The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and the related notes included in this annual report. This report contains forward-looking statements. See “Forward-Looking Information.” In evaluating our business, you should carefully consider the information provided under the caption “Item 3. Key Information—D. Risk Factors” in this annual report. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties. A.OPERATING RESULTS Overview iQIYI is a leading provider of online entertainment video services in China. We remain focused on high-quality content and user experience. We provide our users with a variety of products and services encompassing online videos, experience services, online games, comics, and others. As of December 31, 2025, our comprehensive and diversified video content library boasted over 40,000 professionally produced long-form content titles, including drama series, films, variety shows, children’s content, animations, and others, along with approximately 20,000 micro dramas, collectively providing an all-inclusive entertainment experience for our users. We have developed diversified monetization models. We generate revenues through membership services, online advertising services, content distribution, and a suite of other monetization methods, including online games, talent agency, experience business and others. Our membership services contribute a significant portion of our revenues. Our monetization model fosters an environment for high-quality content production and effective content distribution on our platform, which in turn attracts a large and highly-engaged user base, creating a virtuous cycle. We recorded a net income of RMB1,952.6 million in 2023, a net income of RMB790.6 million in 2024 and a net loss of RMB204.0 million (US$29.2 million) in 2025. We have been generating positive operating cash flows on an annual basis since 2023. In 2025, we had a net cash inflow from operating activities of RMB105.8 million (US$15.1 million). Selected Income Statement Items Total Revenues We derive our revenues from (i) membership services, (ii) online advertising services, (iii) content distribution and (iv) others. The following table presents our revenue lines and as percentages of our total revenues for the periods presented. For the year ended December 31, 2023 2024 2025 RMB % RMB % RMB US$ % (in thousands, except for percentages) Revenues: Membership services 20,314,216 63.7 17,762,814 60.8 16,807,289 2,403,410 61.6 Online advertising services 6,223,903 19.5 5,714,243 19.6 5,193,406 742,647 19.0 Content distribution 2,458,610 7.7 2,846,854 9.7 2,497,464 357,133 9.2 Others 2,875,922 9.1 2,901,327 9.9 2,793,141 399,414 10.2 Total revenues 31,872,651 100.0 29,225,238 100.0 27,291,300 3,902,604 100.0 Membership services. We offer membership packages primarily to provide our members with (i) access to streaming of a library of premium content, (ii) certain commercial skipping and other viewing privilege, and (iii) merchandise selection and privilege. We also offer a broader selection of paid services with innovative privileges. We generate a small portion of our membership services revenue from on-demand content purchase by our users and the sale of the right to membership services through the cooperation with other parties, where we recognize revenue on a net basis when we do not control the specified services before they are transferred to the customer. We review and evaluate the scope and the price of our membership services periodically, and may adjust based on evolving market needs from time to time. Online advertising services. Our advertising revenues are recognized net of advertising agency rebates in 2023, 2024 and 2025. Our online advertising services are in the form of brand advertising and performance-based advertising. 94 Content distribution. We distribute video content by sub-licensing such content to other third-party internet video streaming platforms, and as consideration, receive either cash or the right to broadcast certain licensed content from such platforms on our platform. We also distribute selected content to regions outside of Chinese mainland and/or to TV stations in Chinese mainland, as well as from the release of feature films for exhibition in cinemas. Others. We generate revenues from various other channels, such as online games, talent agency, experience business and others. We generate revenues from online games both by distributing third-party online games and sharing revenues with them, and offering online games we develop ourselves. We generate revenues from talent agency services, primarily from celebrity endorsement contracts for the artists we represent. For experience business, we focus on IP-based consumer products and offline experiences, generating revenue primarily through direct merchandise sales, licensing fees, and ticket sales and on-site spending at iQIYI LAND. We also generated revenue from other licensing, granting rights to certain customers to re-create short-form videos for selected content assets from our existing content library over a fixed license period. Operating Costs and Expenses Our operating costs and expenses consist of (i) cost of revenues, (ii) selling, general and administrative expenses and (iii) research and development expenses. Cost of revenues. Our cost of revenues mainly consists of content costs and others. Content costs mainly consist of costs for iQIYI original content, which includes amortization and impairment of capitalized produced content and expenses recorded when production costs exceed the total revenues to be earned, licensed content, which includes amortization and impairment of licensed copyrights; revenue sharing cost for content uploaded by partners, and personnel compensation expenses directly associated with the acquisition, licensing and production of content. We expect our cost of revenues to remain largely stable in the foreseeable future. Selling, general and administrative expenses. Our selling expenses primarily consist of promotional and marketing expenses and compensation for our sales and marketing personnel. We expect our selling and marketing expenses as a percentage of total revenues to remain largely stable in the foreseeable future. Our general and administrative expenses primarily consist of salaries and benefits for our general and administrative personnel and fees and expenses for legal, accounting and other professional services. We expect our general and administrative expenses as a percentage of total revenues to remain largely stable in the foreseeable future. Research and development expenses. Research and development expenses primarily consist of salaries and benefits for our research and development personnel. We expect our research and development expenses as a percentage of total revenues to remain largely stable in the foreseeable future. Taxation We had income tax expense of RMB80.0 million, RMB61.1 million and RMB144.5 million (US$20.7 million) in 2023, 2024 and 2025, respectively. We are subject to various rates of income tax under different jurisdictions. The following summarizes major factors affecting our applicable tax rates in the Cayman Islands, Hong Kong, Singapore and Chinese mainland. Cayman Islands We are an exempted company incorporated in the Cayman Islands. The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of estate duty or inheritance tax. