Zhihu (02390. HK) released its unaudited financial results for the third quarter of 2024 today. During the period, Zhihu's total revenue was 845 million yuan (RMB), a year-on-year decrease of 17.3%. The gross profit margin increased from 53.7% in the same period last year to 63.9%, with a net loss of 90 million yuan, a significant decrease of 96.8% compared to the same period last year, setting a single quarter record for the largest reduction in losses and the smallest net loss since going public. After adjustment, the net loss was 131 million yuan, a year-on-year decrease of 94.2%.
Zhihu's AI search product Zhihu Zhida continued to maintain high growth in the third quarter, entering a more professional and practical stage of expanding deep search capabilities. At the end of October this year, Zhihu Direct Answer officially launched the "Professional Search" function, introducing professional content sources such as VIP and Zhihu Selected, covering over 50 million Chinese and English literature data. At the same time, it supports file uploading and parsing of long files, and provides functions such as single article reading and designated source Q&A, which is more suitable for the productivity scenarios of professionals.
Zhihu continues to advance its multi engine business strategy, and various businesses are steadily passing through the adjustment period. Among them, paid reading business is the largest source of revenue, contributing 459 million yuan in revenue, accounting for more than half of the revenue for the first time, reaching 54%. The marketing service business and vocational education business contributed revenue of 257 million yuan and 105 million yuan respectively, with the self operated vocational education business continuing to maintain positive growth.
During the period, Zhihu also achieved significant results in user activity and member growth. The average monthly active users (MAUs) of Zhihu in the third quarter of 2024 were 81.1 million, with an average monthly subscription membership of 16.5 million. According to revenue segmentation, marketing service revenue was 256.6 million yuan, paid membership revenue was 459.4 million yuan, vocational training revenue was 105.1 million yuan, and other revenue was 239 million yuan.
Founder, Chairman, and CEO of Zhihu, Zhou Yuan, stated that in the third quarter, Zhihu further fulfilled its commitment to reducing losses and accurately executed the company's strategy. During this period, the optimization of community ecology has achieved multiple positive results, including steady improvement in core user health indicators and month on month growth in active users. At the same time, it has further enhanced the confidence of content creators, continuously improved content quality and user activity, and strengthened the community atmosphere.
In addition, the user traffic of AI search product Zhihu Direct Answer has grown rapidly. The professional search function launched on this basis has become a differentiated exploration towards deeper scenarios. Looking ahead, Zhihu will continue to strive to enhance user experience and community trustworthiness, in order to fully unleash the potential of the Zhihu brand and user base Zhou Yuan said.
In the third quarter, Zhihu continued to increase profits and achieved another milestone of the lowest loss quarter since its initial public offering in the United States. In addition, Zhihu's gross profit margin expanded to 63.9%, thanks to improved operational efficiency and strict cost management, with total costs and operating expenses decreasing by 35.6% and 30.5% respectively compared to the same period last year. Looking ahead, Zhihu will invest more resources strategically to explore business models that can strengthen its high-value brand image and unique user positioning. In the long run, Zhihu's goal is to achieve sustainable profitability growth and bring substantial value returns to shareholders, "added Zhihu CFO Wang Han.
In terms of share repurchase plan, Zhihu's 2022 repurchase plan has repurchased 31.1 million Class A common shares with a total value of $66.5 million. The 2024 repurchase plan is valid until June 26, 2025, and the repurchasable shares shall not exceed 10% of the total issued shares of the company.
Zhihu announced on the evening of November 26th that it has renewed its three-year framework agreement with Tencent. On November 26, 2024, the wholly-owned subsidiary, Zhishi Sihai, entered into a 2025 Tencent Framework Agreement with Tencent Computer, and the company's wholly-owned comprehensive affiliated entity, Zhishi Tianxia, entered into a 2025 Reading Framework Agreement with Shanghai Yueting to respectively renew the existing Tencent Framework Agreement and the existing Reading Framework Agreement and establish their respective annual caps, for a period of three years from January 1, 2025. On November 26th, Wise Four Seas signed a Tencent Payment Service Framework Agreement with Tencent Computer, under which Tencent Group is required to provide payment services to the Group from December 1st, 2024 to December 31st, 2026.