JOYY Q2 Earnings: Exceeds upper end of guidance for four consecutive quarters; AI accelerates integration into business operations

Notably, this marks the fourth consecutive quarter that JOYY has exceeded the upper end of its revenue guidance. In Q2, JOYY's total revenue, as well as its Social Entertainment, BIGO Ads, and SHOPLINE segments, all achieved year-over-year and quarter-over-quarter growth. Of the approximately $83 million in additional revenue compared to the same period last year, about two-thirds came from non-live-streaming businesses.

Summary:

1. Profit growth outpaced revenue growth, leading to a synchronized upward revision of full-year profit expectations. Q2 total revenue reached $591 million, up 16.3% year-over-year; non-GAAP operating profit increased by 28.2% year-over-year and 29.4% quarter-over-quarter. Revenue guidance for Q3 is set between $602 million and $622 million. The full-year non-GAAP operating profit forecast has been raised, with an expected year-over-year increase of approximately 20%.

2. The quality of this growth cycle lies in the stability of the core business, the accelerated pace of new businesses, and the penetration of AI across three revenue streams: payments, advertising, and transactions. In Q2, revenues from Social Entertainment, BIGO Ads, and SHOPLINE grew by 7.4%, 53.1%, and 28.6% year-over-year, respectively. The proportion of non-live-streaming revenue rose from 26.1% to 31.8%.

3. As of the end of June, the company's net cash stood at approximately $3.059 billion. Based on the closing price of around $75 on August 25, and roughly 49 million ADSs representing outstanding ordinary shares disclosed as of the end of June, the market capitalization was approximately $3.68 billion. The market cap exceeds the company's reported net cash by only about $620 million, indicating that the stock remains relatively undervalued.

The core of social entertainment remains content supply and user payments, with AI initially penetrating these two segments.

In the second quarter, core paying live-streaming users reached 1.56 million, a year-on-year increase of 3.9%; average revenue per paying user (ARPPU) rose by 2.4%, while live-streaming revenue in developed markets grew by 11.8%. On the content supply side, Bigo Live, a global live-streaming social platform, saw its daily active streamers increase by 4.4% quarter-on-quarter, and the number of newly signed streamers going live rose by 5.4% quarter-on-quarter.

Building on this foundation, Bigo Live uses AI to identify high-quality content for cross-regional distribution and applies AI-generated content to interactive gifts, entering the existing virtual gifting payment segment. By May this year, AI-generated interactive gifts accounted for 34.3% of virtual gift spending.

In the advertising business, JOYY's BIGO Ads manages ads for its own products and monetizes traffic for third-party developers through the BIGO Audience Network. This means JOYY's ad revenue is no longer solely dependent on the traffic volume from its own products; as more third-party developers join, the pool of traffic available for monetization expands, covering more countries, app categories, and user scenarios. The role of AI here is to determine which budget allocations are best suited for specific traffic sources and advertisers.

According to management, as the client base and traffic volume expand, more campaign feedback can be used to iterate user profiles, attribution models, bidding strategies, and vertical industry models, thereby improving the efficiency of matching budgets with effective traffic. In the second quarter, third-party ad revenue increased by 74.1% year-on-year, and SDK network ad requests rose by 37.7% year-on-year. Multi-channel budgets also performed strongly, with web-based revenue up 91.7% year-on-year and in-app advertising (IAA) revenue up 70.6% year-on-year.

SHOPLINE is JOYY's omnichannel e-commerce retail system for merchants, offering tools for website building, payments, marketing, and operations. Previously, consumers often had to open search or e-commerce platforms and sift through multiple pages to find products; now, consumers are beginning to discover products through AI conversations, creating new traffic entry points for merchants. A single AI interaction can suffice for needs confirmation and product comparison. For SHOPLINE, the new value lies in directing these entry points to merchants' stores, ensuring that orders, customer relationships, and operational data generated across different channels continue to accumulate within the merchants' own systems.

According to management disclosures, SHOPLINE has integrated with major mainstream AI Agent entry points. The SHOPLINE Copilot, currently in internal beta testing, allows merchants to manage their stores using natural language. In the first half of the year, page views from AI channels for SHOPLINE merchants increased nearly 15-fold year-on-year, and order volume surged by over 35 times year-on-year.

Traffic from these AI entry points can be converted into revenue through SHOPLINE's existing fee structure. SHOPLINE charges software subscription fees and provides value-added services such as payments and marketing to merchants. In the second quarter, revenue from SHOPLINE's cross-border merchants grew by 73.5%, with its share of total revenue increasing by 7.2 percentage points year-on-year, while revenue from value-added services also expanded.

AI applications have also extended internally within the company. Management stated that the company is leveraging AI for data analysis, decision-making, and execution, while controlling investments through resource sharing and operational synergy across business units.

From a group perspective, JOYY has demonstrated certain operating leverage this quarter. Operating expenses increased by 4.7% year-on-year, significantly lower than the revenue growth rate; the non-GAAP operating profit margin rose from 7.5% in the same period last year to 8.3%. Non-GAAP EBITDA reached $56.9 million, representing a year-on-year increase of 18.1% and a quarter-on-quarter increase of 24.4%.

Whether profits can be converted into shareholder returns ultimately depends on cash flow. In the second quarter, JOYY generated $64.9 million in operating cash flow. Coupled with ample cash on hand, this provides room to accelerate shareholder returns.

JOYY's execution over the past year demonstrates a strong commitment and capability to deliver shareholder returns. This May, JOYY updated its shareholder return plan for 2026–2028, allocating a total of $1.5 billion, including approximately $900 million in dividends and up to $600 million in share buybacks. Year-to-date through August 21, the company has repurchased $216.4 million worth of shares and paid $142.4 million in dividends, totaling $358.8 million—already exceeding the full-year shareholder return amount for 2025.

Management expects that by 2028, non-live-streaming businesses will contribute nearly half of the group's revenue and operating profit. If this goal is gradually realized, the changes in revenue structure already seen in the second quarter will further translate into the profit structure. Consequently, the market's valuation of JOYY will more fully reflect the profitability of AI commercialization and non-live-streaming businesses, beyond just its net cash position. $JOYY Inc (JOYY.US)$

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