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands. In addition, the Cayman Islands does not impose withholding tax on dividend payments. Hong Kong Our subsidiaries in Hong Kong are subject to the uniform tax rate of 16.5%. Under the Hong Kong tax laws, we are generally exempted from the Hong Kong income tax on our foreign-derived income. Hong Kong does not impose a withholding tax on dividends. 95 Singapore Generally, entities in Singapore are subject to a unified 17% tax rate. Singapore does not impose a withholding tax on dividends. Chinese Mainland Generally, our Chinese mainland subsidiaries, the VIEs and their subsidiaries are subject to enterprise income tax on their taxable income in Chinese mainland at a rate of 25%. The enterprise income tax is calculated based on the entity’s global income as determined under Chinese mainland tax laws and accounting standards. An enterprise may benefit from a preferential tax rate of 15% under the Enterprise Income Tax Law if it qualifies as a High and New Technology Enterprise, or HNTE. A HNTE certificate is normally effective for a period of three years and can be reapplied or renewed. Certain of our Chinese mainland subsidiaries and VIEs, including Beijing QIYI Century, Shanghai Zhong Yuan and Beijing iQIYI, are qualified as HNTEs. The related tax benefits for our entities will expire between 2026 and 2028. Our Chinese mainland subsidiaries, the VIEs and their subsidiaries are generally subject to VAT at a rate of 3%, 6%, 9% or 13% and related surcharges. If our holding company in the Cayman Islands or our subsidiary outside of Chinese mainland were deemed to be a “resident enterprise” under the Enterprise Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Chinese Mainland—If we are classified as a Chinese mainland resident enterprise for Chinese mainland income tax purposes, such classification could result in unfavorable tax consequences to us and our non-Chinese mainland shareholders or ADS holders.” Results of Operations Despite the lack of equity ownership, our Cayman Island holding company is considered as the primary beneficiary of the variable interest entities and consolidates the financial results of the variable interest entities and their subsidiaries as required by ASC topic 810, Consolidation. Accordingly, we treat the variable interest entities as our consolidated entities under U.S. GAAP and we consolidate the financial results of the variable interest entities in our consolidated financial statements in accordance with U.S. GAAP. The following table summarizes our consolidated results of operations in absolute amounts and as percentages of our total revenues for the years presented. For the year ended December 31, 2023 2024 2025 RMB % RMB % RMB US$ % (in thousands, except for percentages) Revenues: Membership services 20,314,216 63.7 17,762,814 60.8 16,807,289 2,403,410 61.6 Online advertising services 6,223,903 19.5 5,714,243 19.6 5,193,406 742,647 19.0 Content distribution 2,458,610 7.7 2,846,854 9.7 2,497,464 357,133 9.2 Others 2,875,922 9.1 2,901,327 9.9 2,793,141 399,414 10.2 Total revenues 31,872,651 100.0 29,225,238 100.0 27,291,300 3,902,604 100.0 Operating costs and expenses: Cost of revenues(1) (23,102,492 ) (72.5 ) (21,953,582 ) (75.1 ) (21,542,347 ) (3,080,515 ) (78.9 ) Selling, general and administrative(1) (4,014,070 ) (12.6 ) (3,682,050 ) (12.6 ) (3,856,554 ) (551,480 ) (14.1 ) Research and development(1) (1,766,610 ) (5.5 ) (1,778,403 ) (6.1 ) (1,663,084 ) (237,817 ) (6.1 ) Total operating costs and expenses (28,883,172 ) (90.6 ) (27,414,035 ) (93.8 ) (27,061,985 ) (3,869,812 ) (99.1 ) Operating income 2,989,479 9.4 1,811,203 6.2 229,315 32,792 0.9 Total other expenses, net (956,878 ) (3.0 ) (959,524 ) (3.3 ) (288,816 ) (41,301 ) (1.1 ) Income/(Loss) before income taxes 2,032,601 6.4 851,679 2.9 (59,501 ) (8,509 ) (0.2 ) Income tax expenses (80,047 ) (0.3 ) (61,090 ) (0.2 ) (144,542 ) (20,669 ) (0.5 ) Net income/(loss) 1,952,554 6.1 790,589 2.7 (204,043 ) (29,178 ) (0.7 ) Note: 96 (1)Share-based compensation expense was allocated as follows: For the year ended December 31, 2023 2024 2025 RMB RMB RMB US$ Cost of revenues 133,160 121,048 112,822 16,133 Selling, general and administrative 314,788 273,330 163,585 23,393 Research and development 188,784 150,017 127,018 18,163 Total 636,732 544,395 403,425 57,689 Year Ended December 31, 2025 Compared with Year Ended December 31, 2024 Our revenues decreased by 6.6% from RMB29,225.2 million in 2024 to RMB27,291.3 million (US$3,902.6 million) in 2025. Membership services. Our membership services revenue decreased by 5.4% from RMB17,762.8 million in 2024 to RMB16,807.3 million (US$2,403.4 million) in 2025, primarily due to a lighter content slate and the competition among online entertainment video service providers. Online advertising services. Our online advertising services revenue decreased by 9.1% from RMB5,714.2 million in 2024 to RMB5,193.4 million (US$742.6 million) in 2025, as some advertisers adjusted their advertising and promotion strategies in response to macro pressure. Content distribution. Our content distribution revenue decreased by 12.3% from RMB2,846.9 million in 2024 to RMB2,497.5 million (US$357.1 million) in 2025, primarily due to the decrease in barter transactions. Others. Other revenues decreased by 3.7% from RMB2,901.3 million in 2024 to RMB2,793.1 million (US$399.4 million) in 2025 primarily due to the alteration of certain business cooperation arrangement. Cost of revenues Our cost of revenues decreased by 1.9% from RMB21,953.6 million in 2024 to RMB21,542.3 million (US$3,080.5 million) in 2025, primarily due to a decrease in content cost. Content cost. Content cost decreased by 1.7% from RMB15,709.7 million in 2024 to RMB15,449.6 million (US$2,209.3 million) in 2025, as we adopted a more curated content acquisition strategy centered on quality. Gross profit As a result of the foregoing, our gross profit decreased by 20.9% from RMB7,271.7 million in 2024 to RMB5,749.0 million (US$822.1 million) in 2025. Our gross profit as a percentage of total revenues declined from 24.9% in 2024 to 21.1% in 2025, primarily due to the decrease in our membership services revenue. Selling, general and administrative expenses Selling expenses increased by 7% from RMB3,079.4 million in 2024 to RMB3,301.0 million (US$472.0 million) in 2025, primarily due to increased marketing spending to promote our entertainment offerings. Our marketing and promotional expenses increased by 8% from RMB2,424.9 million in 2024 to RMB2,624.3 million (US$375.3 million) in 2025, primarily driven by higher marketing spending. General and administrative expenses decreased by 8% from RMB602.7 million in 2024 to RMB555.5 million (US$79.4 million) in 2025, primarily due to a decrease in share-based compensation expenses. Research and development expenses Our research and development expenses decreased from RMB1,778.4 million in 2024 to RMB1,663.1 million (US$237.8 million) in 2025, primarily attributable to the decrease in personnel-related expenses. 