Thank you for standing by, and welcome to the iQIYI First Quarter 2026 Earnings Conference Call. 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 Online Game Business. Mr. Gong 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 all for joining us today. The convergence of breakthrough AI and a supportive domestic regulatory landscape is fundamentally reshaping entertainment and creating incredible opportunities for iQIYI. Let me share iQIYI's value proposition in this new era from three perspectives: reinforcing our core today, igniting new growth engines and building for the long term. Let's start with the first perspective, reinforcing our core foundational strategy. Premium content remains the cornerstone of our strategy. And in Q1, we reaffirmed its compelling appeal for audiences. Our diverse lineup of hit dramas, including The Punishment 2, Azay Are, Born to Be Alive, Sheng Shu, Pursuit of Jade, Zhu Yu, and How Dare You!?, Chong Qi Tong secured our dominant position in the core drama category per Enlightent data. Moving forward, our commitment to content quality is stronger than ever, designed to deliver expert experiences that profoundly connect with viewers. This focus is revitalizing our core operations, evidenced by the sequential growth in membership revenue. We are also highly encouraged by the supportive domestic regulatory landscape, which is accelerating the content approval program and driving stronger capital efficiency. Importantly, these regulatory policies are unlocking innovation across new formats. This includes short-form dramas Zhong Ju, typically 15 to 25 minutes per episode with flexible episode counts, and internet feature films, Wang Wo Gu Shi Pian, which are limited to 3 chapters of 60 minutes each. These formats not only shorten production cycles and lower capital barriers, but also attract a broader pool of creative talent, enabling more innovative storytelling than traditional long-form content. Furthermore, they 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 strength. 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 itself as a proven second growth driver. In Q1, overseas membership revenue surged by over 40% annually. This success stems from a highly differentiated market position compared to global peers: we focus on premium Asian content tailored primarily for young female demographics. Within our Asian content portfolio, K-dramas, whose global influence continues 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 broadcasting windows and long-tail monetization. Finally, our foray into offline experience is yielding encouraging results. Our first iQIYI LAND in Yangzhou has garnered solid initial feedback, allowing us to rapidly accumulate operational experience to apply to other locations. Third, 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 once made quality content costly and time-consuming, igniting growth in both creators and content value, and we anticipate 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. A decentralized ecosystem greatly expands content supply, allowing us to meet diverse demand at a whole new scale. Creators will have greater opportunities to brainstorm and succeed, retaining full ownership of their IP and converting it into attractive returns. We are also cultivating private traffic, building loyal fan bases and gathering valuable data from direct user interactions. Meanwhile, for iQIYI Originals, we are sharpening our focus on premium content while decentralized planning flow drives scale. Our originals 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 Nadou Pro, iQIYI's proprietary platform for studio-grade content production. Nadou Pro is powered by both public and self-deployed large models, but it goes beyond generic models. It is built upon our years of technology infrastructure and deep content expertise. We transform years of industry know-how into AI agents and combine them with our core IP and digital assets to deliver accessible platform capabilities. Nadou Pro offers one-stop services from content creation to operations and commercial collaborations. Beyond Nadou Pro, we offer professional training and workspaces. We also facilitate financing solutions, connecting talent with capital from our own funds and external investor networks. Now let's explore what defines iQIYI's long-term investment value and how we are uniquely positioned to lead in the AI era. Our confidence rests on two core pillars. First, a hard-to-replicate competitive moat. We possess a unique blend of deep content expertise and cutting-edge technology. We have a proven DNA of innovation from pioneering genre-specific theater brands to now leading the AIGC transformation in the industry. Crucially, we possess a vast, high-quality IP library that is essential in the AI era, alongside a highly engaged user base that we are committed to serving with excellence. Second, 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 a broader audience base, while IP originals focus on crafting enduring premium IPs. 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 richer, deeply resonant content. It will empower creators to overcome human limitations and turn their boldest inspiration into reality with 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 cooperation. In Q1, we unveiled the Peter Pau iQIYI AI Theater, featuring a suite of 16 titles across science fiction, thriller, wuxia and fantasy genres, each running 11 to 20 minutes. Nadou Pro powered key production processes from capture, design and scene setting to storyboarding, demonstrating AI's transformative potential in professional content creation. In terms of our long-form drama performance, The Punishment 2 became our second franchise with two seasons exceeding the 10,000 iQIYI popularity index. Pursuit of Jade also surpassed 10,000 while our in-house produced drama How Dare You!? exceeded 9,000. 