iQIYI, Inc. Sponsored ADR Class A Stock

Thank you for standing by, and welcome to the iQIYI Second Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to Ms. Chang You, IR Director of the company. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining iQIYI's Second Quarter 2026 Earnings Conference Call. The company's results were released earlier today and are available on the company's Investor Relations website at ir.iqiyi.com.

On the call today are Mr. Yu Gong, our Founder, Director and CEO; Mr. Ying Zeng, our CFO; Mr. Xiaohui Wang, our CCO, Chief Content Officer; Mr. Youqiao Duan, Senior Vice President of our Membership Business, Mr. Xianghua Yang, Senior Vice President of International and Online Games Business; and Mr. Gang Wu, Senior Vice President of Brand Advertising business. Mr. Gong will give a brief overview of the company's operations and highlights, followed by Ying, who will go through the financials. After the prepared remarks, the management team will participate in the Q&A session.

Before we proceed, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC. iQIYI does not undertake any obligation to update any forward-looking statements, except as required under applicable law.

I will now pass on to Mr. Gong. Please go ahead.

Hello, everybody. In the second quarter, we continue to reinforce our core business, high-quality, diversified content powered by our industry-leading performance. According to in-license data, we maintained the #1 market share in each of the long-form drama, field and children's content categories. And for short-form dramas, we made a major pretty soon reaching #1 market share for the first time Financial performance also improved quarter-over-quarter. Total revenue -- total revenues grew sequentially and our non-GAAP operating loss narrowed substantially approaching breakeven. We are fully amounting our strategy -- strategic and transformation. First, we are shooting from a centralized media to decentralized, creator and user-centric social media ecosystem. AI can remittance and barrier content ratio turning what was once -- niche professional activity into a mass capability and triggering unparalleled search incontinent supply. Because transitional centralized models cannot accommodate the scale and diversity. We are upgrading our content acquisition and distribute mechanism to efficiently connect creators and audiences.

Second, we are taking an OEM approach on AI to revolutionize both live action pressure and pure AIGC. Our guiding principle is clear, maximizing cost efficiency without compromising quality.

Together, these each other like flywheel, AI rapid growth in content supply, which help us move faster to more decentralized model as we decentralize more creators can participate, users get more engaged and our platform becomes even stronger. In Q2, our strategy moved from plans to results over time. They will structurally improve on content costs, revenue quality, profit and cash flow.

Let me walk you through the progress. Through decentralization, we are improving our platform and accelerating the creator ecosystem in April, which reflected our core greater half the IQ IT IG creator center early are promising the number of creators and uploads are all trending higher. Content is short production cycle, lower production scale and a good fit for AIT and creation have seen especially strong growth for various types of content. The delayed average number of uploaded works in the second quarter increased by 30% to 500% compared to the first quarter, into daily fields for microtumor and micro animations were up by double digits compared with March.

Short-form dramas and animation are also gaining tranship. Looking ahead, more long-form video categories we are doing a decentralized content ecosystem as we preserve. It's premium content advantage with our burden on content slate by adopting lighter, more flexible content agitation models.

On content production, AI is substantially optimizing production efficiency and cost structure. First, in that action, AI is streaming in the Antero workflow, for example, we leverage AI in our shop to prime season 2 to achieve a [ 104 ] Lipin rough cut efficiency compared to traditional measures.

Second, for content test, well suited to AIGC. AIGC production can reduce production costs and time lines by 70% to 90% compared with transitional while pushing past the physical limits of live action shorting. Naturally, AI adoption is faster in CG having formats, we have launched multiple AI-generated Internet future fill. A major milestone was July Premier of the industry's first ITC Internet feature film to launch with Internet drama and field distribution assets.

This marks the official shift of long-form AIGC from technical testing to Large-scale production, in addition, year-to-date, we have launched 16 AI-generated short-from under a revenue-sharing model with traded as a top performing title in the second half of the year, we have launched a diversified list of AIGC title, including multiple IT invested films with an even broader pipeline across expanded categories next year.

Currently, we have multiple AI generated short-form drama in development. is our seg-grade production platform for creators as less on optimized third-party and in-house models plus longstanding expertise in professional content by replacing costly steps with lower compute and cost at lower spares and speed up professional content production. Our strategy is planned, internally nonrap development and production costs, external other crop express new revenue streams and gradually converge on professional production capabilities into incremental revenue.

is general AI output is change the key parts of long-form production, a script writing shop design workflows digital asset editing and doubling into platform features. It delivers an end-to-end flow in next talent with content assets and make progress repeatable and reusable is involving from our tools into comprehensive greater ecosystem. It links content demand is greater and enables them to realize commercial returns to flexible business model. These activities are flywheel commercial returns encourage more content supply, expanded supply fortifies the ecosystem, a stronger ecosystem scale both peers and works, poring creation platform for iQIYI's decentralized content ecosystem.

We believe this advantage will improve content production efficiency, lower unit costs and increase for users and revenue, as we roll them out across all operations and scale, we expected their contributions to profit and cash flow to stably material line.

Now let's move on to the detailed performance in Q2. Let's start with content. Our premium company is well recognized by users and the industry as the mean work this room, one of China's top TV owners, by Milano, IT titles and their accretive teams -- 14 of 23 awards, including 10 of 11 in the drama category, well ahead of cars.

In Q2, our content performed well across formats in long-form dramas, we continue to focus on female-centric stories with working among this year's top two titles by ad revenue. We also reinforced our lead in suspension general innovation. The suspense [indiscernible] or surpassed the 10,000 popularity score and a strong membership sign-ups.

We will in [indiscernible] juncture from our IT suspense seller earned strong reveals our original title archiving mystery. exceeded 9,300 populating index score under the nonexclusive the effort of topped 8,500. In-place supported short-form dramas typically 15 to 25 minutes per source with flat door and so costs. We delivered exciting early results for enlighten data our market share doubled from 25% in March to 50% in June taking #1 for the first time. The strong performance was supported by all original deferment 10th anniversary which reached a per-day market share of 60% short-form titles can offer structural advantages of our long-form dramas, potentially reducing average per minute cost by over 50% and shortening production to approval time lines by 30% to 50%.

In macro dramas, we released a premium live action titles like all of our sector currently forming for you and the all responded well with AIGC scale quickly under revenue sharing model accounting for over 50% of our macro and unique visitors in June while AI native micro animations expanded with strong sequential growth in and time.

In fields, we maintained diversified slate of different offices. Originals like the counter fit, we talked on the received positive feedback. We are licensed the article hit, [indiscernible] breadth of the Garden ran Zoomtopia 2, we are also well received on our platform. In already shows, we launched 7 originals in Q2 with our flagship from transit delivering a sustained value has will help across popular index score of 9 solid, reaching a new front for 10 years evergreen IP, the wrap of China 2026 also stood out surpassing a popularity index score of 8,800.

In animation, we further solidified our original offers, the long branding against the long -- with Premal in April, topped our animation popularity index chart and broad notable of platform users back to IT together with growth ruler, a -- we now have two long-running angles to get users in digital year round.

In student's content, we reinforced our leadership with the return of our original IP vehicle and the local life adoption of the BBC Classic

Next, let me show our pipeline for the second half of the year. Our summer, long-form dramas features, a diversified lineup, which includes multiple female-oriented titles like road to success [indiscernible] Junior golfers continue on in of the blade in and in vibrations complemented by the military theme linked from Warren into fontina and the major realistic drama forging, Justice For the remainder of the year, we will printer great long March [indiscernible] no return in sugar.

As for short-form drama, our accounting releases include that of wing term. In Duncan, the 5 of fecal the sixth group of fatal drug and the upgrade nobody to in films of pipeline features, original cell article films, including winter and summer. Yellowtail, not go to the child to monitor and provision on this work in the second half of the year. On the investments front, our pipeline includes a nation part, chosen and the fuels this summer. With I know who you are, but there you and managing to an crossing do late for the later half of the year.

For Internet feature films, which are eliminated to a maximum of 3 chapters, each at least a 6 our pipeline includes multiple ITC titles based on the classic IP, the environment in Humber first 2 chapters, butter flight drain and the ring of -- to launch this summer. Additionally, audiences can also drove a strong of live action handles, including motor game, and speed and be this summer.

Shifting to a shore. Deepening orders engagement with established IPs, including the wrap-fee 2026, the team of season siting and Horitthis summer followed by the Bloomington in Europe and enter together to reduction in the second half.

For amination this year, could be IT strong gift animation summer today. The line of feature a good data to an toleration rise by demand primarily more golden cost, Hietanen, Changhong [indiscernible] the AI panels, the legend of King cancer Hakan the Legend of King...

For children's content, our summer slate features a new season of the popular present Board and the Big Wolf. Xianyang as well as original AIGC animation like looking ahead at the second half of the year, we will roll out the original AIGC animation and come and bid for test travel to our control tuition.

Now turning to membership business. Revenue declined sequentially due to seasonal -- seasonality. We are strengthening the business with more refined operation. For example, targeted discounts for students and future year-over-year increase of over 60% in quarter and subscribers we in this cold -- we also continued to enhance membership value with experience package. In Q2, we launched the express package across 16 dramas driving nearly 80% and increase in total participation we are expanding drone membership is frequently purchased top-tier brands popular among young users to support membership world and retention.

Next, moving on to advertising business for our brand as revenue from drama targeted and delivered double-digit year-over-year growth and sector building, personnel - and health care recorded double-digit year-over-year growth. We also depend our use of AI in operations and now support customized rating. For performance revenue returned to year-over-year growth, we continue to optimize advertiser mix.

Revenue from small and midsized advertisers delivered strong year-over-year growth and sector-wise revenue from advertisers in AI application, instant retail. Retial and e-commerce recorded a strong year-over-year growth. We further strengthened results with -- upgrading our price large models, improving targeting precision and driving revenue.

Moving on to our business performance in regions outside of Milan China. In Q2, this business sustained rapid growth, membership revenue grew 40% year-over-year. Pop gifts and Spanish-speaking regions demonstrated robust growth, notably membership revenue from Brazil and Mexico search by over at 215% and 150% year-over-year, respectively, arb speaking markets also show strong financial with membership revenue increasing 85%.

The global influence of Sea drama continues to expand in membership revenue from Cremers grew over 40% year-over-year. As to out -- as to our hit was faced to [indiscernible] at the top our international platform, rankings across 14 regions in its first week and stay in the top 10 of the Sedramers chat for 10 consecutive weeks.

On the local production front, we are accelerating our pace, our first original Indonesian drama, the other system gain strong traction for global trend and became the #1 local Internet drama in Indonesia in the first half of 2026.

My Programmers were another major highlights, serving as the second largest membership revenue contributor following long-form dramas. In Q2, membership revenue from this category grew over 300% year-over-year. This momentum was partly fueled by stronger original production. Notably, originals rose to 3 of the top 10 contributors to membership revenue.

AITC was another key driver of our overseas microgram expansion. In Q2, we launched AI-generated titles in multiple language including English, Thai and Our original titles delivered exception of efficiency, recovering production costs within the same quarter and demonstrating the power feed potential. We are scaling supply soon both originals and external partnerships.

In May, we released offers original EI generated crore overseas, which quickly ranked in the top 3 for macro drama revenue on our international platform. The title was produced by another which caused us to template full long laying a strong foundation for scale production in parallel. We are proactively affording external partnerships to connect overseas script production and tool ecosystem, including andro unlocking a current city and scaling AIDC supply.

Beyond content, we are driving growth with strong membership, we have partnered with Vision Plus in Indonesia and a well launched joint membership with fill in more markets in the second half. We are excited about the future potential of our overseas business.

