Zhihu (HKEX:2390) Q2 2026 Earnings Call

0:00 Ladies and gentlemen, thank you for standing by, and welcome to the Zhihu Inc. Second Quarter twenty twenty six Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Today's conference is being recorded and webcasted. At this time, I would like to turn the conference over to Demi Young of Investor Relations. Please go ahead, ma'am.

0:27 Thank you, Sharon. Hello, everyone. Welcome to Zhihu's Second Quarter twenty twenty six Financial Results Conference Call. Joining me today from our senior management team are Mr. Zhou Yuan, Founder, Chairman Executive Officer Mr. Wang Han, Chief Financial Officer and Mr. Zhang Long Le, Chief Operating Officer. Before we begin, I'd like to remind you that today's discussion will include forward looking statements made under the safe harbor provisions of The US Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. As such, actual results may be materially different from the views expressed today.

1:13 Further information regarding this included in our public filings with the U. S. Securities and Exchange Commission and the Hong Kong Stock Exchange. The company does not assume any obligation to update any forward looking statements except as required under applicable law. Additionally, today's discussion will include both GAAP and non GAAP financial measures for comparison purposes only. For a reconciliation of these non GAAP measures to the most directly comparable GAAP measures, please refer to our earnings release issued earlier today. Today of this conference call will be available on our IR website at ir.zhihu.com.

2:00 And today, Mr. Zhou Yuan will deliver prepared remarks in Chinese and followed by English translation. Please go ahead, sir.

2:45 Hello, everyone, and thank you for joining Zhihu second quarter twenty twenty six earnings call. Today, I will cover three areas: Our core business performance in the second quarter, how AI is expanding the value of our community content, IP and expert network, and our and our priorities for

4:44 Let me start with our core businesses. Overall, our core business remains stable, while some areas continue to adjust and recover. In the second quarter, total revenue were million, down 3.7% year over year and up 5.9% sequentially, with a year over year decline narrowing further. Adjusted net loss was 10,250,000, reflecting changes in the revenue mix and phased business investments. Our CFO will discuss the financial details shortly. Community engagement among core users remained stable. Average daily time spent was about thirty nine minutes, broadly daily creation of high quality content grew more than 16%.

5:33 As AIGC makes content creation easier, authentic experiences, clear sourcing, and professional judgment are becoming more valuable. These remain the foundation of Zhihu and our long term value.

6:49 Turning to Marketing Services. Revenue were RMB 199,000,000, down 10.7% year over year and up 4% sequentially. We continue to focus on key verticals, including technology, automotive, consumer electronics and home appliances and gaming. Spending or performance increased 1% sequentially, including a 22% increase in gaming. This has not yet translated into a broader recovery in the marketing revenue, but it's but it supports our strategy of strengthening key verticals, products, and algorithms. Marketing services remain in structural recovery and will continue to improve the matching of professional content, user needs and client demand.

8:55 For paid content and IP, revenue reached RMB $426,000,000, up 4.4 year over year and 5.9% sequentially. Average monthly subscribing members were 13,110,000, broadly stable, while member ARPU also remained stable. We'll continue to improve membership content and product experience while expanding knowledge based offerings. IP operation continued to contribute incremental growth. Licensing increasing 105% sequentially and 607% year over year. We're expanding Yen Yang story IP from onetime licensing toward multi format for life cycle development.

9:42 Overall, challenges remain, but our business mix continues to adjust, and our strategic direction remain unchanged. We'll continue to stabilize our core businesses while maintaining the investment discipline.

13:49 Next, I would like to focus on Zhihu in the AI area. Zhihu starts with the community means bringing the value accumulated within Zhihu to more people through new products, formats, and use cases. Real users, professional content IP, and our next expert network remain our most important assets. AI is helping extend these capabilities into new applications and commercial scenarios. First, the community will become more open. AI is changing how content is discovered and used. For Zhihu, openness does not mean changing our positioning. It means enabling the high quality content

14:33 to reach more users and developers through the AI tools and applications. This requires clear cultures around content sourcing, creator rights, and community values. We are further integrating Zhihu Zhihu with Zhihu Search, making AI powered search a new gateway to community content rather than a substitute for it. Earlier testing has shown positive signals for user retention.

