Hello Group Q1 Profit Surges, Revenues Down; Warns On Weak Q2 Revenues

Hello Group (MOMO) reported a significant increase in Q1 net income, reaching RMB358.0 million ($49.3 million) compared to RMB5.2 million the previous year, despite a 1.5% revenue decrease to RMB2.520 billion ($347.4 million). While overseas revenues saw a 71.9% increase, the company anticipates a year-over-year revenue decline of 0.8% to 4.5% in Q2, projecting revenues between RMB2.57 billion and RMB2.67 billion; shares rose in after-hours trading following the earnings release.

Analysis

Hello Group Inc. (MOMO) reported a notable surge in first-quarter profitability, with net income attributable to the company reaching RMB358.0 million, a significant increase from RMB5.2 million in the prior year, and adjusted net income per ADS climbing to RMB2.34 from RMB0.31. This improved bottom line was achieved despite a 1.5% year-over-year decrease in total revenues to RMB2.520 billion. A key positive contributor was the overseas segment, where net revenues grew by an impressive 71.9% year-over-year to RMB414.6 million. However, the company faces headwinds in user engagement, as evidenced by the article stating Tantan app's Monthly Active Users were 10.7 million in March 2025, compared to 13.7 million in March 2024, and a substantial drop in total paying users for the Momo app to 4.2 million from 7.1 million year-over-year. Looking ahead, Hello Group issued cautious second-quarter revenue guidance, expecting a year-over-year decline of between 0.8% and 4.5%, with projected revenues of RMB2.57 billion to RMB2.67 billion. Despite these mixed signals, including a 'mixed' overall sentiment score of 0.15 for the news, the company's shares experienced a post-earnings rally, gaining 2.3% in after-hours trading following a 1.8% rise in regular trading, suggesting investor focus on the immediate profit improvement.

Key Decisions for Investors

• Investors should scrutinize the sustainability of Hello Group's improved profit margins in upcoming quarters, particularly given the forecasted Q2 revenue decline and challenges in user metrics.
• Close attention should be paid to the company's ability to continue expanding its overseas revenue, which grew 71.9% in Q1, as this could be a critical growth driver offsetting domestic pressures and the overall projected revenue decrease.
• Given the reported decline in Tantan MAUs and a significant drop in Momo paying users, alongside negative Q2 revenue guidance, investors should carefully weigh the strong Q1 profit figures against these deteriorating user engagement trends before adjusting positions or making new investments.