iQIYI, Inc. (IQ) Earnings

Management highlights

### Core Content Business Reinforcement - Premium long-form content remains the strategy cornerstone; Q1 saw multiple hit dramas including *The Punishment 2* and *Pursuit of Jade* that exceeded 10,000 ITA popularity scores, and secured leadership in realistic and suspense genres. In-house variety shows topped market share rankings, and original animation offerings expanded. - Leveraging supportive domestic regulation that accelerated content approval, the company is expanding into lower-capital, shorter-cycle new formats: short-form dramas and internet feature films. Over 100 short-form dramas are planned for 2026, and expansion is structured to avoid increasing overall content cost pressure. - Original microdrama production contributed over half of Q1 microdrama revenue, and the AI-native microanimation library exceeded 14,000 titles by quarter end with steadily rising viewership. ### New Growth Engine Expansion - Overseas business is a proven second growth driver, with a differentiated positioning focused on premium Asian content targeted at young female demographics. The company is expanding presence in Southeast Asia and entering high-growth Middle East and Latin American markets, with Brazil as a key focus. - Q1 saw strong localized content progress: the first original Thai variety show *Running Man Thailand* set platform records, and the first original Indonesian drama is scheduled to premiere in Q2. Overseas microdrama revenue is growing with both original and licensed multi-language content. - Offline experience and IP merchandising are being scaled to extend IP lifecycle: the first Yangzhou ITE Land location accumulated operational experience, and new locations in Kaifeng and Beijing are progressing smoothly. ### AI & Long-Term Ecosystem Building - The company is building a decentralized social content ecosystem powered by AI, to expand content supply and enable creator monetization while creators retain full IP ownership. - NADO Pro, the proprietary AI-powered content production platform built on the company's content industry expertise and existing IP assets, launched to the public in April 2026. It offers one-stop services from creation to commercialization, and had over 10,000 active creators as of the call. - The company believes AI will improve industry business economics by reducing content costs and shortening production cycles, expanding margins and capital efficiency while enabling greater content diversity to capture broader audiences.

Guidance

- The company maintained its plan to launch over 100 short-form dramas in 2026 while steadily building out the internet feature film slate. - Q2 membership growth is expected to be driven by a deep premium content pipeline, dormant user reactivation, large-screen membership expansion with smart TV partners, and the June 18 e-commerce festival promotional period; management expects membership business to maintain a steady growth trajectory long-term supported by a consistent premium content pipeline. - The international version of NADO Pro is on track to launch soon, with full-cycle commercial features added to the platform in upcoming updates. - The company will continue incremental investment in high-growth overseas markets: core Southeast Asian markets (Thailand, Indonesia, Malaysia, Vietnam, Philippines), plus emerging high-growth markets including Brazil and North America, with a continued focus on localized content aligned with user preferences. - The Hong Kong main board proposed listing is in progress, and the $100 million share repurchase program effective through September 2027 remains active, with $8 million in repurchases completed as of the call.

Segment performance

Total revenue for Q1 2026 was 6.2 billion RMB, down 8% sequentially. 1. Membership services: Revenue reached 4.2 billion RMB, up 2% sequentially, contributing 67.7% of total revenue. Domestic membership revenue grew sequentially driven by premium content, and refined upselling strategies increased average annual subscription duration for monthly subscribers year-over-year. Overseas membership revenue grew over 40% year-over-year, with Indonesia up over 80% and Portuguese/Spanish-speaking regions up over 100% year-over-year. 2. Online advertising: Revenue was 1.2 billion RMB, down 8% sequentially, contributing 19.4% of total revenue. Brand advertising achieved double-digit year-over-year growth, with food & beverage, internet services and e-commerce all growing double-digit. Revenue from small and mid-sized performance advertisers saw strong year-over-year growth, and monetization efficiency for micro-dramas (measured by revenue per inventory unit) increased over 60% year-over-year. 3. Content distribution: Revenue reached 358.7 million RMB, down 54% sequentially, contributing 5.8% of total revenue, due to a lower volume of content distributed to third parties. 4. Other revenue: Revenue was 426.7 million RMB, down 22% sequentially, contributing 7.1% of total revenue. This segment includes the experience business, where first offline ITE Land in Yangzhou met performance expectations, and IP-based merchandise hit a sales record for its category.

Risks & headwinds

- Forward-looking statements are subject to general risks and uncertainties that could cause actual results to differ materially from current expectations, including the risks outlined in the company's SEC filings. - Prior to the recent regulatory crackdown, widespread copyright piracy posed a material risk to content monetization and investment incentives, though management expects the issue to be substantially mitigated following new regulatory enforcement.

Analyst Q&A

• Q: What is the recent progress of NADO Pro, and what are its commercialization prospects?

  A: NADO Pro is ITE's proprietary studio-grade AI production platform that integrates the company's years of industry know-how into AI agents, with internal creator tools like script evaluation now open to all industry creators. It launched publicly on April 20, 2026, and already has over 10,000 active creators producing content across long-form dramas, micro-dramas, commercials, and more, with ~100 projects for ITE original content. An international version is in development and will launch soon, commercial features are upcoming, and it will operate as a standalone monetized product going forward.

• Q: What progress has there been on industry copyright anti-piracy enforcement?

  A: In late April and early May 2026, China's National Radio and Television Administration launched a targeted crackdown on piracy across illegal websites, browsers, and cloud services, with strict new rules: platforms must remove infringing content within 24 hours of a notice, or within 4 hours for new hit titles, and repeat offenders are referred to law enforcement. This campaign will combine with the upcoming National Copyright Administration's 2026 special anti-piracy operation, and ITE has already seen significantly faster infringement takedown processing, with expectations of substantial long-term improvement.

• Q: Is the Q1 sequential membership growth sustainable, and what is the outlook for Q2 and beyond?

  A: Q1 growth was driven by strong premium content and refined upselling operations. Q2 has a deep content pipeline, with already launched Born with Luck surpassing 10,000 ITA popularity. Additional initiatives to drive growth include reactivating dormant users, expanding large-screen membership partnerships with TV manufacturers, and leveraging the 618 e-commerce festival to sell annual and bundled subscriptions. With a consistent premium content pipeline and ongoing operational optimization, management expects the membership business to maintain a steady growth trajectory.

• Q: What is the overseas investment strategy for high-growth Southeast Asia, and what are user preference differences between domestic and overseas audiences?

  A: The company will continue investing in core Southeast Asian markets, plus fast-growing emerging markets like Brazil. The core user acquisition and retention strategy remains focused on popular Chinese dramas targeted at young female users, with controlled incremental investment in local original content also focused on genres preferred by young female demographics. Carrier and e-commerce platform partnerships will be used to scale membership, and this strategy will be replicated across new markets. The core overseas audience is under 40, female, and overall revenue per user for overseas membership is higher than for domestic membership.