iQIYI (IQ) Q2 2026 earnings call transcript

Thank you, operator. Hello, everyone, and thank you for joining IPE's second quarter 2026 earnings conference call. The company's results were released earlier today and are available on the company's investor relations website at ir. ite. com. On the call today are Mr. Yugong, our founder, director, and CEO, Mr. Yingjian, our CFO, Mr. Xiaogui Wang, our CCO, Chief Content Officer. Mr. You Chao Duan, Senior Vice President of our membership business, Mr. Xiang Ha Yang, Senior Vice President of International and Online Game Business, and Mr. Gang Wu, Senior Vice President of Brand Advertising Business. Mr. Gong will give a brief overview of the company's business operations and highlights, followed by me, who will go through the financials. After the prepared remarks, the management team will participate in the Q&A session.

Before we proceed, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U. S. Private Securities Litigation Report Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but I'm now lamenting to those outlined in our public filings with the SEC. IQIYI does not undertake any obligation to update any forward list statement except as required under applicable law. I will now pass on to Mr. Gong. Please go ahead.

Hello everyone. In the second quarter, we continued to reinforce our core business. High quality, diversified content powered by powered industry leading performance. According to enlightened data, we maintained the number one market share in each of the long-form drama, film, and children's content categories. And for short-form drummers, we made a major breakthrough reaching number one market share for the first time improved. Financial performance also improved quarter over quarter. Total revenues grew sequentially, and our long gap operating loss narrowed substantially. Approaching break-even, we are fully announcing our strategy, strategic transformation.

First, we are shifting from a centralized media to a decentralized, creator and user-centric social media ecosystem. AI can dramatically lower the cost and barrier the content creation, turning what was a niche professional activity into a mass capability and triggering and parallel a search in content supply. Because traditional centralized models cannot accommodate this scale and diversity, we are upgrading our content acquisition and distribution mechanism to efficiently connect creators and audiences.

Second, we are taking an all-in approach on AI to revolutionize both live action production and pure AITC. Our guiding principle is clear, maximizing cost efficiency without compromising quality. Together, these two pillars reinforce each other like a flywheel. AI drives rapid growth in content supply, which helps us move faster toward a decentralized model. As we decentralize, more creatures can participate, users get more engaged, and our platform becomes even stronger. In Q2, both strategies move from claims to measurable results over time. They will structurally improve our content cost, revenue quality, profitability, and cash flow. Let me walk you through the progress. For decentralization, we are improving our platform and accelerating the creator ecosystem. In April, we flashed our call creator hub.

The iQIYI, IcE, creator center, early signs are promising the number of creators and uploads are all trending higher. Content with short production cycle, lower production scale, and a good fit for AI-driven creation has seen especially strong growth. For various types of content, the daily average number of uploaded works in the second quarter increased by 30% to 500% compared to the first quarter. In June, daily views for micro-dramas and micro-animations will up by double digits compared with much. Short-form dramas and animation are also gaining traction.

Looking ahead, more long-form video categories will join the decentralized content ecosystem as we preserve IT's premium content advantage. We will broaden our content slate by adopting lighter, more flexible content acquisition models.

On content production, AI is substantially optimizing production efficiency and cost structure. First, in live action, AI is streaming the entire workshop workflow. For example, we leverage AI in our variety show for Prime Season 2 to achieve a 10-fold leap in rough color efficiency compared to traditional methods.

Second, for content tests well suited to AIGC, AIGC production can reduce production costs and timelines by 70% to 90% compared with traditional measure, while pushing past the physical limits of live action shooting. Naturally, AI adoption is faster in Android CG-having formats. We have launched a multiple AI-generated internet features field. A major milestone was the July primewars premiere of Mystic Tale, the industry's first AIGC internet feature film to launch with an internet drama and a field distribution lesson. This marks the official shift of long-form AIGC from technical testing to center line.

Large-scale production, in addition, here today, we have launched 16 AI-generated short-form drummers under a revenue-sharing model, with Trill Handmaid as the top-performing title. In the second half of the year, we have launched a diversified slate of AIGC titles, including multiple IT-invested fields, with an even broader pipeline across expanded categories next year. Currently, we have multiple AI-generated short-form drummers in development. NatoProm is our pseudo-grade production platform for creators. It rests on optimized third-party and in-house models, plus IT long-standing expertise in professional content. By replacing costly steps with lower compute and tool cost, it lowers barriers and speeds up professional content production. Our strategy is clear. Internally, NadoPro has development and production costs. Externally, NadoPro explores new revenue streams and gradually converts our professional production capabilities into incremental revenue.

