Hello Group Faces Revenue Decline Amid Tax Changes and User Engagement Challenges

### Hello Group Faces Revenue Challenges Amid Tax Adjustments and User Declines

Hello Group Inc. experiences a challenging second quarter in 2025, with a reported net revenue decline of 2.6% year-over-year, totaling RMB2,620.4 million (approximately US$365.8 million). This downturn contrasts sharply with the company's overseas revenue performance, which sees a remarkable surge of 72.7%, reaching RMB442.4 million (US$61.8 million). However, the overall financial landscape is marred by a net loss of RMB140.2 million (US$19.6 million), a stark departure from the net income of RMB397.8 million reported in the same quarter of the previous year. This significant financial shift is largely attributed to a substantial accrual of RMB547.9 million (US$76.5 million) for withholding taxes following a change in the withholding tax rate from 5% to 10% as mandated by tax authorities in China.

The company’s financial results reflect broader trends in its user engagement metrics. Active users on the Tantan app fell to 10.2 million from 12.9 million a year prior, indicating a troubling decline in user retention. Similarly, the Momo app sees a decrease in total paying users, dropping to 3.5 million from 7.2 million. This decline in user engagement poses a significant concern for Hello Group, as maintaining a robust user base is crucial for long-term sustainability and growth in the competitive landscape of online social networking in Asia.

Despite these challenges, Hello Group demonstrates resilience through its international operations. The substantial increase in overseas revenues suggests a potential avenue for recovery and growth in markets beyond China. As the company navigates its financial troubles and the impact of tax changes, the focus on enhancing user engagement and expanding its global footprint could play a pivotal role in reversing current trends and improving overall performance in the upcoming quarters.

In the context of these developments, Hello Group's non-GAAP net loss for the second quarter stands at RMB96.0 million (US$13.4 million), down from a net income of RMB449.2 million in the previous year. This decline underscores the company's pressing need to adapt to changing market dynamics and user preferences. As Hello Group works to regain its footing, the emphasis on international growth could be a critical factor in stabilizing its financial performance and enhancing its competitive edge in the online social networking sector.