(Yicai) Aug. 21 -- IQiyi reported a net loss in the second quarter of the year, mainly because the Chinese video streaming site saw declines in revenues from membership services and advertising.

Net loss was CNY133.7 million (USD18.7 million) in the three months ended June 30, compared with a net profit of CNY68.7 million (USD9.6 million) a year earlier, the Beijing-based firm said in its latest earnings report released yesterday.

Revenue fell 11 percent to CNY6.6 billion (USD925.3 million) in the period, mainly because membership service revenue declined 9 percent to CNY4.1 billion due to a lighter content slate, and online advertising revenue slid 13 percent to CNY1.3 billion as some advertisers adjusted their strategies in response to macro pressures.

Meanwhile, revenue from overseas membership services surged 35 percent in the second quarter from the same period last year, with key markets such as Brazil, Mexico, and Indonesia up more than 80 percent.

"We effectively managed our resources and optimized our capital structure, with net interest expense consistently declining over the last seven consecutive quarters," said Wang Jun, chief financial officer of iQiyi. "This better positions us for long-term value creation."

Cost of revenue dropped 7 percent to CNY5.3 billion in the second quarter from a year earlier, with content costs down 8 percent to CNY3.8 billion. Selling, general, and administrative expenses and research and development spending decreased 1 percent and 6 percent to CNY958.6 million (USD134 million) and CNY421.9 million, respectively.

IQiyi achieved its 14th consecutive quarter of non-generally accepted accounting principles operating profitability and maintained a solid balance sheet, with nearly CNY5.1 billion in cash, cash equivalents, restricted cash, short-term investments, and long-term restricted cash included in prepayments and other assets.

The firm repurchased a total principal amount of USD85 million of notes maturing in 2028 for cash, with USD208 million outstanding principal balance remaining for the 2028 notes, according to Wang.

IQiyi’s net interest expenses shrank by 33 percent in the second quarter from a year earlier, Wang pointed out.

"During the second quarter and into the summer season, we delivered a series of blockbusters and secured the top market share in total drama viewership, according to Enlightent data," said Gong Yu, founder, director, and chief executive officer of iQiyi.

The company also retained the first spot in China by movie viewership for the 14th consecutive quarter, Enlightent data showed.

Three blockbuster dramas released by iQiyi in the second quarter logged popularity index scores exceeding 10,000. The Shadow's Edge, an action crime drama starring Jackie Chan, hit theaters in the period and raked in over CNY300 million in box office revenue.

"We are focusing on innovation and investing in key growth areas, such as artificial intelligence applications, micro dramas, experience business, and global expansion, all with the goal of driving sustainable, long-term success," Gong noted.

IQiyi's micro-drama segment showed strong momentum in the second quarter, with about 15,000 titles generating double-digit sequential growth in daily viewing time and unique visitors.

The company introduced several AI innovations in the second quarter, including the iJump feature, which enables viewers to navigate between key scenes across over 2,300 titles, and Taodou World, an AI agent platform featuring more than 1,200 characters from popular content to help the audience in video search, recommendations, and plot insights to boost user engagement.

Recent policy changes by China's broadcasting regulator removed the 40-episode limit for television dramas and reduced seasonal programming restrictions.

These changes can shorten the time from content production and review to broadcast, provide creators with greater creative freedom, boost synergy between online video platforms and TV channels, and attract more talent and capital into content production, driving the healthy development of the industry, said Wang Xiaohui, chief content officer of iQiyi.

IQiyi's shares [NASDAQ: IQ] rose 0.9 percent to USD2.30 in New York yesterday.

According to recent media reports, iQiyi has hired Bank of America, China International Capital Corporation, and JPMorgan Chase as underwriters for a secondary listing in Hong Kong that could raise about USD200 million to USD300 million. The company has declined to comment.

Editor: Futura Costaglione