Goldman Sachs maintains a Neutral rating on Zhihu and lowers its 12-month target price to US$3.8/HK$10

Overview

This is a post-quarterly-results update report by Goldman Sachs on Zhihu. The core conclusion of the report is to maintain a Neutral rating on Zhihu, while lowering the 12-month DCF target price after updating business forecasts. On the revenue side, the analysts believe membership revenue recovery and growth in IP operation-related business were better than previously expected, and therefore raised their 2026-2028E revenue forecasts; on the profit side, non-GAAP net margin forecasts were lowered because the company increased investment in business growth.

Core views

The report believes Zhihu's short-term revenue mix is showing divergence: growth in IP operation-related revenue can partially offset pressure from advertising and the membership business, but overall growth remains weak. 2Q26E total revenue is expected to be flat year over year, and 2026E total revenue is expected to decline 5% year over year. In terms of profitability, 2Q26E non-GAAP net loss is expected to be RMB37 million, and 2026E non-GAAP net profit is expected to be near break-even, at an estimated loss of about RMB10 million. The Neutral rating is maintained, reflecting a balance between revenue recovery and margin pressure.

Analysis framework

The analysis uses a post-results earnings forecast update and DCF valuation framework. Goldman Sachs adjusted its 2026-2028E revenue and non-GAAP margin assumptions and, with base valuation assumptions unchanged, lowered its 12-month target price from US$4.3/HK$11.5 to US$3.8/HK$10. The report also presents explanations of Goldman Sachs' internal analytical frameworks such as GS Factor Profile, M&A Rank, and Quantum.

Methodology notes

• Valuation methodsDCF

  12-month DCF target price

  The report uses the DCF method to set Zhihu's 12-month target price. After the update, the target price is US$3.8/HK$10; base assumptions are unchanged, but revisions to earnings forecasts led to the target price cut.

• factor_profileGS Factor Profile

  Growth, financial returns, valuation multiples, and composite score

  Goldman Sachs compares a stock with the market and industry peers across growth, financial returns, valuation multiples, and composite factors to provide investment context.

• corporate_activityM&A Rank

  M&A probability score

  Goldman Sachs uses a score of 1 to 3 to assess the likelihood that a company becomes an acquisition target, where 1 represents high probability, 2 medium probability, and 3 low probability; a ranking of 1 or 2 may be incorporated into the target price.

• data_platformQuantum

  Goldman Sachs proprietary financial database

  Quantum provides financial statement history, forecasts, and ratios, and can be used for in-depth single-company analysis as well as cross-industry and cross-market comparisons.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• ZH.US

  Research target

  Strengths

  Growth in IP operation-related revenue, membership revenue recovery better than previously expected, and 2026E non-GAAP net profit close to break-even.

  Weaknesses

  Declining advertising revenue, continued pressure on the membership business, and increased growth investment leading to cuts in non-GAAP net margin forecasts.

  Comparison

  The rating is relative to Chinese internet content and information service companies covered by Goldman Sachs, including Bilibili, NetEase, Kuaishou, Tencent Music, iQIYI, and others.

  Risks

  Slower user growth, content regulation risk, and weaker-than-expected monetization and profitability.

• Zhihu Inc.(H)

  The same company's H-share security

  Strengths

  Shares the same company fundamentals and target price logic as the ADR, with a target price of HK$10.

  Weaknesses

  Also affected by revenue mix, margins, and growth investment.

  Comparison

  The report discloses rating and price information for both Zhihu Inc.(ADR) and Zhihu Inc.(H).

  Risks

  Same as ZH.US, including user growth, content regulation, and monetization risks.

Key data

• RatingNeutralGoldman Sachs maintains a Neutral rating on Zhihu.
• 12-month target priceUS$3.8 / HK$10Previously US$4.3 / HK$11.5, based on DCF valuation.
• 2026-2028E revenue forecast revision+5%Mainly due to a better recovery in membership revenue and higher IP-related revenue.
• 2026-2028E non-GAAP net margin revisionLowered by 0.6 to 1.5 percentage pointsThe reason is the company's increased investment in business growth.
• 2Q26E total revenueFlat year over yearGrowth in IP operation-related business offsets the decline in advertising revenue.
• 2Q26E non-GAAP net lossRMB37 millionReport estimate.
• 2026E total revenue-5% year over yearThe decline in the membership business is partially cushioned by growth in IP-related revenue.
• 2026E non-GAAP net profitEstimated loss of about RMB10 millionNear break-even.
• Disclosed priceUS$3.07 / HK$7.58Prices of Zhihu Inc.(ADR) and Zhihu Inc.(H) as listed in the report disclosure.

Impact & implications

For investors, the report signals that the revenue mix is improving but earnings elasticity remains constrained by investment. Growth in IP operation-related business and recovery in membership revenue lifted revenue forecasts, but the company's investment for growth led to margin cuts, keeping the rating at Neutral. The target price cut indicates that valuation is quite sensitive to changes in earnings quality and margins.

Risks

• Upside risks include MAU growth faster than expected.
• Upside risks include improved monetization prospects.
• Upside risks include meaningful progress in operating expense optimization.
• Downside risks include slower-than-expected user growth.
• Downside risks include content regulation or content control risks.
• Downside risks include weaker-than-expected monetization and profitability.

What to watch

• Whether 2Q26E total revenue can achieve flat year-over-year growth.
• Whether IP operation-related business can continue growing and offset the decline in advertising revenue.
• Whether recovery in the membership business continues to outperform expectations.
• The extent to which growth investment drags on non-GAAP net margins.
• Changes in MAU growth, content regulation, and monetization efficiency.
• Whether the DCF target price will be further adjusted due to changes in earnings forecasts or discount assumptions.