The company, which is the video streaming arm of Chinese
major Baidu (NASDAQ: BIDU),
continues to impress in terms of revenue and subscriber growth. During the last
reported quarter, it reported a 55% increase
in revenue to RMB 7 billion ($1 billion), helped by a 72% increase in
subscriber base. Analysts had projected revenue of just $961.45 million in Q4.
The company had 87.4 million subscribers at the end of fiscal 2018, of which over 98% were paid users. iQiyi’s content is highly popular and we can expect to see further growth in its membership business in Q1. It also doesn’t shy from innovating with newer technologies including augmented reality to provide better binge-watching experience to viewers. But all that is coming at the cost of squeezed margins.
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Last quarter, the management had stated that they would
continue to expend on premium content and technology innovation to drive
topline growth. So we can expect to see
increased costs on revenues and weakening cash flow. Expenses doubled during the
last quarter to RMB 8.5 billion ($1.2 billion).
As profitability is not on the short-term agenda, investors will be looking at other key numbers such as advertising revenues, which is currently seeing strong growth on the back of licensed content. Subscriber growth could be another key metric watched by the Street to gauge iQiyi’s consistency. A partnership with peer Chinese firm JD.com (NASDAQ: JD) as well as cross-promotional offers are expected to drive subscriber base in Q1.