Zhihu Inc.'s Q2 2025: Navigating Revenue Challenges with AI-Driven Engagement and Strategic Monetization in China's Knowledge Economy

Zhihu Inc. (NYSE: ZH) has navigated a complex landscape in Q2 2025, balancing user engagement gains with revenue headwinds in China’s competitive online knowledge economy. While total revenue fell to RMB716.9 million year-over-year, the company’s strategic focus on AI integration, cost discipline, and high-margin monetization streams has positioned it to stabilize its financials and rebuild growth. This analysis unpacks Zhihu’s dual-track approach to user engagement and monetization, offering insights into its long-term potential.

User Engagement: Quality Over Quantity

Zhihu’s user base remains a cornerstone of its value proposition. As of Q4 2024, the platform reported 81.4 million Monthly Active Users (MAU), a 0.3% sequential increase, and a 23% year-over-year rise in average session time [1]. These metrics suggest that Zhihu’s product enhancements—such as AI-driven content personalization and improved community moderation—are fostering deeper user interaction. The company has prioritized core user retention and engagement quality over aggressive user acquisition, a strategy that aligns with its mission to become a “trusted knowledge ecosystem” [1].

However, the absence of disclosed Daily Active Users (DAU) for Q2 2025 raises questions about short-term engagement volatility. While Zhihu’s leadership has not explicitly tied DAU to monetization, the 23% session time growth indicates a strong foundation for future ad and subscription revenue. The key challenge lies in converting this engagement into sustainable monetization without compromising user trust.

Monetization: Strategic Refinement and AI-Driven Efficiency

Zhihu’s Q2 2025 revenue decline masks a broader strategic shift toward high-margin offerings and operational efficiency. Paid memberships, which accounted for 56% of total revenue (RMB402 million), remain a critical pillar, though the average number of subscribers dipped slightly [2]. The company’s marketing services segment fell to RMB222.8 million, a 35% decline from the prior year, as Zhihu intentionally scaled back lower-margin ad formats to prioritize quality over quantity [3]. Similarly, vocational training revenue dropped to RMB62.1 million, reflecting a strategic repositioning to focus on core knowledge-sharing services [3].

The most striking financial improvement was Zhihu’s 62.5% gross margin, up from 59.6% in 2024, driven by a 27.2% reduction in operating expenses and AI-driven productivity gains [1]. By automating content moderation and optimizing resource allocation, Zhihu has demonstrated its ability to scale efficiently while maintaining user experience. This cost discipline has enabled the company to achieve non-GAAP profitability for three consecutive quarters, a stark contrast to its RMB44.6 million loss in Q2 2024 [1].

The Road Ahead: AI as a Dual-Edged Sword

Zhihu’s leadership has emphasized AI integration as both a cost-saving tool and a growth enabler. By leveraging AI to enhance content quality and user trust, the company aims to unlock new monetization avenues, such as premium AI-driven insights or personalized learning paths. However, the success of this strategy hinges on two factors:
1. User Trust: Over-reliance on AI could alienate Zhihu’s community if it compromises the authenticity of human-driven knowledge sharing.
2. Regulatory Risks: China’s evolving AI governance framework may impose constraints on Zhihu’s ability to innovate freely.

Despite these risks, Zhihu’s executives project revenue stabilization in H2 2025, with a focus on recovering marketing services revenue and expanding paid membership tiers [1]. The company’s disciplined approach to cost management and its AI-first strategy suggest a path to long-term profitability, even in a maturing market.

Conclusion

Zhihu’s Q2 2025 performance underscores its resilience in a challenging environment. By prioritizing user engagement quality and high-margin monetization, the company has laid the groundwork for sustainable growth. While revenue declines and regulatory uncertainties persist, Zhihu’s AI-driven efficiency and strategic clarity position it as a compelling player in China’s knowledge economy. Investors should monitor its ability to balance innovation with user trust, as this will determine its trajectory in the coming quarters.

Source:
[1] Earnings call transcript: Zhihu Q2 2025 sees AI-driven growth amid revenue dip [https://www.investing.com/news/transcripts/earnings-call-transcript-zhihu-q2-2025-sees-aidriven-growth-amid-revenue-dip-93CH-4212638]
[2] Zhihu Inc. Reports Unaudited Second Quarter 2025 Financial Results [https://www.stocktitan.net/news/ZH/zhihu-inc-reports-unaudited-second-quarter-2025-financial-vxjx7f5nw6qq.html]
[3] Zhihu Inc. Reports Second Quarter 2025 Financial Results with Improved Profitability and Gross Margin [https://www.quiverquant.com/news/Zhihu+Inc.+Reports+Second+Quarter+2025+Financial+Results+with+Improved+Profitability+and+Gross+Margin]