15:01 We're also exploring community agents. AI Kanshan is one example. Rather than another general purpose chatbot, we wanted to help users explore Zhihu and discover real people, professional content, and diverse perspectives. The product remain at an early testing stage, and our focus is on content discovery, interaction, and retention. AI Works now hosts more than 2,600 AI projects. While the data open data platform API has attracted more than six 17,600 professional developers, about 20% were not previously Zhihu created. We also released an updated Zhihu CLI, making it easier to discover and use Zhihu content across AI tool.

15:54 Through AI search, agents, open platforms, and developer tools, Zhihu's content and professional capabilities can reach more users, developers, and clients beyond the Zhihu app. We believe AI is becoming a new medium that can help existing content reach new audiences, enable new applications and create new opportunities in content licensing, brand content assets and expert services.

18:02 Second, marketing services are evolving from traffic value toward the content asset value. As more information discovery happens through AI, brands increasingly care not only about visibility, but also whether the professional information can be accurately understood and cited by AI, while helping brands build functional content assets with clear sourcing. Unlike a one off campaign, these assets can continue to be discovered and used across such AI and other channels, creating longer term value. Our AI content asset offering remains at early stage. In the second quarter, the number of clients increased 50% sequentially. This does not yet represent a stable or scalable revenue contribution, but it's beginning to demonstrate new commercial value.

18:54 Going forward, we'll focus on client outcomes with demand and product standardization.

20:43 Third, AI is accelerating the expansion of IP into multimedia formats. AI is lowering the cost and barriers of turning tax based multimedia formats. For Zhihu, this allows our large base of original content to be developed more efficiently into comic dramas, short dramas, film and television, and other formats. A meaningful portion of the comic drama projects monetized this quarter came from the works created in 2025 or earlier. This shows that high quality IP can return value over time. While technology improves the development efficiency and expands its reach. In the first half, we also explore in house with some projects showing encouraging early results.

21:34 However, we'll remain disciplined and will not materially increase asset heavy investments. We'll flexibly choose among licensing in house and commission production based on the project economics. Going forward, we'll continue to strengthen our capabilities in IP selection, development and cross format operations to unlock more value from our content library.

24:18 Four, expert data solutions are evolving from project delivery to work with usable cap capabilities. AI is creating new ways to use Zhihu's expert capabilities, not only creating content for users. Experts can now help translate the professional judgment into model capabilities through training data, model evaluation, and complex task design. We position as a research driven data lab. We identify model capability gaps and develop training data, evaluation systems, and complex task task environments to help improve the model performance. In the first half, we completed projects across coding, search, and deep research, visual reasoning and agents, while building capability spanning model analysis.

25:15 Our expert network plays an important role in defining the professional tasks, setting quality standards and evaluating whether motor outputs meet the professional requirements. We're also becoming more proactive in identifying motor gaps, developing training data and evaluation methods in house, and validating the value through the actual model performance. Our goal is not one or is not one off data delivery, but reusable capabilities that can evolve across clients and model iterations. In the next phase, we'll continue this and extend them into products, complex tasks and environments. Finally, let me briefly summarize.

26:35 In the second quarter, our core community remained resilient. Pet content remained stable, IP operation continued to grow, and marketing services improved sequentially. Our position in the AI area is also becoming clear. Our authentic professional and trustworthy community remain the foundation, while AI helps us reach

27:01 new users' applications and commercial scenarios. In the second half, we'll focus on two

28:40 priorities. First, we'll by improving user experience, maintaining a stable membership base, improving IP development efficiency, and advancing the structural recovery of marketing services. And second, we'll continue to validate AI driven opportunities across our open community ecosystem, AI content assets, IP, and expert data solution by focusing on real demand, client value, capability reuse, and ROI. Initial validation does not mean these initiatives have become stable growth drivers. May fluctuate due to the business timing and phased investments. Our long term goals of improving operating efficiency and returning sustainable profitability remain unchanged.

29:33 Over the long term, we want Zhihu to be not only an authentic, professional and trustworthy community, but also an important platform connecting content, knowledge and AI applications. Thank you. I will now hand over to our CFO to review the quarter's financial performance. I will now go over our second quarter financial results issued earlier today. During the second quarter, our revenue trend continued to improve sequentially, supported by growth in payment pay count and in IP operations. At the same time, disciplined cost management drove year over year reductions in operating expenses and operating losses.

