Growth may be slowing down at Momo (NASDAQ:MOMO), but at least the pace of the top-line deceleration at the Chinese social video and online dating specialist is moderating. Momo stock opened higher on Tuesday morning after the company posted better-than-expected financial results. 

Net revenue rose 32% to hit $604.9 million in the second quarter. Momo's top-line results have decelerated in all but one of the past 10 quarters, but this is still a relative victory. Momo's growth pace may have slowed from the 35% increase it posted in the first quarter, but it still landed well above the 27% to 30% year-over-year gain that it was targeting in mid-May. 

Momo app running on a smartphone.

Image source: Momo.

Striking a match

Momo is doing a good job of milking more money out of its audience, as total and premium user growth isn't rising as quickly as its revenue. There were 113.5 million monthly active users on Momo's app, a modest 5% increase over the past year and a marginal sequential dip from the 114.4 million monthly active users on its platform back in March. 

Total paying users of its live video and value-added services -- including the Tantan dating site it acquired -- are also increasing at a slower pace, climbing from 11.6 million a year ago to just 11.8 million today. If revenue can grow by 32% when its audience and premium subscribers have risen by just 5% and 2%, respectively, something is clearly going right on the monetization end.

Once again we're seeing live video broadcasting -- the feature that has delivered explosive top-line growth in the past and still serving up nearly three-quarters of Momo's revenue -- growing slower than the balance of the business. Live video revenue climbed 18% higher during the second quarter. Virtual gifting is the hot growth driver at Momo these days, joining the consolidation of Tantan to push value-added service revenue 169% higher for the quarter.

Things aren't as robust at the other end of the income statement, but investors are used to margins contracting as Momo integrates the Tantan online dating platform and strikes revenue-sharing deals with broadcasters and virtual-gift recipients. Costs and expenses once again overshot top-line gains, rising 44% during the three months ending in June.

Momo's operating income rose a mere 4%, with reported earnings declining slightly pitted against the prior year's second-quarter showing. The financials clean up nicely on an adjusted basis, with non-GAAP earnings per share roughly matching the 32% top-line growth to clock in at $0.82 a share. Momo doesn't issue earnings guidance, but this is the third quarter in a row that the adjusted profit tops analyst targets by a double-digit percentage margin. 

Deceleration continues to be the name of the game, and Momo's guidance calls for revenue to rise by just 17% to 19% for the current quarter. Momo stock has historically underperformed during the second half of the year, but the company has also found a way to consistently land above its seemingly conservative guidance. Momo offers a compelling value proposition for tech stock investors with a trailing earnings multiple now in the low teens, but naturally there continue to be risks with investing in China in general, and in a decelerating growth stock in particular. 

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