Now, the process isn't generally AI output. It changes the key parts of non-form production, script writing, shop design, workflows, digital assets, editing, and dubbing into platform features. It delivers an end-to-end workflow in next talent with content assets and makes progress repeatable and reusable. I will try it involving from a tool into a comprehensive greater ecosystem. It links content demand with creators and enables them to realize commercial returns. So, I'm glad to be here. We will improve content production efficiency, lower unit costs, and increase both users and revenue. As we roll them out across all operations and scale, we expected their contributions to profit and cash flow to steadily materialize.

Now, let's move on to the detailed performance in Q2. Let's start with content. Our premium content is well recognized by users and the industry. At the Magnolia Award with Jun, one of China's top TV owners, by Yulanjia, IGE titles and their creative teams won 14 of 23 awards, including 10 of 11 in the drama category, well ahead of pairs.

In Q2, our content performed well across formats. In long-form dramas, we continue to focus on female-centric stories. With the hair, Jiayi, ranking among this year's top two titles by Ad Revenue, we also reinforce our lead in suspense song general innovation. The suspense committee formed with luck, Gigi Shang-Chan, surpassed the 10,000 iQIYI popularity score and drawn strong membership sign-ups.

Well, in support, in support, So Ye Jiang Shi from our iQIYI suspense theater earned strong reviews. Our original title, Archives the Nanyang Mystery, Nanyang, exceeded 9,300 popularity index scores, and the non-exclusive, the Epoch of MiYu, MiYu Qi, topped 8,500. In place supported strong-form drummers, typically 15 to 25 minutes per episode with flexible episode counts. We delivered exciting early results. For enlightened data, our market share doubled from 25% in March to 50% in June.

Taking number one for the first time the strong performance was supported by all original The Fireman 10th Anniversary which reached a peak daily market share of about 60 Short-form titles can offer structural advantages over long-form drummers, potentially reducing average per minute costs by over 50% and shortening production to approval timelines by 30% to 50%. In micro drummers, we released a premium live action titles like All About Sacred Carey Lead, Falling for You, and Phoenix Blade. All resulted well with audiences. AIDC scaled quickly under revenue sharing model, accounting for over 50% of all micro-physelial and unique visitors in June, while AI native micro-animations expanded with strong sequential growth in views and time-stack. In films, we maintained a diversified slate of different audiences.

Originals like the counterfeit Weichao Dong'an, the thin train, Ju-U, received positive feedback. We are licensed to our article, his practice, the three feature in the show, the place of the garden, the one. Zoom top here too, we are also well received on our platform. In a variety of shows, we launched the seven originals in Q2 with our flagship from Chasis delivering the sustained value five hearts, WUHA crossed a popularity index score of 9,000, reaching a new franchise high. For 10 years, Evergreen IP, the Rep of China, May 26, also stood out, surpassing a popularity index score of 8,800. In animation, we further solidified our original offers, the long-draining against the goals. Iqian Xie Shen with pre-mail in April, topped all animation popularity in DexChats, and brought notable platform users back to IT.

Together with the booth ruler, we now have two long-running titles to keep users engaged year-round. Finally, in children's content, we enforce our leadership with the return of our original IP SQL, Dell Squad, and the localized adoption of the BBC Classic, Teletubbies.

Next, let me show our pipeline for the second half of the year. Our summer long-form drama features a diversified lineup, which includes multiple female-oriented titles like Road to Success, Cairo Penxing, Key to the Phoenix Park, Chue Gu, Overdue, Zhe Miao, Guohua, Genius Girlfriend, Kiancai Yu, Spring of the Blade, with Yu Chun, or Beast, Shen Yuan Wu Jian, and in my prime, Shong Kong Qi Shi, complemented by the military theme, Windblown Warriors, Bing Cong Feng Zhonglan, and the major realistic drama forging justice, Song Qi. For the remainder of the year, we will premiere the Great Long March, Changzheng, Hikoneng, Hayao Dao Shunji, Small Town Remedy, Xiaocheng Yangfeng, and River of No Return, Yang Ding Shui.

As for short dramas, our upcoming releases include Dead of Winter, in Dongxiangde Zuiwe, The Five Groups of Fatal Case, the Six Groups of Fatal Case, Zuan Lozun, and The Great Nobody 2. In films, our pipeline features original theoretical films including Winter and Summer, Yilu Chau Tingan, No Go to the Child, Si Wang Jing Qu Shilu, and Probation for Mitzvah. In the second half of the year, on the last step front, our pipeline includes the formation prompt and the furious this summer with I know who you are, but so dare you, and I'm not a king shu, and the crossing to do for the later half of the year. For internet feature films, which are limited to a maximum of three chapters, each at least 60 minutes long, our pipeline includes multiple AITC titles based on the classic IP, the Pyramid, Ying-Hun Baidu.

