iQIYI's Q1 Non-GAAP Operating Profit Hits a Record High, Continuously Strengthening Generative AI.
Iqiyi Innovation Building
On May 16th, iQIYI (IQ:NASDAQ) released its unaudited financial report for the first quarter ending March 31, 2024. The report shows that iQIYI's total revenue for the first quarter was CNY 7.9 billion. Among this, membership service revenue was CNY 4.8 billion, with the monthly average revenue per member reaching a new high, marking a sequential increase for six consecutive quarters. Online advertising service revenue was CNY 1.5 billion, a year-on-year increase of 6%; content distribution revenue was CNY 928 million, a year-on-year increase of 27%, showing strong performance. For the quarter, iQIYI's Non-GAAP operating profit was CNY 1.1 billion, with an operating profit margin of 14%, setting a new record high.
In the first quarter, iQIYI demonstrated steady operational and financial performance with a steady improvement in operational efficiency. As the core business of iQIYI, the focus of the membership business at this stage is to enhance the ARM value and long-term retention of members. The ARM value reached a new high in the first quarter and achieved a sequential increase for six consecutive quarters. This indicates that iQIYI's strategy to strengthen refined operations, enrich membership products and rights, and enhance the perception of member value is highly effective.
During the earnings call on the same day, iQIYI's founder and CEO, Gong Yu, stated that there is still room for long-term improvement in the ARM value. In the future, iQIYI will continue to provide high-quality content, optimize membership rights and benefits, and strengthen the construction of member loyalty to encourage users to subscribe to long-term, premium membership services.
In addition, the application of generative AI and high-quality content has helped to achieve breakthroughs in advertising and content distribution performance. Online advertising revenue for the quarter was CNY 1.5 billion, a year-on-year increase of 6%. Among this, performance advertising revenue saw a double-digit year-on-year increase. This is mainly due to the empowerment of advertising quality and efficiency by generative AI, with AI-produced advertising materials driving a more than 50% increase in the return on investment for advertisers in industries such as gaming and short dramas.
The second quarter is the peak season for brand advertising spending. With the increase in the supply of iQIYI's variety shows, it is expected that brand advertising will see a recovery both year-on-year and sequentially. Thanks to the distribution of several key pieces of content, iQIYI's content distribution revenue reached a record high of CNY 928 million in the first quarter; other revenues were CNY 718 million.
In the overseas market, revenue in the first quarter grew steadily year-on-year, with membership revenue achieving growth both year-on-year and sequentially, with the UK and Hong Kong, China, seeing nearly an 80% year-on-year increase. In Malaysia, the launch of the local original series "Steal My Heart 2" drove a double increase in local site traffic and membership revenue.
The steady performance in the first quarter has laid a solid foundation for iQIYI's high-quality growth throughout the year. In Gong Yu's view, generative AI is very likely to reshape the entire entertainment industry landscape.
As of press time, iQIYI's US stock was priced at USD 5.79 per share, with a total market value of USD 5.556 billion.