Meitu’s First-Half Profit Surges Past 2023 Full-Year on AI Subscription Boom

Meitu’s net profit for the first half of the year has already exceeded its total profit for 2023, driven by robust growth in its AI-powered subscription services within the Chinese photo-editing software industry.

The company’s net profit increased by 30.8% over the six months ending June 30, reaching CNY400 million (approximately USD55.69 million), surpassing the CNY370 million earned last year, according to a financial report published yesterday by the Xiamen-based firm.

Revenue rose 12.3% during the same period to CNY1.8 billion (around USD250 million). Its imaging and design product segment, which is the largest contributor, saw a 45.2% increase, totaling CNY1.3 billion (about USD181 million) and making up 74% of overall revenue. Paid subscriber numbers surged 42% to 15.4 million, raising the penetration rate to 5.5%.

Despite these positive results, the company’s stock price [HK:1357] declined 1.6%, closing at HKD10.22 (USD1.31) today. Over the past year, the stock has quintupled, fueled by impressive earnings reports.

Chief Financial Officer Yan Jinliang noted that generative AI directly tackles user frustrations that conventional tools cannot resolve, significantly increasing subscription interest.

Founder Wu Xinhong emphasized that the AI revolution is fundamentally transforming the market. To stay competitive, Meitu needs to maintain a startup mentality. Smaller, nimble competitors could pose a more significant threat than larger companies. As a result, Meitu is adopting startup-like strategies regarding focus and organizational agility while directing resources toward core areas.

Strategically, the company is emphasizing “AI-driven productivity and expansion into global markets.” In the first half of the year, monthly active users reached 280 million, with overseas users increasing 15.3% year-over-year to 98 million.

The company’s productivity tools are also gaining traction, with subscriber numbers climbing 69% year-on-year to 1.8 million. The user base for its ‘Kaipai’ app has more than quadrupled. Wu predicts that revenue from these tools could soon constitute over half of the company’s overall income.

Additionally, a recent CNY1.8 billion (USD250.7 million) partnership with e-commerce leader Alibaba Group has drawn considerable attention. Wu explained that, lacking the capacity to build foundational AI models independently, collaborating with strategic partners is crucial.

He mentioned that Alibaba’s open-source Tongyi model aligns well with Meitu’s vertical models and business use cases. The two companies will collaborate on areas like AI-driven virtual try-ons, e-commerce imagery tools, and cloud services, with Alibaba Cloud providing the necessary computing resources.

Wu warned that the window for capitalizing on generative AI is limited, estimating roughly two years to maximize this opportunity. By leveraging its large user base, extensive engineering investments, and expertise in visual aesthetics, he believes the company can remain ahead of competitors.