Weibo Corporation

Joining me today are our Chief Executive Officer, Gaofei Wang, and our Chief Financial Officer, Liz Hou. The conference call is also being broadcasted on the internet, and it's available through Rainbow's IR website. Before the management remarks, I would like to read you the same Harvard statement in connection with today's conference call. During today's conference call, we may make four looking statements. Statements that have 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 statement. The State Board assumes no obligation to update the forward-looking statement in this conference, conference call, and elsewhere. Further information regarding this and other risks is included in Weibo's annual report on Form 30S and other findings with the SEC. All the information provided in this press release is occurring as a dead hero. People assume no obligation to update such information, except as required and an applicable role. Additionally, I would like to remind you that our discussion today includes certain non-debt measures, which includes stock-based compensation and certain other expenses. We use non-debt 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 flows or a non-recurring 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. The loading management prepared remarks. We open the lines for a brief Q&A session. With this, I'd like to turn the call over to our CEO, Gauteng Wang. Thank you. Hello, everyone. Welcome to Weibo's first quarter 2026 earnings conference call. On today's call, I'll share with you highlights on Weibo's product and monetization in the first quarter of 2026.

In terms of users, since the end of the first quarter, our monthly users have reached 5.62 billion, and our monthly users have reached 254 billion. As you can see, the MAU of Weibo has decreased significantly. Mainly because our strategy is more focused on the growth of user experience and process, and the direction of investment on the channel, focus on the transition, and improve the transfer efficiency of all users to Weibo users. At the same time, and the growth of the core user group of mobile phone products, as well as the continued increase in the consumption of platform video content. The core users of the platform, including the size and usage frequency of interaction and click-on users, have maintained a steady trend. The drop-out rate has shown a small growth.

In the first quarter, mobile phone sales reached $4.213 billion, with a 6% increase that year. Among them, advertising sales reached $3.698 billion, with a 6% increase that year.

On the user front, in March 2026, Weibo's MAU reached 262 million, and average daily use reached 254 million. Our MAU experienced a modest decline on both a daily and a quarter-by-quarter basis. This is primarily driven by our strategic focus on enhancing user experience and driving user retention. We have proactively rationalized our channel budget allocation, shifting our focus toward improving the conversion rate of newly acquired users into active users. And currently, driven by our recent effort to optimize information-seek product experience for our core users, which includes engaged users and click-oriented users, Up with the sustained growth in video content consumption on the platform, the scale and engagement residency of our core users has maintained a solid trend. As a result, our DAUs achieved modest growth quarter-over-quarter. Our total revenue in the first quarter reached $421.3 million, an increase of 6% year-over-year. Our total ad revenues reached $369.8 million. an increase of 9% year-over-year. Our non-GAAP operating income is in the quarter, which 119.8 million US dollars, representing a non-GAAP operating margin of 28%. Next, I will highlight Weibo's key development in the first quarter across user growth and engagement.

from the ecosystem competitiveness and monetization.

On user growth and engagement, in 2026, we will focus on improving user retention and building a high-quality, highly engaged, and sustainable user growth framework. In the first year, the information base still remained in the optimization stage post the product upgrade last year. The related strategies began to deliver positive results starting in March, with content consumption and interactive metrics among our core users beginning to improve. And meanwhile, the sustained growth in timestamp on our video playback pages has served as a more solid foundation for the growth of our overall user timestamp and retention.

Moving on to information feed product.

In 2026, the strategy focuses on the product optimization after the information feed upgrade. which aligns with our long-term direction. Building on Weibo's strengths in social network and hot-trend discussion will further enhance the distribution capabilities of Weibo's distinctive native content, establish a more stable and consistent content consumption experience, and continue to strengthen users' trust in the information feed.

In the first quarter, we focused on the balance of social content, hot-topic content, and vertical information content. including a series of strategic optimization work. For the core social interaction users of Apple, while we are ensuring the performance of social relationships, we focus on improving the performance of hot points and information. At the same time, we focus on strengthening the distribution of real-name, UZI original content and forwarding content, strengthening the governance of low-key content and cross-border marketing content, and improving the experience of content sales in the first page. Relative strategies are gradually emerging in the first quarter, From today's results, we can see a certain positive effect in March. The scale of the social interaction with the mobile information stream, market, and the amount of interaction are showing major improvements. Relative strategies are being used to achieve effective results.

