Chinese entertainment platform iQiyi (NASDAQ: IQ) reported on Tuesday mixed results for its first quarter of 2020, with total revenue climbing 9% year-on-year (YoY) to USD 1.1 billion, exceeding market expectations of USD 1.02 billion. However, the firm also booked a loss per share of USD 0.56, up from USD 0.37 a year ago, missing analyst estimates of USD 0.45.
IQiyi’s share price slid 3.66% to USD 17.66 as of market close on Tuesday.
The COVID-19-induced lockdown helped to increase iQiyi’s membership revenue by 35% YoY and total subscribers by 23% YoY. However, the broader macroeconomic headwinds caused by the pandemic resulted in a 27% YoY decline in advertising revenue to RMB 1.5 billion (USD 217.0 million), as many advertisers tightened their budget.
Yu Gong, iQiyi’s CEO, said that the advertising business is likely to remain under pressure throughout 2020, as the economy recovers from the COVID-19 shutdown. He specifically explained that domestic ad sales are showing signs of a speedy recovery while international advertisers are slower to return to pre-pandemic levels.
Gong also acknowledged that although user time spent increased during the first quarter, total time spent has been declining through April and May, as people begin to resume normal daily life.
The Baidu-owned subsidiary saw content costs increase by 11% YoY to USD 836.4 million while selling, general and administrative expenses rose 15% YoY to USD 185 million.
The firm was the target of a short report from Muddy Waters Research in April. A 37-page report concluded that iQiyi inflated its 2019 revenue by approximately RMB 8 billion to 13 billion (USD 1.13 to 1.84 billion), or 27% to 44%. According to the research, iQiyi also overstated its user numbers by 42% to 60%.
The Beijing-based company quickly replied to the allegations, saying that the report contains numerous errors, unsubstantiated statements, and misleading conclusions and interpretations. After an initial 11.2% drop following the announcement, the firm’s stock price remained largely unaffected since then.
For the second quarter, iQiyi forecasted total revenue to be between USD 1.02 billion and USD 1.08 billion, representing 8% YoY growth but likely to fall short of analysts’ consensus of USD 1.08 billion.