Executive Summary / Key Takeaways

• Definitive Strategic Transformation: The February 2025 sale of YY Live marks JOYY's complete exit from China-focused livestreaming, freeing management to concentrate on a global multi-engine platform strategy where ad tech and SaaS businesses are rapidly scaling.

• Financial Inflection Point: Non-livestreaming revenue surged from 17.4% to 28.1% of group total in just three quarters (Q1 to Q3 2025), with BIGO Ads delivering 33% year-over-year growth and Shopline maintaining 20%+ expansion, demonstrating successful diversification beyond the legacy livestreaming business.

• Cash Cow Foundation Stabilized: After temporary Q4 2024 disruptions, livestreaming has resumed sequential growth for two consecutive quarters (Q2 and Q3 2025), providing sustainable cash flow to fund high-growth initiatives without diluting shareholders.

• Fortress Balance Sheet and Aggressive Capital Returns: $3.3 billion in net cash (exceeding the current market capitalization) underpins a $900 million shareholder return program through 2027, while management actively accelerates buybacks, signaling strong conviction in undervaluation.

• Key Risk/Reward Asymmetry: The investment case hinges on whether JOYY can sustain BIGO Ads' 30%+ growth trajectory and scale Shopline's SaaS business while navigating regulatory headwinds in key markets—a bet that the market's 0.95x EV/Revenue multiple severely underprices given the emerging growth engines.

Setting the Scene: The Making of a Global Tech Platform

Founded in 2005, JOYY Inc. spent its first fifteen years building one of China's largest livestreaming communities under the YY brand. This history established the company's core competency in real-time content delivery, virtual economies, and community management at massive scale. When the company rebranded to JOYY in December 2019, it signaled ambitions beyond China's borders. The subsequent 2022 strategic shift to accelerate ad tech and SaaS initiatives represented more than typical corporate diversification—it was a recognition that livestreaming alone, while profitable, couldn't deliver the growth profile of a true technology platform.

The business model transformation became irreversible in February 2025 with the $810 million sale of YY Live, JOYY's mainland China livestreaming business. This divestiture eliminated regulatory exposure to China's increasingly restrictive internet policies. It also freed management resources to focus exclusively on global markets where JOYY already generates 89.6% of revenue. In addition, it provided fresh capital to invest in higher-margin ad tech and SaaS businesses that are scaling faster than legacy livestreaming ever could.

Today, JOYY operates as a three-engine platform. The livestreaming business (Bigo Live, Likee, Hago) functions as a cash cow, generating predictable profits from 266 million mobile MAUs. BIGO Ads, the AI-powered advertising platform, serves as the primary growth engine, leveraging proprietary first-party data from JOYY's social ecosystem. Shopline, the e-commerce SaaS platform, represents the third engine—a bet on the long-term digitization of commerce in Southeast Asia and other emerging markets where JOYY has deep operational roots.

This positioning places JOYY in direct competition with Meta (META)'s family of apps for user attention and advertising dollars, while Shopline competes with Shopify (SHOP) and regional e-commerce enablers. The key difference lies in JOYY's emerging-market focus and integrated ecosystem. Unlike Western platforms that entered Asia later, JOYY built its infrastructure from the ground up in these markets, giving it qualitatively better unit economics on user acquisition and deeper relationships with local payment systems and regulators.

Technology, Products, and Strategic Differentiation

The BIGO Ads Moat: Proprietary Data at Scale

BIGO Ads is not just another ad network. As an AI-powered platform that leverages JOYY's 263 million first-party users, it enjoys exclusive access to behavioral data that third-party cookies can no longer provide. This solves the targeting precision problem that has plagued advertisers since Apple's privacy changes and Google's cookie deprecation. The platform's ability to analyze user intentions, interests, and behavioral patterns across livestreaming, short video, and messaging creates a feedback loop: better targeting drives higher ROI for advertisers, which attracts more ad spend, which funds further AI improvements.

The financial evidence validates this moat. In Q3 2025, BIGO Ads revenue hit $104 million, up 33.1% year-over-year and 19.7% quarter-over-quarter. More telling is the acceleration in underlying metrics: SDK ad requests surged 228% year-over-year, third-party audience network revenue grew 25% sequentially, and spending from key advertiser cohorts increased 30% quarter-over-quarter. These figures indicate that BIGO Ads is scaling not just through price increases but through genuine network effects—more publishers joining the platform, more advertisers spending larger budgets, and more efficient matching through AI.