30:19 Now turning to the financial highlights of the second quarter. Our total revenues for the quarter were 6 and 90,100,000, down 3.7% year over year and up 5.9 sequentially. The sequential growth was primarily driven by content and audio operations. Marketing services revenue was RMB199 million compared with million in the same period of 2025. Decrease primarily reflected our proactive and ongoing refinement of service offerings. Sequentially, marketing services revenue increased by 4% with improving traction in key verticals and performance based products. We also continue to make early progress in AI related commercial use cases.

31:10 Content and IP operations revenue was RMB425.9 million, up 4.4% year over year and 5.9% sequentially, primarily driven by continued growth in IP operations. Average monthly subscriber members remained stable at 15,100,000. We will continue to strengthen our paid content offerings while developing and monetizing selected IP across multiple formats with disciplined attention to project returns and risk. Our revenues were RMB86 million in the same period of 2025. The decrease was primarily due to the continuous strategic refinements of our vocational training business.

31:57 Sequentially, other revenues increased by 12.7% and year over year decline continued to narrow. Our gross profit for the quarter was million compared with million in the same period of 2025. Gross margin was 57% compared with 62.5 in same period of 2025. The decline in gross margin primarily reflected our continued efforts to broaden and enhance our current offerings. Total operating expenses decreased by 13% to RMB 4 and 69,400,000 from CNY 500,000,000 in the same period of 2025, reflecting continued efficiency improvements across our operations.

32:47 Selling and marketing expenses decreased by 5.4% to RMB308.7 million from 3 and 26,300,000 in the same period of 2019. This is a in our disciplined marketing spending. Research and development expenses decreased by 25.4% to RMB108.6 million from million in the same period of 2025, primarily attributable to continued improvements in our research and development efficiency. General and administrative expenses decreased by 22.7% to 52,000,000 from RMB 67,300,000 in the same period of 2025, primarily attributable to lower personnel related expenses.

33:50 Period 2025. On a non GAAP basis, adjusted loss from operations narrowed by 32% to RMB48.7 million from million in the same period of 2025. Investment income was RMB16.4 million compared with RMB140.8 million in the same period of 2025. The decrease was primarily due to unrealized gain from the fair value of remeasurement of our investment in a privately held company in the same period of 2025. RMB37.4 million compared with net income of RMB 72,500,000 in the same period of 2025.

34:35 On a non GAAP basis, adjusted net loss was RMB 10,300,000 compared with adjusted net income of RMB 91,300,000 in the same period of 2025. As of 06/30/2026, we had RMB 4,400,000,000 in cash and cash equivalents, term deposit, restricted cash and short term investments, maintaining a solid liquidity position to support our As of 06/13/2026, we have repurchased aggregate of 41,300,000 Class A ordinary shares for total consideration of USD 77,900,000 on both New York Stock Exchange and the Stock Exchange of Hong Kong. During the second quarter, we repurchased 6,500,000 Class A ordinary shares for a total consideration of USD 7,200,000.

35:30 Looking ahead, we will continue to balance selective investments in new initiatives with operating efficiency. While quarterly profitability may be affected investment. Our long term objective of improving operating efficiency and returning to sustainable profitability remain unchanged. We will also maintain a disciplined approach to our capital allocation and continue to execute share repurchase to enhance long term shareholder returns. This concludes my prepared remarks on our financial performance for the quarter. I'll turn the call over to the operator for the Q and A session. Thank you. To ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again.

36:22 In the interest of time, please ask one question each time. If you have any follow-up questions, please go back to the queue. Thank you. We will now go to the first question. One moment please. And your first question today comes from the line of Thomas Chong from Jefferies. So I will transfer myself. Thanks, management, for taking my question. So my question is how should we think the revenue and profit trend in the second half of the year?

37:10 And under the business adjustment and new business investment, are there any fluctuation between quarters? Zhihu speaking on behalf of CEO.

38:06 Looking into the second half, we do not think it's appropriate to calculate the sequential improvement seen in the second quarter. And different businesses have different operating rhythms. And marketing services remain in a period of structural recovery, like we mentioned before, and may continue to be affected by changes in client budgets and industrial demand. We'll strengthen our product, R and D and especially the performance advertising capabilities and also increase the value per unit of traffic and rather than drive. Paid content remains relatively stable, while IP operations will be influenced by project timing.

39:15 Recent changes in industry standards and filing requirements may also affect the launch timing of certain projects. At the same time, we're still validating the new capabilities like AI content assets and expert data solutions. We we have seen, like, mind and client validation, but it might take time until we see scalable revenue contribution, and will also require some near term investments.

