Executive Summary / Key Takeaways

• HUYA is undergoing a significant transformation, evolving from a traditional live streaming platform into a comprehensive game-related entertainment and service provider, with a clear focus on diversification and value creation across the gaming ecosystem.
• Game-related services, advertising, and other revenues are now the primary growth engine, contributing over a quarter of total net revenues in Q2 2025 and projected to drive overall revenue growth in the second half and full year 2025.
• The company is deeply embedding artificial intelligence (AI) across its operations, leveraging proprietary gaming datasets and large language models to enhance user experience, create new content, and unlock novel consumption opportunities, thereby strengthening its technological moat.
• Despite macroeconomic headwinds impacting its core live streaming business, HUYA achieved its sixth consecutive profitable quarter on a non-GAAP basis in Q2 2025, reaching breakeven non-GAAP operating profit, and anticipates a meaningful improvement in full-year 2025 non-GAAP operating profit.
• HUYA maintains a robust financial position with substantial cash reserves, enabling it to execute a significant shareholder return program while strategically investing in overseas expansion and technological innovation for long-term sustainable growth.

HUYA's Evolution in the Gaming Ecosystem

Founded in 2014, HUYA Inc. (NYSE:HUYA) initially established itself as a leading game live streaming platform in China, a core business that has since undergone a profound strategic transformation. Beginning around August 2023, HUYA embarked on a comprehensive initiative to uncover new opportunities, execute a clear strategy, and deepen its alignment with Tencent (TCEHY) and the broader gaming industry. This strategic pivot positions HUYA as a diversified game-related entertainment and service provider, capable of adding value across the entire gaming ecosystem.

The company operates in a highly competitive landscape, with direct rivals including DouYu International Holdings Limited (DOYU), Bilibili Inc. (BILI), and globally, Twitch (owned by Amazon.com, Inc. (AMZN)). HUYA's strong affiliation with Tencent provides a significant ecosystem advantage, enabling cross-platform content distribution through channels like WeChat, Douyin, and Kuaishou. This integration enhances user retention and content discovery, offering a qualitatively stronger network effect compared to DouYu, which primarily focuses on its own platform. HUYA also commands the largest representation among the top 300 game live streamers nationwide, a testament to its ability to attract and retain top-tier talent. Its internal data indicates a leading market share in e-sports broadcasting, including over half of the market share for top-tier in-house produced e-sports events in 2024. The average revenue per user (ARPU) for several games distributed through HUYA's platform is notably higher than the overall gaming market, underscoring the commercial value of its engaged user base. While Bilibili offers broader content, HUYA's specialized focus on gaming and e-sports, coupled with its robust infrastructure, allows it to lead in interactive gaming experiences. Against global giant Twitch, HUYA's strength lies in its deep penetration and localization within the Chinese market, providing a qualitative edge in domestic user experience and efficient content delivery for local audiences.

Technological Differentiators and Innovation

HUYA's strategic transformation is underpinned by a deep commitment to technological innovation, particularly in artificial intelligence. The company is embedding AI across every aspect of its operations, encompassing "AI plus live streaming," "AI plus IP," and "AI plus services." This strategy leverages HUYA's proprietary gaming datasets, deep user insights, and extensive content library to build intelligent gaming analytic models and large language models for specific service needs.

In a tangible display of its AI capabilities, HUYA's AI agent, "Hu Xiao Ai," delivers real-time engaging commentary during e-sports streams, significantly boosting viewer interaction. During the LoL Legend Cup Season 3, approximately 17% of the over 300,000 bullet chats generated were directly related to interactive discussions initiated by Hu Xiao Ai. The company is also developing AI-powered virtual live streamers, utilizing high-fidelity avatar and expression technologies to introduce new dimensions to its content offerings. Furthermore, AI sparring partners provide e-sports players with real-time tactical alerts, respond to players' emotions, and offer personalized encouragement. This technology also powers the "Huya AI Superbot," an industry-first AI game companion robot launched with the Invictus Gaming (IG) team at ChinaJoy, which mirrors player looks and voices while offering virtual sparring and emotional companionship. In February 2025, HUYA became the first game live streaming platform to fully deploy the DeepSeek-R1 model, launching an AI assistant feature to help users efficiently search for game strategies and live channels of interest. These AI initiatives enhance user experience, create new consumption opportunities, and improve broadcasters' content creation efficiency, ultimately driving viewer activity and gift revenue. This technological edge is a critical component of HUYA's competitive moat, fostering differentiated, immersive, and interactive experiences that contribute to higher user engagement and monetization potential.

A New Growth Engine: Game-Related Services and Diversification

The most compelling aspect of HUYA's transformation is the robust growth of its game-related services, advertising, and other revenues. This segment has emerged as a key growth engine, demonstrating significant expansion and diversification beyond traditional live streaming. In the second quarter of 2025, these revenues grew to RMB 414 million, accounting for 26.4% of total net revenues. From a gross billing perspective, this segment now represents over 40% of HUYA's total transaction value. This marks a substantial increase from RMB 122 million in Q2 2023 and RMB 309 million in Q2 2024. For the full year 2024, these revenues surged by 145.4% year-over-year to RMB 1.33 billion, increasing their contribution to total net revenues from 7.8% in 2023 to 21.9%.

The growth is primarily driven by deepened cooperation with Tencent and other game companies. HUYA's domestic portfolio of jointly distributed games has expanded to over 300 titles, with total gross proceeds from its game distribution channel more than doubling year-over-year in Q1 2025. The company is also making significant strides in in-game item sales, with gross billings from in-game accessories and cosmetics increasing by 90% year-over-year in Q2 2025. This business line achieved a record high GMV for in-game item sales in Q1 2025, exemplified by a co-branded outfit skin that generated over RMB 50 million in total value during its initial release on a broadcaster's channel. HUYA is strategically entering the game publishing arena, having successfully piloted a content-led launch strategy for "Goddess of Victory: Nikke" in Q2 2025. This segment is seen as having substantial room for further expansion as HUYA deepens partnerships and broadens its service offerings.

