iQIYI, Inc. (IQ): Navigating Content Monetization and User Growth in China's Competitive Streaming Landscape

In the rapidly evolving Chinese streaming market, iQIYI, Inc. (IQ) faces a dual challenge: sustaining revenue growth amid fierce competition and adapting to shifting consumer preferences. As the "Big Three" platforms-iQIYI, Youku, and Tencent Video-vie for dominance, iQIYI's strategic focus on content monetization, AI-driven innovation, and international expansion positions it as a key player to watch in 2025–2026. This analysis evaluates iQIYI's financial performance, user growth initiatives, and competitive positioning, drawing on recent data to assess its long-term investment potential.

Financial Performance and Content Monetization Challenges

iQIYI's Q3 2025 financial results underscored the pressures facing the streaming sector. Total revenues declined by 8% year-over-year to RMB6.68 billion ($938.7 million), driven by a lighter content slate and reduced online advertising sales, despite growth in brand advertising. The company reported a net loss of RMB248.9 million ($35.0 million), a stark reversal from a net income of RMB229.4 million in the same period in 2024. These figures highlight the fragility of iQIYI's monetization model, which relies heavily on membership fees and advertising.

However, leadership remains optimistic about long-term growth. CEO Lu Gong emphasized the transformative potential of AI in content creation, comparing its impact to the Internet's rise two decades ago. . The company's focus on IP-driven content and high-quality storytelling-evidenced by hits like The Thriving Land-is designed to retain subscribers and justify premium pricing. Additionally, iQIYI is diversifying revenue streams through e-commerce tools and a revenue-sharing model for films, which generated over RMB17 million in two months for titles like A Cool Fish Two.

User Growth and Competitive Positioning

iQIYI's user base remains a critical asset. As of Q3 2025, the platform reported 524.8 million monthly active users, reflecting its entrenched position in the domestic market. Yet, membership services revenue fell by 9% year-over-year in Q2 2025 to RMB4.09 billion ($571.0 million), attributed to a lighter content slate. This decline contrasts with Youku's strategic pivot toward shorter, high-impact episodes and culturally resonant storytelling, which has strengthened its appeal among urban, educated viewers aged 25–40.

iQIYI's competitive edge lies in its dominance of domestic drama viewership, according to Enlightent data. However, Tencent Video's broader ecosystem-integrating gaming, social media, and short-form video-poses a unique challenge. To differentiate, iQIYI is doubling down on AI-driven personalization and localized content. For instance, its partnership with Snaplii allows users to purchase iQIYI International VIP memberships directly within the app, enhancing user acquisition and retention.

AI and International Expansion: Catalysts for Growth

Post-Q3 2025, iQIYI has prioritized AI-driven innovation and overseas expansion. The company's collaboration with Google and Baidu on a global AI short film competition aims to foster talent in AI-driven content creation, while partnerships with academic award-winning photographer Peter Paul explore AI's role in theatrical production. These initiatives align with broader industry trends, as AI-generated promotional materials and virtual production technologies reduce costs and improve monetization efficiency.

International markets represent another growth frontier. Membership revenue outside Mainland China surged by over 40% annually in Q3 2025, with Brazil, Spanish-speaking regions, Mexico, and Indonesia seeing membership revenue more than double year-over-year. iQIYI's localized content strategy-such as Thai drama Linghuun Chong Sheng and English-language musical projects-cater to regional tastes, while micro-dramas and variety shows drive engagement. Analysts project that overseas expansion could become a "significant revenue driver" by 2026, particularly as Chinese content gains global traction.

Analyst Outlooks and Investment Risks

Despite these strategic moves, iQIYI faces headwinds. Rising content costs and regulatory shifts in China's entertainment sector could strain profitability, while macroeconomic pressures may dampen subscriber spending. The consensus analyst rating for IQ stock is "Hold", with a price target of $2.51, reflecting cautious optimism. Three analysts rate the stock as "Buy," citing its AI and international initiatives, while two advise "Sell," citing margin risks.

Key risks include the scalability of AI-generated content and the ability to maintain audience engagement without compromising quality. Additionally, Tencent Video's ecosystem-driven approach and Youku's focus on long-form storytelling could erode iQIYI's market share if the company fails to innovate further.

Conclusion: A Calculated Bet on Innovation

iQIYI's investment potential hinges on its ability to balance short-term financial pressures with long-term strategic bets. While Q3 2025 results highlight vulnerabilities in content monetization and user growth, the company's AI-driven initiatives and international expansion offer a compelling path to recovery. For investors, the key will be monitoring the success of localized content, the scalability of AI tools, and the company's ability to navigate regulatory and competitive challenges. If iQIYI can sustain its focus on high-quality IP and technological innovation, it may yet reclaim its position as a leader in China's streaming wars.