Prepared remarks
Good day, and thank you for standing by. Welcome to the Weibo Reports Second Quarter 2026 Financial Results Conference Call. (Operator provided instructions.) Please note that today's conference is being recorded. I would now like to hand the conference over to your speaker, Sandra Zhang, IR. Please go ahead.
Thank you, operator. Welcome to Weibo's Second Quarter 2026 Earnings Conference Call. Joining me today are our Chief Executive Officer, Gaofei Wang; and our Chief Financial Officer, Fei Cao. This conference call is also being broadcast on the Internet and is available through Weibo's IR website. Before the management remarks, I would like to read the safe harbor statement in connection with today's conference call. During today's conference call, we may make forward-looking statements, statements that are not historical facts, including statements of our beliefs and expectations. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Weibo assumes no obligation to update forward-looking statements in this conference call and elsewhere. Further information regarding this and other risks is included in Weibo's annual report on Form 20-F and other filings with the SEC. All the information provided in this press release is current as of the date hereof. Weibo assumes no obligation to update such information, except as required under applicable law. Additionally, I would like to remind you that our discussion today includes certain non-GAAP measures, which exclude stock-based compensation and certain other expenses. We use non-GAAP financial measures to gain a better understanding of Weibo's comparative operating performance and the future prospects. Our non-GAAP financials exclude certain expenses, gains or losses and other items that are not expected in future cash payments or are nonrecurring in nature or are not indicative of our core operating results and outlook. Please refer to our press release for more information about our non-GAAP measures. Following management prepared remarks, we will open the lines for a brief Q&A session. With this, I would like to turn the call over to our CEO, Gaofei Wang. Thank you.
Hello, everyone. Welcome to Weibo's Second Quarter 2026 Earnings Conference Call. On today's call, I will share with you highlights on Weibo's product and monetization in the second quarter 2026. On the user front, in June 2026, Weibo's MAUs reached 561 million and average DAUs reached 254 million. This year, we have proactively rationalized our channel budget allocation strategy. Instead of scaling up user acquisition, we shifted our focus toward improving the conversion rate of newly acquired channel users into active users. Concurrently, as the homepage information feed revamp is still in the phase of continuous optimization, some low-frequency users will need time to adapt to the changes. As a result, our DAU base declined slightly year-over-year in June, but remained largely flat quarter-over-quarter. Now let me walk you through the financials. Our total revenue in the second quarter reached USD 453.8 million, an increase of 2% year-over-year. Our total ad revenue reached USD 381 million, a decrease of 1% year-over-year. VAS revenue reached USD 72.9 million, an increase of 19% year-over-year. Although our advertising business was impacted by the consumption market headwinds and tightened budgets from advertisers in certain industries, advertising revenue from automobile, Internet services and food and beverage still achieved solid year-over-year growth this quarter. Ad revenues from selective marketing also maintained year-over-year growth trends. Our non-GAAP operating income in the second quarter reached USD 125.4 million, representing a non-GAAP operating margin of 28%. In 2026, we will continue to enhance user experience, improve platform operating efficiency and content quality, continuously step up AI investment in product operation and strengthen user retention and long-term engagement. On the product and operation front, we will continue to refine the homepage information feed. By leveraging trending topic curation, social interaction and hot topic discussion, we aim to ensure that users gain timely access to key trending content, content worth discussing and sharing, as well as high-quality posts tailored to their interests when they access Weibo. Furthermore, we will continue to strengthen product capabilities across core consumption scenarios such as video, interest-based community and search, thereby enriching user experience in video content consumption, interest-driven interaction and information discovery and further enhancing the platform's long-term competitiveness. The use of AI in both product and operations this year has delivered tangible results in new feature and product development as well as operational strategy optimization. On the user growth and engagement front, we continue to optimize the homepage information feed product in the second quarter. While maintaining a stable social consumption experience in the relationship-based feed, we focused on strengthening the capabilities of