iQIYI's Q3 2025: Contradictions Emerge in Content Strategy, AI Integration, and Overseas Growth Plans

Date of Call: None provided

Financials Results

• Revenue: RMB 6.7 billion, up 1% sequentially
• Operating Margin: Non-GAAP operating loss RMB 21.9 million; non-GAAP operating loss margin 0.3%

Business Commentary:

• Content Performance and Strategic Initiatives:
• IQIYI's content, including dramas and movies, continued to perform well, with titles like This Thriving Land exceeding 10,000 on IT popularity index and The Shadow's Edge surpassing RMB 1.2 billion in box office sales.
• The success was driven by strong storytelling, advanced production technology, and strategic IP-centric business models that extend from online to offline and across domestic and global markets.

• Membership and Advertising Revenue Growth:
• Membership services revenue reached RMB 4.2 billion, up 3% sequentially, driven by original blockbuster dramas and theatrical hits.

• Online advertising revenue, although down 2% sequentially, maintained a strong contribution of 60% from content-related ad solutions, with key verticals showing annual growth.

• AI Integration and Content Innovation:

• IQIYI has been integrating AI into content production, marketing, and user engagement, resulting in significant operational efficiency gains and enhanced monetization capabilities.
• Initiatives like the global AI short film competition and partnerships with Google and Peter Paul are aimed at fostering an AI-driven content ecosystem and leveraging AI for creative talent development.

• International Expansion and Local Content Production:
• Overseas membership revenue increased by over 40% annually, with strong performance in markets like Brazil, Mexico, and Indonesia.
• The growth was supported by popular C-dramas and local content slate, with the company embracing both licensing and original production strategies and leveraging AI for content production and promotional efficiency.

Sentiment Analysis:

Overall Tone: Positive

• Management emphasized Q3 revenue of RMB 6.7B (up 1% seq.), membership revenue growth (membership services RMB 4.2B, up 3% seq.), strong content hits (This Thriving Land) and accelerating overseas growth and AI investments, framing the outlook as constructive and growth-focused.

Q&A:

• Question from Xueqing Zhang (CICC): It has been 3 months since the new regulations issued, so could management provide an update on the progress.
  Response: New policies have had a positive early impact—enabling concurrent national/provincial reviews, speeding some approvals, encouraging new formats and revenue-sharing models to attract talent and drive industry innovation and growth.

• Question from Vicky Wei (Citi): Will management share some color about your outlook about the membership business.
  Response: Membership momentum since end-September driven by premium content, enhanced member services, expanded bundles and targeted promotions; management expects sustainable membership growth supported by these initiatives.

• Question from Felix Liu (UBS): We noticed that Chinese culture industries have made good progress in the overseas markets lately. Can management share more progress on your overseas expansion and strategy?
  Response: Overseas business posted its strongest annual sequential growth in two years; C-dramas remain core, local originals (notably Thailand) are scaling, and the company will expand local productions while using AI (70% of promo materials) to improve efficiency.

• Question from Jiji Zhao (Guangfa Securities): The application of AI in the global film and television industry has been advancing, increasing depth. Do management share strategy, insights and future plans pertaining to AI adoption content production and business payout?
  Response: AI is deployed to boost operational efficiency, monetization and content production; iQIYI will open parts of its intelligent production system to partners, continue AIGC investment (micro animation, education, etc.) and expects material industry impact within 1–5 years.

Contradiction Point 1

Content Strategy and Focus

It reflects a shift in the company's strategic focus on content types and programming pillars, which could impact future content investments and audience engagement.

Has management provided an update on progress since the new regulations were issued three months ago? - Xueqing Zhang(CICC)

20251118-2025 Q3: The new policies' core objective is to promote healthy development of the long-form video industry. iQIYI is innovating in content production and broadcasting models, with projects benefiting from policy support. - Xiaohui Wang(Chief Content Officer)

What is your 2025 content pipeline, and how many titles could become blockbusters? - Xueqing Zhang(CICC)

2024Q4: 2025 started well with the new season of We Are Criminal Police reaching 10,000 popularity index in six days. The goal is to enhance top-tier content quality and share. In dramas, there's an increase in high-quality releases compared to last year. Premium suspects and female-oriented dramas are key programming pillars. - Xiaohui Wang(Chief Content Officer)

Contradiction Point 2

AI Integration and Strategy

It involves differing perspectives on AI integration and its impact on content production and operations, affecting the company's technological and operational strategy.

What are management’s strategy and future plans for AI adoption in content production and business payouts? - Jiji Zhao(Guangfa Securities)

20251118-2025 Q3: AI provides significant opportunities, increasing operational efficiency and monetization capabilities. iQIYY uses AI for marketing materials, content translation, and user features. - Tim Yu(CEO)

What's the update on the overseas business strategy for 2025? - Maggie Ye(CLSA)

2024Q4: We understand the importance of AI. From business models, marketing strategy, to the content itself, we have more and more AI-driven business, and also in terms of content creation. So you will see more and more AI-driven business models, marketing strategies, in our company in the future. - Tim Yu(CEO)

Contradiction Point 3

AI Adoption in Content Production

It impacts the company's plans for AI adoption, which is crucial for operational efficiency and future growth.

Management discussed the strategy and future plans for AI adoption in content production and business payout? - Jiji Zhao(Guangfa Securities)

20251118-2025 Q3: AI provides significant opportunities, increasing operational efficiency and monetization capabilities. iQIYY uses AI for marketing materials, content translation, and user features. - Tim Yu(CEO)

Can you summarize the summer season's content performance and how will you adapt to new regulations? - Xueqing Zhang(CICC)

2025Q2: The summer season saw outstanding performance across drama, variety shows, films, and micro dramas. Future strategies include strengthening content across categories, leveraging IP and innovative formats, enhancing viewer engagement and appeal, and exploring monetization opportunities beyond existing models. - Unknown Executive(Chief Content Officer)

Contradiction Point 4

Overseas Business Strategy and Growth Expectations

It involves differing expectations for the growth trajectory and revenue contribution of iQIYI's overseas business, which is a critical aspect of the company's strategic expansion.

What progress has been made on overseas expansion and strategy? - Felix Liu (UBS)

20251118-2025 Q3: Our overseas business has achieved strong performance, with Q3 revenue up. iQIYI is the top choice for Chinese content overseas. Chinese content is the cornerstone, and local content is gaining traction. - Xiaohui Wang

Can you provide updates on your overseas business, including membership and content distribution? What are the current financial metrics for the overseas business, including revenue and profit contribution? What are the expected contributions from the overseas business over the next 1-3 years? - Maggie Ye (CLSA)

2025Q1: Our overseas business growth post-COVID, with key developments in content mix and promotions. Chinese content accounts for half of the content mix. Revenue contribution from overseas is still relatively low but expected to grow with strategic investments. - Yu Gong and Jun Wang

Contradiction Point 5

AI Integration in Content Production and Business Strategy

It highlights a shift in iQIYI's strategic direction regarding the integration of AI in content production and monetization, which is crucial for its business growth and investor expectations.

What is management's strategy and future plans for AI adoption in content production and business operations? - Jiji Zhao (Guangfa Securities)

20251118-2025 Q3: AI provides significant opportunities, increasing operational efficiency and monetization capabilities. iQIYY uses AI for marketing materials, content translation, and user features. The company's intelligent production system will open to partners. - Tim Yu(CEO)

Can management provide updates on micro dramas and highlight key areas for future development? - Xueqing Zhang (CICC)

2025Q1: On the content side, AICG is becoming an increasingly important part of our content strategy for large-scale application in areas like micro animation and educational content. - Tim Yu(CEO)