HUYA (HUYA) Q2 2026 Earnings Call Transcript
HUYA (HUYA) Q2 2026 Earnings Call Transcript
Motley Fool Transcribing, The Motley FoolWed, August 12, 2026 at 2:03 AM UTC
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Image source: The Motley Fool.
Tuesday, Aug. 11, 2026, at 6 a.m. ET
CALL PARTICIPANTS -
Acting Chief Executive Officer - Junhong Huang
Chief Financial Officer - Raymond Peng Lei
Head of Capital Markets - Margaret Shi
Investor Relations - Zicheng Liu
TAKEAWAYS -
Total Net Revenues -- RMB 1.74 billion, an 11% increase year over year, driven by momentum in game-related services, advertising, and other revenue streams.
Game-Related Services, Advertising, and Other Revenues -- RMB 638 million, representing 54% growth year over year and accounting for 37% of total net revenues due to the commercialization of Goose Goose Duck Mobile and expanded advertising partnerships.
Live Streaming Revenues -- RMB 1.1 billion, representing a low single-digit percentage decrease year over year, reflecting the current live-streaming industry environment.
Gross Profit -- RMB 255 million, a 20% increase year over year, reflecting a shift toward higher-margin business segments.
Gross Margin -- 14.7%, expanding from 13.5% in the same period last year due to the increased revenue contribution from game-related services.
Non-GAAP Operating Income -- RMB 16 million, improving from RMB 400,000 in the prior-year Q2 and RMB 2.7 million loss in the preceding quarter as a result of narrowed operating losses.
Sales and Marketing Expenses -- RMB 91 million, a 58% increase year over year, primarily driven by promotional efforts for Goose Goose Duck Mobile.
Research and Development Expenses -- RMB 120 million, a 1% decrease year over year as the company maintained stable technical spending.
General and Administrative Expenses -- RMB 58 million, an 8% decrease year over year, reflecting lower professional service fees.
Revenue Sharing Fees and Content Costs -- RMB 1.21 billion, a 3% increase year over year, generally in line with revenue trends.
Interest Income -- RMB 26 million, down from RMB 59 million in the prior year due to lower average deposit balances following special cash dividend payments and lower interest rates.
Non-GAAP Net Income -- RMB 36 million, compared with RMB 47.5 million in the prior year Q2.
Cash and Deposits -- RMB 3.21 billion, as of June 30, 2026, compared with RMB 3.46 billion as of March 31, 2026.
Share Repurchases -- 3.2 million American depositary shares (ADS), representing approximately 1.4% of total outstanding shares, repurchased during the second quarter.
Share Repurchase Program Expansion -- $100 million, an increase from the previous $50 million authorization for the 2026 program.
In-game Item Sales -- Triple-digit year-over-year growth, with Peacekeeper Elite, PUBG Mobile, and Genshin Impact as primary contributors.
AI Game Tool Engagement -- 1 million users, with adopters of the Hextech ARAM assistant more than doubling their monthly active days on the platform.
Tournament Content -- 100 licensed and 20 self-produced tournaments hosted in the second quarter, including the CF Grand Master Cup and Dota 2 Immortal Cup Season 2.
Shareholder Yield -- 14% to 15%, projected annually through a combination of at least $30 million in dividends and the $100 million repurchase program spread over two years.
Game Pipeline -- Three titles in preparation, including exclusively published titles The Legend of Swordsman: Reunion and Xiao Xiao Qi Yu, alongside self-developed Zhe Dao You Huan Shou.
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RISKS -
Huang stated, "The industry continues to face pressure from softer user spending and intensifying competition among platforms," noting that macro headwinds affect the stability of the live-streaming sector.
Management reported progress in the transition of HUYA(NYSE:HUYA) from a live-streaming platform into an integrated game service provider through deeper involvement in the industry value chain. The company stated that growth is being driven by game publishing, in-game item sales, and advertising solutions for developers. HUYA indicated a shift in its publishing model to focus on content-driven marketing rather than paid traffic acquisition to reduce reliance on traditional paid channels. Executives noted the integration of AI-powered tools across the platform to enhance user engagement and improve the economics of content production through virtual hosts.
