Hello Group Inc. Q2 FY2026 earnings call

• Domestic Strategy: MoMo is maintaining its 'cash cow' status through refined operations and product innovation. Tantan is focusing on AI-driven user experience improvements to enhance matching efficiency and monetization.
• MoMo Performance: Paying users increased by 200,000 QoQ to 3.9 million. Revenue declined due to tax scrutiny impacting agencies and weak consumer sentiment, but showed sequential recovery after subsidies were introduced.
• Tantan Updates: Focused on AI features like 'AI Icebreaker' and photo-based matching to improve retention. User base stabilized for the first time since marketing spend reductions began in early 2022.
• Overseas Growth: MENA region showed strong recovery post-Ramadan. New products Yachalan and Amar are growing rapidly, with combined revenue approaching that of flagship product Socio. Yachalan reached net income break-even.
• Developed Markets: Happn expanded into neighboring European markets with encouraging initial results, validating long-term growth potential.
• Global Shift: The overseas portfolio has shifted from single-product reliance to a diversified matrix, providing greater resilience against geopolitical and regulatory risks.

Total Revenue: 2.49 billion RMB (down 5% YoY, up 4% QoQ). Domestic Revenue: 1.81 billion RMB (down 17% YoY, up 1% QoQ), representing 73% of total revenue. Overseas Revenue: 673 million RMB (up 52% YoY, up 13% QoQ), representing 27% of total revenue. Adjusted Operating Income: 276 million RMB with an 11% margin.

• Q3 2026 Revenue: Expected between 2.4 billion RMB and 2.5 billion RMB, representing a 5.7% to 9.4% year-over-year decline.
• Full-Year Outlook: The original 3 billion RMB overseas revenue target for 2026 is considered 'a stretch'; management plans to reduce this target by 100-200 million RMB to balance top-line growth with bottom-line health.
• Margin Target: Management maintains that the low-teens adjusted operating margin target for 2026 remains achievable, contingent on successful cost optimization in personnel and sales/marketing expenses.

• Macro Spending Pressure: High-net-worth users in China are significantly reducing discretionary spending on social entertainment due to weaker wealth expectations.
• Regulatory & Geopolitical Issues: Tax scrutiny continues to pressure domestic agency models; geopolitical tensions in the Middle East and app store removals in Turkey have impacted MENA operations.
• Payment Channel Costs: Geographic shift toward international operations, which have higher payment channel fees, pressures gross margins.
• Film Production Losses: Additional losses recognized from film production activities impact overall profitability.

Q: Why does Q3 domestic revenue guidance show a wider YoY decline than previously expected? / A: Management cited consumption downgrading among high-spending users due to macroeconomic uncertainty. While DAUs remain stable, top-tier users are spending less. Consequently, the company is shifting focus to deepening social connections for these users rather than pushing immediate transactions, leading to a revised outlook where domestic declines widen in H2.