Zhihu Reports Q2 2025 Profit Amid Revenue Decline

Zhihu (ZH.US) reported its Q2 2025 financial results, achieving a net income of RMB72.5 million (US$10.1 million), a significant turnaround from a net loss of RMB80.6 million in Q2 2024. Adjusted net income (non-GAAP) reached RMB91.3 million (US$12.8 million), compared to an adjusted net loss of RMB44.6 million in the same period last year. Total revenues for the quarter were RMB716.9 million (US$100.1 million), marking a decrease from RMB933.8 million in Q2 2024, and falling short of the analyst estimate of RMB753.17 million. This marks the third consecutive quarter of non-GAAP profitability for the company.

Operational Efficiency and Gross Margin Expansion

The company demonstrated improved cost structure and operating efficiency, with gross margin expanding to 62.5% in Q2 2025 from 59.6% in the same period of 2024. This improvement was primarily driven by monetization enhancements and better operating efficiency. Cost of revenues decreased by 28.8% to RMB268.7 million, attributed to reduced content and operating costs, decreased personnel-related expenses, and lower cloud services and bandwidth costs due to improved technological efficiency.

Total operating expenses also saw a substantial decrease of 27.2% to RMB539.2 million. Selling and marketing expenses declined by 21.8% due to more disciplined promotional spending. Research and development expenses decreased by 30.4%, reflecting improvements in R&D efficiency, while general and administrative expenses fell by 41.1%, mainly due to a decline in the allowance for expected credit losses and lower share-based compensation.

Strategic Refinements and Revenue Performance

While overall revenues decreased, the company emphasized strategic refinements in its business lines. Marketing services revenue was RMB222.8 million, down from RMB344.0 million in the prior year, primarily due to a strategic focus on margin improvement. Paid membership revenue slightly decreased to RMB402.0 million from RMB432.7 million, linked to a decline in average monthly subscribing members.

Vocational training revenue also saw a significant decrease to RMB62.1 million from RMB133.6 million, attributed to strategic business refinements. Conversely, other revenues increased by 27.6% to RMB30.0 million. The company's investment income substantially increased to RMB140.8 million, primarily due to unrealized gains from re-measuring the fair value of an investment.

Management Outlook and AI Integration

Management highlighted the effectiveness of refined operational strategies and the efficiency improvements driven by AI integration. CEO Mr. Yuan Zhou noted that AI is now deeply embedded in the product experience, enhancing value for both users and creators. Zhihu has also become a key platform for AI-related content and expert engagement, with the company believing the synergy of high-quality content, trusted creators, and AI capabilities will provide long-term competitive advantages.

CFO Mr. Han Wang reiterated the focus on disciplined execution and sustainable monetization to drive long-term growth. The company aims to continue improving its cost structure and operating efficiency through AI-driven productivity gains. This strategic focus on efficiency and AI is expected to underpin future performance.