iQIYI (IQ) Q3 2025: Overseas Membership Revenue Surges 40%, AI Drives Content and Monetization Shift
iQIYI’s third quarter showcased a strategic inflection as overseas markets and AI-enabled content production delivered outsized momentum, offsetting domestic advertising softness. Core membership business strengthened on the back of original IP hits, while AI integration began reshaping both creative output and operational efficiency. Management’s forward posture on regulatory tailwinds and global expansion signals a multi-year transformation in the company’s business model and addressable market.
Summary
- AI-Driven Content and Monetization: iQIYI is accelerating AI adoption across production, marketing, and user experience, reshaping cost and creative models.
- Overseas Expansion Outpaces Domestic Growth: International membership revenue grew over 40% YoY, with Southeast Asia and Latin America leading gains.
- Regulatory Tailwinds Support Long-Form Video: Recent policy changes are enabling faster project approvals and new content formats, underpinning future growth.
Performance Analysis
iQIYI’s Q3 revenue mix reveals a business in transition, balancing legacy domestic operations with rapid international and digital innovation. Membership services, the company’s largest segment, posted sequential growth, fueled by original drama blockbusters like “The Thriving Land” and the theatrical hit “Nezha 2.” Notably, overseas membership revenue soared over 40% year-over-year, with markets such as Brazil, Mexico, and Indonesia doubling their contribution, reflecting successful localization and content adaptation strategies.
Advertising revenue saw a modest sequential decline, reflecting the normalization after Q2’s campaign-heavy period. In contrast, content distribution revenue surged 48% sequentially, driven by original movie releases and a new revenue-sharing model for films with limited box office potential. Operating expenses were tightly managed, declining 3% sequentially, even as content costs increased due to a richer premium slate. The company closed the quarter near break-even on a non-GAAP basis, maintaining a solid cash position of RMB 4.9 billion.
- Membership Resilience: Premium content and enhanced member services underpinned sequential growth and improved retention, especially with exclusive IP-themed offerings.
- Content Distribution Upside: Original films and drama transactions drove outsized gains, validating the pivot to a diversified revenue-sharing model.
- Cost Discipline Amid Content Investment: Operating expenses fell even as content investment rose, highlighting a focus on efficiency and ROI.
International momentum and AI-driven efficiencies are offsetting domestic ad softness, positioning the business for more diversified and scalable growth into 2026.
Executive Commentary
"Our business model continues to evolve and scale. Today, our online operations are well established. Global expansion is accelerating and our experience business is advancing accordingly. On top of that, we are embracing exciting opportunities enabled by our supportive regulatory environment and advancements in AI."
Li Gong, Founder, Director, and CEO
"The total revenue for the third quarter was RMB 6.7 billion, up 1% sequentially. Membership services revenue reached RMB 4.2 billion, up 3% sequentially, driven mainly by original blockbuster dramas and theatrical mega-hits. The online advertising revenue was RMB 1.2 billion, decreased by 2% sequentially... The non-GAAP operating loss was RMB 21.9 million. As of the end of the third quarter, we had cash... a total of RMB 4.9 billion."
Jun Wang, CFO
Strategic Positioning
1. AI as a Core Value Lever
AI adoption is rapidly becoming central to iQIYI’s business model. Management detailed how AI is now embedded in content production (script evaluation, image generation), marketing (automated creative, translation), and user experience (personalization, recommendation engines). Over 70% of overseas promotional materials are now AI-generated, and the company expects AI to transform content creation within three years, with significant investment in AIGC (AI-generated content) as a future growth engine.
2. International Growth Engine
Overseas markets are now the company’s fastest-growing segment. Membership revenue outside China rose over 40% YoY, with Southeast Asia and Latin America outpacing expectations. Localized content, especially Thai dramas, has become the second most important content category globally after Chinese dramas. The company is doubling down on local production and AI-driven marketing to accelerate international penetration.
3. Content IP Ecosystem and Monetization
Original IP remains the commercial backbone, with blockbuster series and movies driving both membership and merchandise sales. The dual-track strategy for IP-based consumer products (self-operated plus licensing) more than doubled revenue YoY, and collectible merchandise from drama titles is unlocking new monetization pathways. The company is also pioneering offline “experience labs,” blending digital IP with physical entertainment in an asset-light format.
4. Regulatory Environment as a Catalyst
Recent policy changes are enabling faster approvals and new content formats, including anthology and multi-season dramas. Management sees these regulatory shifts as a foundation for industry-wide innovation and long-term growth, with several projects already benefiting from expedited broadcast readiness.
Key Considerations
Q3 marked a turning point for iQIYI’s business model, with AI and global expansion now shaping both operational priorities and future addressable market. The company is navigating a complex landscape of domestic competition, evolving regulation, and shifting monetization models.
Key Considerations:
- AI Integration at Scale: AI is being deployed across production, marketing, and user engagement, with tangible cost and efficiency gains already materializing.
- Global Content Localization: Success in tailoring and distributing Chinese and local-language IP has unlocked new revenue streams abroad, especially in Southeast Asia and Latin America.
- Premium IP Drives Membership Stickiness: Exclusive original series and movies, coupled with member-only merchandise and events, are boosting retention and ARPU.
- Regulatory Shifts Favor Long-Form Video: New policies are catalyzing innovation in content formats, giving iQIYI a first-mover advantage in emerging categories.
- Offline Experience Business Emerges: Asset-light IP experience labs and self-operated merchandise are diversifying revenue and deepening user engagement.
Risks
Domestic advertising remains a pressure point, with softness likely to persist amid macro headwinds and shifting media budgets. Content costs are rising as the company invests in premium IP and global expansion, which could compress margins if overseas monetization lags. Regulatory risk, while currently a tailwind, remains unpredictable and could impact content approvals or monetization models. Execution risk around scaling AI and offline businesses also warrants close monitoring.
Forward Outlook
For Q4 2025, iQIYI management signaled:
- Continued sequential growth in membership revenue, supported by a robust pipeline of original dramas and movies.
- Further expansion of AI applications in content production, marketing, and user engagement.
For full-year 2025, management maintained a focus on:
- Accelerating overseas revenue growth and local content production.
- Disciplined cost management and targeted content investment.
Management highlighted several factors that will shape results:
- Regulatory support for long-form video and new content formats.
- Scaling AI-driven efficiencies and monetization across all business lines.
Takeaways
iQIYI is at an inflection point, leveraging AI and global content localization to diversify revenue and accelerate growth beyond its legacy domestic base.
- AI Transformation: The company’s aggressive AI integration is already yielding cost and creative benefits, but full impact depends on continued execution and ecosystem adoption.
- International Outperformance: Overseas membership growth and local content traction are reshaping the company’s revenue mix and risk profile.
- Watch for Margin Leverage: Investors should monitor whether international growth and AI efficiencies can offset rising content costs and persistent domestic ad headwinds.
Conclusion
iQIYI’s Q3 results underscore a business in active transformation, with AI and international expansion now defining its strategic trajectory. While domestic advertising remains challenged, the company’s ability to scale premium IP, monetize global audiences, and embed AI at the core of operations positions it for long-term upside—if execution remains disciplined.
Industry Read-Through
iQIYI’s pivot to AI-driven content production and rapid international expansion signals a broader shift for the streaming and digital entertainment industry. Competitors relying on legacy content models or slow to adopt AI risk falling behind as regulatory environments evolve and consumer preferences fragment globally. The success of asset-light offline experiences and IP-based merchandise also hints at new monetization avenues for media companies. Investors should watch for similar strategies among other Asian and global streaming platforms as the race for scalable, diversified growth accelerates.