iQIYI, Inc. Q4 FY2025 earnings call

2025 focused on strengthening core business. Long-form dramas secured number one market share. Made breakthroughs in IP franchise development. Overseas business is a second growth engine. Membership services revenue up over 30% y/y. Experience business in critical stage. Q4 content performance: long-form dramas strong, movies diverse, variety shows set benchmarks. 2026 Q1 content strategy outlined. Advertising revenue grew y/y and q/q. Technology innovation with AI agent platform, virtual production tech. Overseas business saw robust growth. Experience business focused on IP consumer products and IT labs.

In Q4, total revenue was 6.8 billion RMB, up 2% sequentially. Membership services revenue reached 4.1 billion RMB, down 3% sequentially due to seasonality. Online advertising revenue was 1.4 billion RMB, up 9% sequentially. Content distribution revenue reached 787.7 million RMB, up 22% sequentially. Other revenues were 547.9 million RMB, down 6% sequentially. Content cost was 3.8 billion RMB, down 5% sequentially. Total operating expenses were 1.4 billion RMB, up 2% sequentially. Non-GAAP operating income was 143.5 million RMB, with an operating income margin of 2%. As of the end of Q4, cash, cash equivalents, etc. totaled 4.7 billion RMB, and there was a loan of 636.6 million U.S. dollars to PAG recorded under prepayments and other assets.

2026 to focus on strengthening domestic core, sustaining strong growth in overseas and experience business, leverage AI to revolutionize content production, build AIGC ecosystem.

Forward-looking statements subject to risks and uncertainties outlined in SEC filings, which may cause actual results to differ materially from expectations.

Q: Recently, AI video production models have been constantly upgrading, such as C-DANCE 2.0 and similar models have basically reached the film industry level. I would like to ask Manager Chen to share how this will affect iQIYI, especially in terms of content production and cost reduction, and what plans iQIYI has in this regard.

A: Video models significantly reduce the cost of video production and shorten production time. And it will also create a threshold for some newbies to be able to do a good long-term content. So its impact is to let more people enter the long-term business. That will inevitably lead to a large increase in the number and quality of long-term customers. As a long-term media platform, IT is very good for IT.

Q: Please share the company's 2026 overall content strategy planning, such as the key priorities across different genres, including drama, variety shows, film and micro drama, etc., and how to consider self-produced and licensed content.

A: Given the current volume of in-production dramas, we will slightly reduce the number of dramas to be produced in 2026. and place greater emphasis on top-tier titles in terms of their quality. In terms of the realistic and suspense crime genres, And these content categories have been IPE's strength, in fact. And in these areas, we'll continue to maintain our innovation to create new content and more creative content, and then maintain our advantage in these areas. At the same time, since the beginning of 2025, we have paid special attention to increasing the supply of female-oriented content.

Q: What is the business plan and strategy of the AICI in 2026 for the overseas business?

A: In 2025, membership revenue grew by over 30%, with annual growth rate actually accelerating to 40% in the second half of the year. 2025 marked our highest growth rate year since the overseas business entered a stable operating state. For 2026, our strategy is to sustain high revenue growth rate or even accelerate our growth rate. In terms of the content strategy, our market-tailored content mixes actually have proven effective and continue to attract users. But for sea dramas, they continue to expand their influence overseas. And the sea dramas will remain at the core of our overseas content portfolio, especially genres with strong cross-culture appeals, such as ancient costume romance and contemporary romance.

Q: Could management share the operating performance of IQ Lend Yangzhou since it's opening? Also, can you please share the 2026 plan for this business?

A: Yangzhou is a good business, including Chen Ningchi's stage, strong theater, Our very first IT event actually opened in Yangzhou on February 8th and offers seven core immersive experiences, including stage performances, multi-sensory theaters, interactive light and shadow spaces. It has been less than 20 days since the opening of the store, especially after experiencing the long-term price of the whole business. The overall effect is in line with the expectations of the users, and the payment is relatively positive. It is reflected in the main OKA platform, and the score is more than 4.8. Today, some platforms have already reached 4.9, and they are full. For 2026, we will focus more on the self-operated IP consumer products, and the operations will be strengthened this year, and this will lead to a revenue potential growth of 100% this year.

Q: I still care about the development of our overseas, and I also saw that very good results were achieved in 2025, so I also want to understand the distribution of our overseas content, which is currently mainly the self-produced dramas translated and distributed globally. Then I don't know how to think about the profit margin of our overseas business compared with the domestic membership business, and whether there are some, for example, in the overseas membership up pool.

A: In terms of our content, our brand or our slogan is the beloved Asian content. So we focus not only Chinese content, but Also, the Asian content as well. Of course, Chinese content, which we call C-pop or C-drama, is our foundation because all the content has been already produced for our domestic business. So we only have to incur some of the dubbing and also translation, which is the cost. With AI, it's much more efficient and controllable. But in addition to C drama and also Chinese content, we also have, for example, Japanese animation, also Korean dramas, and also the local content, for example, for the Thai region, Malaysia, and also Indonesia. So this is how we set apart from many of the Western players overseas. And for example, the Netflix and other houses, they host a lot of the Western content, whereas For us, we are a home of the developed Asian content. Then I would like to add something about VG, which is the VG of the digital screen. Since last year, we have gradually launched some digital screen VGs overseas. At present, the digital screen VGs are ranked second in our entire streaming category, and the growth rate is very fast. During the period of time, its overall income and market share have gone up. This is also a very important category in contrast to other video platforms at present. Okay. Also, I want to add real quickly in terms of another content genre called microdrama. We actually, this is something we wrote out end of last year. And in terms of the content viewing time contribution, microdrama already ranks as number two content genre categories of the overseas platform. It has been growing quickly and also very Recently, for the Chinese New Year, it has experienced rapid growth as well and reached a new high. So this is something else also that set us apart from the Western players in overseas markets. The second question is about membership and process. This is different for each country. We set different prices for each country or region. It's a middle position. It's a little cheaper than some of the most expensive video platforms, but it's a little higher than some of the cheaper ones, but it's in the middle. In the same way, it has a great deal to do with the local pricing and consumption level in different countries. It's very different from some relatively more developed countries in the West, or its pricing will be much higher than the domestic pricing. And in terms of a question regarding ARPU and also membership performance, for ARPU, actually, for each region, it's actually different. Overall speaking, we would think we're at the mid-range of the price tier. For each different region, we expect a different price sense. For areas more developed, similar to the Western spending powers, the ARPU is a bit higher from the China domestic region. And for the developing regions, for example, like the Southeast Asia, the average ARPU is a bit lower than the China domestic region. But overall speaking, I will say that overseas ARPU will be greater or more than the China domestic airport. And in terms of the membership retention, in overseas business, we adopt the premium model, which is the free plus paid content model. And in areas such as more developed regions, I will say that this is very much similar to their spending habit and the retention is actually a bit better than domestic areas. But in some of the areas such as the developing regions, the retention performance is a bit lower. But overall speaking, the overall membership retention is similar to domestic levels. Thank you. Thank you. In terms, we're adding the performance for the financial aspect. Overall speaking, the free cash flow now is positive in terms of the P&L performance for operating income because there's some financial accounting that we still have to sort out. Now we haven't disclosed the exam numbers, but we will share more insights as we have more clarity. Okay, thank you. Thank you. Thank you.