97 Income tax expense In 2025, we recognized RMB144.5 million (US$20.7 million) of income tax expense, which resulted from RMB141.8 million (US$20.3 million) current year income tax and RMB2.7 million (US$0.4 million) deferred income tax expense. In comparison, in 2024, we recognized RMB61.1 million of income tax expense, which resulted from RMB85.5 million current year income tax and RMB24.4 million deferred income tax benefit. Net loss As a result of the foregoing, we recorded a net loss of RMB204.0 million (US$29.2 million) in 2025, compared to a net income of RMB790.6 million in 2024. Year Ended December 31, 2024 Compared with Year Ended December 31, 2023 For a detailed description of the comparison of our operating results for the year ended December 31, 2024 to the year ended December 31, 2023, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operation—Year Ended December 31, 2024 Compared with Year Ended December 31, 2023” of our Annual Report on Form 20-F filed with the Securities and Exchange Commission on March 27, 2025. Impact of Foreign Currency Fluctuation See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Chinese Mainland—Fluctuations in exchange rates could have a material and adverse effect on our results of operations and the value of your investment” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk—Foreign Exchange Risk.” Impact of Governmental Policies See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Chinese Mainland” and “Item 4. Information on the Company—B. Business Overview—Government Regulations.” B.LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2025, we had RMB4,354.3 million (US$622.7 million) and RMB23.1 million (US$3.3 million) in cash and cash equivalents and restricted cash, respectively. Our cash and cash equivalents primarily consist of cash on hand and highly liquid investments, which are unrestricted from withdrawal or use, or which have original maturities of three months or less when purchased. Our restricted cash mainly represents restricted deposits used as security against certain lawsuits. As of December 31, 2025, we had RMB314.8 million (US$45.0 million) in short-term investments. Our short-term investments consisted of available-for-sale debt securities with maturities of less than one year purchased from commercial banks and other financial institutions. Our total current liabilities were RMB22.1 billion (US$3.2 billion) as of December 31, 2025, which primarily included RMB6,652.4 million (US$951.3 million) in accounts and notes payable, RMB4,160.5 million (US$594.9 million) in customer advances and deferred revenue, and RMB3,717.3 million (US$531.6 million) in amounts due to related parties. As of December 31, 2025, we had unused credit lines of RMB3.4 billion (US$0.5 billion) and a working capital deficit of RMB11.8 billion (US$1.7 billion). We generated a net loss of RMB204.0 million (US$29.2 million) in 2025 and had a net cash generated from operating activities of RMB105.8 million (US$15.1 million) in 2025. Accounts and notes payable amounted to RMB6,482.2 million and RMB6,652.4 million (US$951.3 million) as of December 31, 2024 and 2025, respectively. A substantial majority of our accounts and notes payable are due to content providers. To finance our operations, we have incurred a significant amount of indebtedness and other liabilities in relation to our convertible senior notes and other financing arrangements. We had only been able to generate positive net cash flows since the second quarter of 2022. We cannot assure you that we will be able to generate sufficient cash flow from our operations or secure additional financing to support the repayment of our indebtedness when our payments become due. Historically, we have issued convertible senior notes, which are senior, unsecured obligations of our company. Upon the occurrence of an event of default, the trustee or the holders of at least 25% in aggregate principal amount of our convertible senior notes may declare the whole principal of, and accrued and unpaid interest on, all the notes to be due and payable immediately, subject to certain exceptions and conditions under the respective indenture. Furthermore, upon the occurrence of a fundamental change, holders of the notes will have the right, at their option, to require us to repurchase all of their notes or any portion of the principal amount and accrued and unpaid interests. In the event of a fundamental change, we may also be required to issue additional ADSs upon conversion of the notes. 98 Our current cash and cash equivalents, restricted cash, short-term investments and proceeds and lines of credit/financing available to us and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements and capital expenditures for at least the next 12 months. We prudently manage our working capital to support our business and operations. We have been exploring and executing plans to reduce discretionary capital expenditures and operational expenses and secure additional financing, including, but not limited to, obtaining additional credit facilities from banks in the normal course of business, re-financing certain existing loans and credit facilities, and raising funds through additional issuances of equity and/or debt in public and/or private capital market transactions. We have conducted the below debt and equity financing activities in the last three fiscal years: •In December 2022, we issued an aggregate amount of US$500 million convertible notes due January 2028, to PAG. In February 2023, we issued to PAG an additional US$50 million principal amount of the PAG Notes upon its exercise to subscribe for additional notes in full. The PAG Notes bear an interest rate of 6% per annum and will mature on January 1, 2028. Holders of the PAG notes have the right to require us to repurchase all or part of their notes at a price equal to 120% of the principal amount