Investment Rating - The report maintains a "Buy" rating for the company, iQIYI (IQ US), with a target price of $2.10, indicating a potential upside of 5.5% from the current price of $1.99 [2][3][14]. Core Views - The company is expected to achieve operational breakeven in Q2 2025, focusing on upgrading its content ecosystem with both long and short formats. The impact of short drama investments on profits may continue in the short term, but improvements in the supply of high-quality short dramas and the release of advertising inventory are anticipated to positively affect user acquisition, retention, and commercialization [2][7]. - The valuation benchmark has been adjusted to 2026, based on a 10x P/E ratio for that year, reflecting marginal improvements in the performance of key content and the counter-cyclical nature of entertainment subscriptions [2][7]. Financial Model Update - Revenue forecasts for 2024E, 2025E, and 2026E have been revised downwards by 4%, 3%, and 3% respectively, with expected revenues of RMB 27,875 million, RMB 29,126 million, and RMB 30,557 million [6]. - Adjusted net profit estimates for 2025 and 2026 have been lowered to RMB 7.7 billion and RMB 14.3 billion respectively, reflecting challenges in content scheduling and advertising performance [7][11]. Earnings Forecast Changes - The report outlines a decrease in expected paid membership and online advertising revenues, with 2024E paid members revised to 16,879 million (down 5%) and online advertising revenue to RMB 5,413 million (down 2%) [6][11]. - The adjusted operating profit for 2025E is projected at RMB 1,242 million, a decrease of 20% from previous estimates, with an operating profit margin of 4% [6][11]. Stock Performance - The stock has a 52-week high of $3.33 and a low of $1.53, with a market capitalization of approximately $1,051.52 million. The year-to-date change is -1.00% [5][11]. Revenue Breakdown - For Q2 2025, total revenue is expected to decline by 8% quarter-on-quarter to RMB 6,621 million, with a year-on-year decrease of 11% [11]. - The breakdown includes a projected decline in paid membership revenue to RMB 4,096 million and online advertising revenue to RMB 1,271 million [11].