Zhihu (02390) 2024Q3 financial report: net loss of revenue of 845 million yuan decreased by 96.8% year-on-year

The Zhitong Finance App learned that on November 26, Zhihu (ZH.US,02390) released the results report for the third quarter of 2024. According to financial reports, Zhihu's third-quarter revenue was 845 million yuan, and net loss decreased 96.8% year over year to 9 million yuan, once again setting the record for the biggest loss reduction and lowest net loss since listing, exceeding market expectations. Zhihu Direct, the AI search product launched by Zhihu, continued to maintain high growth in the third quarter, and launched a new “professional search” function at the end of October, entering a stage of expanding more professional and practical in-depth search capabilities.

Net loss reduced to less than 10 million, speeding up the achievement of profit targets

At the financial level, Zhihu continues to advance its multi-engine business strategy, and various businesses are also steadily passing through the adjustment period. Among them, the paid reading business was 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 257 million yuan and 105 million yuan in revenue respectively. Among them, the vocational education self-operated business continued to grow positively.

In the third quarter, Zhihu continuously improved operational efficiency, optimized the cost and expense investment structure, and achieved good results. Among them, net loss decreased by 96.8% year on year to 9 million yuan. Whether in terms of loss reduction or net loss amount, it set the best single-quarter record since listing. The gross margin reached 63.9%, the highest level since listing. Zhihu's loss reduction process far exceeded market expectations and accelerated towards the goal of single-quarter profit and long-term profitability growth during the year.

At the operational level, Zhihu continues to consolidate the core values and advantages of a trustworthy community, promote the further expansion of the high-value content pool, and continue to be active by creators. By the end of the third quarter, Zhihu's cumulative content creation volume reached 855 million, an increase of 14.9% over the previous year, and the total number of content creators on the platform reached 77.7 million, an increase of 11.6% over the previous year. The average monthly active users (MAUs) of Zhihu reached 81.1 million in the third quarter, returning to month-on-month growth. Many indicators such as user health, user activity rate, and core user retention all achieved steady increases. Relying on the healthy development of the paid reading business, the average monthly subscription membership of Zhihu reached 16.5 million, achieving year-on-year and month-on-month growth.

Zhou Yuan, founder, chairman and CEO of Zhihu, said, “In the third quarter, Zhihu further implemented its loss reduction promises and accurately implemented the company's strategy. The optimization of community ecology has achieved many positive results during this period, including a steady improvement in core user health indicators and a month-on-month increase in monthly active users. At the same time, it has further enhanced the confidence of content creators, continuously improved content quality and active users, and strengthened the community atmosphere. Furthermore, the number of user visits to the AI search product Zhihu Direct Answer is growing rapidly. The professional search function launched on this basis has become a further step towards differentiated exploration of deep scenarios. Looking forward to the future, Zhihu will continue to work to enhance the user experience and community trustworthiness to fully unlock the potential of the Zhihu brand and user base.”

Zhihu CFO Wang Han added, “In the third quarter, Zhihu continued to increase profits and achieved another milestone of the lowest losing quarter since the US initial public offering. Furthermore, Zhihu's gross margin increased to 63.9%. Thanks to improved operating efficiency and strict cost management, total costs and operating expenses decreased by 35.6% and 30.5%, respectively, compared with the same period last year. Looking forward to the future, Zhihu will invest more resources to strategically explore business models that can strengthen Zhihu's high-value brand image and unique user positioning. In the long run, Zhihu's goal is to achieve sustainable profitability growth and deliver real value returns to shareholders.”

Zhihu Direct Answers continues to grow, and professional search opens up deep ability exploration

Since this year, Zhihu has accelerated the pace of AI applications. Among them, the AI search product Zhihu Direct Answer has effectively improved the efficiency of community content circulation and user experience, and has gradually become a productivity tool that creators can trust. Since its launch in June of this year, Zhihu Direct Answer has achieved continuous rapid growth in traffic volume and excellent industry reputation with the advantage of high-quality content and excellent traceability of search results, and is regarded as the “Chinese version of Perplexity.”

At the end of October this year, Zhihu Direct Answer officially launched the “Professional Search” function, introducing professional content sources such as Weipu and Zhihu Select, covering data from more than 50 million articles in Chinese and English. At the same time, it supports file upload and analysis of very long files, and provides functions such as intensive reading of individual articles and questions and answers from designated sources, which is more suitable for professional productivity scenarios.

The introduction of the professional search function represents that Zhihu Direct Answer became the first product in China to provide a one-stop solution for AI search and a library of genuine papers. It also marks that Zhihu has entered a stage of expanding its more professional and practical in-depth search capabilities on the AI search circuit.