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 Douban rating among all domestic drama releases in Q1. The Devil Between Us 2, our own suspense theater brand, was also well received by users. For variety shows, our in-house production Wander Together topped Enlightent market share ranking for the first quarter. For animations, we expanded our offering with four key original titles; among these, 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 adaptation. For our 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 formats, we are rapidly expanding our library, which featured over 14,000 titles as of quarter end with viewership continuing to rise steadily. Next, our Q2 content pipeline. Our drama serials lineup features a rich variety of titles from historical tactics to niche genres, including Echoes of a Thousand Moons, Bloom Lion, Born with Luck, The Heir and Archives: The Nanyang Mystery (Nandu Dang An). 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 title to reach such a mark this year. For films, our pipeline includes original online movies: The Same Trick, Zuiue, Wind of Death, Man Lizhi, and The Counterfeit (Wei Chao Zhong An). For licensed titles, we will release theatrical hits on our platform like Pegasus 3, Awakening of Insects in Silence (Jing Zhe Wu Sheng), The Blaze of the Goddess (Biaoren), along with the online film The Legend Hunter (Xiang Long Ju). For variety shows, we will continue to captivate audiences with established franchises such as Fight House Season 6, Become a Farmer Season 4, The Rap of China 2026, and Yes I Do Season 6, while launching new IP like Voice of the Youths. For micro dramas, we have a diverse slate including Perfect Match, San Di Yu, One Night Pearl, Phoenix Rules, Man Zha Chou Huang, and Spring Rain of Phoenix. For animations and children's content, we will continue the long-running Against the Gods (Ni Tian Xie Shen), and then debut a localized adaptation of the BBC classic I'll Tell You With. Now turning to membership business. Revenue grew sequentially, primarily driven by premium titles including Pursuit of Jade, The Punishment 2, How Dare You!? and The Devil Between Us. 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-tier F7 membership continued to scale, driven by a highly differentiated value proposition that features free express packages. Next, advertising business. For brand ads, revenue contribution from targeted dramas recorded double-digit annual growth with titles like Born to Be Alive, How Dare You!? and Pursuit of Jade gaining 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 through new content formats. For example, we partner with leading advertisers to co-produce short-form content for micro dramas, creating new avenues for brand integration. On the technology front, AI continues to empower our advertising operations. We leverage Nadou 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 while 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 mid-sized 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 improved as well, measured by revenue per inventory unit, which increased by over 60% year-over-year. For the rest of the year, our strategy for performance ads focuses on four 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 windows such as major e-commerce festivals; third, enhancing monetization efficiency through AI-powered capabilities; and fourth, tapping into additional ad budgets by harnessing a more diverse content ecosystem and an 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 growing by over 100% annually. Average daily subscribers reached a new high. The global influence of C-dramas continues to expand. Notably, Pursuit of Jade led performance across multiple markets and secured top position on our international platform viewership rankings. It topped Google Trends among all C-dramas broadcast during the same window in 15 markets and set a record as the most-searched Chinese drama on Google. 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 paid variety show over the past three years and the title earned strong recognition from advertisers. Meanwhile, our first original Indonesian drama is on track to premiere 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 languages, including English, Thai, Korean and Indonesian. Next, our experience business. We focus on two core areas: IP-based consumer products and iQIYI LAND. For IP-based consumer products, our self-operated merchandise delivered solid performance with collectible cards from Pursuit of Jade setting a new sales record in this category. For offline experience business, our first iQIYI LAND in Yangzhou performed in line with expectations and was highly acclaimed for its scenic 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 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 fewer dramas were distributed to third parties. Other revenues were RMB 426.7 million, down 22% sequentially. Moving on to cost and expenses. We adopted 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 was 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 and further strengthened 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. To date, we have repurchased a total of approximately 6.45 million ADSs 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.

