Waterdrop Inc (WDH) (Q2 2026) Earnings Call Highlights: Revenue Jumps 72. ...

Negative Points

• Net profit attributable to shareholders decreased 10.3% year-over-year due to tax-related items and non-recurring gains and losses.

• Total operating costs and expenses rose 80.5% year-over-year, primarily from increased marketing and personnel costs.

• Sales and marketing expenses surged to RMB638 million from RMB199 million, reflecting heavy investment in public domain traffic.

• G&A expenses increased 27.2% year-over-year, mainly due to a RMB33.3 million allowance for credit losses.

• R&D expenses grew 32.4% year-over-year, driven by higher cloud server fees, token fees, and personnel costs.

Q & A Highlights

Q: Media reported that mainland tax authorities made tax policy dividends regarding Hong Kong insurance. Has management seen any change in international or domestic business? A: Tracy Lee, Investor Relations Manager, clarified that what is being seen reflects the enforcement of long-standing tax rules rather than a new policy specifically targeting Hong Kong insurance. While media coverage has had some effect on customer sentiment, the fundamental drivers of Hong Kong insurance products currency allocation, access to global healthcare resources, and inheritance planning remain unchanged. Mainland China insurance growth is driven by rising health protection awareness, policy tailwinds for commercial health insurance, continued product innovation, and a structural shift of household savings into long-term assets amid low interest rates. Waterdrop serves a diversified customer base across multiple markets and remains confident in serving user demand wherever it rises.

Q: Several insurers have recently launched health insurance products targeting customers with pre-existing conditions. How does management evaluate this opportunity, and what is Waterdrop's product strategy in this area? A: Chenyang Wei, Independent Director, noted that as chronic illness becomes more common, people with pre-existing conditions are far more typical than the "clean standard life." The industry consensus is shifting from insuring more healthy people to protecting the health of more people. Waterdrop's strategy centers on lowering coverage thresholds by segmenting disease risk and building differentiated underwriting and claims capabilities. The company breaks demand down by scenario, age, and condition, co-designs terms with insurer partners, and uses platform and AI insights to match the right product to the right customer. Longer-term, health cover for people with pre-existing conditions could become more like auto insurance buyable, claimable, and renewable.

Q: Is there a clear timeline for AI agents to start generating commercial value? How will AI investment impact the R&D expense ratio going forward? What other new initiatives is the company exploring? A: Management stated that AI is expanding across four value chains acquisition, pre-screening, claims, and renewal and is not being commercialized as a standalone business; its value shows up in top-line and bottom-line growth. AI directly supports user consultation and purchase decisions, driving nearly RMB100 million in FYP, while tools like Kui.ai and AI pre-sales assistants help life planners close more cases. The overall R&D ratio is expected to remain stable, though resources are actively shifting toward AI in talent and token costs, with disciplined ROI management. On new initiatives, Waterdrop is incubating a portable AI office assistant a smart hardware product leveraging its AI agent know-how, in-house R&D, and China supply chain strength with pilot sales across major global markets showing encouraging early feedback, though financial impact remains limited for now.

Q: From both product and supply perspectives, which insurance category does management view as having the strongest growth potential? A: Chenyang Wei, Independent Director, identified two forces reshaping health insurance: rising health protection awareness and an aging population. The market is shifting from standardized products to more tailored, demand-driven coverage, including insurance for pre-existing conditions, high-end medical insurance, and products bundled with health management and elderly care services. This category plays directly into Waterdrop's strengths broad online reach, precise targeting, AI capability to spot protection gaps in specific customer groups, and matching them with the right products and faster service at the point of user consultation.

Q: Noticing the strong growth in Q2, could you walk us through recent customer acquisition investment and outcomes, and what can be expected on the cost side for the rest of 2026 and into 2027? A: Li Zhu, CFO, explained that the Q2 user acquisition investment is already showing results insurance revenue and operating profit both grew further from the previous quarter, and new users were up more than 30% sequentially, driven by better reach, conversion, and product supply. The strategy is not simply pursuing cost reduction; the focus is on leveraging AI to better align product supply with user profiles and improve conversion efficiency. AI is embedded across the entire process from customer acquisition to service. For the second half of 2026 and full year 2027, the company expects to maintain an active user acquisition pace, targeting average customer segments and broadening user application coverage, with user value gradually realized through renewals and upsells over the customer life cycle.

Q: What were the key financial highlights for the second quarter of 2026? A: Li Zhu, CFO, reported net operating revenue of RMB1,448 million, up 72.8% year over year. The insurance business contributed about RMB1,333 million, up 80.5% year over year. Operating profit reached about RMB111 million, up 14.3% year over year and 39.2% quarter over quarter. Net profit attributable to shareholders was around RMB126 million, down 10.3% year over year but up 27.9% quarter over quarter, due to tax-related items and non-recurring gains and losses. Cash and cash equivalents, short-term investments, and other cash positions totaled about RMB2.653 billion as of June 30, 2026.

Q: What is the outlook for the full year 2026? A: Shen Peng, Founder, Chairman, and CEO, stated that for the full year of 2026, Waterdrop targets more than 40% year-over-year growth in total revenue and over 10% growth in operating profit. The company expects current incremental investment to continue translating into a solid user base and future product potential, with technology and AI regarded as core drivers of growth.

Q: What shareholder return initiatives were recently approved? A: The Board approved two new initiatives. First, a cash dividend of $0.03 per ADS, or $0.003 per ordinary share, payable to holders of record on October 9, 2026, with aggregate payment of approximately $10.8 million to be made in early November. Second, the sixth share repurchase program of up to $50 million over the next 12 months. Since the initial program launched in 2021, the company has repurchased approximately 62.9 million ADS for $121 million as of August 31, 2026.

Q: How did the insurance business perform in Q2 2026, and what product innovations were launched? A: Chenyang Wei, Independent Director, reported insurance-related income reached RMB1.33 billion, up 80.5% year over year and 16.4% quarter over quarter, with operating profit of RMB180 million, up 20% from the previous quarter. Newly acquired customers rose 32.3% sequentially,

For the complete transcript of the earnings call, please refer to the full earnings call transcript .