Acting CEO Huang announced the launch of VAM 1.0, a real-time multi-modal digital human model that can generate virtual hosts to "scale content production more efficiently" and lower marginal creation costs.
Management is reviewing streamer contracts and tournament licensing to "improve the efficiency of our content investment" and support a more sustainable live-streaming ecosystem.
The company's first self-developed game, Zhe Dao You Huan Shou, received regulatory approval in July 2026 and is currently entering the testing phase.
Huang reported that Goose Goose Duck Mobile returned to the No. 1 position on the iOS free game chart in the Chinese mainland at the end of July 2026 following collaborations with IPs like Journey to the West.
The Hextech ARAM assistant AI tool reached 1 million users, and management reported that users of AI-powered game tools showed "longer viewing time and greater monetization potential."
HUYA is developing a WeChat mini-game version of Goose Goose Duck to leverage the ecosystem's social features for friend-based game sessions and user growth.
CFO Lei confirmed the board's expansion of the share repurchase program from $50 million to $100 million, citing confidence in the business outlook.
INDUSTRY GLOSSARY -
ADS: American Depositary Share, a U.S. dollar-denominated equity share of a foreign-based company available for purchase on an American stock exchange.
GAAP: Generally Accepted Accounting Principles, a common set of accounting rules and standards for financial reporting.
MMORPG: Massively Multiplayer Online Role-Playing Game, a genre where a large number of players interact in a persistent virtual world.
Non-GAAP: Financial measures that exclude certain items required by GAAP, such as share-based compensation or amortization, to provide an alternative view of performance.
PEL: Peacekeeper Elite League, the professional e-sports league for the game Peacekeeper Elite.
SLG: Simulation Game, a subgenre often focused on strategy, resource management, or social simulation.
UGC: User-Generated Content, any form of content created by users or players rather than the game developer or platform.
VAM: Virtual Avatar Model, the company's proprietary AI system for generating real-time digital human hosts.
Full Conference Call Transcript
Zicheng Liu: Good day and good evening, [indiscernible]. Welcome to HUYA 2nd quarter 2026 earnings webinar. I'm Zicheng Liu from the HUYA Investor Relations. At this time, all participants are in listen-only mode. Please be advised that today's webinar is being recorded. The company's financial and operational results were issued earlier today and are posted online. You can also view the earnings press release by visiting the IR website at ir.huya.com. A replay of the call will be available on the IR website soon. Participants of management on today's call will be Mr. Vincent Junhong Huang, our Acting CEO, Mr. Raymond Peng Lei, our CFO, and Ms. Margaret [Shi], Head of Capital Markets.
Management will begin with prepared remarks, and the call will conclude with a Q&A session. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the company's latest annual report on Form 20-F, and other public filings as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law.
Please also note that HUYA's earnings press release and this conference call include discussions of unaudited GAAP financial information, as well as unaudited non-GAAP financial measures. HUYA's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. With that, I'm pleased to turn the call over to Mr. Huang. Please go ahead.
Junhong Huang: Okay. Hello, everyone. I'm Vincent, and thank you for joining our earnings call today. Let me begin with a brief overview of our second quarter performance. We deliver another quarter of sustainable growth, with total net revenues increasing by 11% year-over-year to RMB 1.74 billion. Game-related services, advertising, and other revenues maintain strong momentum, growing by 54% year-over-year to RMB 638 million and contributing approximately 37% of total net revenues. Behind this growth is our long-term positioning along the game industry value chain, which is steadily translating into sustainable growth momentum.
Over the past three years, we have steadily expanded our presence across the game industry value chain, evolving from game distribution to in-game item sales, advertising and marketing, and now game publishing. Throughout this journey, we have built differentiated user acquisition capabilities that have been increasingly recognized and validated by both our partners and the market. This give us the confidence to extend beyond our capacity as a publishing partner and take on the full game publisher role, which allow us to participate more deeply across the entire game life cycle. Our publishing model is built around content rather than paid traffic acquisition, leveraging our strengths in content creation, streamer network, and user communities.