the interest-based feed to distribute relationship-based content, trending topics and video content and sustain user engagement and consumption. By doing so, we aim to improve content matching efficiency while further highlighting Weibo's differentiated advantages in social interaction, trending topics and opinion discussion, which ultimately increase users' willingness to open Weibo and stay engaged. Specifically, with the continuous improvement of distribution capability of the interest-based feed, the platform has strengthened its ability to better organize and distribute social content that users have strong demand for; trending discussion and high-quality video content received greater exposure through the interest-based feed. This in turn drove an overall increase in time spent, the number of engaged users and interaction for the homepage information feed since the second quarter. At the same time, we have observed that some low-frequency users still take time to adapt to the new product format and thus their visit frequency and retention continue to lag behind the improvement in the overall consumption metrics, posing challenges in time spent and retention. Going forward, we will continue to optimize product experience, keeping a better balance between improving recommendation efficiency and accommodating different user habits, thereby strengthening the homepage feed's ability to drive user visits and long-term engagement. On the video front, in the second quarter, we continued to optimize video distribution and supply with a focus on improving video consumption efficiency and expanding the supply of high-quality video content. On the distribution side, with an enhanced recommendation algorithm for the interest-based feed, we were able to more effectively identify and distribute high-quality video content, shifting traffic toward high-quality content. This helped reduce the negative impact of repetitive and low-quality videos on the user experience. In the second quarter, total time spent on video views continued to grow double digit year-over-year and average time spent per user on video views grew even more meaningfully, indicating deeper video consumption. On the supply side, the supply of high-quality video content across the platform continued to grow double-digit quarter-over-quarter in the second quarter. As the upgraded interest-based feed continues to drive greater distribution and consumption of high-quality video content, we further beefed up our efforts to expand the video content creator base and strengthen content operation. By improving our content creator acquisition mechanism, enhancing traffic support and sustaining operation, we have gradually established a clear framework for creator onboarding, content production and creator retention. As a result, the scale of video production from newly acquired content creators and their corresponding user consumption performance has largely met our expectations and is gradually forming a positive cycle between video content supply and consumption. In the second half of this year, we will further step up our efforts to expand our video creator base, accelerate the onboarding of high-quality creators with stable production capabilities and strong content influence. We will also leverage traffic support to strategically supplement key video content in alignment with our users' consumption needs. At the same time, through ongoing operation, we will help video content creators better understand the type of content that resonates on Weibo's platform and establish consistent production. As the supply of high-quality video content expands, the recommendation algorithm will also be able to better understand users' video consumption preferences, improving the efficiency of matching quality content with targeted users. By simultaneously improving video creator supply, content distribution and content consumption, the video business will more sustainably drive user time spent, long-term engagement and monetization efficiency, while further enhancing the vitality and competitiveness of the platform's content ecosystem. Moving on to content ecosystem competitiveness. Throughout 2026, we will continue to focus on three core areas: trending topics, social network and search, while further enhancing the health and core competitiveness of our content ecosystem. On social attributes, Super Topic is a core interest-based community on Weibo and an important area for strengthening our competitiveness in interest-based social engagement. In the second quarter, we accelerated product and feature integration around the core needs of users across different interest-based communities, aiming to further reinforce Weibo's competitiveness in interest-based social scenarios. For example, in celebrity Super Topic, we enhanced the check-in experience and introduced a celebrity memory album feature as well as online-to-offline engagement initiatives. For sports and e-sports Super Topics, we introduced features for event reviews, ratings and discussion and leveraged the World Cup to strengthen user awareness, driving