Core Viewpoint - Zhihu Inc. is facing significant challenges due to the impact of generative AI on its business model, leading to a decline in revenue and user engagement, ultimately resulting in a return to net losses after a brief period of profitability [3][4][6]. Financial Performance - In the third quarter, Zhihu's revenue fell 22% year-on-year to 660 million yuan ($120 million), down from 850 million yuan a year earlier [4]. - All three main revenue streams experienced declines: advertising and marketing services revenue decreased by 26% to 189 million yuan, paid membership revenue dropped 16% to 385 million yuan, and "other revenue" fell over 30% to 83.92 million yuan [4]. - The company's revenue for the first nine months of the year totaled 2.11 billion yuan, down 23% year-on-year, with a net profit of 15.7 million yuan compared to a net loss of 260 million yuan in the same period last year [7]. User Engagement - By the end of the third quarter, Zhihu's average monthly subscribing members totaled 14.3 million, a decline of 13.3% from 16.5 million a year earlier, and its average monthly active users (MAU) also decreased by 21.2% year-on-year [10]. Strategic Challenges - The rise of AI large language models is undermining Zhihu's traditional value proposition of high-quality knowledge sharing, making it increasingly replaceable [9]. - Founder Zhou Yuan acknowledges the need for Zhihu to evolve into a platform that combines "information + trust" to remain relevant in the AI era [11]. - Despite launching AI-powered features and a knowledge base subscription product, these initiatives have not significantly improved user engagement or revenue [13]. Market Perception - Following the earnings report, Zhihu's Hong Kong-listed shares fell over 8%, reflecting market pessimism about the company's near-term outlook [14]. - The company's shares trade at a price-to-sales (P/S) ratio of less than 1, indicating that the market does not view it as a beneficiary of the AI trend [14].