The online knowledge community operator briefly achieved profitability in the first half of this year, but that momentum didn't carry into the third quarterKey Takeaways:Zhihu reported its revenue fell 22% year-on-year in the third quarter, as it slipped back into the red after finding profits earlier this yearThe operator of a knowledge-sharing community, often called the "Quora of China," said its paid membership revenue for the quarter dropped 16% year-on-yearGenerative AI is reshaping the global content ...

Financial Data and Key Metrics Changes - In Q3 2025, the company reported total revenues of RMB 658.9 million, a decrease from RMB 845 million in the same period of 2024, indicating a narrowing year-over-year decline for the third consecutive quarter [21][22] - The non-GAAP operating loss narrowed by 16.3% year-over-year, reflecting improved operational efficiency and cost management [4][21] - The GAAP net loss for Q3 was RMB 46.7 million compared to RMB 9 million in the same period of 2024, while the adjusted non-GAAP net loss was RMB 21 million compared to RMB 13.1 million in the same period of 2024 [24] Business Line Data and Key Metrics Changes - Marketing services revenue for Q3 was RMB 189.4 million, down from RMB 256.6 million in the same period of 2024, but the year-over-year decrease narrowed, indicating a potential recovery [11][22] - Paid membership revenue was RMB 386 million, down from RMB 459.4 million in the same period of 2024, although average monthly paid members increased by 8.1% sequentially to 14.3 million [15][22] - Other revenues surged to RMB 839 million compared to RMB 129 million in the same period of 2024, primarily due to strategic refinements in the vocational training business [23] Market Data and Key Metrics Changes - The company reported a modest increase in Monthly Active Users (MAUs) and a significant rise in daily time spent on the platform, indicating improved user engagement [4][5] - Daily creation of high-quality content increased by over 25% year-over-year, with professional AI-focused content up by more than 30% compared to the same period last year [7][8] Company Strategy and Development Direction - The company aims to achieve non-GAAP break-even on a full-year basis, focusing on structural optimization, service offerings refinement, and balancing commercialization with community health [4][5] - The integration of AI capabilities is a strategic priority, with plans to enhance user experience and content creation through AI tools [30][41] - The company is committed to maintaining a healthy ecosystem by focusing on content quality, user structure, and creator incentives [33][37] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year profitability in 2025, despite a small loss in Q3, indicating a focus on fine-tuning operations and targeted investments [45][49] - The company is optimistic about the recovery of its marketing services and expects sequential growth starting in Q4 [46] - Management emphasized the importance of trust and professionalism in content as key indicators of ecosystem health, with ongoing efforts to enhance the creator network and content quality [35][37] Other Important Information - The company has repurchased 31.1 million Class A ordinary shares for an aggregate value of $66.5 million, reflecting confidence in its valuation and future prospects [25][53] - The Yanyan Story initiative has successfully generated significant engagement and content, showcasing the potential for IP development and commercialization [16][17] Q&A Session Summary Question: AI progress of Zhihu - Management reported that the penetration rate of Zhihu Zhida exceeded 15%, nearly four times higher than the same period last year, indicating strong user endorsement of AI integration [29] Question: Current status of Zhihu's user ecosystem - Management stated that the community ecosystem is healthy, focusing on content quality and user structure, with double-digit growth in daily high-quality content creation [33][35] Question: Adjustments in each business line and revenue outlook - Management indicated that marketing services revenue is expected to recover sequentially starting in Q4, while paid membership is still in transition [46][47] Question: Shareholder return plan and progress - Management highlighted the company's active buyback program, expressing confidence in reaching profitability and maintaining shareholder value [52][53]