Specifically, in the first quarter, we focused on a series of optimization initiatives aimed at balancing the distribution of social content, trending topics, and vertical interest-based content. For web-based engaged core users, while ensuring their consumption of social content, we also prioritize improving recommendation efficiency for trending and interest-based content. Meanwhile, we further strengthen the distribution of content from authentic accounts, high-quality original content, and repository content, while stepping up governance over low-quality and overly promotional content. to enhance the consumption experience within our information feed. These strategies were gradually rolled out throughout the first quarter and began to make positive impacts in March. Looking at the preliminary results, the skill, time spent, and engagement volume of the socially engaged users within our information feed have all shown month-over-month improvement. demonstrating that our strategies are more effective in retaining and serving this specific user cohort.

These effects have enhanced our confidence to continue to promote the optimization of the primary information. In the second phase, we will focus on the optimization of the experience of social interaction users. On the platform, we will increase the percentage of recommended users, and increase the requirements of the user group for content management effects. Through product strategy, we will enhance the optimization of product decision-making, and enhance the continuous consumer experience of recommended users.

This preliminary result has voiced our confidence to further advance the optimization of information-free products. In the second quarter, building upon the improvement for our socially engaged users, we will place greater focus on user groups that rely more heavily on the recommendation fees and have higher expectations for content matching efficiencies. through the continued optimization of product strategies and content-matching algorithms. We aim to improve the seamless content consumption for these users within the recommendation feed, and further strengthen Weibo's competitiveness in recommendation-driven content consumption scenarios.

This project will serve as a driving force for us to continue the effective routine in the second half of 2025. Moving on to video.

Our video business is set to serve as a crucial driver for increasing user time spent and retention throughout 2026. In the first quarter, we continue with the proven path established in the second half of 2025. and saw continued improvement of video consumption. During the first quarter, total timestamp on the video playback pages achieved double-digit year-over-year growth, while also maintaining an upward trend quarter-over-quarter. Notably, the growth per capita input timestamp on video playback pages was even more pronounced.

From this point of view, the main focus of D&G's video business is on distribution and supply.

On the other hand, we continue to optimize the video and monitor the information flow, hot points, and other core products to recommend the operation efficiency. At the same time, we reduce, reduce, repeat, and commercialize the content of the whole process, and promote the growth of the video market. More from the content of the highest level and the improvement of effective viewing behavior. On the other hand, we further strengthen the supply of useful video content, invest more resources, and promote useful video blogging, and encourage their production. For example, the star's life blog, hot point interpretation, Specifically, during the first quarter, our video business initiative centered around two key aspects.

Distribution and supply. On the distribution side, we continue to optimize the recommendation conversion efficiency for videos across core scenarios, such as information feeds and trending feeds. At the same time, we reduce the distribution weight of repetitive low-quality and excessively commercialized content. This ensures that the growth in video watch time is increasingly driven by high-quality content and writing uses meaningful viewing behaviors. On the supply side, we further strengthen the supply of high-quality video content by investing more resources to attract high-quality video content creators and incentivize their content production. This includes celebrity and top KOL live blogs, trending topic analysis, and derivative creation of popular content, all of which are distinctive to our platforms. and strategically skewed our traffic distribution toward these high-quality offerings. In the first quarter, both the number of top-tier accounts, for example, the golden and orange verified accounts, publishing original videos and the number of original videos posted recorded double-digit year-over-year growth. Meanwhile, we are also exploring and validating the introduction of more diverse video content formats

such as short plays and video podcasts. to connect and attract 3,000 people to participate in the production of the relevant AI content in 8 lines. At the same time, we have improved and improved our Weibo AI creative platform, providing creators with image creation, heat creation, video creation, copyright material, contract activity model, and other resources to help bloggers create negative energy, help them get more creative material and inspiration, and at a lower cost, express their content experience into video and image content that can be translated and published.

In the first quarter, leveraging the continued iteration of our video AI large models, we further build on the platform's strengths in vertical IP by opening up AI creation tools to the creators, enabling them to produce derivative video content and extend IP-related content. As of April, We have made copyright materials available from over 20 top-tier TV dramas and variety show IPs on the platform and have actively collaborated with partners to launch AI-driven content recreation initiatives, which have attracted nearly 3,000 creators and generated nearly 8,000 pieces of AI content. Meanwhile, we further enhanced Weibo's AI creation platform by providing creators with resources such as graphic text generation tools, funding topics creation tools, video generation capabilities, copyright material, and campaign templates. This empowers creators with richer materials and inspiration, allowing them to translate their content expertise and creative ideas into publishable videos and text-based posts at a significantly lower cost.

This, in turn, has helped improve content production efficiency for creators on Weibo.

Moving on to company ecosystem competitiveness, throughout 2026, we will continue to focus on our three core business, trending topics, social network, and search, while further enhancing the health and core competitiveness of our company ecosystem. In the first quarter, our focus within the company ecosystem was on enhancing the quality of trending topic consumption, deepening community interactions, and advancing our AI search capabilities. Through these efforts, we aim to significantly improve users' content consumption efficiency and their overall engagement experience on the platform.