The first two chapters, A Butterfly Dream and The Dream of Celestial Madden, are set to launch this summer. Additionally, audiences can also enjoy a strong map of live action titles including Mortal Game and Speed and Battle.

Shifting to variety shows by a deepening audience engagement with established IPs, including the Wrap of China 2026, the King of Santa comedy season 3, Xi Ju Zhivang Dan Kouji, and Her Prime 2 this summer, followed by the Blooming Journey Blue Fan Hwa 3. And the weather together to, 宇宙闪烁请注意, in the second half. For animations, this year could be iQI's strongest animation summer today. The line of feature, a good day to SM. And to be a winner, Cheng Ye Xiao He alongside the AIGC titles, The Legend of King Hongwu,天子傳奇, Hongwu大地, and The Legend of King Ji Fa,天子傳奇, Ji Fa, Ji Fa Tian. For children's content, our summer slate features a new season of the popular present thought and big, big wolf, Xinyang Yung Yung, as well as original AIGC animations like Lala Beat.

Looking ahead the second half of the year, we will roll out the original AIGC animation, Wusheng Armor, and the Common and Burst Fools track, Tested Travel, Now turning to membership business, revenue declined sequentially due to seasonality. We are strengthening the business with more refined operations. For example, targeted discounts for students and teachers drove a year-over-year increase of over 60% in quarter and subscribers within this cohort. We also continued to enhance membership value with all express packages. In Q2, we launched express packages across 16 drummers, driving a nearly 80% annual increase in total participants. In addition, we are expanding joint membership with frequently purchased a top tier brand popular among young users to support membership growth and retention.

Next, moving on to advertising business. For brand ads, revenue from drama targeted ads delivered double-digit year-over-year growth by sector beauty, personnel, care, and health care recorded double-digit year-over-year growth. We also depend on use of AI in operations and now support customized AITC rating. For performance ads, revenue returned to year-over-year growth. We continue to optimize advertiser mix. Revenue from small and mid-sized advertisers delivered strong year-over-year growth. And sector-wise, revenue from advertisers in AI applications, instant retail, and e-commerce recorded strong year-over-year growth. We further strengthened results with AI by upgrading of proprietary large models, improving targeting precision and driving revenue.

Moving on to our business performance in regions outside of mainland China, in Q2, this business sustained rapid growth. Membership revenue grew 40% year over year. The Portuguese and the Spanish-speaking regions demonstrated robust growth. Notably, membership revenue from Brazil and Mexico searched by over 215% and 150% year-over-year, respectively. Arabic speaking markets also show strong potential with membership revenue increasing 85%. The global influence of C-Drama continues to expand. In Q2, membership revenue from C-Dramas grow over 40% year over year. A stood out hit was Space Truth U, Jiang, or Piancheng. It talked on international platform rankings across 14 regions in its first week and stayed in the top 10 of the C-Drummers chat for 10 consecutive weeks.

On the local production front, we are accelerating our pace. Our first original Indonesian drummer, the other sister, gained strong traction. For Google Trans, it became the number one local internet drummer in Indonesia in the first half of 2026. Micro drummers were another major in highlights. Serving as the second largest membership revenue contributor, following long-form drummers in Q2, membership revenue from this category grew over 300% year-over-year. This momentum was partly fueled by stronger original production. Notably, originals rose to three of the top ten contributors to membership revenue.

AIGC was another key driver of our overseas micro-drama expansion. In Q2, we launched AI-generated titles in multiple languages, including English, Thai, and Green. Our original titles delivered exceptional efficiency, recoupling production costs within the same quarter, and demonstrating stable profit potential. We are scaling supply from both originals and external partnerships. In May, we released our first original EI-generated microgrammer overseas, which quickly ranked in the top three for microgrammer revenue on our international platform. The title was produced by another pro, which helped us establish full-blown AIGC know-how, laying a strong foundation for scale production. In parallel we are proactively forging external partnerships to connect overseas script production and the tool ecosystem including nanoprop unlocking capacity and scaling AITC supply Beyond content, we are driving growth with joint memberships.

We have partnered with Vision Plus in Indonesia and we'll launch joint membership with Bill in more markets in the second half. We are excited about the future potential of our overseas business.

With that, I will hand it over to Ying Tian on New South to work you soon on the financials.

