Hello Group (MOMO) Q4 2025 earnings review
Overseas Surge Fails to Mask Deepening Domestic Decline
Hello Group is a tale of two businesses: a rapidly shrinking domestic cash cow and a booming international startup. Q4 revenue fell 2.3% YoY, driven by a brutal 14% revenue collapse in the Chinese mainland as the core Momo and Tantan apps continued to bleed paying users. Total Net Income optically surged 27% to RMB 237.3 million, but this was a mirage created by a one-time RMB 94.1M film production write-off in the prior year's quarter. Stripped of this base effect, operating profitability is stagnant. While the overseas portfolio (Soulchill, Yaahlan) is executing flawlessly with 70% YoY growth, Q1 2026 guidance projects a steepening 4.8%-8.8% revenue contraction. The international pivot simply isn't large enough yet to plug the massive hole left by domestic user fatigue.
🐂 Bull Case
The international segment is undeniably working. Revenue exploded 70.3% YoY in Q4 to RMB 608.2 million, now representing nearly 24% of total sales. The MENA-focused apps are scaling rapidly and proving the company's localization playbook.
Management continues to return cash via a US$0.28 per ADS special dividend and aggressive buybacks (60.3 million ADSs repurchased to date). A fortress balance sheet with RMB 8.68 billion in cash provides a massive margin of safety.
🐻 Bear Case
Chinese mainland revenues fell 14% to RMB 1.96 billion. The "cash cow" narrative is losing credibility as paying users plummet across both major apps. Cost-cutting can only prop up margins for so long when top-line volume is eroding this fast.
As low-margin overseas revenue (which requires higher creator payouts and channel fees) becomes a larger piece of the pie, structural gross margin compression is inevitable. The transition from high-margin domestic live streaming is painful.
⚖️ Verdict: 🔴
Bearish. The 70% overseas growth is phenomenal, but it is mathematically overwhelmed by the double-digit decay of the 76% domestic business. With Q1 guidance pointing to accelerating revenue declines, the "turnaround" remains out of reach.
Key Themes
The "Stable Cash Cow" Illusion
Management's press release praises the "agile response" that "maintained stable performance of our cash-cow business." The data firmly contradicts this narrative. The Chinese mainland segment revenue plunged 13.7% YoY in Q4. Furthermore, Tantan's paying users have dropped 33% YoY (from 0.9M to 0.6M), and Momo's paying users are down 32% YoY (from 5.7M to 3.9M). Stability is an illusion; the company is actively shrinking the domestic business by cutting marketing spend to harvest short-term profitability.
Overseas Segment: The Lone Growth Engine
The international portfolio (led by MENA-focused Soulchill, Yahale, and Amar) is the sole bright spot, maintaining stable, blistering growth of over 70% YoY for four consecutive quarters. Overseas revenue reached RMB 608.2 million in Q4, fundamentally reshaping the company's composition. If this trajectory holds, overseas will surpass 35% of total revenue by the end of FY26.
Optically Inflated Margin Recovery
Total cost and expenses fell 5.4% YoY, leading to an apparent 30% jump in Operating Income (RMB 307.1M). However, this improvement is reversing purely due to base effects. Management noted that Q4 2024 included a massive one-time RMB 94.1 million film production cost. Backing out that historical anomaly, actual core operating costs were relatively flat, meaning true operating leverage remains negative as revenues contract.
Macro Weakness Crushing Domestic Spenders
A recurring theme from management is the severe impact of "weak consumer sentiment" on the Momo app. Specifically, the high-tier "whale" users—often business owners tied to the broader equity market and macroeconomic performance in China—have drastically tightened their wallets. This macro sensitivity leaves the domestic cash cow vulnerable to economic forces entirely outside the company's control.
Strict Cost and ROI Discipline
Hello Group is aggressively restructuring its cost base, essentially managing Tantan for profit rather than scale. By cutting underperforming, negative-ROI marketing channels and reducing revenue sharing with domestic broadcasters, the company generated RMB 1.18 billion in operating cash flow for FY25. This discipline is funding the heavy investments required for the overseas expansion without bankrupting the balance sheet.
AI Integration Attempting to Revive Engagement
To combat user churn, management is leaning into AI to solve user pain points. Prior quarters have seen the rollout of AI-powered greeting features on Momo (which boosted engagement rates), alongside testing of AI chat assistants. While still a developing story, this represents a crucial technological pivot from human-centric live streaming toward scalable, AI-driven social matching.
Other KPIs
Decelerating significantly from RMB 1.64 billion in FY24. Despite the drop, it remains healthy enough to cover the RMB 492.5 million in capital expenditures, leaving roughly RMB 690 million in Free Cash Flow. This cash generation continues to fund the aggressive dividend and buyback programs.
A massive war chest that represents a substantial portion of the company's market capitalization. The balance decreased from RMB 14.7 billion at year-end 2024, primarily due to bank loan repayments, massive capital returns (dividends and buybacks), and a one-off tax settlement earlier in the year.
Up 22% YoY. A solid beat on the bottom line, reflecting lower marketing spend on the Tantan app and reduced domestic broadcaster payouts. Diluted Non-GAAP EPS came in at RMB 1.70 ($0.24).
Guidance
Decelerating. This range implies a YoY decline of 4.8% to 8.8% (midpoint -6.8%). This is a stark worsening of the trend compared to the -2.3% decline posted in Q4 25. The guidance mathematically proves that the rapid acceleration of the overseas segment is still not large enough to offset the accelerating deterioration of the domestic "cash cow" business in the immediate future.
Key Questions
The Domestic Floor
Tantan paying users have dropped for consecutive quarters, landing at just 0.6M. Momo users sit at 3.9M, down sharply YoY. What is the absolute floor for paying users on these platforms before the ecosystems lose critical mass and network effects begin to work in reverse?
Overseas Margin Trajectory
Overseas revenue grew 70%, but relies heavily on elevated payout ratios and higher payment channel costs. As this segment becomes the majority of total revenue over the next 2-3 years, what is the long-term structural gross margin target for the consolidated group?
Capital Allocation Strategy
With the stock trading at a depressed valuation relative to cash, why issue a US$42.6M special dividend rather than directing 100% of excess free cash flow into the existing share repurchase program?