Inquired about the expected digestion timeline for new tax rules affecting Momo, the scope and duration of Alipay's auto-renewal policy impact on Tantan and other products, and the full-year domestic revenue outlook.

Management explained tax tightening impacted March-May, with new incentive programs for agencies showing rebound since late May, expecting normalization by Q3 FY26. Alipay policy affected Tantan's domestic membership, leading to unbundling and payment diversification, with impact concentrated in H1. Momo and overseas were minimally affected. Full-year domestic revenue outlook adjusted to mid-teens YoY decline from low teens due to H1 disruption, with H2 expected to improve. “We expect their performance to return to normal level by Q3.”

Asked for details on the group's AI product roadmap, its contribution to long-term earnings, near-term profitability impact from AI investments, and overall full-year group prospects given external factors.

Management highlighted AI's role in enhancing user connections (AI-assisted chat, AI voice drift bottle) and enabling new product formats (Donut, Soulmate). They view AI spending as high-return, improving user experience and payment propensity, with plans for horizontal tech reuse to maximize ROI. For full-year group prospects, revenue is expected to see a slight YoY decline (couple of percentage points), but the low-teens adjusted operating margin target remains achievable, with internal efforts to optimize spending. “AI spending is high return in nature. It directly improves user experience and drives higher propensity to pay.”

MOMO

Hello Group (MOMO) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Information Technology· Jun 2, 2026

Source: earnings call transcript

Executive summary

Hello Group Q1 FY26 – Overseas Growth Offsets Domestic Headwinds

Hello Group navigated Q1 FY26 with strong overseas expansion, driven by new product growth and a diversified portfolio, which helped offset persistent domestic headwinds from tax regulations and soft consumer sentiment. The company is strategically optimizing its core Momo business, refining Tantan's user experience, and scaling new overseas ventures, aiming for long-term profitability despite near-term revenue pressures. AI investments are focused on enhancing user connections and enabling new product formats.

Highlights

Overseas revenue grew 44% year-over-year to RMB 597 million, now accounting for 25% of group revenue.
Adjusted operating income increased 1% year-over-year to RMB 349 million, with margin expanding to 14.6%.
Two new overseas products delivered triple-digit revenue growth year-over-year, with one approaching net income breakeven and the other achieving positive marginal contribution.
China ROI for user acquisition remained fully profitable, with improved channel conversions lifting payment intent among net and small spending users.
Non-GAAP gross margin rose by 1 percentage point year-over-year to 38.8%, driven by improved margins in MENA products.

Concerns

Total group revenue decreased 5% year-over-year to RMB 2.39 billion.
Domestic revenue declined 15% year-over-year to RMB 1.79 billion, impacted by new tax regulations and soft consumer spending sentiment.
Momo's paying users decreased by 200,000 quarter-over-quarter to 3.7 million.
Tantan's paying users decreased by 30,000 quarter-over-quarter to 0.6 million, due to MAU decline and Alipay policy changes.
Overseas business faced sequential softness (2% quarter-over-quarter decline) due to Turkish regulatory issues, Ramadan, and Middle East conflicts.