Your first question comes from Xueqing Zhang with CICC.

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

Nadou 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-how from key areas such as screenwriting, filming and production into AI agents and combined them with our core IP and digital assets to deliver accessible platform capabilities. Creator tools previously used only within iQIYI, such as script evaluation and shot-based reference search, have now been incorporated into Nadou Pro. Nadou Pro has been available to all creators across the industry since April 20. We 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 long-form dramas, micro dramas, micro animation and short videos, and also some commercial app content. Among these, about 100 of them are iQIYI original title projects. Nadou Pro recently launched a creator community as a platform for creators to exchange experiences and provide feedback, which will feed internal development for upgrades in upcoming versions. This platform will also feature commercial matchmaking capabilities. These will empower creators with the full cycle from content creation to commercial monetization. In addition, the international version of Nadou Pro is in development and will be online soon. Regarding Nadou Pro's commercial prospects, it will serve as a stand-alone product to boost monetization capabilities. We will continue to iterate, improve development and roll out upgraded versions to provide better features.

Next question comes from Vicki Wei with Citi.

Would management share some latest progress about the industry anti-piracy update?

For the anti-piracy situation, we 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 pirated distribution of drama content across illegal websites, browsers, search engines and cloud storage services. Industry regulators attach great importance to this issue and have established clear requirements for the prevention and handling of online copyright infringement, including several initiatives. For example, we established a rapid response mechanism for infringing content, enabling real-time communication between copyright owners and platforms to ensure swift response and removal. Second, the new policies and regulations enforce dual responsibilities for platforms and local authorities, requiring provincial and municipal bureaus to fulfill their local management duties, for example, enhancing monitoring and improving processing efficiency. 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, removal must be completed within 4 hours. Third, authorities are building a coordinated enforcement mechanism, regularly reporting on infringement status, takedowns and typical cases; repeat offenders 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. Currently, we're happy to see the efficiency of handling infringement has improved significantly, and we believe the piracy issue will be substantially mitigated in the future. We believe strong copyright protection safeguards the commercial interests of all industry stakeholders, boosts the willingness to invest in high-quality content creation and fosters a virtuous cycle of content supply. For iQIYI, we will continue to upgrade our technology and operational mechanisms 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.

Membership business saw sequential recovery in the first quarter. In particular, overseas business delivered robust growth momentum. 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?

In Q1, driven by a strong slate of premium content and refined operational strategies, membership revenue delivered sequential growth. We have a rich content pipeline for Q2. A number of recently launched titles have performed well. Notably, Born with Luck surpassed 10,000 on iQIYI's Popularity Index, powered by a distinct suspense-comedy narrative style. In addition, we have also expanded the slate for the second quarter, including long-form dramas such as Echoes of a Thousand Moons, The Epoch of Miyu and The Heir, and variety shows such as Fight House Season 6 and Become a Farmer Season 4. We believe this content will effectively reach a broad membership base. Looking ahead, for Q2 our operational and sales priorities include reactivating dormant members, optimizing variety show schedules to offer more content for members, expanding large-screen membership via joint operating initiatives with smart TV manufacturers, and leveraging the June 18 e-commerce festival to boost annual and bundled membership. Together, we believe these efforts will expand our subscriber base and extend subscription cycles. As the stability and consistency of our premium content pipeline continues to strengthen, coupled with our ongoing optimization of membership operations, we believe our membership business will maintain a steady development trajectory.

Your next question comes from Thomas Chong with Jefferies.

Congratulations on the fast growth of your overseas business. We talked about fast growth in Southeast Asia. May I ask about our investment strategies in Southeast Asia market? Also, can you share some of the differences or similarities in audience preference between domestic and overseas markets?

I will address this in two segments. First, our key markets. Southeast Asia has been growing quickly and remains crucial for our strategy; we will continue to invest in countries such as Thailand, Indonesia, Malaysia, Vietnam and the Philippines. We are also investing in growing markets like North America and Brazil. In terms of content, our key differentiation is C-dramas, which continue to be central to acquiring users, especially among young female audiences. In the markets I mentioned, we will increase promotional and marketing activities to drive user growth and retention. For local content, we are pacing our investments carefully in terms of volume and quality; we also focus local productions on young female audiences and similar favored genres. For mature markets, we will continue to cooperate with telecom carriers and e-commerce platforms to increase membership scale, and we will replicate this strategy in other markets we explore. In terms of user demographics for overseas audiences, the majority are young female users under 40. User behaviors vary by market: some markets have higher subscription cycles and better retention than others. Overall, ARPU for overseas memberships is higher than domestic ARPU.

Your next question comes from Gigi Xiao with Guangfa.

Seeing iQIYI's efforts in Nadou Pro and fostering AI-driven creation and talent cultivation, how do we view the competitive landscape in the AI era?

For long-form video, in the past our challenge has been the scale of investment. Content costs are massive and investment risk is high, which led to a smaller number of titles being developed and rolled out by the industry. We typically focused on premium head content. AI fundamentally improves this situation. Under AI, content cost is much lower, and production cycles are shorter, which means more titles will be rolled out. Because there is more content, there are more choices for users, and user scale will increase under the new AI model. Overall, we think it's greatly beneficial for long-form video to improve its business fundamentals and economics and to attract more users to the platform. To better accommodate this industry trend, we have rolled out several initiatives, including iQIYI accounts, through which users can upload content to our platform. Under a revenue-share model, creators will have opportunities to distribute content to our users, increase viewership and monetize. Under this backdrop, content cost will be lower and the number of video titles will increase. Looking back over the past 10 years of the Internet, especially for short-form video and micro dramas, technology has been the fundamental driver of industry growth. In the AI era, we see a great opportunity for long-form video to achieve better economics and improved 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. Portions of this transcript that were marked as interpreted were spoken by an interpreter present on the live call.