Management's commentary that BIGO Ads has "enjoyed inherent advantages over technology, data and also advertiser outreach" is not mere marketing. The platform's integration with JOYY's livestreaming ecosystem provides real-time conversion data that standalone ad networks cannot access. When a user watches a livestream, engages with a short video, and then makes a purchase through Shopline, BIGO Ads captures the entire funnel. This end-to-end visibility allows it to optimize campaigns with precision that competitors relying on fragmented data sources cannot match.

Shopline: The SaaS Growth Curve

Shopline's evolution from storefront builder to full-stack e-commerce platform mirrors Shopify (SHOP)'s trajectory but with a critical difference: it operates in markets where e-commerce penetration remains low and growing rapidly. The platform's open architecture, which gives merchants full data ownership, contrasts with "walled garden" marketplaces like Amazon (AMZN) and Shopee (SEA). This positioning attracts merchants seeking to build independent brands rather than surrender margin to platform fees.

The "All Other" segment (primarily Shopline) showed gross margin expansion of 3 percentage points year-over-year to 42.6% in Q3 2025, driven entirely by higher-margin SaaS revenues. Management expects "robust double-digit revenue growth year-on-year in 2026" for the ad tech and SaaS businesses combined, implying Shopline will maintain its 20%+ growth trajectory.

The strategic significance extends beyond revenue. Shopline creates a three-way synergy: it provides BIGO Ads with a growing base of e-commerce advertisers, it gives livestreaming creators a monetization path through affiliate commerce, and it generates subscription revenue that is more predictable than advertising. This ecosystem effect strengthens JOYY's competitive moat by making each business unit more valuable as the others grow.

Livestreaming: AI-Enhanced Cash Generation

The livestreaming business, once JOYY's sole focus, has been repositioned as a cash-generating foundation. After the Q4 2024 temporary app removals that caused short-term revenue fluctuations, management took decisive action to enhance community safety infrastructure and update global guidelines. This response demonstrates operational discipline: rather than accepting regulatory risk as a cost of doing business, JOYY invested in compliance capabilities that now serve as a competitive barrier to less-scrupulous rivals.

The financial recovery validates this approach. Q3 2025 livestreaming revenue reached $388 million, up 3.5% quarter-over-quarter for the second consecutive quarter. More importantly, the quality of revenue improved: livestreaming revenue from developed countries grew 7.6% quarter-over-quarter, ARPPU increased 3.4%, and streaming hours from newly signed streamers rose 3.5%. These metrics indicate that JOYY is optimizing for profitability over pure scale, focusing on higher-value users and content rather than chasing low-monetization MAU growth.

AI integration is transforming the livestreaming economics. Real-time translation across 15 languages, AIGC-generated virtual gifts, and AI-powered content distribution are improving engagement while reducing content costs. In October 2025, AI-powered interactive gifts represented 25% of total virtual gift consumption—a figure that will likely grow as AIGC technology matures. This shows JOYY can maintain gross margins even as it scales, a critical advantage in a content-heavy business.

Financial Performance & Segment Dynamics

The Margin Expansion Story

JOYY's Q3 2025 results reveal a company at an inflection point. Group gross margin reached 35.8%, up 4.3 percentage points quarter-over-quarter, driven by a favorable revenue mix shift toward higher-margin ad tech and SaaS businesses. Non-GAAP operating income of $41 million grew 16.6% year-over-year, while EBITDA of $51 million increased 16.8% year-over-year and 4.9% quarter-over-quarter. These figures demonstrate operational leverage: revenue growth is translating into disproportionate profit growth, validating the multi-engine strategy.

The segment-level dynamics tell a more nuanced story. BIGO's gross margin was "slightly down quarter-over-quarter" due to the increased contribution from lower-margin network ad revenues, but this was "partially offset by content cost optimization and efficiency improvements in livestreaming." This trade-off is strategically sound: accepting modest margin compression in the ad network to drive rapid scale, while protecting profitability in the core livestreaming business. Meanwhile, the "All Other" segment's gross margin expanded 3 percentage points year-over-year to 42.6%, confirming that Shopline's SaaS revenues are structurally higher-margin than the legacy business.