We foster high-quality UGC, expand our reach, and generate social buzz across platforms such as Douyin, [indiscernible], and WeChat Channels. This differentiated approach to publishing let us acquire users more efficiently while reducing our reliance on traditional paid traffic channels. Goose Duck Mobile is our first success story published under this framework, maintaining an active user base and a vibrant content ecosystem. Since July, we have stepped up our efforts to improve the in-game voice environment, launching an AI-powered voice moderation system and a tiered matchmaking system under the Goose Alliance program. These measures have laid a solid foundation for a healthy in-game environment and sustained user engagement.
On July 20, we launched a collaboration with the classic IP Journey to the West, together with a new party game play mode that expands player interaction across multiple sim spaces. The update expanded the experience beyond the game's core social deduction game play into a broader range of immersive social experiences, resulting in enthusiastic reception by players. Supported by our ongoing efforts to improve the in-game environment and introduce compelling content updates, Goose Duck Mobile returned to the number 1 position on the iOS free game chart in the Chinese mainland at the end of July.
The performance of Goose Duck Mobile has demonstrated the effectiveness of HUYA's content-driven marketing approach, while also helping us develop a repeatable publishing playbook and build valuable operational expertise for future titles. Next up in our pipeline are two titles we are publishing exclusively: The Legend of Swordsman: Reunion, the classic martial arts MMORPG, and Xiao Qi Yu, a 3D match-based casual mobile game. Our transition from co-publishing to exclusive publishing marks another step forward in the evolution of our publishing strategy. Officially licensed from Xishanju, The Legend of Swordsman: Reunion is the latest entry in the renowned Legend of Swordsman franchise, building on more than 2 decades of rich heritage.
It was developed by the original core team behind the PC game [indiscernible], and offers a seamless cross-platform experience featuring synchronized account data and gameplay across mobile app, PC, and mini-program platforms. The game has completed its first round of testing and received encouraging user feedback. By combining our content marketing capabilities with the reach of our streamer network, we aim to bring this classic franchise to a broader audience while preserving the authentic gameplay that has made it a fan favorite for generations. Xiao Qi Yu is a 3D match-based casual mobile game featuring the official licensed [indiscernible] and represents an expansion into the match category for HUYA.
The title is well-aligned with our content-driven publishing model, with strong potential to generate user-created content, social engagement, and organic traffic across live-streaming and short-form video platforms. On the self-developed game front, we were pleased to see our first self-developed title, [indiscernible], receive regulatory approval for publication in July. As a casual SLG centered on [indiscernible] collection, the game represents another important step in building an in-house game development capabilities. We are now actively preparing for its upcoming testing and look forward to sharing more updates as development progresses. On the advertising side, we continue to strengthen our content-driven integrated marketing solution for game developers during the quarter while broadening our advertiser base.
Hearthstone has emerged as an important new customer this quarter. We partnered with leading streamers to deliver a series of tournaments and content collaborations for Hearthstone, highlighted by Da Men Global Invitational, the first global third-party platform tournament for Hearthstone Battlegrounds. It debuted in China and generated more than 200 million impressions across online platforms during tournament play, and received strong recognition from the client. On the in-game item sales front, revenues maintained triple-digit year-over-year growth with Peacekeeper Elite, PUBG Mobile, Genshin Impact, and Arena Breakout as key contributors. For Peacekeeper Elite, we continue to invest in the broader game ecosystem.
In particular, our coverage and commentary around PEL tournaments generated strong audience interest and engagement, enhanced the appeal of our in-game item offerings, and contributed to continued growth in related sales. In our live-streaming business, the outdoor entertainment content category continued to perform well during the quarter, while our overall streamer ecosystem remains stable. We are also exploring ways to drive greater synergies between game streaming and our entertainment verticals to boost the revenue contribution from top streamers. Since the beginning of the second half of the year, we have also been proactively reviewing the economics of our live streamer partnership, aiming to improve the efficiency of our content investment and support a healthier, more sustainable live-streaming ecosystem.
