Zhihu: Q3 Misses but Cheap Valuation Merits a Second Look

Zhihu reported third-quarter results that fell short of consensus expectations, but the headline miss masks a more nuanced story for long-term investors. User engagement metrics remain resilient, with time spent and active-user trends showing modest improvement versus recent troughs. Management cited near-term headwinds in advertising demand and macro-driven softness among key clients, which compressed top-line growth and depressed short-term monetization.

Despite the earnings disappointment, Zhihu’s underlying fundamentals show potential. The platform continues to expand its paid content and membership offerings, while nascent e-commerce and knowledge-commerce initiatives offer incremental revenue paths. Cost controls implemented over prior quarters helped stabilize margins, and the company highlighted ongoing efforts to refine advertising products and target higher-value advertisers.

Valuation paints the clearest contrarian case. Zhihu is trading at materially lower multiples than many domestic peers, reflecting investor caution after a weak quarter and broader market skepticism toward Chinese internet names. For value-focused investors, the share price appears to price in several negative scenarios, leaving room for upside if ad markets recover or monetization accelerates.

Key catalysts to monitor include ad spend normalization, adoption of premium paid services, improvements in average revenue per user, and any strategic shifts that boost monetization efficiency. Conversely, regulatory uncertainty, intensifying competition from larger ecosystems, or a prolonged macro slowdown could further pressure results and valuation.

For investors, the choice comes down to risk tolerance and time horizon. Short-term traders may avoid exposure until revenue momentum reappears, while long-term investors who believe in Zhihu’s content moat and multi-channel monetization strategy might view the current price as an attractive entry point. As always, balancing upside potential against operational and macro risks will be essential before adding Zhihu to a portfolio.