Zhihu Inc. Q1 FY2026 earnings call

### Community and User Engagement - Average daily time spent per daily active user (DAU) reached ~42 minutes in 1Q26, growing on both a year-over-year and quarter-over-quarter basis, while daily active user coverage of positive interactions also grew year-over-year. - As of end-1Q26, cumulative content volume reached 972 million entries (up 8.8% year-over-year) and cumulative topics grew to 4.38 million (up 15.7% year-over-year); daily creation of high-quality content rose 18% year-over-year, with professional AI-related content growing over 30% year-over-year.

### Creator Ecosystem - The number of verified honored creators grew over 10% year-over-year, with more than 19 million AI-focused creators aggregated on the platform, forming a robust pipeline of potential 2B service providers; there was also notable influx of experts in frontier tech fields like commercial aerospace. - The 12th Zhihu Xinzhi Youth Conference held in May 2026 had on-site attendance exceeding 80,000, a new historical record, and focused on the value of human creativity in the AI era.

### AI Integration and Governance - AI capabilities are being integrated across content creation, discovery, consumption, and community interactions; the firm has entered the second phase of AI development, building an aggregated high-quality community data platform open to developers via MCP and skills, and an open platform with community APIs, including hosting the first AI hackathon. - A rigorous AI-generated content governance framework has been implemented; since the start of 2026, over 250,000 pieces of low-quality AI-generated spam content have been removed, and more than 11,000 violating accounts have been penalized to preserve the platform's authentic community atmosphere.

### Product Optimization - The short-form 'ideas' product was optimized to lower creation barriers and boost community vitality; future efforts will deepen synergies between the ideas product and the community Circle product to improve core user retention and total time spent.

### Financial Performance - Non-GAAP adjusted net profit turned positive in 1Q26 at RMB 17.2 million, up from a non-GAAP adjusted net loss of RMB 39.4 million in 4Q25, and an increase of 147.2% year-over-year from RMB 6.9 million in 1Q25. - Gross margin reached 59.6%, improving 6 percentage points sequentially from 53.6% in 4Q25, driven by prudent cost controls across content and cloud operations. - Total operating expenses decreased 10.4% year-over-year; R&D expenses fell 22.4% year-over-year due to improved R&D efficiency, and selling and marketing expenses decreased 11.1% year-over-year due to more disciplined marketing spending and lower personnel-related costs. - As of March 31, 2026, the company held RMB 4.5 billion in cash, cash equivalents, term deposits, restricted cash, and short-term investments.

Total revenue for 1Q26 reached RMB 651.6 million, with positive sequential growth and a narrowed year-over-year decline. The firm reclassified segments starting in 1Q26, merging IP-related revenue from the former 'Other revenues' into the new 'Paid content and IP operations' segment: 1. Paid content and IP operations: Revenue was RMB 402.3 million, representing 61.7% of total revenue. Revenue increased 15.8% sequentially, with average monthly subscribing members growing 7.9% quarter-over-quarter to 13.1 million. IP operations drove growth, with the number of IP partnerships growing more than fivefold year-over-year and more than doubling sequentially. 2. Marketing services: Revenue was RMB 191.4 million, representing 29.4% of total revenue, which was broadly flat year-over-year and showed sequential improvement. 3. Other revenues: Revenue was RMB 57.8 million, representing 8.9% of total revenue. The year-over-year decrease was primarily due to strategic refinements to the vocational training business; the expert data solutions segment within other revenues began generating revenue from leading enterprise clients in 1Q26.

- Management expects core businesses to see accelerated recovery through the remaining three quarters of 2026, while AI-related new initiatives will continue to gain traction and contribute meaningfully to overall growth. - The company will maintain a focus on strengthening operational profitability, improving execution efficiency, and driving high-quality growth in 2026, with no downward revision to prior profitability targets. - The full lifecycle commercial value of the firm's original IP is expected to be further unlocked as the AI short drama industry shifts from volume-focused growth to quality-focused growth. - AI-driven efficiency improvements are expected to reduce production costs for adapted content and improve profit margins for IP operations over time.

- Forward-looking statements involve inherent risks and uncertainties, and actual results may differ materially from management's projections, with additional risks disclosed in the company's public filings with the SEC and Hong Kong Stock Exchange. - Both AI-focused business lines (AI content/IP and expert data solutions) face industry competition and macro environment challenges that require long-term investment. - The company does not assume any obligation to update forward-looking statements unless required by applicable law.

Q: What is Zhihu's latest strategic thinking and roadmap for integrating AI with its community? A: Management states its core strategy has not changed: Zhihu's mission is to build a high-quality, trustworthy community centered on real human connections and cognitive improvement, not to treat the community as just an AI application scenario. AI is a tool to serve people, not an end goal. Current AI development is in phase two, with work on two fronts: building a cleaned, ranked high-quality community data platform open to developers, and launching an open API platform to empower external AI creators and engineers. The overall strategy follows the cycle of community content generating IP, which is extended to external users via new AI-powered formats.

Q: Why did the company reclassify IP revenue into the new paid content and IP operations segment, and what are Zhihu's competitive advantages in this business? A: The reclassification is not just an accounting change; it reflects the strategic upgrade from a single membership subscription model to full-lifecycle IP operation. This better showcases the full commercial value of the company's original content, which now extends beyond subscriptions to short dramas, comics, film/TV, and game adaptation. Zhihu has four key advantages: it is the leading player in China's premium short story track with a vast existing IP library ideal for adaptation, it has a mature creator ecosystem that enables creators to transition from novel writing to script adaptation, AI is accelerating IP monetization with surging partnership growth proving market demand for high-quality original content, and AI reduces production costs and improves profit margins for adapted content.

Q: Where will AI investments be allocated, and how will the company balance new AI investments with long-term profitability goals? A: Management maintains its focus on two high-priority AI verticals with healthy cash flow profiles: AI-powered short drama/comic IP monetization, which addresses user demand for AI-generated premium content, and expert data solutions, which provides high-quality community data to the broader AI industry. While these areas face competition and macro challenges requiring long-term investment, the company will not pursue a burn-cash-for-growth strategy, and will only invest to build core long-term capabilities that deliver fundamentally superior products, aligned with overall profitability goals.

Q: Given the improved profitability in Q1, is there any update to the company's shareholder return plans? A: The company remains firmly committed to its ongoing large-scale share repurchase program. Since 2022, Zhihu has repurchased a cumulative 63.5 million Class A ordinary shares for a total cost of US$130 million, making it one of the most active Chinese ADRs in terms of repurchase intensity. Year-to-date 2026, the company has repurchased 4.61 million shares for US$5.06 million, and all shares repurchased in 1Q26 have been fully canceled to deliver value to shareholders.