Cash Flow and Capital Allocation

Operating cash flow of $73 million in Q3 2025 and $3.3 billion in net cash as of September 30, 2025 provide JOYY with strategic optionality that few peers enjoy. This allows the company to fund growth initiatives without diluting shareholders, make opportunistic acquisitions, and return substantial capital to investors. The $900 million shareholder return program for 2025-2027—comprising $600 million in dividends and $300 million in buybacks—demonstrates management's confidence that the stock is undervalued.

The pace of buybacks is accelerating. JOYY repurchased $30.8 million worth of shares in Q3 2025 alone, and $88.6 million through November 14, 2025. Management's repeated statements that shares "remain undervalued" are backed by action, not just words. This capital return strategy is particularly attractive given the company's low valuation multiples, suggesting management believes the market is mispricing the transformation story.

The Geographic Profitability Shift

A critical but underappreciated trend is JOYY's geographic mix improvement. In 2024, revenue from developed countries grew 24.6% year-over-year, increasing their share to 53.9% of group revenue. Developed market users command higher ARPPU and present more attractive advertising CPMs than emerging market users. The Q3 2025 data shows this trend accelerating: livestreaming revenue from developed countries grew 7.6% quarter-over-quarter, while BIGO Audience Network revenue from North America and Western Europe grew 22% and 41% quarter-over-quarter, respectively.

This geographic shift de-risks the investment thesis by reducing dependence on volatile emerging markets and exposing JOYY to higher-margin advertising budgets from global brands. It also positions the company to benefit from the $379 billion global digital advertising market's continued shift toward performance-driven, AI-optimized campaigns—precisely where BIGO Ads excels.

Outlook, Management Guidance, and Execution Risk

The 2026 Growth Trajectory

Management's guidance for 2026 provides a clear roadmap for the investment thesis. They expect livestreaming to "return to year-over-year growth" after stabilizing in 2025, while ad tech and SaaS businesses "will sustain robust double-digit revenue growth year-on-year." This suggests the multi-engine strategy will reach full maturity in 2026, with all three businesses contributing to top-line expansion.

The Q4 2025 revenue guidance of $563-578 million implies 2.5% to 5.2% year-over-year growth, but the real story is the mix shift. Management explicitly expects BIGO Ads to deliver "mid-double-digit year-over-year growth" in Q4, meaning the ad tech business will account for an increasing share of total revenue. This acceleration is supported by concrete initiatives: expanding traffic coverage through partnerships with Google (GOOGL) AdMob and Microsoft (MSFT) Xandr, strengthening the iOS ecosystem to capture high-quality iOS traffic, and optimizing IAA D7 ROAS products for game advertisers.

Execution Credibility

Management's track record on guidance provides confidence. They accurately predicted livestreaming stabilization in Q2 2025 and sequential recovery in the second half. They delivered on BIGO Ads' emergence as a second growth engine, with revenue growing from $80.3 million in Q1 to $104 million in Q3 2025. This execution credibility reduces the risk premium investors should assign to forward-looking statements.

Ms. Ting Li's first full fiscal year as CEO in 2024 established a clear strategic framework focused on "high-quality operations, sustainable growth, AI-driven innovation, and organizational vitality." The results speak for themselves: non-GAAP operating profit is on track for a "nearly double-digit year-over-year increase" in 2025, and the company has maintained profitability while investing in growth.

The iOS Opportunity

A key 2026 initiative is "establishing and strengthening its iOS ecosystem to unlock substantial incremental growth potential from high-quality iOS traffic." iOS users typically generate 2-3x higher ARPPU than Android users, and Apple's privacy changes have made first-party data platforms like BIGO Ads more valuable. Success here could provide a meaningful revenue uplift beyond current guidance, as iOS monetization remains underdeveloped compared to JOYY's Android-heavy user base.

Risks and Asymmetries

Regulatory and Geopolitical Headwinds

The most material risk to the thesis comes from regulatory and geopolitical tensions. Management acknowledges that "factors such as geopolitical tensions and anti-monopoly measures have led to changes in the advertising market that caused advertisers to demand further diversification over their placement channels." This could compress ad pricing power and increase compliance costs. The Q4 2024 temporary app removals, while resolved, demonstrated that JOYY's global operations remain vulnerable to platform policy changes and regional regulatory actions.

However, management's decisive response—enhancing community safety infrastructure and accelerating global guideline updates—has turned this risk into a potential moat. The investments in compliance create barriers to entry for smaller competitors who cannot afford similar infrastructure, potentially strengthening JOYY's position with platform partners like Google (GOOGL) and Apple.

