Zhihu's Q2 2025: Contradictions Emerge on AI Integration, Community Strategy, Shareholder Returns, and User Engagement

The above is the analysis of the conflicting points in this earnings call

Date of Call: August 27, 2025

Financials Results

• Revenue: RMB 716.9M, compared with RMB 933.8M in Q2 2024 (YOY decline; decline narrowed vs prior quarter)
• Gross Margin: 62.5%, up from 59.6% in Q2 2024 and 61.8% in Q1 2025

Guidance:

• Marketing services: adjustment phase nearing end; expect stabilization and return to positive YOY growth in coming quarters.
• H2 recovery aided by AI-driven ad product upgrades and improved client mix.
• Paid membership: prioritize retention/renewals and ARPU via premium formats (e.g., voice live), longer-cycle subs.
• Vocational training: maintain efficiency/profitability focus; model/content adjustments approaching stable stage.
• AI: major Q4 experience update deepening integration of AI search and knowledge base; ongoing agentic upgrades.
• Profitability: higher likelihood of near breakeven on full-year 2025 non-GAAP basis.
• Shareholder returns: continue executing 10% buyback authorization in H2.

Business Commentary:

* Financial Performance and Profitability: - Zhihu Inc. reported adjusted net income of RMB 91.3 million for the second quarter, compared to a loss of RMB 44.6 million in the same period last year. - This improvement reflects the company's disciplined operating strategy and AI-powered productivity gains.

• AI Integration and Community Engagement:
• The average daily user time spent exceeded 39 minutes, reflecting a 15% year-over-year increase.

• This growth is due to enhanced AI capabilities, such as the Zhihu Zhida public knowledge base, which facilitates user-friendly and reliable experiences.

• Marketing Services and Paid Membership Growth:

• Marketing services revenue grew 13.1% quarter-over-quarter to RMB 222.8 million.
• Paid membership revenue reached RMB 402 million, although it slightly declined due to strategic focus on acquiring users with longer life cycles.

• These trends result from refining client structures, upgrading commercial products, and optimizing user acquisition strategies.

• AI and Content Ecosystem:

• AI-related content maintained year-over-year growth of over 45% for two consecutive quarters.
• The platform's role as a launchpad for new AI technologies and a network for AI talent has further strengthened its value proposition.
• This is attributed to the platform's trustworthy content, expert network, and AI capabilities, which drive user engagement and commercial growth.

Sentiment Analysis:

• Third consecutive quarter of non-GAAP profitability; gross margin expanded to 62.5% (59.6% prior year, 61.8% prior quarter). Total revenue was RMB 716.9M vs RMB 933.8M in Q2 2024. Management expects marketing services to stabilize and return to positive YOY growth and sees increased likelihood of near breakeven on a full-year non-GAAP basis.

Q&A:

• Question from Xueqing Zhang (CICC): What are the latest plans and progress for Zhihu's AI/LLM products?
  Response: Zhida penetration and usage are rising, and a major Q4 update will deepen integration of AI search and knowledge base within the community.

• Question from Yi Jing Wei (Citigroup): What are Zhida’s user metrics and the value/opportunities of authentic user-generated content?
  Response: Zhida now denotes platform-wide AI across scenarios; strategy is to scale trust by combining trusted human content with an expert network and AI capabilities.

• Question from Lincoln Kong (Goldman Sachs): Outlook for marketing services, paid membership, and vocational training in H2?
  Response: Marketing services’ adjustment is nearing completion with expected positive YOY growth; memberships focus on retention/ARPU via premium content and longer-cycle subs; vocational training prioritizes efficiency and profitability.

• Question from Unidentified Analyst (indiscernible): How should we anticipate shareholder returns going forward?
  Response: The company is executing a 10% repurchase authorization, had bought back ~2.8% of shares by June 30, and will continue active buybacks in H2.

• Question from Lincoln Kong (Goldman Sachs): What is the full-year 2025 profitability outlook?
  Response: Given H1 profitability, management sees a higher likelihood of near breakeven on a full-year non-GAAP basis.