Hello Group (MOMO) Q2 2026: Overseas Revenue Surges 52% Amid Domestic Spending Pressure
Hello Group navigated a challenging domestic environment with a 17% drop in mainland China revenue, offset by a robust 52% surge in overseas sales, driven by diversified product growth in the MENA region. The company’s strategic focus on AI-enabled product innovation and refined operations supported stable user engagement despite consumer spending contraction. Guidance points to continued domestic headwinds but sustained international expansion, underpinning a complex growth trajectory.
Summary
- Revenue Diversification Strengthens: Overseas business now accounts for over a quarter of total revenue, mitigating domestic softness.
- AI and Product Innovation Drive Engagement: Enhanced AI features in Momo and Tantan improved user retention and monetization efficiency.
- Domestic Spending Contraction Persists: High-value users’ reduced discretionary spending pressures near-term revenue and guidance.
Business Overview
Hello Group operates primarily in the Asian online social networking sector, generating revenue through value-added services such as virtual gifts and membership subscriptions on its flagship apps Momo and Tantan. The company’s major segments include its domestic China business and an expanding overseas portfolio with a focus on social entertainment and dating apps, notably in the Middle East and North Africa (MENA) region.
Performance Analysis
In Q2 2026, Hello Group reported total net revenues of RMB2.49 billion, down 5.1% year-over-year but up 4% sequentially. This decline was driven by a 17% year-over-year drop in domestic mainland China revenues, which accounted for approximately 73% of total revenues, reflecting ongoing macroeconomic challenges and regulatory scrutiny impacting high-spending users. Conversely, overseas revenues surged 52% year-over-year to RMB673 million, now constituting 27% of total revenues, fueled by rapid growth in new MENA social entertainment products and consolidated dating brands.
Value-added services, the core revenue driver, declined 5.4% year-over-year, mainly due to the domestic segment’s weakness but partially offset by overseas expansion. The company’s adjusted operating income stood at RMB276 million, with an 11% margin, down from 17.1% a year earlier, reflecting increased marketing investments overseas and elevated production costs. Excluding film production expenses, operating income margin from recurring business improved to 13.4%, signaling operational resilience amid cost pressures.
- Domestic Revenue Pressure: High-net-worth users reduced spending significantly, impacting live streaming revenues and driving a 17% decline in mainland China revenue.
- Overseas Portfolio Diversification: Expansion beyond the flagship Socio product to newer apps like Yahalan and Amar improved revenue stability and contributed to profitability gains.
- Cost Dynamics: Increased overseas marketing and payment channel costs elevated expenses, though domestic cost controls partially offset these pressures.
Overall, the quarter reflected a strategic pivot where overseas growth offsets domestic softness, supported by AI-driven product enhancements and operational discipline.
Executive Commentary
"On the domestic front, Momo navigated external headwinds to sustain the healthy performance of our cash-cow business, while Tantan continued to strengthen its AI capabilities to enhance user experience and monetization efficiency. Overseas, our product portfolio shifted from single-product reliance to more balanced and diversified growth, with growing synergies across the portfolio."
Yan Tang, CEO
"Our revised outlook for the domestic business is mainly based on some new trends that we've seen in the mobile live streaming revenue since entering the second half of the year. The data shows that the revenue pressure is concentrated mainly in consumption downgrading among high-spending paying users. ... We will take a tiered operating approach starting with top tier users, focusing on deepening social connections rather than simply pushing more spending."
Wen Jianhua, COO
Strategic Positioning
1. Strengthening Domestic Core Through AI and Refined Operations
Hello Group continues to prioritize its domestic cash-cow business, Momo, by deploying AI-powered features such as KnockKnock and AI Chat Assistant to improve matching precision and user engagement. The company is adopting a tiered operational approach to stabilize revenue by focusing on social connection enhancements for high-value users and low-barrier, high-retention scenarios like audio-based interactions for broader user segments.
2. Accelerating Overseas Expansion and Portfolio Diversification
The overseas segment, especially in the MENA region, has shifted from dependence on a single flagship product to a multi-product matrix including Yahalan and Amar. These newer products show strong revenue growth and improving profitability, with Yahalan achieving breakeven in Q2. This diversification strengthens resilience against geopolitical and regulatory risks and enhances the company’s ability to capture growth opportunities in emerging markets.
