Hello Group's Revenue Falls 2.6% Amid AI-Backed Dating App Revamp

Hello Group, the leading dating app in China, has launched an AI-backed function to advise users on what to say to prospective dates, in an attempt to boost its revenue. Despite this effort, the company's revenue fell 2.6% in Q2, extending a five-year decline. However, the app has seen recent success with its overseas business, contributing 17% of revenue in Q2, up from less than 10% a year earlier.

Hello Group, the leading dating app in China, has launched an AI-backed function to advise users on what to say to prospective dates, in an attempt to boost its revenue. Despite this effort, the company's revenue fell 2.6% in Q2, extending a five-year decline. However, the app has seen recent success with its overseas business, contributing 17% of revenue in Q2, up from less than 10% a year earlier.

The AI feature, rolled out in the second quarter, uses an "AI greeting feature" to help male users generate personalized greetings for their potential dates when using the app. This feature is part of a broader effort to enhance the icebreaking chat experience and drive an increase in multi-round conversations, thereby improving retention and stabilizing the user base.

Hello Group's revenue fell just 1.5% in the first quarter, one of its best performances in quite a while, signaling it could finally return to revenue growth. However, the latest results show its revenue continued to decline in the second quarter, falling 2.6% year-on-year to 2.62 billion yuan ($368 million) from 2.69 billion yuan a year earlier.

The company's overseas business remains a bright spot, with revenue rising 73% year-over-year in the second quarter to 442 million yuan. This growth contributed to the overseas unit's revenue reaching 17% of total revenue, up from 9.5% a year earlier. The company expects overseas revenue to grow in the mid-60% range in the third quarter.

Despite these efforts, Hello Group reported its first net loss in more than three years during the latest quarter, with a net loss of 139 million yuan. The loss was attributed to one-time tax expenses related to dividends paid out in 2024 and the first half of 2025.

The company's stock fell 7.3% in the three trading days after the release of its latest report, wiping out most of the stock's gains this year. The stock is still up 17% over the last 52 weeks, though even that is well behind the nearly 60% gain for the iShares MSCI China ETF amid a strong rally for U.S.-listed China stocks during that time.

Analysts and investors remain mixed on Hello Group, with six of eight analysts polled by Yahoo Finance still rating the company a "buy," though one rates it a "hold" and one calls it an "underperform." The company's stock trades at a relatively low price-to-earnings (P/E) ratio of 11, which is well behind the 19 for global peers Match Group (MTCH.US) and Bumble (BMBL.US).

Hello Group's core China business continues to face headwinds, with the company blaming "soft consumer sentiment" for an 11% year-on-year decline in the Momo app's value-added services in the second quarter. Paid users for the Momo app fell about 15% sequentially to 3.5 million in the second quarter, while the figure for the much smaller Tantan fell about 10% to 740,000 over that period.

The latest AI functions look potentially intriguing and could perhaps revive some interest in the company's business. However, other dating apps are likely doing similar things, and nothing the company can do will change the reality of softening consumer demand at home due to China's sluggish economy.

Hello Group Turns To AI To Boost Slumping Revenue^[1] https://www.benzinga.com/markets/equities/25/09/47638793/hello-group-turns-to-ai-to-boost-slumping-revenue
Hello Group anticipates up to 70% overseas revenue growth in 2025 amid product innovation and tax-related headwinds^[2] https://seekingalpha.com/news/4493434-hello-group-anticipates-up-to-70-percent-overseas-revenue-growth-in-2025-amid-product