Hello Group Shares Tumble Following Unexpected Quarterly Loss

Hello Group Inc. (A) jolted investors with its second-quarter earnings report, revealing a surprising net loss—its first since 2021. The operator of the Momo and Tantan dating apps fell short of anticipated profits, raising questions about the underlying causes of this setback and whether its international operations offer a viable path to recovery.

International Expansion Offers a Silver Lining

Amidst domestic challenges, one segment of the business is experiencing remarkable growth. The company’s international revenue surged by 72.7 percent, reaching 442.4 million yuan. This impressive performance means overseas operations now contribute 17 percent to total revenue, a significant increase from less than 10 percent just one year ago.

Domestic Market Contraction Weighs Heavily

The core issues behind the disappointing results stem from significant pressure in Hello Group’s home market. User metrics in China have deteriorated sharply. The number of monthly active users plummeted by a dramatic 21 percent to just 10.2 million. The decline is even more pronounced among paying customers: Momo saw this key user segment halve from 7.2 million to 3.5 million over the past twelve months, while Tantan lost 30 percent of its premium subscribers.

Should investors sell immediately? Or is it worth buying Hello Group (A) (A)?

Unexpected Tax Charge Drives Surprise Loss

The primary factor behind the loss was an substantial tax payment of 547.9 million yuan, which heavily impacted the quarterly results. Although revenue of 2.62 billion yuan slightly exceeded market expectations, it was insufficient to offset the financial burden of this tax assessment. Consequently, the company reported a net loss of 140.2 million yuan instead of the projected profit.

Cautious Outlook and Market Reaction

The path to recovery appears challenging based on management’s guidance. For the third quarter, executives anticipate revenue between 2.59 and 2.69 billion yuan, representing at best a minimal 0.6 percent increase. The company also expects international growth momentum to slow in the coming months.

Market reaction was decisively negative, with shares losing nearly 10 percent in the past week alone. Financial analysts have already reduced their 2025 profit forecasts for Hello Group by 25 percent. The central question facing investors is whether the company’s expanding international presence can ultimately compensate for the persistent erosion of its domestic user base.