Okay, thank you Mr. Gong, and hello everyone. Let me work you through our key financial results for Q2. Total revenues were RMB $6.3 billion, up 1% sequentially. Membership services revenue was RMB $4.0 billion, down 4% sequentially, primarily due to seasonality. Online advertising revenue was RMB $1.2 billion, flat sequentially. Content distribution revenue was RMB $681.5 million, up 90% sequentially. Driven by the increase in content distribution revenue related to the drama series. Other revenues were RMB $344.9 million, down 19% sequentially.

Moving on to cost and operating expenses. Content of cost was RMB 3.8 billion, up 2% sequentially. Total operating expenses were RMB 1.1 billion, down 6% sequentially, reflecting this kind of market spending. Non-GAAP operation laws narrowed by 80% sequentially from RMB 148.6 million in Q1 to RMB 30.3 million, bringing us close to the break-even. Tending to cash flow, net cash provided by operating activities increased to RMB 339.6 million from RMB 186.4 million in Q1. As of the annual Q2, we had cash equivalents, restricted cash, and the short-term investments of RMB, 4.1 billion. Separately, as of the quarter-end, we had a loan principal of $636.6 million U. S. dollars receivable from PAG, included in prepayment and other assets on the consolidated balance sheet.

We remain focused on creating long-term shareholders' value. In March 2026, we announced a share repurchase program of up to $100 million effective through September 2027. As of June 30, we had repurchased approximately $21.6 million ADSES for an aggregated cost of $24.1 million. For further details, please refer to today's earnings on our investor relations website.

With that, we are ready to take questions.

好,谢谢王公学,我来回答这个问题吧。 这个 iQIYI是AI的受益者,从现在到长期都是这样的。 所以我们的战略要做些调整,管理目标也比较清晰。 and also turn the call over to management for the iQIYI. Thank you. The CEO takes this question. So he says, we see ITE as the beneficiary of AI now and also in the long term. So to capture this opportunity, we are making some strategic transformation for our business, mainly focused on two main pillars. Decentralization, which means transforming from the media-centric platform to a decentralized content ecosystem, and also all in AI. So these two pillars, we believe, will mutually reinforce each other, and jointly driving a flywheel effect across the number of creators, the volume The premium content, the user base, and potentially revenue performance. The first content is the main value of the asset and the main work.

AI will be very clear to the product of the first content of the product. It will be a very difficult to achieve the performance of the first content. Okay, premium content still remains at the core of our business. We believe AI will significantly lower production cost for premium content, shorten production cycles, and potentially enable production and visual effects that were previously difficult to achieve through life action.

And the current content of the creation of the project, and the current content of the project, has been increasing. As a result, the current content of the project has been in the past. The current content of the project will be implemented in the future. I can expect in the future of the project, in the future, there will be more of the project on the future. On decentralization, we're mostly focusing on our iQIYI, which is the ITE, Creator Center. And we have seen some positive initial progress, such as the number of creators, the content upload numbers are trending well. And we're seeing AI adoption is progressing across our core content categories and with initial breakthroughs achieved.

For example, for the projects we both in production and also launched. And in the future, we expect a greater scale of content to be released next year. I think that AI's use and the two-dimensional methods will improve the quality of the content and the value of the content. Over the long term, we believe these two strategies, meaning the decentralization and all-in AI, these two will structurally improve our content cost, revenue quality, We have inequality, profitability, and cash flow. Thank you.

Thank you.

Excellent, Yen. We'll invite our chief content officer, Mr. Xiaohui, to take this question.

Please go ahead. Thank you. We will also do the same with the same strategy. We must also keep the main strategy for the main strategy, and also use the short-term strategy. We also use the same strategy for the same strategy for the investment. First of all, we believe that AI reduces the basic costs and barriers to production, but it doesn't lower the bar for creativity and judgment. We leverage AI to optimize the economics of content production while reinforcing our core mode, which is storytelling and aesthetic judgment, emotional expression, and also visual language. Our goal is to advance on both fronts, premium content quality and scale content supply. I will now turn the call over to management for the iQIYI.

I will share our thoughts by category based on the pace of AI adoption at scale. First of all, for micro dramas, we're seeing rapid adoption with AIGC as the primary source of supply. We primarily use a revenue sharing model and leverage algorithm recommendations and decentralized operations to deliver a diversified, rapidly refreshed, and skilled content supply. For animation, a micromat animation, we believe these are AI native content. So AIGC will serve as the primary supply.

For animation and children's content, these have mature CG industrialization, are a good fit in our view, and we're seeing rapid AI adoption. Um, AI significantly boosts efficiency and our pipeline is expanding. Uh, for next year, we will release more AIGC titles to serve niche audiences and broaden, uh, stable supply. And the content of the content of the content of the content is more than the content The content is more than the content of the content So, the strategy is to be a solid-favorite. The key is to look for the content of the content, and to be a good-favorite. I will now turn the call over to management for the next few weeks. We will now turn the call over to management for the next few weeks.

