Good day and thank you for standing by. Welcome to Weibo's second quarter 2025 financial results. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sandra of Investor Relations. Please go ahead. We have a technical difficulty on the line. Please remain on the line. Your conference will resume shortly. Thank you. We are now back. Our conference call resumes. I would now like to hand the conference over to your first speaker today, Sandra of Investor Relations. Please go ahead.

Thank you, operator. Welcome to Weibo's Second Quarter of 2025 Earnings Conference Call. Joining me today are our Chief Executive Officer, Gaofei Wang; and our Chief Financial Officer, Fei Cao. The conference call is also being broadcasted on the Internet and is available through Weibo's IR website. Before the management remarks, I would like to read you 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 the 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 occurring as of the date hereof. Weibo assumes no obligation to update such information, except as required under applicable law. Additionally, I'd 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 future prospects. Our non-GAAP financials exclude certain expenses, gains or losses, and other items that are not expected to result in future cash payments or are non-recurring in nature or 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's prepared remarks, we'll 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 of 2025 earnings conference call. Today, I will share highlights on Weibo's product and monetization in the second quarter of 2025. In June 2025, Weibo's monthly active users reached 588 million, and the average daily active users reached 261 million. In the second quarter, Weibo's total revenues were $444.8 million, a 2% increase year-over-year. Total ad revenues were $383.4 million, also up 2% year-over-year. Our non-GAAP operating income reached $161.8 million, resulting in a non-GAAP operating margin of 36%. The company’s strategy for 2025 focuses on user value, maintaining leadership in trending topics and the entertainment sector, and strengthening the competitive edge of our social products. We are prioritizing enhancements to our recommendation and search functions through the integration of large language models to boost user engagement and scale. I will outline our progress this quarter in three areas: user growth, content ecosystem competitiveness, and monetization. In user growth and engagement, we are integrating social products and upgrading our recommendation system, aiming for higher user engagement and growth. Over 15 years, we have evolved the homepage information feed to increase content consumption efficiency and enhance social interaction. Our content recommendation mechanism has shifted from a timeline-based approach to one focused on user preferences. Initially, posts were displayed in reverse chronological order, but as user-generated content surged, we updated our algorithm in 2016 to focus on showcasing unread posts from followed accounts. In 2018, we introduced a relationship-based and interest-based feed structure to improve content discovery. Recently, we revamped our homepage information feed to make the interest-based feed the main interface, adjusting our distribution mechanisms for improved user experience based on interaction feedback. This upgrade aims to deepen user engagement while delivering quality content. We have rolled out enhancements to nearly all users, stabilizing content views per user while increasing the proportion of recommended content consumed to 43%. Our platform's strategy now expands from relationship-based to interest-based distribution to enhance content competitiveness. We have also reinforced social features within our products, addressing low-quality content issues to improve user experiences and driving significant year-over-year increases in social interactions related to celebrity content. To enhance our content ecosystem, the interest-based feed is now the primary distribution method. We've transitioned from an influencer to a vertical content model, drawing content creators from various verticals. Currently, over 50% of interest-based content comes from cross-vertical influencers, with vertical content consumption accounting for 60% of interest-based feed usage. We see opportunities to increase high-quality content supply and user engagement through better recommendations, facilitating more effective content consumption. Moving on to our intelligent search products, we have enhanced our AI-powered search experience, resulting in robust growth and over 50 million monthly active users in June. Our intelligent search has improved user experiences for trending topics and effectively addressed on-demand search needs, with daily active users increasing significantly. In the long term, leveraging large language models, we can improve content relevance and consumption efficiency, positioning Weibo’s intelligent search to better serve both timely and long-tail needs. Regarding monetization, we have focused on solidifying Weibo as the preferred content marketing platform across industries and enhancing ad product conversion. E-commerce sectors increased ad spending this quarter, and we maintained our focus on performance-driven ad products while leveraging Weibo's strengths in trending topics and celebrity connections. The automotive sector continues to thrive on Weibo, especially for new energy vehicle marketing. In the FMCG sector, we're observing a shift toward integrating more strategic marketing approaches, increasing interest in Weibo's product launch and celebrity marketing offerings. We are tailoring our ad products to meet diverse marketing needs in the FMCG sector, striving to enhance the synergy between commercial content and organic posts. In the second quarter, our promoted feed and real-time bidding systems saw solid revenue growth. Looking ahead, while we expect challenges from last year's high performance, we will strengthen sales efforts in targeted sectors like e-commerce and healthcare and work to secure additional budgets. In summary, we aim to amplify the integration of content and monetization operations. With our information feed upgrades, we have a clear plan to enhance our vertical content ecosystem and promote interest-based consumption. This will showcase our content and marketing capabilities, further strengthening Weibo's position in the advertising market.

