iQIYI Inc. (Nasdaq: IQ) saw its revenue shrink 13% in the first quarter from a year earlier, as the Chinese streaming giant swung to a loss while grappling with a difficult market for long-form video. The company is now promoting a broad AI strategy to cut its heavy content spending and find a new path to growth.
"We are reinforcing our core strengths, unlocking new growth drivers, and building for the long term," Yu Gong, Founder and Chief Executive Officer of iQIYI, said in the earnings release. "Looking ahead, we are leveraging AI to reduce content production costs, accelerate production cycles, and expand our content ecosystem."
The Beijing-based company posted total revenues of RMB 6.23 billion ($902.5 million) for the quarter ended March 31, down from RMB 7.19 billion in the same period of 2025. It recorded a non-GAAP operating loss of RMB 148.6 million ($21.5 million), a sharp reversal from a non-GAAP operating income of RMB 458.5 million a year prior. The results reflect broad weakness, with membership services revenue falling 5% to RMB 4.2 billion and online advertising revenue dropping 7% to RMB 1.24 billion.
The quarter highlights the immense pressure on iQIYI and other Chinese streaming platforms, which are battling for user attention against rivals like ByteDance's Douyin and in a market still recovering from a "film and television winter." The company's costly content model remains its biggest challenge. Content costs were RMB 3.74 billion in the quarter, and while that was down 1% year-over-year, they still represented 71% of the company's total cost of revenues.
Faced with shrinking revenue streams, iQIYI is turning to artificial intelligence to overhaul its content production pipeline. The company has heavily promoted its new "Nadou Pro" platform, a suite of AI tools designed to assist in scriptwriting, character creation, and other production tasks. In the first quarter, an "AI theater" channel on its platform launched 16 short-form, AI-assisted shows.
This AI pivot is central to the company's survival narrative for investors. While the cost savings are not yet clear in the financial results, the strategy mirrors that of its parent company, Baidu (Nasdaq: BIDU), which has made AI the core of its business. In its own Q1 results, Baidu reported that its AI-powered business revenue grew 49% year-over-year, a bright spot that iQIYI hopes to emulate.
For investors, iQIYI's stock, which has struggled over the past year, now represents a bet on a high-risk, high-reward AI transformation. The company's ability to prove that AI can meaningfully reduce its content budget and create popular shows is critical. Interim CFO Ying Zeng also pointed to a proposed listing in Hong Kong and a new $100 million share repurchase program as moves to deliver shareholder value. However, with free cash flow at just RMB 109.8 million for the quarter, the company's financial flexibility to invest heavily in both new tech and premium content remains constrained. The success of "Nadou Pro" will determine whether iQIYI is writing a comeback story or just the next chapter in its struggle for profitability.
This article is for informational purposes only and does not constitute investment advice.