In terms of tournament content, we offer more than 100 licensed tournaments and approximately 20 self-produced tournaments on the HUYA platform during the quarter. Our self-produced events continued to grow in scale and build stronger proprietary event brands. For the CF Grand Master Cup, we officially partnered with CrossFire to stage an international invitational featuring 8 professional teams and 4 leading overseas teams. The tournament also featured a crossover with the film Kung Fu Hustle, further integrating e-sport and broader entertainment content. The Dota 2 Immortal Cup Season 2 generated widespread online buzz and more than 2.5 billion impressions across online platforms. In July, we launched [indiscernible] Streamer Championship and the Peacekeeper Elite Mengnan [Superstar] Cup.
Together, these events expanded our presence across leading shooter titles, strengthened our portfolio of self-produced tournaments, and enhanced HUYA's appeal among core gamers. We also helped host the Valorant National Tournament, earning further recognition from game developers for our tournament hosting and product capabilities. On product and AI, we continue to apply AI technologies across our game content ecosystem to improve both our products and overall platform experience. For popular titles such as Delta Force, League of Legends, and Teamfight Tactics, we have launched a range of AI-powered game tools, including map navigation and combat assistance features. These tools have driven solid user engagement and retention.
Users of this tool have also shown higher activity levels, longer viewing time, and greater monetization potential on the HUYA platform, reinforcing our view that AI-powered game tools will play an increasingly important role in reaching our live-streaming ecosystem and creating long-term value. In July, we released VAM version 1.0, our self-developed real-time multi-modal digital human model. VAM can rapidly generate AI-powered virtual hosts with natural speech, thinking capabilities, and expressive body movements, enabling highly realistic real-time interaction. We believe VAM has the potential to meaningfully improve the economics of live-streaming content. Unlike traditional live streaming, where content supply is inherently constrained by the number and availability of human streamers, VAM enables us to scale content production more efficiently.
As development expands, deployment expands, we expect operating leverage to increase with our marginal content creation cost declining while content supply become more scalable. Looking back at the quarter, we continue to make steady progress in executing our long-term strategy across publishing, self-development, AI innovation, and game-related services. We have further strengthened our capabilities and expanded our role across the game industry value chain. Looking ahead, we remain focused on executing our content-driven strategy, deepening our partnership across the gaming ecosystem, and investing in the capabilities that will support our next phase of growth. We believe these efforts will further strengthen HUYA's competitive position and create sustainable long-term value for our shareholders. Thank you.
With that, I will now turn the call over to our CFO, Raymond Lei. He will share more details on our results. Raymond, please go ahead.
Lei Peng: Thank you, Vincent, and hello, everyone. I will start with an overview of our financial performance. In the second quarter, we delivered steady top-line growth while continuing to improve our revenue mix and operating performance. With a larger revenue contribution from our higher-margin game-related services, advertising, and other businesses, our gross margin expanded to 14.7%. Operating loss narrowed to RMB 7 million and the non-GAAP operating income improved both year-over-year and sequentially to RMB 16 million. Let's move on to more details of our Q2 financial results. Total net revenues were RMB 1.74 billion for Q2, up 11% from the same period last year.
Live streaming revenues were RMB 1.1 billion for Q2, compared with RMB 1.15 billion for the same period last year, primarily reflecting the live streaming industry's current environment. Game-related services, advertising, and other revenues were RMB 638 million for Q2, up 54% from the same period last year. The increase was primarily driven by higher revenues from in-game item sales and advertising, as well as the contribution from the commercialization of Goose Duck Mobile. Cost of revenues increased by 10% year-over-year to RMB 1.48 billion for Q2, generally in line with the increase in revenues, primarily due to increased revenue sharing fees and the cost of in-game virtual items.
Within this, revenue sharing fees and the content cost rose by 3% year-over-year to RMB 1.21 billion. Gross profit was RMB 255 million for Q2, up 20% from the same period last year. Gross margin was 14.7% for Q2, improving from 13.5% for the same period last year. Excluding share-based compensation expenses, non-GAAP gross profit was RMB 257 million, and the non-GAAP gross margin was 14.8% for Q2. Research and development expenses decreased by 1% year-over-year to RMB 120 million for Q2. Sales and marketing expenses increased by 58% year-over-year to RMB 91 million for Q2, primarily due to continued marketing and promotional efforts related to Goose Duck Mobile.