In terms of hot points, in the first quarter, we focused on improving the impact of the hot search list, to improve the ranking of the list, to improve the content quality of the list, and to improve the content supply and discussion atmosphere of the landing page, and to promote the improvement of the consumption and discussion rules of the hot search product. Compared with the fourth quarter of last year, In the first quarter, we focused on strengthening the influence and the credibility of our trending list.

We optimized the ranking mechanism, improved the quality of content presented on the list, and enriched content supply and discussion atmosphere on the landing pages. This effort drove higher content consumption and more vibrant discussion under the Hot Trends scenarios. Compared with the first quarter last year, both average timestamp and average discussion volume per user under the Hot Trends scenarios increased in the first quarter. The strengthened thickness of user engagement around Hot Trends further reinforced WayVault's competitive position

as a go-to platform for hot-chain discovery and public discussion. On social attributes, in 2036, we aim to deepen user engagement and increase revisit intention within interest-based communities.

leveraging richer community engagement features and stronger interaction mechanisms. In the first quarter, the Supertopics community continued to enhance its product capabilities and standardized event-based operations across categories such as celebrities, IPs, and sports events, which sustainably drove user engagement. As a result, both their use and engaged users of Supertopics recorded year-over-year growth. With AI further integrated into product development efficiency and content understanding, we will continue to center on coordinates of users of community products, accelerating iteration of interactive community products and features, and thereby further improving users' social fulfillment and sense of belonging on Weibo.

On search products, as we continue to enhance our AI capabilities,

In the first quarter, we have upgraded our Weibo Intention Search function from a single-term Q&A into an AI-powered multi-term follow-up queries and can understand multi-model content, including videos and images with text. Meanwhile, we integrated AI agent capabilities into key scenarios, such as public figure search and hot-trend search. and conducted product experiments on search landing pages and comments sections. Leveraging AI agent capabilities will enhance the user's search experience and efficiency, and further reinforce the way we differentiate value proposition in the search market.

At the level of commercialization growth, we have continued to implement two strategies for advertising products and sales teams in the past 25 years. continue to promote all content marketing values of Weibo, and infiltrate more industries and customers, and synchronize AI capabilities to systematically improve advertising's effect transformation capabilities. Still, Weibo's ad revenue has increased by 9%. In general, Weibo continues to play a key role in new products release, spring sales, fashion, and celebrity sales, and continues to play a key role in new products release, spring sales, fashion, and celebrity sales, and continues to play a key role in new products release, fashion, and celebrity sales,

Moving on to monetization, we have continued to execute on two key strategies that have edupinned our ad products and sales teams since 2025. First, driving broader adoption of Weibo's unique content marketing value across more industries and clients. And second, systematically improving ad conversion effectiveness by leveraging AI capabilities. In the first quarter, Weibo's ad revenues increased 9% year-over-year. Overall, Weibo continues to leverage its differentiated strengths in hot trends plus social plus content marketing across proven marketing scenarios, such as new product launches, Chinese New Year campaigns, sports events, and celebrity marketing, leading to growth across multiple key industries.

The growth of the online market is mainly due to the Internet of Things services, such as daily life and cars. The growth of the Internet of Things services is mainly due to the growth of the Internet of Things services, such as daily life and cars. The growth of the Internet of Things services, such as daily life and cars. The growth of the Internet of Things services, such as daily life and cars. The growth of the Internet of Things services, such as daily life and cars. The growth of the Internet of Things services, such as daily life and cars. The growth of the Internet of Things services, such as daily life and cars. The growth of the Internet of Things services, such as daily life and cars. The growth of the Internet of Things services, such as daily life and cars. The growth of the Internet of Things services, such as daily life and cars. The growth of the Internet of Things services, such as daily life and cars. The growth of the Internet of Things services, such as daily life and cars. The growth of the Internet of Things services, such as daily life We believe that with the continuous integration of AI technology and applications, AI-related content will become an important source of income for micro-blogging content. In May, the size of micro-blogging platform AI is expected to increase by more than 30% in terms of the number of hot spots and AI-related content discussions. The innovation of AI technology will continue to stimulate the creation and use of platform content, and it will further contribute to the growth of micro-blogging ecosystem and commercialization.

