行1Q26结果；新增长引擎稳步进展

growth engines Inline 1Q26 results; solid progress on new Target PriceUS$1.58(Previous TPUS$1.80)Up/Downside39.8%Current PriceUS$1.13 iQiyireported1Q26 results: total revenue declined by 13% YoY and 8% QoQ toRMB6.23bn, in line with Bloomberg consensus and our estimate; non-GAAP netloss was RMB234mn, down fromnet income of RMB308mn in 1Q25due tooperating deleverage, in line with consensus/ourestimate. Looking into 2Q26E,we expect total revenue to recover by 2% QoQ to RMB6.35bn, primarily drivenby the sequential growth of online advertising and content distribution revenue.We slightly trim our FY26-FY28 total revenue forecast by 1-2% in view of therelatively slow recovery of membership business. We lower our target price to China Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk ExpectQoQ revenue recovery in 2Q26E.By segment in 1Q26:1)membership services revenue declined by 5% YoY, but grew by 2% QoQto RMB4.20bn primarily thanks to strong viewershipperformanceofPursuitof Jade(逐玉)andHow Dare You(成何体统);2)online advertising revenuedecreasedby 7%YoY and 8%QoQ to RMB1.24bn,mainly due toseasonalityand lack of popular variety shows;3)content distributionrevenue dropped by 43% YoY and 54% QoQ to RMB359mn, as iQiyiadjusted its content distribution strategy with less content distributed to Ye TAO, CFA(852) 3850 5226franktao@cmbi.com.hk Shuyin GUO(852) 3916 3716guoshuyin@cmbi.com.hkStockData Solid progresson new growth engines.iQiyi continued to makeprogresson new growth initiatives.1)Overseas membership revenue was up by over40% YoY in 1Q26, supported by iQiyi’s differentiated offerings of premiumAsian content. The company also expanded into new markets liketheMiddleEast andLatinAmerica, inaddition to Southeast Asia.2) IP-basedconsumer products delivered solid performance in 1Q26, driven by thestrong sales of collectible cards of hit titles likePursuit of Jade.3) NaDou LeveragingAI to improve efficiency.iQiyi gross margin declined by8.8pptYoY and 4.9ppt QoQ to 15.9% in 1Q26, mainly due to contentinvestment and operating deleverage. Non-GAAPoperatingmargin alsodropped by 8.8ppt YoY to-2.4% in 1Q26. The company leveraged AI toimprove its own content productionefficiency, launching over3,000 AI- Source: FactSet Valuation We valueiQiyiat US$1.58per share,based on0.4xFY26EPS.Our targetPSmultiple isat adiscountto thesector average (4x), due to the intense competition in China’s video Disclosures& Disclaimers Analyst Certification The research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuerthat the analyst covered in this report: (1) all of the views expressed accurately reflecthis or her personal views about the subject 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 confirmsthat 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 the Hong Kong listed companies covered in this report. CMBIGM Ratings BUY: 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 over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM OUTPERFORM:Industry expected to outperform the relevant broad market benchmark over next 12 monthsMARKET-PERFORM:Industry expected to perform in-line with the relevant broad market benchmark over next 12 monthsUNDERPERFORM:Industry expected to underperform the relevant broad market benchmark over next 12 months Important Disclosures There are risks involved in transacting in any securities. The information contained in this report may not be suitable forthe purposes of all investors.CMBIGMdoes not provide individually tailored investment advice. This report has been prepared without regard to the individual investment objectives, financial positionor special requirements. Past performance has no indication of future performance, and actual events may differ materially from that which is contained in thereport.The value of, and returns from, any investments are uncertain and are not guaranteed and may fluctuate as a result of their dependence on the or its affiliate(s) to whom it is distributed. This report is not and should not be construed as an offer or solicitation tobuy or sell any security or any intere