Negative Points

• Total group revenue declined 5% year-over-year to RMB2.49 billion, with domestic revenue down 17% year-over-year due to continued tax scrutiny on agencies and weak consumer spending.

• Momo's VAS revenue fell 16% year-over-year, pressured by sustained tax-related negative impacts on agencies and broadcasters, as well as macro-driven softness in consumer spending.

• Tantan's paying users decreased by 40,000 quarter-over-quarter to 0.5 million, mainly due to Alipay's adjustments to auto-renewal deduction rules pressuring paying conversion.

• The company revised its Q3 revenue guidance downward, expecting domestic revenue to decline by high teens year-over-year, widening from Q2's 17% decline, due to reduced spending from high-net-worth users.

• SoulChill's progress moderated due to its removal from the Turkish App Store and ongoing geopolitical tensions in the Middle East, leading to a downward revision of the full-year overseas revenue target by RMB100-200 million.

• Non-GAAP operating margin declined to 11.1% from 17.1% a year ago, impacted by film production expenses and rising payment channel costs from the geographic mix shift towards international operations.

Q & A Highlights

Q: The Q3 guidance implies a widening year-over-year decline for the domestic business compared to Q2. What is the key reason for this change, and what specific measures is the company taking in response? A: (COO & CFO) The revised outlook is primarily due to new trends in Momo's live streaming revenue, specifically a consumption downgrade among high-spending users. While these users remain active, their average revenue per paying user (ARPPU) has declined significantly due to weaker wealth expectations among high-net-worth individuals amid macro volatility. In response, the company will adopt a tiered operating approach: for top-tier users, it will focus on deepening social connections through light-weighted features and exclusive offline events rather than pushing spending; for mid-tier and long-tail users, it will focus on low-barrier, high-retention scenarios like audio-based interactive features and social mini-games. The company is also actively managing costs, including optimizing personnel and sales & marketing expenses, to mitigate bottom-line pressure.

Q: With the combined revenue of Yaahlan and Amar approaching that of SoulChill, how will this diversification impact the stability and margin profile of the MENA business? Has the full-year overseas revenue outlook changed? A: (COO & CFO) The combined revenue of the two new MENA products is expected to surpass SoulChill in Q3. This diversification strengthens resilience to external risks, as pressure on one product can be offset by others. On profitability, Yaahlan has already achieved net income breakeven, and Amar is expected to do so in about half a year, with both contributing to group profit next year. However, the CFO noted that the original RMB3 billion overseas revenue target for 2026 is now a "stretch," and the company would rather lower the target by RMB100 million to RMB200 million due to SoulChill's underperformance from external factors, despite the strong growth of the newer apps.

Q: Given the weaker domestic revenue outlook for the second half, how should we think about the impact on the group's overall profitability and earnings performance? A: (CFO) The full-year group revenue decline is now expected to be in the mid-single-digit range, larger than the slight decline previously expected. Additionally, investments in two movies have created incremental pressure on the bottom line. However, the company sees opportunities to offset this through cost management and operational efficiency, particularly in personnel and sales & marketing spending. Despite the challenges, the CFO stated that the original target of a low-teens adjusted operating margin for 2026 remains achievable, provided the company executes well on cost control.

Q: Can you provide more color on the financial performance and user trends for Momo and Tantan in Q2 2026? A: (COO) Momo's paying users increased by 200,000 quarter-over-quarter to 3.9 million, driven by product iterations and themed events. Momo's VAS revenue was RMB1.54 billion, down 16% year-over-year but up 2% quarter-over-quarter, impacted by tax tightening and macro softness. Tantan's paying users decreased by 40,000 to 0.5 million due to Alipay's auto-renewal policy changes. However, Tantan's domestic user base stabilized with a slight uptick, marking the first stabilization since early 2022. Tantan's total revenue was RMB156 million, down 18% year-over-year, but the company is exploring AI-driven features like AI icebreakers and chat assistants to improve user experience and retention.

Q: What were the key drivers behind the strong growth in overseas revenue, and what is the current status of the different overseas products? A: (COO) Overseas revenue reached RMB673 million, up 52% year-over-year and 13% quarter-over-quarter, accounting for 27% of total revenue. Growth was driven by strong momentum from new MENA products (Yaahlan and Amar) and the consolidation of acquired overseas dating products. SoulChill is recovering from its Q1 trough after being removed from the Turkish App Store and facing geopolitical tensions. Happn, the developed-market dating app, has maintained high-quality expansion and is exploring neighboring markets with encouraging early results. The overseas portfolio has shifted from a single-product model to a diversified, balanced growth structure.

Q: What is the company's strategy for user acquisition and marketing spend, particularly in light of the challenges in the domestic market? A: (COO) For Momo, a holdout experiment on channel spend for dormant user reactivation revealed inefficiencies in channel investments. The company is confident it can maintain current platform scale and revenue with less spend and will continue to improve acquisition efficiency in Q3. For Tantan, external factors have pushed up unit acquisition costs, leading to a reduction in paid acquisition. However, organic traffic retains better, partially offsetting the pressure. The company is focusing on improving ROI and maintaining a healthy payback period above 100%.

Q: Can you elaborate on the impact of the tax-related pressures on Momo's agencies and the measures taken to mitigate them? A: (COO) The year-over-year decline in Momo's VAS revenue was partly due to continued tightening on the tax front, which negatively impacted agencies and broadcasters. In late May, the company rolled out targeted subsidies to ease operating pressure on these agencies, which drove a quick recovery in revenue. The overall VAS revenue share ratio rose by a low single-digit percentage point to support core agencies through the tax compliance process, keeping the supply side stable at a manageable cost.

Q: What are the key initiatives for Tantan to counter the revenue decline and improve its business model? A: (COO) Tantan is focusing on AI-driven improvements to the user experience, including AI icebreakers, AI chat assistants, and an AI matching feature to reduce decision fatigue for female users. To address the revenue decline from Alipay's policy changes, Tantan launched a lifetime membership product to encourage longer-cycle subscriptions and upgraded its payment infrastructure to integrate Douyin Pay and WeChat Pay, reducing reliance on a single channel. The company also optimized the matching strategy behind Flash Chat, driving revenue growth in that scenario.

Q: What is the company's view on the regulatory environment and its impact on the business outlook? A: (CFO) The company is not seeing any significant incremental regulatory pressure and expects the environment to remain relatively stable. This is not a major driver of the change in the outlook. The primary headwind is the macro spending environment, particularly among the top cohort of users, which is affecting discretionary and

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