By industry, the main growth contributors in the first quarter were verticals such as internet service, local service, and automobiles. The internet service sector delivered robust year-over-year growth, primarily driven by incremental budget we captured from the internet service companies. For example, during the Chinese New Year period, various AI large language model players ramped up their marketing investment, leveraging Weibo's strong KOL ecosystem and professional discussion environment in the digital and technology verticals. We effectively fulfilled AI companies' marketing needs in areas such as new product launches, technology education, and word-of-mouth building, which resulted in a notable increase in related marketing revenues. We believe that as AI technologies and applications continue to evolve, AI-related content will become a major incremental driver of Weibo's content ecosystem. In May, the number of AI-focused professional content creators, the average daily number of AI-related hot trends, and the discussion volume of AI content on Weibo all increased more than 30% compared with January this year. This technological transformation in AI has been continuously stimulating content creation

and use the discussion on our platform and will further build a flywheel between content ecosystem enrichment and monetization growth. The user-friendly and brand-based construction maintains a more stable investment, and the first-generation system also achieves the same double growth. Although the first-generation system growth in the mobile phone industry has achieved a small increase, the market competition is still growing in the industry environment. Although the national stock market is asking for a change in political support, the increase in chip and content costs and the increase in storage costs are the greatest pressure on our customer profits. Customer budget will face a certain pressure in the future. The local service sector was also among the fast-growing sector in the first quarter, supported by ongoing competition in food delivery.

as well as seasonal boost from the Chinese New Year holiday. The automobile sector delivered double-digit year-over-year growth, primarily driven by favorable policies and new vehicle launches, relatively stable ad spend around new product launches, user reputation building, and brand awareness. The headset sector recorded modest year-over-year growth in the first quarter, but looking ahead, market competition in the sector continued to intensify. Despite ongoing support from trading subsidies, rising cheap and memory costs continue to put pressure on handset manufacturers' profitability, which may weigh on their ad budget going forward. We will closely track new product launch cycles and the client's budget dynamics and optimize our sales strategy accordingly to ensure solid coverage of key clients. Among other verticals, the apparel and footwear sector achieved double-digit year-over-year growth in the first quarter, primarily fueled by the Winter Olympics, concentrated marketing campaigns by sports and outdoor brands, and celebrity endorsement activities, through which advertisers effectively leveraged events and celebrity moments to boost the brand awareness.

and IP content marketing. In the past, we have improved customer service, deepening and increasing efficiency. The target of each and every customer is the level of budget and target of the target. Combining the hot spots of Weibo, IP, stars, and the resources in the QoR ecosystem, provide more targeted resource matching, content planning, and dissemination and collection services, and help our customers realize brand exposure and user interaction. At present, the ability of relevant products and services is still improving. Some projects have seen the effective execution of the exchange and customer feedback. In the future, we will continue to promote star VIP content marketing services, which will be an important part of improving our brand customers' cost cooperation and marketing performance, as well as the overall advertising product system performance coordination of the platform.

As mentioned last quarter, we have seen a recovery trend in demand for celebrity and IP-based content marketing from certain brand advertisers. In the first quarter, this trend continued to play out in a number of key industries and campaigns, with related revenues maintaining solid year-over-year growth and providing a meaningful supplement to our overall content marketing business. Celebrity marketing has always been a distinctive component of Weibo's content marketing capabilities, Over the past quarter, we focused more on enhancing service staff and ad placement efficiency for clients in this area. Based on clients' brand objectives, budget levels, and target audience, we integrated Weibo resources in hot trends, IPs, celebrities, and KOL ecosystems to provide more tailored resource matching, content planning, and campaign execution services. This initiative enables clients to effectively achieve brand exposure and user engagement. While our products and service capabilities are still being further refined, we have already seen encouraging execution results and client feedback in some of the pilot projects. Looking forward, we will continue to advance our celebrity and IP content marketing services, positioning them as a key component to deepen collaboration with brand advertisers and enhance our content marketing competitiveness while driving greater synergy with our overall ad product portfolio. With that, let me turn the call over to Feicao for financial review.

Thank you, Gopi, and hello, everyone.