a significant increase in the sports Super Topic user base. These new features further encourage users to move from content consumption to interaction and deeper participation. As a result, both daily active users and the number of users participating in discussion on Super Topics achieved double-digit year-over-year growth in the second quarter. On search, building on the scaled rollout of Weibo Intelligent Search last year, our focus this year has shifted further toward deepening the use of multi-turn conversations and integrating AI search more naturally into the content consumption experience. In the second quarter, we continued to enhance intelligent search ability to understand context and user intent in multi-turn conversations with a particular focus on enhancing the search experience in areas where Weibo has differentiated content strength such as trending topics, public figures and IPs. At the same time, we are embedding search entry points more deeply into users' journey for browsing posts, videos and trending topics, allowing us to promptly address needs as they arise during content consumption and continue to improve the efficiency and user experience of information discovery. Monetization: in the first half of the year, our advertising product and sales team focused on two key strategies. First, we sought to bring Weibo's unique content marketing value to more industries and advertisers. Second, we systematically enhanced advertising performance and conversion through AI integration. In the second quarter, the recovery in the domestic consumption market remained relatively subdued with divergent trends across industries and advertisers. Some advertisers continued to face challenges such as limited recovery in consumption demand, intensifying industry competition and rising cost and margin pressures. As a result, they became more cautious with their marketing budgets, placing greater emphasis on measurable returns and ROI certainty. Although Weibo continues to be well positioned to capture advertising budget in areas such as new product launches, celebrity marketing and sports event marketing, the aforementioned factors weighed on our advertising business to a certain extent. Consequently, Weibo's ad revenue experienced temporary pressure in the second quarter and decreased 1% year-over-year. By industry, advertising revenue from the automobile sector grew year-over-year, driven by intensive launches of new energy vehicles. The Internet service sector continued to book solid growth, primarily benefiting from the increased demand among AI and software service advertisers for performance-driven advertising and content distribution. The food and beverage sector also delivered growth, mainly fueled by the World Cup, celebrity marketing and the promotion of key new products. On the flip side, some industries continued to face headwinds. Following intense competition last year, the e-commerce sector has gradually returned to a more normal market condition. Despite overall stable ad spend during the June 18 shopping festival, the relatively high revenue base from certain business lines last year posed noticeable pressure on revenue growth this year. In the handset sector, overall ad budgets contracted under cost and margin pressure, but Weibo's wallet share within the sector remained largely stable. In light of advertisers' budget trends, in the second half of the year, we will focus on further strengthening our content marketing products and services. By offering more standardized product solutions and more convenient advertising tools, we aim to lower the barrier for advertisers across content planning, resource allocation and information feed placement, thereby further enhancing Weibo's ability to capture ad budgets. Among marketing scenarios, celebrity marketing was one of our key focus areas in the second quarter. We are pleased with the growing demand from advertisers for celebrity marketing. In the first half of the year, we not only supported advertisers with celebrity marketing campaigns on Weibo, but also became involved earlier in campaign planning and resource matching, providing more comprehensive service aligned with their brand objectives and communication goals. Leveraging measured resource investment and enhanced service capabilities, we successfully expanded ad spend on celebrity marketing products. Taking Mono's partnership with Erling Haaland as an example, we helped match the brand with the right celebrity resource and worked with both the brand and celebrity to co-create content and drive engagement around key event-related topics. During the World Cup, topics related to Erling Haaland attracted broader attention on Weibo, generating over 5 billion topic views and 1.4 million discussions. Mono also further enhanced its brand exposure and user engagement thanks to the celebrity content and World Cup-related discussion. During the campaign, Weibo effectively integrated celebrity resources, event-related trending topics and social discussion to provide the advertiser with one-stop service spanning resource