With that, I will hand it to over to Tian Ying, our new CFO, to walk you on the financials.

Okay. Thank you, Mr. Gong, and hello, everyone. Let me walk you through our key financial results for Q2. Total revenues were RMB 6.3 billion, up 1% sequentially. Membership services revenue was RMB 4.0 billion, down 4% sequentially, primarily due to seasonality. Online advertising revenue was RMB 1.2 billion, sequentially. Content distribution revenue was RMB 681.5 million, up 90% sequentially, driven by the increase in content distribution revenue related to the drama series. Other revenues were RMB 344.9 million, down 19% sequential.

Moving on to cost and operation, operating expenses, content cost was RMB 3.8 billion, up 2% sequentially. Total operating expenses were RMB 1.1 billion, down 6% sequentially, reflecting this in market spending. Non-GAAP operating loss narrowed by 80% sequentially from RMB 148.6 million in Q1 to RMB 30.3 million, bring us close to breakeven.

Turning to cash flow. Net cash provided by operating activities increased to RMB 339.6 million, from RMB 186.4 million in Q1. As of the end of Q2, we had cash, cash equivalents restricted cash and short-term investments of RMB 4.1 billion. Separately, as of the quarter end, we had a long principle of USD 636.6 million receivable from PAG, included in prepayments and other assets on the consolidated balance sheet.

We remain focused on creating long-term shareholder value. In March 2026, we announced a share repurchase program of up to USD 100 million effective through September 2027. As of June 30, we had repurchased approximately 21.6 million ADS for aggregated cost of USD 24.1 million. For further details, please refer to today's earnings on our Investor Relations website.

With that, we are ready to take questions. Operator, please proceed.

[Operator Instructions] Your first question comes from Xueqing Zhang with CICC.

[Interpreted] I would like to ask with large and the market involved rapidly by management, the actual business model in the future and is the company's key strategic and operational priorities going forward.

[Foreign Language]

[Interpreted] Thank you. The CEO takes this question. So he says, we see IT of the benefactory of AI now and also in the long term. So to capture these opportunities, we are making some strategic transformation for our business, mainly focused on two main pillars. Decentralization, which meaning transforming from the media-centric platform to a decentralized content ecosystem and also all in AI. So these two pillars the lease will mutually reinforce each other and driving a flywheel effect across the number of creators the volume of content, the user base and potentially on revenue performance.

Okay. Premium content still remains the core of our business. We believe AI will significantly lower production cost for premium content, short-term production cycles and potentially enable production and visual effects that were previously difficult to achieve their life action.

On decentralization, we're mostly focusing on our IQ ID, which is the ICE creator center, and we have seen some positive initial progress, such as the number of creators, the content upload numbers are trending well. And we're seeing AI adoption is progressing across our core content categories and with initial breakthroughs achieved, for example, for the projects we both in production and also launched. And in the future, we expect a greater scale of content to be released next year.

Over the long term, we believe these two strategies, meaning the decentralization and all in AI, these two will structurally improve our content cost, revenue quality, profitability and cash flow. Thank you.

Your next question comes from Lincoln Kong with Goldman Sachs.

[Foreign Language] So my question is about IG's overall AIGC strategy and how is our plan in terms of each content categories?

Thanks, Lincoln. We'll invite our Chief Content Officer, Mr. Xiaohui, to take this question. Please go ahead.

[Foreign Language]

[Interpreted] First of all, we believe AI reduces the basic costs and barriers to production, but it doesn't lower the bar for creativity and judgment. We leverage AI to optimize the economics of content production, while we reinforcing our core mode, which is storytelling and aesthetic judgment, emotional expression and also digital language. Our goal is to advance on both fronts, premium content quality and scale content supply. Strategically, we'll prioritize core long-form video while accommodating microtrauma and micro animation. Now we use a revenue-sharing model to improve capital turnover.

We'll share our thoughts by category based on the pace of AI adoption at scale. First of all, for micro dramas, we're seeing rapid adoption with AIGC as the primary source of supply. We primarily use a revenue-sharing model and leverage algorithm recommendations and decentralized operations to deliver a diversified rapidly refreshed and skilled content supply.

For animation -- micro animation, we believe these are AI native content. So AITC will serve as the primary supply.

For animations and Truvis content, these have mature CG industrialization are a good fit in our view, and we are seeing rapid AI adoption. AI significantly improves efficiency and our pipeline is expanding. For next year, we will release more AIGC titles to serve niche audiences and broaden stable supply.

For short-form dramas and interface feature films, these are medium in production complexity and volume and compared to long-form content that these are bit in complexity and also installed as well. And we are actively adopting AI, focusing on garners like fantasy, supernatural and adventures to widen our garner Some panels have already launched and we will speed up the scale releases and balancing cost efficiency and content diversity. So far, we released -- we have released 16 AIGC short-form drama under a revenue-sharing model, along with several feature films.

For long-term dramas and theatrical films, we believe carries the highest emotional and artist value, but these are relatively slower to adopt AIGC scale. And for this content, we will focus on life action to quality first use AI to support our production and use AI to reduce cost. Thank you.

Your next question comes from Vicky Wei with Citi.

[Foreign Language] In the context of the AI era and the ongoing shift towards the centralization, how do you view ICE's core competitiveness? And what kind of value does ICE offer to content creators?

Thank you. We will invite our CEO to take this question.

[Foreign Language]

[Interpreted] We believe in the AI era, video industry competition centers on end-to-end capabilities, which is from concept to commercialization. And there are quite a few essentials that are required for this. For example, the ability to bring together professional talent, generate compelling ideas, run industrialized production, have a comprehensive understanding of content review and compliance, deliver effective content distribution and drive diversified monetization. And these are the four modes TI have built over the past decade.

So our values to creators with there are three areas that we are targeting and also a sloping help them to be seen, generate income and gain recognition. First of all, have a major share of the video entertainment audiences. So the creators have greater capabilities or possibilities to be seen on the IT platform. And also IT have deep expertise in long-form video production, and we have established a very mature industrialized content production of mechanism.

And in addition, IT also have a map viewership data, a very rich IP and also licensing resources, and also a very strong ecosystem support.

We have built a 7-pillar creator support system on the iQIYI ID, which is the ICE creator Center; NadoPro, our professional production platform. A physical creative centers offline, training programs and IT Noto and AIG Venture Summit helping the creators with the fund support. And the Peter Kao and IT AI theater for benchmark productions and last but not least, a dedicated creator customer service.

On August 20 in Beijing, which is in today, we will host the IT creator conference featuring in-depth discussions on content ecosystem development frontier on AI opportunities and greater empowerment. Thank you.

Your next question comes from with Guangfa Securities.

[Foreign Language] I want to know about the latest development in overseas business and how the operational experience or more major markets like parent can be replicated in other markets?

Thank you. We'll invite Mr. Xianghua Yang to take this question. .

[Foreign Language]

[Interpreted] Our overseas business maintained rapid growth in Q2 with overall membership revenue grew 40% year-over-year, and we remain profitable on a managerial accounting basis, and Thailand is the market where we enter early and where our operating model is relatively mature. It still delivered solid growth year-over-year in Q2. and with steady top line growth and continued profitability improvement in the quarter as well. And in new markets, such as Brazil and Mexico, we see membership revenue increased 215% and 150% year-over-year, respectively.

We categorize our overseas markets into mature growth and potential markets, where mature markets will aim for stable profitability, growth markets focus on accelerated reading revenue with disciplined investments.

Thailand serves of our proving ground. What we have validated is a set of reusable operating capabilities, yes. So using C drama as the foundation and a sustained marketing to amplify influence of Chinese content and expanding a local supply content supply and tailoring the content has adapted to the local audiences.

We are also partnering with our local carriers, platforms and payment channels to scale the membership base. And we're also leveraging AI to improve the translation and distribution and also production efficiency.

Because the content preferences and collaboration channel structures deferred by market, we will replicate these underlying capabilities, while the local teams do make targeted adaptations, for example, applying Thailand's operating capabilities to other markets.

Our strategy is not to chase contract counts. We are guided by unit economics and operating contribution, and we will expand into new markets after validating revenue quality and profit-generating capabilities. Thank you.

There are no further phone questions at this time. I'll now hand back to the company for closing remarks.

Thank you, everyone, for joining the call today. If you have further questions, do not have to take to contact us. Thank you, and see you next quarter.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to the iQIYI's First Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to Ms. Chang Yu, IR Director of the company. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining iQIYI's First Quarter 2026 earnings conference call. The company's results were released earlier today and are available on the company's Investor Relations website at ir.iqiyi.com. On the call today are Mr. Yu Gong, our Founder, Director and CEO; Ms. Ying Zeng, our Interim CFO; Mr. Xiaohui Wang, our Chief Content Officer; [ Mr. Youqiao Duan, ] Senior Vice President of our Membership business; and Mr. Xianghua Yang, Senior Vice President of International and overseas, online gaming business. Mr. Gong will give a brief overview of the company's business operations and highlights, followed by , Ying will go through the financials. After the prepared remarks, the management team will participate in the Q&A session.

Before we proceed, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC. iQIYI does not undertake any obligation to update any forward-looking statements, except as required under applicable law.

I will now pass on to Mr. Gong. Please go ahead.

Hello, everyone, thank you for joining us today, the avoidance of [indiscernible] landscape is fundamentally reshaping entertainment and creating incredible opportunities for iQIYI. That we shall at iQIYI value of creation in the new area from 3 [indiscernible] creating our core today, igniting new growth engines and building for the long term.

Let's start with the first prospective reinforcing our core fundamental foundational set. Premium content remains the cornerstone of our strategy. And in Q1, we reformed its compelling appeal for audiences of the worse lineup of heat drama, including the Punishment 2, Born to Be Alive, Sheng Ming Shu, [indiscernible] and How dare you!? [indiscernible] dominant position in the core drama category, Enlightent data moving from our commitment to content quality stronger than ever designed to deliver experience that profoundly connect with viewers. This focus is vitalizing our core operations evidenced by the sequential growth in membership revenue.

We are also highly encouraged by the supportive domestic value landscape, which is accelerating the company's approval programs and try stronger capital efficiency. Importantly, these regulatory policies are unlocking innovation across new formats. This includes short-form dramas -- 15 to 25 minutes per episode with flexible episode counts and Internet feature films from Rouen, which are limited to 3 chapters of 60 minutes each.

These formats are not only shortened production cycles and lower capital barriers, but also attract a broader pool of creative talent, enabling more innovative story telling than traditional long-form content.

Furthermore, there are perfectly suited for AI integration, ultimately enriching our portfolio and maximizing our ROI. Looking ahead, we plan to launch over 100 short-form dramas in 2026, while steadily building our Internet feature film slate. By continually delivering premium long-form content while strategically expanding into new formats, we are reinforcing our foundational strengths.

Importantly, this expansion is efficient, allowing us to capture new opportunities without putting additional pressure on our overall content costs. Second, we are igniting new growth engines. Among our emerging business segments, our overseas business has established it as a proven second growth driver. In Q1, overseas membership revenue surged by over 40% annually. This success stemmed from a highly differentiated market positioning compared to global peers, we focus on premium Asian content tailored primarily for young female demographics within our Asian content portfolio, key dramas whose global influence continue to rise serve as the key catalyst for our international expansion, complemented by our growing slate of local content.

