Core Viewpoint - Zhihu has achieved its first quarterly profit after 14 years, marking a significant milestone in its journey towards profitability, although this has primarily been driven by cost-cutting rather than revenue growth [1][5][10]. Financial Performance - In Q2 2024, Zhihu reported an adjusted net profit of 91.3 million RMB, marking three consecutive quarters of Non-GAAP profitability [1]. - However, Zhihu's revenue declined by 23.7% year-on-year in the first half of 2024, with all major business segments—marketing services, paid memberships, and vocational training—experiencing revenue drops [2][3]. - The company managed to reduce its cost of revenue by 31.13% and total operating expenses by 30.87%, leading to an increase in gross margin from 58.1% to 62.2% [3][4]. - Investment income significantly contributed to profitability, amounting to 160 million RMB, compared to 38.71 million RMB in the same period last year [3]. Strategic Shifts - The management's focus has shifted towards cost reduction and operational efficiency, prioritizing profitability over aggressive growth [5][10]. - Zhihu's strategy has evolved from rapid commercial expansion to a more sustainable approach that emphasizes community health and user experience, even at the cost of scaling [9][12]. - The company has recognized the need to balance commercial goals with maintaining a healthy community ecosystem, leading to a strategic pivot towards "ecology-first" [10][12]. User Engagement and Community Dynamics - Despite achieving profitability, Zhihu has seen a decline in monthly active users, losing over 17 million users in 2024, which raises concerns about its long-term growth potential [10]. - The platform's advertising revenue continues to decline, and paid membership income has also decreased, indicating challenges in maintaining user engagement and monetization [10][11]. AI Integration and Future Prospects - Zhihu has launched an AI search product, "Zhihu Direct Answer," which has seen increased user engagement, with 50 million monthly active users interested in AI content [13][15]. - The company aims to leverage AI to enhance content quality and user experience, although challenges remain regarding the accuracy and reliability of existing content [16][17]. - The integration of AI is seen as a potential opportunity for Zhihu to strengthen its competitive advantage, but the complexity of community dynamics may pose challenges [15][18].

Core Viewpoint - Zhihu aims to improve profit margins as a strategic focus, continuing its efforts to turn losses into profits [1][6] Financial Performance - In Q1 2025, Zhihu reported revenue of 730 million yuan, a year-on-year decrease of 24.06% [3] - The net loss narrowed to 10.1 million yuan, a 93.9% improvement compared to the previous year [3] - Adjusted net profit (non-GAAP) reached 6.9 million yuan, compared to a loss of 138 million yuan in the same period last year [3] - Gross margin increased from 56.6% in Q1 2024 to 61.8% in Q1 2025, reflecting improved operational efficiency [2][6] Revenue Breakdown - Marketing services revenue was 197 million yuan, down from 331 million yuan in Q1 2024 [4][5] - Paid membership revenue slightly decreased to 418 million yuan from 450 million yuan year-on-year, attributed to a slight decline in average monthly subscribers [5] - Vocational training revenue fell to 94.5 million yuan from 146 million yuan, mainly due to reduced contributions from acquired businesses [5] - Other income decreased to 20.3 million yuan from 35.2 million yuan in the previous year [5] User Engagement and AI Integration - Monthly active users for Zhihu's direct answer feature exceeded 10 million, with a growth of over 37% from the beginning of the quarter [2][9] - Daily active user engagement time increased by 17.6% to nearly 38 minutes [8] - The number of paid members reached an average of 14.2 million, continuing an upward trend [9] - The citation rate of Zhihu's professional content by AI assistants reached 29.9%, the highest among content communities [9] Strategic Focus and Future Outlook - The company emphasizes enhancing commercialization capabilities while unlocking community value [9] - The CEO highlighted the achievement of recording adjusted net profit for the first time in Q1 since the company's listing, indicating effective operational strategies [6] - The CFO noted that the increase in gross margin reflects improved execution and operational efficiency [6]

Financial Data and Key Metrics Changes - The company achieved a non-GAAP net profit of RMB6.9 million in Q1 2025, compared to an adjusted net loss of RMB135.7 million in the same period last year, marking a significant improvement in profitability [7][28] - Total revenue for the quarter was RMB729.7 million, down 24% from RMB960.9 million in Q1 2024, reflecting ongoing adjustments to the business [24][25] - Gross profit for the quarter was RMB451.1 million, with a gross margin of 61.8%, an increase of 5.2 percentage points year over year [26][28] - Total operating expenses decreased by 34.4% year over year to RMB503.7 million, driven by better cost management [27][28] Business Line Data and Key Metrics Changes - Revenue from marketing services was RMB197 million, a decline of 40.4% year over year, primarily due to the adoption of a trustworthy content model [15][24] - Paid membership revenue remained stable at RMB417.9 million, with average monthly paying members increasing by 1.2% sequentially to 14.2 million [19][25] - Vocational training revenue was RMB94.5 million, down 35% year over year, reflecting a strategic transformation of the business model [20][21] Market Data and Key Metrics Changes - The number of daily active high-tier content creators increased by 20% year over year, indicating growth in the creator ecosystem [12] - AI-related professional content grew by 46% year over year, highlighting the increasing engagement with AI-driven content [11] Company Strategy and Development Direction - The company is focusing on integrating AI applications into its community, with plans to launch a public knowledge base to enhance content quality [8][37] - The strategic focus is on balancing commercial growth with community integrity, aiming to create a sustainable commercial flywheel [14][18] - The company is transitioning its vocational training business to a more socially interactive model, leveraging its content ecosystem [21][49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing optimization of the business model and expects financial performance to exceed initial expectations for 2025 [49] - The company aims to capitalize on the opportunities created by AI, enhancing connections and engagement among its user base [22][29] Other Important Information - The company repurchased 31.1 million Class A ordinary shares for a total value of USD66.5 million, as part of its share repurchase program [28][29] - A new share repurchase program was approved, allowing for the repurchase of up to 10% of total issued shares [29] Q&A Session Summary Question: What other AI initiatives can be expected next within the Juhu community and beyond? - Management highlighted the focus on trustworthy content and expert networks, with plans to integrate more experts and aggregate high-quality content [33][37] Question: Can management share some color on the revenue trends for each business segment in 2025 and the profitability outlook? - Management indicated that each business stream is entering a new phase of growth, with a focus on aligning the community ecosystem with commercial operations [47][49] Question: What are the thoughts about the shareholder return program this year? - Management confirmed commitment to enhancing shareholder returns through a share repurchase plan, emphasizing confidence in the company's long-term success [52][53]