matching, content co-creation and campaign execution. This empowered the brand to extend a single celebrity collaboration into sustained content buzz and brand exposure. On advertising products, we will continue to apply AI across key stages of the advertising process, focusing on creative supply, intelligent ad placement and creative quality management to improve advertisers' campaign efficiency and user experience. In the second quarter, driven by the advancement of video generation models, we automatically generated viable ad creatives for e-commerce advertisers facing a shortage of video materials, resulting in solid improvement in the coverage and usability of AI-produced videos for target products with continued gains in efficiency and quality of AI creative production. On the ad placement front, the consumption share of AI-generated ad creatives in promoted feed ad offerings and the real-time bidding system continued to increase, reaching 50% in June. Meanwhile, we use AI to identify ad creatives with low quality and those generating high levels of negative feedback and apply targeted optimization accordingly. In the e-commerce sector, AI-optimized materials saw a drop of over 30% in negative feedback rate compared with clients' original materials, effectively enhancing the user experience in ad content consumption. Going forward, leveraging an increasingly mature creative quality evaluation system and implementing differentiated generation strategies for various distribution scenarios, we aim to continuously improve the adaptability of AI creatives to their respective scenarios. With these initiatives, we hope to further improve advertising performance and campaign efficiency. Looking ahead to the second half of the year, we believe the recovery in consumer demand will take some time, while pressure on advertisers from cost, profitability and industry competition is likely to persist. Competition for advertising budget is also expected to remain intense. It's worth mentioning that the food delivery price war in the third quarter of last year created a relatively high revenue base for comparison. Moreover, due to factors such as broadcaster scheduling and advertiser dynamics during this year's World Cup, the incremental boost to related ad budgets was lower than that of the previous tournament. These factors are expected to put some pressure on year-over-year advertising revenue growth in the third quarter. Faced with this market environment, we will continue to invest in building Weibo's differentiated commercial service capabilities, keep pace with shifts in clients' marketing needs and budget structures, reinforce our content marketing value proposition and add conversion effectiveness and enhance our capability to capture clients' budgets with more certainty to stabilize our overall ad revenue base. With that, let me turn the call over to Fei Cao for a financial review.
Thank you, Gaofei, and hello, everyone. Welcome to Weibo's Second Quarter 2026 Earnings Conference Call. Let's start with user metrics. In June 2026, Weibo's MAUs and average DAUs reached 561 million and 254 million, respectively. During this quarter, our user strategy continued to focus on improving user quality, driving retention and deepening engagement, while MAUs saw a modest sequential decline and DAUs remained resilient and broadly stable quarter-over-quarter. We continued to see solid engagement among our core users, along with improving consumption and engagement in the recommendation feed. Video consumption also continued to improve, supported by better content distribution within our revamped feed. AI continued to serve as an important enabler across our product, content and monetization systems, helping us better understand user interest, improve ad targeting and delivery and enhance operating efficiency. Turning to financials. As a reminder, my prepared remarks will focus on non-GAAP results. All monetary amounts are in U.S. dollars and all comparisons are on a year-over-year basis, unless otherwise noted. Now let me walk you through our financial highlights for the second quarter 2026. Weibo's second quarter 2026 net revenues were USD 453.8 million, an increase of 2% or a decrease of 4% on a constant currency basis. Operating income was USD 125.4 million representing operating margin of 28%. Net income attributable to Weibo reached USD 102.7 million and diluted EPS was USD 0.38. Let me give you more color on the second quarter 2026 revenue performance. Weibo's advertising and marketing revenues for the second quarter 2026 were USD 381 million, a decrease of 1% or 6% on a constant currency basis. The decrease mainly reflected softer demand in certain key advertising verticals and was partially offset by the favorable foreign exchange impact on reported numbers on a year-over-year basis. By industries, our top three verticals were FMCG, e-commerce and automobile. In terms of growth, Internet services and automobile were primary contributors despite softness in overall automobile sales; ad revenues from the auto sector delivered solid year-over-year