iQIYI Pursues Strategic Transformation with AI and Decentralized Content Ecosystem
iQIYI reports Q2 revenue of RMB 6.3 billion, narrowing non-GAAP operating loss to RMB 130.3 million
iQIYI, a leading online entertainment service provider, has reported its second-quarter revenue of RMB 6.3 billion, up 1% sequentially. The company's non-GAAP operating loss narrowed 8% from the prior quarter to RMB 130.3 million, bringing it closer to breakeven.
Financial Results and Cash Flow
The company's financial results show a mixed picture. Membership services revenue totaled RMB 4.0 billion, down 4% sequentially, primarily due to seasonality. Online advertising revenue was RMB 1.2 billion, unchanged from the first quarter. Content distribution revenue rose 90% sequentially to RMB 681.5 million, driven by increased distribution revenue related to drama series.
| Revenue Category | Q2 Revenue | Q1 Revenue | Change |
|---|---|---|---|
| Membership Services | RMB 4.0 billion | RMB 4.2 billion | -4% |
| Online Advertising | RMB 1.2 billion | RMB 1.2 billion | 0% |
| Content Distribution | RMB 681.5 million | RMB 357.5 million | 90% |
| Other Revenue | RMB 344.9 million | RMB 415.5 million | -17% |
Content costs were RMB 1.8 billion, up 2% sequentially. Total operating expenses were RMB 1.1 billion, down 6% sequentially, reflecting disciplined marketing spending. Net cash provided by operating activities increased to RMB 339.6 million from RMB 186.4 million in the first quarter. Cash, cash equivalents, restricted cash and short-term investments totaled RMB 4.1 billion at quarter-end.
AI and Creator-Economy Push
iQIYI is pursuing a strategic transformation centered on decentralizing its content ecosystem and expanding the use of artificial intelligence across production and distribution. Founder and CEO Yu Gong said the company is using AI to lower barriers to content creation and increase content supply beyond what traditional centralized media models can efficiently accommodate.
The company has refreshed its iQIYI Creator Center and seen an increase in daily average uploads across various content categories, rising between 30% and 500% in the second quarter compared with the first quarter. Daily views for micro dramas and micro animations in June rose by double digits compared with March.
iQIYI is using AI in live-action production as well as AI-generated content. Gong said AI use in the rough-cut workflow for its original series Her Prime Season 2 produced a tenfold improvement in rough-cut efficiency compared with traditional methods. For formats more suited to AI-generated production, he said AI can reduce production costs and timelines by 70% to 90% versus traditional processes.
Content Performance and Membership Initiatives
iQIYI maintained the top market share in long-form dramas, films and children’s content, according to Enlightent Data. In short-form dramas, the company’s market share doubled from 25% in March to 50% in June, reaching the top position for the first time.
The company cited the original title The Fireman: 10th Anniversary as a contributor to the short-form performance, saying the title reached a peak daily market share above 60%. Gong said short-form titles may offer lower per-minute costs and shorter production-to-approval timelines than long-form dramas.
In membership operations, iQIYI said targeted discounts for students and teachers helped lift quarter-end subscribers in that cohort by more than 60% year over year. Its express packages were offered across 16 dramas during the quarter, with total participants rising nearly 80% year over year.
International Business Growth
Overseas membership revenue grew 40% year over year in the second quarter and the segment remained profitable on a managerial accounting basis. Membership revenue in Brazil and Mexico increased more than 215% and 150%, respectively, while revenue in Arabic-speaking markets rose 85%. Overseas micro-drama membership revenue grew more than 300% year over year and was the company’s second-largest membership-revenue contributor after long-form dramas.