Geographically, we are anchoring our presence in Southeast Asia. We are also expanding into high-growth markets in the Middle East and Latin America with Brazil as a key focus. We are also deeply integrating AI across our global operations to drive efficiency. Parallel to our market expansion, we are maximizing IP value through our experience business, expanding our content value from online to offline and extending the IP life cycle. For IP-based consumer products, we are driving deeper user engagement through merchandising while empowering popular IPs to generate both casting window and long tail monetization. Finally, our foray into offline experience is yielding encouraging results.

Our first IT event in Yangzhou has gathered solid initial feedback, allowing us to rapidly accumulate operational experience to apply to other locations. Thirdly, we are laying a robust foundation for long-term growth powered by AI and our decentralized platform. AI is breaking down the historic barrier that was made quality content costly, time consuming, igniting explore growth in both creators and content value, anticipating that this accelerating shift will soon outgrow the traditional centralized media platform model.

We have strategically pivoted to build an upgraded and vibrant decentralized social media ecosystem. This will unlock substantial value decentralized ecosystem greatly expands content supply, allowing us to meet diverse demand at a whole new scale. creators will have greater opportunities to breakthrough NSSC, retaining full ownership of their IP and converting it into fair attractive returns. We are also cultivating private traffic, building loyal fan base and gathering valuable data from direct user interactions.

Meanwhile, for IQ originals, we are sharpening our focus on premium content, while the decentralized platform drive scale original will serve as our signature offerings. Additionally, we are building a comprehensive support system so creators can focus purely on creativity. One key pillar is Nado Pro, a proprietary platform for great content production. Nado Pro is powered by both public and self-deployed large models, but it goes beyond generic models. It built upon our years of technology infrastructure and deep content expertise. We transform years of industry know-how into AI agent and combine them with our core IP and digital assets to deliver accessible platform capabilities.

Nado Pro offers one-stop services from content creation to operations and commercial collaborations. Beyond Nado Pro, we offer professional training and workplaces. We also facilitate financing solution, connecting talent with capital from our own funds and external investor networks.

Now let's explore what define iQIYI's long-term investment value and how we are uniquely positioned to lead in the AI area. Our confidence rests on 2 core pillars. First, how to replicate competitive moat. We p a unique blend of deep content expertise and cutting-edge technology. We have a proven DNA of innovation from pioneering general specific the brands to now leading the AIGC transformation in the industry.

Crucially, we process a vast high-quality IP library that is essential in the AI area, alongside a high engaged user base that we are committed to serving with excellence. Second, a long-term structural enhancement to our business economics. AI is poised to address major industry pain points expanding our margins and maximizing capital efficiency. At the same time, our decentralized platform will boost content diversity to capture broader audiences while iQIYI originals focus on crafting enduring premium IPs together. These initiatives fuel our diversified monetization system, expanding membership, advertising and offline experiences, unlocking IP value across both domestic and global markets.

Before we dive into Q1 details, I want to emphasize our core philosophy, the true power of technology is to empower humanity, not replace it -- it will serve audiences with deeply resonate content. It will empower creators to overcome human limitation, turning their best inspiration into reality with absolute efficiency and freedom. Ultimately, it will elevate the entire industry, unlocking new avenues for growth and helping more creators, especially young talent, realize both their creative vision and commercial value.

Now let's move on to the detailed performance in Q1. Let's start with content. We are pioneering AI-driven storytelling and talent cultivation. In Q1, we unveiled Peter Paul AI filter featuring a slate of 16 titles across science fiction, [indiscernible] each running 11 to 20 minutes. Nado Pro powered the key production process from capture design and setting to storylling, demonstrating AI transformative potential in professional content creation. In terms of our long-form drama performance, the punishment 2 became our second franchise with 2 seasons exceeding the 10,000 iQIYI popularity score. Pursuit of Jade also surpassed 10,000, while our in-house produced custom drama, How dare You! exceeded 9,000. Both Pursuit of Jade and How dare you! Resonated strongly with young female audiences, further solidifying our connection with these key demographics. Furthermore, we secured our leadership in realistic and suspense genres. Born to be Alive earned the highest rating reaching among all domestic drama releases in Q1 and [indiscernible] and our Suspense brand was also well received by users. For variety shows, our in-house production Wander Together [indiscernible] invited market share ranking for the first quarter.

For animation, we expanded our offering with 4 key original titles among this, the long running, the Great Ruler, continued to captivate audiences and Season 2 of How dare you! achieved a strong synergy with its drama series adoption. For micro dramas, original production contributed over half of revenue from this category in Q1. AIGC has emerged as a powerful driver for content releases. In Q1, we launched more than 3,000 AI-generated micro dramas, further enriching our offerings.

Finally, for micro animation and AI native format, we are rapidly expanding our library, which featured over 14,000 titles as of quarter end, with viewership continuing to rise steadily. Next, let me show our Q2 content pipeline. Our drama series lineup features a rich variety of titles from historical epics to niche genres, including [Foreign Language] among the already released titles Born with Luck gained wide popularity driven by its innovative storytelling combining comedy and mystery and surpassed iQIYI popularity score of 10,000, becoming the third to reach such mark this year.

For films, our pipeline includes original online movies, [Foreign Language] For licensed titles, we will release the hits on our platform like [Foreign Language] For licensed titles, we will release the hits on our platform like [Foreign Language] along with the online film, the Legend Hunter [indiscernible] for variety shows, we will continue to captivate audience with established franchise such as 5HA Season 6, Become A Farmer Season 4, The Rap of China 2026 and Yes I Do Season 6 while launching new IP like of [Foreign Language]

For microgram, we have a diverse slate schedule, including diverse slate schedule, including Perfect Match [Foreign Language] and the Spring Rise of Phoenix. For animation and children's content, we will continue the long running against and build a localized adoption of the BBC classic [Foreign Language] Now turning to membership business. Revenue grew sequentially, primarily driven by premium titles, including Pursuit of Jade, The Punishment 2, How are You! And [indiscernible].

Operationally, our refined upselling strategies and value-driven membership options successfully encouraged users to extend their plans, driving a year-over-year increase in average subscription duration for monthly subscribers this quarter. Additionally, our higher membership continued to scale, driven by a highly different value proposition that features free express package.

Next, moving on to advertising business. For brand ad revenue contribution from targeted dramas recorded double-digit annual growth with titles like Born to be Alive, How dare You! And the Pursuit of Jade gained strong recognition from advertisers sector-wise, food and beverage, Internet services and e-commerce all achieved double-digit annual growth. Furthermore, we are expanding our advertising appeal across new content formats. For example, we partner with leading advertisers to coproduce [indiscernible] of content for micro dramas, creating new avenues for brand integration.

On the technology front, AI continued to empower our advertising operations. We leverage Nado Pro to produce marketing materials and combine AIGC capabilities with our IPs to generate high-quality ad content. During Q2, our focus will be on maximizing ad sales across premium variety shows, dramas and traditional display ads with further enhancing monetization on large screens. Concurrently, we will continue to leverage AI to optimize advertising efficiency.

For performance ads, the advertiser mix is healthier and more balanced. Revenue from small and midsized advertisers recorded strong annual growth with sustained improvements by sector. Internet services, e-commerce and mini games delivered outstanding quarterly results. Additionally, monetization efficiency for micro drama immersive ads measured by revenue per inventory unit increased by over 60% year-over-year. For the rest of the year, our strategy for performance ads focused on 4 key areas: First, expanding our client base across high-growth verticals, including Internet services, short-form videos, mini games and AI tools; second, capturing greater market share during peak window such as major e-commerce festival. Third, enhancing monetization efficiency through AI-powered capabilities. Finally, tapping into additional ad budgets by harnessing a more diverse content ecosystem and upgraded ad placement system.

Moving on to our business performance in regions outside of Mainland China. Membership revenue increased by over 40% annually in Southeast Asia markets. Membership revenue from Indonesia grew by over 80% annually. Meanwhile, Portuguese and Spanish-speaking regions demonstrated robust growth with membership revenue from Brazil and Mexico both grew by over 500% annually. Average daily subscribers reached a new high. The global influence of dramas continue to expand, notably Pursuit of Jade led performance across multiple markets and secured top position on our international platform viewership rankings and topped Google trends among all free dramas broadcasted during the same window in 15 markets and set a record as the most such Chinese drama [indiscernible].

Beyond C-dramas, we are scaling original local production to elevate the appeal of our content library, particularly in key Southeast Asia markets in Q1. Our first original Thailand show, Running Man Thailand delivered exceptional results, setting multiple new records for variety shows on our international platform. Google Trends confirmed its position as the most popular variety show over the past 3 years, and the title earned strong recognition from advertisers. Meanwhile, our first original Indonesia drama is on track to premium in Q2, marking a further step in our localization journey.

Our overseas micro drama business also gained momentum with growing revenue contribution fueled by both licensed and original content. Our original production pipeline consistently delivered new releases across multiple language, including English, Thai, Korean and Indonesian.

Next, our experience business. We focus on 2 core areas: IT-based consumer products and IT led. For IT-based consumer products, our self-operated merchandise delivered solid performance with collectible cars from pursuit of seeking a new sales record in this category. For offline experience business, our first IT lab in Yangzhou performed in line with expectation and was highly acclaimed for its design, immersive experiences and technology-enabled interactions.

Going forward, we will continue refining operations and introducing new creative offerings to encourage repeat visits and on-site consumption. Furthermore, we are leveraging our experience gained in Yangzhou to drive to development of new locations in Kaifeng and Beijing, which are progressing smoothly.

Now I would like to hand it to Ying for the financials. Thank you

Thanks, Mr. Gong, and hello, everyone. Let me walk you through the key numbers for Q1. Total revenues were RMB 6.2 billion, down 8% sequentially. Membership services revenue reached RMB 4.2 billion, up 2% sequentially, driven primarily by our diverse lineup of key dramas. Online advertising revenue was RMB 1.2 billion, down 8% sequentially, primarily due to seasonality. Content distribution revenue reached RMB 358.7 million, down 54% sequentially, primarily because less number of dramas we distribute to third parties. Other revenues were RMB 426.7 million, down 22% sequentially.

Moving on to cost and expenses. We adopt a disciplined strategy in Q1. Content cost was RMB 3.7 billion, down 2% sequentially. Total operating expenses were RMB 1.2 billion, down 10% sequentially. Moving on to cash flow. Net cash provided by operating activities were RMB 186 million, reflecting some encouraging early signs in financial performance driven by our new business initiatives.

Turning to bottom line and cash balance. Non-GAAP operating loss was RMB 149 million, and non-GAAP operating loss margin was approximately 2%. As of the end of Q1, we had cash, cash equivalents, restricted cash, short-term investments and long-term restricted cash, including prepayments and other assets at a total of RMB 4 billion. The sequential decrease in cash balance was primarily due to the repurchase of our 6.5% convertible senior notes due 2028 which reduced our outstanding debt, further strengthening our capital structure. At quarter end, the company had a loan of USD 636.6 million to PAG recorded under the line item of prepayments and other assets.

We remain committed to delivering shareholder value over the long run. In March, we announced a proposed listing on the main board of the Hong Kong Stock Exchange and our first share repurchase program of up to USD 100 million effective through September 2027. Up to now, we have repurchased a total of approximately 6.45 million ADS for a total cost of USD 8 million. For detailed financial data, please refer to our press release on our IR website.

Now I will open the floor for Q&A.

[Operator Instructions]

Your first question comes from Xueqing Zhang with CICC.

[Interpreted] And my question about Nado Pro. The company previously launched Nado Pro AI agent for film and television content creation. Could management share more details about the recent progress of Nado Pro and any specific examples of its practical applications. In addition, how does management view the future commercialization prospects for Nado Pro?

