Yuanbao's Q3 2025 Earnings Call: Contradictions in Marketing Efficiency, Growth Strategies, and AI Integration

Date of Call: December 3, 2025

Financials Results

• Revenue: RMB 1.16 billion, up 33.6% year-over-year

Guidance:

• For the remainder of full-year 2025, management expects revenue to grow at least 30% year-over-year.
• Take rate/take-rate trends expected to remain relatively stable versus historical levels.
• Continue to prioritize balanced high-quality growth, operational efficiency and strong liquidity to fund investments.
• Shareholder-return options (including dividends) are under active evaluation.

Business Commentary:

* Revenue Growth and AI Integration: - Yuanbao Inc. reported total revenues of RMB 1.16 billion for Q3 2025, growing 33.6% year-over-year. - The growth was driven by enhanced AI and data capabilities, which improved consumer targeting and deepened consumer need understanding, feeding directly into product innovation and pricing processes.

• Profitability and Cash Reserves:
• Net income surged 51.3% year-over-year to RMB 370 million, marking the 13th consecutive quarter of profitability.

• As of the end of September, cash reserves stood at RMB 3.75 billion, providing a solid foundation for technological innovation and strategic expansion.

• Product Innovation and Market Penetration:

• Yuanbao issued 8 million new policies, a 41.8% year-over-year increase, by leveraging AI to lower insurance access barriers.

• The company's multidimensional product matrix and innovative solutions, such as the short-term critical illness insurance product, align with market demand for balance between coverage and affordability.

• Operational Efficiency and Cost Management:

• System services revenues reached RMB 783.5 million, a 36.9% year-over-year increase, driven by improvements in marketing and precise analytics services.

• The company's optimized AI-driven consumer service cycle engine enhanced operational efficiency, contributing to the sustained growth in system services.

• Future Growth Strategy:

• Yuanbao aims to maintain high-quality growth, with a focus on operational efficiency and a strong cash position to fund business growth and strategic investments.
• The company plans to continue investment in AI and data capabilities to improve consumer experience and refine its product offerings, creating a competitive edge in the market.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted record third-quarter performance: total revenues RMB 1.16bn (+33.6% YoY), net income RMB 370.4m (+51.3% YoY), net income margin expanded to 32% from 28.2%, cash RMB 3.75bn and 13th consecutive quarter of profitability.

Q&A:

• Question from Amy Jy Chen (Citigroup Inc., Research Division): This is Amy from Citi. I have 2 questions. My first question is regarding marketing efficiency. We noted that your selling and marketing expenses as a percentage of total revenue actually improved both year-on-year and quarter-on-quarter. I'm wondering is there any seasonality in this? Or what was the core driver behind this improvement? And going forward, is this level of efficiency sustainable? The second question is regarding shareholders' returns. Given our improved top line growth as well as earnings, what are management's thoughts on perhaps dividends or share buybacks at this point?
  Response: Marketing efficiency improved via dynamic, real-time adjustments to acquisition strategy with some seasonality; improvements have been consistent over 13 quarters and management aims to balance continued growth with efficiency. On shareholder returns, the company is evaluating options and dividends are being considered.

• Question from Yue Xu (CSC): Congrats on your solid results. My first question relates to the recent tax regulation change effective in October with a nearly 15% cap on ad spend deduction — have you seen a material impact on bidding intensity across platforms and how should we think about future revenue growth? Second, peers are expanding into public traffic acquisition — how should we think about margin or customer acquisition cost going forward?
  Response: No material impact observed so far; if industry-wide the cap could raise ad costs and favor players with stronger profitability and efficiency, potentially driving consolidation; partners' increased external traffic validates market expansion and operational efficiency remains the key competitive advantage.

• Question from Yuan Liao (Citic Securities Co., Ltd., Research Division): With rapid development of generative AI and AI agents, how do you see this impacting your products and business models and can you share a strategic roadmap for algorithm/product innovation? Second, how do you view current market penetration within Yuanbao's target demographic and potential for ARPU growth?
  Response: AI (including LLMs) is embedded across acquisition, risk identification, product design and claims, improving experience and model performance; penetration is far from saturated with substantial headroom for upsell/cross-sell, so ARPU growth driven by tailored products and precise pricing using AI/data.

• Question from Unknown Analyst (Huafu Securities): Could you break down Q3 growth between new user acquisition and higher premium per user, and what are the key drivers for sustainable growth over the next 3 years? Also, can you quantify KPI improvements from AI and will exporting AI capabilities create new revenue streams or pricing power?
  Response: Revenue growth is driven by market tailwinds, cross-selling/product innovation and data advantages rather than a single factor; AI deeply integrated across the funnel boosts efficiency and product co-development with partners, enabling more offerings and better ROI though new revenue streams via AI are potential but not yet a core driver.

