Hello Group Q1 profit surges on overseas growth; revenue declines

Hello Group (MOMO) reported mixed Q1 2025 results, with revenues declining 1.5% year-over-year to RMB2.52 billion due to weakness in domestic operations, offset by a 71.9% surge in overseas revenue. Non-GAAP net income increased to RMB403.8 million, while user metrics declined, with Tantan's monthly active users falling to 10.7 million. The company expects Q2 2025 revenue between RMB2.57 billion and RMB2.67 billion, representing a potential year-over-year decline of up to 4.5%.

Analysis

Hello Group Inc. (MOMO) reported mixed Q1 2025 results, with total net revenues declining 1.5% year-over-year to RMB2.52 billion due to continued softness in its mainland China operations, specifically on the Momo and Tantan platforms. This was partially mitigated by a robust 71.9% surge in overseas revenues to RMB414.6 million, driven by the Soulchill app and monetization of new products. Despite the revenue contraction and a fall in operating income to RMB299.5 million, attributed to increased investment in overseas expansion and product development, non-GAAP net income rose significantly to RMB403.8 million, or RMB2.07 per ADS, up from RMB0.03 in Q1 2024, aided by a lower tax burden. Key user metrics remain a concern, with Tantan's monthly active users decreasing to 10.7 million from 13.7 million and Momo's paying users declining to 4.2 million from 7.1 million. Cash flow from operations also weakened to RMB239.7 million from RMB400.2 million. The company maintains a substantial cash position of RMB12.8 billion and has continued its capital return initiatives, completing a special dividend of $0.30 per ADS and share repurchases totaling $291 million to date. Management highlighted accelerating overseas growth, but Q2 2025 revenue guidance of RMB2.57 billion to RMB2.67 billion indicates a potential further year-over-year decline of up to 4.5%, suggesting ongoing challenges in the core domestic market.

Key Decisions for Investors

• Investors should carefully weigh the significant improvement in profitability and strong overseas revenue growth against the persistent declines in domestic revenue and key user metrics.
• The Q2 2025 revenue guidance, projecting a potential year-over-year decline of up to 4.5%, warrants close monitoring of the company's ability to scale its international operations sufficiently to offset domestic headwinds.
• Consider the company's substantial cash reserves and active capital return program as positive factors, but remain cautious regarding the eroding user base in its core Chinese market and its long-term implications.