Financial Data and Key Metrics Changes - In Q3 2025, the company achieved total revenues of RMB 658.9 million, a decrease from RMB 845 million in the same period of 2024, indicating a narrowing year-over-year decline for the third consecutive quarter [20][21] - The non-GAAP operating loss narrowed by 16.3% year-over-year, reflecting improved operational efficiency and disciplined cost management [4][20] - The GAAP net loss for Q3 was RMB 46.7 million compared to RMB 9 million in the same period of 2024, while the adjusted net loss on a non-GAAP basis was RMB 21 million compared to RMB 13.1 million in the same period of 2024 [23][24] Business Line Data and Key Metrics Changes - Marketing services revenue was RMB 189.4 million, with the year-over-year decrease narrowing, indicating the bottoming out of the adjustment cycle [10][21] - Paid membership revenue reached RMB 386 million, with average monthly paid members increasing by 8.1% sequentially to 14.3 million [14][21] - Other revenues were RMB 839 million, primarily due to the strategic refinement of the vocational training business, which has been reclassified into other revenues [22][24] Market Data and Key Metrics Changes - The daily creation of high-quality content increased by over 25% year-over-year, with professional AI-focused content up by more than 30% compared to the same period last year [6][7] - The user base remains stable, with MAUs showing modest growth and average daily user time spent delivering double-digit year-over-year growth for six consecutive quarters [36][37] Company Strategy and Development Direction - The company aims to achieve non-GAAP break-even on a full-year basis, focusing on structural optimization, service refinement, and balancing commercialization with community health [4][20] - The integration of AI capabilities is a core strategy, with plans to enhance user experience through AI-powered tools and features [30][39] - The company is committed to maintaining a healthy ecosystem by investing in trustworthy content and expert networks while cracking down on low-quality content [35][37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year profitability in 2025, with Q3 and Q4 being used to fine-tune operations and make targeted investments [46][50] - The company is optimistic about the recovery of its marketing services and expects sequential growth starting in Q4 [47][50] - Management emphasized the importance of real human interactions and trusted content in the AI era, positioning the company as a connection layer for users [42][43] Other Important Information - The company repurchased 31.1 million Class A ordinary shares for an aggregate value of $66.5 million, reflecting confidence in its valuation and future prospects [24][54] - The Yanyan Story initiative has successfully generated significant engagement and international interest, showcasing the potential for Chinese digital literature [15][16] Q&A Session Summary Question: Update on AI progress and integration with the Zhihu community - Management reported that the penetration rate of Zhihu Zhida exceeded 15%, reflecting strong user endorsement of the AI+ community strategy [28][29] Question: Status of Zhihu's user ecosystem and future product design - Management indicated that the community ecosystem is healthy, focusing on content quality and user structure, with continuous improvements in user engagement and trust [34][36] Question: Progress of adjustments in each business line and outlook on profitability - Management confirmed that marketing services revenue is expected to recover sequentially, while the paid membership segment is still in transition [44][46] Question: Shareholder return plan and progress - Management highlighted the company's active buyback program, expressing confidence in reaching profitability and maintaining shareholder value [54]

Core Viewpoint - Zhihu Inc. reported its first-ever non-GAAP net income for the first quarter of 2025, reflecting effective operational strategies and AI integration, despite a decline in total revenues compared to the previous year [3][4]. Financial Performance - Total revenues for Q1 2025 were RMB 729.7 million (US$ 100.6 million), down from RMB 960.9 million in Q1 2024 [4][8]. - Non-GAAP net income was RMB 6.9 million (US$ 1.0 million), a significant improvement from a net loss of RMB 135.7 million in the same period of 2024 [8][12]. - Gross margin increased to 61.8% in Q1 2025 from 56.6% in Q1 2024, attributed to monetization enhancements and operational efficiency improvements [7][8]. Revenue Breakdown - Marketing services revenue decreased to RMB 197.0 million (US$ 27.1 million) from RMB 330.5 million in Q1 2024, due to strategic refinements in service offerings [4]. - Paid membership revenue was RMB 417.9 million (US$ 57.6 million), slightly down from RMB 449.7 million in Q1 2024, primarily due to a marginal decline in average monthly subscribing members [5]. - Vocational training revenue fell to RMB 94.5 million (US$ 13.0 million) from RMB 145.4 million in Q1 2024, mainly due to lower contributions from acquired businesses [5]. Cost Management - Cost of revenues decreased by 33.3% to RMB 278.6 million (US$ 38.4 million) from RMB 417.4 million in Q1 2024, driven by reduced content and operating costs [6]. - Total operating expenses decreased by 34.4% to RMB 503.7 million (US$ 69.4 million) from RMB 768.2 million in Q1 2024, with selling and marketing expenses down by 32.9% [9]. Shareholder Value Initiatives - As of March 31, 2025, the company had cash and cash equivalents totaling RMB 4,766.5 million (US$ 656.8 million) [13]. - The company repurchased 31.1 million Class A ordinary shares for a total of US$ 66.5 million under its existing share repurchase program [13][14].