of the PAG notes plus any accrued and unpaid interest to, but excluding, the repurchase date during the three-month period commencing on December 30, 2025. Holders of the PAG Notes may also have the right to require us to repurchase their notes in the event of certain fundamental changes or events of default. On the maturity date, we are obligated to pay a premium at 30% of the principal amount of the PAG Notes, in addition to repaying the principal amount itself. In September 2023 and August 2024, our subsidiary, iQIYI HK Limited, entered into facility agreements with PAGAC IV-4 (Cayman) Limited, an entity affiliated with PAG. Pursuant to the facility agreements, iQIYI HK Limited agreed to provide to PAGAC IV-4 (Cayman) Limited with aggregate loan facilities up to US$522.5 million, with an interest rate of 6% per annum. For each drawdown under these facilities, PAG releases an equivalent amount of restricted cash collateralized by us under the PAG Notes. Following PAG’s total drawdown of US$400.0 million under the facility agreements in August 2024, PAG’s repurchase right for the US$522.5 million principal of the PAG Notes on or shortly after the third anniversary of the issuance date had been waived. In October 2025, iQIYI HK Limited entered into another facility agreement with PAGAC IV-4 (Cayman) Limited which provides PAG with an additional loan facility of US$114.1 million, carrying an interest rate of 4.5% per annum. In connection with this loan facility, PAG released all remaining collateral secured by our Company under the PAG Notes. As of December 31, 2025, we had a loan principal of US$636.6 million to PAG. •In January 2023, we completed a registered follow-on public offering of 76,500,000 ADSs at a public offering price of US$5.90 per ADS. The underwriters exercised their option to purchase 9,975,000 additional ADSs at the price of US$5.90 per ADS in January 2023. We received net proceeds of US$500.0 million from the follow-on offering, including the exercise of the underwriters’ option to purchase additional ADSs, after deducting the underwriters’ discounts and commissions. •In March 2023, we completed an offering of US$600 million in aggregate principal amount of 6.50% convertible senior notes due March 2028, or the 2028 Notes. Holders of the 2028 Notes may require us to repurchase all or a portion of their notes for cash on March 16, 2026 or in the event of certain fundamental changes at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest. •In February 2025, we completed an offering of US$350 million in aggregate principal amount of 4.625% convertible senior notes due March 2030, or the 2030 Notes. Holders of the 2030 Notes may require us to repurchase all or a portion of their notes for cash on March 15, 2028 or in the event of certain fundamental changes at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest. We have also conducted the following structured payable arrangements in the last three fiscal years: •Since 2020, we have entered into structured payable arrangements with banks or other financial institutions, pursuant to which the suppliers’ receivables collection process was accelerated through selling their receivables from us to the banks or other financial institutions at a discount. We were legally obligated to pay the banks or other financial institutions in the amount totaling RMB1,771.1 million, RMB1,119.2 million and RMB812.1 million (US$116.1 million) for the year ended December 31, 2023, 2024 and 2025, respectively. As of December 31, 2025, the outstanding borrowings from the factoring arrangements was RMB693.0 million (US$99.1 million), which is repayable within one year. In terms of business and operational initiatives, we will continue to (i) pursue diversified monetization models, including membership services, online advertising services, content distribution, online games, talent agency, and experience business, among others, (ii) work closely with our customers and suppliers to optimize our credit terms and payment terms, and (iii) strengthen our content production capabilities and improve production efficiency to enhance content quality, increase return on investment, and manage our cost and operating expenses, in particular content costs. 99 As we will continue to invest in both original and licensed content and technology to support our growth, we may not be able to improve our working capital or liquidity position or to generate or maintain positive net cash flows beyond the next 12 months. We have taken a series of measures to mitigate such risks, including stepping up efforts in accounts receivable collection as well as disciplined spending through careful budget formulation, stringent budget implementation and payment arrangements with longer payment period. We are also exploring opportunities to obtain additional financing, including financing from new and/or existing shareholders, and financing generated through capital market transactions and commercial banks. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We have substantial indebtedness and we may continue to incur substantial additional indebtedness in the future, which could adversely affect our financial health and our ability to generate sufficient cash to satisfy our outstanding and future debt obligations on a timely manner. Deterioration of our cash flow position could materially and adversely affect our ability to service our indebtedness and continue our operations” and “—We have significant working capital requirements and have in the past experienced working capital deficits. If we experience such working capital deficits in the future, our business, liquidity, financial condition and results of operations may be materially and adversely affected.” Despite our efforts to pursue our fund raising plans and business initiatives, the successful completion of these plans is dependent on factors outside of our control and there can be no assurances that new financings or other transactions will be available to us on commercially acceptable terms, or at all. In addition, the deterioration in global economic conditions or escalation of geopolitical conflicts and other adverse changes in macro-economic conditions may adversely impact our ability to secure additional financing. As of December 31, 2025, 57.6% of our cash and cash equivalents and short-term investments were held in Chinese mainland, while 36.7% of our cash and cash equivalents and short-term investments were held by the variable interest entities and their subsidiaries. Although we consolidate the results of the variable interest entities and their subsidiaries, we only have access to the assets or earnings of the variable interest entities and their subsidiaries through our contractual arrangements with the variable