iQIYI generated RMB319.6 million, or approximately $47.1 million, of free cash flow in Q2 2026 despite reporting a RMB287.5 million net loss attributable to the company, creating a sharp divergence between reported earnings and cash generation.
Free cash flow improved from negative RMB34.1 million a year earlier. Operating cash flow showed a similar reversal, reaching RMB339.6 million, or approximately $50 million, compared with RMB12.7 million of cash used in operations during Q2 2025.
The reported net loss more than doubled from RMB133.7 million a year earlier, but much of the deterioration was tax-related rather than operating. iQIYI recognized RMB219.8 million of income tax expense, compared with RMB27.2 million in the prior-year period, including RMB193.6 million of discrete enterprise income-tax expense and related interest tied to adjustments at a mainland Chinese subsidiary.
Revenue declined 5% to RMB6.29 billion, or approximately $926.6 million. Membership-services revenue declined 2% to RMB4.01 billion and online advertising revenue fell 2% to RMB1.25 billion, while content-distribution revenue moved in the opposite direction, increasing 56% to RMB681.5 million because of higher cash transactions.
Operating loss was RMB104.8 million, compared with RMB46.2 million a year earlier. However, sequential performance improved materially from the first quarter, when operating loss was RMB228.4 million. Non-GAAP operating loss narrowed sequentially to RMB30.3 million from RMB148.6 million.
The company also reduced several major expense categories. Selling, general and administrative expense fell 22% to RMB744.2 million, largely because of disciplined marketing spending, while R&D expense declined 6% to RMB398 million because of lower personnel-related costs.
Liquidity remained significant at quarter-end. iQIYI held RMB4.12 billion, or approximately $607.8 million, of cash, restricted cash and short-term investments. It also held a $636.6 million loan receivable from PAG classified as a non-current asset.
Capital returns continued alongside the cash-flow improvement. Under the company’s $100 million repurchase authorization, iQIYI had bought back approximately 21.8 million ADSs for $24.1 million through June 30.
The cash-flow performance gives iQIYI greater flexibility as it invests in AI, short-form drama and its broader strategic transformation. Management said the company retained the No. 1 domestic market share across long-form dramas, films and children’s content during the quarter, while its short-form drama business reached the No. 1 domestic position for the first time in June.
KEY QUOTES:
“Our financial performance improved sequentially in the second quarter, marked by revenue growth and substantially narrowed operating loss. We implemented our share repurchase program, underscoring our commitment to creating long-term value for shareholders.”
Ying Tian, Chief Financial Officer of iQIYI
“In the second quarter, we reinforced our content leadership and advanced our strategic transformation. According to Enlightent, we maintained the No. 1 domestic market share across long-form dramas, films, and children’s content during the quarter, while our short-form dramas claimed the top domestic market share for the first time in June. The strategic transformation toward a decentralized social media ecosystem and our all-in approach to AI are yielding encouraging initial results. We look forward to further leveraging AI to empower our content ecosystem and enhance our financial performance.”
Yu Gong, Founder, Director and Chief Executive Officer of iQIYI
