HUYA, Inc. Aktie

Good day, and good evening, and thank you for standing by. Welcome to HUYA's First Quarter 2026 Earnings Webinar. I'm Hanyu Liu from the HUYA's Investor Relations. [Operator Instructions] Please be advised that today's webinar is being recorded.

The company's financial and operational results were issued earlier today and are posted online. You can also view the earnings press release by visiting the IR website at ir.huya.com. A replay of the call will be available on the IR website soon.

Participants of management on today's call will be Mr. Vincent Junhong Huang, our acting CEO; Mr. Raymond Peng Lei, our CFO; and Ms. Marguerite Xie, Head of Capital Markets. Management will begin with prepared remarks, and the call will conclude with a Q&A session.

Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today.

Further information regarding this and other risks and uncertainties is included in the company's latest annual report on Form 20-F and other public filings as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law.

Please also note that HUYA's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. HUYA's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.

With that, I'm pleased to turn the call over to Mr. Huang. Please go ahead.

Okay. Hello, everyone, and thank you for joining our earnings call today. First, I would like to share our overall performance for the quarter. In the first quarter, total net revenues grew by 15% year-over-year to RMB 1.73 billion, primarily driven by continued strong growth from game-related services, advertising and other businesses.

Game-related services, advertising and other revenues reached RMB 627 million, up 69% year-over-year and further increased to record 36% of total net revenues. Live streaming revenues were RMB 1.1 billion for the quarter, underpinned by our vibrant, diversified and high-quality live streaming content ecosystem.

With the integration of AI, we are able to offer an enriched more creative experiences to our users. Our ecosystem of game content live streamer is becoming increasingly influential across the broader social platforms, while our own channels, including the HUYA Live app, continue to enjoy a stable user base.

Our estimated reach across external platforms doubled from last year, exceeding 200 million users, including those on Douyin and WeChat platforms. According to our internal data, HUYA is the largest gaming MCN on WeChat channels and remain among the top 3 on Douyin.

Across multiple leading game titles, nearly half of the core streamers are connected to HUYA. This broad content network enables us to provide games with strong content-driven marketing and user reach, which is what's driving our growth in our collaboration with game developers in game item sales and advertising as well as game publishing.

On the game publishing front, Goose Goose Duck mobile continued to deliver impressive results. Since its launch on January 7, the game ranked #1 on the iOS free games chart for most of the first quarter.

We have been accelerating the pace of content updates since March. And on April 1, we launched Season 2, introducing a new map, Ancient [ Desert ] as well as new roles, including Dueling Dodo and Raven. At the same time, we continue to work on our UGC mechanism, which we believe will be an important driver of player engagement, social interaction and long-term content vitality for the game. Building on this foundation, we launched our first PGC gameplay mode, Goose Hunt on April 29, which received positive feedback from players and further expanded the game's content ecosystem.

As we continue to focus on building a healthy user ecosystem with robust and fun game content, we are also ramping up its monetization gradually. In April, Goose Goose Duck mobile reached the top 5 on the iOS top grossing game chart with new skin offered validating its monetization potential. Looking ahead, we will further enrich the game's content and social environment with new features such as party mode and a home decoration system, and introduce more IP collaborations to meet players' growing demand for low playing experiences.

Meanwhile, we are working on the WeChat mini-game version, which is currently scheduled for launch this summer. By integrating Goose Goose Duck mobile more deeply with the WeChat user ecosystem, we hope to leverage WeChat social graph to further reactivate existing users and attract new ones.

With the successful debut of Goose Goose Duck mobile, we are gaining more recognition from game developers of our publishing capabilities through our content ecosystem. We now have a handful of new titles in the pipeline to launch this year across various genres, including casual, SLG and AMO.

For in-game item sales, revenues continue to grow solidly year-over-year. On the domestic front, item 4 titles, including Peacekeeper Elite, Honor of Kings and Crossfire continue to contribute incremental growth. For example, our large-scale outdoor live streaming event for Peacekeeper Elite journey season 2, not only effectively drop in-game item sales, but also generated strong social buzz for the game IP.

On the overseas front, in-game item sales for PUBG Mobile, Genshin Impact and Arena Breakout also delivered impressive performance.

On the advertising side, leveraging our influence across streamer networks, tournament production capabilities and UGC creation know-how, we provide fully integrated content marketing solution for game developers.

Some of our earlier advertising campaigns have proven very effective, gaining further recognition from leading advertisers, including Tencent, NetEase and Hypergryph. For example, for Hypergryph's Arknights:Endfield opened better campaigns in the first quarter, we connected multiple top streamers to generate in-depth live streaming content, generating more than 70 million views across the Internet. This not only drove strong live streaming traction on HUYA Live app, but also sparked extensive UGC content across all social platforms, broadening the game's user reach.

In terms of our content offerings on our own platform, we continue to enhance our live streaming tournament ecosystem, introducing 55 licensed tournaments as well as more than 20 self-produced tournaments and variety shows.

In late March, we created Uzi Cup named after e-sports legend Uzi, attracting more than 200 League of Legends teams across China. The event generated more than 100 million views across the Internet and appear on Weibo's trending list 22 times. Building on this momentum, we hosted additional self-produced events, including the Delta Force [ Shija ] Cup and Dota 2 Immortal Cup Season 2.

We have also become the official production partner for multiple top-tier game tournaments such as Valorant 2026 National tournament and 2026 Jiangsu E-Sports Super League. Hosting and producing these events creates organic synergies with our live streaming content in-game item sales and other businesses.

On the product side, we remain committed to upgrading our platform ecosystem through game services and enriching users' entertainment experience with a suite of game tools.

In March, we officially launched the real-time navigation feature for our Delta Force Map Tool as well as the League of Legends Hextech ARAM assistant tool, helping players make better in-game decisions. Beyond this, we are actively developing assistant tools for more titles, including Golden Special and Goose Goose Duck mobile, further establishing game tools as a differentiated product gateway. We are also developing a physical AI companion around the appeal of Goose Goose Duck, creating richer and differentiated game play and companionship value.

Overall, we delivered solid progress across multiple business lines in the first quarter. Game publishing, in-game item sales, advertising marketing and tournament operations all achieved meaningful breakthroughs.

HUYA is accelerating its strategic evolution from a game live streaming platform into a full-service game services platform with game-related revenues reaching a record high percentage of total revenues and our revenue mix continue to improve.

We will continue to deepen our game content ecosystem and focus on high-value opportunities across the game industry value chain. While scaling the business, we will continue to enhance earnings quality and strive to deliver resilient and sustainable growth for our shareholders.

With that, I will now turn the call over to our CFO, Raymond Lei. He will share more details on our results. Raymond, please go ahead.

Thank you, Vincent, and hello, everyone. I'll start with an overview of our financial performance. In the first quarter, we delivered a steady top line growth with continued improvement in both our revenue mix and operating performance. Notably, the increased revenue contribution from business with higher gross margins led to both year-over-year and sequential gross margin expansion to 14.6% this quarter. Furthermore, we achieved a non-GAAP net income of RMB 21 million for the quarter despite lower interest income.

Let's move on to more details of our Q1 financial results. Total net revenues were RMB 1.73 billion for Q1, up 15% from the same period last year. Live streaming revenues were RMB 1.1 billion for Q1 compared with RMB 1.14 billion from the same period last year, primarily reflecting the live streaming industry's current environment.

Game-related services, advertising and other revenues were RMB 627 million for Q1, up 69% from the same period last year. The increase was primarily driven by higher revenues from in-game item sales and advertising, mainly attributable to the company's deepened and broadened collaboration with game companies.

Cost of revenues increased by 12% year-over-year to RMB 1.48 billion for Q1, primarily due to increased cost of in-game virtual items as well as increased revenue sharing fees and content costs. Within this, revenue sharing fees and the content costs rose by 7% year-over-year to RMB 1.23 billion, mainly reflecting growth in our top line.

Gross profit was RMB 253 million for Q1, up 34% from the same period last year. Gross margin was 14.6% for Q1, improving from 12.5% from the same period last year. Excluding share-based compensation expenses, non-GAAP gross profit was RMB 256 million and non-GAAP gross margin was 14.8% for Q1.

Research and development expenses increased by 2% year-over-year to RMB 132 million for Q1. Sales and the marketing expenses increased by 45% year-over-year to RMB 88 million for Q1, primarily due to marketing and the promotion efforts related to the launch of Goose Goose Duck mobile. General and administrative expenses increased by 6% year-over-year to RMB 65 million for Q1, primarily due to increased share-based compensation expenses.

Other income was RMB 3 million for Q1 compared with RMB 4 million for the same period last year, primarily due to lower government subsidies.

Operating loss narrowed to RMB 29 million for Q1 compared with a loss of RMB 60 million for the same period last year. Excluding share-based compensation expenses and amortization of intangible assets from business acquisition, non-GAAP operating loss narrowed to RMB 3 million for Q1 compared with a loss of RMB 36 million in the same period last year.

Interest income was RMB 30 million for Q1, down from RMB 65 million for the same period last year, primarily due to a lower time deposit balance following the payment of special cash dividends.

