI Lite app for free, ad-supported content. This has driven significant growth in user time spent and stickiness. Mr. Gong highlighted the cost-effectiveness of original productions, with top-tier titles costing under RMB 2 million and achieving strong revenue-sharing results. Future plans involve producing more high-quality content, increasing user acquisition investment, and expanding monetization through advertising and e-commerce.

Xueqing Zhang of CICC inquired about the latest developments in iQIYI's micro drama business and the key strategic focus for its future growth.

Answer

CEO Yu Gong explained that iQIYI has successfully cultivated user habits for micro dramas through a dual-app strategy, with the main app for paid content and the iQIYI Lite app for ad-supported free content. He highlighted significant growth in user time spent and the success of original productions, noting that top-tier titles can achieve over RMB 1 million in revenue sharing within a week on a cost base under RMB 2 million. Future focus will be on producing more high-quality content, increasing user acquisition investment, and exploring monetization through advertising and e-commerce.

Xueqing Zhang from CICC inquired about iQIYI's 2025 content pipeline, asking for details on the quality of upcoming titles and how many have the potential to become blockbusters, following a strong start to the year.

Answer

Chief Content Officer Xiaohui Wang responded, confirming a strong start with 'Drifting Away' surpassing a 10,000 popularity index. He stated the 2025 goal is to increase both the quality and share of premium content, with a significant year-over-year increase in top-tier dramas. The company will focus on its two main pillars, suspense and female-oriented content, and also invest in the realistic genre, listing upcoming titles like 'Breaking the Shadow', 'Fox Spirit Matchmaker', and 'What a Wonderful'.

Xueqing Zhang inquired about iQIYI's strategy for integrating mini and short dramas into its content ecosystem, asking for more details beyond the prepared remarks.

Answer

CEO Yu Gong explained that mini-dramas (1-5 minutes, vertical) and short dramas (5-20 minutes, horizontal) are a strategic complement to long-form content. He noted the rapid growth of the mini-drama market and iQIYI's innovation of adding a subscription model, allowing members to watch most mini-dramas for free to boost retention. The content strategy will leverage licensing, co-rights, and profit-sharing to develop a premium, unique iQIYI-branded style.

Xueqing Zhang of CICC asked about the key metrics for new game approvals and the pipeline for the next 1-2 years. She also followed up on plans for international esports operations after 'Identity V' and 'Naraka' were selected for the 2026 Asian Games.

Answer

CEO William Ding, via interpreter Bill Pang, explained that the primary criterion for new projects is the core team's passion for gaming and their specific idea. He assured that the pipeline for the next couple of years is strong with unannounced products. Regarding esports, he noted the Asian Games selection is a testament to game quality and player base, and NetEase will continue its long-term investment in esports operations, utilizing its large stadiums in Hangzhou and Shanghai.

Xueqing Zhang from CICC asked about NetEase's overseas studio strategy and plans for globalizing its studio games, referencing the performance of 'Once Human'. She also inquired about the continued strong performance of flagship evergreen games like 'Fantasy Westward Journey Mobile'.

Answer

Executive Bill Pang detailed NetEase's dual strategy for global markets: overseas studios creating games for local markets and domestic studios developing titles for global release, such as the upcoming 'Marvel Rivals'. He affirmed that both approaches are yielding successful content. Regarding evergreen titles, Pang emphasized that the company's core strategy is continuous innovation, consistently adding new gameplay and content to franchises, some of which are over a decade old, to maintain player engagement and longevity.

Xueqing Zhang from CICC inquired about the company's capital allocation plans, focusing on the newly announced cash dividend and share repurchase program, and what to expect for the future payout ratio.

Answer

CFO Min Hu described a dual strategy of investing in growth areas (content, tech) while increasing shareholder returns. She highlighted the company's track record with two completed buyback programs and announced a new $1 billion repurchase plan, reflecting strong confidence. She also noted that the new dividend is a 'significant improvement' in absolute value, underscoring a commitment to returning capital to shareholders as profits grow.

Xueqing Zhang from CICC inquired about Weibo's future strategy for AI applications, noting the successful integration of the DeepSeek model and its positive user experience.

Answer

Executive Gaofei Wang detailed Weibo's AI strategy, which involves integrating multiple large language models to enhance core products. He noted that using DeepSeek for intelligent search has already increased MAU usage by 40% in test groups and will be rolled out to all users in the current quarter. Wang also mentioned that AI is being applied to monetization, showing several percentage points of improvement in performance-based ads, with further testing underway for brand-based advertising.