JOYY Inc.'s Dual-Growth Engine: A Calculated Bet on Shareholder Value Amid Streaming Decline

The global live-streaming market, once a beacon of explosive growth, now faces structural headwinds. JOYY Inc. (NASDAQ: JOYY), a key player in this space, has responded with a strategic pivot to a dual-growth engine model, balancing its declining live-streaming revenue with a rapidly scaling advertising technology (ad-tech) segment. This shift raises critical questions: Can the company's cost discipline and capital return programs justify its dividend declarations and share buybacks? And is the ad-tech segment sustainable enough to offset long-term user base erosion and macroeconomic volatility?

The Dual-Growth Engine: A Strategic Rebalancing

JOYY's Q2 2025 earnings report underscores a stark divergence between its two business lines. While live-streaming revenue grew modestly by 1.1% quarter-over-quarter to $375.4 million, it declined 10.1% year-over-year, reflecting a shrinking base of paying users and a 7.6% drop in average revenue per paying user (ARPPU). This decline is emblematic of broader industry challenges: regulatory pressures, market saturation, and shifting consumer preferences.

In contrast, the ad-tech segment—led by BIGO Ads—posted 29.0% year-over-year revenue growth to $132.4 million. This segment's success hinges on a self-reinforcing flywheel: algorithmic improvements in ad targeting boost advertiser ROI, attracting more advertisers and publishers, which in turn fuels further data-driven refinements. The ad-tech pivot is not just a revenue diversifier but a strategic repositioning toward a more scalable, capital-efficient model.

Cost Optimization and Capital Returns: A Double-Edged Sword

JOYY's disciplined cost management has been a lifeline. Operating income surged 155.4% year-over-year to $5.8 million, driven by 19.5% and 14.1% reductions in sales and marketing and R&D expenses, respectively. Non-GAAP EBITDA rose 25.7% to $48.2 million, while the company's net cash position of $3.3 billion provides ample flexibility.

This financial fortitude has enabled aggressive shareholder returns. In the first half of 2025 alone, JOYY distributed $98.5 million in dividends and repurchased $36.5 million in shares. A three-year $600 million dividend program, including a $0.95 per ADS payout in Q3 2025, further signals confidence in its capital structure. However, the sustainability of these returns depends on the ad-tech segment's ability to scale profitably.

Ad-Tech's Promise and Peril

The ad-tech segment's growth is promising but not without risks. While BIGO Ads achieved mid-double-digit year-over-year growth in third-party ad network revenues, it faces stiff competition from global giants like Meta and Google. JOYY's ad-tech platform must differentiate itself through niche verticals, regional expertise, and AI-driven personalization.

Moreover, user engagement metrics remain a concern. Global average mobile monthly active users (MAUs) fell 4.7% year-over-year to 262.5 million, and paying users dropped to 1.5 million in Q2 2025 from 1.66 million in Q2 2024. A shrinking user base threatens both live-streaming and ad-tech monetization, as fewer users mean less data for ad targeting and reduced platform stickiness.

Macro Risks and Regulatory Headwinds

The macroeconomic environment adds another layer of complexity. Global advertising revenue is projected to grow at a 6.1% CAGR through 2029, outpacing consumer spending growth of 2.0%. However, regulatory scrutiny of data privacy, AI ethics, and antitrust issues could disrupt JOYY's ad-tech ambitions. For instance, the UK's recent campaign against AI training using copyrighted material—led by artists like Elton John—highlights the fragility of data-driven ad models.

JOYY's reliance on algorithmic optimization also exposes it to technological obsolescence. Competitors are rapidly adopting generative AI and real-time analytics, raising the bar for ad-tech performance. The company's ability to innovate without compromising user trust will be pivotal.

Investment Implications: A Calculated Bet

JOYY's dual-growth engine model is a calculated bet on shareholder value. The ad-tech pivot and cost discipline have justified short-term capital returns, but long-term success hinges on three factors:
1. Ad-Tech Scalability: Can BIGO Ads capture a meaningful share of the $345 billion global ad-tech market by 2030?
2. User Retention: Will JOYY reverse its declining user base through product innovation or strategic acquisitions?
3. Regulatory Navigation: Can the company adapt to evolving data privacy and AI regulations without stifling growth?

For investors, the key is to balance optimism with caution. JOYY's strong balance sheet and disciplined execution make it a compelling candidate for defensive investors seeking capital preservation. However, the ad-tech segment's high-growth potential comes with volatility, and the live-streaming decline is a structural risk that cannot be ignored.

Conclusion: A Tenuous Equilibrium

JOYY's strategic shift to a dual-growth engine model is a bold response to a maturing live-streaming market. While the ad-tech pivot and cost optimization have bolstered short-term profitability and shareholder returns, the company's long-term success depends on its ability to scale its ad-tech platform sustainably and navigate macroeconomic and regulatory risks. For now, the balance sheet provides a buffer, but investors must remain vigilant. In a world of shifting sands, JOYY's resilience will be tested not by its past, but by its capacity to adapt to the future.