Zhihu Inc. (ZH) Q1 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call revealed mixed signals: strong adjusted net income and reduced net loss, but declining gross profit and margins. AI integration and strategic shifts in membership revenue show long-term potential, yet lack immediate impact. Shareholder returns are positive, but no new partnerships or guidance changes were announced. The Q&A highlighted strategic AI focus but lacked specifics, leaving uncertainties. Without market cap data, a neutral prediction is prudent, as positive long-term strategies are counterbalanced by short-term financial challenges.

Key Financial Performance

Total Revenue RMB 651.6 million, compared with RMB 729.7 million in the same period of 2025. The year-over-year decline reflects continued efforts to optimize revenue mix and prioritize high-quality services. Revenue grew sequentially driven by strong revenue contribution from paid content and IP operations.

Marketing Services Revenue RMB 191.4 million, compared with RMB 197 million in the same period of 2025. The stabilization reflects proactive and ongoing refinement of service offerings with notably improving sequential trend.

Paid Content and IP Operations Revenue RMB 402.3 million, compared with RMB 420.9 million in the same period of 2025. Average monthly subscribing members were 13.1 million, an increase of 7.9% on a quarterly basis. Growth was driven by seasonal content consumption during the Chinese New Year holiday and improved customer acquisition efficiency.

Other Revenues RMB 57.8 million, compared with RMB 111.8 million in the same period of 2025. The decrease was primarily due to strategic refinement of the vocational training business.

Gross Profit RMB 388.3 million, compared with RMB 451.1 million in the same period of 2025. Gross margin was 59.6%, compared with 61.8% in the same period of 2025. Sequential improvement from 53.6% in Q4 2025 was due to prudent cost controls across content and cloud operations.

Total Operating Expenses RMB 451.2 million, a decrease of 10.4% year-over-year from RMB 503.7 million in the same period of 2025. The decrease was supported by careful cost controls.

Selling and Marketing Expenses RMB 285.1 million, a decrease of 11.1% year-over-year from RMB 320.6 million in the same period of 2025. The decrease was due to disciplined marketing spending and a decrease in personnel-related expenses.

Research and Development Expenses RMB 110.1 million, a decrease of 22.4% year-over-year from RMB 141.9 million in the same period of 2025. The decrease was driven by ongoing improvements in research and development efficiency.

General and Administrative Expenses RMB 56 million, compared with RMB 41.2 million in the same period of 2025. The increase was primarily due to an increase in the allowance for expected credit losses on trade receivables.

Net Loss RMB 8.5 million, narrowed by 15.6% from RMB 10.1 million in the same period of 2025.

Adjusted Net Income (Non-GAAP) RMB 17.2 million, an increase of 147.2% year-over-year from RMB 6.9 million in the same period of 2025.

Cash and Cash Equivalents, Term Deposits, Restricted Cash, and Short-term Investments RMB 4.5 billion as of March 31, 2026.

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Operating Highlights

AI Integration: Accelerated integration of AI capabilities across platform and business operations, enhancing social interactions and user engagement.

IP Operations: Revenue from IP operations delivered robust growth, with multiple short dramas and comic dramas gaining billions of views and topping popularity charts.

Expert Data Solutions: Started gaining traction among key clients with early-stage monetization opportunities.

User Engagement: Average daily time spent per DAU reached 42 minutes, increasing year-over-year and quarter-over-quarter.

Content Ecosystem: Cumulative content volume reached 972 million entries, and cumulative topics grew to 4.38 million, up 8.8% and 15.7% year-over-year, respectively.

Revenue Growth: Total revenues grew sequentially, with a significant narrowing of year-over-year decline.

Cost Management: Operating expenses decreased by 10.4% year-over-year, supported by disciplined cost controls.

Gross Margin: Improved sequentially from 53.6% in Q4 2025 to 59.6% in Q1 2026.

AI-Driven Commercialization: Focused on leveraging AI capabilities to enhance content creation, discovery, and monetization opportunities.

Content Monetization: Combined IP-related revenue with paid membership revenue to better reflect commercialization potential.

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Risk or Challenges

Revenue Decline: The company experienced a year-over-year decline in total revenue, reflecting challenges in optimizing revenue mix and prioritizing high-quality services.

Marketing Services Revenue: Marketing Services revenue showed stabilization but remained lower compared to the same period in 2025, indicating challenges in refining service offerings and maintaining growth.

Vocational Training Business: Revenue from vocational training decreased due to strategic refinement, highlighting potential challenges in this segment.

Gross Margin Decline: Gross margin decreased year-over-year, though it improved sequentially, indicating ongoing cost pressures in content and cloud operations.

Operating Expenses: Total operating expenses decreased year-over-year, but the reduction aligns with revenue decline, suggesting challenges in maintaining profitability.

Allowance for Credit Losses: General and administrative expenses increased due to higher allowances for expected credit losses on trade receivables, indicating potential risks in receivables management.

AI-Generated Content Governance: Efforts to remove low-quality AI-generated content and penalize violating accounts highlight challenges in maintaining content quality and authenticity.

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Guidance & Outlook

Revenue Growth: Building on the solid momentum achieved in the first quarter, the company expects 2026 to be a year of high-quality growth. Revenue from paid content and IP operations is expected to continue growing, driven by expanding IP initiatives and improved monetization efficiency.