Welcome to Weibo's first quarter 2026 earnings conference call. Let's start with user metrics. In March 2026, Weibo's MAUs and average DAUs reached $562 million and $254 million respectively. During the first quarter, we continued to focus on user quality, retention, and engagement. MAUs saw modest sequential decline. mainly reflecting our ongoing rationalization of channel investment and the transition forming our information feed revamp. At the same time, DAUs remained resilient and improved slightly quarter-over-quarter, supported by better retention of core users, continued optimization of the homepage feed experience, and improving video consumption. AI continued to serve as an important enabler across our product content and monetization systems. On the monetization side, AI-powered targeting, bidding, and ad creative generation continued to support promoted fees and real-time bidding ad products. Internally, we are also expanding the use of AI tools to improve execution efficiency across product, operations, and sales teams. Turning to financials. As a reminder, my prepared remarks would focus on the gap results. Monetary amounts are in US dollar terms, and all comparisons are on a year-to-year basis, unless otherwise noted. Now, let me walk you through our financial highlights for the first quarter, 2026. Weibo's first quarter 2026 net revenues were 421.3 million U.S. dollars, an increase of 6%, or 1%, on a constant currency basis. Operating income was 119.8 million U.S. dollars, representing operating margin of 28%. Net income attributable to Weibo reached 91.9 million U.S. dollars, and the diluted EPS was 33%. Let me give you more color on the first quarter 2026 revenue performance. We started the year with our advertising business returning to year-over-year growth, supported by improving demand from selected verticals and continued execution in content marketing and performance-based ad products. We bought advertising and marketing revenues for the first quarter 2026. was $369.8 million, an increase of 9% or 3% on a constant currency basis by industry. Our largest three verticals were FMCG, e-commerce, and 3C products in terms of growth. Internet services, automobile, and local services were the major contributors. Advertising revenues from internet companies increased primarily due to incremental advertising spend from leading players in the sector. The automobile sector also saw substantial growth, supported by auto-related content ecosystems and ad spend from electric vehicles. For the hindsight sector, advertising revenues recorded modest growth, but we remain mindful that their marketing budgets may face pressure amid intensified competition with the hindsight market. as well as rising component costs. As for areas facing headwinds, FMCG continued to face a year-over-year gap, although we saw sequential recovery as certain advertisers resumed spending in celebrity and KOL marketing campaigns. The online game sector was still on a descending trend due to lack of blockbuster release this quarter by ad product. Promoted fees ad was the largest, followed by social display and search on the topic. Promoted fees delivered solid growth, benefiting from better ad matching in the revamped information feed. Continued demand for Weibo's differentiated IP and content marketing solutions, and a deeper AI integration in targeting, reading, and creative generation. These product improvements helped advertisers combat brand exposure with more measurable conversion objectives. Ad revenues from Alibaba for the first quarter were $43.3 million, an increase of 2% year-over-year or a decrease of 4% on a constant currency basis. The most significant decline of revenues from Alibaba was primarily due to high bays last year. which included the burn-off revenues from promotional ad budget for Alibaba's sponsorship of Spring Festival in 2025 and AI-related budget in the first quarter last year. Ad spend from Alibaba highly correlated to its own marketing strategies, which may fluctuate with Alibaba's campaign priorities and product launch schedule, etc. Value-added service revenues were $51.6 million in the first quarter, a decrease of 11% or 15% on a constant currency basis. The decrease was primarily attributable to decline in game-related revenue. Turning to costs and expenses, total costs and expenses for the first quarter were $301.5 million, an increase of 13% mainly due to higher ad production cost and marketing expense, partially offset by the decrease of general and administration expense. During the quarter, we continued to make major investments in selected monetization-related initiatives, primarily around advertising product capabilities, content marketing ecosystem, and client service offerings. We will continue to manage the pace of these investments with ROI discipline and within a controllable budget framework. Operating income in the first quarter was $119.8 million, representing operating margin of 28% compared to 33% in the same period last year. While operating margin declined year-over-year due to these investments, We remain focused on balancing near-term execution needs with sustainable profitability and healthy cash flow generation. Turning to income tax, under GAAP, income tax expenses for the first quarter were $15.7 million compared to $24.3 million last year, mainly due to decrease in deferred tax liability related to equity pickup adjustment. Net income attributable to Weibo in the first quarter was $91.9 million, representing a net margin of 22%. Turning to our balance sheet and cash flow items, as of March 31, 2026, Weibo's cash, cash equivalents, and short-term investments totaled $2.59 billion, compared to $2.41 billion as of December 31, In the first quarter, cash provided by operating activities was $164 million. Capital expenditures totaled $11.9 million. And the depreciation and amortization expenses amounted to $15.5 million. Let me share some color on our shareholder returns. We have completed the distribution of the annual cash dividend of $0.31. for Ordinary Share, or EDIs, for the fiscal year 2025, with aggregate amount of approximately $150 million in May 2026. We will continue to take a disciplined approach to capital allocation, balancing shareholder returns with the financial flexibility needed to fund our long-term product, AI, and the content ecosystem initiatives. Overall, first quarter was a quarter of continued transition and steady execution, while micro-consumption sentiment and industry competition remain uncertain, with the initial signs of stabilization in core user engagement and advertising demand. We will continue to balance investment needs with operating efficiency and healthy cash flow generation as we build a more sustainable foundation for long-term development. Before turning to the Q&A session, let me provide you a brief update on ESG brand. In April, we published our fifth ESG report, highlighting our efforts across social value, tech empowerment, information security, employee development, content ecosystem, and brain operations. MSCI also recently upgraded our ESG rating from BB to AA. recognizing our progress in sustainability, innovation, and social responsibility. Please visit our IR website for more information. With that, let me now turn the call over to the operator for the Q&A session.