interest entities and their shareholders. See “Item 4. Information on the Company—C. Organizational Structure” For restrictions and limitations on liquidity and capital resources as a result of our corporate structure, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Holding company structure.” We may make additional capital contributions to our Chinese mainland subsidiaries, establish new Chinese mainland subsidiaries and make capital contributions to these new Chinese mainland subsidiaries, make loans to our Chinese mainland subsidiaries, or acquire offshore entities with business operations in Chinese mainland in offshore transactions. However, most of these uses are subject to PRC regulations and approvals. For example: •capital contributions to our Chinese mainland subsidiaries must be registered with the SAMR or its local counterparts, and reported to the competent commerce authorities through the enterprise registration system and the National Enterprise Credit Information Publicity System; and •loans by our company to our Chinese mainland subsidiaries to finance their activities cannot exceed the difference between its registered capital and its total investment amount as recorded in the foreign investment comprehensive management information system or, as an alternative, only procure loans subject to the Risk-Weighted Approach and the Net Asset Limits and must be registered with SAFE or its local branches or filed with SAFE in its information system. Any loan to be provided by our company to our Chinese mainland subsidiaries, variable interest entities and their subsidiaries with a term of more than one year must be recorded and registered by the NDRC or its local branches. See “Item 4. Information on the Company—B. Business Overview—Government Regulations—Regulations on Foreign Exchange.” There is, in effect, no statutory limit on the amount of capital contribution that we can make to our Chinese mainland subsidiaries. This is because there is no statutory limit on the amount of registered capital for our Chinese mainland subsidiaries, and we are allowed to make capital contributions to our Chinese mainland subsidiaries by subscribing for their initial registered capital and increased registered capital, provided that the Chinese mainland subsidiaries complete the filing and registration procedures. With respect to loans to the Chinese mainland subsidiaries by our company, (i) if the Chinese mainland subsidiaries determine to adopt the traditional foreign exchange administration mechanism, or the Current Foreign Debt Mechanism, the outstanding amount of the loans shall not exceed the difference between the total investment and the registered capital of the Chinese mainland subsidiaries and there is, in effect, no statutory limit on the amount of loans that we can make to our Chinese mainland subsidiaries under this circumstance since we can increase the registered capital of our Chinese mainland subsidiaries by making capital contributions to them, subject to the completion of registration, and the difference between the total investment and the registered capital will increase accordingly; and (ii) if the Chinese mainland subsidiaries determine to adopt the foreign exchange administration mechanism as provided in PBOC Notice No. 9, or the Notice No. 9 Foreign Debt Mechanism, the risk-weighted outstanding amount of the loans, which shall be calculated based on the formula provided in PBOC Notice No. 9, shall not exceed 200% of the net asset of the Chinese mainland subsidiary. According to PBOC Notice No. 9, after a transition period of one year since the promulgation of PBOC Notice No. 9, the 100 People’s Bank of China and SAFE will determine the cross-border financing administration mechanism for the foreign-invested enterprises after evaluating the overall implementation of PBOC Notice No. 9. As of the date hereof, neither the People’s Bank of China nor SAFE has promulgated and made public any further rules, regulations, notices or circulars in this regard. It is uncertain which mechanism will be adopted by the People’s Bank of China and SAFE in the future and what statutory limits will be imposed on us when providing loans to our Chinese mainland subsidiaries. We have in place a centralized cash management policy and established stringent controls and procedures for cash flows within our organization. Under our cash management policy, cash is managed by the centralized treasury department of our company, and each transfer of cash between our Cayman Islands holding company and a subsidiary, the variable interest entities or the subsidiaries of the variable interest entities is subject to internal approval. All such transfers are reviewed and approved by the authorities where required, including SAFE. We only allow the treasury department personnel to have access to our funds, and we also segregate duties between personnel involved in funds management. The cash management policy is our management policy and adheres to the applicable laws and regulations. In addition, our board of directors has complete discretion on whether to distribute dividends to the shareholders. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. If we pay any dividends, we will pay our ADS holders to the same extent as holders of our Class A ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See “Item 8. Financial Information—A. Consolidated Statements and other Financial Information—Dividend Policy.” A majority of our future revenues are likely to continue to be in the form of Renminbi. Under existing PRC foreign exchange regulations, Renminbi may be converted into foreign exchange for current account items, including profit distributions, interest payments and trade and service related foreign exchange transactions. Our Chinese mainland subsidiaries may convert Renminbi amounts that they generate in their own business activities, including technical consulting and related service fees pursuant to their contracts with the variable interest entities, as well as dividends they receive from their own subsidiaries, into foreign exchange and pay them to their non-Chinese mainland parent companies in the form of dividends. However, current PRC regulations permit our Chinese mainland subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Each of our Chinese mainland subsidiaries is required to set aside at least 10% of its after-tax profits after making up previous years’ accumulated losses each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital. These reserves are not distributable as cash dividends. The following table sets forth a summary of our cash flows for the periods indicated. For the year ended December 31, 2023 2024 2025 RMB RMB RMB US$ (in thousands) Summary Consolidated Cash Flows Data: Net