Video Streamer iQiyi Posts Strong Subscriber Growth

Shares of Chinese video streaming service provider iQiyi Inc. climbed to the highest in a week Wednesday morning after the company reported strong revenue growth in the second quarter and projected similar gains for the third.

Dubbed China’s Netflix, iQiyi said revenue rose 51% year-on-year to 6.2 billion ($932.5 million) for the quarter ended in June driven by rapid subscriber growth. For the third quarter, iQiyi projected a revenue increase of 43% to 49% from a year earlier.

IQiyi’s Nasdaq-traded shares climbed as high as $33.56 in morning trading, before edging down to around $32. The market shrugged off a widening of the company’s net loss as iQiyi poured more resources into developing original content.

“Supported by our vast library of premium content, and the premiere of a series of highly popular self-produced content, our membership and advertising businesses both generated robust growth during the quarter,” said founder and Chief Executive Officer Gong Yu in a press release.

Total subscribing membership jumped 75% to 67.1 million by the end of the quarter from the same time a year ago, with 66.2 million paid members, iQiyi said in a filing after the market closed Tuesday.

IQiyi is among a rush of Chinese tech companies that have floated shares in New York this year. IQiyi raised more than $2 billion in an initial public offering in March, the largest U.S. flotation of a Chinese company since 2014.

Despite some bumps, iQiyi’s shares have generally performed well since the IPO. The issue has sustained a rising trend from the $18 offering price and touched a peak in late June of nearly $45. The company’s American depositary receipts have surged 81% since the IPO. ADRs are negotiable certificates issued by a bank that represent equity in a foreign company.

Citing a surge in marketing, research and development expenses in the quarter, the company reported that its net loss widened to 2.1 billion yuan, more than double the 953.2 million yuan loss in the same period last year.

But iQiyi’s operating loss margin narrowed by 2 percentage points from the same period last year to 22%, indicating steps toward profitability.

Cost of revenue surged 47% to 6.1 billion yuan, as higher amortization of self-produced content and licensed copyrights increased content costs, according to the company. IQiyi will invest more in high-quality content in the second half, expecting content costs to reach 80% of total costs, Chief Financial Officer Wang Xiaodong said on an earnings call.

The Chinese video giant stressed the focus on creating its own shows, while a new releasing format for some of the company’s most popular content also helped generate traffic.