It didn't take long for investors to see what kind of growth iQiyi (IQ 3.52%) is capable of as a public company. China's leading streaming video service in terms of monthly active users and overall time spent on platform posted healthy top-line growth and a narrowing deficit in its first quarterly update on Thursday night.
By Friday morning, iQiyi was announcing a partnership with Chinese online retail juggernaut JD.com (JD 1.68%). iQiyi and JD.com will link membership programs, allowing paying users of one platform's membership program to enjoy the perks of the other's premium features. There's a lot of excitement for iQiyi after it went public at $18 just four weeks ago.
Revenue rose 57% to hit $777.6 million for iQiyi through the first three months of the year. Wall Street was hoping for slightly higher growth, but a key takeaway here is that top-line growth accelerated from the 55% spike it registered for 2017.
There was growth across all three of iQiyi's primary revenue streams. Membership services, online advertising, and content distribution revenue rose 67%, 52%, and 44%, respectively. Membership growth is the scintillating part of this story, as more and more users of the free ad-supported service upgrade to iQiyi VIP for access to proprietary content and other premium features.
Membership services revenue of $334 million (or 43% of total revenue) should overtake ad revenue -- clocking in at $336.5 million (or 43.2% of total revenue) -- to be the primary driver in the current quarter. iQiyi didn't provide an update on its user tallies, but it began the year with just 12% of its more than 420 million monthly active mobile users as premium subscribers. As you can imagine, the paying accounts are more valuable than the folks settling for the free platform.
iQiyi's operating loss widened by 10% to $169.4 million, but because total revenue grew so much faster, the operating loss margin actually improved from 34% a year ago to 22%. Net loss narrowed to $63.1 million or $0.31 a share, but that was the handiwork of a fair value gain in one of its private company investments and favorable appreciation of China's currency against the U.S. dollar. iQiyi isn't providing adjusted bottom-line results in its earnings release.
Accelerating revenue isn't likely to continue after the first quarter's 57% surge. Guidance is calling for second-quarter revenue to clock in at a record $924 million to $963.1 million, or 42% to 48% in top-line growth. Analysts were already bracing for growth to slow to 43% for the full year.
The strategic partnership with JD.com will help beef up the number of premium users of iQiyi even if it blurs organic growth. Anyone buying a one-year membership to iQiyi VIP or JD Plus will have access to iQiyi's content and JD.com's premium membership prices. It's a smart move for both companies, especially since both are leaders in their respective fields. This may not have been a blowout showing for iQiyi in its first quarter as a public company, but a lot of things still went right for the dot-com speedster.