growth, supported by Weibo's strong content ecosystem and frequent new energy vehicle launches during the quarter. Advertising revenues from Internet companies also increased, driven by stronger marketing demand for AI-related products and services as leading Internet platforms increased marketing activities around their AI offerings. As for industries facing headwinds, the handset sector remained under pressure in the second quarter. Softer ad demand continued to weigh on smartphone shipments while rising component costs put additional pressure on handset manufacturers' profitability and marketing budgets. As a result, advertising revenues from the sector declined year-over-year. The FMCG sector saw divergent performance during the quarter. Food and beverage delivered solid growth, benefiting from the early release of World Cup-related marketing budgets during the quarter. The cosmetics vertical remained soft as certain international brands reduced marketing spend amid weak sales and intensified competition. In addition, game developers remained cautious on advertising spend amid continued softness in the online game market. The ad product promoted feed ads remained our largest format followed by social display ads and search and topic ads. eCPM continued to improve both year-over-year and quarter-over-quarter, supported by deeper AI integration in creative generation, marketing and bidding. These improvements helped enhance ad delivery efficiency and advertiser ROI. Our IP and content marketing solutions also continued to see solid demand. Ad revenues from Alibaba for the second quarter were USD 39.2 million, an increase of 10% or 3% on a constant currency basis. During the quarter, higher spending on AI-related activities more than offset softer spending in local services as we have noted previously. Alibaba's advertising spend on Weibo is closely tied to its own marketing priorities and pace of product launches, which may therefore vary from quarter to quarter. Value-added service revenues were USD 72.9 million in the second quarter, an increase of 19% or 12% on a constant currency basis. The increase was primarily driven by one-off ticket proceeds from offline activities held by Weibo, solid growth from membership services as well as favorable foreign exchange impact on reported numbers on a year-over-year basis. Turning to costs and expenses. Total cost and expenses for the second quarter were USD 328.4 million, an increase of 16%, mainly due to higher ad production costs and marketing expenses. Operating income in the second quarter was USD 125.4 million, representing an operating margin of 28% compared to 36% in the same period last year. Turning to income tax and GAAP. Income tax expenses for the second quarter were USD 23 million compared to USD 31.7 million last year, mainly due to lower income before taxes. Net income attributable to Weibo in the second quarter was USD 102.7 million, representing a net margin of 23%. Turning to our balance sheet and cash flow items. As of June 30, 2026, Weibo's cash, cash equivalents and short-term investments totaled USD 2.64 billion compared to USD 2.41 billion as of December 31, 2025. In the second quarter, cash provided by operating activities was USD 15.5 million. The decrease in operating cash flow for the quarter primarily resulted from settlement of corporate income taxes, the collection schedule of receivables as well as payment schedule of annual rebates compared with the prior quarter. Capital expenditures totaled USD 3.1 million and depreciation and amortization expenses amounted to USD 15.7 million. We remain disciplined in capital allocation with measured capital spending and continued support for shareholder returns. We closed the first half of 2026 with continued progress across our product, content and monetization initiatives. While soft consumer demand and intensified industry competition continued to weigh on advertising demand, we are encouraged by measurable improvements from our product revamp and AI initiatives, particularly in user engagement and advertising efficiency. Entering the second half, we will focus on advertising opportunities with better budget visibility while carefully managing the pace of investment and maintaining our focus on operating efficiency. Our priority remains to balance near-term sustainable profitability and financial flexibility while strengthening the foundation for Weibo's long-term development. With that, let me now turn the call over to the operator for the Q&A session.
Questions and answers
(Operator provided instructions.) Our first question comes from the line of Timothy Zhao from Goldman Sachs.
Great. I think my question is regarding the outlook of advertising revenue into the second half of this year. Can management share more detail on your expectations for ad revenue growth? What is the trend for different subsectors? What is the latest update on your advertising strategy? More specifically on AI, can you share more color on how AI has increased the overall eCPM of the advertising business and what other operating metrics you may share?