Thank you so much. Dear participants, as a reminder, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star 1 and 1 again. Mr. Ba will compile the Q&A roster. This will take a few moments. Once again, if you would like to ask a question, please press star, one, one. And now we're going to take our first question. And it comes down of Thomas Chong from Jefferies. Your line is open. Please ask your question.

Good evening. Thank you, Guan Yicheng, for accepting my question. My question is about the advertisement of Weibo. Guan Yicheng, if you look at the Q&A, And in the current situation, we can share the outlook of our second quarter Weibo ads. In addition, the management can share some updates on our advertising strategy in 2026. There is another question about AI. Management, how should we look at the role of AI in advertising and commercialization? Thank you. Hi, good evening. Thanks, management, for taking my questions. Based on the trend so far we see in Q1 and recent months, can management comment about Weibo advertising outlook in Q2? In addition, can management also comment about our advertising strategies, any updates for the full year? And separate today on AI, can management share about how it benefits advertising and monetization? Thank you.

Thank you. Thank you for the question.

So first of all, let's talk about the overall recap of Q1 performance as well as the expectation of the second half of the year. First of all, we had a year-on-year growth of about 9% of the advertising revenue in Q1. If we're talking about the definition of R&B, it was about 3% of the growth. And in Q1, primarily the advertising revenue growth was driven by the internet-based software deployment and AI-related investments, as well as the other local lifestyle and automotive industry-related.

Okay. From Q1's overall consumer industry perspective, although our advertising has maintained a slightly better growth than before, we see that our key industry customers are still under a lot of pressure. For example, in the automotive industry, This year, most of our customers may have the same sales, with more than 200,000 customers. In the mobile industry, the sales of our customers have also decreased to a certain extent. It's because the cost of storage has risen. Many of our customers' products have been reduced. In the e-commerce industry, which is a relatively large industry, the profits of our customers are under a certain pressure. These are some of our main Or.

Okay.

And next, I would like to say that in Q1, overall speaking, we had a better than expectation growth of our ad revenue in terms of the consumption area. But if you're talking about the key accounts that we have, especially from different verticals, we've been seeing a stressful situation. For instance, in terms of automotive sales, they've been experiencing double-digit growth, a decrease. And for the headset, they had also a decrease in terms of their overall revenue because of the additional cost of the memory. And most of the headset makers have to adjust their overall price. And also for e-commerce, we've been experiencing also the stressful profitability situation. So even if our revenue was growing, we have still a stressful operation for our customers. Okay.

From the perspective of the second quarter and the future, although we are facing the pressure of external consumption, the performance of our customers in different industries is still different. In the car industry, although the sales are declining, our customers have not reduced the number of new products. In fact, the new products in the car industry this year will be launched faster than last year. Although we will look at the first quarter and the second quarter this year, we may keep a relatively fast record in the future. Right.

Okay.

And next, in terms of Q2 and also the future outlook, I think that although we've been seeing a stressful operational situation for consumption industry, we did have the different responses from different customers. First of all, in terms of automotive industry, in the current stage, they've been experiencing some of the decrease of their sales volume. However, they were not just stopping in terms of the promotional activities for their new products and new product launch as well. So this year, we've been seeing more new product launches. than that of last year in q1 and q2 as of the near future i think that this is going to be accelerated as you can see that we always have more and more frequent launches of new evs and also weibo is a very good and natural ecosystem to generate and stimulate the discussions around the topics of technology related and new energy related okay

In terms of the mobile industry, it's hard to say what the trend will be in the second half of the year. Indeed, in the second half of the year, the sales of our customers have fallen to a certain extent. But we will also see that some customers will actually launch new products this year, especially high-end products. The pace will increase in the second half of the year. But in the second half of the year, some of their products may have to be adjusted. Yes.

At the same time for the headset industry, as you can see that it is difficult for us to have a very correct prediction of the performance in the second half of the year, but the industry did experience a drop of their sales volume in the first half of this year. Of course, this year, however, still we are seeing more launches of new products and new smartphones, and especially increasing the frequency of the smartphone launches for the medium to high-end segment. In summer holiday, we might have been experiencing some of the adjustments of the strategy from the handset industry. And of course, this year we've been seeing Apple proactively adjusted their price, causing some of the stressful situations to some of the Chinese handset makers. So as a result, our ad revenue and ad budget was primarily related to the frequency of the new product launches of the different verticals, as well as the sales, but not necessarily related to the operational result of the customers in different verticals.

Okay. Of course.

