iQiyi reports first annual profit

The Baidu-backed video streaming platform became profitable after a major strategy shift in 2022, but now faces new challenges from China’s slowing economy


By Teri Yu

iQiyi Inc. (IQ.US), one of China’s leading long-form video streaming platforms, posted its first annual profit last year, reporting net income of 1.9 billion yuan ($271 million) in 2023, reversing a 136.2 million loss the previous year, according to its latest earnings announcement on Wednesday.

The company attributed the move into the black to a shift in its priorities in 2022, when it began downsizing its non-core businesses and investing further in premium original content. The 2022 commitment to original content helped the company boost its financial performance by drawing in more paying customers.  

“Building on the momentum of an iconic turnaround in 2022, 2023 stood as our best-performing year in our corporate history,” said iQiyi founder and CEO Tim Gong. “Key financial metrics, including total revenues, operating and net income and cash flows, all hit historical highs.”

The company’s revenue grew 10% to 31.9 billion yuan for the year, driven by double-digit growth in income from paid memberships and online advertising services.

Full-year revenue from its membership services rose 15% to 20.3 billion yuan, driven by growth in its average revenue per member (ARM) and subscriber base. Its ARM has achieved sequential growth for five consecutive quarters to a record high of 15.98 yuan per month in the fourth quarter, up 13% on an annual basis.

Online advertising revenue rose 17% to 6.2 billion yuan last year, while content distribution revenue fell 4% to 2.5 billion yuan as a result of fewer barter transactions.

The company’s full year non-GAAP operating profit was 3.6 billion yuan, up 68% over the prior year. In addition to recording its first annual net profit, the company’s full-year cash flow of 3.3 billion yuan marked its first time being cash flow positive on that basis.

Despite the upbeat annual figures, iQiyi’s fourth quarter results, released concurrently with the annual results, were more mixed and raised concerns over future challenges it could face amid growing consumer caution in China.

Fourth quarter revenue rose just 1% year-on-year to 7.7 billion yuan, and membership services revenue was also only up 1%. The average daily number of total subscribing members for the quarter was 100.3 million, down from 111.6 million a year earlier and also down from 107.5 million in the previous quarter.

The company said it will offer more differentiated products tailored to different user cohorts, optimize content scheduling and enhance its loyalty program to achieve higher user retention. It will focus on having more quality premium titles that bring higher monetization.

iQiyi’s shares were unchanged in Wednesday trade after its latest report came out. The stock is down 16.6% in the last three months and has lost nearly half its value over the last year.

iQiyi was founded in 2010 as a video website owned by Chinese internet company Baidu and was once dubbed “the Netflix in China.” China’s video streaming market is intensely competitive, and the company faces strong competition from key rivals like Alibaba’s Youku and Tencent Video.

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