Net loss attributable to HUYA Inc. was RMB 4 million for Q1 compared with net income attributable to HUYA Inc. of RMB 1 million for the same period last year. Excluding share-based compensation expenses and the amortization of intangible assets from business acquisitions net of income tax, non-GAAP net income attributable to HUYA Inc. was RMB 21 million for Q1 compared with RMB 24 million for the same period last year.

Diluted net loss per ADS was approximately RMB 0.02 for Q1. Non-GAAP diluted net income per ADS was RMB 0.09 for Q1.

As of March 31, 2026, the company had cash and cash equivalents, short-term deposits and long-term deposits of RMB 3.46 billion compared with RMB 3.82 billion as of December 31, 2025.

With that, I'd like to open the call to your questions.

[Operator Instructions] Today's first question comes from Ritchie Sun from HSBS.

Congrats on a solid start from Goose Goose Duck. I want to ask about the latest operating and strategy and also commercialization progress for this game. And what is the -- this year's operating strategy going to be?

[Interpreted] Since its launch on January 7, Goose Goose Duck mobile has continued to deliver impressive results, ranking #1 on the iOS free game chart for most of the quarter. This validates both the appeal of the game social gameplay and HUYA's content-driven game publishing model. In the first quarter, we have been mainly focused on marketing and promoting the game as well as perfecting our gameplay and in-game operations to keep up with the better-than-expected user numbers. As of now, we are still at an early stage in terms of monetization, but we're ramping up gradually. For 2026, especially the first half, our priority for this game remains to be growing the user base and user engagement.

In particular, there are 3 things we'll be focusing our efforts on. Number one, we'll continue to build and strengthen our UGC mechanism, and Goose Hunt is an early example of this framework with its gameplay and content currently led by a PGC team. As we continue to enhance our UGC mechanism and related know-how, we will add more UGC gameplay and casual game modes to the game. We believe this is crucial for game sustainable user engagement and the longevity. Second, we will add more social and community features, including interplayer connections, the home decoration system and team-up interactions so the game can evolve into a deeper social environment. Third, we are working on the WeChat mini-game version, which is currently scheduled for launch this summer. Given the game's strong party game nature, we believe the WeChat ecosystem and social graph can help us further reactivate existing users and attract new ones.

And we will take our next question from Nelson Cheung from Citi.

And my question is related to your AI progress. Wondering if management can share your latest strategic planning on AI for the company. And how should we integrate your AI applications into the company core business?

[Interpreted] Yes. So our AI initiatives are focused on 4 areas centered around our business. Number one, that's live streaming; number two, game tools; number three, IP-based companionship; and number four, game production. So for AI-powered live streaming, we are exploring 2 main parts. Firstly, that's AI-powered content creation and secondly, it's AI-native live streaming. So these products are still in early stages of product iteration and user testing. We do not expect AI to replace real live streamers anytime soon, especially top ones with emotional connection with users and real-time interactivity remain difficult to replicate. Instead, we think the real value of AI in live streaming is to help us explore more opportunities in mid-tier and long-tail live streaming content, 24-hour companionship and certain interactive formats.

For AI-powered game tools, we are also progressing really well. In March, we launched the real-time navigation feature for our Delta Force Map tool as well as the Hextech ARAM assistant tool for League of Legends. These tools are not just static guide for players, instead they combine AI capabilities with HUYA's deep understanding of games to provide more real-time and context-aware decision support. For example, our Delta Force Map Tool helps players quickly identify resource points, routes and high-risk areas, lowering their learning curve. The Hextech ARAM tool can provide champion recommendations, item build suggestions and gameplay ideas for each match. Since every match requires players to make new decisions, this kind of match-based assistant tool has very strong repeat use value. Going forward, we'll expand game tools to more titles and categories, including Golden Spatula, Goose Goose Duck mobile, card and board games, strategy games and auto chat games.

AI-enabled companionship were exploring IP-based smart hardware, including physical AI companion products embedded with the multimodal AI capabilities. Based on our user feedback from Goose Goose Duck, we believe this product can go beyond emotional companionship and create deeper integration with the game itself, including in-game interactions and post-game reviews. This can further extend the connection between IP and the players.

For AI-assisted game production, we are also exploring how AI can help us generate and test casual game content more efficiently. We do not expect to replace large-scale AAA type of games in the near future, but we do see a lot of opportunities improving R&D efficiencies in casual games, web-based games or more interactive games.

And our next questions come from Wei Meng from CICC.

Just want to ask about the game publishing pipeline. Could management maybe share some colors on those pipelines and what's the rough timeline for those releases and what kind of revenue contribution should we expect from them?

[Interpreted] Currently, we have a robust publishing pipeline, and we expect to launch multiple new games this year. These include collaborations with leading game companies such as Tencent and Kingsoft. The pipeline covers multiple genres, including casual, strategy, SLG, MMO and others. We will pace the launches based on product testing, license approval progress and the right market windows.

The next in our pipeline is the casual 3D puzzle matching game that we licensed, which is scheduled for launch for the summer holidays. We have exclusive publishing rights for Mainland China, Hong Kong, and Macau. The game is already proven in overseas markets in terms of user appeal and monetization. Based on third-party estimates, its cumulative downloads exceed 10 million and the title has remained among the top grossing titles in overseas 3D puzzle matching category.

In terms of publishing strategy, we're leveraging our influence in streamer networks, cross-platform distribution and player communities. As mentioned in our prepared remarks, our estimated reach across external platforms now exceed 200 million users, including those on Douyin and WeChat platforms. This extensive user reach allows us to target core players more efficiently, create more appealing content and enhance game longevity.

We will take next question from Maggie Ye from CLSA.

Could management share your perspective on the recent trends and future outlook for the live streaming business? In addition to that, what are the core strategic levers and key drivers for the company to maintain a stability in this segment moving forward?

[Interpreted] So live streaming remains a core part of HUYA's business. In the first quarter, the live streaming revenue was RMB 1.1 billion, but we do feel this business may still be under some pressure due to the overall market environment. Therefore, we'll be more focused on improving ROI across content cost, which includes streamer costs and licensing costs.

We believe one of HUYA's key differentiator versus any other live streaming platform is our ability to consistently create influential gaming content and leverage that content to better support game publishing and distribution. This capability is backed by our close relationships with top streamers, our know-how in tournament production and our cross-platform game distribution capability.

In the third quarter of 2026, we offered around 55 licensed tournaments and more than 20 self-produced tournaments and variety shows. Among them, our self-produced Uzi Cup generated over 100 million views across the Internet, demonstrating the value of our streamer IP plus self-produced tournament model.

Also during the quarter, we partnered with a top entertainment live streamer for collaboration at major tourist attractions in Luoyang, generating strong online engagement and attracting over 100,000 peak concurrent viewers.

The key game titles will continue to build self-produced content around them. For example, Dota 2 Immortal Cup Season 2 is currently one of the largest third-party Dota 2 tournaments in China. For Crossfire, we recently worked with CF team on live streaming campaigns around the Kung Fu IP collaboration, including Crossfire Kung Fu HUYA Duel Night. These campaigns helped generate significant social buzz for new updates and further improve user engagement. For Peacekeeper Elite, we launched Elite Journey Season 2 in the third quarter, which is a live streaming show that generated solid user participation that creatively combines game content, streamer influence and outdoor scenarios. We think this is a great way to improve user engagement and help game content reach a broader audience.

HUYA also offers a broad range of highly-engaging sports content. We have already secured full rights for 2026 Badminton World Federation events and 2026 World Snooker Tour and will provide viewers with high-definition live broadcast of these events. The recently concluded 2026 World Snooker Championship generated more than 150 million total views on HUYA. In particular, the match between the 2 Chinese players, Ding Junhui and Zhao Xintong reached a peak of nearly 20 million viewers in a single live streaming room.

We will take the next question from Yiwen Zhang from China Renaissance.

My question is on the advertising and in-game item sales. Can you share some operational color on that?

[Interpreted] In third quarter, game-related services, advertising and other revenues reached RMB 226 million, up 69% year-over-year and increased to 36% of the total net revenue. The growth was mainly driven by the continued expansion in in-game item sales, advertising, while game publishing also contributed incremental growth. This shows that HUYA's revenue mix is continuing to improve and non-live streaming game services have become an important growth driver.

For in-game item sales, revenue continued to grow rapidly year-over-year. In the domestic market, growth was mainly driven by leading titles such as Peacekeeper Elite and Honor of Kings. More specifically, Honor of Kings benefited from the exclusive skin sales and Chinese New Year skin events, while Peacekeeper Elite saw better sales conversion as we continue to optimize item offering and content quality through our content ecosystem. Crossfire and other titles also benefited from key sales windows and tournament-related resources.

Overseas, titles such as PUBG Mobile, Genshin Impact and Arena Breakout continue to contribute to incremental growth. We will continue to expand our overseas in-game items supply and strengthen our localized service capabilities. Looking ahead, we will continue to develop more customized bundles and rights-based partnerships while bringing more transactions into HUYA's own platform ecosystem.