Guidance & targets

Category	Target	Timeline	Confidence
Q2 FY26 Total Revenue	RMB 2.45 billion to RMB 2.55 billion high materiality	Q2 · FY26	Medium
Q2 FY26 Mainland China Business Revenue Growth	High teens percentage-wise decline medium materiality	Q2 · FY26	Medium
Q2 FY26 Overseas Revenue Growth	High 50s percentage-wise growth medium materiality	Q2 · FY26	Medium
FY26 Overseas Revenue	RMB 3 billion high materiality	FY26	Medium
FY26 Domestic Business Revenue Growth	Mid-teens year-over-year decline high materiality	FY26	Medium
FY26 Group Revenue Growth	Slight year-over-year decline (couple of percentage points) high materiality	FY26	Medium
FY26 Adjusted Operating Margin	Low teens high materiality	FY26	High
Yalla Net Income Breakeven	Within a quarter medium materiality	Q2 · FY26	High
Amar Net Income Breakeven	About half a year behind Yalla medium materiality	Q4 · FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Group Total Maintained steady business momentum, but total revenue declined due to domestic pressures.	RMB 2.39 billion	-5%	-7%	—
Domestic Business Healthy through focused product innovation and refined operations despite external pressures. PRC Mainland value-added service revenue was RMB 1.76 billion, down 9% QoQ.	RMB 1.79 billion	-15%	—	—
Overseas Business Remained a positive trend, accounted for 25% of group revenue (compared to 16% in the same period last year). Sequential softness due to external challenges (Turkish regulation, Ramadan, Middle East conflict).	RMB 597 million	+44%	-2%	—
Momo (Domestic) Year-over-year decline due to new tax regulations and stricter local enforcement; QoQ decline seasonal due to Chinese New Year and soft consumer spending. Glass revenue. Paying users: 3.7 million (down 200,000 QoQ)	RMB 1.52 billion	-15%	-9%	—
Tantan (Domestic) Decline driven by MAU contraction leading to fewer paying users, compounded by the short-term impact of Alipay's policy adjustments on auto-renewal payments. Net profit grew significantly YoY due to cost controls. Paying users: 0.6 million (down 30,000 QoQ)	RMB 125 million	-25%	-8%	—
New Overseas Products (MENA) Two new products (Yalla, Amar) showed rapid growth, continuously improving localized operations and game plan innovation. Yalla approaching net income breakeven, Amar achieved positive marginal contribution for the first time.	—	Triple-digit revenue growth	—	—

MOMO operating KPIs by quarter

MOMO operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Paid subscribers Tantan	600K As of the end of Q1, Tantan had 0.6 million paying users a modest decrease of 30,000 quarter-over-quarter. Source: earnings call transcript	500K As of the end of Q2, Tantan had 0.5 million paying users, a modest decrease of 40,000 quarter-over-quarter, mainly due to pressure on paying conversion from Alipay's adjustments to its auto renewal deduction rules. Source: earnings call transcript	-16.7%
Employees	1,396 We ended the quarter with 1,396 total employees compared to 1,336 from a year ago. Source: earnings call transcript	1,399 We ended the quarter with 1,399 total employees compared to 1,268 from a year ago. Source: earnings call transcript	+0.2%
R&D personnel as a percentage of total employees	56% The R&D personnel as a percentage of total employees for the group was 56% compared with 58% from Q1 last year. Source: earnings call transcript	56% The R&D personnel as a percentage of total employees for the group was 56% compared with 58% from Q2 last year. Source: earnings call transcript	0 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline
AI voice drift bottle	update	Currently testing
Donut	launch	—
Soulmate	launch	—

Risks & headwinds

Turkish Regulatory Tightening Q1 FY26 (temporary)

Not quantified in revenue terms, but impacted Soulchill's user acquisition.

Mitigation:Company working with authorities for app reinstatement; accelerating localization efforts in other markets to offset temporary impact.

Soft Consumer Sentiment in MENA Q1 FY26 (during Ramadan)

Not quantified, but impacted Soulchill.

Mitigation:Diversified product portfolio helps mitigate single product volatility.

Middle East Conflict Ongoing (Q1 FY26)

Not quantified, but had some drag on Soulchill's revenue in the Gulf region.

Mitigation:Diversified product portfolio helps mitigate single product volatility.

New Tax Regulations and Stricter Enforcement in China H2 2025, Q1-Q2 2026, expected to normalize by Q3 2026.

Contributed to Momo's 15% YoY revenue decline and domestic revenue decline. Caused a decline in agency-related revenue during March and April.

Mitigation:Moderately adjusted revenue sharing ratios for key agencies, introduced new incentive programs, provided financial support, and assisted agencies with tax compliance.

Alipay Auto-Renewal Policy Changes Q1-H1 2026, expected to improve in H2 2026.

Caused a 30,000 QoQ decrease in Tantan paying users and contributed to Tantan's 25% YoY domestic revenue decline.