cash provided by operating activities 3,351,600 2,110,057 105,801 15,131 Net cash used for investing activities (1,739,515 ) (2,444,870 ) (327,435 ) (46,822 ) Net cash provided by/ (used for) financing activities (4,285,072 ) (1,370,121 ) 1,064,434 152,213 Effect of exchange rate changes on cash, cash equivalents and restricted cash 92,039 14,657 (55,393 ) (7,924 ) Net increase/ (decrease) in cash, cash equivalents and restricted cash (2,580,948 ) (1,690,277 ) 787,407 112,598 Cash, cash equivalents and restricted cash at the beginning of the year 7,861,556 5,280,608 3,590,331 513,411 Cash, cash equivalents and restricted cash at the end of the year 5,280,608 3,590,331 4,377,738 626,009 101 Net Cash Provided by Operating Activities Net cash provided by operating activities was RMB105.8 million (US$15.1 million) in 2025, primarily attributable to net loss of RMB204.0 million (US$29.2 million), adjusted by non-cash items of RMB13,363.2 million (US$1,910.9 million) and cash outflow from changes in operating assets and liabilities of RMB13,053.4 million (US$1,866.6 million). The decrease in non-cash items compared with 2024 was primarily due to a decrease of amortization of licensed copyrights, partially offset by an increase of amortization and impairment of produced content. The increase of cash outflow from changes in operating assets and liabilities compared with 2024 was primarily due to an increase in prepayments and other assets, which was offset by a decrease in the addition of licensed copyrights. Net cash provided by operating activities was RMB2,110.1 million in 2024, primarily attributable to net income of RMB790.6 million, adjusted by non-cash items of RMB13,678.6 million and cash outflow from changes in operating assets and liabilities of RMB12,359.1 million. The decrease in non-cash items compared with 2023 was primarily due to a decrease of amortization and impairment of produced content and an increase of barter transaction revenue, partially offset by an increase of amortization of licensed copyright. The decrease of cash outflow from changes in operating assets and liabilities compared with 2023 was primarily due to a decrease in accounts payable and prepayments and other assets, which was offset by an increase in other non-current liabilities. Net cash provided by operating activities was RMB3,351.6 million in 2023, primarily attributable to net income of RMB1,952.6 million, adjusted by non-cash items of RMB14,757.5 million and cash outflow from changes in operating assets and liabilities of RMB13,358.5 million. The increase in non-cash items compared with 2022 was primarily due to an increase of amortization and impairment of produced content, which was offset by a decrease of amortization of licensed copyright. The decrease of cash outflow from changes in operating assets and liabilities compared with 2022 was primarily due to a decrease in accounts payable, which was offset by increase in other non-current liabilities. Net Cash Used for Investing Activities Net cash used for investing activities was RMB327.4 million (US$46.8 million) in 2025, primarily due to (i) cash outflow from loans provided to related parties of RMB812.6 million (US$116.2 million), (ii) cash outflow from purchasing of debt securities of RMB497.4 million (US$71.1 million), and (iii) cash inflow from maturities of debt securities of RMB1,110.5 million (US$158.8 million). Net cash used for investing activities was RMB2,444.9 million in 2024, primarily due to (i) cash outflow from loans provided to related parties of RMB2,316.2 million, (ii) cash outflow from purchasing of debt securities of RMB948.0 million, and (iii) cash inflow from maturities of debt securities of RMB953.0 million. Net cash used for investing activities was RMB1,739.5 million in 2023, primarily due to (i) cash inflow from maturities of debt securities of RMB1,769.3 million, (ii) cash outflow from loans provided to related parties of RMB1,472.6 million, and (iii) cash outflow from purchasing of debt securities of RMB1,890.5 million. Net Cash Provided by/(Used for) Financing Activities Net cash provided by financing activities was RMB1,064.4 million (US$152.2 million) in 2025, primarily due to (i) proceeds from short-term and long-term loans of RMB6,037.0 million (US$863.3 million), (ii) net cash inflow from issuance of convertible senior notes of RMB2,490.0 million (US$356.1 million), (iii) cash outflow used for repayments of short-term loans and long-term loans of RMB4,428.8 million (US$633.3 million), and (iv) cash outflow used for repayments or redemption of convertible senior notes of RMB2,813.6 million (US$402.3 million). Net cash used for financing activities was RMB1,370.1 million in 2024, primarily due to (i) cash outflow used for repayments or redemption of convertible senior notes of RMB2,914.2 million, and (ii) proceeds from long-term loans of RMB1,120.3 million. Net cash used for financing activities was RMB4,285.1 million in 2023, primarily due to (i) cash outflow used for repayments or redemption of convertible senior notes of RMB11,736.0 million, (ii) net cash inflow from issuance of convertible senior notes of RMB4,415.4 million, and (iii) net cash inflow from follow-up offering of RMB3,391.3 million. Material Cash Requirements Our material cash requirements as of December 31, 2025 and any subsequent period primarily include our capital expenditures, long-term debt obligations, operating lease obligations, and purchase obligations. 102 Our capital expenditures are incurred primarily in connection with leasehold improvements, computers and servers, and construction in process. Our capital expenditures were RMB37.0 million, RMB79.3 million and RMB95.8 million (US$13.7 million) in the years ended December 31, 2023, 2024 and 2025, respectively. Our capital expenditures may increase in the future as our business continues to grow. We currently plan to fund these expenditures with our current cash and cash equivalents, short-term investments and anticipated cash flow generated from our operating activities. We intend to fund our existing and future material cash requirements with our cash provided by operating activities, existing cash and cash equivalents, restricted cash, short-term investments and other financing alternatives. We will continue to make cash commitments, including capital expenditures, to support the growth of our business. The following table sets forth our contractual obligations by specified categories as of December 31, 2025. Payment due by period Total 2026 2027 2028 2029 2030 and after (in RMB thousands) Long-Term Debt and Convertible Senior Notes Obligations(1) 14,071,070 1,271,428 3,155,014 7,003,228 116,505 2,524,895 Operating Lease Obligations(2) 497,002 85,987 78,632 74,696 63,633 194,054 Purchase