Thank you, Gaofei, and hello, everyone. Welcome to Weibo's second quarter 2025 earnings conference call. Let's start with user metrics. In June 2025, Weibo's MAUs and average DAUs reached 588 million and 261 million, respectively, representing a net addition of 5 million and 5 million users on a year-over-year basis. The DAU versus MAU ratio further enhanced as our strategic focus on high-quality users is paying off. Leveraging the transformative power of AI, we're revamping our recommendation engine as well as speed and search experience to make Weibo more relevant and engaging. Turning to financials. As a reminder, my prepared remarks will focus on non-GAAP results. All monetary amounts are in U.S. dollar terms 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 of 2025. Weibo's second quarter 2025 net revenues were $444.8 million, an increase of 2%. Operating income was $161.8 million, representing an operating margin of 36%. Net income attributable to Weibo reached $143.2 million, an increase of 13%, and diluted EPS was $0.54. Let me give you more color on the second quarter 2025 revenue performance. Weibo's advertising and marketing revenues for the second quarter 2025 were $383.4 million, up 2%, while value-added service revenues were $61.4 million, down 2%. Weibo's advertising business continued to deliver a slight uptick, which resulted from mixed performance of major ad verticals by industry. Our top three verticals were FMCG, e-commerce, and 3P products. In terms of growth, e-commerce, Internet services, and automobile were the key contributors, benefiting from changing policies and intensifying competition among platforms. E-commerce advertisers increased their ad spending on Weibo to boost brand visibility during the June 18 shopping festival. The automobile sector sustained healthy growth as Weibo plays an increasingly important role in building a market hub for EV launches, underpinned by strong discussion in the auto vertical. The FMCG sector continued to see a year-over-year decline. However, we are seeing early signs of gradual recovery despite near-term pressure. We are encouraged to see a gradual comeback with those Manga festival brands, the FMCG brands, reallocating their budgets to Weibo's celebrity product launch ad offerings to engage our young and high-value users. Other underperforming industries that dragged the overall top line recovery included online games, luxury, and entertainment. In particular, the online game sector remained soft due to tough comps and lack of blockbuster releases this quarter. The ad product category promoted feed ads remained the largest contributor, followed by social display ads and topic and search placement. We have been integrating AI to facilitate smarter ad targeting and placement, leading to the double-digit growth of our feed ad offerings. Specifically, our real-time bidding feed products saw strong improvement in both performance and conversion metrics. Ad revenues from Alibaba sustained healthy growth of 10%, reaching $35.7 million in the second quarter. We gained a larger share of Alibaba's ad wallet in Q2, driven by increased marketing demand during the June 18 festival and heightened competition in the local service segment. Looking ahead to the second half of the year, we expect to face a tough year-over-year comparison in the third quarter due to the Summer Olympics in the prior year. Also, advertisers from consumption-related industries remain conservative in their ad budget allocation in light of geopolitical outlook and macro uncertainty. That said, we will step up our sales execution to capture engagement opportunities, particularly in on-demand e-commerce services and new EV launches. In the longer term, we aim to further integrate AI capabilities to drive meaningful improvement in ad inventory availability and eCPM update. Value-added services revenue grew 2% to $61.4 million in the second quarter, mainly due to a modest decrease in membership services. Turning to cost and expenses. Total cost and expenses for the second quarter were $283 million, an increase of 1%, with an increase in cost of revenue and product development expenses offset by a decrease in general and administrative expenses. Operating income in the second quarter was $161.8 million, an increase of 3%, with an operating margin of 36%, flat versus the same period last year. Turning to income tax. Under GAAP, income tax expenses for the second quarter were $31.7 million compared to $33.3 million last year. Net income attributable to Weibo in the second quarter was $143.2 million, an increase of 13%, representing a net margin of 32% compared to 29% last year, primarily attributable to higher net interest and other income. Turning to our balance sheet and cash flow items. As of June 30, 2025, Weibo's cash, cash equivalents, and short-term investments totaled $2.11 billion, compared to $2.35 billion as of December 31, 2024. The decrease in Weibo's cash, cash equivalents, and short-term investments was mainly the result of the purchase of long-term wealth management products and the payment of the annual dividend to our shareholders in the first half of 2025, partially offset by operating cash flow. In the second quarter, cash provided by operating activities was $24.8 million. Capital expenditures totaled $17.6 million, and depreciation and amortization expenses amounted to $14.8 million. With that, let me now turn the call over to the operator for the Q&A session.

Our first question comes from Felix Liu from UBS.

Congratulations on the strong second quarter results. Can you provide more details on your product strategy and future plans for commercialization regarding Weibo Smart Search? Additionally, could you share updates on how AI is enhancing the monetization and commercialization of the Weibo platform?