General and administrative expenses decreased by 8% year-over-year to RMB 58 million for Q2, primarily due to decreased professional service fees. Other income was RMB 7.8 million for Q2, compared with RMB 7.6 million for the same period last year. Operating loss narrowed to RMB 7 million for Q2, compared with a loss of RMB 24 million for the same period last year. Excluding share-based compensation expenses and amortization of intangible assets from business acquisition, non-GAAP operating income increased to RMB 16 million from RMB0.4 million in the same period last year.
Interest income was RMB 26 million for Q2, down from RMB 59 million for the same period last year, primarily due to a decrease in the average deposit balance as a result of special cash dividends and lower interest rates. Net income attributable to HUYA Inc. was RMB 1.6 million for Q2, compared with a net loss attributable to HUYA Inc. of RMB 5.5 million for the same period last year. Excluding share-based compensation expenses and amortization of intangible assets from business acquisitions, net of income taxes, non-GAAP net income attributable to HUYA Inc. was RMB 36 million for Q2, compared with RMB 48 million for the same period last year.
[indiscernible] and diluted net income per ADS were each RMB 0.01 for Q2. Non-GAAP basic and diluted net income per ADS was each RMB 0.16 for Q2. As of June 30, 2026, the company had cash and cash equivalents, short-term deposits, and long-term deposits of RMB 3.21 billion, compared with RMB 3.46 billion as of March 31, 2026. With that, I'd like to open the call to your questions.
Zicheng Liu: Thanks, Raymond, and hello everyone. [Operator Instructions][Operator Instructions] For the benefits of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. Today's first question comes from Ritchie Sun from HSBC. Your line is open. Please go ahead.
Ritchie Sun: Vincent, Raymond, Margaret [Foreign Language] Good evening management, thank you for the opportunity to ask a question. I would like to ask about the progress of Goose Duck. Could you please share the operation update, monetization performance, and summer promotion progress for Goose Duck? Thank you.
Junhong Huang: [Foreign Language]
Unknown Executive: In the second quarter, Goose Duck Mobile continued to maintain a healthy and engaged player base with users aged between 18 to 25 remaining our core demographic. Long-term retention remained stable with limited user churn, reflecting continued engagement among our core users. We also continue to invest in building a healthy and a positive game environment. Last month, we launched an AI-powered voice moderation system to improve the quality of in-game voice chat and foster a more positive community environment. This has helped enhance both the gameplay and social experience for our players and further supports the long-term health of the game.
Junhong Huang: [Foreign Language]
Unknown Executive: [indiscernible] continues to demonstrate its strong commercial potential. Since our very first IP collaboration with Empresses in the Palace in April, we have continued to unlock new monetization opportunities. Subsequently, we had collaborations with Fox Spirit Matchmaker in June, Journey to the West and B.Duck in July, further boosted player engagement and helped the game return to the number 1 spot on iOS free game charts at end of July. We aim to have a robust pipeline of collaborations with new themed events planned on almost monthly basis. In August, for example, we plan to launch additional collaborations including JX3, further expanding our content offerings and creating new opportunities to drive player engagement and monetization.
Junhong Huang: [Foreign Language]
Unknown Executive: On the content front, it's encouraging to see UGC modes such as Goose Hunt, [Pool] and Mahjong continue to account for an increasing share of total player time. We also have a robust summer content lineup. In July, we launched a personal island home decorating system, giving players greater freedom to design and customize their own islands. From August through September, we plan to roll out a series of updates spanning core gameplay, social features, AI-powered matches, and tournament features, further enhancing the overall play experience.
Junhong Huang: [Foreign Language]
Unknown Executive: We're also working closely with R&D team to develop the WeChat mini game version. At this stage, we are focused on ensuring product stability and testing key operating metrics while taking advantage of WeChat's built-in social and sharing features to make it easier for players to invite friends and organize game sessions. With a solid user base established in the first half of the year, the WeChat mini game version gives us an opportunity to reach new audience across the WeChat ecosystem and drive the next phase of our user growth. Overall, we remain fully confident in the long-term health and stability of Goose Duck Mobile ecosystem, as well as its user engagement and monetization potential.
Zicheng Liu: Our next question comes from Maggie from CLSA. Please go ahead. Maggie, please unmute yourself.