We will now turn the call over to management for the next few weeks. For short-form dramas and internet feature films, these are medium in production complexity and volume. And compared to long-form content, these are lighter in complexity and also in quality as well. And we're actively adopting AI, focusing on genres like fantasy, supernatural, and adventures to widen our genre-mates. Some titles have already launched, and we will speed up the SKL releases, and balancing cost efficiency and content diversity. So far, we have released 16 AIGC short-form dramas under a revenue-sharing model, along with several internet feature films.

For long-term dramas and theatrical films, we believe carry the highest emotional and artistic value, but these are relatively slower to adopt AI as a scale. And for these content, we will focus on live action. Quality first, use AI to support our production, and use AI to reduce costs. Thank you.

We'll invite our CEO to take this question. I will now turn the call over to management for the last year. We believe in the AI era, video industry competition centers on end-to-end capabilities, which is from concept to commercialization. And there are quite a few essentials that are required for this. For example, the ability to bring together professional talent, generate compelling ideas, run industrialized production, have a comprehensive understanding of content review and compliance, deliver effective content distribution, and drive diversified monetization.

And these are the core modes iQIYI has built over the past decade. 我们对于创作者的价值,我们这个定义的口号是叫被看见,有钱赚,有荣誉,意思是那个 iQIYI积累了主要的观众,创作者的作品,被更多的观众能看到,然后 iQIYI深耕多年的影视长篇的创作,所以已经建立了成熟的工业化脾系。 So, our values to creators, there are three areas that we are targeting and also a slogan. Help them to be seen, generate income, and gain recognition. First of all, iQIYI has a major share of the video entertainment audiences. So the creators have greater capabilities or possibilities to be seen on the iQII platform. And also, iQIYI has deep expertise in long-form video production, and we have established a very mature industrialized content production mechanism. 其次来, it还有海量的观影数据,丰富的版权资源,还有其他的强大的生态链的资源支持. In addition, IT also has a map of viewership data, very rich IP, and also licensing resources, and also a very strong ecosystem support. 然后对于创作者已经建立了七大的服务体系,包括爱奇艺号,专业的制作平台Nadotron,就是物理存在的办公空间的创意中心,培训创作大会给创作者融资的,还有标杆作品创作的报道戏剧场, and the creator of the KFU, the seven of the support of the team.

and the venture summit, helping the creators with the fund support, and the Peter Powell and iQIIII theater for benchmark productions, and last but not least, a dedicated creators customer service. 8月20日, we will be in Beijing to attend the ITE creative conference, and discuss the topic of the ITE creative conference. On August 20th in Beijing, which is in two days, we will host the IT Creator Conference, featuring in-depth discussions on content ecosystem development, frontier AI opportunities, and creator empowerment.

Thank you. Thank you.

We'll invite Mr. Xiangha Yang to take this question. Thank you. Our overseas business maintains record growth in Q2, with overall membership revenue grew 40% year over year, and we remain profitable on a managerial accounting basis. And Thailand is the market where we enter earliest and where our operating model is relatively mature.

It still delivers solid growth year over year in Q2, and with steady top-line growth and continued profitability improvement in the quarter as well. And in new markets such as Brazil and Mexico, we see membership revenue increase 215% and 150% year over year, respectively. We categorize our overseas markets into mature growth and potential markets. Where mature markets, we aim for stable profitability. 泰国是我们的先行的试验田,它验证了一套可以复用的精英能力。首先,以华语内容是我们的基本盘。我们通过持续的营销,增强华语内容的影响力,让更多的观众观看华语内容并订阅会员。 本质上就是如果把华语内容更好地销售给当地的观众。 to the local audiences. We are also partnering with our local carriers, platforms, and payment channels to scare the membership base. And we're also leveraging AI to improve the translation and distribution, and also production efficiency.

不同市场的内容偏好和其中的结构并不相同,因此我们复制的这些底层的能力, 同时由本地团队进行针对性的调整,将开国的基因能力复制到其他市场。 Because the content preferences and collaboration channel structures differ by markets, what we replicate are these underlying capabilities, while the local teams do make targeted adaptations, for example, applying Thailand's operating capabilities to other markets. Our strategy is not to chase conflict camps. We are guided by unit economics and operating contributions. and we will expand into new markets after validating revenue quality and profit generating capabilities.

Thank you.

Thank you everyone for joining the call today. If you have further questions, do not hesitate to contact us. Thank you and see you next quarter.