40:42 So at this stage, we are more focused on the stable stability of our core businesses while whether new initiatives can create real client value and reusable staff and ROI. We'll continue to invest prudently. Our long term goals remain to improve our revenue mix and return to sustainable profitability. Next question, please. Thank you. Your next question today comes from the line of Vicky Wai from Citi. Please go ahead. Would management share some color about your view on the AI generated comic dramas?

41:43 And how should we think of Zhihu's advantages? Thank you. This is speaking on behalf of COO.

42:53 We are very positive on the AI comic pharma market and believe the industry see you in a clear growth trend. One hand, AI content generation capabilities continue to improve rapidly, including character consistency, visual quality quality, motion, and the overall production efficiency. And on the other hand, as more creators enter the market, we're seeing greater diversity in ideas and formats. So AI comic dramas are gradually becoming a new form of content consumption As the production continue to improve, we expect content quality and user acceptance to rise further.

44:15 At the same time, the basis of computation is also changing. In the early stage, the focus was on, like, who could adopt AI faster and produce content at lower cost. As AI production become more widely available, the real scarcity shifts back to the content itself, like the good stories of sustainable pipeline of creative ideas and the ability to to consistently turn IP into compelling virtual content. And this is where Zhihu has a clear advantage through any story and other products. We have viewed a broader a broad ecosystem of original stories and creators.

45:35 Our advantage is not simply the size of the library, but our ability to continuously generate the new content and identify the the strong strongest titles supported by a well established creator. And this helps reduce the trial and error costs in IP development and improve the overall efficiency of our content portfolio. We already seen these validated in the AI comment.

47:01 According to the third party data, in the first half of twenty twenty six, Yin and Story became one of the leading IP providers for native AI comic dramas on TikTok and ranked among the top three IP providers on Hong Kong. We also began the in house and commission production in second quarter and have seen encouraging heat rates so far. As AI creates new media formats, a strong story can be visualized. And In this way, AI helps extend the life cycle of quality IP and improve the monetization efficiency of our existing cost content assets. Strategically, our focus is to build on Zhihu's strength in the content and our greater ecosystem, like

48:32 we mentioned before. While using AI to improve the development efficiency across, like, scraping scripting production and distribution, We will remain flexible in our business models, licensing in house for the where the market demand and project economics are well validated. We we may selectively move further upstream in the value chain. Over the long term, we believe Zhihu's Mode in this market will come from a combination of capabilities, including a sustainable supply of the original IP content selection based on you real user behavior, a stable creator ecosystem, and a clear license framework and AI enabled cross media IP development.

49:55 Thank Next question, please. Thank you. Your next question today comes from the line of Zhihu Inc. Zhihu Please go ahead. For expert data solutions? And what's Zhihu's advantage in this business? Thank you. As a data lab focused on improving frontier model capabilities.

51:23 So simply put, we continuously study where models still have capability gaps, identify the tasks they cannot perform reliably, and then design the training data, complex task environments, and benchmarks around these gaps. We then validate whether these efforts actually improve the performance through the training and evaluation. Our goal is not simply to deliver data, but to solve the specific model capability problems for our clients. Our business model currently includes the customized R and D projects based on the client's frontier needs, while we're also increasing our own research and exploring ways to productize selected, like, capabilities.

52:53 As we complete more projects, we enter, standardize, and reuse our data pipelines, environment building capabilities, like evaluation frameworks, and know how across, like, more clients and different generations of models. And these should improve both scalability and capability reuse. Zhihu's expert network is an important part. At the same time, we are building an end to end r and d look from identifying model gaps and designing tasks and training signals to building environments and and graders and ultimately validating motor performance.

54:22 In areas such as coding, search, deep research, data production increasingly rely on the motor requirements rather than the large scale manual work. Experts, therefore, play a greater role in citing standards, providing the professional judgment and validating the results. The investment profile of this business will differ from the traditional one. Going forward, more or much more will be directed toward compute, model usage and r and d infrastructure with the goal of building capabilities that can continuously evolve and be reused.

55:53 So at this stage, we are focused on three things. Whether we can consistently improve the model performance, whether the long term relationships with the clients and whether our capabilities can be reused across them. So if these metrics continue to validate sources in a measured way based on the client demand and the ROI. And thank you. Thank you. That concludes today's Q and A session. At this time, I will turn the conference back to Demi for any additional or closing remarks. Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.