Hello Group's Q3 2025: Contradictions Emerge on Overseas Growth, Domestic Revenue Decline, and Soulchill Expansion

Date of Call: December 10, 2025

Financials Results

• Revenue: RMB 2.65 billion, down 1% YOY, up 1% sequentially
• Gross Margin: 37.6%, down 1.7 percentage points YOY
• Operating Margin: 15.2%, compared with 17% in the prior year

Guidance:

• Q4 2025 revenue guided to RMB 2.52–2.62 billion, implying -4.4% to -0.6% YOY.
• Assumes Mainland China revenue down mid- to low-teens YOY; overseas revenue expected to grow at a pace similar to Q3.
• Domestic exit rate for Q4 2025 ~13% YOY; rolling that forward implies roughly a ~10% full-year 2026 domestic decline, subject to macro and regulatory changes.
• Overseas expansion (including Happn consolidation) expected to contribute meaningfully in Q4 and remain a key growth driver.

Business Commentary:

* Revenue and Profitability Trends: - Hello Group reported total revenue of RMB 2.65 billion for Q3 2025, down 1% year-over-year but up 1% quarter-over-quarter. - The group's overseas revenue reached RMB 535 million, up 69% year-over-year and 21% quarter-over-quarter, while domestic revenue fell 10% year-over-year. - Adjusted operating income was RMB 404 million, down 11% from Q3 2024, with a margin of 15.2%. - The decline in domestic revenue was primarily due to tax scrutiny affecting broadcasters and agencies, softened consumer sentiment, and a decline in paying users on Tantan.

• Momo and Tantan Performance:
• Momo's value-added service revenue was RMB 1.79 billion, down 11% year-over-year and 3% quarter-over-quarter.
• Tantan's revenue from the onshore business was RMB 150 million, down 15% to 30% year-over-year and 5% quarter-over-quarter.

• The decline in Momo's revenue was attributed to tax changes impacting broadcasters, while Tantan's revenue decreased due to a decline in the number of paying users.

• Overseas Business Growth:

• Overseas revenue accounted for 20% of the group's revenue, up from 12% in the same period last year.
• Growth was primarily driven by audio and video social products in the MENA region, with contributions from Yaahlan and Amar.

• The increase in overseas revenue was supported by improvements in ARPU and ROI, despite initial challenges with user acquisition costs.

• Financial Outlook and Challenges:

• For Q4 2025, revenue is expected to be between RMB 2.52 billion and RMB 2.62 billion, representing a year-over-year decline of 4.4% to 0.6%.
• The ongoing impact of tax scrutiny is anticipated to continue affecting domestic revenue, while overseas revenue is expected to maintain growth similar to Q3.
• The challenges in domestic revenue are expected to ease into 2026 as the significant tax-related impact is completed.

Sentiment Analysis:

Overall Tone: Neutral

• Management flagged tax-related headwinds compressing domestic revenue (Q3 revenue RMB 2.65bn, -1% YoY) and said they increased revenue-sharing subsidies, which will reduce gross margin ~1–2ppt H2 2025. They also highlighted strong overseas momentum (overseas revenue +69% YoY) and guided Q4 revenue RMB 2.52–2.62bn while stressing continued ROI discipline on overseas investments.

Q&A:

• Question from Thomas Chong (Jefferies LLC): Can management comment on the progress of the revenue-sharing adjustment, its margin impact, why peers didn't note similar issues, and how to think about Momo's revenue trend into 2026?
  Response: They raised revenue-sharing subsidies for affected broadcasters/agencies to stabilize supply, which will compress gross margin by ~1–2 percentage points in H2 2025; domestic revenue is expected to exit Q4 down ~13% YoY, implying roughly a ~10% domestic decline for FY2026 assuming normal seasonality and absent adverse macro/regulatory changes.

• Question from Jiahui Wang (UBS Investment Bank): Which overseas businesses outperformed expectations in Q3, and how much of Q4 overseas guidance is organic vs. Happn consolidation; can overseas fully offset domestic declines?
  Response: Overseas outperformance was driven mainly by MENA audio/video apps (Amar, Yaahlan, SoulChill) and fast-growing non-SoulChill brands; Happn's consolidation will add more in Q4, but while overseas is a strong growth engine it is unlikely to fully offset domestic declines in 2026.

• Question from Leo Chiang (Deutsche Bank AG): What are the key M&A criteria (industry, geography, revenue/profit) and will Hello Group actively manage acquired products?
  Response: M&A targets are selected case-by-case with emphasis on product/team value, sustainable profitability and reasonable valuation; post-acquisition involvement is flexible—typically local teams retain autonomy with group support, and Hello Group will take a hands-on role only when required.