[Interpreted] The CEO Gong is taking this question. So Nado Pro is iQIYI's proprietary platform for studio-grade content production. It is powered by public large models, but it goes beyond generic models. It's actually built upon our years of tech infrastructure and deep content expertise. For example, we have transformed years of industry know-hows from key areas such as screen writing, filming and post production into AI agents and combine them with our core IP and digital assets to deliver accessible platform capability. Creator tools previously used only within iQIYI such as the script evaluation and shop-based reference search have now been incorporated to Nado Pro.

Nado Pro has been available to all creators across the industry since April 20. We now currently have over 10,000 active creators on board, ranging from traditional production companies to independent creators. Content productions cover a wide variety of formats, including the long-form dramas, micro dramas, micro animation and for videos and also for some commercial app content among which about 100 of them are IT original titles project..

Nado Pro actually recently launched a creator community as a platform for creators to interchange experiences and for some feedback and that will feed internal development for the upgrades in the coming versions. And also, this platform will feature some commercial matchmaking features upcoming next. And then these will empower the creators with the full cycle from content creation to commercial monetization.

In addition, the international version of Nado Pro is in development and will be online soon. Regarding Nado Pro's commercial prospects, it will serve as a stand-alone product to boost actually monetization capabilities. And it will continue to reiterate and continue to improve the development and also to roll out the upgraded version to create more better features.

Next question comes from Vicki Wei with Citi.

[Interpreted]

Would management share some latest progress about the industry antiprivacy update?

Thanks. We will invite our Chief Content Officer, Xiaohui to take this question. Please go ahead.

[Interpreted] For the antipiracy situation, we actually have observed very positive progress. Around the end of April and early May, the National Radio and Television Administration launched a targeted campaign to crack down on the piracy distribution of drama content across illegal websites, browsers, search engines and cloud storage services. The industry regulators actually attached great importance to this issue and have established clear requirements for the prevention and handling of online copyright infringement, including some of the initiatives.

To give you guys some examples. For example, we established a rapid response mechanism for infringement content, enabling real-time communication within copyright owners and platforms to ensure swift response and removal.

Second, the new policies and regulations actually enforce dual responsibilities for platforms and local authorities requiring provincial and municipal bureaus to fulfill their local management duties, for example, enhancing monitoring and improve processing efficiency. The platforms must resolve and remove infringing content within 24 hours of receiving a report or notice. For newly released dramas, hit series or key titles, the removal must be completed within 4 hours.

And third, building a coordinated enforcement mechanism, regularly reporting on infringement status, takedown and typical cases for repeat offenders who will be publicly named and handed over to copyright and police authorities for investigation and prosecution.

This targeted campaign will be integrated with routine regulatory enforcement. Looking ahead, the National Copyright Administration's Sortnet 2026 anti-piracy special campaign has designated online copyright infringement and piracy as its top priority, signaling even stricter enforcement measures.

Currently, we're happy to see the efficiency of handling infringement has improved significantly, and we believe the policy issue will be substantially mitigated in the future. We believe strong copyright protection safeguards the commercial interest of all industry stakeholders, with the willingness to invest in high-quality content creation and foster a virtuous cycle of content supply. And for iQIYI, we will continue to upgrade our technology and operational mechanism to co-build a healthy copyright ecosystem, ultimately helping to drive user growth and revenue of our long-form video business.

Your next question comes from Jenny Yuan with UBS.

[Interpreted] So let me translate myself. So membership business saw a sequential recovery in the first quarter. In particular, overseas business delivered a robust growth momentum. So how does management view the sustainability of this improving trend? And how should we think about the membership business outlook into second quarter and beyond?

Thanks, Jenny. We'll invite the Senior Vice President of Membership business to take on those questions. Go ahead, please.

[Interpreted] In Q1, driven by a strong slate of premium content and refined operational strategies, our membership revenue delivered sequential growth in the first quarter.

We have a rich content pipeline for Q2. A number of recently launched titles actually have performed well. Notably, Born with Luck surpassed 10,000 on iQIYI's Popularity Index, powered by its distinct suspense plus comedy narrative style. And in addition, we have also an expanded slate for the second quarter, including the long-form dramas, for example, Echoes of Thousand Moons, the Epic of -- The Heir and for variety shows, we have Hahahahaha Season 6 become a farmer Season 4, and we believe this content will effectively reaching a broad membership base.

Looking ahead, looking for Q2, we're looking at our operations and the sales priorities. For example, we're focusing on reactivating dormant members. optimizing variety shows schedules to offer more content for members and expanding large screen membership via joint operating initiatives with smart TV manufacturers and also leveraging the June 18 e-commerce festival to boost annual and bundled membership. And together, we believe these efforts will expand our subscriber base and expand subscription cycle.

And looking ahead, as the stability and consistency of our premium content pipeline continues to strengthen and coupled with our ongoing optimization of our membership operations, -- we believe our membership business will maintain a steady development trajectory.

Your next question comes from Thomas Chong with Jefferies.

[Interpreted] Congratulations on the fast growth of your overseas business. just now we talk about the fast growth in Southeast Asia. So may I ask about our investment strategies in Southeast Asia market? And also, can you share about some of the differences or similarities in terms of the audience preference in domestic versus overseas?

Thank you, Thomas. We'll invite our Senior Vice President of our overseas business, Mr. Xianghua to take on this question.

[Interpreted] Okay. Well, I will take this part into 2 segments. First, for the key markets. Currently, our key markets are performing pretty well. And then for the Southeast Asia market has been growing quickly. And for the market that's crucial for our Southeast Asia, we'll continue to invest in countries such as Thailand, Indonesia, Malaysia, Vietnam and Philippines. And also for some of the emerging markets that's been also growing pretty well, for example, North America, Brazil, et cetera. So we'll continue to invest in these areas and markets.

Let's start with content. So for us, our key differentiation is our C drama. So that will continue to be our key in terms of getting users and especially for the content that's favorable and liked by young female users. And in key areas that I mentioned earlier, that will increase the promotional activities and marketing activities for the market. For example, for user growth, using content to attract and also to retain users. And for local content, we control and also have a good pace in terms of the content investment and also in terms of the volume that we're investing into the local content. We also focus for the young female users like genre and content for local production.

Third for our mature markets, we'll continue to cooperate with telecom carriers and also e-commerce platforms to increase our membership scale, and we will continue to use this strategy to replicate to other markets that we're trying to explore.

In terms of the user demographics for overseas audiences is majority focusing on the young female users who are under 40 years old. For the user behaviors for overseas market, each major market is a bit different. Some of them have higher user subscription cycles, better cycles, better retention than others. But overall speaking, the ARPU for overseas memberships are higher than the domestic ones.

Your next question comes from [indiscernible].

[Interpreted] I will translate the question myself. Seeing iQIYI's efforts in Nado Pro and fostering AI-driven creation and talent cultivation, how do we view the competitive landscape in the AI era?

[Interpreted] For long-form video, in the past, our challenge has been the investment scale or the amount that we invest in content is massive. The content cost is high, which means the investment risk is high, which leads to less number of titles that's been invested and rolled out for the industry. And for any content that we invested, we typically focus on the premium head content. That becomes -- that was the cycle that we faced and the challenge we faced.

For AI, it actually fundamentally improves the situation. Under the AI model, the content cost is much cheaper. The production cycle and production period is shorter which means there are more titles, more number of titles will be rolled out and introduced in the industry. And because there are more content, there are more choices for users to enjoy. So user scale will increase under the new AI model. So overall speaking, we think it's greatly beneficial for long-form video to improve its business fundamentals and economics and also to attract more users to the platform.

To better accommodate this industry trend, we rolled out a number of initiatives, for example, the Nado Pro we discussed and also the IGI account, which means the users can upload their content to our platform. Under the revenue share model, they will have the opportunity to introduce their content to more users to enjoy and to increase the revenue performance and also monetization capabilities. So under this whole backdrop, we believe the content cost will be lower and the number of video content will be increased.

If we look back for the past 10 years of the Internet and especially for short-form video and also micro drama in the recent years, we believe the technology is the fundamental driver in terms of the industry boom and industry development. So we think under this AI era, we think it becomes a great opportunity for the long-term video to have better economics and better industry dynamics.

There are no further questions at this time. I'll now hand back to the company for closing remarks.

Thank you, everyone, for participating on the call today. If you have further questions, don't hesitate to contact us. Thank you.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to the iQIYI Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Ms. Chang You, IR Director of the company. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining iQIYI's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. The company's results were released earlier today and are available on the company's Investor Relations website at ir.iqiyi.com. On the call today are Mr. Yu Gong, our Founder, Director and CEO; Ms. Ying Zeng, our Interim CFO; Mr. Xiaohui Wang, our Chief Content Officer; Mr. Youqiao Duan, Senior Vice President of our Membership Business; Mr. Xianghua Yang, Senior Vice President of International and Online Game Business; and Mr. Gang Wu, Senior Vice President of Brand Advertising Business.

Mr. Wong will give a brief overview of the company's business operations and highlights, followed by Ying, who will go through the financials. After the prepared remarks, the management team will participate in the Q&A session.

Before we proceed, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC. iQIYI does not undertake any obligation to update any forward-looking statements, except as required under applicable law. I will now pass on to Mr. Gong. Please go ahead.

Hello, everyone, and thank you for joining us today. In 2025, we focused on strengthening our core business to renew growth while achieving advancements in emerging businesses. These efforts drove a solid year-end performance with total revenue in Q4 returned to growth both annually and sequentially. Notably, our long-form dramas secured #1 in viewership market share on Enlightent data annual rankings with 5 titles exceeding 10,000 for the iQIYI popularity score. More importantly, we made remarkable breakthroughs in IP franchise development, moving beyond making individual hit titles to building evergreen IPs that drive growth across diverse formats. Strange Tales of Tang Dynasty stand as a stellar example as a flagship IP with 4 consecutive blockbuster seasons. It's influence has expanded from long to short and micro dramas as well as off-line experience.

Our advertising businesses continue to demonstrate strong growth potential. Our overseas business has evolved into a sustainable and scalable second growth engine powered by accelerated organic momentum. In 2025, membership services revenue increased by over 30% year-over-year with growth accelerating to 40% in the second half of the year. The subscriber base reached an all-time high. At the same time, our experience business has entered a critical stage of development. For IP-based consumer products, we have built a dedicated in-house team and upgraded from a listening-only approach to a dual-track model, combining self-operated mechanism merchandise with licensing.

This strategic shift strengthened our control our IP operation and amplifies monetization efficiency. On the offline experience front, we launched our first iQIYI LAND in Yangzhou on February 8, 2026, receiving positive initial reception. Two additional parks scheduled to open later this year. 2026 marks a key step towards scaled development as we build the experience business into a new engine for long-term value creation.

Now let's dive into the details of our business performance in Q4. Starting with content, the cornerstone of our business. For long-form dramas, we secured the #1 viewership market share for Enlightent data driven by a robust slate of premium content and breakthroughs in serialized IPs that boost engagement and commercial results. Strange Tales of Tang Dynasty 3: To Changan marked our first title with 2 seasons exceeding a popularity score of 10,000. Among 2025 new releases, it ranked #1 in ad revenue and #2 in membership revenue. Following this momentum, the crime drama, The Punishment 2 further became the first title of 2026 to surpass 10,000 for the popularity score. It is also our second franchise with 2 seasons achieving this milestone.

