Zhihu (NYSE:ZH) reported second-quarter financial results on Wednesday. The transcript from the company's second-quarter earnings call has been provided below.

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Summary

Zhihu Inc. reported second quarter 2026 revenues of RMB 619 million, down 3.7% year-over-year but up 5.9% sequentially, with an adjusted net loss of RMB 10.25 million.

The company emphasized strategic initiatives in AI, enhancing community openness, AI content assets, IP multimedia expansion, and expert data solutions, aiming to leverage its professional network and content library.

Zhihu's focus remains on stabilizing core businesses, improving user experience, and exploring AI-driven opportunities, with long-term goals of sustainable profitability and enhancing shareholder returns through selective investments and share repurchases.

Full Transcript

OPERATOR

Ladies and gentlemen, thank you for standing by and welcome to the Zhihu Inc. Second Quarter 2026 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Today's conference is being recorded and webcast. At this time, I would like to turn the conference over to Demi Nung of Investor Relations. Please go ahead.

Demi Nung, Investor Relations

Thank you, Sharon. Hello everyone. Welcome to Zhihu's second quarter 2026 financial results conference call. Joining me today from our senior management team are Mr. Zhou Yuan, Founder and Chairman, Mr. Wang Han, Chief Financial Officer, and Mr. Zhang Rongle, Chief Operating Officer. Before we begin, I'd like to remind you that today's discussion will include forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

These statements involve inherent risks and uncertainties. As such, actual results may be materially different from the views expressed today. Further information regarding this is included in our public filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Additionally, today's discussion will include both GAAP and non-GAAP financial measures for comparison purposes only.

For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please refer to our earnings release issued earlier today. A replay of this conference call will be available on our IR website at ir.zhihu.com. Today, Mr. Zhou Yuan will deliver prepared remarks in Chinese, followed by English translation. Please go ahead.

Zhou Yuan, Founder and Chairman

Hello everyone and thank you for joining Zhihu's second quarter 2026 earnings call. Today I will cover three areas: our core business performance in the second quarter; how AI is expanding the value of our community content, IP and expert network; and our priorities for the second half of the year. Let me start with our core businesses. Overall, our core business remains stable while some areas continue to adjust and recover. In the second quarter, total revenues were RMB 619 million, down 3.7% year over year and up 5.9% sequentially, with the year-over-year decline narrowing further.

Adjusted net loss was RMB 10.25 million, reflecting changes in revenue mix and phased business investments. Our CFO will discuss the financial details shortly. Community engagement among core users remains stable. Average daily time spent was about 39 minutes, broadly unchanged, while daily creation of high quality content grew more than 16%. As AIGC makes content creation easier, authentic experiences, clear sourcing and professional judgment are becoming more valuable.

These remain the foundation of Zhihu and our long-term value. Turning to marketing services, revenue was RMB 199 million, down 10.7% year over year and up 4% sequentially. We continue to focus on key verticals including technology, automotive, consumer electronics and home appliances, and gaming. Spending on performance was up 1% sequentially, including a 22% increase in gaming. This has not yet translated into a broader recovery in the marketing revenue, but it supports our strategy of strengthening key verticals, products and algorithms.

Marketing services remain in structural recovery, and we will continue to improve the matching of professional content, user needs and client demand. For paid content and IP, revenue reached RMB 426 million, up 4.4% year over year and 5.9% sequentially. Average monthly subscribing members were 13.11 million, broadly stable, while member ARPU also remains stable. We'll continue to improve membership content and product experience while expanding knowledge-based offerings.

IP operations continue to contribute incremental growth, with licensing increasing 105% sequentially and 600% year over year. We're expanding Yanyang Story IP from one-time licensing to multi-format, full-lifecycle development. Overall, challenges remain, but our business mix continues to adjust and our strategic direction remains unchanged. We'll continue to stabilize our core businesses while maintaining investment discipline. Next I would like to focus on Zhihu in the AI area.

Zhihu starts with the community, bringing the value accumulated within Zhihu to more people through new products, formats and use cases. Real users, professional content, IP and our expert network remain our most important assets. AI is helping extend these capabilities into new applications and commercial scenarios. First, the community will become more open. AI is changing how content is discovered and used. For Zhihu, openness does not mean changing our positioning; it means enabling high-quality content to reach more users and developers through AI tools and applications. This requires clear goals around content sourcing, creator rights and community values. We are further integrating Zhihu Jiuda with Zhihu Search, making AI-powered search a new gateway to community content rather than a substitute for it. Earlier testing has shown positive signals for user retention. We're also exploring community agents. AI Conscience is one example.

Rather than another general-purpose chatbot, we want it to help users explore Zhihu and discover real people, professional content and diverse perspectives. The product remains at an early testing stage, and our focus is on content discovery, interaction and retention. AI Works now hosts more than 2,600 AI projects, while the Open Data Platform API has attracted more than 17,600 professional developers; about 20% were not previously Zhihu creators.

