Global Expansion Will Crumble Under Regulatory And Demographic Pressures

Key Takeaways

• Investor expectations for global expansion, user growth, and margin improvement may be too optimistic given regulatory, competitive, and demographic challenges.
  
• Market optimism overlooks risks from increased compliance costs, competition, and potential revenue overestimation in entertainment and ad tech segments.
  
• Strategic focus on AI-powered user growth, operational discipline, and capital returns positions JOYY for sustained revenue expansion, margin improvements, and long-term competitive advantage.

Catalysts

Engages in the provision of social product matrix and communication technology.

• Investors are likely overestimating JOYY's ability to sustain rapid global expansion and user growth as they expect increased internet penetration and mobile adoption to continue driving consistent double-digit increases in global MAUs and revenues, but this growth may be challenged by heightened regulatory risks and demographic headwinds in key markets, impacting future revenue upside.
  
• The current valuation appears to price in compounding improvements in net margins, as investors expect ongoing advances in AI-driven content recommendation, monetization, and advertising technologies to continually drive higher user engagement, ARPU, and operating efficiency; however, execution and competitive pressures could prevent margin expansion from fully materializing.
  
• The market seems to assume that JOYY's successful international expansion-especially in developed markets and Southeast Asia-will remain unimpeded by geopolitical issues or regulatory tightening regarding data privacy and cross-border data flows, which could materially increase compliance costs and limit scaling, impacting long-term earnings growth.
  
• Expectations are high that the structural tailwinds from the global shift towards digital entertainment, livestreaming, and interactive platforms will prevent saturation risk, with JOYY enjoying persistent user base and revenue growth despite rising competition and the risk of user fatigue in core entertainment segments-this could lead to overstated revenue forecasts.
  
• Investors appear to be pricing in sustained acceleration from JOYY's emerging ad tech business and successful investments in new monetization channels, without accounting for the risk of declining pricing power, increased competition from established global platforms, and regulatory headwinds, all of which could constrain top-line and bottom-line growth.

JOYY Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming JOYY's revenue will grow by 4.0% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 82.3% today to 11.3% in 3 years time.
• Analysts expect earnings to reach $267.8 million (and earnings per share of $4.56) by about September 2028, down from $1.7 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $306 million in earnings, and the most bearish expecting $174 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.6x on those 2028 earnings, up from 1.8x today. This future PE is lower than the current PE for the US Interactive Media and Services industry at 16.9x.
• Analysts expect the number of shares outstanding to decline by 4.58% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.58%, as per the Simply Wall St company report.

JOYY Future Earnings Per Share Growth

Risks

• JOYY's ad tech business, BIGO Ads, is experiencing robust and accelerating growth-up 29% year-over-year and 9% quarter-over-quarter in Q2 2025-with management highlighting high advertiser demand, ongoing expansion into new verticals and geographies, and a flywheel effect from enhanced algorithms, which could materially increase revenue and profit over the long term.
  
• The company is successfully localizing and growing its user base in developed regions (Europe, North America) and emerging markets (Southeast Asia, MENA), supported by AI-driven content and expansion into new social product lines, pointing to the potential for sustained user growth, higher engagement, and incremental monetization-impacting both top-line revenue and net user growth.
  
• Management is focusing on high-quality operations and disciplined cost control, leading to a significant improvement in non-GAAP operating income (+27.9% YoY) and net margins, with gross margin improvements driven by higher-margin non-livestreaming revenues and steady cost discipline, which could support long-term earnings growth.
  
• The company's strategic investment in AI and proprietary technology for content recommendation, user targeting, and real-time translation is creating differentiators that increase user engagement, conversion, and ARPU, while enabling JOYY to build durable competitive advantages that are likely to drive margin expansion and operating leverage.
  
• JOYY is actively returning capital to shareholders through dividends and buybacks (over $135 million YTD as of June 2025) and maintains a strong net cash position ($3.3 billion), which supports financial resilience, allows for continued investment in new growth engines and infrastructure, and could underpin share price appreciation via improved earnings and reduced share count.

Valuation

• The analysts have a consensus price target of $56.875 for JOYY based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $70.0, and the most bearish reporting a price target of just $35.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.4 billion, earnings will come to $267.8 million, and it would be trading on a PE ratio of 11.6x, assuming you use a discount rate of 7.6%.
• Given the current share price of $59.87, the analyst price target of $56.88 is 5.3% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.