Weibo Margins Fall 8 Points to 28% as Video Creator Subsidies and Weak Handset Pre-Installs Weigh on a Flat Ad Business
Second-quarter 2026 earnings call, August 19, 2026: management guides to ad revenue pressure in the third quarter
Weibo's second-quarter results showed a business in which AI-driven pricing gains are failing to offset weak advertiser demand and a declining low-frequency user base, while management is spending to rebuild the video ecosystem. Revenue rose 2% year-over-year to $453.8 million, but that was a 4% decline in constant currency. Advertising revenue fell 1% to $381 million, down 6% on a constant currency basis. Non-GAAP operating income was $125.4 million, a 28% margin versus 36% a year ago, as total costs and expenses rose 16% to $328.4 million on higher ad production costs and marketing expenses. Non-GAAP net income attributable to Weibo was $102.7 million, or $0.38 per diluted share.
Pre-installs and the feed revamp are costing the user base
The most consequential disclosure came in the Q&A, where management gave a more candid explanation of user weakness than in its prepared remarks. June MAUs were 561 million and average DAUs 254 million. DAUs were down slightly year-over-year and flat quarter-over-quarter, and MAUs declined modestly sequentially. CEO Gaofei Wang attributed the softness to two factors. The first is handset pre-installs: "previously, we were pretty much focused on the pre-installed app in those handsets. But this year, we had lower shipments of those handsets with the pre-installed app." He put the impact on the overall business at around 10%, a notable admission that user acquisition depends on a handset market that is itself under pressure.
The second factor is more structural. After moving the homepage to a recommendation-based feed, Weibo does not see much differentiation against peers in attracting low-frequency users. Wang acknowledged that "this is quite stressful for the low-frequency users." Core users show rising time spent and interaction, but the recovery in visit frequency and retention among the lighter cohort continues to lag. The company has also cut channel spending, preferring to convert acquired users into active ones over scaling acquisition. The result is a healthier-quality but smaller funnel, and management offered no timeline for stabilization beyond saying it would focus on the issue in the second half.
Video creator push: roughly 10,000 accounts, with a margin cost
Video is the center of the product strategy. Total video time spent grew at a double-digit rate year-over-year, and per-user time grew faster. Supply of high-quality video content rose by a double-digit percentage quarter-over-quarter. Wang argued that the shift to recommendation distribution gives Weibo a tool it lacked under the relationship-based feed: it can route traffic to new creators, which makes onboarding easier. He said the newly recruited creator base is around 10,000 accounts, with roughly 70% retention, meaning those accounts keep posting video.
The economics are not yet clearly favorable. Incentives paid to creators carry an ROI of "about 70% to 100%," and Wang said the program has a "little bit negative" effect on gross margin. Management framed this as a long-term investment in ad inventory and engagement, but the incentive spend, together with higher ad production costs, contributed to the 8-point decline in operating margin. Investors should read the 70% to 100% ROI figure cautiously, since a return at or below 100% implies the program is roughly breakeven at best on a direct basis.
Ad business: higher eCPM, but not higher revenue
The most useful analytical point came from management's answer to Goldman Sachs on AI and pricing. eCPM improved both year-over-year and quarter-over-quarter, helped by AI in creative generation and bidding. AI-generated creatives reached 50% of consumption in the promoted feed and real-time bidding system in June, and AI-optimized e-commerce creatives showed a drop of more than 30% in negative feedback rate versus advertisers' original materials. But management cautioned that rising eCPM "does not represent that the ad revenue was going to also increase." Last year's ad product restructuring and the removal of poor-experience ad formats reduced ad load, particularly to low-frequency users, and that offsets pricing gains.
On brand advertising, management noted that the sell-through rate of core resources has been declining in line with revenue, reflecting weaker advertiser demand rather than a pricing problem. This is a clear sign that price optimization alone will not stabilize the revenue base.
Verticals: autos and AI-related internet advertisers help; handsets, e-commerce and delivery do not
Autos grew on a dense schedule of new energy vehicle launches, even as overall auto sales were soft, and management expects that momentum to persist into the second half. Internet services also grew as large platforms promoted AI products. Management expects the software and application services category to be flat to slightly up in the second half, as advertisers demand strict ROI on budgets. Food and beverage grew on early World Cup budget releases and celebrity marketing.
The weaker side is larger. Handset advertising fell on component cost and margin pressure. Management said that excluding Apple, other handset makers posted double-digit declines. The company is not optimistic on the third quarter and is watching whether Apple's September launch prompts other vendors to put more money behind mid- and high-end launches. E-commerce is normalizing after a competitive 2025, and the June 18 festival had stable spending but faced a high prior-year base. Cosmetics were soft as international brands cut spending, and game developers remained cautious.
Third-quarter guide: tough comparisons and a smaller World Cup lift
Management explicitly flagged pressure on year-over-year ad revenue growth in the third quarter. Two reasons stand out. The food delivery price war in the third quarter of 2025 created a high comparison base, and management expects the Chinese government's anti-involution policies to keep that competition subdued. In addition, the World Cup lift to related ad budgets was smaller than at the previous tournament, which management attributed to prime match broadcast timing and advertiser dynamics. The company said consumer demand recovery "will take some time" and that competition for budgets will stay intense. It did not provide a quantified guide, but the tone points to another quarter of flat to negative ad growth.
The strategic response is to lean on content and celebrity marketing. Management highlighted a Haaland campaign, with more than 5 billion topic views and 1.4 million discussions, as a template for what it calls one-stop service. In Q&A, management said advertisers with budgets of RMB 5 million to RMB 20 million are best suited to KOL-based marketing, citing P&G as an example of a client keeping most of its budget on Weibo for that purpose. Whether this lifts sell-through rates is the key variable to monitor.
Alibaba, VAS and the quality of reported growth
Advertising revenue from Alibaba was $39.2 million, up 10% (3% in constant currency), as AI-related spending more than offset weaker local services. The CFO noted this spend tracks Alibaba's own launch cadence and can vary by quarter. VAS revenue of $72.9 million rose 19%, or 12% in constant currency, but the increase was partly driven by one-off ticket proceeds from offline events held by Weibo, along with membership growth and favorable FX. Both the reported ad and VAS comparisons are flattered by currency, which hides a weaker underlying trend.
Super Topics and search
Super Topic is a bright spot. DAUs and discussion participants grew at double-digit rates year-over-year, and Wang said interaction is at a historical high, aided by AI-assisted generation of sub-topics for gaming, sports and entertainment accounts. The World Cup also lifted the sports Super Topic base. Search is less clear. Wang said Weibo Intelligent Search showed year-over-year improvement but a negative quarter-over-quarter trend. Management is moving users from typed search toward conversational and guided search after a large model upgrade in Q1, but offered no metrics to show the shift is working.
Cash flow and balance sheet
Operating cash flow was only $15.5 million, which management blamed on corporate income tax settlements, receivables collection timing and annual rebate payments. Capital expenditures were $3.1 million. Cash, equivalents and short-term investments stood at $2.64 billion versus $2.41 billion at the end of 2025. With a market capitalization of about HK$12.6 billion cited on the quote page and a forward P/E of 5.7x, the market is pricing Weibo as a business in structural decline. This quarter's evidence of falling margins, a shrinking low-frequency user base and a cautious third-quarter outlook does little to challenge that view, though the cash position and a still-healthy 28% margin provide support.