iQIYI, Inc. (IQ -8.33%) reported first quarter 2025 earnings on May 21, 2025, reporting revenue of RMB 7.2 billion. Membership services revenue increased 7% sequentially. Unique user engagement rose significantly, especially across micro drama formats, while management highlighted ongoing improvements in cost control and capital structure.

User Engagement with Micro Drama Formats Surges, Delivering Monetization Upside

Between December and April, micro drama user engagement surged, with the number of high-engagement users—those dedicating ≥80% of their time to the format—increased approximately threefold between December 2024 and April 2025, supported by a rise of over 300% in daily time spent on micro drama content between December and the first week of April.

Management cited over 15,000 available micro drama titles, about half of which are member-exclusive, and some top titles now exceed RMB 1 million in weekly revenue share, while average production costs per micro drama title typically remain under RMB 1 million.

The low cost-to-revenue profile and surging adoption rates indicate that micro drama offers enhanced user stickiness.

Debt Restructuring and Cost Control Strengthen Fiscal Flexibility

The outstanding principal on iQIYI's convertible bonds declined, from RMB 2.9 billion in Q1 2023, to RMB 1.17 billion in Q1 2025. Net interest expenses declined, from RMB 223 million in Q1 2023, to RMB 155 million in Q1 2025, a decrease of over 30% year over year.

This capital optimization occurred alongside continued positive operating cash flow totaling RMB 339 million, positive for twelve consecutive quarters.

This disciplined deleveraging enhances the resilience of the balance sheet.

Strategic Shift to Shorter-Form, Higher-Quality Dramas Diversifies Content Ecosystem

Management articulated a pivot toward drama series with episodes lasting 5–20 minutes and an expanded volume of high-quality short dramas, aiming to reduce cost per title, improve scheduling flexibility, and diminish reliance on breakout hits.

Premium content continues to grow as the company’s key subscription acquisition and retention driver, evidenced by a 7% sequential rise in membership services revenue to RMB 4.4 billion in Q1 2025.

"[O]ur future drama strategy will focus on two key areas. First of all, releasing high-quality shorter episodes of premium dramas and second, producing more high-quality short dramas, with each episode lasting five to 20 minutes. Going forward, the total number of drama titles will increase. Accompanied by enhanced content quality and greater diversity. This approach will not only improve the flexibility and stability of conference scheduling, but will also reduce reliance on individual titles and effectively mitigate food."
-- Xiaohui Wang, Chief Content Officer

By shifting to a diversified pipeline of shorter dramas, iQIYI shields itself from single-title volatility and aligns more closely with evolving viewer habits, thereby enhancing user acquisition and lifetime value.

Looking Ahead

Management provided no specific numeric forward guidance for Q2 or fiscal 2025 but reiterated prioritization of increased investment in premium micro drama production, user acquisition for underpenetrated demographics, and further monetization via advertising and e-commerce integration.

No detailed targets were set for international expansion, but maintaining profitability in the overseas business remains a stated intention with reinvestment of profits highlighted as a priority. Explicit financial targets or strategic milestone forecasts were not disclosed during the call.