We also released an updated Zhihu CLI, making it easier to discover and use Zhihu content across AI tools. Through AI search, agents, open platforms and developer tools, Zhihu's content and professional capabilities can reach more users, developers and clients. Beyond the Zhihu app, we believe AI is becoming a new medium that can help existing content reach new audiences, enable new applications and create new opportunities in content licensing, brand content assets and expert services.

Second, marketing services are evolving from traffic value to content asset value. As more information discovery happens through AI, brands increasingly care not only about visibility but also whether their professional information can be accurately understood and cited by AI, while helping brands build persistent content assets with clear sourcing. Unlike a one-off campaign, these assets can continue to be discovered and used across search, AI and other channels, creating longer-term value.

Our AI content asset offering remains at an early stage. In the second quarter, the number of clients increased 50% sequentially. This does not yet represent a stable or scalable revenue contribution, but it's beginning to demonstrate new commercial value. Going forward, we'll focus on client outcomes with demand and product standardization. Third, AI is accelerating the expansion of IP into multimedia formats. AI is lowering the cost and barriers of turning text-based content into multimedia formats for Zhihu.

This allows our large base of original content to be developed more efficiently into comic dramas, short dramas, film and television and other formats. A meaningful portion of the comic drama projects monetized this quarter came from works created in 2025 or earlier. This shows that high-quality IP can return value over time while technology improves development efficiency and expands its reach. In the first half, we also explored in-house production, with some projects showing encouraging early results.

However, we'll remain disciplined and will not materially increase asset-heavy investment. We'll flexibly choose among licensing, in-house and commissioned production based on the project economics. Going forward, we'll continue to strengthen our capabilities in IP selection, development and cross-format operations to unlock more value from our content library. Fourth, expert data solutions are evolving from project delivery toward reusable capabilities.

AI is creating new ways to use Zhihu's expert capabilities, not only creating content for users. Experts can now help translate professional knowledge and judgment into model capabilities through training data, model evaluation and complex task design. We position as a research-driven data lab. We identify model capability gaps and develop training data, evaluation systems and complex task environments to help improve model performance. In the first half, we completed projects across coding, research and deep research, visual reasoning and agents, while building capabilities spanning model analysis.

Our expert network plays an important role in defining professional tasks, setting quality standards and evaluating whether model outputs meet professional requirements. We're also becoming more proactive in identifying model gaps, developing training data and evaluation methods in-house, and validating the value through actual model performance. Our goal is not one-off data delivery, but reusable capabilities that can evolve across clients and model iterations.

In the next phase, we'll continue this and extend them into productized complex tasks and environments. In the second half, we'll focus on two priorities. First, we'll improve user experience, maintain a stable membership base, improve IP development efficiency and advance the structural recovery of marketing services. Second, we'll continue to validate AI-driven opportunities across our open community ecosystem, AI content assets, IP and expert data solutions by focusing on real demand, client value, capability reuse and ROI.

Initial validation does not mean these initiatives have become stable growth drivers. Sustainability may fluctuate due to business timing and phased investments. Our long-term goals of improving operating efficiency and returning to sustainable profitability remain unchanged. Over the long term, we want Zhihu to be not only an authentic, professional and trustworthy community, but also an important platform connecting content, knowledge and AI applications.

Thank you. I will now hand over to our CFO to review the quarter's financial performance.

Wang Han, Chief Financial Officer

Hi, I will now go over our second quarter results issued earlier today. During the second quarter, our revenue trend continued to improve sequentially, supported by growth in paid content and IP operations. At the same time, disciplined cost management drove year-over-year reductions in operating expenses and operating losses. Now turning to the financial highlights of the second quarter, our total revenues for the quarter were RMB 690.1 million, down 3.7% year over year and up 5.9% sequentially.

The sequential growth was primarily driven by content and IP operations. Marketing services revenue was RMB 199 million, compared with RMB 222.8 million in the same period of 2025. The decrease primarily reflected our proactive and ongoing refinement of service offerings. Sequentially, marketing services revenue increased by 4%, with improving traction in key verticals and performance-based products. We also continued to make early progress in AI-related commercial use cases.

Content and IP operations revenue was RMB 425.9 million, up 4.4% year over year and 5.9% sequentially, primarily driven by continued growth in IP operations. Average monthly subscribing members remained stable at 13.1 million. We will continue to strengthen our paid content offerings while developing and monetizing selected IP across multiple formats with disciplined attention to project returns and risk. Other revenues were RMB 86 million. The decrease was primarily due to the continuous strategic refinements of our vocational training business.

Sequentially, other revenues increased by 12.7% and the year-over-year decline continued to narrow. Our gross profit for the quarter was RMB 390.9 million, compared with RMB 448.2 million in the same period of 2025. Gross margin was 57%, compared with 62.5% in the same period of 2025. The decline in gross margin primarily reflected our continued efforts to broaden and enhance our content offerings. Total operating expenses decreased by 13% to RMB 469.4 million from RMB 539.2 million in the same period of 2025, reflecting continued efficiency improvements across our operations.