Obligations(3) 18,120,256 8,864,249 5,146,459 2,814,328 852,151 443,069 Total 32,688,328 10,221,664 8,380,105 9,892,252 1,032,289 3,162,018 Notes: (1)On December 21, 2020, we issued US$800 million convertible senior notes and offered an additional US$100 million principal amount simultaneously, issuable pursuant to the underwriters’ exercise of option to purchase additional notes. On January 8, 2021, the additional US$100 million principal amount was issued pursuant to the underwriters’ exercise of their option. The convertible senior notes issued on December 21, 2020 and January 8, 2021, which we collectively refer to as the 2026 Notes, are senior, unsecured obligations of us, and interest is payable semi-annually in cash at a rate of 4.00% per annum on June 15 and December 15 of each year, beginning on June 15, 2021. The 2026 Notes will mature on December 15, 2026, unless repurchased, redeemed or converted prior to such date. In 2023, we entered into separate individually and privately negotiated agreements with certain holders of the 2026 Notes, pursuant to which we repurchased US$504.4 million principal amount of the 2026 Notes for cash. In 2024, we redeemed US$395.5 million aggregate principal amount of the 2026 Notes as requested by the holders. The holders may also require us to repurchase all or a portion of the 2026 Notes upon a fundamental change. On December 30, 2022, we issued an aggregate amount of US$500 million convertible senior notes due January 2028, which we refer to as the PAG Notes, to PAG. In February 2023, we issued to PAG an additional US$50 million principal amount of the PAG Notes upon its exercise to subscribe for additional notes in full. The PAG Notes, secured by certain collateral arrangements, bear an interest rate of 6% per annum and will mature on January 1, 2028. On the maturity date, we are obligated to pay a premium at 30% of the principal amount of the PAG Notes, in addition to repaying the principal amount itself. Holders of the PAG Notes also have the right to require us to repurchase all or part of their notes in the event of certain fundamental changes and events of default. In 2025, we entered into separate individually and privately negotiated agreements with certain holders of the PAG Notes, pursuant to which we repurchased US$27.5 million principal amount of the PAG Notes for cash. On March 7, 2023, we issued US$600 million convertible senior notes, which we refer to as the 2028 Notes. The 2028 Notes are senior, unsecured obligations of us, and interest is payable quarterly in cash at a rate of 6.50% per annum on March 15, June 15, September 15 and December 15 of each year, beginning on June 15, 2023. The 2028 Notes will mature on March 15, 2028, unless redeemed, repurchased or converted prior to such date. The holders may require us to repurchase all or a portion of the 2028 Notes upon a fundamental change, at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest. In 2023, 2024 and 2025, we entered into separate individually and privately negotiated agreements with certain holders of the 2028 Notes, pursuant to which we repurchased US$391.9 million principal amount of the 2028 Notes for cash. In March 2026, we completed the repurchase right offer for the 2028 Notes, pursuant to which US$207.8 million aggregate principal amount of the 2028 Notes were validly surrendered and repurchased and US$0.3 million principal amount of the 2028 Notes remained outstanding. On February 24, 2025, we issued US$350 million convertible senior notes, which we refer to as the 2030 Notes. The 2030 Notes are senior, unsecured obligations of us, and interest is payable quarterly in cash at a rate of 4.625% per annum on March 15, June 15, September 15 and December 15 of each year, beginning on June 15, 2025. The 2030 Notes will mature on March 15, 2030, unless redeemed, repurchased or converted prior to such date. The holders may require us to repurchase all or a portion of the 2030 Notes for cash on March 15, 2028, or upon a fundamental change, at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest. For further information, please see “Loans Payable” under Note 13 and “Convertible Senior Notes” under Note 14 to our consolidated financial statements included elsewhere in this annual report. (2)Operating lease obligations represent our obligations for leasing office premises and internet data center facilities. (3)Purchase obligations represent our future minimum payments under non-cancelable agreements for licensed copyrights, produced content, property management fees and fixed assets. 103 Other than the contractual obligations set forth above, we do not have any significant contractual obligations that are long-term debt obligations, capital/operating lease obligations, purchase obligations or other long-term liabilities reflected on our balance sheet as of December 31, 2025. Holding Company Structure iQIYI, Inc. is a holding company with no material operations of its own. We conduct our operations primarily through our Chinese mainland subsidiaries, the variable interest entities and their subsidiaries in Chinese mainland. As a result, iQIYI, Inc.’s ability to pay dividends to the shareholders and investors of the ADSs depends upon dividends paid by our Chinese mainland subsidiaries. If our existing Chinese mainland subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our wholly foreign-owned subsidiaries in Chinese mainland are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of our subsidiaries and the variable interest entities in Chinese mainland is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, each of our subsidiaries and the variable interest entities in Chinese mainland may allocate a portion of their after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of Chinese mainland is subject to examination by the banks designated by SAFE. Our Chinese mainland subsidiaries have not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds. The table below sets forth the respective revenue contribution and assets of iQIYI, Inc. and our wholly-owned subsidiaries and the VIEs and VIEs’ subsidiaries as of the dates and for the periods indicated: Total revenues(1) For the year ended December 31, 2023 2024 2025 iQIYI, Inc. and its wholly-owned subsidiaries 7.7 % 6.9 % 11.9 % Variable interest entities and their subsidiaries 92.3 % 93.1 % 88.1 % Total 100.0 % 100.0 % 100.0 % Notes: (1)The percentages exclude the inter-company transactions and balances between iQIYI, Inc. and our wholly-owned subsidiaries and the variable interest entities. Total assets As of December 31, 2023 2024 2025 iQIYI, Inc. and its wholly-owned subsidiaries 36.2 % 40.5 % 39.4 % Variable interest entities 63.8 % 59.5 % 60.6 % Total 100.0 % 100.0 % 100.0 % C.RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC. Technology