• Question from Xueqing Zhang (China International Capital Corporation Limited): Given lower gross margins in overseas audio/video and Momo's revenue-sharing changes, how should we view overall gross margin next year and impacts on shareholder returns?
  Response: Domestic gross margin likely down a couple points with Q4 adjusted gross margin anchored around 36–37%; overseas margins vary by product (social lower, dating/subscription higher) and won't meaningfully offset domestic profit pressure in 2026; dividend/share-return decisions will weigh profitability, M&A needs, liquidity and repatriation considerations.

Contradiction Point 1

Impact of Overseas Growth on Domestic Revenue

It highlights differing expectations regarding the sustainability and impact of overseas growth on domestic revenue, which could affect investor perceptions of growth strategies and revenue projections.

Which part of the overseas business outperformed expectations in Q3? How much of Q4 growth is driven by organic business and M&A? Do you expect overseas growth to offset domestic decline? - Jiahui Wang(UBS Investment Bank)

2025Q3: Over the long term, the overseas portfolio is expected to rely on SoulChill, emerging social apps, and dating brands. - Yan Tang(CFO)

What are management's views on the sustainability of the over 70% year-over-year overseas revenue growth for two consecutive quarters, and what are your expectations for overseas revenue in the second half? - Yicheng Yuan(UBS Investment Bank)

2025Q2: Overseas growth is driven by social entertainment and dating businesses. There is potential for further acceleration, but the group is conscious about maintaining profitability. - Sichuan Zhang(COO)

Contradiction Point 2

Expectations for Domestic Revenue Decline

It involves differing expectations for the decline in domestic revenue, which is a critical indicator of the company's performance in its core market.

Can management comment on the latest progress of the tax adjustment and its margin impact? What is the revenue trend outlook for the cash cow business in 2026? - Thomas Chong(Jefferies LLC)

2025Q3: Revenue from domestic China is expected to decline mid- to low teens year-over-year in 2026, with improvements likely in the second half as comps ease. - Yan Tang(CFO)

Can you discuss the second-half outlook given Momo's first-half fundamentals exceeded early 2025 expectations? Can you discuss your strategy and thoughts on AI applications, such as AI greetings and AI chat assistance? - Thomas Chong(Jefferies LLC, Research Division)

2025Q2: We expect domestic China for the second half to be relatively controllable. - Sichuan Zhang(COO)

Contradiction Point 3

Revenue Growth and Market Expansion for Soulchill

It involves differing expectations and strategies for revenue growth and market expansion of the Soulchill product, which is crucial for the company's international growth.

What is the outlook for Momo and Tantan post-2024 changes, and what are your expectations for China revenue this year? - Thomas Chong (Jefferies)

2025Q3: We expect a low teens percentage Y-o-Y decline in Mainland China revenue for the full year, showing stabilization from previous years. - Yan Tang(CEO)

Q1 overseas revenue exceeded RMB 415 million, with Soulchill contributing nearly RMB 300 million. What is the growth of the other two apps and your projected overseas revenue for this year? - Leo Chiang (Deutsche Bank)

2025Q1: Soulchill is the largest overseas product, while two other social entertainment products also showed significant growth. Improved user retention and channel marketing efficiency led to strong growth. - Yan Tang(CEO)

Contradiction Point 4

Gross Margin Expectations

It involves changes in financial forecasts, specifically regarding gross margin expectations, which are critical indicators for investors.

How should we assess future gross margins given overseas initiatives and domestic margin adjustments? Will this affect shareholder return decisions? - Xueqing Zhang (China International Corporation Limited)

2025Q3: We expect our adjusted gross margin in Q4 to be 36% to 37%. - Cathy Peng(CFO)

Can you detail the profit outlook for this year and how expenses will be managed and allocated for the rest of the year? - Jiahui Wang (UBS)

2025Q1: Gross margin is expected to decline slightly due to the mix shift towards overseas business. - Hui Peng(CFO)

Contradiction Point 5

Overseas Revenue and Growth Strategy

It highlights differing perspectives on the growth strategy and revenue expectations for the company's overseas operations, which are critical for understanding its international expansion plans.

What drove overseas outperformance in Q3? What portion of Q4 growth is from organic and M&A contributions? Will overseas growth offset domestic decline? - Jiahui Wang (UBS Investment Bank)

2025Q3: Over the long term, the overseas portfolio is expected to rely on SoulChill, emerging social apps, and dating brands. - Yan Tang(CFO)

Can management outline Tantan’s plans for product and operational strategies to address the continued decline in user and revenue growth, and provide the 2025 revenue and profit outlook? - Leo Chiang (Deutsche Bank AG)

2024Q4: Revenue from overseas business is expected to grow to RMB1.7-2 billion in 2025. Profitability will improve over time as marketing efficiency is maintained. - Hui Peng(CFO)