On November 21st, iQiyi (NASDAQ: IQ) released its unaudited third quarter financial report as of September 30th. According to financial report data, iQiyi's total revenue in the third quarter was 8 billion yuan, a year-on-year increase of 7%. The revenue of membership services was 5 billion yuan, a year-on-year increase of 19%. The daily average number of subscribed members was 107.5 million, a year-on-year increase of 6%, and the monthly average single member income (ARM) reached 15.54 yuan, a year-on-year increase of 12%, setting a new historical high. The advertising revenue for this quarter was 1.7 billion yuan, a year-on-year increase of 34%. In the current quarter, iQiyi achieved a Non GAAP (Non US GAAP) operating profit of 895 million yuan, an increase of 71% compared to 524 million yuan in the same period last year.
Gong Yu, founder and CEO of iQiyi, said, "Our revenue and profit performance are strong, and the strong appeal of content and constantly improving member value perception have driven ARM to grow by 12% year-on-year. This indicates that iQiyi's business model can withstand the impact of economic cyclical fluctuations
Member service revenue breaks the 5 billion yuan mark again
The revenue of membership services exceeded 5 billion yuan, a year-on-year increase of 19%, marking the second time in iQiyi's history that the revenue of membership services exceeded 5 billion yuan. IQiyi stated that the growth in revenue from membership services is mainly due to the improvement of ARM and the improvement of refined operations, which have improved liquidity. Data shows that ARM in the third quarter was 15.54 yuan, a year-on-year increase of 12% and a month on month increase of 5%.
In the third quarter, ARM broke through 15 yuan for the first time within expectations, which is the result of our long-term efforts in content quality and membership rights. Users are increasingly willing to pay reasonable prices for high-quality content and services. "Duan Youqiao, Senior Vice President of iQiyi and General Manager of the New Technology Consumer Business Group, said on the same day's financial report conference call that ARM is expected to continue to maintain healthy growth in the fourth quarter, And in the long run, ARM still has significant room for improvement.
As the second largest revenue business, the revenue of online advertising services in the third quarter was 1.7 billion yuan, a year-on-year increase of 34%. Brand advertising and effect advertising both achieved year-on-year and month on month growth. Content distribution and other revenue achieved revenue of 526 million yuan and 803 million yuan, respectively.
In terms of cost, iQiyi's revenue cost in the third quarter was 5.8 billion yuan, a year-on-year increase of 2%. As an important component of revenue costs, content cost expenditures amounted to 4.2 billion yuan, a year-on-year decrease of 3%. Sales and management expenses amounted to 981 million yuan, which was the same as the same period last year.
In terms of profit, under the Non GAAP standard, the operating profit for the quarter was 895 million yuan, with an operating profit margin of 11%; The operating profit for the third quarter of 2022 was 524 million yuan, with an operating profit margin of 7%.
IQiyi Chief Financial Officer Wang Jun said, "We continue to benefit from operating leverage. This quarter, GAAP and Non GAAP (Non GAAP) The operating profit increased by 141% and 71% year-on-year, respectively. The operating profit margins of GAAP and Non GAAP have further improved, expanding from 4% and 7% in the same period last year to 9% and 11% in this quarter, respectively. The operating cash flow and free cash flow reached 831 million yuan and 826 million yuan respectively
Focus on AIGC
Users are willing to pay for good content, and the improvement of their intention requires gradual guidance, especially in order to be accepted by users if they want to offer more cost-effective content and services. To achieve this, content quality and technology are indispensable.
At present, domestic long video platforms focus their technological breakthroughs on AIGC.
Gong Yu previously stated during iQiyi's Q2 financial report conference call that iQiyi is actively exploring transformative technologies such as AIGC to facilitate future business growth. Subsequently, in October, iQiyi upgraded its AI search and applied generative AI technology to three major search scenarios: character search, plot search, and celebrity search for the first time.
We are promoting the implementation of generative AI in the film and television industry, putting the industrialization of film and television on the 'fast track'. Gong Yu said that the role of generative AI is currently evolving from a simple 'embedded tool' to a 'co pilot' mode.
According to iQiyi, the company has already utilized generative AI technology in four core processes: planning, development, production, and promotion. High quality posters and dynamic videos that match IP settings and are produced using generative AI at a low cost have been applied to key projects such as "Changfengdu" and "Lexia 3" for on-site operations and off-site promotion. This technology has also been used to increase advertising exposure and reach rates.
Looking ahead, Gong Yu stated that he will continue to improve user experience, strengthen the advantages of original content, enhance member value, and expand AI technology applications. He will also prudently increase investment in core and innovative businesses, laying the foundation for long-term growth.