On advertising, we have continued to strengthen content-driven integrated game marketing solutions. By combining streamer network, tournament integrations, UGC co-creation, other core capabilities, we provide game developers with end-to-end marketing solutions. Our ROI performance on these advertising campaigns continue to earn recognition from leading advertisers such as Tencent, NetEase and Hypergryph.

Now we will take our last question today from Rebecca Xu from Morgan Stanley.

I'm honored to be the last to raise question. My question is about margin and net profit trend. Can management share some color on the margin and net profit trend maybe in the full year basis?

[Interpreted] Our margins will continue to see improvement in the third quarter with non-GAAP operating margin approaching breakeven. This improvement was mainly driven by continued revenue mix optimization with higher contributions from relatively high-margin business such as advertising, game items and game publishing. We also continue to strengthen cost and expense management and improve operating efficiency.

Looking ahead, as this margin -- as the higher-margin businesses continue to scale and operating leverage gradually come through, we expect further improvement in our overall gross margin and operating margin for the full year. In addition, given the pace of investments related to Goose Goose Duck and other games, we expect improvement in both margins to become more visible in the second half of the year.

Thank you once again for joining us today. If you have further questions, please feel free to contact HUYA's Investor Relations through the contact information provided on our website of Piacente Financial Communications. This concludes today's call, and we look forward to speaking to you again next quarter. Thank you.

Good day, and good evening, and thank you for standing by. Welcome to Huya's Fourth Quarter and Fiscal Year 2025 Earnings Webinar. I'm Hanyu Liu from the Huya Investor Relations.

[Operator Instructions]

Please be advised that today's webinar is being recorded. The company's financial and operational results were issued earlier today and are posted online. You can also view the earnings press release by visiting the IR website at ir. huya.com. A replay of the call will be available on the IR website soon.

Participants of management on today's call will be Mr. Vincent Junhong Huang, our Acting Co-CEO and Senior Vice President; Mr. Raymond Peng Lei, our Acting Co-CEO and CFO; and Ms. Marguerite Xie, Head of Capital Markets. Management will begin with prepared remarks, and the call will conclude with a Q&A session.

Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in the company's latest annual report on Form 20-F and other public filings as filed with the U.S. Securities and Exchange Commission.

The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please also note that Huya's earnings press release and this conference call include discussion of unaudited GAAP financial information as well as unaudited non-GAAP financial measures.

Huya's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. With that, I'm pleased to turn the call over to our Co-CEO, Mr. Huang. Please go ahead.

Okay. Hello, everyone, and thank you for joining our earnings call today. I'm proud to say 2025 was a record year for us. In the fourth quarter, total net revenues grew by 16% to RMB 1.74 billion, the highest in the last 10 quarters, while our live streaming business remained stable. Revenues from game-related services, advertising and other businesses grew 59% year-over-year, demonstrating our successful transformation to the gaming space.

On a full year basis, total net revenues returned to growth and reached RMB 6.5 billion, up 7% year-over-year. In the fourth quarter, we recorded a one-off accounting provision, excluding lease provision, SBC and amortization items, we would have seen 3 consecutive quarters of positive growing operating profit and the full year operating profit.

A robust content ecosystem and a stable user base underpin our performance. In Q4, Huya's total MAUs were approximately 160 million. We are also pleased to see our platform's influence continue to grow.

In February, we welcomed the return of UGI, one of the most legendary names in Esports. This return further validates the strength of Huya's Esports content ecosystem and our ability to attract and support top-tier streamers. The influence of our streamer ecosystem continued to expand with more top streamers returning to Huya and many of our streamers gaining recognition across our platforms, including WeChat channels, Douyin and beyond.

We are no longer just a game live streaming platform, but have evolved into a content-driven integrated game services provider with broad cross-platform reach and a key strategic partner to game developers.

Since our strategic transformation into games-related services in 2023, we have expanded and deepened our footprint across the industry's value chain. We have expanded beyond live streaming into a broader range of game-related services, including game distribution, in-game item sales and game advertising, further transforming Huya into a more integrated game-related services provider. Our entry into game publishing with the success of Goose Goose Duck Mobile marks another important milestone in this transformation. Unlike traditional publishing model that rely primarily on user acquisition, we leveraged the strength of our content ecosystem and take a content-driven approach to publishing.

Goose Goose Duck Mobile launched in January delivered outstanding results, attracting over 5 million new users within the first 24 hours and surpassing 10 million within 6 days and has ranked #1 on the iOS free game chart for the most of the time since its launch.

The game quickly become a market sensation and a clear validation of our strategy. Since preregistration stage, we have been working closely with top streamers across multiple platforms and produced 2 seasons of a live streaming variety show. [indiscernible] with full strong social media buzz and anticipation prior to launch. We saw very strong user-generated content trending on social media as the game generated hundreds of millions of impressions and sparked over 100 social media trending moments on social platforms such as Douyin and Red Note. This content-driven marketing approach resulted in a much higher ROI that far exceed traditional traffic acquisition channels.

This underscore our effectiveness in content-driven marketing for new game launches and maintaining traction over time. We are pleased to see that 2 months after this launch, Goose Goose Duck Mobile continues to stay at the top of the chart and continue to outperform our expectation in terms of user retention.

Most of our players for this game are college students and young working professionals with a higher proportion of iOS and female users. Looking ahead, we are excited to continue enhancing our social feature and building a stronger and more vibrant community.

Monetization remains relatively limited for now as we focus on growing engagement, but with major game content updates scheduled for later this year, we expect monetization to increase afterwards. The successful debut of Goose Goose Duck Mobile demonstrates the potential of our publishing strategy and give us great confidence in our next growth driver fueled by our live streaming content ecosystem.

We are excited by our strong publishing pipeline with multiple new titles coming later this year. At the same time, supported by the strength of Huya's ecosystem, our other game-related businesses, including in-game item sales and advertising continue to deliver solid performance.

For in-game item sales, revenue continued to grow year-over-year, increasing by more than 200%, driven by new titles such as Peacekeeper Elite and Crossfire Mobile. As the business further scales, we continue to expand and deepen our collaboration with game developers.

In January, we became the first platform to secure exclusive presale rights for the MVP scheme in Honor of Kings, which is rare for the industry. We also partnered with Arena Breakout to launch a customized bundle exclusively for overseas players, which also delivered strong sales performance.

Looking ahead, we will continue to expand customized rights offerings, joint marketing and localized partnerships across more top-tier titles to further enhance user satisfaction. On the advertising side, Huya's content-driven marketing capabilities are also gaining broader recognition from leading game developers, including Tencent and NetEase.

In the fourth quarter, we hosted NetEase's Fantasy Westward Journey Mobile, [Foreign Language] Cup in collaboration with 32 top streamers. This helped the game to further expand its brand awareness to younger audience through live streaming. In our e-sports ecosystem, we delivered solid results across both licensed and self-produced events in Q4. During the quarter, we offered users close to 100 licensed tournaments as well as around 40 self-produced tournaments and variety shows. One key highlight came in December when we hosted the Demacia Cup for the first time, one of the core professional tournament in the League of Legends ecosystem.

This also marked the first time that the official League of Legends organizer had granted hosting rights to a third-party live streaming platform. It reflects strong recognition of Huya's event planning, operational and content production capabilities and marks our evolution from an exclusive live streaming partner to a full-service tournament organizer.

Building on our summer success, we hosted the Delta Force Diamond Champions autumn season. The event set new bars for the game in item in terms of both scale and viewership in Delta Force e-sports circuit.

On the product side, we see great opportunities in the AI wave today. We have made meaningful progress in AI-powered live streaming with a growing number of production featuring permanently on viewership charts.

We have integrated AI host into our e-sports programs who are equipped with realistic human-like avatars and capable of professional level commentary and interaction. This visual host engaged with viewer comment in real time, fostering strong audience resonance.

This has been particularly well received among users of leading game categories such as League of Legends and CS:GO, driving longer viewing time and deeper community engagement.

We are thrilled to continue exploring the latest technologies and integrating them directly into our game tools and products, creating richer and more engaging experience for our players that were not possible before. For example, in March, our Delta Force Map tool will introduce a real-time navigation feature powered by our context-aware multimodal AI capabilities, enabling smoother game play and more intuitive interactions.

Beyond this, we are actively exploring ways to embed these technologies across additional titles, including Golden Spatula and Goose Goose Duck Mobile. On the overseas front, we remain focused on improving the product experiences and strengthening our content ecosystem, which supported steady growth in both advertising and in-game item sales.

We will continue to incubate new products in a flexible manner and evolve our monetization strategies. We believe this will further strengthen our capabilities and momentum for scaling our overseas publishing business as well as other monetization opportunities.

Overall, marked a pivotal year for Huya, defined by solid strategic execution and impactful milestones. From an operational perspective, we returned to growth and further enhanced our profit profile. Looking ahead, we will further scale our footprint across the entire gaming value chain. With our growth momentum on a robust and sustained upward trajectory, we are poised to embark on an ambitious new chapter of sustainable high-quality development for Huya.

With that, I will now turn the call over to our Co-Acting CEO and CFO, Raymond Lei. He will share more details on our results. Raymond, please go ahead.