AI Integration: The company plans to deepen the integration of AI capabilities across content creation, discovery, consumption, and community interactions. This includes refining AI-generated content governance and expanding practical applications of AI technologies through initiatives like the AI Hackathon.

Content and IP Commercialization: Zhihu aims to leverage its strong IP pipeline to pursue end-to-end multidimensional commercialization and extend the lifecycle of individual IPs. This includes expanding IP partnerships and licensing deals in verticals like science fiction, film, and gaming.

Marketing Services: The company expects continued improvement in marketing services, with a focus on client mix optimization and product upgrades. Core verticals like gaming and automotive are expected to drive ARPU growth.

Operational Profitability: Zhihu remains focused on strengthening operational profitability and improving execution efficiency throughout 2026. This includes disciplined cost management and resource allocation.

User Engagement: The company plans to enhance user engagement by optimizing short-form content experiences and expanding distribution scenarios for community-based products. This is expected to drive core user retention and total time spent on the platform.

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Shareholder Return Plan

Share Repurchase Program: As of March 31, 2026, the company has repurchased 34.8 million Class A ordinary shares on the open market for an aggregate value of USD 70.7 million on both the New York Stock Exchange and the stock exchange of Hong Kong. During the first quarter of 2026, the company repurchased 3.7 million Class A ordinary shares for a total consideration of USD 4.2 million. The share repurchase program continues to deliver value back to our shareholders.

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Key Q&A

Q:Could management share some of the latest strategic thinking and road map around AI, particularly in integrating AI with the Zhihu community?

A:Management emphasized that the focus is not on AI itself but on leveraging technology to enhance cognitive enhancement, experience sharing, and real connections within the community. They highlighted four initiatives over the past two years: sustained investment in community operations, simplification of product experience, long-term investment in technical infrastructure, and advancements in AI innovation. They are currently in Phase 2 of AI integration, focusing on building a data platform and an open platform for community APIs to empower creators. AI is seen as a tool to unlock creativity and enhance the value of IP, with a long-term strategy centered on cultivating the community and leveraging AI to serve people.

Q:Does the reclassification of paid membership revenue reflect a new strategic thinking regarding the market potential and growth drivers of this business?

A:Yes, the reclassification reflects a strategic shift to showcase the full lifecycle value of content and IP. Zhihu is transitioning from a single subscription model to a full-chain IP operation and development. They highlighted four competitive advantages: a vast library of premium short stories, a strengthened creator ecosystem, high potential for AI-driven content creation, and increased IP monetization through AI short dramas and other formats. The reclassification aims to maximize the lifetime value of IP and drive growth through synergies across paid content, IP licensing, and other formats.

Q:Can management elaborate on the specific areas of allocation of AI investment and how they plan to balance these investments with long-term profitability goals?

A:Management is focusing AI investments on two areas: AI short dramas and comic dramas, which represent high-demand content, and data solutions for the AI industry. These areas are chosen for their healthy cash flow profiles and Zhihu's competitive advantages. They emphasized a medium- to long-term perspective and stated they will not pursue cash-burning strategies but will focus on building core long-term capabilities to deliver superior products.

Q:Does management have any update to the shareholder return plan, such as the resource and payout scale?

A:Management reaffirmed their commitment to share repurchases. Since 2022, Zhihu has repurchased 63.5 million Class A ordinary shares at a total cost of USD 130 million. In 2026, they repurchased 4.61 million shares for USD 5.06 million, representing 1.74% of total shares outstanding. All shares repurchased in the first quarter of 2026 have been fully canceled.

Q:Review of Unclear Management Responses

A:Management avoided directly addressing when AI-driven revenue will reaccelerate growth, instead emphasizing a medium- to long-term perspective and focusing on building core capabilities. Additionally, while they discussed AI integration and investments, they did not provide specific numerical data or timelines for expected outcomes.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

ZH Transcript

Zhihu Inc. (ZH) Q1 2026 Earnings Call Transcript

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Zhihu Inc. (ZH) Q4 2025 Earnings Call Transcript

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Despite challenges in financial performance, such as revenue declines and increased net loss, Zhihu's strategic focus on AI and international expansion shows potential for future growth. The positive sentiment from management's detailed Q&A responses about AI impact and future strategies balances the negative aspects. The stock price reaction is likely to be neutral, considering the mixed signals from financial metrics and strategic initiatives.

Zhihu Inc. (ZH) Q3 2025 Earnings Call Transcript

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Despite challenges like decreased revenues and increased losses, management's optimistic guidance and AI progress provide a counterbalance. The Q&A highlighted positive AI integration and a healthy user ecosystem. The commitment to share buybacks also supports sentiment. However, the absence of clear market cap data and ongoing financial pressures suggest a cautious outlook, resulting in a neutral prediction.

Zhihu Inc. (ZH) Q2 2025 Earnings Call Transcript

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The earnings call presents mixed signals: a decline in revenue and specific segments, but an improvement in gross margin, cost control, and profitability. The Q&A section reveals cautious optimism, with management focusing on AI integration and shareholder returns. However, the lack of specific guidance and avoidance of detailed plans may concern investors. The share repurchase program and profitability turnaround are positives, but the overall sentiment remains balanced, leading to a neutral stock price prediction.

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