Shifting to movies, we maintained a diverse lineup with broad demographic appeal. For iQIYI originals, the summer's theatrical hit, The Shadow's Edge Bufeng Zhui Ying extended its offline success to the online demand. It not only topped all Q4 film releases by peak iQIYI Popularity Index score, but also became the highest rated domestic action crime film of the past decade on Douban. Additionally, our original online film, The Sixth Robber Yun Chao Da Jie An set a new all-time high for the popularity score within its category. For movies broadcasted on our platform, we retained the #1 viewership market share for 16 consecutive quarters. In Q4, we rolled out diversified titles, including The Warm Seat, That Two Lives [Foreign Language], The Animated Feature, Nobody, Lang Lang Shan Xiao Yao Guai; The Fantasy comedy, The Adventure [Foreign Language] and the female-oriented feature Flew Away [Foreign Language].

Furthermore, our innovative revenue sharing model designed to optimize returns for films with limited theatrical box office performance gained further traction. The Return of the Lame Hero, Bi Zhengming de Zhengming generated RMB 36 million in revenue -- in shared revenue, ranking first among all titles under this model. Turning to variety show, our dual focus on long-running franchise and fresh innovative IPs show market-leading performance in 2025. According to Enlightent data, 3 of our multi-season titles ranked in the top 10 most watched multi-season variety shows and 2 new releases ranked in the top 3 most watched new shows. Our originals continue to set benchmark. The Rap of China ranked its ninth season this year, cementing its position as China's longest running online variety IP.

Additionally, Hi! Young Farmers 3, a spin of the developed beloved Become a Farmer franchise, featuring the boy group, reached an all-time high in its popularity score this season. Among brand-new originals, Wander Together Yuzhou shanshuo qing zhuyi exceeded 8,300 for popularity score. We also expanded IP values through merchandise partnerships with brands for Hi! Young Farmers 3, The Blooming Journey 2, Yilu Fanhua and Wander Together unlocking new revenue potential.

Turning to micro dramas. We have expanded free content to over 70% of our 20,000 title library to broaden engagement. Our original portfolio is scaling to over 150 titles today, fueling record high membership and distribution revenues in Q4 from these offerings. Spin-off from Strange Tales of Tang Dynasty, The Chinese Detective [Foreign Language] and The Light On library [Foreign Language] both hit new highs for popularity school. Notably, over 70% of their debut viewers also watched the long-form serials, helping to extend the IP's life span. These releases not only boosted membership views, but also attracted top-tier brand partnership, moving well beyond the conventional performance ad model.

Building on the momentum of the premium micro dramas, we are working into micro animations and business model centered on free content with a pipeline of over 10,000 titles in place, micro animation viewership and the time spent are growing rapidly. Beyond content, we further amplified our IP value from flagship marketing events. In December 2025, we hosted the annual iQIYI Scream Night, alongside a 2 days iQIYI Scream Carnival in Macau to honor the year's standout productions and talents. The event drew over 200 million on-site attendees and live stream viewers and brought together around 300 celebrities and industry partners.

Next, let's dive into our 2026 content strategy and the exciting Q1 lineup. Starting with dramas, our Q1 slate includes between Love Between Lines, Da Xi, Swords into Plowshares, Tai Ping Nian, Born to Be Alive, Sheng Ming Shu, How Dare You, Cheng He Ti Tong, The Devil Between Us, Chu E, Our Dazzling Days, Sui Yue You Qing Shi, Pursuit of Jade, Zhu Yu and Love After You Yang, Zhong Qi Chu Nai For movies, we will meet audience demand with a diverse slate spanning top theatrical releases off and online movies.

Q1 lineup features original online movies such as Northeastern Brother Season 3, Dong Bei Yong Ge and The Sing City [Foreign Language] alongside licensed titles such as [Foreign Language]. For variety shows, we are enhancing the long-term operation of multi-season IPs while exploring fresh and innovative new IPs. Key Q1 releases include Five Hearts Season 6, Wu Xi; Hit Song Season 2, You Ge; as well as new IPs such as Wonders Gather and Tonight Comedy Show, Jin Ye Xi You Xiu.

For micro dramas, we will focus on creating original content with quality and innovation while enhancing operations, commercialization and deepening integration of AI. Q1 key titles include Return to a Better Tomorrow, Xin Yingxiong Bense; The Address of a False Noble Woman [Foreign Language] and The Amber hour [Foreign Language]. For animations, we will meaningfully expand our lineup of original Chinese animation compared with previous years.

In Q1, our slate features original long-running series such as The Great Ruler, Da Zhuzai and Against the Gods Nitian Xieshen as well as popular IP, including How Dare You Season 2 and Ways of Crisis [Foreign Language]. For children's content, we will secure top-tier SSIPs, scale and original production and expand our AI-driven portfolio. In Q1, key offerings include a brand-new original title, Detective Baboo [Foreign Language] alongside licensed show such as PAW Patrol Season 11 Wangwang dui li dagong and the latest season of Pleasant Goat and Big Big Wolf Xi Yangyang Yu Hui Tailang.

Moving on to the membership services. Over the past few quarters, our membership services revenue has shown consistent year-over-year recovery driven by diverse premium offerings. In Q4, members enjoyed the popular titles such as Strange Tales of Tang Dynasty 3: To Changan; Silent Honor, Chen Mo De Rong Yao; Fated Hearts, Yixiao Suige; Legend of the Magnate, Da Sheng Yi Ren, and Sword and Beloved, Tian di Jian Xin. We will revitalized our membership business through a range of operational initiatives. For example, we boosted new subscriptions and upgrades to the S-Diamond plan by offering inclusive products such as free Express package, which provided early access to families at no extra cost.

In 2025, Express package were available for over 40 dramas. Additionally, we are strengthening member retention by emphasizing annual memberships during holiday promotions, e-commerce festivals and bundled partnership offers. To further increase the value of memberships, we introduced additional exclusive benefits, including 5 VIP events in the first quarter, featuring participation in offline show recordings, advanced screenings and the exciting iQIYI Scream Night. In particular, iQIYI Scream Night event was highly praised for exclusive perks like red carpet viewing privilege and live feed featuring their favorite celebrities.

Moving on to advertising business. In Q4, brand advertising revenue growth both annually and sequentially, ad revenues from variety shows and our dramas both delivered double-digit annual growth, while core ad verticals such as food and beverage, Internet services and e-commerce and telecom services all recorded double-digit annual growth. Beyond long-form videos, our micro dramas and micro variety shows are gaining considerable attention from brand advertisers. For micro dramas, we have successfully engaged several renowned brands in 2025 through tailored content bundled sales that integrates product placements with theater branding and a string of collaborations.

Likewise, our micro variety shows have received a strong market recognition, fostering long-term partnerships with multiple clients and driving impressive revenue growth. For commercial ads, we regained sequential revenue growth in Q4, driven by a healthier and more balanced advertiser portfolio. Revenue from small and midsized advertisers grew both annually and sequentially. By vertical, Internet services, e-commerce and financial services led growth. Additionally, we have deployed a proprietary large AI model for scaled ad delivery, leveraging deep thematic understanding that has boosted commercial rates.

Moving on to technology. We introduced Nado Pro, our proprietary AI agent platform designed to revolutionize professional content creation by integrating leading global large models with iQIYI deep expertise in professional content production. Nado Pro efficient -- effectively streamlines the production pipeline from script evaluation to final generation. Currently in its close beta phase, Nado Pro is empowering our internal teams and select partners in a wide variety of professional content such as feature films, dramas, animation. In addition, Taodou World, our pioneering AI agent-based NPC platform continues to redefine entertainment experience. Users can now engage with over 1,700 NPC agents from our popular titles Song, Dialogue, Fan Fiction and Virtual Social Interaction. The platform creates powerful synergies with key content, delivers immersive emotion, connection with fans and extends the long-term value of our IP.

Strong user adoption is translating into commercial success and revenue from Total War raising sharply year-over-year in 2025. In addition to pushing the boundaries of AI applications, we are leading the industry with cutting-edge virtual production technology. Our in-house developed IQ Stage system has meaningfully enhanced the efficiency of vehicle scene shots for the theatrical hit Pegasus 3, featuring Shen Teng. This achievement delivered unparalleled results with zero frame drops and zero aliasing representing the highest standard for virtual production in car scenes in China. At iQIYI innovation is at the core of everything we do with a portfolio of over 12,000 patent applications. We are proud to rank #72 among the top 100 Chinese enterprises for valid invention patents. In 2025 alone, we filed nearly 1,000 new patent applications, most of them driving achievements in AI across content development, production, broadcasting and offline experiences.

Moving on to the business performance in regions outside of Mainland China. In Q4, we continue to deliver robust growth with membership revenue increasing by 40% annually. Markets such as Brazil, Mexico and Indonesia showed exceptional performance with membership revenue surging by over 80% annually. Our strong performance is driven by the growing popularity of our C-dramas, which have shown substantial annual revenue growth. Notably, Speed and Love, Shuang Gui was a standout hit in 2025, emerging as the best-performing the C-drama during the peak viewing period and toping popularity chart in 14 markets on our international platform. It performed exceptionally well in key regions like Thailand, Malaysia and Singapore, where it leads its category on Google Trends. Its success extended further with the spin-off variety, which became one of the most popular Chinese variety shows on our overseas platform this year.

We are also ramping up production of local original content with strong user reception. The original Oops! I'm in Jail stood out as the top Taiwanese drama on our platform in 2025. Moreover, our Thai original variety show Running Man Thailand launched in February 2026 has secured exceptional brand advertising partnerships. Apart from long-form content, micro dramas captivated increased engagement among overseas audiences in Q4. Membership revenue from micro drama hit a new high, driven by originals such as Spring in the Palace and Wild Scene and licensed hits from China like Midsummer's Vendela.

Our efforts in creating local original micro dramas have also started to show results with 5 titles premiered in December 2025, featuring local content for South Korea, Thailand, the U.K. and Indonesia. Among these, the Korean micro drama, Darling, Is It All Coincidence and the Thai micro drama, Catch Me If You Love Me have outperformed gaining notable popularity across and beyond our platform. In addition to content in Q4, we held 4 major offline marketing events in Thailand, Indonesia, Malaysia and Singapore featuring Chinese celebrities. This event amplifies the influence of our content and the commercial value of our platform, forged stronger partnerships and propelled the global reach of Chinese content.

Moving on to Enterprise business -- moving on to experience business. While we are focusing on 2 core areas, IP-based consumer products and iQIYI LAND by leveraging our extensive IP assets, we aim to build a new engine for sustainable long-term growth. For IP-based consumer products, our self-operated merchandise demonstrated solid progress, highlighted by top-selling collectible cards from premium dramas like The Journey of Legend. For IP licensing, Strange Tales of Tang Dynasty 3: To Changan secured strong partnerships across food and beverage, beauty and outdoors. And Sword and Beloved set new sales records during its broadcast period. Looking ahead to 2026, we plan to grow our IP licensing business and expand our self-operated merchandise beyond collective cards to more categories.

For iQIYI LAND, we adopt a light asset model by combining AI and XR technology with IPs. We create immersive experiences that are more efficient, flexible and require less space and investment than traditional theme park. Our first iQIYI LAND was successfully opened in Ganzhou on February 8. Our Kaifeng and Beijing locations are set to open later this year each incorporating unique local elements to deliver tailored experiences. Revenue will primarily come from ticket sales and on-site spending. Looking ahead, we aim to position iQIYI Land as a key sales channel for IP-based consumer products and a vital platform for maximizing the long-term value of our IP portfolio.

