Assessing JOYY's Valuation Post-Earnings: Is the Recent 74.9% Share Price Surge Justified?

JOYY Inc. (JOYY) has seen a staggering 74.9% surge in its share price following its Q2 2025 earnings release, sparking debates about whether this rally is rooted in fundamentals or driven by speculative momentum. To assess this, we dissect the company's valuation metrics, Rule of 40 score, and market dynamics against high-growth tech peers.

JOYY's Financial Performance and Valuation Metrics

JOYY reported Q2 2025 revenue of $507.8 million, reflecting 2.7% quarter-over-quarter growth, with non-livestreaming revenue surging 25.6% year-over-year to $132.4 million JOYY Inc (JOYY) Q2 2025 Earnings Call Highlights^[1]. This segment, driven by its advertising technology (ad-tech) business, now accounts for 26.1% of total revenue. The company's non-GAAP EBITDA reached $48.2 million, up 25.7% year-over-year, while its net cash balance stood at $3.3 billion as of June 30, 2025 JOYY Reports Second Quarter 2025 Financial Results^[2].

Valuation-wise, JOYY's trailing P/E ratio is 1.75, and its forward P/E is 14.32, signaling a sharp divergence between historical performance and future expectations JOYY Inc. (JOYY) Statistics & Valuation^[3]. Its EV/EBITDA ratio of 9.49 appears undervalued relative to the Software (System & Application) industry's average of 27.98 but aligns with the lower end of B2B SaaS multiples (7.4x–12.8x) Valuation & EBITDA Multiples for Tech Companies^[4].

Rule of 40 Analysis: A Missed Benchmark

The Rule of 40-a metric combining revenue growth and EBITDA margin-is critical for evaluating SaaS companies. For JOYY, the Q2 2025 EBITDA margin was 9.5% ($48.2 million / $507.8 million revenue), and its revenue growth rate was 2.7% quarter-over-quarter JOYY Inc. (JOYY) Q2 FY2025 earnings call transcript^[5]. Applying the Rule of 40 formula (growth rate + EBITDA margin), JOYY's score is 12.2%, far below the 40% benchmark Rule of 40: Tech Stocks Outperforming in 2025^[6]. This suggests the company is prioritizing profitability over growth, a stark contrast to peers like NVIDIA, which achieved a Rule of 40 score of 163.3% in 2025 Rule of 40 for SaaS: Full Guide and Excel Examples^[7].

However, JOYY's weighted Rule of 40 score-where growth is emphasized for early-stage companies-remains uncalculated due to insufficient data. This ambiguity leaves room for interpretation, as the market may be betting on JOYY's long-term AI integration and ad-tech expansion rather than short-term metrics JOYY Earnings Q2 2025 | YY News & Analysis^[8].

Post-Earnings Market Reaction and Investor Sentiment

The 74.9% share price surge post-earnings appears partially driven by momentum. Analysts at Morgan Stanley raised their price target from $40 to $62, citing JOYY's "attractive shareholder returns" and recovery in core livestreaming revenue JOYY Inc. (JOYY) Stock Price & Overview^[9]. Similarly, Seeking Alpha upgraded JOYY to "Buy," highlighting a 10.1% shareholder yield from dividends and buybacks JOYY Inc. (JOYY) Q2 2025 Earnings Call Highlights^[10].

Yet, these upgrades contrast with JOYY's Rule of 40 shortfall. While its EBITDA growth (25.7% YoY) and $3.3 billion net cash position are compelling, the market may be overestimating the scalability of its ad-tech segment. For context, only 28% of SaaS peers achieved a Rule of 40 score of 40+ in Q2 2025, with the median score at 12% Q2 2025 Rule of 40 Data in Public SaaS^[11]. JOYY's performance aligns with this median, suggesting its fundamentals are in line with industry averages.

Historical backtesting of JOYY's earnings events from 2022 to 2025 reveals mixed signals. On average, the stock delivered positive excess returns in the 30 trading days following earnings, with a 5.5% outperformance versus the benchmark's 1.7%. However, the one-day post-earnings pop averaged +1.6%, and win-rates were highest in short-term windows (1 day and 8–10 days), indicating fleeting momentum rather than sustained value creationHistorical Earnings Event Analysis for JOYY (2022–2025)^[14]. These results suggest that while JOYY's recent surge may reflect optimism about its ad-tech and AI initiatives, the historical pattern of short-lived gains implies caution for long-term investors.

Is the Surge Justified? Balancing Fundamentals and Momentum

JOYY's valuation metrics-particularly its EV/EBITDA of 9.49-indicate undervaluation relative to the broader Software industry but not exceptional value within the SaaS subset. The surge may reflect optimism about its AI-driven ad-tech initiatives and strategic capital allocation, such as its $135 million shareholder return program JOYY Reports Second Quarter 2025 Unaudited Financial Results^[12]. However, the Rule of 40 score and low P/E ratio (1.75) suggest the market is discounting future growth potential rather than current performance.

This dynamic mirrors broader trends in high-growth tech stocks, where the Rule of 40 has become a proxy for quality. Companies like MongoDB have achieved high valuations despite missing the Rule of 40, underscoring that long-term potential can outweigh short-term metrics The Rule of 40 Explained: A Proven Framework for Scaling SaaS^[13]. For JOYY, the key question is whether its ad-tech and AI segments can sustain growth to justify the 74.9% rally.

Conclusion

JOYY's post-earnings surge is a blend of fundamentals and momentum. While its robust EBITDA growth, strong balance sheet, and ad-tech momentum provide a foundation, the valuation surge exceeds what its Rule of 40 score and peer comparisons currently justify. Investors should monitor Q3 2025 guidance ($525–539 million revenue) and the scalability of its non-livestreaming business to determine if the rally is sustainable.