Zhihu (ZH) Q2 2024 earnings summary

Executive summary

• Gross margin improved by 5.8 percentage points year-over-year to 59.6%, with total operating expenses down by over RMB 140 million and cost of revenues down 21.8%.

• Adjusted net loss declined by 79.9% year-over-year to RMB 44.6 million, the lowest quarterly loss since IPO; GAAP net loss narrowed by 71.1% to RMB 80.6 million.

• User engagement and retention improved, with daily active user engagement up nearly 40% year-over-year and average monthly active users at 80.6 million.

• Launched AI-powered search product Zhihu Zhida, driving a 430% increase in visits month-over-month and doubling seven-day user retention.

• Content library reached 830.9 million pieces, up 16.8% year-over-year; content creators grew 12.5% to 74.9 million.

Financial highlights

• Gross profit for Q2 was RMB 556.5 million, nearly flat year-over-year.

• Gross margin reached 59.6%, the highest since IPO, with seven consecutive quarters of year-over-year improvement.

• Total operating expenses were RMB 740.4 million, down 16.7% year-over-year.

• Selling and marketing expenses fell 22.9% to RMB 417 million; R&D expenses decreased 11.4% to RMB 209.3 million.

• Cash and equivalents stood at RMB 5.1 billion as of June 30, 2024.

Outlook and guidance

• Management remains committed to achieving quarterly non-GAAP net profit in Q4 2024.

• Further loss reduction expected in Q3, with continued focus on operational efficiency and profitability.

• Ongoing investment in AI and product development to drive long-term sustainable growth.