And also lastly, let's talk about some of the other industries like the e-commerce and local lifestyle, as well as the FMCG industry. First of all, for the e-commerce, we've already had a very high base number entering to Q2. And of course, also for the industry, Some of the promotional activities and especially budget allocated to the fast food delivery was not as intense as before. So this is going to be not that stressful. And also, I would like to comment on FMCG. Entering to the second half of year, we are going to have the World Cup as activities. So I believe that we are trying our best to catch the opportunity to gain that ad revenue or ad budget from that customer. Okay.

Another question is related to AI. As I mentioned in the first part, AI is currently using more and more materials in terms of effective advertising, such as material production, pricing, and data recommendation. The current consumption of AI-produced materials in our price advertising is about 40%. The entire information flow of the first quarter And also, you can see that talking about the AI topic, as we have already previously stated,

that the AI was primarily very effective on the performance-based ads. So you can see that AI was quite useful in terms of the ad material generation, the ESPAM, and also the recommendations as well. So in terms of those generated materials for the advertisements, the primary consumption rate was already reaching to about 40% And in Q1, in the information-based feed, we had a double-digit growth, especially talking about the ESPAN and the other relevant areas.

Okay. In addition, as you all know, our main focus is on the advertising aspect of the brand. In terms of AI in the brand, including in the marketing aspect of the stars, we are also testing it. From a practical perspective, after the Spring Festival, in terms of product development. Whether it is in terms of celebrity endorsement or in terms of some QOL, including some new product endorsement, in fact, the TVC aspect of AI-generated advertising materials and brands has already demonstrated good capabilities. But in the first quarter and the second quarter, we will see that the public will see that AI-generated advertising and still have certain emotional and acceptance barriers. So, at the current stage, we are not trying to commercialize similar products, but we are testing it with small-scale customers and celebrities. I think this needs to be commercialized officially to a certain extent, and we will push it out to the public.

Also, of course, you know that Weibo is very good at doing the business in the advertisement industry for the brand-based advertisements and key customers advertisements. So we are very good at doing the business of the celebrity-based or the content-based marketing. And at the current stage, we've been having a very good progress in terms of adoption of the AI among those KOLs and also the celebrities as well. So AI is pretty much useful in generating those ad materials for those KOLs to be very much facilitative. But of course, in Q1 and Q2, we've been seeing some of the headwinds in terms of the adoption rate as well as the acceptance by the public in terms of those ad generated by AI or those contents generated by AI. So at the current stage, we're not doing a massive commercialization as for the front. But still we are going to, you know, wait. Still we are doing some internal testing, some on the QLs. And, you know, the public acceptance is the criteria for us to, you know, evaluate before we go massive commercialization.

Okay. Thank you. Thank you.

Thank you. Now we're going to take our next question. Yes, give us a moment. And the question comes from Jenny Yuan from UBS.

Your line is open. Please ask a question.

Thank you. Good evening, Manager Ceng. Manager Ceng, please share with us about the positive effects of the update on the entire user growth and user activity. In addition, last week, the company also mentioned that our video strategy will be an important development direction this year. So thank you management for taking my question. Could you please share some updates on the impact of the state of the bank on the growth? Last quarter, we highlighted BDO strategy as a key focus for this year. Could you please provide an update on the progress so far as well as the key priorities and targets for the next phase? And lastly, could you please also share recent developments on the AI front in terms of user-facing code? Thank you.

Okay. In terms of the information flow revision, we have been working on uh, uh, uh, the delivery volume of the phone has decreased, so the number of pre-installed users has decreased to a certain extent. There is also an issue in terms of channel delivery, because online applications are actually an issue that is mainly put forward. In fact, in some cases, the cost of delivery of users has also increased. So, but our core application, we want social users and our click-on consumer users, in fact, are still maintaining a growth. And after 20 years, Okay.

Thank you for this question.

So, first of all, as for the update of the information-based feed, we've been seeing that this was actually completed in about Q3 of, in the middle of Q3 of 2025, and before which we had primarily based on the recommendation-based feed. But when we actually had that update and adjustments, we've been seeing a very good improvement of the user experience in the front. And in Q1, we had a little bit decrease of MAU and DAU of this side, primarily due to the strategic or strategy changes of channel placement and also some of the low shimmons of the handset. So we had a lower number of pre-installments and also the users as well. And in Q1, you can see that we've been seeing a very good user acquisition. We've been seeing a user acquisition cost increase because it was actually the hot season in terms of the AI application adoption and also the usage. But at the same time, still, we are keeping a very good number in terms of the social-based users and also the clickbait users. And in after Q2, we are going to see a very good improvement, both in terms of the time span, total time span, as well as the interactive volume.

