Zhihu Inc. Q2 FY2025 earnings call

• Posted third consecutive quarter of non-GAAP profitability; adjusted net income Q2: RMB 91.3 million vs. loss of RMB 44.6 million same period 2024. Gross margin expanded ~3 percentage points year-over-year.
• User metrics: daily time spent up 15% y-o-y, core user retention improved, daily high-quality content creation up over 10% q-o-q. AI-related content growth: professional AI content up over 45% for 2 consecutive quarters.
• Suppressed low-quality content distribution by over 98% y-o-y and 59% q-o-q. Partnerships with AI companies (e.g., Moonshot AI, ByteDance, Zhipu AI) to launch and discuss technologies.
• Paid membership: Focus on enhancing user stickiness, expanding premium content formats (e.g., Yanyan story voice live streaming, long form writing Marathon). IP licensing revenue tripled.

Marketing Services

• Second quarter revenue: RMB 222.8 million, up 13.1% quarter-over-quarter, year-over-year decline narrowed. Cracked down on low-quality marketing content, reducing its consumption by over 90% year-over-year. Expanded B2B client base, gaming ad spend up fourfold, client base expanded 75%.

Paid Membership

• Average monthly subscribing members: 13.2 million, revenue: RMB 402 million, slight sequential decline (3.8%) due to focus on acquiring users with longer life cycles. Yanyan story features (e.g., voice live streaming) growing, IP licensing revenue tripled year-over-year and quarter-over-quarter.

Vocational Training

• Revenue: RMB 62.1 million, down 34.3% quarter-over-quarter. Operating profit up 90% year-over-year. Transitioning to a community-driven model to foster deeper social engagement and knowledge sharing.

• Marketing services: Expected to recover stronger in H2, expanding commercial potential. Focus on optimizing client structures and upgrading commercial products.
• Paid membership: Focus on improving renewal, retention, and ARPU; expanding premium content formats and exploring media/long-form content.
• Vocational training: Continue efficiency and profitability focus, transitioning to community-driven model.
• Share repurchase: Firm commitment to enhance shareholder returns; repurchased shares in open market and through trustee, with plans to continue in H2.

• Forward-looking statements involve inherent risks and uncertainties; actual results may differ from views expressed. Risks related to financial performance, market adjustments, and challenges in AI integration and content monetization.

Q: Does the company have any new plans regarding AI and large language model related products, and how to think about current progress?

A: Over the past quarter, integrations of many new models (open source and closed source) are ongoing. Zhihu Zhida has evolved through stages, with knowledge-based entries becoming shareable/securable. Q4 plans to deliver significant experience updates.

Q: Share color about current user matrix for Zhihu Zhida, value of authentic UGC, opportunities and challenges?

A: Zhida penetration with the community continues to grow. UGC is valuable as trust currency in AI era. Opportunity is scaling trust through formula of trusted content × expert network × AI capabilities.

Q: Growth outlook for marketing service, paid membership, and vocational training business, and full-year profitability?

A: Marketing services nearing end of adjustment phase, expected to stabilize and recover. Paid membership focus on retention and ARPU. Vocational training on efficiency and profitability. Full-year non-GAAP profitability near breakeven.

Q: How to anticipate shareholder returns going forward?

A: 10% share repurchase authorization approved. Ongoing share repurchases in open market and through trustee. Expect to remain significant in U.S.-listed Chinese companies for share repurchases.