4Q25 review: total revenue recovered on improving content performance

4Q25 review: total revenue recovered onimproving content performance Target PriceUS$2.00(Previous TPUS$2.75)Up/Downside17.0%Current PriceUS$1.71 iQiyi announced 4Q25 results: total revenue grew by 3% YoY to RMB6.79bn, inlinewith Bloomberg consensus estimate;non-GAAP net income wasRMB110mn, up from RMB59mn net loss in 4Q24 and ahead of consensusestimateof RMB68mn, thanks to the operating leverage. Looking ahead, weforecast total revenue to decline by 13% YoY and 8% QoQ to RMB6.28bnin1Q26E, as the companyhas beenadjustingcontent strategy and reducingcontent distributed to other channels,whichcouldlead toadecline in contentdistribution revenue. Thus, we lower our FY26 total revenue forecast by 4%,and cut our non-GAAPnet profitforecastto RMB0.8bn (previous: RMB1.0bn)due to operating deleverage. We lower our target price to US$2.00 based on18x2026E non-GAAP EPS(previous:US$2.75 based on 18x 2026E non-GAAPEPS). Maintain BUY. China Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk Total revenue recovered in 4Q25,but 1Q26E remains challenging.Membership services revenue was RMB4.1bn in 4Q25, flattish YoYafterdeclining for7 consecutive quarters,thanks to the improving contentperformance. iQiyi ranked the first inviewership market share on 2025EnlightentData TV series annual ranking,supported by 5 titles thatexceeded10,000 iQiyi popularity score. Online advertising revenue droppedby 6% YoY to RMB1.4bnin 4Q25, mainly due to the decline in ad budget ofcertain advertisers amid macroheadwinds. Content distribution revenueincreased by 94% YoY to RMB788mn in 4Q25, primarily thanks to theincrease in cash transactionswith TV and other channels. Others revenuedeclined by 18% YoY to RMB548mn in 4Q25. Looking ahead, weexpecttotal revenue todecline by 13% YoY and 8% QoQ to RMB6.28bnin 1Q26E,withmembership/online advertising/content distributionrevenuedown by5%/8%/38% YoYrespectively. Ye TAO, CFA(852) 3850 5226franktao@cmbi.com.hk Stock Data Emergingbusinessesmade solid progress.New initiatives startedtobear fruit: 1) overseas membership revenue grew byover 40% YoY in 2H25,with subscriber base reaching record highs; 2) IP experience businessachieved new milestones and opened its first iQiyi Land in Feb 2026,receivingpositive early feedback; 3) the companynow has over 20,000micro-drama titles with over70%available for free.On the AI front, thecompany launched NaDou AI agent platform, which integrateslarge modelcapabilities and iQiyi’sexpertisein content creation, to streamline contentproduction pipeline from script evaluation to content generation. Margintoremain under pressure.iQiyi gross margin improved by 2.7pptsQoQ to 20.9% in 4Q25, thanks to the recovery of membership businesses.Non-GAAPoperatingmargin rose by 2.4pptsYoY to 2.1% in 4Q25. For1Q26E, we expect iQiyi’s non-GAAP OPM to decline by2.9ppts QoQ to-0.8%, as the declinesin online advertising and content distribution revenuelead to operating deleverage. Source: FactSet Valuation We valueiQiyiat US$2.00perADSbased on18x2026E non-GAAP EPS.Our target PEmultiple isat adiscountto thesector average (22x), due to the intensecompetition inChina’s video streaming sector. Disclosures& Disclaimers Analyst CertificationThe research analyst who is primaryresponsible for the content of this research report, in whole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about thesubject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3)serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in theHong Kong listed companies covered in this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM :Industry expected to outperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line withthe relevant broad market benchmark over next 12 months:Industry expected to underperform the relevant broad market benchmark over next 12 months CMB InternationalGlobal MarketsLimited Address: 45/F, Champion Tower, 3Garden Road, Hong Kong, Tel: (852