Yes. Thank you very much for the question. First of all, regarding expectations for the second half of this year: except for some verticals showing stronger performance—such as automotive and food and beverage—many other verticals faced stress due to the overall macro environment, especially weaker consumption, and advertisers decreased their budgets for advertising. Concerning automotive, while sales were weaker in the first half of the year, we did see many launches of new energy vehicles. Weibo is a strong platform for advertising around new product launches and availability, and that momentum could continue into the second half of the year. For the Internet industry, especially software and application services, we believe the second half will be similar to the first half: clients have high requirements on ROI and budget allocation, so we do not expect significant growth; that industry is likely to be flat or see only modest gains in the second half. In the handset industry, performance was down in the first half, mainly due to decreased demand among most manufacturers except Apple. We are watching whether Apple's typical September product announcements will trigger greater budget allocation from other handset makers for new product availability. We are not very optimistic on the handset industry for Q3, but we will observe Q4 performance. For e-commerce and food delivery, last year's food delivery price war in Q3 and Q4 created a high revenue base, and this year we see continued uncertainty across local services, local lifestyle, food delivery and e-commerce. We have observed uncertainty in these areas. Regarding ad-related strategies, while performance-based metrics such as eCPM have increased quarter-over-quarter, this does not necessarily translate into overall ad revenue growth. Last year we restructured ad products, and we have been optimizing since then. We reduced exposure of low-quality ad experiences and decreased exposure to some low-frequency users, which affected ad load. In the second half, while we see trends of increased time spent and other improved consumption metrics, the increase in eCPM does not automatically imply strong overall revenue growth. For brand-based ads, aside from optimized pricing schemes, the most important parameter is the sales rate of our core resources. This metric has shown a declining tendency when compared with the ad revenue trend, due to decreased advertiser demand. Therefore, we are focusing more on celebrity- or KOL-based marketing and content-based marketing, particularly for advertisers with budgets in the range of roughly RMB 5 million to 20 million. KOL marketing is an effective option for these advertisers and can attract a meaningful portion of their budgets to Weibo—for example, P&G has placed much of its budget on Weibo for KOL marketing, which helps capture medium-level users and consumers. This helps increase budget attraction and ad revenue on this front. The core part is to improve the sales rate of our core resources.
We are now going to proceed with our next question and the question comes from the line of Yicheng Yuan from UBS.
Could you please provide an update on user growth and engagement trends, including content consumption, time spent and usage frequency? In addition, regarding your digitalization strategy and AI initiatives, could you please share the latest progress and the main areas of focus for the second half of the year?
For the past two quarters, as I noted earlier, we adjusted our product structure. Last year's second-half changes affected some low-frequency users because of changing usage habits. For our core users, we have seen strong increases in time spent on Weibo and in interactivity. However, low-frequency users remain pressured for two reasons. First, we previously benefited from pre-installed apps on certain handsets, and this year there were lower shipments of handsets with pre-installed apps, which impacted new user attraction by around a 10% effect. Second, we have been focusing on the recommendation-based feed; when competing with peers, that approach does not necessarily differentiate in attracting low-frequency users, which has given us some pressure. We will focus on this issue in the second half and hope to make improvements. Regarding video consumption, as stated in our prepared remarks, time spent on Weibo video and video production and consumption saw double-digit growth. After Q2, we increased resources and investments to attract video creators to Weibo and to onboard creators from other platforms. Previously it was difficult to grow new accounts when the product was purely relationship-based feed. Converting to recommendation-based feed gives us an advantage by providing more traffic to video creators, making them more willing to create accounts on Weibo. The overall trend is very positive for video content creation and consumption, and we will keep investing. In terms of the number of video content creators at the current count, we have around 10,000 creators, with a retention rate of about 70%, meaning these accounts continue updating video content. Incentives we provided to content creators have produced returns around 70% to 100%, contributing significantly this year. There is some negative impact on gross margin from these investments, but we believe there will be long-term benefits because they help increase ad monetization and user attraction. Regarding Weibo Intelligent Search, we launched it last year and are advancing agentic AI and intelligent search. Year-on-year performance improved, though quarter-by-quarter may show variability. In Q1 there was a major update in large language model capabilities; now we focus on upgrading technology and improving user experience, shifting user behavior from fixed-box typing search to interactive Q&A-based and guided search. We expect positive trends in user behavior and related areas. On AI application and its impact on R&D efficiency and operations, we see positive impacts facilitating product R&D. For core product R&D there is less to publicly share since it's standardized, but for Super Topics the impact is significant. Because of the efficiency of generating Super Topics by AI, we have seen more sub-communities created by content accounts—such as for gaming or sports industries. Super Topic interaction and activity rates have reached historical highs due to AI facilitation, and we are seeing a very good trend in Super Topics.
We appear to have no further questions at this time. I will now hand back to Sandra Zhang for closing remarks.
This wraps up our conference call today. Thank you all for joining us. We'll see you next quarter.
This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.