Technology is the bedrock of our products and services. As of December 31, 2025, approximately 35% of our employees were engineers dedicated to technological innovation and breakthrough. We utilize AI technology to drive our entire business, including video content creation, purchase, production, tagging, distribution, monetization and customer service, to achieve automation and intelligence in the entire business process. Our advanced technologies facilitate better content production, enhanced operation efficiency and superior user experience. To maintain our industry-leading position, we have established extensive cooperation with many industry-leading research institutes. Technologies to Enhance Content Production and Operation Efficiency We empower all stages of the content production and monetization cycle by applying various AI technologies. We have developed and put into use an integral set of technological infrastructures and AI tools that improve content production quality and enhance operation efficiency. 104 For content creation, we have developed a comprehensive AI-driven system, the Screenplay Studio (剧本工坊), for script evaluation, which enabled breakthroughs in quantitative script analysis. For example, the system is capable of in-depth evaluations of the romantic dynamics and interactions between lead characters, and the identification of unnecessary plots. Based on our massive data and analytical capabilities, our systems also provide recommendations on casting decisions to identify the actors and actresses who are the most suitable for specific characters. Collectively, these analyses substantially improve our ability to identify scripts with potential and develop them into high-quality content. During content production, our integrated production systems improve digital workflow by integrating and streamlining the elements of video production. The Imaging Studio (影像工坊) supports the automatic generation of graphic and video designs, such as anime character design, concept art design, game character design, and storyboard design, among others. In addition, our AI-assisted subtitle translation and dubbing functions have enabled the efficient distribution of our premium content overseas. As for content distribution and monetization, our AI technologies enable the systematic generation of promotional materials including posters and video teasers which are more efficient and cost-effective than a traditional manual process. iQuickReel (速看) uses an AI agent to create collection of short videos based on long-form content, providing viewing experiences akin to micro dramas while amplifying the value of our existing content library. Our toolsets also enable the intelligent breakdown and analysis of scenes, such as identifying objects that a character is interacting with, for an evaluation of the optimal ad placement. Technologies to Enhance User Experience We have skillfully leveraged deep learning technology to areas such as content tagging, user profiling, developing knowledge graph and content recommendation. We have utilized large language models to enhance the accuracy of tagging and understanding search query intents. Moreover, through Taodou (桃豆), an AI agent serving as a personal assistant, we provide services including video searches, recommendations, and plot insights, among others. These innovations are revolutionizing user engagement. In addition, our advanced video, audio and AI technologies provide users with superior viewing experience. The iJump (跳看) feature caters to certain users’ fast-paced viewing preferences. In terms of audio-visual quality, we are one of a few online entertainment video service providers in Chinese mainland providing concurrent 4K/8K high-definition video quality, HDR (High Dynamic Range) video, Dolby Atmos® audio effect and an ultimate cinematic like immersive experience via eXave MAX (幀綺映畫MAX). Leveraging our big data analytics, features such as AI Radar and Watch Me Only support real-time recognition and search of information from video images, or allow users to view only the segments featuring particular artists. Our extensive P2P and CDN-based HCDN (hybrid content delivery network) seamlessly distribute and transmit massive internet video with high quality and low bandwidth cost. In the years ended December 31, 2023, 2024 and 2025, our research and development expenditures, including share-based compensation expenses for research and development staff, were RMB1,766.6 million, RMB1,778.4 million and RMB1,663.1 million (US$237.8 million), respectively, representing 5.5%, 6.1% and 6.1% of our total revenues for the years ended December 31, 2023, 2024 and 2025, respectively. Our research and development expenditures consist primarily of personnel-related costs (including share-based compensation expenses). D.TREND INFORMATION Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2025 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions. E.CRITICAL ACCOUNTING ESTIMATES We prepare our financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect our reporting of, among other things, assets and liabilities, contingent assets and liabilities and total revenues and expenses. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since our financial reporting process inherently relies on the use of estimates and assumptions, our actual results could differ from what we expect. 105 We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. Such critical estimates are discussed below. For further information on our other significant accounting estimates, see Note 2 to our consolidated financial statements included elsewhere in this annual report. Amortization of content assets Based on factors including historical and estimated future viewership consumption patterns, our content assets (licensed copyrights and produced content) are amortized using an accelerated method by content categories over the shorter of each content’s contractual period or estimated useful lives within ten years, beginning with the month of first availability. We review factors that impact the amortization of the content assets on a regular basis, such as the estimates of future viewership consumption patterns and estimated useful lives. Our estimates related to these factors require complex and subjective management judgment and any changes in our estimates of future viewership consumption patterns and estimated useful lives may cause us to realize different amounts of amortization in future periods. Critical Accounting Policies and Judgments The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. For further information on our significant accounting policies, see Note 2 to our consolidated financial statements included elsewhere in this annual report.