Yuanbao's Q3 2025 Earnings Call: Contradictions in Revenue Guidance, AI ROI, and Premium Trends Emerge

Date of Call: October 2025

Financials Results

• Revenue: RMB 1.16 billion, up 33.6% YOY

Business Commentary:

• Revenue and Profit Growth:
• Yuanbao Inc. reported total revenues of RMB 1.16 billion for Q3 2025, marking a 33.6% year-over-year increase. Net income surged by 51.3% to RMB 370 million.

• The growth was driven by the company's high-quality growth trajectory, enhanced AI capabilities, and increased policy issuance, which improved consumer targeting and product innovation.

• AI Integration and Operational Efficiency:

• The company's use of AI and data capabilities resulted in a 41.8% year-over-year increase in issued policies, enhancing operational efficiency.

• AI technology is integrated into core workflows, including risk identification and customer acquisition, which has helped automate processes and improve service capabilities.

• Cash Reserves and Liquidity:

• Yuanbao ended Q3 with RMB 3.75 billion in cash reserves, an 82.3% increase year-over-year.

• This strong liquidity position is attributed to healthy cash flow generation, providing financial flexibility for business growth and strategic investments.

• Marketing Efficiency:

• Selling and marketing expenses increased by 23.9% year-over-year, but as a percentage of revenue, the efficiency improved.
• This improvement is due to continuous efficiency gains over the last 13 quarters, supported by dynamic marketing strategy adjustments based on growth and ROI targets.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted 'trajectory of high-quality growth,' 'strong results,' and 'solid financial foundation.' They noted '13th consecutive quarter of profitability,' 'revenue expansion, optimized operational efficiency, improved profitability,' and that results 'validate the strength and scalability of our business model.'

Q&A:

• Question from Amy Jy Chen (Citi): Regarding selling and marketing expenses, what drove the efficiency improvement, is there seasonality, and is it sustainable? Also, what are management's thoughts on dividends or share buybacks?
  Response: Marketing efficiency improvements are due to continuous optimization, some seasonality in strategy, and real-time adjustments for ROI; sustainability is balanced with growth targets. Dividends are a consideration for shareholder return.

• Question from Yue Xu (CSC): Regarding recent ad spend tax regulation, what is the impact and future revenue growth outlook? Also, how does public traffic acquisition competition affect customer acquisition cost?
  Response: No material impact seen yet; if industry-wide, could drive up ad costs, favoring players with strong efficiency. Competition validates market potential; the deciding factor is operational efficiency with their optimized engine.

• Question from Yuan Liao (CITIC): How will generative AI and AI agents impact products and business models? What is the strategic roadmap? Also, what is the market penetration rate in the target demographic and potential for ARPU growth?
  Response: AI is integrated across operations, enhancing consumer experience and creating feedback loops for model refinement. Market penetration is low; there is significant headroom for upselling, cross-selling, and family policies, with focus on precise risk assessment for sustainable ROI.

• Question from Unknown Analyst (Huafu Securities): Can you break down Q3 revenue growth between new user acquisition and higher premium per user? What are the key drivers for sustainable growth over the next 3 years? Also, can you quantify AI's KPI improvements and will it create new revenue streams or pricing power?
  Response: Growth is driven by multiple factors: market tailwinds, cross-selling/product innovation, and data advantage for model refinement. AI is systematically integrated to enhance efficiency and service quality, enabling innovative products like the new critical illness insurance, which may expand product offerings and support efficient growth.

• Question from Yingying Xu (Southwest Securities): What are the main drivers of continued revenue growth looking ahead to 2026? How do you plan to strengthen brand, improve customer loyalty, and increase renewal rates?
  Response: Growth is holistic, focusing on traffic acquisition, model efficiency, and cross-selling. For 2025, revenue growth is expected to be at least 30% with healthy profit. Brand strength comes from an AI-driven, independent platform with a holistic iterative feedback mechanism and cross-functional collaboration for operational excellence.

• Question from Xintao Chen (CICC): What are the key drivers behind Yuanbao's model efficiency? Is there further room for improvement in net income margin and ROI? Also, how do you view the competitive landscape over the coming years?
  Response: Efficiency stems from full digitization and AI-driven optimization of the user lifecycle. There is potential for further efficiency upside, balanced with capturing market share growth. The competitive landscape is stable; their optimized engine allows attractive economics, with a comprehensive iterative feedback loop as a key edge.

• 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: Insurance distribution revenue grew 27.9%; system services grew 36.9%. Average premium for short-term policies was consistent. Take rate is expected to remain stable historically; it is one factor among many in optimizing ROI.