Mitigation:Unbundling membership features, offering stand-alone purchases, enhancing FlashChat, diversifying payment channels, and promoting longer-term membership plans.

Broader Consumer Spending Sentiment in China Ongoing

Contributed to Momo's 15% YoY revenue decline.

Mitigation:Focus on making product fundamentals rock solid and maximizing operating efficiency.

Q&A highlights

Asked for details on external challenges impacting overseas business in Q1, their full-year impact, and the path to profitability for new products, specifically regarding marketing investment strategy.

Management detailed challenges (Turkish regulation, Ramadan, Middle East conflict) impacting Soulchill, but expressed confidence in recovery and localization efforts. They stated new MENA products (Yalla, Amar) had strong triple-digit YoY revenue growth with rapidly narrowing losses, aiming for scale first, then gross margin optimization, and marketing ROI-driven approach for natural profitability. Yalla is near net income breakeven, Amar half a year behind. Full-year overseas revenue target of RMB 3 billion remains comfortable.

“Our path for these 2 [indiscernible] products is pretty clear, build scale first. Optimize the gross margin structure, keep marketing ROI driven and net profitability flow naturally.”

asked by Xueqing Zhang · answered by Ashley Jing, Cathy Peng

2 min read 6 chapters

Detailed narrative

Momo Product Innovation & User Base Stability

Momo focused on optimizing user experience and stabilizing its user base in Q1 FY26. Key initiatives included refining the chat experience with improved matching algorithms and introducing video features for instant interactions. AI-driven innovations like voice profiles and AI chat assist features were piloted, showing encouraging results in improving female user experience and driving deeper conversations.

Despite a 200,000 QoQ decrease in paying users to 3.7 million, organic traffic grew YoY and retention among existing users improved slightly.

Tantan Strategic Adjustments & Monetization

Tantan experienced a modest decrease of 30,000 paying users QoQ, reaching 0.6 million, influenced by ongoing MAU decline and Alipay's policy changes on auto-renewal. The team optimized recommendation strategies, including gender restrictions on metrics for female users, leading to a near 3 percentage point increase in average swipe.

Monetization efforts included unbundling membership features and enriching fresh chat gameplay to mitigate top-line pressure, while cost controls in channel investment and personnel significantly improved net profit YoY.

Overseas Business Diversification & Growth

The overseas segment demonstrated robust growth, with revenue up 44% YoY to RMB 597 million, now contributing 25% of group revenue compared to 16% in the same period last year. This growth was driven by the rapid expansion of a diversified product portfolio, including two new products in MENA achieving triple-digit revenue growth and nearing profitability.

Tantan International completed its migration to a dedicated overseas app, and the dating business in developed markets also showed satisfying progress.

Impact of Tax Regulations on Domestic Business

New tax regulations and stricter local enforcement introduced in H2 2025 continued to impact Momo's domestic business, particularly high-grossing agencies. Further tightening in early 2026 led to a decline in agency-related revenue during March and April. In response, the company introduced new incentive-based revenue sharing policies and financial support for selected high-quality agencies, expecting their performance to normalize by Q3 FY26.

Alipay Auto-Renewal Policy Impact

Alipay's policy changes primarily affected Tantan's domestic membership business, leading to a temporary decline in renewal rates and subscriber churn. The company responded by unbundling membership features, offering stand-alone purchases, enhancing FlashChat, diversifying payment channels, and promoting longer-term plans. The impact is expected to be concentrated in H1 2026, with gradual improvement in H2, and minimal effect on Momo or overseas businesses.

AI Investment Strategy and Impact

Hello Group views AI as a high-return investment, directly improving user experience and payment propensity. AI is being used to enhance user connections through features like AI-assisted chat and AI voice drift bottles, and to enable new product formats such as the AI-powered voice social product Donut and the AI role-play dating app Soulmate.

The company plans to replicate AI tech across more use cases, including AI agents for Momo live streaming and smart matching, to maximize ROI.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.