Overseas initiatives are also gaining significant momentum. HUYA has reached tens of millions of monthly active users internationally through its mobile application service platform and live streaming. In Q1 2025, the company partnered with multiple game companies to distribute or sell in-game items for approximately 50 games, leading to multi-fold sequential revenue growth in its overseas game-related services. These efforts position HUYA to capture opportunities in the growing overseas game-related services market, particularly in genres like FPS and mobile.

Stabilizing the Core: Live Streaming and E-sports Leadership

While game-related services drive growth, HUYA's core live streaming business is showing signs of stabilization. Live streaming revenues reached RMB 1.15 billion in Q2 2025, marking a slight sequential increase and stabilizing after previous declines. This segment, however, continues to be impacted by the macroeconomic and industry environment, which affects users' willingness to spend on gifting.

HUYA maintains a robust content ecosystem through its cross-platform strategy, reaching an average of 162 million monthly active users across its platforms. Its content is further distributed on third-party platforms like WeChat channels, Douyin, and Kuaishou, extending its reach to over 140 million users as of September 2024. As a premier destination for e-sports live streaming in China, HUYA continues to invest heavily in e-sports content. In Q2 2025, it live-streamed over 100 licensed e-sports tournaments, including major international events, and produced over 40 in-house tournaments. The inaugural Delta Force Diamond Champions Summer Season, launched in partnership with Tencent in July 2025, showcased HUYA's production and technology leadership, offering 4K ultra-high definition and 120 FPS streaming, multiscreen viewing, and in-team voice chat. The company has also reduced the gap between major licensed tournaments and in-house produced content for popular titles like League of Legends and Honor of Kings, from over one month in 2023 to no longer than two weeks in 2024. Furthermore, the HUYA rating section on its platform, a professional forum for e-sport ratings and reviews, received 6.8 million user ratings for LPL Split 1, an 80% increase year-over-year, demonstrating high user engagement.

Financial Health and Shareholder Returns

HUYA's strategic transformation is reflected in its improving financial performance. Total net revenues in Q2 2025 reached approximately RMB 1.57 billion, marking two consecutive quarters of both year-over-year and quarter-over-quarter growth. This revenue trajectory is supported by optimized content costs, particularly those related to e-sports tournaments, which contributed to a sequential improvement in gross margin to 13.5% in Q2 2025.

The company achieved breakeven non-GAAP operating profit in Q2 2025 and reported a non-GAAP net income of RMB 48 million, marking its sixth consecutive profitable quarter. For the full year 2024, non-GAAP net income reached RMB 269 million, a significant 125.6% increase year-over-year, with net cash provided by operating activities turning positive at RMB 94 million.

As of June 30, 2025, HUYA maintained a strong liquidity position with cash and cash equivalents, short-term deposits, and long-term deposits totaling RMB 3.77 billion. The company has also demonstrated a commitment to shareholder returns, repurchasing 22.8 million shares for USD 75.4 million under its USD 100 million share repurchase program as of June 2025. Additionally, approximately USD 340 million in special cash dividends were distributed during Q2 2025.

HUYA has established a 2025-2027 dividend plan, aiming to distribute no less than $400 million in cash dividends, including $1.47 per ADS (approximately $340 million) for 2025, and no less than $30 million annually for 2026 and 2027. Management indicates that even after these dividend payments, HUYA expects to retain approximately $500 million in funds, ensuring sufficient financial support for future business development.

Outlook and Key Risks

Looking ahead, HUYA's management anticipates continued growth in its total net revenues for the second half and full year 2025. This outlook is predicated on the expectation that live streaming revenues will remain broadly steady as industry and user behavior stabilize, while game-related services, advertising, and other revenues will serve as the primary growth driver. The company expects a meaningful improvement in its non-GAAP operating profit for the full year 2025 compared to 2024 under normal circumstances, driven by continued content cost optimization and increased investment in high-ROI self-produced content.

However, investors should be mindful of several key risks. Interest income is projected to be significantly lower in the second half of 2025 compared to the first half, primarily due to a reduced cash balance from shareholder return measures and fluctuations in market interest rates. This means the company's bottom line performance will increasingly rely on improvements in operational results. The macroeconomic and industry environment continues to exert pressure on users' willingness to spend on live streaming, and the seasonal nature of the gaming industry can lead to quarterly fluctuations in game-related service revenues. Furthermore, HUYA continuously monitors U.S. listing regulations and potential impacts from a changing international situation, though no new formal regulations regarding delisting risks for U.S.-listed China-based companies have been issued.

Conclusion

HUYA is in the midst of a significant and promising transformation, strategically shifting its focus to become a comprehensive game-related entertainment and service provider. By leveraging its deep integration with the Tencent ecosystem, its leadership in the e-sports market, and a robust commitment to AI-driven innovation, HUYA is successfully diversifying its revenue streams. The rapid expansion of game-related services, coupled with the stabilization of its core live streaming business, positions the company for sustained growth. While macroeconomic headwinds and the inherent seasonality of the gaming industry present ongoing challenges, HUYA's disciplined approach to cost management and its strong financial position, supported by a clear shareholder return strategy, provide a solid foundation. The company's technological leadership, particularly in AI, is not merely an enhancement but a fundamental differentiator, creating new avenues for user engagement and monetization that are critical to its long-term competitive advantage and overall investment thesis.