In summary, in 2026, we will focus on 3 key strategic goals. First, we will strengthen our domestic core by enhancing the quality of original content, strengthening membership and advertising businesses. Second, we will aim to sustain strong growth in our overseas and experience business, building more robust engines for long-term expansion. Third, over the past several months, rapid advancements in AI large models worldwide has revealed a clear insight. The content production industry will be revolutionized within the next 1, 2, 3 years. This transformation will significantly cut production costs, lower barriers to professional content creation and boost both the quality and the quality content. This exciting changes will greatly benefit media platform, especially iQIYI. To seize this opportunity, we are dedicated to building a dynamic AIGC ecosystem and transitioning our platform from a centralized to a decentralized model. We look forward to sharing detailed initiatives at our upcoming iQIYI World Conference on April.

Now let me hand it over to Ying Zeng for the financials.

Thanks, Mr. Gong, and hello, everyone. Let me walk you through the key numbers for Q4. Total revenues for Q4 were RMB 6.8 billion, up 2% sequentially. Membership services revenue reached RMB 4.1 billion, down 3% sequentially due to seasonality. Online advertising revenue was RMB 1.4 billion, up 9% sequentially, primarily driven by the streaming content and e-commerce Double 11 campaign. Content distribution revenue reached RMB 787.7 million, up 22% sequentially, primarily driven by the increase in cash transactions. Other revenues were RMB 547.9 million, down 6% sequentially.

Moving on to cost and expenses. Content cost was RMB 3.8 billion, down 5% sequentially as we adopt a more curated content acquisition strategy centered on quality. Total operating expenses were RMB 1.4 billion, up 2% sequentially. Turning to profit and cash balance. Non-GAAP operating income was RMB 143.5 million. Non-GAAP operating income margin was 2%. As of the end of Q4, we had cash, cash equivalents, restricted cash, short-term investments and long-term restricted cash included in prepayments and other assets at a total of RMB 4.7 billion. At quarter end, the company had a loan of USD 636.6 million to PAG recorded under the line item of prepayments and other assets. For detailed financial data, please refer to our press release on our IR website. Now I will open the floor for Q&A.

Your first question comes from Xueqing Zhang with CICC.

[Foreign Language] With recent upgrades in AI video generation models like Seedance, which are approaching production level quality. Could management share your view on how these advancements may impact iQIYI's business, particularly in content production and cost structure. What's your plan on leveraging AI video generation models?

[Foreign Language]

Our CEO, Mr. Gong is taking this question. Video generation models will substantially reduce the cost of producing long-form videos, shorter production time and lower the barrier to creation. This potentially will attract more new creators to this business and ultimately lead to more creations for the long-form video production. And this is very much beneficial to long-form video platforms like iQIYI, which means this will lead to increase in both the quantity and quality of long-form video content.

[Foreign Language]

Let me just discuss the impact of AI generation content for each content genres. For example, the micro animation is actually an AI-native content created entirely by AI. And for children's animation and also micro dramas, it has been demonstrated that large models can produce this content and reducing the production cost to 1/10 or less compared to traditional methods. For online films, animation and documentary, et cetera, these are rapidly permitted by AI-led production approaches as well. Among all these long-form video content, the most difficult ones to produce are the live-action content, for example, the theatrical films, drama series and variety shows.

And in fact, these content have in part adopted AI in their production process and which the results have proven that these have significantly reduced the content cost -- content production cost. And based on our projections and estimations that we think the AI-led commercial film probably will emerge within the next 2 to 3 years.

[Foreign Language]

For iQIYI, we are actually placing our focuses on 2 areas to embrace these AI initiatives. On one hand, we have developed a Nado Pro an industry-specific AI agent for video content production. And on the other hand, we are working to build a new AIGC content ecosystem through various operation methods. Hopefully, that we can attract more creative talent under this new AI era.

Your next question comes from Maggie Ye with CLSA.

[Foreign Language] Can management walk us through company's content strategy for 2026 in more details? For example, how are we thinking about the key priorities across different genres, including drama, variety shows, film and micro drama, et cetera? And how are you thinking about the mix of self-produced content versus licensed one?

Thank you, Maggie. We will invite our Chief Content Officer, Mr. Xiaohui, to take this question.

[Foreign Language]

Given the current volume of in production dramas, we will slightly reduce the number of dramas to be produced in 2026 and place greater emphasis on top-tier titles in terms of their quality.

[Foreign Language]

In terms of the realistic and suspense and crime genres and these content categories have been iQIYI's strength in fact. And in these areas, we'll continue to maintain our innovation to create new content and more creative content and then maintain our advantage in these areas.

[Foreign Language]

Starting in 2025, we have increased the supply of female-oriented content. For example, starting from the end of 2025, we started to roll out a new variety show called Winter Together. This is targeting for the new female users and also that the beginning of 2026, we also launched a female-oriented -- a young female-oriented drama called How Dare You.

[Foreign Language]

For young male users, we have released multiple original animations this year, including the long-running series The Great Ruler, How Dare You Season 2 and a Way of choices.

[Foreign Language]

With the support of new regulatory policies, we will step up exploration of innovative content, for example, the short-form drama series.

[Foreign Language]

We recently introduced a unified revenue sharing policy across 8 major content categories, including dramas and films. And under this new framework, production partners return actually will be more directly linked to each title's revenue contribution and allowing outstanding work to earn higher returns.

[Foreign Language]

Apart from the content category, for example, like theatrical films and drama series, like Mr. Gong mentioned earlier, we are actually gradually adopting and actually very proactively adopting AI-led production for categories such as micro animation, animation and micro dramas, while we're applying AI across other content categories to cut cost and also accelerate time line.

Your next question comes from Lincoln Kong with Goldman Sachs.

[Foreign Language] My question is about the overseas business. How is our plan and strategy for 2026?

Thank you, Lincoln. We'll invite our Senior Vice President of International Business, Mr. Xianghua Yang to take this question. Please go ahead.

[Foreign Language]

In 2025, membership revenue grew by over 30%, with annual growth rate actually accelerating to 40% in the second half of the year. 2025 marked our highest growth rate year since the overseas business entered a stable operating phase.

[Foreign Language]

For 2026, our strategy is to sustain high revenue growth rate or even accelerate our growth rate.

[Foreign Language]

In terms of the content strategy, our market tailored content mixes actually have proven effective and continue to attract users. For C-dramas, they continue to expand their influence overseas. And the C-dramas will remain at the core of our overseas content portfolio, especially genres with strong cross-over appeal such as ancient costume, romance and contemporary romance.

[Foreign Language]

I am sorry, one more thing. Yes, go ahead.

[Foreign Language]

For content, we actually ramp up original production and local content licensing in Thailand, Malaysia and Indonesia. And in terms of operations, AI-powered translation and dubbing actually have significantly improved efficiency, reduced cost and accelerated the content release schedule. And going forward, we will fully leverage social media channels and use AI to generate promotional efforts, enabling low-cost, high-efficiency content distribution and user reach. Meanwhile, we will continue online and offline advertising to further amplifying the influence of C-drama. And last but not least, we will continue to promote content and strengthen our brand presence in international markets through initiatives such as celebrity sign-ups and also offline events.

Your next question comes from Rebecca Xu with Morgan Stanley.

[Foreign Language] My question is about iQIYI LAND. Could management share the operating performance of iQIYI LAND, Yangzhou since its opening. Also, can you please share the 2026 plan for this business?

Thank you, Rebecca. I will invite our CEO, Mr. Gong to take this question.

[Foreign Language]

Our very first iQIYI LAND actually opened in Yangzhou on February 8 and offers 7 core immersive experiences, including stage performances, multisensory theaters, interactive light and shadow spaces.

[Foreign Language]

The first iQIYI LAND opened about 20 days since its opening and during which also we experienced the Chinese New Year holidays. And actually, the performance and the feedback actually are meeting expectations, which can be reflected in the ratings on major OTA platforms. And the average points are 4.8 out of 5. And actually recently, the latest rating exceeded -- reached 4.9 for certain platforms.

[Foreign Language]

From the opening until now, the visitor numbers have continued to grow. And based on the actual operations, we observed that this experience really offered fun for all ages. We see participants ranging from children as young as 4 to 5 years old to seniors in their 60s and 70s.

[Foreign Language]

We are looking at the potential for a 1 to 2x increase in peak single day revenue during the following peak period. For Yangzhou location actually has its special areas and for the spring season, especially March and April is a peak travel season for Yangzhou. And also upcoming, we have the Labor holiday in May, the summer months of July and August and also the National Day holiday in October and all these key holidays and periods could potentially boost the revenue performance compared to the first 20 days.

[Foreign Language]

And the expected growth will come probably from 2 major areas from a more deeper operations to a more finer detailed operation for the entire iQIYI LAND and also the increased efficiency for iQIYI LAND as well.

[Foreign Language]

Currently, the average transaction value for consumer products at iQIYI LAND is about RMB 100. We think there's potential for growth in the future. We will try to load more products in the future and also to extend to other content categories as we do a more refined consumer product team operation.

[Foreign Language]

And for this year, we will focus more on the self-operated IP consumer products and the operations will be strengthened this year, and this will lead to a revenue potential growth of 100% this year.

Your next question comes from [indiscernible] with Guangfa.

[Foreign Language]

We'll invite our international business leader to take this question.

[Foreign Language]

In terms of our content, our brand or our slogan is beloved Asian content. So we focus not only Chinese content, but also the Asian content as well. Of course, Chinese content, which we call people or C-drama is our foundation because all the content has been already produced for our domestic business. So we only have to incur some of the dubbing and also translation, which is the cost with AI is much more efficient and controllable. But in addition to C-drama and also Chinese content, we also have, for example, Japanese animation, also Korean dramas and also the local content, for example, for the Thai region, Malaysia and also Indonesia. So this is how we set apart from many of the Western players in overseas. And for example, the Netflix and other houses, they host a lot of the Western content, whereas for us, we are the home of the beloved Asian content.

[Foreign Language]

Also, I want to add real quickly in terms of another content channel called micro drama. We actually -- this is something we rolled out end of last year. And in terms of the content viewing time contribution, micro drama already ranked us #2 content categories of the overseas platform and has been growing quickly and also very recently for the Chinese New Year, we have experienced rapid growth as well and reached a new high. So this is something else also that set us apart from the Western players in overseas market.

[Foreign Language]

And in terms of your question regarding ARPU and also membership performance. For ARPU actually for each region, it's actually different. Overall speaking, we think we're at the midrange of the price tier. For each different region, we expect a different price point. For areas more developed similar to the Western spending powers, the ARPU is a bit higher from the China domestic region. And for regions for the developing regions, for example, like the Southeast Asia, the average ARPU is a bit lower than the China domestic region. But overall speaking, I would say that the overseas ARPU will be greater or more than the China domestic ARPU.

[Foreign Language]

And in terms of the membership retention, in overseas business, we adopt the premium model, which is the free plus paid content model. And in areas such as more developed regions, I will say that this is very much similar to their spending habit and viewing habit, the retention is actually a bit better than domestic areas. But in some of the areas such as the developing regions, the retention performance is a bit lower. But overall speaking, the overall membership retention is similar to domestic level.

[Foreign Language]

In terms of we're adding the performance for the financial aspect. Overall speaking, the free cash flow now is positive. But in terms of the P&L performance for operating income because there is some financial accounting treatment that we still have to sort out. Now we haven't disclosed the exact numbers, but we will share more insights as we have more clarity.

There are no further questions at this time. I'll now hand back to management for closing remarks.

Thank you, everyone, for joining the call today. And if you have any further questions, please do not hesitate to contact us. Thank you.

Thank you. Bye-bye.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to the iQIYI's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Ms. Chang Yu. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining iQIYI's Third Quarter 2025 Earnings Conference Call.