Thank you, Vincent, and hello, everyone. I'll start with our fourth quarter results, followed by our full year financial highlights and an update on our shareholder returns.

In the fourth quarter, we delivered accelerated top line growth driven by robust expansion in our game-related services and advertising businesses. However, our operating results were impacted by a onetime RMB 66 million provision, which led to a non-GAAP operating loss of RMB 36 million for the quarter. Excluding the impact of this onetime item, we continue to see improvement in our core operating performance and the overall earnings profile.

Let's move on to more details of our Q4 financial results. Total net revenues were RMB 1.74 billion for Q4, up 16% from the same period last year. Live streaming revenues were RMB 1.15 billion for Q4, up 2% from the same period last year, primarily due to higher average spending per paying user for live streaming services.

The number of domestic paying users remained stable at 4.4 million for Q4. This figure excludes users who made in game purchases through our game distribution business, but didn't complete payments through our platform or related services as well as overseas paying users. Game-related services, advertising and other revenues were RMB 593 million for Q4, up 59% from the same period last year. The increase was primarily due to higher revenue from game-related services and advertising, which were mainly attributable to our deepened cooperation with game companies in China and overseas.

Cost of revenues increased by 30% year-over-year to RMB 1.49 billion for Q4, primarily due to increased revenue sharing fees and content costs as well as increased costs related to in-game items. Within this, revenue sharing fees and content costs rose by 10% year-over-year to RMB 1.28 billion, reflecting growth in our top line.

Gross profit was RMB 245 million for Q4, up 44% from the same period last year. Gross margin was 14.1% for Q4, improving from 11.4% from the same period last year. Excluding share-based compensation expenses, non-GAAP gross profit was RMB 248 million and non-GAAP gross margin was 14.3% for Q4. Research and development expenses were RMB 123 million for Q4, largely flat year-over-year. Sales and marketing expenses increased by 24% year-over-year to RMB 78 million for Q4, primarily due to increased marketing and promotional efforts, including pre-launch preparations for Goose Goose Duck mobile.

General and administrative expenses decreased by 55% year-over-year to RMB 126 million for Q4, primarily due to RMB 66 million provision related to a receivable arising from 2021 arrangement with a broadcaster, which was deemed to have heightened risk of non-recoverability. Other income was RMB 18 million for Q4 compared with RMB 4 million for the same period last year, primarily due to increased government subsidies.

Operating loss narrowed to RMB 65 million for Q4 compared with a loss of RMB 93 million for the same period last year. Excluding share-based compensation expenses and amortization of intangible assets from business acquisition, non-GAAP operating loss narrowed to RMB 36 million for Q4 compared with a loss of RMB 69 million in the same period last year.

Interest income was RMB 32 million for Q4, down from RMB 75 million for the same period last year, primarily due to a lower time deposit balance following the payment of special cash dividends. Impairment loss of investments was RMB 81 million for Q4 compared with RMB 151 million for the same period last year, primarily due to the recognition of impairment charge on the company's investments attributable to the weak financial performance of certain investees.

Net loss attributable to HUYA Inc. narrowed to RMB 118 million for Q4 compared with loss of RMB 172 million for the same period last year. Excluding share-based compensation expenses, impairment loss of investment and amortization of intangible assets from business acquisitions, net of income taxes. Non-GAAP net loss attributable to HUYA Inc. was RMB 8 million for Q4 compared with non-GAAP net income attributable to HUYA Inc. of RMB 1 million for the same period last year, primarily due to the provision item and lower interest income as explained earlier.

Diluted net loss per ADS were approximately RMB 0.51 for Q4. Non-GAAP diluted net loss per ADS was RMB 0.04 for Q4. As of December 31, 2025, the company has cash and cash equivalents, short-term deposits and long-term deposits of RMB 3.82 billion, largely flat compared to September 30, 2025.

Moving on to our full year 2025 results. Total net revenues were RMB 6.5 billion for 2025, decreased by 7% from the prior year. Live streaming revenues were RMB 4.59 billion for 2025 compared with RMB 4.75 billion for the prior year. Game-related services, advertising and other revenues were RMB 1.91 billion for 2025 compared with RMB 1.33 billion for the prior year. Non-GAAP gross profit was RMB 884 million for 2025, up 7% from the prior year. Non-GAAP gross margin remained flat at 13.6% for 2025. Non-GAAP net income attributable to HUYA Inc. was RMB 99 million for 2025 compared with RMB 269 million for the prior year, and the non-GAAP net margin was 1.5% for 2025 compared with 4.4% for the prior year. To reiterate, the decline was largely due to the provision we discussed and the lower interest income rather than any change in our core business performance. Non-GAAP diluted net income per ADS was RMB 0.43 for 2025 compared with RMB 1.15 for the prior year.

Net cash used in operating activities was RMB 176 million for 2025 compared with net cash provided by operating activities of RMB 94 million for the prior year, primarily due to decreased interest income and increased amounts due from related parties. For additional details on our full year 2025 financial results, I encourage listeners to refer to our earnings press release issued earlier today.

Finally, let me provide an update on our shareholder returns. To implement our 2025 to 2027 dividend plan adopted in March 2025, we are pleased to declare a 2026 special cash dividend of USD 0.135 per ordinary share or USD 0.135 per ADS for a total amount of approximately USD 31 million. In addition, under our up to USD 100 million share repurchase program, we have repurchased 22.9 million Huya shares with an aggregate consideration of USD 75.5 million as of the end of December 2025.

With that, I'd like to open the call for your questions.

[Operator Instructions] Today's first question comes from Rebecca Xu from Morgan Stanley.

[Foreign Language] I will translate myself. We see profit fluctuations mainly driven by provisioning and investment impairments. Could management share the composition and underlying reasons for this item? And how should we think of the future trend on OP and net profit?

[Interpreted] Thank you for the question. The fluctuate in our profit this quarter was mainly driven by 2 items. First, we recorded a RMB 66 million one-off provision related to a receivable arising from 2021 arrangement with broadcaster. This was recorded in G&A and contributed materially to our non-GAAP operating loss of RMB 36 million for the fourth quarter. And secondly, we recorded impairment loss of investments of RMB 81 million related to companies that were previously investees as underperforming. This contributed to our net loss. So overall, these 2 items are noncash accounting adjustments based on management's highly prudent and critical evaluation. So from our perspective, these are more like one-off impacts that do not reflect our core operating trends.

So going forward, we'll continue to review -- to perform regular impairment review in accordance to the accounting standards. But right as of now, based on management's current judgment, we don't see any additional impairment required at the moment.

Our next question comes from Wei Meng from CICC.

[Foreign Language] Let me translate myself. My question is about Goose Goose Duck. First of all, could you maybe share some color on the current metrics like DAU retention, ARPU and revenue, et cetera. And also what's the KPIs for 2026? And secondly, how does the management think about extending the game life cycle from here?

[Interpreted] Thank you for the question. Let me briefly walk you through the current performance and our future plans for Goose Goose Duck. The game's DAU has consistently stood high and steady since its launch with user retention also exceeding our expectations. As mentioned earlier, we are very proud that 2 months after this launch, the game is still at the very top of the iOS download charts. We expect to see another DAU jump in the summer as we prepare a number of game events and content updates for that season.

On monetization, we have been quite conservative with only very limited monetization content introduced at this stage as we focus on growing the user base. As a result, our baseline daily ARPU is still at a relatively low level. Having said that, whenever we push out a new event or a new update, we do see significant ARPU growth. This reiterates our belief that our users respond well to these content updates, and we will roll out more party game modes and home systems later this year, which we hope will be meaningful in driving daily ARPU.

In terms of longer-term potential and life cycle extension, we are focused on 3 things: first, keeping a rapid pace of content updates; second, gaining actual user growth across multiple platforms. We expect to launch WeChat mini-game version later this year, which could further expand our overall active user base; third, building our UGC ecosystem. We are currently working on the UGC editor, and we will keep upgrading these functions to give our users an enriched UGC experience within the game.

And our next questions come from Ritchie Sun from HSBC.

[Foreign Language] I want to ask about AI. So what has been the progress in terms of the AI, especially in AI live streaming, AI game tools and internal organizational improvement in terms of efficiency? What are the tangible results over there?

[Interpreted] Thank you for the question. So AI is something every company should think about. For us, it's about 2 things: one, is empowering our existing business; and two, exploring new opportunities. So for our existing business, both AI-powered live streaming channels and AI game tools continue to deliver very strong momentum. These AI-powered channels now contribute nearly 10% of our overall DAU and the performance continues to stand out across the platform.

On average, they outperformed their real life peers by 40% across key metrics such as viewing time, retention and attributed DAU. And that number goes up to 80% for the very best AI live streaming channels. This year, we'll continue to enhance content capabilities and operating efficiency of fully AI-powered live streaming channels and further increase their traffic contribution. AI game tools are also very promising. Last quarter, we launched Delta Force Map Tool, which provides a very rich, immersive 3D environment for players to quickly get familiar and better navigate the game. So we also launched this tool to the overseas market, and it was very well received by international users. It draw great attention from games official team and was recommended on many of the official community channels.

