Surprised By iQIYI's 57% Slide? What Investors Overlooked

If you only glanced at headlines about iQIYI’s AI push, overseas subscriber gains, and heavy content slate, the business story might have sounded exciting. Holding iQIYI over the past year would have meant a 56.8% loss, including dividends. That gap between product buzz and portfolio reality is hard to ignore. If you had been weighing a position back in October 2025, what warning signs were already on the table before results weakened so visibly?

This theme extends beyond iQIYI. See which of 38 AI small caps may still merit a closer look.

The Two iQIYI Stories Investors Were Arguing Over

The shares cost US$2.06 at the start of the period, and anyone looking at iQIYI then had to choose between two very different stories.

The bullish view saw a content and overseas growth engine, with a Fair Value of US$2.44. The assumptions implied upside to that price and leaned on 1.8% annual revenue growth and a 4.3% profit margin assumption, helped by AI, premium originals, and new IP based businesses.

The bearish camp focused on pressure. Its Fair Value sat nearer US$1, reflecting concerns over piracy, tighter Chinese regulation, and saturated streaming markets that could keep subscriber growth and margins under strain.

What The Evidence Around iQIYI Actually Tested

iQIYI leaned hard into the AI story, rolling out Nadou Pro, loading it with more than 10,000 creators and supporting over 100 productions, which backed the bullish efficiency and content assumptions. At the same time, total revenue slipped from RMB 6,628.2m in Q2 2025 to RMB 6,287.1m in Q2 2026 and the net margin fell to a loss of 4.6%, so profitability progress in the optimistic case remained unproven. Overall, the evidence cut both ways.

The lesson is simple. When a growth pitch leans on technology and cost savings, do not stop at product launches or user counts. Track whether revenue, absolute profit and the net margin actually move toward the forecasted levels before treating the story as validated.

What Today’s iQIYI Price Already Assumes

Today iQIYI trades at US$0.95, while the selected Narrative’s Fair Value sits above the current price based on its own assumptions. That view leans on AI tools like NadouPro, micro-dramas and overseas audiences turning the catalog into a leaner, more diversified engine.

For that higher figure to hold, a buyer today would need to believe AI driven production and the expanded creator base actually cut unit content costs as they scale.

"As NadouPro and other AI tools move beyond pilots and into routine use across more than 100 original productions and thousands of AI generated titles, iQIYI has scope to convert current workflow gains such as higher VFX efficiency and faster rough cuts into a structurally leaner content cost base. This would support higher net margins even if headline content spend stays roughly flat."

One Narrative has put a figure on that disagreement. → See the Narrative with its higher Fair Value, assumptions and all

Go Straight To The Source

Passing on this one could have spared you a loss. Where might you find the opposite surprise? Start looking for companies whose prices leave room for a better outcome than investors expect. These three trade below our estimated value.

• Company 1 - 34% below our estimate - uses expanded high horsepower engine capacity to supply data center power projects.
• Company 2 - 49% below our estimate - scales digital small business platforms that tie lending, deposits and government guaranteed loans together.
• Company 3 - 35% below our estimate - folds new acquisitions into a broader deposit base to reshape funding mix and efficiency.

That is three of the list. See all 33 potentially undervalued companies →

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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