Zhihu's Q2 2025: Contradictions Emerge on AI Strategy, Share Repurchases, User Value, Revenue Forecasts, and Monetization Plans

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

Date of Call: None provided

Financials Results

• Revenue: RMB716.9M; year-over-year decline narrowed for the second straight quarter (management commentary).
• Gross Margin: 62.5%, up from 59.6% in 2Q24 and 61.8% in 1Q25

Guidance:

• Marketing services: adjustment phase near end; expect stabilization and return to positive YOY growth; optimize client mix toward trust-driven categories and B2B.
• Paid membership: prioritize renewals/retention and ARPU growth; shift to longer-tenure plans; expand premium formats (e.g., voice live streaming) and accelerate IP monetization.
• Vocational training: focus on efficiency/profitability; transition to social/knowledge-sharing model; H2 adjustments approaching a stable stage.
• Product: major Zhihu ZhiDA experience update planned in Q4, deepening integration of AI search and knowledge base with community.
• Profitability: higher likelihood of near breakeven on full-year 2025 non-GAAP basis.
• Capital return: continue executing share repurchases under the 10% authorization in H2.

Business Commentary:

* Earnings Performance and AI Integration: - Zhuhu Inc. reported adjusted net income of RMB91.3 million for the second quarter, compared to a loss of RMB44.6 million in the same period last year. - The improvement was driven by the strength of their disciplined operating strategy and value of AI-powered productivity gains.

• User Engagement and AI Capabilities:
• Average daily user time spent exceeded 39 minutes, reflecting a 15% year-over-year increase.

• This growth is attributed to optimized community features, AI integration, and the ongoing refinement of content models.

• Content Creation and AI Vertical Growth:

• Daily high-quality content creation increased by over 10% sequentially, with AI-related content maintaining year-over-year growth of over 45% for two consecutive quarters.

• The rise in AI vertical content is due to more frontline engineers and AI model developers openly sharing insights, enhancing the platform's value.

• Marketing Services Recovery:

• Marketing services revenue grew 13.1% quarter-over-quarter to RMB222.8 million, with the year-over-year decline narrowing substantially.
• The recovery is attributed to reducing low-quality marketing content, optimizing client mix, and leveraging Zhuhu's brand equity.

Sentiment Analysis:

• Third consecutive quarter of non-GAAP profitability; adjusted net income RMB91.3M vs a loss of RMB44.6M last year. GAAP net income RMB72.5M vs a loss of RMB806M last year. Gross margin expanded to 62.5% (59.6% in 2Q24; 61.8% in 1Q25). Management expects marketing services to stabilize and return to positive YOY growth and sees higher likelihood of near breakeven on full-year 2025 non-GAAP basis.

Q&A:

• Question from Xuejing Zhang (CICC): What are Zhihu’s latest plans and progress on AI and large language model products?
  Response: AI capabilities are scaling via integrations with multiple LLMs and upgraded agentic features; ZhiDA evolved from AI search to search+knowledge base, with a major experience update planned for Q4 and growing penetration/usage.

• Question from Vicky Wei (Citi): How are user metrics for ZhiDA trending, and what is the unique value of Zhihu’s authentic UGC? Key opportunities and challenges?
  Response: ZhiDA penetration is rising as AI is applied across community scenarios; human-generated, trustworthy content is the core ‘currency of trust,’ and strategy centers on trusted content × expert network × AI.

• Question from Lincoln Kung (Goldman Sachs): Outlook for marketing services, paid membership, vocational training in H2, and full-year 2025 profitability?
  Response: Marketing services nearing end of adjustment with expected stabilization and positive YOY growth; paid membership targeting retention/ARPU via longer tenures and premium content; vocational training prioritizes efficiency/profit; higher likelihood of near breakeven on full-year non-GAAP.

• Question from Xiaohanneson (HTR): How should we anticipate shareholder returns going forward?
  Response: Company remains committed to buybacks under its 10% authorization, has repurchased 2.8% of shares by June 30 and continues executing actively in H2.