Okay. In the last quarter, we announced the promotion of our intelligent search product in Q1, which we launched after connecting it to the DeepSeek-R1 model. By Q2, it had its first full season on Weibo. In June, we also linked it to Ali Q1 because the output speed from DeepSeek-R1 was a bit slow, causing some users to be impatient with the results. Overall, in Q2, the product was still being refined. By the end of Q2, we achieved a stable product. In June, we reported over 50 million monthly active users, and user queries improved by 60%. The daily active users and their queries grew even faster, exceeding 100%. Traffic increased by around 150% compared to the previous quarter. This data indicates a growing user base and increased usage frequency. We have high expectations for the intelligent search product in the second half of the year. Those familiar with Weibo know we excel in news search; however, we haven't been as strong in long-tail searches. With this new product, while news searches still dominate, more users are utilizing it for experience, product, and long-tail searches. Connecting the models and other content allows us to showcase previously hidden search results on Weibo, which is crucial for changing user behavior and enhancing long-tail search percentages. There's a general belief in the industry that AI search is taking over traditional search, marking a clear trend. On social media platforms, enhancing the search function isn't the only goal; users on Weibo can also fact-check in comment sections and utilize the tool for comprehensive reading of related content. We see numerous use cases and scenarios as key focal points for the latter half of the year, and we have some pilot programs underway. Regarding commercialization, many clients are showing interest in the product, but we're focused on expanding our user base rather than rushing into commercialization. Future strategies may involve partnerships with brands or incorporating ads into search results, but we won't pursue this in Q3; perhaps we will test certain elements in Q4. Overall, increasing the user base for search is crucial for enhancing user engagement and traffic, and we are optimistic about the product's future commercialization. Regarding your second question about AI ads, most platforms concentrate on performance-based ads. For us, one aspect involves the automatic placement of AI-generated assets. In Q2, we introduced our AI ad creative platform called Linchong, with over 10% of consumed assets coming from AI. In Q2, eCPM for information feed ads grew by single digits, under 10%. For various clients, cost-per-result could be approximately 20% for leads and over 10% for applications. Generally, eCPM increased by less than 10%. Many brand customers deliver high-quality ad assets on Weibo. In Q2, we tested high-quality PPC ads with select clients, using AI for coordination and reediting of their existing assets. The results outperformed those for small and medium-sized clients, showing similar click rates to performance-based ads while overall engagement doubled. However, for brand clients, the primary challenge lies in ad placement constraints. Brand customers need all assets to be approved on their end, which significantly limits the extensive use of AI ads. In general, if we can implement AI ads at scale for brand ads, the performance and outcomes would improve drastically, but it may take time for customers to adapt. We anticipate that by year-end, over 10% of our brand customers will begin utilizing the AI ad system.

My question is about the outlook for advertising revenue growth. Can management share your expectations for ad revenue growth in the third quarter and the second half of this year? Specifically, which industries might experience stronger revenue growth? Additionally, can you explain the differences in growth rates among search ads, display ads, recommendation feed ads, and so on? Given the mention of AI in information ads, could you elaborate on its implications for search ad growth?

In the latter half of the year, particularly for industries receiving national subsidies, there remain uncertainties, especially for sectors like mobile phones and automotive. For the third quarter, we already addressed growth in the e-commerce and automotive industries during the second quarter and believe these sectors can continue to exhibit strong growth. Over the past two years, user demographics have shifted, particularly among white-collar workers, leading to increased focus on healthcare, which has experienced good growth. However, its base is not as large as that of e-commerce and automotive. Those are the sectors showing growth. Still, in the third quarter, we face notable pressure in the fast-moving consumer goods sector. The Olympics influenced spending on dairy products and other FMCG areas, which saw declines, particularly in the third quarter. Cosmetics have steadied, but we continue to experience pressure, and the same goes for luxury goods. For mobile phones and gaming, there is significant uncertainty. In the mobile phone sector this year, budgets have stabilized compared to the first half, but overall sales have dropped significantly. Without new national subsidy policies, we anticipate continued pressure in the mobile phone industry for the latter half of this year. Regarding our advertising strategy, the largest share is still allocated to information feed ads, followed by displayed ads and then other formats. Information feed ads are experiencing growth and have the highest growth rate. In the first and second quarters, displayed ads saw a slight decline due to customer budget constraints and we don’t see displayed ads as our main focus going forward. More clients are likely to transition to performance-based ads and invest significantly in star collaborations or KOL partnerships. For search ads, while some clients have expectations for monetization, our focus remains on expanding our customer base and enhancing traffic. We may introduce displayed ads, but that would be a minor part of our strategy. Currently, our priority is to build a larger customer base, and we emphasize user experience with intelligent search, which has received positive feedback from the industry. We plan to increase our budget for computing power, alongside investing in external collaborations and marketing, which we believe will support user base growth, a crucial focus for this product. Concerning revenues and commercialization, we are not rushing the process.

Thank you, operator. 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 for participating. You may now disconnect.