iQiyi (IQ -2.69%) stock limped into its first-quarter earnings report. Wall Street had soured on the Chinese video-streaming giant after watching two straight quarters of declining membership.

But the actual results were surprisingly good and might illustrate a path back to growth for this business. And there were at least three ways the company far exceeded admittedly low analyst expectations.

Let's take a closer look.

1. Subscriber losses were modest

iQiyi shed subscribers for a third straight quarter, with paying membership falling to 105 million subscribers from 119 million a year earlier. Yet that decline wasn't as bad as many Wall Street pros were forecasting, and that win allowed revenue to outpace estimates.

Person wearing headphones while laying on a pillow in bed and looking at a glowing laptop screen.

Image source: Getty Images.

In a press release, iQiyi's management focused on the fact that growth was strong compared to the prior quarter even though membership declined year over year. "[M]embership services revenue grew by 12%," CEO Yu Gong said, to set a new quarterly record. That success is good news for iQiyi bulls since it apparently came from successful content launches. Executives had blamed the weak membership results in the past half year on a temporarily slow content release pace. The latest uptick bolsters that prediction.

2. Costs are under control

The video-streaming specialist is still far from profitable. Its losses were $155 million, or 13% of sales. But that's an improvement over last year when losses were 20% of sales, as well as 2019 when they were 32%.

iQiyi has now reduced content costs for three consecutive quarters while keeping a tight lid on spending in areas like marketing and tech development. That's putting the young company on track toward self-funding, even if that milestone is still more than a year away. "[W]e are committed to pursuing [return-on-investment]-driven approach across different aspects of [the] business," CFO Xiaodong Wang said.

3. The outlook is brightening

The stock's slump so far in 2021 seemed to reflect investors' view that the business has no path to sustainable growth or profitability. But iQiyi's outlook isn't that dire. Management sees another quarter of roughly flat sales in Q2. Its longer-term forecast is cloudier but relies on the company solving its content-quality problem over the next few years. "We need to find the best talent and partners in the industry to build a strong content ecosystem," executives said in a letter to shareholders, "and then make breakthroughs of original content."

That process will take time, and there's no guarantee that it will pay off for investors. On the bright side, the company has one of the biggest platforms in its industry, and recent hits like February's launch of My Heroic Husband show a huge appetite for quality film and TV releases.

Investor takeaway

None of that means iQiyi is suddenly a screaming buy today. The biggest asset it needs to thrive -- a steady pipeline of great streaming content -- isn't on the books just yet.

Until it can build that infrastructure, the stock will still be prone to bearish attacks about its elevated debt and questionable competitive position. But more than a few Wall Street pros wrote iQiyi off too quickly. The streamer has some valuable time it can use to fix its content challenges.