So as we continue to iterate our AI capabilities, we are working on applying AI-powered real-time navigation into this map tool this month, further expand user reach and engagement. Additionally, we are developing AI hardware and AI interactive products, including AI-enabled smart hardware based on Goose Goose Duck IP. At the same time, we're exploring different ways to integrate new technologies such as open call, multi-agent systems, virtual live streamers into party game scenarios to enhance interactivity and support more customized gameplay experiences for Goose Goose Duck. Going forward, we also plan to create more AI-driven companion tools for other popular titles such as Battle of Golden Spatula.

We will take our next question from Nelson Cheung from Citibank.

[Foreign Language] So let translate myself. Can management share your future strategy on your game publishing business, latest publishing pipeline and the release schedule? Can management share your view on the growth expectation for the game distribution business and overall contribution to the group revenue as a whole?

[Interpreted] The in-game publishing, we remain firmly committed to a content-driven strategy. The industry is rapidly shifting towards content-driven publishing, which fits very well with Huya's strength in live streaming, short-form video content and community engagement. Rather than relying mainly on traditional user acquisition, we're building a more integrated publishing model driven by content. Having publishing rights help us to better measure user conversion efficiency and build a scalable publishing capability.

From a pipeline perspective, we have a number of mini games and mobile games in the pipeline for the year. Most of them either have very strong content appeal or clear e-sports and entertainment potential. This is where Huya's strength in live streaming and e-sports content can be fully leveraged. We see game publishing as the most important driver of our growth as we continue to diversify beyond our traditional live streaming business. While we might have better visibility into revenue contribution after the games are launched, we do have a very strong conviction that our publishing business will be an important part of our revenue mix over time.

Our next question comes from Yiwen Zhang from China Renaisance.

[Foreign Language] So translating my question. The question is on margin. We note despite some net impact from provision impairment in Q4, there was not improvement on our gross profit margin during the quarter. So what is the management's view on future gross profit margin trend and the room for improvement?

[Interpreted] Full year 2025, our gross margin was 13.4%, up 0.1 percentage points year-over-year. In Q4 2025, gross margin, however, improved by 2.7 percentage points year-over-year, mainly driven by 2 factors: first, advertising accounted for a high percentage of total revenue and carries a relatively high gross margin; second, our in-game item business maintained very strong growth and also contributed positively to the margin improvement.

Looking ahead, while gross margin of our live streaming business might be facing a bit of pressure, the benefits from our higher-margin businesses are becoming much more visible as reflected in our fourth quarter performance. As game publishing and in-game item sales business continue to grow and as operating leverage gradually improve, we do -- we expect to see continued gross margin improvement.

We will take our last question today from Maggie Ye from CLSA.

[Foreign Language] My question is related to game virtual item sales. So beyond the top line growth this quarter, could management share any material progress regarding this segment's margin profile, channel mix and any exclusive partnership initiatives? And furthermore, how should we think about the sustainability of this growth and the potential for future margin expansion over the coming quarters?

[Interpreted] Thank you for the question. So overall, our in-game item business delivered a very solid quarter with a very strong growth and improved profitability. In the fourth quarter of 2025, revenue from in-game item sales continued to grow by over 200% year-over-year. As the business scaled, we also further optimized our cost structure, which then translated into meaningful improvement in earnings quality.

So there were 2 -- there were 3 key highlights during the quarter. First, we achieved a meaningful milestone in exclusive rights partnership. For the first time, we secured exclusive presale rights for Wang Zhaojun's FMVP skin in Honor of Kings. The launch generated close to RMB 10 million in gross billings within the first hour and drove very strong growth in new paying users, demonstrating our monetization capability.

Second, we continue to improve our channel mix. We expect more transactions to be completed in our proprietary in-game item more over time, which will further improve monetization efficiency. Third, we continue to work with some of the largest game companies in China, who are working on their key titles, including those from Tencent and NetEase. We hope to further expand our portfolio of games and make -- and continue to grow our presence in the industry. Thank you.

Thank you once again for joining us today. If you have further questions, please feel free to contact the Huya Investor Relations through the contact information provided on our website or Piacente Financial Communications. This concludes today's call, and we're looking forward to speaking to you again next quarter. Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

[Audio Gap]

Huya's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.

With that, I'm pleased to turn the call over to our Co-CEO and SVP, Mr. Huang. Please go ahead.

Okay. Hello, everyone. Thank you for joining our earnings conference today. I'm pleased to report a solid third quarter. Total net revenues reached approximately RMB 1.7 billion, the highest level yet in the past 9 quarters with year-over-year growth accelerating to around 10%.

Non-GAAP operating profit was approximately RMB 6.3 million, representing a meaningful improvement over the same period last year. This encouraging performance was mainly driven by strong growth in game-related services, advertising and other revenues, while our live streaming revenues remained stable.

Revenues from game-related service, advertising and others have now surpassed 30% of total net revenues of the first time this quarter. Our platform ecosystem and user base remained resilient in the third quarter, with total MAUs stable at around 162 million.

The influence of our [ streamer ] ecosystem continues to expand as more top streamers are returning to Huya. And many of our streamers are also gaining recognition across other platforms, including WeChat channels, Douyin and [ Beiyang ].

Across all major competitive titles, including Honor of Kings, League of Legends, Delta Force and Peacekeeper Elite, our top-tier streamers consistently rank among the leading creators in their respective categories, in addition to our own products and app.

We estimate through our top creators, we are able to reach over 100 million users across other platforms, expanding our audience influence and monetization opportunities across the wider gaming and streaming landscape. This impact is reflected in our third quarter performance, where our game-related service, advertising and other segment grew 30% year-over-year, reaching RMB 532 million in revenue.

Within this segment, in-game item sales have become a significant growth driver as we deepen our collaboration with game developers, expand our SKU offerings and leverage the increasing synergy between our live streaming and gaming ecosystems. In-game item sales revenue grew by more than 200% year-over-year in the third quarter.

Partnerships with flagship titles in both China and abroad, including Peacekeeper Elite, League of Legends, Arena Breakout and PUBG Mobile delivered short-lived results. Looking ahead, we are confident that in-game item sales will maintain robust growth momentum as we continue to broaden partnerships and enhance operations.

In terms of game publishing, we are thrilled to announce the upcoming launch of our first title, Goose Goose Duck Mobile, a social deduction game centered on teamwork and strategic game play. The game has gone through its second round of testing throughout October with preregistration quickly surpassing 10 million during that period, leveraging our powerful streamer influence and stronger content-driven marketing capabilities.

In October, we created a live streaming variety show, [ A SIKA ZIYE ], which brought together top streamers from -- for a group gaming session.

The show attracted strong player engagement and brought market attention. We view Goose Goose Duck Mobile as a key step in our strategy to diversify into game publishing, an important milestone that will not only validate our publishing capabilities, but also position us for sustainable growth in this space.

As we continue to step up for our efforts in key areas, including in-game item sales, game publishing, advertising, we believe this segment will remain a sustainable driver of our revenue growth.

Let's move on to live streaming, where revenues increased by about 3% year-over-year, making our first quarter of positive year-over-year growth since the third quarter of 2021. Our content mix has become more balanced and vibrant with the outdoor live streaming category delivering solid gains in both viewing hours and monetization this quarter.

At the same time, we continue to enhance both our mobile and PC platform to ensure users enjoy a truly best-in-class live streaming and e-sports experience. Our latest update introduced a new short-form video hub and interactive 3D game map tool of Delta Force and other cool features.

The short-form video hub enables users to conveniently discover short clips from live streams directly within the Huya Live app, enhancing our content ecosystem and driving a notable increase in short video daily active users and time spent.

Meanwhile, the Delta Force map tool provide rich immersive 3D environment for Delta Force players to quickly get familiar and better navigate the game, attracting more hard-core players to our platform.

E-sport live streaming remains a crucial part of our content offering. We streamed nearly 100 licensed tournament and hosted around 40 self-produced events in the third quarter of 2025 during the recently concluded League of Legends World Championship, one of the most watched licensed e-sports events in China.

We have remained the top live streaming platform in terms of average concurrent users. Building on our fan base, we hosted the 2025 League of Legends Asia Invitational, the first ever LOL international professional tournament produced by a live streaming platform. This event was an important milestone for us, attracting massive viewership outside of China and significantly enhancing our international brand recognition.

We are also excited to announce that we will be hosting the Demacia Cup for League of Legends later this year. Again, we are privileged to be the first live streaming platform ever to be hosting this flagship official event for this game.

Additionally, we have a strong lineup of other highly anticipated e-sports tournament that we will be hosting, including the Delta Force Diamond Champions autumn season following the success we had in the summer.

On the international expansion front, our user base continued to grow steadily during the quarter through our overseas platforms. We are deepening our presence in key geographic market by focusing on user experience and the content ecosystem to enhance engagement and retention.

We have also built closer partnership with popular game partners and diversified monetization strategy, driving sustainable growth and improving profitability.

To sum up, we made solid progress expanding our content ecosystem, unlocked new monetization opportunities and advanced our emerging business models in a disciplined and sustainable manner.