Okay. Okay. to break through the current relationship flow. Although there are still small challenges in the market and in the user experience, the core goal is to release the value of Weibo's quality content and improve our users' sales experience and consumption depth through the ability to calculate. On the other hand, we hope to use this opportunity So, in the long run,

Our overall objective of doing the update and changes of this existing product is that we would like to, first of all, get rid of those user experience that was primarily based on the relationship-based feed. And, of course, at the current stage, there are still some of the challenges from the user side in terms of the acceptance and getting used to this new version. But still, in the long run, we have two objectives by doing this kind of change. First is that we hope that we are going to fully release the value of Waveboard to those consumers. And at the same time, using our algorithm to better enhance the user experience and also the depth of the user interaction on the social media. And second point is that we hope that our total video consumption in terms of the time span and also the total video-based consumption could be further improved because of this kind of a strategy. Also, we would like to attract more bloggers to be on the whiteboard to open account and generate more video content. And also this would be helping them to do more deployment and the placements as well as the generation and production of the video-related content. So this would be really helpful for us to increase the time span on video-related content on Weibo.

Okay. From the video's result, on one hand, from the number of users, . . . . . . . the user's interest in Weibo consumer video. And from a market perspective, the consumer market has also achieved a growth of double the number. The more important thing is that in the supply side of video, especially after we break through the recommended flow, we can introduce more resources and budget to expand Zanmai's YouTube video blog to Weibo. And with the recommended flow, we can give them more traffic and encourage their production. In the first quarter, we accelerated the introduction of Zanmai's video blog, Also, in terms of the overall results of this particular strategy for the video front, first of all, of course, we've been seeing actually a very good growth

of the number of users consuming the video-related content on Weibo. And you can see that this was pretty much forming a new mindset of the consumers on the video-related content. And we had a very good double-digit growth year-on-year in terms of the time span on the video-related content on Weibo. And on the supply side of the video content, because of this recommendation-based fees, we hope that we are able to attract more creators and bloggers from outside of Weibo to actually providing them with more resources and also more budgets. And based on this new algorithm and new incentives plan and encouragement plans, we hope that we are able to attract more and more of those external bloggers and also content creators to be landing on Weibo and helping us to enrich the supply of video content. Okay.

In terms of AI, last year, we have been using AI to develop new products in product development. Last year, after the year-end launch, the size and search volume of 25 users increased significantly. But in the first quarter of this year, there are still some challenges, especially AI and these independent tools. After an outbreak of growth in the first quarter of this year, we will see some consumer behavior of our users. There is also a change in the market, and there is an obvious shift from search to conversation-like search. This kind of conversation-like search is in Weibo users. After we launched in the fourth quarter of last year, there was also a 100% increase in the first quarter of this year, but its user size is actually only in the millions now. This year is actually our In terms of the AI,

We had a lot of R&D investment and tried to encourage people to actually use AI to facilitate what they do. And when we launched the true show in 2025, we had actually a very good boost in terms of the total volume of search. But still, in Q1, we had some of the challenges because at the current stage, we've been seeing a lot of AI tools that were emerging. And, you know, on the consumption side or on the consumer side, they're actually now, more and more consumers are now trying to use the interactive and dialogue-based search instead of just the pure search function. So in Q4, we made that interactive dialogue-based search available and experiencing 100% of the growth in terms of users and adoption in Q1. But still at the current stage, the base number of the user for this particular feature is only at a level of a million. So we hope that in the future, we are able to further boost that and further strengthen our AI-related strategy on this front.

At the same time, in the first quarter, we also launched AI Creative Center for the first time. It covers images, videos, and other scenes to help create this kind of general, including videos, with the special material of big topics, hot topics, and platforms. And we also launched this kind of 15-second, almost a minute-long video with GDance and QM. So in Q1, especially targeting those content creators, we are now establishing an AI platform

Content Creating Center facilitating those content creators to generate the text and images as well as video content as well. So the current stage you can see that we had a lot of important key account or the key content creators that had a very good video generated in the center. and those text and images as well. Also, we've been seeing a very good, you know, collaboration with CDANCE and TaiWen or QianWen to actually have the capability to help the content creators to generate a video with a length of one minute long, which primarily it's about like, you know, several seconds or 10 or so seconds, but we are able to help to generate the videos of one minute long. So this, of course, is the feature that is not accessible by all the users by the current stage. We're only providing this to some of the new certified users. But in the future, we hope that we are able to have a rollout. But before that, we are going to have further consolidation internally.

Okay.

Okay. Thank you. Thank you.

Thank you.

Dear participants, due to time constraints of today's call, we will not be addressing any further questions. Thank you very much for taking participation. You may now all disconnect. Have a nice day.