Company Reports

Iqiyi is the second-largest video-on-demand, or VOD, platform in China, trailing Tencent Video. The company produces a significant amount of content on its platform, which it monetizes through a combination of subscription revenue, advertising, and content licensing. However, while often referred to as the “Netflix of China,” Iqiyi faces unique challenges in the Chinese market. Strict content restrictions and fragmented user attention favor platforms centered on user-generated content, such as Douyin and Bilibili, over those reliant on professionally produced shows.

Iqiyi's second-quarter revenue fell 5% year on year, even as its short-form drama market share doubled to 50% between March and June and reached number one for the first time. Operating loss widened and non-GAAP earnings swung to a loss. Shares fell 10% in US trading on Aug. 18.

Iqiyi is the second-largest video-on-demand, or VOD, platform in China, trailing Tencent Video. The company produces a significant amount of content on its platform, which it monetizes through a combination of subscription revenue, advertising, and content licensing. However, while often referred to as the “Netflix of China,” Iqiyi faces unique challenges in the Chinese market. Strict content restrictions and fragmented user attention favor platforms centered on user-generated content, such as Douyin and Bilibili, over those reliant on professionally produced shows.

Iqiyi is the second-largest video-on-demand, or VOD, platform in China, trailing Tencent Video. The company produces a significant amount of content on its platform, which it monetizes through a combination of subscription revenue, advertising, and content licensing. However, while often referred to as the “Netflix of China,” Iqiyi faces unique challenges in the Chinese market. Strict content restrictions and fragmented user attention favor platforms centered on user-generated content, such as Douyin and Bilibili, over those reliant on professionally produced shows.

Iqiyi's first quarter was weak. Revenue fell 13% year over year, and the firm swung to an operating loss from a profit a year earlier. At the same time, management is doubling down on its artificial intelligence strategy, highlighted by the launch of its AI video and film production tool, Nadou Pro.

Iqiyi is the second-largest video-on-demand, or VOD, platform in China, trailing Tencent Video. The company produces a significant amount of content on its platform, which it monetizes through a combination of subscription revenue, advertising, and content licensing. However, while often referred to as the “Netflix of China,” Iqiyi faces unique challenges in the Chinese market. Strict content restrictions and fragmented user attention favor platforms centered on user-generated content, such as Douyin and Bilibili, over those reliant on professionally produced shows.

Iqiyi is the second-largest video-on-demand, or VOD, platform in China, trailing Tencent Video. The company produces a significant amount of content on its platform, which it monetizes through a combination of subscription revenue, advertising, and content licensing. However, while often referred to as the “Netflix of China,” Iqiyi faces unique challenges in the Chinese market. Strict content restrictions and fragmented user attention favor platforms centered on user-generated content, such as Douyin and Bilibili, over those reliant on professionally produced shows.

Iqiyi's operating profit fell 81% in another disappointing quarter, even as revenue rose 3%. Free cash flow barely broke even, remaining only marginally positive.

Iqiyi's third-quarter weakness was driven by a 21% year-on-year decline in content distribution revenue and a 7% drop in advertising revenue, weighed down by performance-based ads. Growth in brand advertising only partially offset these declines.

Iqiyi posted an 8% year-on-year revenue decline in the third quarter, driven by weak advertising demand. Operating losses widened sequentially, and the operating cash flow remained negative during the period.

Iqiyi posted another disappointing set of results, with revenue falling 11% year over year in the second quarter. The company also recorded operating losses and negative free cash flow for the first time in three years.

Long-form video platforms continue to lose market share as younger generations prefer quick content. User-generated content, which faces less regulation and can respond to trends much faster, is accelerating this shift, creating additional headwinds for platforms like Iqiyi.

Iqiyi is the second-largest video-on-demand, or VOD, platform in China, trailing Tencent Video. The company produces a significant amount of content on its platform, which it monetizes through a combination of subscription revenue, advertising, and content licensing. However, while often referred to as the “Netflix of China,” Iqiyi faces unique challenges in the Chinese market. Strict content restrictions and fragmented user attention favor platforms centered on user-generated content, such as Douyin and Bilibili, over those reliant on professionally produced shows.

Iqiyi reported a 9% year-over-year revenue decline in the first quarter of 2025, with operating profit plunging 64%.

Iqiyi is the second-largest video-on-demand, or VOD, platform in China, trailing Tencent Video. The company produces a significant amount of content on its platform, which it monetizes through a combination of subscription revenue, advertising, and content licensing. However, while often referred to as the “Netflix of China,” Iqiyi faces unique challenges in the Chinese market. Strict content restrictions and fragmented user attention favor platforms centered on user-generated content, such as Douyin and Bilibili, over those reliant on professionally produced shows.

We transfer coverage of Iqiyi, a leading video-on-demand provider in China. The company’s fourth-quarter earnings met expectations, although challenges remain. Revenue declined by 14% year over year, and operating profit fell by 63%.

Iqiyi is the second-largest video-on-demand, or VOD, platform in China, trailing Tencent Video. The company produces a significant amount of content on its platform, which it monetizes through a combination of subscription revenue, advertising, and content licensing. However, while often referred to as the “Netflix of China,” Iqiyi faces unique challenges in the Chinese market. Strict content restrictions and fragmented user attention favor platforms centered on user-generated content, such as Douyin and Bilibili, over those reliant on professionally produced shows.

We are encouraged that Iqiyi has been successful at turning around its business to generate high-single-digit operating margins, which are a significant improvement from a 30% operating loss margin since its IPO in 2018. We expect Iqiyi to maintain profitability in the near term because of expectations of lower content costs that are 50%-60% of sales, rather than the 70%-80% level prior to 2022. However, we forecast that subscription prices and memberships will grow at only low-single-digit levels, given our view that Iqiyi will have challenges in retaining customers on a consistent basis and is vulnerable to switching costs and churn.

We lower our fair value estimate by 33% for Iqiyi to $2.00 per share from $3.00 after it reported third-quarter 2024 revenue of CNY 7.2 billion, which reflected a 10% decline year on year, but was in line with our expectation. However, our valuation revision reflects company guidance for a 14% revenue decline year on year next quarter, which was worse than our forecast as we had anticipated the bottom this quarter. We believe the guidance reflects the long-term challenges for Iqiyi to return to subscriber growth without sacrificing profitability from heavy content costs. We believe subscribers have been gradually leaving the platform and estimate it is now down to 89 million from 100 million a year ago. We think Iqiyi is prioritizing profitability given that its balance sheet still has CNY 9 billion of net debt accumulated from heavy spending on content. However, its shift toward low-cost content appears to be souring due to user experience, as suggested by declines in membership and advertising revenue.

We are encouraged that Iqiyi has been successful at turning around its business to generate high-single-digit operating margins, which are a significant improvement from a 30% operating loss margin since its IPO in 2018. We expect Iqiyi to maintain profitability in the near term because of expectations of lower content costs that are 50%-60% of sales, rather than the 70%-80% level prior to 2022. However, we forecast that subscription prices and memberships will grow at only low-single-digit levels, given our view that Iqiyi will have challenges in retaining customers on a consistent basis and is vulnerable to switching costs and churn.