Looking ahead, we will remain focused on long-term development, deepening collaboration with partners, improving monetization efficiency and product experience, strengthening our content and technology capabilities and steadily expanding internationally to deliver sustainable, high-quality growth.

With that, I will now turn the call over to our Acting Co-CEO and CFO, Raymond Lei. He will share more details on our results. Raymond, please go ahead.

Thank you, Vincent, and hello, everyone. I'll start with an overview of our financial performance.

Our total net revenues for the third quarter reached approximately RMB 1.69 billion, increasing 10% year-over-year. Of this, live streaming revenues has resumed growth at 3% year-over-year to RMB 1.16 billion and game-related services, advertising and other revenues grew around 30% year-over-year to RMB 532 million, accounting for 31.5% of total net revenues.

We also achieved a non-GAAP operating income of RMB 6.3 million, another quarter of solid improvement since we first broke even at operating level last quarter. Furthermore, we still achieved a positive net income for the quarter with non-GAAP net income of RMB 36 million despite a substantial decrease in interest income compared with previous periods, primarily due to special dividends paid out.

Let's move on to more details of our Q3 financial results. Live streaming revenues were RMB 1.16 billion for Q3, up 3% from the same period last year, primarily due to the improvement of average spending per paying user for live streaming services.

The number of the domestic paying users remained stable at 4.4 million in the third quarter. This figure excludes users who made in-game purchases through our game distribution business but didn't pay via our platform or related services as well as overseas paying users.

Game-related services, advertising and other revenues were RMB 532 million for Q3, up 30% from the same period last year. The increase was primarily due to higher revenues from game-related services and advertising, which were mainly attributable to our deepened cooperation with game companies in China and abroad.

Cost of revenues increased by 10% to RMB 1.46 billion for Q3, primarily due to increased revenue sharing fees and content costs as well as cost of in-game items. Within this, revenue sharing fees and content costs rose by 8% year-over-year to RMB 1.26 billion, reflecting growth in our top line.

Gross profit was RMB 227 million for Q3, up 11% from the same period last year. Gross margin was 13.4% for Q3, also an improvement from 13.2% from the same period last year.

Excluding share-based compensation expenses, non-GAAP gross profit was RMB 228 million and the non-GAAP gross margin was 30.5% for Q3.

Research and development expenses decreased by 3% year-over-year to RMB 122 million for Q3, primarily due to decreased staff costs as a result of enhanced efficiency. Sales and marketing expenses decreased by 4% year-over-year to RMB 70 million for Q3, primarily due to decreased channel promotion fees.

General and administrative expenses increased by 15% year-over-year to RMB 58 million for Q3, primarily due to increased professional service fees and staff costs. Other income was RMB 9 million for Q3 compared with RMB 13 million for the same period last year, primarily due to lower government subsidies.

As a result, operating loss narrowed significantly to RMB 14 million for Q3 compared with a loss of RMB 32 million for the same period last year. Excluding share-based compensation expenses and amortization of intangible assets from business acquisitions, non-GAAP operating income reached RMB 6 million for Q3, a meaningful improvement from non-GAAP operating loss of RMB 13 million in the same period last year.

Interest income was RMB 35 million for Q3, reduced from RMB 97 million for the same period last year, primarily due to a lower time deposit balance as a result of the special cash dividends paid. Net income attributable to HUYA Inc. was RMB 10 million for Q3 compared with RMB 24 million for the same period last year.

Excluding share-based compensation expenses, gain arising from disposal of an equity investment, net of income taxes, impairment loss of investments and amortization of intangible assets from business acquisitions, net of income taxes, non-GAAP net income attributable to HUYA Inc. was RMB 36 million for Q3 compared with RMB 78 million for the same period last year.

The decrease was mainly due to the lower interest income as explained earlier.

Diluted net income per ADS was approximately RMB 0.04 for Q3. Non-GAAP diluted net income per ADS was RMB 0.60 for Q3. As of September 30, 2025, the company had cash and cash equivalents, short-term deposits and long-term deposits of RMB 3.83 billion compared with RMB 3.77 billion as of June 30, 2025.

With that, I'd like to open the call to your questions.

[Operator Instructions] Today's first question comes from Rebecca Xu from Morgan Stanley.

[Foreign Language] My question is regarding the in-game item sales business. Could you please share some color on the updates from the past quarter as well as the future outlook for this segment?

[Interpreted] This quarter, in-game item sales continued to scale rapidly, supported by our strong live streaming ecosystem and deeper partnerships with flagship titles, including Honor of Kings, Peacekeeper Elite, League of Legends, Arena Breakout and PUBG Mobile.

With broader SKU offerings and more engaging in-game events, in-game item sales revenue grew over 200% year-over-year in the third quarter, giving our users a much wider and more compelling selection on our platform.

So looking ahead, our focus is threefold. Number one is to further enrich item categories in existing titles. And secondly, to expand into additional game partnerships to diversify our portfolio. And third one is to improve our storefront and merchandising systems, enhancing overall purchase experience, making it easier for our users to discover and buy our items.

As collaboration expands and our operating model continues to mature, we expect in-game item sales to deliver sustainable, healthy and high-quality growth.

And our next questions come from Maggie Ye from CLSA.

This is regarding company's overall revenue growth. Firstly, live stream revenue has resumed positive year-over-year growth this quarter. So could you share your views on the segment growth going forward?

And secondly, for the non-live stream business, which now accounting for over 30% of total revenue, what is your expectation on this segment future growth going forward? And what will be the primary growth driver?

[Interpreted] So we saw promising performance from both our live streaming business and our game-related services. Live streaming revenue has returned to growth for the first time since Q3 2021. Our game-related services, advertising and other revenues, on the other hand, grew 30% year-over-year to RMB 530 million, now accounting for over 31.5% of the total net revenues.

The growth was driven in large part by very strong in-game item sales this quarter. So we expect live streaming revenues to remain stable into the fourth quarter, while non-live streaming businesses should continue growing at a very strong pace, potentially accelerating further due to in-game item sales expansion and other deeper game collaborations.

Looking ahead to 2026, we expect overall revenue growth to accelerate versus 2025. Live streaming should remain stable, while game-related services, advertising and others continue to drive the majority of our growth.

And our next questions comes from Ritchie Sun from HSBC.

[Foreign Language] So I would like to ask about the publishing of Goose Goose Duck and overall the game publishing business. So what is our strategy as well as outlook going forward?

[Interpreted] So maybe I'll start by giving you an overview of our publishing strategy. Over the years, we have built a very robust content creator e-sports ecosystem with roughly 162 million MAUs on the platform in the third quarter.

On top of that, in addition to our own apps and products, we estimate through our top creators outside of our platforms we are able to reach another 100 million-plus users across other platforms and this gives us a natural advantage in game publishing.

The mobile version of Goose Goose Duck is our very first full-fledged publishing effort. The game has gone through a second round of testing throughout October with preregistrations quickly surpassing 10 million during that period. We expect the game to be ready for launch pretty soon.

Now for this game specifically, we created a dedicated live streaming variety show, A SIKA ZIYE, which brought together top streamers for group gaming session, helping boost social buzz and community engagement. This project serves as an important milestone in validating our publishing playbook and execution, laying the foundation for titles to come.

Going forward, we will continue to follow a content-driven publishing strategy. We rely on our stream of network, short-form media reach and e-sports presence to focus on titles that work well in live streaming and interactive settings. This allow us to bring more high-quality games to players and drive sustainable growth in this business.

We will take next question from Nelson Cheung from Citi.

[Foreign Language] With the solid momentum of Delta Force launch this year, we also observed a lot of like collaboration between Huya and this title. Maybe have management to elaborate more on their ongoing partnership.

[Interpreted] Our focus on Delta Force is about building a vibrant community engagement and a sophisticated e-sports tournament ecosystem for that game. As part of community engagement effort, we launched Delta Force Map tool recently, which provides rich immersive 3D environments for players to quickly get -- to get familiar and better navigate the game, attracting more hard-core players to our platform.

Over time, it will serve as a new entry point for value-added services, helping us to build a more complete ecosystem around that game.

On e-sports side, we host the first [ EDC ] Diamond Championship in July for Delta Force, which was a great success. Building on that, we'll be hosting the second season in the coming months, gradually building a consistent structured e-sports presence around that game.

So now we will take our last question from [ Wei ] from CICC.

[Foreign Language] My question is on the new business. Can you break down their financial impact in our profitability? And how should we think about the trend for our profit of this going forward?

[Interpreted] Our gross margin remained stable this quarter as we further scale and expand our game-related services and optimization of cost structures, we expect to see gradual margin improvement over time. This quarter, our gross profit actually grew over RMB 23 million, which is 11% year-over-year, which led to further improvement at operating level.

Thank you. Thank you once again for joining us today. If you have further questions, please feel free to contact Huya's Investor Relations through the contact information provided on our website or Piacente Financial Communications.