Yifan Ye: [Foreign Language]
Unknown Executive: I will translate your question. Could management elaborate a bit more on HUYA's overall AI initiative? For example, the creator tools, content recommendation as well as any interactive features. How are these capabilities expected to drive user growth as well as monetization over the next few months and then over the midterm as well? Thank you.
Junhong Huang: [Foreign Language]
Unknown Executive: As mentioned last quarter, our AI initiatives remain focused on four areas: live streaming, game tools, IP-based companionship, and AI-assisted game development. In AI-powered live streaming, we launched VAM 1.0, our proprietary real-time multi-modal digital human model during this quarter. VAM is among the leading solutions in a real-time full duplex digital human space, and we believe it is helping digital humans to move beyond visual and display purposes towards more practical and real-time interactions. By reducing the time and cost constraints associated with human live streamers, VAM could help accelerate the industry's shift towards a hybrid content ecosystem powered by both humans and AI.
Our proprietary model enables us to scale AI-powered content across a broader range of user cases with greater efficiency and a lower marginal cost, creating new opportunities to expand our content supply on our platform.
Junhong Huang: [Foreign Language]
Unknown Executive: We will continue to enhance our VAM model, focusing on improving the [avatar] consistency, facial expressions, and body movements, as well as the naturalness of real-time dialogue and speech, while further reducing latency and computing costs.
Junhong Huang: [Foreign Language]
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Unknown Executive: AI game tools, the Delta Force map tool and Hextech ARAM assistant have delivered steady performance since their launches. Within 6 months, they have attracted more than 1 million users and maintained healthy retention. In the second quarter, we launched Teamfight Tactics assistant, marking our first expansion of AI assistant into auto chess genre. Given its strategic complexity and strong need for real-time decision making, Teamfight Tactics is a natural fit for real-time in-game AI assistance. This further demonstrate that our AI assistant capabilities can be applied across game genres. Based on user demand, we will gradually explore tools for additional strategy games.
Junhong Huang: [Foreign Language]
Unknown Executive: The value of our AI-powered game tools to the HUYA platform is becoming increasingly more evident. Take our Hextech ARAM assistant as an example. After adopting the tool, users more than doubled their monthly active days on HUYA platform, while also watching more frequently and for longer periods, resulting in higher overall user engagement and value.
Junhong Huang: [Foreign Language]
Unknown Executive: We also continuing to explore AI-enabled IP companionship and AI-assisted game development through multi-agent workflows. Later this year, we plan to begin pre-launch promotion for a physical multi-modal AI companion product. Our AI system game development efforts is also at a quite early testing stage with current applications focused on generating and testing casual and lightweight interactive content.
Zicheng Liu: Our next questions comes from Nelson from Citi. Please go ahead.
Fuk Lung Cheung: [Foreign language]
Unknown Executive: So let me translate into English. Thanks management for taking my question. Following the success of Goose Duck, how would HUYA position its game publishing business in future? Can management share the latest update on your product pipeline and publishing schedule going forward? Thank you.
Junhong Huang: [Foreign Language]
Unknown Executive: The game publishing is a key part of our transformation from a live streaming platform into a more integrated game service provider. Our core strength goes beyond traffic acquisition. What sets us apart is strength of our content ecosystem, which enables us to build awareness, engage users, and support games throughout their lifecycle. The successful launch of Goose Duck Mobile validated our content-driven publishing approach and the role of a social engagement in enhancing the game experience. It also helped us to begin building integrated end-to-end capabilities spanning product launch, user acquisition and long-term operations.
Junhong Huang: [Foreign Language]
Unknown Executive: In selecting products, we will continue to focus on high quality games and premium IP, prioritizing titles with strong content appeal, social interactivity and long-term operational potential, while gradually broadening our genre mix and user reach. As mentioned in our prepared remarks, we are actively advancing three key titles: Legend of Swordsman: Reunion, Xiao Qi Yu, both of which will be exclusively published by HUYA, and our self-developed title, Zhe Dao You Huan Shou. Several other additional titles are also under preparation.
