Ge Long Hui·2025-10-25 20:46Core Viewpoint - The company anticipates a 6% year-over-year decline in revenue for Q3 2025, projecting total revenue of $437 million and a 23% decrease in Non-GAAP net profit to $107 million, with earnings report expected in mid to late November [1] Group 1: Revenue Performance - The decline in revenue is attributed to weak demand from advertisers in the fast-moving consumer goods (FMCG) and mobile phone sectors, with advertising revenue expected to decrease by 7% [1] - The FMCG sector, particularly food and beverage, is impacted by a high base from the previous year (Olympics) and overall weak demand this year [1] - The mobile phone sector is experiencing average performance in new model shipments, affecting advertising investments on the platform [1] - The gaming sector is also seeing weaker advertising due to the lifecycle of certain products [1] - Notably, e-commerce (instant retail) and new energy vehicles are identified as sectors performing relatively well in Q3 2025 [1] Group 2: Cost Management and Profitability - The company is expected to maintain a cautious approach to cost management, with some incremental spending on AI initiatives [1] - Projected Non-GAAP operating profit margin for Q3 2025 is 28.9%, while Non-GAAP net profit margin is expected to be 24.6% [1] Group 3: Product and AI Development - The company is focusing on changes in consumer scenarios for its Weibo product, having established a content consumption matrix consisting of four main areas: relationship flow, recommendation flow, hot topics, and video consumption [2] - A new homepage recommendation flow launched in July has led to a 30% year-over-year increase in daily active users for Q3 2025 [2] - Upgrades to hot topic scenarios are also noted, with expectations for improved commercialization as product operations advance [2] - The impact of AI, particularly through features like intelligent search and the Lingchuang platform, on user engagement and advertising effectiveness is being closely monitored [2] Group 4: Profit Forecast and Valuation - Due to weak advertiser demand, the company has revised down its Non-GAAP net profit forecasts for 2025 and 2026 by 3.0% and 3.5% to $468 million and $473 million, respectively [2] - Current trading multiples for Hong Kong and US stocks are at 6x for 2025 and 2026 Non-GAAP P/E [2] - The company maintains an outperform rating, with a target price of HKD 100.8 / USD 13, corresponding to 6.7x and 6.6x Non-GAAP P/E, indicating potential upside of 13% and 14% for Hong Kong and US stocks, respectively [2]