Chinese social media giant Weibo Corp (NASDAQ: WB) posted stronger-than-expected earnings for the second quarter of 2024, despite facing challenges in advertising revenue and a slight dip in its user base. The company reported a revenue of $437.87 million, marking a 1% decline year-on-year, but still slightly above the analyst consensus of $436.95 million. The results were buoyed by a better-than-expected adjusted earnings per share (EPS) of $0.48, surpassing estimates of $0.42. Following the announcement, Weibo's stock rose by 2.28% in premarket trading, reflecting investor optimism.
Weibo's performance highlights the platform's resilience amid a challenging domestic economic environment in China. The company's advertising and marketing revenues, which form the backbone of its income, fell by 3% year-on-year to $375.3 million. This decline reflects broader market trends and the tightening of advertising budgets across industries. However, Weibo managed to offset some of this decline through growth in its value-added services (VAS) segment, which saw a 15% year-on-year increase, bringing in $62.6 million. This growth was primarily driven by membership services, a sector that continues to expand as the platform diversifies its revenue streams.
In terms of user engagement, Weibo reported a slight decrease in its monthly active users (MAUs), which stood at 583 million in June 2024, down from 599 million the previous year. Similarly, average daily active users (DAUs) dropped to 256 million from 258 million year-on-year. Despite these marginal declines, Weibo's CEO Gaofei Wang emphasized that user engagement and operating efficiency have improved. "Our user engagement and operating efficiency have further improved this quarter," Wang noted. He attributed this improvement to the company's focus on acquiring and engaging high-quality users, as well as optimizing its content ecosystem through strategic enhancements in its core strengths and vertical content strategy.
Weibo's ability to maintain a strong operating margin amidst these challenges is noteworthy. The adjusted operating margin improved by 100 basis points (bps) to 36%, while the non-GAAP operating margin increased to 36% from 35% in the same quarter last year. This reflects the company's ongoing efforts to streamline operations and enhance profitability, even as it navigates a complex and evolving market landscape.
The company's robust cash position also provides a buffer against economic uncertainties. As of June 30, 2024, Weibo held $2.8 billion in cash, cash equivalents, and short-term investments. The company also generated $132.1 million in operating cash flow during the quarter, underscoring its financial stability and ability to invest in future growth opportunities.
Despite the positive earnings surprise, Weibo faces ongoing challenges in its core advertising business. The decline in ad revenue signals potential headwinds as advertisers continue to grapple with economic pressures in China. Moreover, the slight drop in user numbers raises concerns about the platform's ability to sustain its user base in a highly competitive social media landscape.