Junhong Huang: [Foreign Language]
Unknown Executive: We'd like to emphasize that the success of publishing strategy is not dependent on Goose Duck Mobile game alone. It was just the beginning. We are building a diversified portfolio across multiple genres, including social [indiscernible], classic martial art, and casual match three games. We remain committed to a quality-first approach and disciplined investments marketing following a phased strategy that includes pre-launch content marketing, product testing and data validation, gradual scaling and long-term operations. This approach will enable us to build broader and more sustainable growth drivers for our game-related services.
Zicheng Liu: Our next question comes from [Raphael] from [BOCI]. Please go ahead. Please go ahead, Raphael.
Unknown Analyst: [Foreign language] Thanks management for letting me ask question. I am just wondering how does management assess current streaming performance and future streaming operational strategies? Following content optimization executions, what is the potential upside for cost savings in the second half of this year? Thank you.
Junhong Huang: [Foreign Language]
Unknown Executive: In the second quarter, live streaming revenue approximately RMB 1.1 billion, down by low single digit percentage year-over-year and broadly stable sequentially. Relative to the broader industry, our performance remained resilient. Paying user numbers and ARPU have also remained within a relatively stable range over the past several quarters.
Junhong Huang: [Foreign Language]
Unknown Executive: The industry continues to face pressure from softer user spending and intensifying competition among platforms. In this environment, we will place greater focus on the returns from our content investment. We are actively reviewing our streamer contracts and tournament licensing agreements to make sure we are getting the right returns from our content investments.
Junhong Huang: [Foreign Language]
Unknown Executive: We are also strengthening collaboration between entertainment and game streamers to drive cross-category user engagement. At the same time, we are expanding monetization opportunities through branded advertising campaigns, joint game operations, and live stream commerce, helping our game streamers to generate more value from their content and audience.
Zicheng Liu: Our next question comes from Wei Meng from CICC. Please go ahead.
Meng Wei: [Foreign Language]
Zicheng Liu: Hello, Wei Meng, we cannot hear from you.
Unknown Executive: [Foreign Language]
Meng Wei: [Foreign Language] So, let me translate myself, I would like to ask about the margins, especially the operating performance outlook. As the game publishing revenue scales up, when do you expect the profit contribution to start showing up? Thank you.
Lei Peng: [Foreign Language]
Unknown Executive: Our gross margin improved by 1.2 percentage points year-over-year in the second quarter. Non-GAAP operating profit reached RMB 16 million, a very significant year-over-year improvement and a quarter with a meaningful level of operating profit. Looking ahead, as higher margin businesses such as game publishing make up a larger share of our revenue, we continue to improve spending efficiency and we see further opportunities to improve both gross margin and operating margin.
Zicheng Liu: Now we will take our last question today from Rebecca from Morgan Stanley. Please go ahead.
Rebecca Xu: [Foreign language] Thanks management for taking my questions. Could you please share the latest progress of the company's share buyback and [indiscernible] plan for the shareholder return going forward? Thank you.
Lei Peng: [Foreign Language]
Unknown Executive: On shareholder returns, we continue to return capital to the shareholders through cash dividends and share repurchases. In the second quarter, we repurchased approximately 3.2 million ADS, representing approximately 1.4% of our total outstanding shares. A portion of these ADSs have already been canceled and the remainder will be canceled as planned. We continue to repurchase shares pursuant to our existing Rule 10b5-1 trading plan.
Lei Peng: [Foreign Language]
Unknown Executive: We are also very pleased to announce that the board has approved the expansion of our 2026 share repurchase program from $50 million to $100 million. The expanded authorization reflects our confidence in HUYA's business outlook and our continued commitment to enhancing long-term shareholder value. Rebecca, maybe I can add a bit more here. If we calculate at our current market cap of around $554 million, plus our $100 million buyback program, that would mean roughly $50 million share repurchases each year if spread over two years. Combined with at least $30 million in annual cash dividends, that would translate into a shareholder yield of around 14%-15% per year. Thank you.
Zicheng Liu: Thank you once again for joining us today. If you have further questions, please feel free to contact HUYA's Investor Relations through the contact information provided on our website or Piacente Financial Communications. This concludes today's call and we look forward to speaking to you again next quarter. Thank you.
Unknown Executive: Thank you.
Lei Peng: Thank you.
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