3. Navigating Macro and Regulatory Challenges in China
Domestic revenue softness is primarily attributed to reduced discretionary spending by high-net-worth users amid macroeconomic uncertainty and tax scrutiny affecting broadcasters and agencies. Hello Group is responding by moderating revenue sharing ratios, providing subsidies, and organizing offline events to maintain user stickiness and stabilize the supply side.
4. Optimizing Cost Structure and Marketing Efficiency
Despite increased marketing spend overseas, Hello Group is exercising cost discipline domestically, including personnel and sales and marketing expenses. Channel spend experiments revealed inefficiencies in user reacquisition, prompting plans to optimize acquisition costs while maintaining platform scale and revenue. The company also absorbed film production-related expenses, which weighed on margins but are not expected to recur at the same scale.
5. Building Long-Term Growth Engines Through Strategic Investments
Beyond immediate revenue drivers, Hello Group is investing in AI-driven user experience improvements and expanding into new markets with acquired dating brands like Happn. The company balances growth and profitability by cautiously scaling marketing investments in new regions to ensure sustainable ecosystem development rather than short-term revenue spikes.
Key Considerations
Investors should weigh the following strategic and operational factors shaping Hello Group’s near-term trajectory:
- High-Value User Spending Decline: The contraction in discretionary spending among top-tier users in China poses a material headwind to domestic revenue recovery.
- Overseas Growth as a Hedge: Rapid expansion and diversification in overseas markets, particularly MENA, provide a vital counterbalance to domestic softness and improve revenue resilience.
- AI-Enabled Product Differentiation: Continued focus on AI enhancements in matching and engagement across apps supports user retention and opens new monetization avenues.
- Cost Management Opportunities: Potential to optimize sales and marketing spend domestically and improve operational efficiency is critical to sustaining margins amid revenue pressure.
- Regulatory Stability Expectations: Current regulatory environment in China is stable, but ongoing scrutiny on tax and compliance remains a risk factor for content creators and agencies.
Risks
Hello Group faces significant risks from macroeconomic volatility impacting consumer spending, particularly among high-net-worth users who historically contribute disproportionate revenue. Geopolitical tensions and regulatory actions in overseas markets, especially in MENA, could disrupt growth momentum. Additionally, evolving tax policies and compliance pressures domestically may continue to affect broadcaster operations and revenue sharing dynamics, posing challenges to revenue stability.
Forward Outlook
For Q3 2026, Hello Group expects total net revenues between RMB2.4 billion and RMB2.5 billion, representing a 9.4% to 5.7% year-over-year decline. This guidance assumes a high-teens percentage decline in mainland China revenues alongside high 30s percentage growth overseas. Management emphasizes that this outlook is preliminary and subject to market and operational condition changes.
Takeaways
Investors should monitor the company’s ability to sustain overseas growth while managing domestic spending headwinds and cost control:
- Revenue Mix Shift: The increasing contribution from overseas markets, now 27% of total revenue, reflects successful globalization efforts and provides a buffer against domestic market softness.
- Execution on AI and User Engagement: Product innovation leveraging AI is central to maintaining user retention and monetization, especially as the domestic market faces spending constraints.
- Margin and Cost Discipline: Balancing increased overseas marketing investments with domestic cost optimization will be key to achieving margin targets amid top-line pressures.
Conclusion
Hello Group’s Q2 2026 results illustrate a company at a strategic inflection point, balancing a challenging domestic environment with promising overseas expansion. While domestic revenue and user spending softness weigh on near-term growth and margins, the company’s diversified overseas portfolio and AI-driven product enhancements offer a pathway to sustainable value creation.
Industry Read-Through
Hello Group’s performance underscores broader industry dynamics where Chinese social entertainment platforms face regulatory and macroeconomic headwinds domestically, while international expansion, especially in emerging markets, becomes critical for growth. The shift towards AI-enabled user experience and diversified product portfolios is a key trend other players may adopt to mitigate regional risks and capture global opportunities. Additionally, the evolving payment and tax compliance landscape in China highlights ongoing operational challenges for monetization models reliant on high-spending users.