IQIYI outlines global micro drama push and AI-driven content innovation as overseas revenue surges 35%

Earnings Call Insights: iQIYI, Inc. (IQ) Q2 2025

MANAGEMENT VIEW

* CEO Yu Gong highlighted the company’s leadership in total drama viewership market share, stating that three original blockbusters each surpassed an iQIYI popularity index score of 10,000. Gong noted, “Our robust offerings were headlined by 3 original blockbuster dramas that generated an iQIYI popularity index score of over 10,000, namely FEUD, Coroner's Diary and This Thriving Land.” He emphasized strong performance across variety shows and the company’s success in both the female and realistic genres.
* Gong described expanding the “experience business,” leveraging the IP collection for consumer products and offline experiences, with two iQIYI Lands in development and over 50 immersive centers in 30 cities. He cited a milestone: “Our self-operated live table trading cards achieved over RMB 100 million in GMV.”
* The overseas business showed strong growth, with both subscriber base and membership services revenue reaching record highs across four major operating regions.
* CFO Jun Wang reported, “In the second quarter, the total revenues were RMB 6.6 billion. The membership services revenue reached RMB 4.1 billion, down 9% annually... The online advertising revenue was RMB 1.3 billion, decreased by 13% annually... The content distribution revenue reached RMB 436.6 million, down 37% annually... Other revenues increased by 6% annually to RMB 829.3 million.” Wang also noted disciplined cost management and ongoing debt optimization.

OUTLOOK

* Management anticipates ongoing growth in both the micro drama and overseas businesses, with Gong stating, “We plan to ramp up original micro drama production overseas in the second half of the year.”
* The company is committed to expanding its bundled membership initiatives and further leveraging AI for advertising and content production. Gong expressed a focus on “innovation and investing in key growth areas such as AI applications, micro dramas, experience business and global expansion.”
* In movies, iQIYI aims to build a vibrant ecosystem for original production via three key projects, and is set to release new theatrical and online titles in upcoming quarters.

FINANCIAL RESULTS

* CFO Wang reported total revenues of RMB 6.6 billion for Q2, with membership services revenue at RMB 4.1 billion, online advertising at RMB 1.3 billion, content distribution at RMB 436.6 million, and other revenues at RMB 829.3 million.
* Non-GAAP operating income reached RMB 58.7 million, with an operating income margin of 1%. The company reported cash, cash equivalents, and investments totaling RMB 5.1 billion as of quarter-end. Wang also noted, “We repurchased a total principal amount of USD 85 million of the 2028 notes for cash and outstanding principal balance remaining for the 2028 notes is USD 208 million.”
* Overseas membership revenue grew by around 35% annually, with standout performance in Brazil, Mexico, Indonesia, and five Spanish-speaking regions, each reporting annual growth over 80%.

Q&A

* Yifan Ye, CLSA: Asked about the impact of new long-form video industry policies. Chief Content Officer Xiaohui Wang responded, “The introduction of the new policies represent a significant positive development for the overall long-form video industry... the time cycle from content production and review to broadcast can be effectively shortened.”
* Xueqing Zhang, CICC: Asked for a review of summer content performance and future strategy. CEO Gong stated the company would “promote innovation in different aspects of the content production,” while Wang added, “We delivered outstanding performances across drama, variety shows, film and micro dramas. Three of our original drama blockbusters... all achieved iQIYI Popularity Index score of over 10,000.”
* Unidentified Analyst: Inquired about the experience business and market potential. Gong described the shift to self-operation for IP consumer products and an “asset-light approach” to offline experiences, with new locations in development.
* Thomas Chong, Jefferies: Asked about debt management. CFO Wang responded, “The capital structure now is pretty healthy enough to support our daily operations and also the long-term development and growth in the future.”

SENTIMENT ANALYSIS

* Analysts focused on regulatory change, content performance, offline strategy, and debt management, with a tone that was neutral to slightly positive and a focus on strategic execution.
* Management maintained a confident tone during prepared remarks, emphasizing leadership in content and innovation, and responded optimistically to questions. CEO Gong and CCO Wang both highlighted industry opportunities from regulatory changes and content success.
* Compared to last quarter, analyst tone remained neutral, while management’s tone was slightly more optimistic due to new policy benefits and overseas growth.

QUARTER-OVER-QUARTER COMPARISON

* Q2 highlighted a shift toward global expansion, with overseas membership revenue up 35% annually, compared to previous remarks that overseas business was still at a low percentage of total revenue.
* Management’s tone was more optimistic about regulatory changes and their potential to accelerate content cycles and reduce costs.
* Content performance focus continued, but this quarter added emphasis on AI-driven product innovation and the scaling of micro drama production, both domestically and internationally.
* Financially, total revenues decreased from RMB 7.2 billion in Q1 to RMB 6.6 billion in Q2, primarily due to a lighter content slate, while cost control and debt optimization continued.

RISKS AND CONCERNS

* CFO Wang cited macroeconomic pressures impacting advertising revenue and a lighter content slate as drivers for the annual revenue decreases in key segments.
* Management acknowledged that policy changes could impact the industry but positioned these as positive, with “greater creative freedom” and “shortened time cycles.”
* The company continues to invest in content and innovation, which may increase short-term costs.

FINAL TAKEAWAY

Management emphasized iQIYI’s leadership in both content creation and user engagement, supported by strong growth in overseas markets and micro drama formats. With regulatory shifts seen as an industry tailwind, the company is accelerating investment in AI and expanding its global content portfolio, while maintaining disciplined cost management and a robust capital structure to support future growth.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/iq/earnings/transcripts]

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