What led to IQIYI Inc (NASDAQ: IQ) stock crash

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IQIYI Inc (NASDAQ: IQ) stock lost over 8.5% on 19th May, 2020 (as of  9:51 am GMT-4; Source: Google finance)  after the company posted mixed results for the first quarter of FY 20. iQIYI has reported an increase in net loss to $406.4 million compared to a loss of $262.4 million in the year-ago quarter. Total subscribers reached 118.9 million as of March 31, 2020, which represents an increase of 23% year-over-year with a net addition of 12 million from previous quarter. During the first quarter, the premium content continued to boost subscriber growth. Top-rated dramas among subscribers included iPartment Season 5, Ai Qing Gong Yu; Under the Power, Jin Yi Zhi Xia; and Qing Yu Nian among others. At the end of March, 2020, the Company had cash, cash equivalents, restricted cash and short-term investments of RMB9.9 billion (US$1.4 billion).

IQ in the first quarter of FY 20 has reported the adjusted loss per share of 56 cents, missing the analysts’ estimates for the adjusted loss per share of 51 cents, according to Analysts surveyed by FactSet. The company had reported the adjusted revenue growth of 9 percent to $1.1 billion in the first quarter of FY 20, beating the analysts’ estimates for revenue of $1.024 billion. The company posted the operating loss was RMB2.2 billion (US$316.6 million), compared to operating loss of RMB2.0 billion in the same period in 2019. Operating loss margin was 29%, compared to operating loss margin of 29% in the same period in 2019.

Moreover, Membership services revenue grew 35% to RMB4.6 billion (US$654.5 million) from the same period in 2019. The increase was mainly due to the growth in the number of subscribing members, on the back of the premium content and increased entertainment demand during Chinese New Year holiday and the COVID-19 pandemic. Online advertising services revenue fell by 27% to RMB1.5 billion (US$217.0 million) from the same period in 2019. The decrease was mainly driven by the challenging macroeconomic environment in China related to the COVID-19 pandemic. Content distribution revenue grew 29% to RMB602.8 million (US$85.1 million) from the same period in 2019. The growth was mainly due to the increase of high-quality content which fulfilled distribution to several platforms during the quarter. Other revenues fell 9% to RMB875.9 million (US$123.7 million) from the same period in 2019, mainly due to the soft performance of certain business lines, partially offset by the growth in game business.

For the second quarter of 2020, iQIYI expects total net revenues to be in the range of RMB7.25 billion (US$1.02 billion) and RMB7.67 billion (US$1.08 billion), which represents an 2% to 8% increase from the same period in 2019.

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