Selling and marketing expenses decreased by 5.4% to RMB 308.7 million from RMB 326.3 million in the same period of 2025, reflecting disciplined marketing spending. Research and development expenses decreased by 25.4% to RMB 108.6 million from RMB 145.7 million in the same period of 2025, primarily attributable to continued improvements in our research and development efficiency. General and administrative expenses decreased by 22.7% to RMB 52 million from RMB 67.3 million in the same period of 2025, primarily attributable to lower personnel-related expenses.

On a non-GAAP basis, adjusted loss from operations narrowed by 32% to RMB 48.7 million from RMB 71.5 million in the same period of 2025. Investment income was RMB 16.4 million, compared with RMB 140.8 million in the same period of 2025. The decrease was primarily due to an unrealized gain from the fair value remeasurement of our investment in a privately held company in the same period of 2025. Net loss was RMB 37.4 million, compared with net income of RMB 72.5 million in the same period of 2025.

On a non-GAAP basis, adjusted net loss was RMB 10.3 million, compared with adjusted net income of RMB 91 million in the same period of 2025. As of June 30, 2026, we had RMB 4.4 billion in cash and cash equivalents, time deposits, restricted cash and short-term investments, maintaining a solid liquidity position to support our operations. As of June 13, 2026, we had repurchased an aggregate of 41.3 million Class A ordinary shares for total consideration of US$77.9 million on both the New York Stock Exchange and the Stock Exchange of Hong Kong.

During the second quarter, we repurchased 6.5 million Class A ordinary shares for a total consideration of US$7.2 million. Looking ahead, we will continue to balance selective investments in new initiatives with operating efficiency. While quarterly profitability may be affected by investment, our long-term objective of improving operating efficiency and returning to sustainable profitability remains unchanged. We will also maintain a disciplined approach to our capital allocation and continue to execute share repurchases to enhance long-term shareholder returns.

This concludes my prepared remarks on our financial performance for the quarter. Now let's turn the call over to the operator for the Q&A session.

OPERATOR

Thank you. To ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. In the interest of time, please ask one question each time. If you have any follow-up questions, please go back to the queue. Thank you. We will now go to the first question. One moment please. And your first question today comes from the line of Thomas Chong from Jefferies.

Please go ahead.

Thomas Chong, Analyst at Jefferies

Thanks, Marjorie, for taking my question. So my question is, how should we think about the revenue and profit trend in the second half of the year? And under the business adjustment and new business investment, are there any fluctuations between quarters? Thanks.

OPERATOR

Thank you. Your next question today comes from the line of Vicky Y from Citi. Please go ahead.

Vicky Y, Analyst at Citi

Would management share some color about your view on the AI-generated dramas, and how should we think of Zhihu's advantages? Thank you.

Peiqing (for COO Zhang Rongle)

This is Peiqing on behalf of the COO. We are very positive on the AI comic drama market and believe the industry is seeing a clear growth trend. On one hand, AI content generation capabilities continue to improve rapidly, including character consistency, visual quality, motion and overall production efficiency. On the other hand, as more creators enter the market, we're seeing greater diversity in ideas and formats. So AI comic dramas are gradually becoming a new form of content consumption.

As production continues to improve, we expect content quality and user acceptance to rise further. At the same time, the basis of competition is also changing. In the early stage, the focus was on who could adopt AI faster and produce content at lower cost. As AI production becomes more widely available, the real scarcity shifts back to the content itself: good stories, a sustainable pipeline of creative ideas and the ability to consistently turn IP into compelling visual content.

This is where Zhihu has a clear advantage. Through Yanyang Story and other products we have built a broad ecosystem of original stories and creators. Our advantage is not simply the size of the library but our ability to continuously generate new content and identify the strongest titles, supported by a well-established creator base. This helps reduce the trial-and-error costs in IP development and improve the overall efficiency of our content portfolio.

We’ve already seen this validated in AI comics. According to third-party data, in the first half of 2026, Yanyang Story became one of the leading IP providers for native AI comic dramas on TikTok and ranked among the top three IP providers in Hong Kong. We also began in-house and commissioned production in the second quarter and have seen encouraging hit rates so far. As AI creates new media formats, a strong story can be visualized, and in this way AI helps extend the life cycle of quality IP and improve the monetization efficiency of our existing content assets.

Strategically, our focus is to build on Zhihu's strength in content and our creator ecosystem, while using AI to improve development efficiency across scripting, production and distribution. We will remain flexible in our business models, including licensing and in-house production. Where market demand and project economics are well validated, we may selectively move further up the value chain. Over the long term, we believe Zhihu's moat in this market will come from a combination of capabilities including a sustainable supply of original IP, content selection based on real user behavior, a stable creator ecosystem, a clear license framework and AI-enabled cross-media IP development. Thank you. Next question please.

OPERATOR

Thank you. Your next question today comes from the line of Shui Qing Zhang from CICC. Please go ahead.

Shui Qing Zhang, Analyst at CICC

Thanks, management, for taking my question. Could management elaborate a little more on the business model for expert data solutions and what's Zhihu's advantage in this business?

OPERATOR

Thank you. That concludes today's Q&A session. At this time I will turn the conference back to Demi for any additional or closing remarks. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.