Hello Group (MOMO) Q3 2025 earnings review
A Tale of Two Companies: Overseas Booms, Domestic Bleeds
Hello Group's Q3 results highlight a stark bifurcation. Total revenue stabilized (-0.9% YoY) as explosive Overseas growth (+69%) nearly offset the continued double-digit decline in the domestic China business. However, this mix shift is toxic to profitability: Net Income fell 22% and Operating Margins compressed as the lower-margin overseas business takes share. While the core Momo app showed a rare sequential uptick in paying users, the company stopped reporting Tantan MAUs—a transparency red flag suggesting the app's turnaround remains elusive.
🐂 Bull Case
The international segment is not a fluke; it grew 69% YoY to $75.1M and now comprises ~20% of total sales. New apps in MENA and dating brands are scaling rapidly, providing a legitimate growth engine.
Despite headwinds, MOMO holds ~$1.24B in cash and deposits—a massive portion of its market cap. The company continues to return capital, repurchasing $20M in shares this quarter ($341M total under current program).
🐻 Bear Case
Growth is coming from the wrong places. Overseas revenue requires higher revenue sharing and channel costs. Consequently, while revenue was flat, Operating Income dropped 16% and Net Income fell 22%.
Management discontinued reporting Tantan's Monthly Active Users (MAU), claiming 'diminished materiality.' In reality, Tantan paying users dropped from 0.9M to 0.7M YoY. Hiding the user count usually signals the metric is deteriorating further.
⚖️ Verdict: ⚪
Neutral. The stabilization of top-line revenue is a technical win, but the quality of earnings is degrading. Until the high-margin domestic business bottoms or overseas margins improve, earnings power remains under pressure.
Key Themes
Overseas Hyper-Growth
Accelerating. Overseas revenue surged 69% YoY to RMB 534.8M. This segment is no longer a side project; it is the sole reason the company isn't shrinking double-digits. Growth is driven by audio/video apps in the MENA region and new dating brands.
Margin Structural Decline
Reversing. GAAP Operating Margin compressed to 13.0% from 15.3% a year ago. The driver is structural: Overseas apps require higher revenue sharing with broadcasters and higher commission fees to payment channels. As the revenue mix shifts toward Overseas, the company's profitability profile is structurally weakening.
Momo App Stabilization
Stable. After quarters of decline, Momo paying users ticked up sequentially to 3.7M (from 3.5M in Q2). While still down significantly from 6.9M a year ago, the bleeding has stopped. Management attributes this to algorithm enhancements and product innovation, signaling a potential floor for the cash-cow domestic business.
Tantan Opacity
The company stopped reporting Tantan MAUs this quarter. While paying users were stable QoQ at 0.7M, they are down from 0.9M YoY. Removing a key KPI usually indicates the number is ugly. Revenue contribution from Tantan is shrinking, and it is losing relevance in the portfolio.
Other KPIs
Decelerating. Down 22% YoY. The decline in profit outpaced the decline in revenue (-0.9%), highlighting the lower margin profile of the new revenue mix.
Decreasing. Down from ~$2.0B at end of 2024, primarily due to repayment of bank loans and shareholder returns. However, the balance sheet remains pristine with net cash significantly exceeding operational needs.
Accelerating. Cost of revenue increased 2.1% YoY despite revenue falling 0.9%. This negative leverage is due to the higher revenue-sharing requirements of the growing overseas segment.
Guidance
Stable. The guidance implies a YoY change of -4.4% to -0.6%. This is consistent with Q3 performance (-0.9%) and suggests the business has found a floor after the double-digit declines seen in 2024. However, it does not forecast a return to growth yet.
Key Questions
Overseas Margin Profile
Overseas revenue is up 69%, but group operating income is down 16%. What is the long-term target margin for the overseas segment, and at what scale do you expect operating leverage to kick in?
Tantan Metrics
You discontinued reporting Tantan MAU citing 'diminished materiality.' However, Tantan still represents a key brand asset. Can you confirm if Tantan is still cash-flow positive, and what is the strategic endgame for this asset if users continue to decline?
Momo Payer Recovery
Momo paying users increased sequentially for the first time in several quarters. Is this driven by specific product features (like AI tools) or a relaxation in the macro environment? Is this 3.7M level the new baseline?
Capital Allocation
With ~$1.2 billion in cash and the stock trading at depressed multiples, why isn't the buyback pace more aggressive? You repurchased $20M this quarter—is there a constraint preventing larger tenders?