The company's results were released earlier today and are available on the company's Investor Relations website at ir.iquiyi.com. On the call today are Mr. Yu Gong, our Founder, Director and CEO; Mr. Jun Wang, our CFO. Mr. Xiaohui Wang, our CCO, Chief Content Officer; Mr. Youqiao Duan, Senior Vice President of our Membership business; and Mr. Xianghua Yang, Senior Vice President of Moody's and overseas business. and Mr. Gang Wu, Senior Vice President of Brand Advertising business.

Mr. Gong will give a brief overview of the company's business operations and highlights, followed by Jun, who will go through the financials. After the prepared remarks, the management team will participate in the Q&A session.

Before we proceed, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC. iQIYI does not undertake any obligation to update any forward-looking statements, except as required under applicable law.

I will now pass on to Mr. Gong. Please go ahead.

Hello, everyone. Thank you for joining us today. This summer, we captured the hearts of audiences with our original blockbuster drama, This Thriving Land. As we begin today's earnings call, I would like to share the journey of bringing the compelling story tonight. This Thriving Land became a highlight of iQIYI highly acclaimed masterpiece data, collection will not for its expertly craft adaptation of show. This Thriving Land tells compelling tales of 3 families across 2 generations in rural China in the 1920s when production began in Chandon last September, we heard questions and concerns.

Can today's audience be drawn to a story that's 100 years ago? However, we built these projects with strong confidence backed by our years of experience in adopting literature to hit farmers, lifelong journey, Enlightent and the North Ward Mason. I think or believe that great stories responded universally. This transit time, culture and age, forging deep connections with viewers across [indiscernible]. This ability to tell timeline stories is what set long-form content apart from faster paced by entertainment.

As we all know, This Thriving Land became a major hit, exceeding the 10,000 mark on IT popularity index score and topping this year Enlightent data attracts for peak daily market shell as influence expanded far beyond our platform, making meaningful impact on traditional TV and offline as well. It achieved the highest average rating product sold on CCTV's drama channel and boosted tourism in filming location according to the off-line effect of the. The success of The Thriving Land as a incidents is built on G-Probe content methodology to create an amplified IP value through high-quality story telling and advanced production technology to connect with broad and diverse audiences and to develop our business model with IP at the core from online to offline from domestic markets to global additives.

Our business model continues to involve under scale. Today, our online operations and well-established global expansion is accelerating and our experienced business is advancing . On top of that, we are embracing exciting opportunities enabled by a supportive regulatory environment and advancements in AI. This new regulatory policies lay a solid foundation for innovation and growth in the long-form video industry. And at the same time, we leverage AI to transfer how content is created and consumed.

In July, we partnered with Google and launched a global AI short film competition and as discovering a nurturing talents, short videos using AI technologies. We also collaborated with academic award winning, Mr. Peter Paul, on co-branded AICL, featuring AI drilling content. We aim to leverage iQIYI's professional production expertise to cultivate the next generation of greater innovative AI-driven content production measures and deliver compelling AI part story telling that resonances with audiences.

Now let's dive into the details of our business performance in Q3. Starting with content, which is the cornerstone of our business. Our goal is to engage audiences will deliver a diverse content that drives commercial success. For long-term drivers, we focus on top large stores with high commercial value. In the third quarter, we again secured the top position in total viewership market share according to in-license data the high-quality lineup included the nation win it This Thriving Land and our enhanced customer detective series, Coroner's Diary, which emerged as summer's with an IT score exceeding 10,000.

Additionally, the science fiction serial, mortgage, earned strong trend for innovative story telling reaching our peak popularity score of over 8,000. Moving to movies. We achieved major resource in original article releases, The Shadow's Edge crossed over RMB 1.2 billion leading the office and making a historic achievement for us. On our online movie platform, we retained the top viewership market share for 15th consecutive quarters driven by the diverse slate of 10 key titles.

In Q2, we launched an innovative revenue sharing model to maximize returns for fields with limited box office opportunities. This strategy is gaining traction in Q3 with new titles like Phase 2 trefoil generating over RMB 17 million in revenue sharing model in 2 months. For shows, our focus on top-tier titles delivered strong results in both popularity and revenue. The King of Stand-Up Comedy Season 2, on flagship IP generated in proactive membership and advertising revenues and achieved iQIYI popularity index of over 8,000 and dominated the general with leading market share according to Enlightent data.

Additionally, our newly launched observation shop for prime had widespread discussions to deepen audience engagement and elevate our variety show IP value. We introduced consumer products like collectible cars and co branded merchandise collections, resulting in a stronger audience loyalty.

Turning to macro drivers, they continue to enhance our content ecosystem, achieving double-digit sequential rate growth in average daily viewing time and subscription revenue in the third quarter. Our macro drivers also have attractive sponsorship from brand and with small partners -- with more partnership anticipated in the future. This growth has been driven by our focus on premium content, enhanced original production capabilities and an expanded library of free titles.

Our macro driver content includes over 20,000 titles with over half available for free. We have also established our strong capabilities for constant and leasing original macro dramas is such as [indiscernible] with audiences. Additionally, we introduced a dedicated micro animation channel and kick off for production. Microanimation is an innovative format of shop from animation that has experienced rapid growth in the past year following the success of macro drama and heavily leveraging AI technology. For animation, we continue to improve our original production capabilities.

In the third quarter, Over the Divine Realms continued to enjoy strong viewership. Additionally, our highly regarded original production now between and the returned with a second season cultivating layer audience and driving high engagement. Let me show our effective flight of content for the first quarter. The diverse pipeline increased fleet in shops, we go, swap and a bit low, [indiscernible] Silent Owner, [Foreign Language], Strange Tales of Tang Dynasty III: To Changan [Foreign Language], Legend of the Magnet [Foreign Language], [indiscernible].

The movie pipeline includes our original article film [indiscernible] for article release and our original hit The Shadow's Edge for online streaming. The first batch of original film under the emerging film projects. [Foreign Language] the licensed films such as Back to Life, The Legend of [Foreign Language]. The original variety show includes flagship IP Blue Journey to high young farmers, [Foreign Language] and the brand new IP, [Foreign Language].

The macro drama pipeline includes the first macro climate based on the highly popular IP, [Foreign Language] titled [indiscernible] conspiracy, [Foreign Language] for seeing you in my final days. [Foreign Language] show. The animate and content includes new animation Ascendant of the [Foreign Language] and new the IP [indiscernible] on food truck shop.

Moving on to membership services. We aim to build a household name membership brand, with brand market appeal backed by our vibrant content ecosystem and exceptional services. Membership service revenue recorded sequential growth in Q3 driven mainly by original hit dramas like This Thriving Land and Coroner's Diary as well as [indiscernible]. Beyond content, we are increasing our efforts to enhance membership services and deliver unmatched value. Our family-oriented state plan stand out with exclusive or like Express package offering early access to show the males program driver of new subscriptions and upgrades to this premium down. The currency experience program in Boca continues to boost engagement with meaningful revenue growth year-over-year.

We have created a stronger synergy between membership and advertising revenues by introducing branded within the program. And are also integrating membership experiments with top IPs. This quarter, we launched the IP membership cards for [indiscernible], The journey of [Foreign Language] is in fact giving fans a deeper connection to their favorite story and.

Connecting with our audience is at the heart of what we do. Our annual flagship on July 17 iQIYI membership has become a signal fund event loaded with exclusive purpose and subscription offers. We also strengthened membership value and loyalty from over 10 online gathering, ranking mix to advanced screenings. We have elevated member of performance by focusing on operational optimization, aiming to boost the membership value under encourage subscribers to stay with our service longer. This includes initiatives to promote on guaranteed term plans and targeted promotions for peri audiences. Additionally, we expanded our bundled membership partnership to 16 brands while broadening of channel across e-commerce and telecom platform.

Moving on to advertising business. In the third quarter, net adds, recording double-digit annual growth, mainly driven by premium variety show like The King of Stand-Up Comedy Season 2 and This Thriving Land, The Journey of Legend and The Soil. Our content-related ad solutions continue to gain traction, contributing over 60% of brand added revenue, key verticals such as food and beverage, Internet services and e-commerce built and the personnel, all show annual growth. We used production innovation and advertising efficiency with features like creative charts, and it has generated materials, including animation, innovative marketing solutions.

As we enter Q4, we aim to capitalize on major advertising opportunities, such as 11/11 shopping festival, Christmas and New Year campaign and the new smartphone launches. Our focus will be on maximizing ad sales from premium variety shows, dramas and our German sector brands will further enhancing monetization on smart TVs. We will continue leveraging AI to improve brand advertising efficiency. For performance as -- we now have health and more balanced advertiser portfolio with revenue dependent on committed individual clients. By industry, Internet services and education and treating well sent-out contributors this quarter.

Looking ahead, we will focus on capturing new targets in the Internet services sector, including tools, social platforms and mini games were scaling up revenue in education and training, wellness management and e-commerce. Additionally, we plan to expand our plant or performance and inventory and utilize AI to further enhance monetization efficiency.

Moving on to technology and products. We continue to harness cutting-edge technologies to transform the entertainment experience improved content production efficiency and boost content value across our platform. On the content creation front, we are leveraging AI to transform story telling as a notable example is our partnership with academic award winning Mr. Peter Paul. Together, we will on the Mr. Peter Paul AI center to pioneer the next generation of AI from 1 in talent development. The first titles are in premium soon, which we are very excited for.

Additionally, we are using AI to produce high-quality order some micro animation and much lower cost. Another unique example is the AI part quick real connection to cut, which now cover all major content categories. These features utilized a smart agent to automatically convert long-form videos into what called shops, which are then included in iQIYI collections. iQIYI real collections to offer users of view experience akin to that of microsomes. We are transforming user engagement with total and AI part personnel assistant that provides personal approval support, including video search recommendation and cloud insights.

The latest update improved recommendation for macro drivers and the short-form videos, alongside long-term content while also enhancing cloud, Q&A capabilities. Additionally, we introduced the binge watching allowing users to track time spent on their favorite sales and view their rankings. This feature has received highly positive feedback from fans. In addition to announcing AI applications, we are driving the industrialization of radio production with cutting-edge wafer production technology. On watch production capabilities on support both in-house and external products. This quarter, we launched an only inaction of motion simulating vehicle refilming platform, powered by our incotdeveloped iQIYI stage water production system the platform naturally enhances efficiency of high-frequency vehicle film shops.

It delivers streamlined repeatable workflow and has already been utilized for portal production in major cell article production.

Moving on to business performance in regions outside of midlife China, we maintained strong growth momentum in Q3. This membership revenue increased by over 40% annually. Markets like Brazil, by Spanish speaking region, Mexico and Indonesia had membership revenue more than doubled year-over-year. In this quarter, the average daily subscribers also reached all-time high. The strong performance is supported by an exceptional content lineup.

Our C-drama, Chinese drama is strong and continue to gain popularity globally, with revenues grow double digit, both annually and sequentially multiples. The aversion of [indiscernible] platform records for both viewing time and peak revenue we've seen as language segment. It also topped IT popularity charts in sorting overseas markets, meanwhile, our local content slate also exited King General serials, inverted as a phenomenal entire language content this year, generating the highest membership revenue among all-time dramas on our plan for token-related rankings on Google and Tata.

Beyond long-form content, micro drivers continue to build strong momentum overseas. Membership revenue from macro dimers grew 114% sequentially by the end of September. Micro dramas ranked second only to long-term dramas across several core metrics, including membership revenue and in time, Moreover, multiple IT or redone micro drama gained solid traction abroad. For example, How dare you!? competitor has a strong long tail effect to 3 months post the launch. We are also expanding into local produced more dramas, multiple projects in English time are an Indonesian in production and are targeted for launch this year.