• Question from Yingying Xu (Southwest Securities): Looking ahead to 2026, what do you see as the main drivers of continued revenue growth — marketing spend, AI efficiency, cross-selling, or higher commission rates — and how will these evolve over 3 years? Second, versus ecosystem players, how will you strengthen Yuanbao's brand, improve customer loyalty and increase renewal rates over 1–3 years?
  Response: Growth will be multi-dimensional — scaled traffic acquisition, model efficiency, cross-selling and tailored products; focus is on keeping CAC stable while improving models. Brand and loyalty come from an AI-driven, cross-functional iterative engine and operational excellence rather than reliance on a single channel.

• Question from Xintao Chen (China International Capital Corporation Limited, Research Division): Your model efficiency stands out — what are the key drivers and is there room for further improvement in net income margin and ROI? Also, how do you view competitive landscape over coming years?
  Response: Efficiency gains come from full digitization/automation of the end-to-end insurance engine improving conversion and lifecycle metrics; there is room for incremental efficiency upside but management will balance growth and profitability; platform bidding is neutral so their deep iterative feedback loop and cross-team integration is the durable advantage.

• Question from Thomas Wang (Goldman Sachs): Please provide updates on sales momentum per-policy premium, product mix and the trend in commission rate and take rate.
  Response: Q3 revenue was driven by insurance distribution (+27.9%) and system services (+36.9%); average premium for short-term policies remained consistent; take rate expected to stay relatively stable and management focuses on overall ROI including cross-selling and CAC.

Contradiction Point 1

Selling and Marketing Expenses Efficiency

It directly impacts the company's financial efficiency and profitability, which are crucial for investor expectations and strategic decision-making.

What drove the improvement in selling and marketing expense efficiency, and is this efficiency sustainable long-term? - Amy Jy Chen (Citigroup Inc., Research Division)

2025Q3: Our marketing expenses have some seasonality, and we dynamically adjust our strategies based on growth and ROI targets. Real-time adjustments result in effective outcomes, including shifts in the age profile and consumption habits of our consumer base. We have seen improvements in overall efficiency over the last 13 quarters, and we aim for a balanced growth profile alongside operational efficiency going forward. - [Huirui Wan](CFO)

What are the implications of healthcare payment reforms for Yuanbao, and how does AI support your operations? How does premium growth differ from revenue growth? - Xintao Chen (China International Capital Corporation Limited, Research Division)

2025Q2: We will continue to work on balancing growth with profitability, and we will look at the most effective ways to invest capital in the sales and marketing area and continue to leverage our technology and data to enhance the product offerings and enhance our customer experience. - [Huirui Wan](CFO)

Contradiction Point 2

Revenue Growth Drivers and Strategy

It highlights the differing emphasis on revenue growth drivers and strategic focus, which can influence investors' understanding of the company's future direction.

What will drive Yuanbao's revenue growth in 2026? How will you strengthen Yuanbao's brand and customer loyalty? - Yingying Xu (Southwest Securities)

2025Q3: Revenue growth is driven by traffic acquisition, model efficiency, cross-selling, and product innovation. We plan to maintain sustainable profitability by refining models and enhancing predictive precision without disrupting existing infrastructure. As an independent AI-driven platform, we differentiate through daily collaborative iteration across diverse teams for continuous improvement. - [Huirui Wan](CFO)

Could you provide 2025 and 2026 revenue and earnings guidance? Could you clarify how compliance with automated renewals is managed and the reasoning for the revenue mix shift between distribution and system services? - Amy Chen (Citi)

2025Q2: Full-year revenue expectations are maintained at 20% to 30% growth, and profit margins should stay above 20%. The company keeps up with regulatory compliance, demonstrating strong financial performance. The difference in revenue growth rates between distribution services and system services stems from recognition methodologies and the value delivered to insurers. - [Huirui Wan](CFO)

Contradiction Point 3

AI Integration and Impact on Operations

It underscores the company's emphasis on AI integration, which is critical for operational efficiency and product innovation.

How does Yuanbao's AI model impact products and business models? What is the potential for future algorithm or product innovation? - Yuan Liao (Citic Securities Co., Ltd., Research Division)

2025Q3: AI helps enhance consumer experience and refine models, creating a feedback loop for further refinement. AI will help develop new products and improve existing business efficiency. - [Huirui Wan](CFO)

How does Yuanbao manage unit economics as it scales and assess competition from major tech platforms like Alibaba or Tencent? What are your international expansion plans? - Yu (China Securities)

2025Q2: We are also moving toward full digitalization and automation, leveraging our AI capabilities to help us become better in underwriting, claims and customer acquisition in many ways. - [Huirui Wan](CFO)