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Zhihu Inc Sees Stock Plummet After Disappointing Q3 Results – Here’s the Breakdown

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Zhihu Inc ZH released their third-quarter FY23 financials, revealing a mere 12.1% year-on-year revenue growth to $140.1 million, which fell short of the consensus of $143.6 million. That dismal news sent the stock plummeting.

The adjusted loss per ADS was $(0.05), slightly better than the consensus loss of $(0.06). 

Breakdown: Marketing services revenue for Zhihu experienced a 17.1% Y/Y decline to $52.5 million while paid membership revenue soared 39.2% Y/Y to $64 million. 

Vocational training revenue also witnessed a healthy 85.6% Y/Y increase to $19.8 million. 

Root Causes: The average monthly active users (MAUs) jumped to 110.5 million from 97.0 million Y/Y. Average monthly paying members surged 35.9% Y/Y to 14.8 million.

Margins: The gross margin contracted by 500 bps to 53.7%, primarily due to heightened monetization efforts and an improved cloud services and bandwidth utilization efficiency.

Zhihu reported holdings of $775 million in cash and equivalents.

Mr. Yuan Zhou, the chairman and CEO of Zhihu, acknowledged, “Our total revenues for the quarter continued their year-over-year growth momentum, fueled by accelerated development in paid memberships and our vocational training business.”

The Q4 consensus revenue and EPS are $168.6 million and $(0.03). The stock has tumbled 26.4% year-to-date.

Market Response: ZH shares dwindled by 1% to $1.01 in the latest trading session.

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