Execution Risk in Scaling New Engines

While BIGO Ads and Shopline are growing rapidly, they remain relatively small compared to the livestreaming business. The risk is that scaling these businesses requires different capabilities—enterprise sales for Shopline, ad tech infrastructure for BIGO Ads—that JOYY is still building. If execution falters, the growth narrative could unravel.

The mitigating factor is JOYY's modular organizational structure, which allows it to "share resources and capabilities across business lines, promoting agility, execution focus, competitive advantages for new ventures, and significant operating leverage." This structure, combined with the cash cow livestreaming business, gives JOYY time to iterate and learn without the pressure of a cash burn crisis.

Competition from Scale Players

Meta (META)'s AI ad tools and TikTok's e-commerce integration pose existential threats. Meta (META)'s Q3 2025 AI ad tools boosted revenues 26% year-over-year, while TikTok's cheaper e-commerce integration could raise JOYY's customer acquisition costs. JOYY's $3.2 billion market cap pales against Meta (META)'s $1.6 trillion, limiting its R&D firepower.

Yet JOYY's emerging-market focus and proprietary data assets provide differentiation. Unlike Meta (META), which must navigate privacy regulations without first-party transaction data, JOYY's integrated ecosystem captures full-funnel behavior. This "proprietary data assets due to our first-party traffic" creates targeting advantages in specific verticals that broad-based platforms cannot replicate.

Valuation Context

Trading at $62.33 per share, JOYY presents a compelling valuation anomaly. The company carries a market capitalization of $3.20 billion against $3.3 billion in net cash, implying an enterprise value of negative $100 million on a cash-adjusted basis. Even using the stated enterprise value of $1.98 billion, the stock trades at just 0.95x trailing revenue—a multiple typically associated with distressed businesses, not companies growing ad tech revenue at 33% year-over-year.

The valuation metrics reveal stark disconnects. The 6.24% dividend yield, combined with a 0.48x price-to-book ratio and 14.83x EV/EBITDA, suggests the market is pricing JOYY as a declining legacy asset. Yet the operational metrics contradict this narrative: gross margins of 36.37% are healthy for a platform business, operating margins are expanding (3.62% TTM, but improving quarterly), and return on equity of 27.67% demonstrates efficient capital deployment.

Peer comparisons highlight the undervaluation. Meta (META) trades at 8.62x EV/Revenue with 82% gross margins, while Bilibili (BILI) trades at 2.00x EV/Revenue with similar 36.36% gross margins. JOYY's 0.95x multiple implies the market expects revenue contraction, yet management guides for 2.5-5.2% year-over-year growth in Q4 2025 and "clear visibility for the group to year-over-year revenue growth in 2026."

The cash position provides downside protection and upside optionality. With $3.3 billion in net cash and a $900 million shareholder return program, JOYY can sustain its dividend, accelerate buybacks, and fund growth investments without tapping capital markets. This financial flexibility is rare for a company trading at such a low revenue multiple.

Conclusion

JOYY Inc. stands at an inflection point where strategic transformation meets compelling valuation. The definitive exit from China-focused livestreaming, combined with the rapid scaling of BIGO Ads and Shopline, has created a multi-engine global technology platform that the market continues to price as a single-product legacy business. This mispricing offers investors asymmetric risk/reward: downside is cushioned by $3.3 billion in net cash and a profitable cash cow business, while upside is driven by ad tech growing at 33% year-over-year and SaaS expanding at 20%+.

The key variables to monitor are BIGO Ads' ability to sustain its growth trajectory and Shopline's path to profitability. If management executes on its 2026 guidance—livestreaming returning to year-over-year growth while ad tech and SaaS deliver double-digit expansion—the current 0.95x EV/Revenue multiple will likely re-rate toward peer levels of 2-3x, implying 100-200% upside potential. The accelerating share repurchases and management's repeated statements on undervaluation suggest insiders believe this re-rating is inevitable.

The primary risk remains execution in the face of regulatory headwinds and competition from scale players. However, JOYY's emerging-market moat, proprietary data assets, and integrated ecosystem provide durable competitive advantages that are not reflected in the current valuation. For investors willing to look beyond the legacy livestreaming label, JOYY offers a rare combination of current income (6.24% dividend yield), balance sheet strength, and genuine growth optionality at a price that assumes failure. The transformation is real; the market simply hasn't caught up.