Hello Group Inc.'s Q3 2025 Earnings Outlook: Navigating Domestic Challenges and Overseas Growth

Hello Group Inc. (MOMO) finds itself at a pivotal juncture in Q3 2025, balancing domestic headwinds with a surge in overseas momentum. The company’s recent earnings guidance and operational updates reveal a complex narrative: while core Chinese market metrics deteriorate, international expansion is accelerating at a remarkable pace. For investors, the key lies in assessing whether Hello Group can leverage its overseas growth and disciplined cost management to offset domestic challenges and unlock long-term value.

Domestic Challenges: A Market in Decline

Hello Group’s domestic business continues to face significant pressure. For Q3 2025, the company projects total net revenues between RMB2.59 billion and RMB2.69 billion, representing a potential year-over-year decline of 3.2% at the midpoint of the range [1]. This follows a 2.6% year-over-year revenue drop in Q2 2025, driven by declining user engagement in its core platforms [2]. Specifically, paying users for Momo fell from 7.2 million to 3.5 million year-over-year, while Tantan’s Monthly Active Users (MAUs) dropped to 10.2 million from 12.9 million in June 2025 [2]. These trends underscore a broader struggle to retain and monetize users in a saturated Chinese market, compounded by macroeconomic uncertainty and regulatory scrutiny [3].

The domestic revenue slump is further exacerbated by a 1-year revenue growth rate of -4% and a 3-year rate of -11.8% [1]. Analysts attribute this to intensifying competition in the social entertainment sector and shifting consumer preferences, which have eroded Hello Group’s traditional advantages.

Overseas Momentum: A Strategic Lifeline

Amid domestic struggles, Hello Group’s overseas expansion has emerged as a critical growth engine. In Q2 2025, international revenues surged 72.7% year-over-year to RMB442.4 million (US$61.8 million), accounting for 17% of total revenue [2]. This follows a 71.9% year-over-year increase in Q1 2025, demonstrating consistent acceleration [3]. The company’s focus on markets like the Middle East and North Africa (MENA), where the social entertainment sector is fragmented and underserved, has yielded strong returns.

Management attributes this success to localized product strategies and AI-driven engagement tools, such as personalized greetings, which enhance user retention [2]. Additionally, Hello Group has prioritized high-growth international regions, reallocating resources from lower-performing markets to optimize returns [4]. These efforts are paying off: overseas revenue now represents a meaningful portion of the company’s total revenue, with management expressing confidence it will increasingly offset domestic weaknesses [1].

Financial Resilience and Cost Discipline

Despite the domestic revenue decline, Hello Group maintains a robust financial profile. The company’s gross margin of 38.12%, net margin of 13.26%, and operating margin of 13.06% [1] highlight its ability to generate strong profitability even amid shrinking top-line growth. This financial flexibility is further supported by a current ratio of 2.06 and a quick ratio of 2.06, enabling continued investment in overseas initiatives and share repurchases [1].

Cost discipline has also been a strategic focus. Hello Group has reduced channel investments in underperforming markets, redirecting capital to high-potential regions [4]. This approach not only improves operational efficiency but also aligns with broader industry trends of prioritizing scalable, data-driven growth.

Valuation and Institutional Confidence

Hello Group’s stock appears undervalued relative to its fundamentals. With a P/E ratio of 7.59, P/S ratio of 1.02, and P/B ratio of 0.85 [1], the company trades at a discount to peers, reflecting market skepticism about its domestic challenges. However, institutional ownership of 44.74% [1] suggests confidence in the company’s long-term strategy, particularly its overseas pivot. The stock’s beta of 0.64 [1] also indicates lower volatility, making it an attractive option for risk-averse investors seeking exposure to a high-growth international play.

Conclusion: A Strategic Investment Opportunity

Hello Group’s Q3 2025 earnings outlook reflects a company navigating a dual narrative: domestic decline and overseas triumph. While the Chinese market remains a drag, the company’s international expansion is accelerating at a pace that could redefine its long-term trajectory. For investors, the key question is whether Hello Group can sustain its overseas momentum while maintaining cost discipline. Given its strong profitability, financial flexibility, and strategic focus on high-growth markets, the company presents a compelling case for strategic investment.

**Source:[1] MOMO Forecasts Slight Fluctuation in Q3 2025 Revenue [https://www.gurufocus.com/news/3100341/momo-forecasts-slight-fluctuation-in-q3-2025-revenue][2] Hello Group Q2 2025: Revenue Down 2.6% to $366M [https://www.stocktitan.net/news/MOMO/hello-group-inc-announces-unaudited-financial-results-for-the-second-ai2peiofrp19.html][3] Hello Group: Operational Improvement Still Not In Sight [https://seekingalpha.com/article/4790279-hello-group-operational-improvement-still-not-in-sight][4] Gold Prices Hit New High [https://discountingcashflows.com/company/MOMO/transcripts/2022/2/2025]