Zhihu (ZH) Q1 2024 earnings summary

Executive summary

• Q1 2024 marked a strategic shift with a focus on core strengths, AI-driven development, and resource reallocation, while total revenues were RMB960.9 million, down from RMB994.2 million year-over-year.

• Gross margin improved to 56.6% from 51.5% year-over-year, marking six consecutive quarters of margin expansion.

• Net loss narrowed by 7.4% to RMB165.8 million, with non-GAAP net loss at RMB135.7 million.

• Average monthly active users reached 89.0 million, with 14.8 million average monthly subscribers; user base declined but engagement and core user retention increased.

• Management emphasized progress toward break-even, improved operating efficiency, and continued investment in AI and community trust.

Financial highlights

• Gross profit for Q1 increased by 6.1% year-over-year to RMB543.5 million, with gross margin rising to 56.6%.

• GAAP net loss narrowed by 7.4% year-over-year to RMB165.8 million; non-GAAP net loss was RMB135.7 million.

• Paid membership revenue reached RMB449.7 million, with 14.8 million average monthly subscribers, up 4.1% quarter-over-quarter.

• Vocational training revenue grew 35.9% year-over-year to RMB145.4 million, surpassing 15% of total revenue.

• Marketing services revenue was RMB330.5 million, down 15.7% year-over-year, but brand advertising grew 40% year-over-year.

Outlook and guidance

• Targeting single-quarter non-GAAP breakeven in Q4 2024.

• Management reiterated confidence in achieving profitability goals, citing ongoing cost optimization and monetization improvements.

• Expect more pronounced improvements in financial metrics from Q2 onward due to strategic adjustments.

• Continued focus on user quality, high-quality content, and leveraging AI for operational efficiency.

• AI search features and enhanced community engagement are expected to drive sustainable growth and a clear path to profitability for the remainder of 2024.