This concludes today's call, and we look forward to speaking to you again next quarter. Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good day, and good evening, and thank you for standing by. Welcome to Huya's Second Quarter 2025 Earnings Webinar. I'm Hanyu Liu from the Huya Investor Relations. [Operator Instructions] Please be advised that today's webinar is being recorded.

The company's financial and operational results were issued earlier today and are posted online. You can also view the earnings press release by visiting the IR website at ir.huya.com. A replay of the call will be available on the IR website soon.

Participants of management on today's call will be Mr. Vincent Junhong Huang, our Acting Co-CEO and Senior Vice President; and Mr. Raymond Peng Lei, our Acting Co-CEO and CFO; and [ Marguerite Xie ], Head of Capital Markets. Management will begin with prepared remarks, and the call will conclude with a Q&A session.

Before we continue, please note that today's discussion will contain forward-looking statements made under safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in the company's latest annual report on Form 20-F and other public filings as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law.

Please also note that Huya's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Huya's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.

With that, I'm pleased to turn the call over to our Co-CEO and SVP, Mr. Huang. Please go ahead.

Hello, everyone. Thank you for joining our earnings conference today. It has been exactly 2 years since I first spoke with you on our August 2023 earnings call. Over this time, Huya has undergone a lot of transformation uncovering new opportunities, executing on clear strategy and deepening our strategic alignment with Tencent and the broader gaming industry.

Today, I'm pleased to share the progress we have made and the opportunities ahead. By leveraging our cross-platform strategy, we have achieved an average of 162 million monthly active users across Huya's platforms and extended our reach even further through the distribution of our content and services on third-party content platforms such as WeChat channels, Douyin and Kuaishou.

Over the past year, we have strengthened collaborations with these platforms, enabling cross-platform streaming and co-creating professional content. This not only expand the reach of our high-quality content, but also builds the foundation for new monetization opportunities in game distribution, in game item sales and potentially game publishing.

One of the industry trends we are seeing is the rising importance of content-driven marketing in publishing and long-term operation of game titles. This trend plays directly to Huya's core strength, our top-tier game live streaming capabilities, a robust and influential e-sports ecosystem and deep expertise in producing high-impact short-form videos optimized for each social platform.

By combining our rich professional production capabilities and community influence, we are able to help game publishers engage players more deeply, extend the life cycle of their titles and drive player spending.

As a result, our game-related services advertising and other revenues have grown significantly from RMB 122 million in Q2 2023 to RMB 414 million this quarter. This segment now contributes over 1/4 of our total net revenues and from a gross billing perspective, accounts for over 40% of Huya's total transaction value. We see this segment as a key growth engine going forward with substantial room for further expansion as we deepen our partnership with game developers and broaden our service offering.

This quarter, we further increased our portfolio of jointly distributed games in the domestic market to over 300 titles. Tencent's games such as Honor of Kings, Peacekeeper Elite and League of Legends Mobile all performed strongly. Games from other partners such as Archero 2 and [ Xiangong Zhanji ] also stood out this quarter. Progressing from our existing joint distribution of games, sales of in-game accessories and cosmetics items are naturally the next step for us.

In the second quarter, gross billings from this category increased by 90% year-over-year, reflecting strong demand from our high engaged user base. Given our ability to integrate sales seamlessly into live streams, e-sports events and other content, often featuring influential streamers, we believe this business line has significant potential to scale further and become an increasingly important part of Huya's revenue mix in the years ahead.

Our community of game streamers remains one of Huya's most strategic and valuable assets. We nurtured their growth not only within the Huya's ecosystem, but also across all leading content platforms, enabling them to broaden their reach and deepen audience engagement. Among the top 300 game live streamers nationwide, Huya continued to command the largest representation in the industry, a testament to our unmatched ability to attract, develop and retain top-tier talent.

With a user base composed of highly engaged hardcore gamers, Huya offers the perfect environment for emerging talent to gain visibility and build a loyal following quickly. Combined with the comprehensive professional support we provide, we continue to successfully introduce some of the most sought after personalities for new release.

For example, one of the hottest games that is trending this summer is Tencent's Delta Force and the biggest live streamer of that game right now in terms of live channel average concurrent users and total short video views is on Huya. We help him build his fame on Huya from the ground up.

As we go to destination for e-sports live streaming in China, we continue to invest in e-sports content, driving deeper user engagement and strengthening our market leadership. In the second quarter, we live streamed over 100 licensed e-sports tournament, covering premier domestic leagues such as the League of Legend Pro League, Kings Pro League and Cross Fire Pro League as well as major international events, including the LoL Mid-Season Invitational and the CS2 Austin major.

Currently, we are also bringing global competition to our audience through coverage of Esports World Cup in Saudi Arabia. Alongside licensed events, we produced over 40 in-house produced tournament, including the LoL Legend Cup Season 3, DOTA2 Immortal Cup and Honor of Kings [ Saudi ] Cup Gold Tournament as well as entertainment show like clear the billiard table goals. The Immortal Cup final sold out in just 7 minutes, while our Huya HYPER eSports Carnival branding e-sports music and culture tourism deepened fan loyalty and expanded our audience reach.

In July, in partnership with Tencent, we launched the inaugural Delta Force Diamond Champions Summer Season, featuring 24 leading domestic teams. The event showcased Huya's production and technology leadership. From 4K ultra-high definition and 120 FPS streaming to multiscreen viewing and in-team voice chat, delivering a truly premium and interactive experience for fans.

Leveraging our content integration strengths, we have begun entering the game publishing arena. In Q2, we piloted a content-led launch strategy for Goddess of Victory: Nikke using live streaming showcases, e-sports promotion and creator videos. The campaign delivered strong results, and we are actively pursuing additional publishing partnership.

Our overseas initiatives are also gaining momentum. We have now reached tens of millions of monthly active users internationally through our mobile application service platform, live streaming and others. Through these products, we are able to build up our gamer communities and local marketing capabilities and accumulate a sizable user base of hardcore gamers, particularly in genres like FPS and mobile. These efforts will position us to capture opportunities in the growing overseas game-related services market.

Before I pass the call on to Raymond, I would like to update you on our AI strategy. AI is becoming embedded in every aspect of our operations. From AI plus live streaming to AI plus IP and AI plus services using our proprietary gaming data sets, deep user insights and years of content, we have built intelligent gaming analytic models and large language models for specific service needs.

Some initiatives enhance user experience such as our AI agent Hu Xiao Ai, which delivers real-time engaging commentary during e-sports streams, boosting viewer interaction during events like the LoL Legend Cup Season 3. We are also developing AI-powered virtual live streamer using high fidelity avatar and expression technologies to add new dimensions to our content.

Others create new consumption opportunities, for example, our AI sparring partners for e-sports players provide real-time tactical alerts, response to players' emotions and offers personal encouragement. This technology also powers the industry's first AI game companion robot, the [ Huya AI Superbot ] launched with Invictus Gaming IG team at ChinaJoy, which generated significant market buzz.

In short, with our dedicated efforts over the past 2 years have demonstrated to the market that we are more than just a live streaming platform, but a game-related entertainment and service provider capable of adding value to the entire gaming ecosystem.

We will continue to deepen our engagement in the gaming industry, strengthen collaborations with industry partners, expand our business boundaries and innovate our service offerings. We will also focus on overseas expansion and AI initiatives, paving the way for Huya's long-term sustainable growth.

With that, I will now turn the call over to our acting Co-CEO and CFO, Raymond Lei. He will share more details on our results. Raymond, please go ahead.

Thank you, Vincent, and hello, everyone. I'll start with an overview of our financial performance. Our total net revenues for the second quarter reached approximately RMB 1.57 billion, increasing both year-over-year and quarter-over-quarter for 2 consecutive quarters. Of this, live streaming revenues stabilized with a slight sequential increase to RMB 1.15 billion and game-related services, advertising and other revenues grew to RMB 414 million, accounting for 26.4% of total net revenues.

The number of domestic paying users in the second quarter remained flat compared with the first quarter, standing at 4.4 million, excluding those who made in-game purchase through our game distribution business but didn't pay via our platform or related services as well as overseas paying users.

Thanks to optimized content cost, particularly those related to e-sports tournaments, we improved our gross margin sequentially to 13.5% for the quarter that -- this discipline also contributed to reaching breakeven non-GAAP operating profit, a significant milestone in our path to improve profitability. We also achieved a non-GAAP net income of RMB 48 million, marking our sixth consecutive profitable quarter.

Let's move on to more details of our Q2 financial results. Our total net revenues were RMB 1.57 billion for Q2 compared with RMB 1.54 billion for the same period last year. Live streaming revenues were RMB 1.15 billion for Q2 compared with RMB 1.23 billion for the same period last year, primarily due to the continued impact of the macroeconomic and industry environment.

Game-related services, advertising and other revenues were RMB 414 million for Q2 compared with RMB 309 million for the same period last year. The increase was primarily due to higher revenue from game-related services and advertising, which were mainly attributable to our deepened cooperation with Tencent and other game companies.

Cost of revenues increased by 2.1% to RMB 1.35 billion for Q2, primarily due to increased revenue sharing fees and content costs, partially offset by decreased bandwidth and server custody fees. Revenue sharing fees and content costs, a key component of cost of revenue increased by 2.6% to RMB 1.2 billion for Q2, primarily due to increased broadcaster related costs, partially offset by lower costs related to licensed e-sports content.