Looking ahead, we will continue to deliver high-quality content to international audiences, deeper partnership with telecom operators and local partners and leverage AI to drive user appreciation.

Moving on to [indiscernible] business. Well, we are focusing on 2 key areas, IP-based consumer products and off-line experiences. We are leveraging our extensive and unique IP resources results to build a more robust entertainment ecosystem. For IP-based consumer products, we have upgraded our business model from a licensing only approach to a dual-track strategy, combining self-operated merchandise with licensing. Q3 growth was strong with revenue from IP-based consumer products more than doubling year-over-year, in particular, revenue from self oriented merchandise grew more than 50% sequentially, driven mainly by collectibles.

Collectible cars from top drama titles mean well. Our self-operated portfolio has expanded beyond collectible cars into additional categories supported by the establishment of in-house teams. For IP licensing, the Journey of Legend has partnered with over 30 licenses setting a new record by expanding multiple sectors, including e-commerce and city and beauty.

In our off-line experience, experience business, we are pioneers in this emerging field at the heart of this initiative iQIYI which are designed to operate an asset-light model, our 2 locations, Yangzhou and Kaifeng under development, with Yangzhou and scheduled to open fully next year. A third site in Beijing has also been announced. By integrating technologies like AI and XR with own content IP IT land will provide interactive and scalable is that factor to iterate and more efficient than traditional SIM parts. This approach reduces space and capital recounts revenue expected to come mainly from ticket sales and other on-site spending.

As 2025 comes to close, we reflect on a year of rapid transformation driven by technical innovation and involving business models. We are not worried, we are very adapting. We are advancing filled by our driving overseas expansion, growing experience business and ongoing AI investments in any of these areas could elevate us to a new high amid this change or hope remains the same. Creating premium content IP supported by on commercial model. This foundation earns us the raw rate of hundreds of millions of users under the trust of industry partners.

Moving forward, we will continue delivering quality content for turning creativity with partners and driving long-term value for our shareholders. Now let me hand it over to Jun for the financials.

Thanks, Mr. Gong, and hello, everyone. Now let me walk you through the key numbers for the third quarter. The total revenue for the third quarter were RMB 6.7 billion, up 1% sequentially. The membership services revenue reached RMB 4.2 billion, up 3% sequentially, driven mainly by original blockbuster drama and theatrical megahit [indiscernible] during the summer season. The online advertising revenue was RMB 1.2 billion, decreased by 2% sequentially and the performance in the second quarter benefited from the major advertising campaign.

The accounting distribution revenue reached RMB 644.5 million up 48% sequentially. The increase was mainly driven by the strong distribution performance of the original theatrical movie invested by ITE, along with the growth in transactions for drama. Other revenues were RMB 585 million, down 29% sequentially.

Moving on to costs and expenses. Accounting cost was RMB 4 billion, up 7% sequentially as we launched a more diverse selection of premium counted during the peak summer season. The total operating expenses were RMB 1.3 billion, down 3% sequentially, benefited from our disciplined experience management.

Now turning to profit and cash balances. The non-GAAP operating loss was RMB 21.9 million. Non-GAAP operating loss margin was 0.3%. As of the end of third quarter, we had cash, cash equivalents, restricted cash, short-term investments and long-term restricted cash included in the prepayments and other assets a total of RMB 4.9 billion. At the quarter end, the company had a loan of USD 522.5 million recorded on the amounts due from related parties. For more detailed financial data, please refer to our press release on our IR website.

Now we will open the floor for Q&A.

[Operator Instructions] Your first question comes from Xueqing Zhang with CICC.

[interpreted] It has been 3 months since the new regulations issued, so could management provide an update on the progress.

[interpreted] We'll invite our chief content officer, Mr. Wang to answer this question.

[interpreted] The core objective of the new policies is to promote the healthy development of the long-form video industry. In the past 2 months, since its implantation, we have observed positive programs in several areas, including the concurrent review of key dramas by the national and provisional administration as well as the exploration of concurrent review of broadcasting for new content formats such as anthology drama, multi-season drama, multi-arm and pickup as well as the optimization of co-review.

[interpreted] Under the new policy environment, we are actively innovating in content production and broadcasting models. For example, we are exploring a very new content format called only feature Series and integrating it into our existing emerging film project collaboration framework. Going through a revenue-sharing model with our partners, we aim to attract more creative talent and high-quality content, strongly driving innovation and also growth in the industry.

[interpreted] Based on the current progress of implementation, it is clear that the new policies have sent positive signals to the industry. Some of our projects have already benefited by the policy support, allowing them to reach a ready to broadcast status more quickly as productions proceed smoothly in the future, where we will gradually see the broad benefits of the policies pain. In the long term, the policies will drive the industry into a more -- a new growth phase, benefiting professionals across board.

Your next question then comes from Vicky Wei from Citi.

Will management share some color about your outlook about the membership business.

Thanks, Vicky. We'll invite our Senior Vice President of [indiscernible] to take this question.

[interpreted] Since the end of September, our membership business has shown nice growth momentum driven by 3 main factors. First, the continued release of high-quality content Second, the ongoing enhancement of member services and benefits; and third, the optimization of marketing and sales strategy, such as expanding bundled membership and offering targeted discounts for teachers and students.

The silent honor, which was released at the end of September, broke the demographic boundaries and capture the heart of young audiences. Our female-oriented content such as Faded Hearts and [indiscernible] along with the suspense the titles like The Hunt and The Dead End also gained wide popularity. The recently released Strange Tales of Tang Dynasty III: To Changan, which is the third drama of the Strange Tales of the Tang Dynasty IP series received widespread claims. Shortly after this is premier with its popularity index on the ITE surpassing 10,000.

It became the second drama in the series to hit this milestone, making the Strange Tales of Tang Dynasty III: To Changan, first IP series to have 2 seasons exceeding the 10,000 popularity mark. The latest release in the series while building on the classic elements introduce more innovative content, showcasing the strength of high-quality IT series development and also successfully attracting and retaining loyal audience base.

At the same time, we have enhanced membership value and the perception of benefits through more refined operations, for example, offering more diverse subscription options offering member-only IP merchandise and also offline events tailored for premium numbers.

We're confident in achieving sustainable growth in membership business with the support of high-quality content and enhanced member benefits and services.

Your next question comes from Felix Liu from UBS.

[interpreted] We noticed that Chinese culture industries have made good progress in the overseas markets lately. Can management share more progress on your overseas expansion and strategy?

Thanks, Felix. I will invite our Senior Vice President of our overseas business, Mr. Xiaohui Wang to take this question.

[interpreted] Our overseas business has strong performance this year with Q3 total revenue and membership revenue, achieving the highest annual sequential growth in the past 2 years. We see the Chinese content serves as the cornerstone of our overseas content portfolio, and iQIYI has become the top choice for an increasing number of overseas users to watch Chinese link content. We continue to promote Chinese language content across various markets and have seen a significant increase in influence in major overseas markets. which effectively driving the growth in user base and also the membership numbers.

In terms of local content, we have engaged in both licensing and original production in Thailand, Malaysia, Indonesia and Taiwan. Among these, Thailand has been our most successful market. This year, we launched several hit titles such as the Thai drama, [indiscernible], The Series, which set new records on our overseas platform in terms of both viewing hours and revenue for Thai content. With subtitles added, our original Thai dramas have been distributed in other markets and the revenue from our original Thai dramas in the U.S. and other overseas markets has already surpassed that of Thailand's domestic market.

We are pleased to see that Thai dramas have become the second globally content category after C-dramas. And looking ahead, we plan to increase the production of original Thai, Malaysian and Indonesian dramas. At the beginning of the year, we mentioned that some of the newly developed markets, such as the Middle East, Spanish-speaking regions in Latin America and Brazil regions. And these regions have maintained rapid growth actually throughout the year, with significant increases in membership revenue and subscriber numbers. In the future, we will continue to deliver high-quality content while leveraging AI technology to enhance content production and promotional efficiency. And currently, over 70% of promotional materials for our overseas content are generated using AI, which is significantly boosting our market efficiency. Thank you.

[Operator Instructions] Your next question comes from Jiji Zhao from Guangfa Securities.

[interpreted] I will translate the question myself. The application of AI in the global film and television industry has been advancing, increasing depth. Do management share strategy, insights and future plans pertaining to AI adoption content production and business payout?

Thank you. We'll have our CEO, Mr. Gong, who is going to take this question.

[interpreted] Okay. For -- I think for the AI technology, it provides a various opportunities outlook for IT. To take analogy, for example, in the past 20 years, actually, the Internet actually provided on the video industry an opportunity and advantage to surpass traditional linear TV. And we think currently with the large language models for AI actually provides a similar opportunity outlook for iQIYI.

In the past few years, actually, the technology has deeply integrated in our operations and then helping us to achieve goals in 3 key areas. The first 1 is to increase our operational efficiency. We use AI for marketing materials, for example, automatically to generate posters and also promoting promotional marketing materials. And also we use that for overseas content translation, while the cost is much cheaper compared to the human labor side and also faster.

The second point is AI actually boosts monetization capabilities, as it can efficiently produce advertising creative materials, and we can use that to optimize our basement algorithms, which help us to improve the targeting accuracy and also conversion rate. The first one is AI can power us to -- for content production. Actually, we use AI as support for our internal production capabilities. For example, we have a stream plate workshop in iQIYI. We use that to significant enhance the evaluation and also the creation capabilities for novels and scripts.

And also, we have an image workshop feature, which can effectively support early-stage creative development for example, by providing contract posters and also story or generations and characteristics. And the fourth point is we actually use AI to roll out some basic user features, for example, based on the AI, we rule out the Top of the World, Tado and also job features all of these will improve the building experiences.

The above mentioned 4 points earlier are the ones we already use in our dry operation. We'll keep of refining them and upgrading them hopefully will bring more benefits. And now and going forward, we'll focus on three major areas. The first one is the iQIYI's intelligent production system, which actually was previously reserved for internal use, and we will, going forward, gradually open up its core functions for close partners, so helping them to leverage AI to enhance their production capabilities.

And third point is we will continue to promote on the -- promoting using AI in the market and also for the industry. For example, we launched initiatives such as the AI short film creation competition, as I mentioned earlier in the opening remarks, and also turning up with Academy winners, Peter Pao, to roll out the AI feature. I think the main purpose for these initiatives are to discover and nurture AI GC-creative talent through collaborations and also market promotions. The purpose is to foster an innovative-driven content ecosystem going forward.

And last but not least, our focus will be collaborating with our partners and also utilizing our current AI technologies to or more on a large-scale application of AIGC in areas, for example, like micro animation, Animation, educational content documentary, et cetera. And hopefully, iQIYI will become core engine of content creation. And this is the first stage. And going forward, the bigger picture will be utilized AIGC to apply them in our long-form vehicle content, for example, dramas, for example, films.

So we're estimating in probably in the next 1 to 2 years. That's on the slower side or maybe 3 years. But we think overall speaking, no more than 5 years. AI will bring a dramatic change to our internet space and also to the video content creation industry. So going forward and also currently, we have been investing heavily in AIGC and also a technology applications and this is one of the amount of core area of investment for the company right now. So hopefully, going forward, we can utilize AI to do more creative content and also to change the company.

That concludes our question-and-answer session. I'll now hand back to management for closing remarks.

Thank you, everyone, for participating in the call today. And if you have further questions, do not hesitate to contact us. And see you next quarter. Thank you.

Thank you. Bye-bye.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.

[Portions of this transcript that are marked [interpreted] were spoken by an interpreter present on the live call.]