AI Integration And Quality Content Will Secure Future Leadership

Key Takeaways

• AI-driven content and operational efficiencies drive user engagement, trust, and recurring profitability, with further improvements likely as adoption expands.
  
• Diversified monetization and stabilized regulations enhance competitive positioning, boost pricing power, and promote sustainable long-term commercial growth.
  
• Strategic shift toward business quality, stagnant platform engagement, rising costs from AI and compliance, and execution risk in diversifying beyond core revenue streams constrain growth prospects.

Catalysts

Operates an online content community in the People’s Republic of China.

• Zhihu's deep integration of AI technologies within its content ecosystem-especially through products like Zhihu Zhida and personalized knowledge assistance-positions the platform to attract and retain users seeking reliable information in an AI-driven era, supporting future improvements in user engagement, monetization, and ultimately top-line growth.
  
• The rising demand for credible, high-quality, expert-driven content in China, especially amidst growing concerns over misinformation, enables Zhihu to strengthen its competitive moat and pricing power, which can translate into higher ARPU (average revenue per user) and margin expansion as engagement and trust scale.
  
• Strategic expansion of diversified monetization streams-such as advertising (with improving CPM and optimized client mix), paid membership (with premium content and improved retention), vocational training (with a transition to higher-margin, community-driven courses), and IP licensing-lays the groundwork for future revenue growth and higher operating leverage.
  
• Ongoing improvements in operational efficiency, cost controls, and AI-powered productivity gains have already driven margin expansion and recurring profitability, signaling room for further net margin improvements as AI initiatives reach greater adoption and scale.
  
• Regulatory stabilization and increasing enterprise/institutional demand for knowledge-based advertising and branded content improve investment visibility and are likely to convert into stronger advertiser and partner interest, supporting a healthy rebound in marketing services revenue and more robust commercial earnings over the long term.

Zhihu Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Zhihu's revenue will grow by 4.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.4% today to 10.4% in 3 years time.
• Analysts expect earnings to reach CN¥376.4 million (and earnings per share of CN¥4.13) by about September 2028, up from CN¥138.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.6x on those 2028 earnings, down from 20.9x today. This future PE is lower than the current PE for the US Interactive Media and Services industry at 16.9x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.88%, as per the Simply Wall St company report.

Zhihu Future Earnings Per Share Growth

Risks

• Zhihu's total revenue, paid membership, and vocational training businesses all experienced year-over-year declines in Q2 2025, with management attributing this to an ongoing "adjustment cycle" and a strategic shift toward business quality over scale; long-term stagnation or further shrinkage in user or client acquisition would pressure revenue and top-line growth.
  
• The stabilization in monthly active users (MAUs), rather than outright growth, raises concerns that platform engagement could plateau amid fierce competition and possible user fatigue; if this persists, it would directly constrain scaling effects and limit the growth of both advertising revenue and paid memberships.
  
• The company's increasing reliance on AI integration and automation to drive productivity and content moderation may lead to escalating technology and operational costs, while continued regulatory scrutiny of online content and censorship in China could increase compliance costs, squeezing net margins over the long term.
  
• Zhihu's marketing services segment showed sequential improvements, but still faces secular risks from potential shifts in Chinese digital advertising trends-especially as advertisers may favor closed ecosystems (like super-apps or short-form video platforms) over standalone knowledge-sharing platforms, leading to volatility and possible contraction in future ad revenues and margin pressure.
  
• The declining contribution from the vocational training business and the company's exit from non-core offerings highlight execution risk in diversifying and scaling revenue streams; failure to establish compelling monetization models outside of advertising and memberships would cap long-term earnings growth and resilience.

Valuation

• The analysts have a consensus price target of $5.832 for Zhihu based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $7.02, and the most bearish reporting a price target of just $4.73.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CN¥3.6 billion, earnings will come to CN¥376.4 million, and it would be trading on a PE ratio of 9.6x, assuming you use a discount rate of 8.9%.
• Given the current share price of $4.84, the analyst price target of $5.83 is 17.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.