Zhihu Q1 FY26 earnings call ZH

Total revenues returned to sequential growth in Q1 with the year-over-year decline narrowing substantially — management frames the remaining YoY gap as the deliberate cost of optimizing revenue mix and prioritizing high-quality services, most visibly the strategic refinement of the vocational training business that compressed other revenues. The quarter's defining structural change is the reclassification, effective Q1 FY26, of IP-related revenue (previously in other revenues) into a combined 'paid content and IP operations' segment built around the Yan'an Stories franchise. Management characterizes 2026 as a year of high-quality growth, with core businesses expected to accelerate and AI initiatives to contribute meaningfully.

Engagement deepened on both axes management tracks: daily time spent per DAU of roughly 42 minutes rose YoY and QoQ, and the daily-active-user coverage of positive interactions also grew YoY (no figure given). The expert network drew heightened participation from scholars (transcribed as 'Shenghua University' — likely garbled), R&D leaders at tech giants, and AI startups including Alibaba, ByteDance and Moonshot AI (Kimi), with deep discussions around DeepSeek's expert mode, Alibaba's new video model (transcribed as 'Happy Horse') and what the transcript renders as 'Google's Gen4'. Management also cited a notable influx of research teams and core developers in aerospace and frontier technology, plus deepened engagement with upstream IP holders in film, entertainment and cultural verticals. The 12th Zhihu Conference ('Shinji') in Beijing in May focused on human creativity in the AI era.

Management explicitly rejects treating the community as an AI application scenario — 'what users truly need is not AI itself but rather cognitive enhancement, experience sharing and real connections' — and attributes engagement gains to four multi-year initiatives: sustained community operations, product simplification, long-term technical infrastructure, and AI innovation. Phase 1 integrated AI search so answers trace back to real people; the current Phase 2 builds a data platform of cleaned, credibly-sourced community data open to developers via MCP, plus an open API platform (currently project-based, with a first open-platform hackathon hosted) intended to become a long-term platform for engineers and AI creators. In parallel, an AIGC governance framework filters machine-generated spam to protect the community's authenticity. Fittingly, the call itself demonstrated the AI push: both CEO and CFO prepared remarks were delivered by AI agents.

The COO framed the reclassification as an upgrade 'from a single subscription model to full-chain IP operation and development': membership validates content and willingness to pay, and the IP library then monetizes through short dramas, comics, TV shows and games. Zhihu claims four advantages — the leading premium short-story library (naturally suited to adaptation given concentrated plots and high-density conflict), a creator ecosystem whose writers transition into scriptwriters and producers, AI short dramas accelerating monetization, and AI-driven production capacity gains pointing to lower cost and higher margin. Several top titles sold both film and gaming rights this quarter, with additional licensing deals signed in verticals like science fiction (counterparties not named). Synergies with membership are emerging as adapted content distributed beyond the community pulls new users into in-community consumption.

Marketing services stabilized near prior-year levels with a notably improving sequential trend, driven by client-mix optimization and product upgrades rather than volume. ARPU rose sharply both YoY and sequentially in core verticals like gaming and automotive, and commercial efficiency improved notably across gaming, travel and transportation, supported by the consumption recovery and a wave of new game launches during the quarter. In March, Zhihu launched its Textura commercial product at the appliance and electronics world expo, pairing an immersive on-site exhibition zone (creator-guided walkthroughs answering consumer questions) with an online discussion forum hosted by Zhihu's reviewer jury.

The expert data solutions business won recognition from leading enterprise clients and began generating revenue this quarter (amount undisclosed), with its differentiated value described as 'firmly validated by top-tier AI labs'. The CFO positioned it as one of only two AI investment areas — alongside AI short/comic dramas — chosen because they carry 'some of the healthiest cash flow profiles among all AI verticals' where Zhihu holds distinct advantages. The 19M+ AI-focused creators aggregated on the platform are explicitly framed as a pipeline of potential 2B service providers feeding this business.

The sequential return to non-GAAP profitability is presented as the cumulative payoff of multi-quarter structural optimization: gross margin recovered on prudent cost controls across content and cloud operations, and every major opex line except G&A fell YoY on disciplined marketing spend, lower personnel costs and R&D efficiency. The one cost blemish — a higher expected-credit-loss allowance on trade receivables driving G&A up — went unexplained. On capital returns, the CFO called Zhihu 'one of the most active Chinese ADRs in terms of buyback intensity over the past 2 years', with all Q1 repurchases fully canceled; no dividend was discussed.