What caused IQ's Q4 2024 EPS to underperform forecasts?

The EPS of iQiyi for Q4 2024 was below market expectations, primarily due to a 10% year-over-year decline in total revenues, which amounted to RMB7.2 billion (US$1.0 billion). This decrease in revenue was driven by a 13% drop in membership services revenue, reaching RMB4.4 billion, and a 20% decline in online advertising revenue, totaling RMB1.3 billion. However, there was a positive aspect in the form of a 52% increase in content distribution revenue, which rose to RMB814 million, attributable to an uptick in barter transactions. 1. **Revenue Decline in Membership Services**: The decrease in membership services revenue can be attributed to strategic shifts in content offerings. iQiyi has been enhancing its content portfolio by introducing mini and short dramas, which complement its extensive long-form content. However, the transition seems to have impacted membership revenue, possibly due to changes in consumer behavior or pricing strategies. 2. **Advertising Revenue Decline**: The decline in online advertising revenue might reflect soft brand advertising and challenging macroeconomic conditions experienced during the quarter. Increased competition from other online platforms and the availability of free entertainment options could also have contributed to the decline in advertising revenue. 3. **Content Distribution Revenue Increase**: The notable increase in content distribution revenue, despite the overall revenue decline, suggests that iQiyi is exploring new monetization avenues, such as barter transactions. This shift could indicate a strategic adaptation to maintain revenue streams in a challenging market. In summary, iQiyi's Q4 2024 EPS underperformance is primarily due to a combination of a decline in membership services and advertising revenues, alongside challenging market conditions. However, the company's strategic shifts, such as enhancing its content portfolio and exploring new monetization avenues, could pave the way for future growth and value creation.