Gross profit was RMB 212 million for Q2 compared with RMB 215 million for the same period last year. Gross margin was 13.5% for Q2 compared with 13.9% for the same period of last year, primarily attributable to increased revenue sharing fees and content costs as a percentage of total net revenues.

Excluding share-based compensation expenses, non-GAAP gross profit was RMB 216 million and non-GAAP gross margin was 13.8% for Q2. Research and development expenses decreased by 5% year-over-year to RMB 122 million for Q2, primarily due to decreased personnel-related expenses and share-based compensation expenses.

Sales and marketing expenses decreased by 6% year-over-year to RMB 58 million for Q2, primarily due to decreased channel promotion fees. General and administrative expenses remained flat year-over-year at RMB 64 million for Q2.

Other income was RMB 8 million for Q2 compared with RMB 13 million for the same period last year, primarily due to a notable settlement income from disputes in the second quarter of 2024 and lower government subsidies. As a result, operating loss was RMB 24 million for Q2 compared with a loss of RMB 26 million for the same period last year.

Excluding share-based compensation expenses and amortization of intangible assets from business acquisitions, non-GAAP operating income reached breakeven for Q2 compared with non-GAAP operating loss of RMB 3 million for the same period last year.

Interest income was RMB 59 million for Q2 compared with RMB 103 million for the same period last year, primarily due to a lower time deposit balance, which was primarily attributable to the special cash dividends paid.

Net loss attributable to HUYA Inc. was RMB 5 million for Q2 compared with net income attributable to HUYA Inc. of RMB 30 million for the same period last year. Excluding share-based compensation expenses, impairment loss of investments and amortization of intangible assets from business acquisition, net of income taxes, non-GAAP net income attributable to HUYA Inc. was RMB 48 million for Q2 compared with RMB 97 million for the same period last year. Non-GAAP net margin was 3% for Q2.

Diluted net loss per ADS was approximately RMB 0.02 for Q2. Non-GAAP diluted net income per ADS was RMB 0.21 for Q2. As of June 30, 2025, the company had cash and cash equivalents, short-term deposits and long-term deposits of RMB 3.77 billion compared with RMB 6.25 billion as of March 31, 2024 -- 2025.

Finally, let me provide an update on our shareholder returns. Through our up to USD 100 million share repurchase program, we had repurchased 22.8 million Huya shares with a total aggregate consideration of USD 75.4 million as of the end of June 2025. Additionally, we distributed a total of about USD 340 million in special cash dividends during the second quarter. Going forward, we will continue to focus on performance, advancing our expansion initiatives and deepening our industry alignment to create long-term value for our shareholders.

With that, I'd like to open the call to your questions.

[Operator Instructions] Today's first question comes from Ritchie Sun from HSBC.

[Foreign Language] I'd like to ask about the game-related services business. So can you share more on the updates? How does it look like in terms of the development, and how should we think about second half?

[Foreign Language]

[Interpreted] Ritchie, its Marguerite let me translate that for you. We continue to expand and deepen our collaborations with game companies, increasing our portfolio of joint distributed games in the domestic market to over 300 titles. Based on our game streamer ecosystem and the connections they have with our users, it is only natural that we take a step further and extend game services to the sales of in-game accessories and cosmetics through these streamers.

We are at the initial stage of this effort, and we have recorded a 90% year-over-year increase this quarter. As we further expand and diversify our in-game accessories SKUs, perfect its related transaction infrastructures and enhance users' mindset about our value proposition, we believe sales from games accessories is likely to be one of the new growth drivers for us.

On top of that, we have strengthened our collaborations with various platforms and products. This approach has allowed us to expand the influence of our high-quality content and services further to a wider audience. Building on our strong content integration capabilities, we are strategically entering the game publishing arena. In the second quarter, we piloted a comprehensive online content publishing strategy with the launch of Goddess of Victory: Nikke.

With prominent live streamers showcasing gameplay, promoting through e-sports events and producing videos in collaboration with content creators, this campaign yielded impressive results. Encouraged by this early success, we are actively pursuing more cooperation opportunities within game sector.

And our next question comes from Yiwen Zhang from China Renaissance.

[Foreign Language] So we have noticed the company has hosted the first e-Sports event for Delta Force. So can you discuss what is the feedback so far? And how many [indiscernible]?

[Foreign Language]

[Interpreted] In July, in partnership with Tencent, we launched the inaugural Delta Force Diamond Champions Summer Season. Between 24 leading domestic teams the event showcased Huya's production and technology leadership from 4K ultra-high definition and 120 frames per second streaming to multiscreen viewing and in-team voice chat delivering a truly premium and interactive experience for fans.

During the finals viewers tuning into Huya Live's DDC exclusive stream will also get a chance to win wear in-game items, especially prepared for the event, including some of the highly sought after bundles such as [indiscernible], et cetera, making experience much more fun and immersive.

And our next question comes from Yanyan Xiao from CICC.

[Foreign Language] And my question is about overseas business. Can you provide us with a detailed update on the progress of overseas operation?

[Foreign Language]

[Interpreted] Overseas initiatives are also gaining momentum. We are now reaching tens of millions of monthly active users internationally through our mobile application service platform, live streaming and others. Through these products, we are able to build up our gamer communities, our local marketing capabilities and accumulate a sizable user base of hardcore gamers, particularly in genres like FPS and mobile. These efforts well position us to capture opportunities in a growing overseas game-related service market.

As you might have noticed, we changed our definition of MAU this quarter to reflect the progress we've made during this period of transformation, particularly in overseas markets. What we've seen over the past few years and is convinced of is that the potential for international user base is immense in terms of growth and monetization opportunities.

We will then take a question from Nelson Cheung from Citibank.

[Foreign Language] Congrats on the solid progress of business transformation during the quarter. My question is related to the company's future plans on AI development, especially in live streaming experience, e-sports tournaments, Hu Xiao Ai, AI desktop robot launched within this year and future positioning in AI gaming.

[Foreign Language]

[Interpreted] As mentioned in prepared remarks, leveraging our proprietary gaming dataset's deep user insights and use of content, we have built intelligent gaming analytic models and large language models for specific service needs. AI is becoming embedded in every aspect of our operations from AI live streaming to AIP and AI services.

Some initiatives enhance user experience such as our AI agent, Hu Xiao Ai, which delivers real-time engaging commentary during e-sports streams, boosting viewer interactions during those events. Others create new consumption opportunities such as Huya AI Superbot, which is a great example of that. In collaboration with a well-known e-sports team IG, we announced these next level robots that not only mirror player's looks and voices, but also offer core experiences like virtual sparring and emotional companionship.

Powered by our proprietary visual recognition technology and this strategy analysis, the robot is close to get the game, get you and get your feelings. Leveraging our knowledge in games and e-sports the robot is your sparring partner and coach. Again, using our proprietary models, our robot reads your mood from your tone and then it responds. It also has a memory graph which helps the robot remembers what our users' favorite heroes are, what their preferred play styles are and what their favorite moves.

Now we will take our last question today from Maggie Ye from CLSA.

[Foreign Language] My question is related to live stream business, which accounted for 74% of total revenue this quarter and seems to have stabilized quarter-over-quarter. How do you think about the overall trend of live stream business and as well as the total revenue trend for 2025 in addition to margin trend?

[Foreign Language]

[Interpreted] Our live streaming revenue continued to stabilize with a slight increase to RMB 1.15 billion Q-over-Q. We continue to see overall revenue back on its growth trajectory, driven by our strong growth from gaming related services, advertising and others. This segment grew 34.1% year-over-year to RMB 414 million this quarter.

Based on what we are seeing right now, we expect live streaming revenues to remain broadly steady as the overall industry and user behavior continues to stabilize. On the other hand, we expect game-related services, advertising and other revenues to be the main driver for the company as we expand and deepen our partnerships with various game companies. And all in all, we expect our total net revenues to grow in the second half of the year as well as the full year.

In terms of profitability, in Q2, we continue to optimize our content costs, including those related to e-sports events and benefited from higher total net revenues. As a result, our gross margin improved sequentially to 13.5%. Notably, we achieved non-GAAP operating profit breakeven this quarter and recorded a non-GAAP net profit of approximately RMB 48 million. This is our sixth consecutive profitable quarter. We will continue to focus on enhancing our operating profitability and expect a meaningful improvement in our non-GAAP operating profit for the full year 2025 compared to 2024 under normal circumstances.

And also as a reminder, our interest income in the second half of the year is expected to be significantly lower than in the first half, and this is due to a lower cash balance resulting from the sizable shareholder return measures that we implemented since last year as well as the fluctuations in market interest rates. Please take this into consideration when doing your modeling for our net income for the remainder of the year. Thank you very much.

Thank you once again for joining us today. If you have further questions, please feel free to contact Huya Investor Relations through the contact information provided on our website or Piacente Financial Communications.

This concludes today's call, and we look forward to speaking to you again next quarter. Thank you.