Waterdrop Q2 Profit Jumps 86%

Waterdrop(NYSE:WDH) reported second-quarter 2025 results on Sept. 4, 2025, with revenue up 23.9% year over year, operating profit up 86% year over year, and a 50% increase in the declared cash dividend. This summary highlights transformative AI-driven operational improvements, significant insurance premium growth, and enhanced shareholder return policies.

AI integration accelerates Waterdrop revenue and profitability

The operating margin expanded by 3.9 percentage points year over year, while first-year premium (FYP) grew 80.2% year over year, signaling notable scalability in the insurance business through technology-enabled productivity. Waterdrop's AI application suite is deployed across the full value chain, contributing to measurable improvements in both efficiency and customer acquisition metrics.

"Powered by AI, the company's improved operational efficiency significantly, driving an 85.9% year over year increase in operating profit and lifting the operating margin by 3.9 percentage points. Our EasterTech business leverages technological innovation to bring inclusive protection for more users. Our Waterdrop Guardian AI application suite has been rolled out across customer acquisition, sales, underwriting, customer service, quality assurance, and other key processes. With that, FYP in Q2 increased 80% year over year and productivity per capita improved significantly."
-- Peng Shen, Founder, Chairman and CEO

AI adoption at scale has enhanced business leverage, positioning Waterdrop as both a technology and insurance leader within China's evolving insurtech sector.

Waterdrop expands insurance portfolio and deepens AI in distribution

Short-term product FYP increased 95% year over year, with AI-powered customer acquisition tools achieving a nearly 50% improvement in conversion over traditional methods. The company's launch of new long-term and pre-existing condition insurance products resulted in a 146.6% year-over-year premium increase in that segment.

"For short-term products, we increased the investment in customer acquisition and technology, representing FYP to billion, up 95% year over year and 62.1% quarter over quarter. In customer acquisition, we continuously tap into AI capabilities, integrate on user outreach and recommendation AI model, and drive continuous breakthrough in customer acquisition from a public domain. We are increasingly applying AI tools to enhance the production,"
-- Ran Wei, Director and GM of the Insurance Business

Strengthening proprietary AI-supported distribution channels and broadening inclusive product offerings increases total addressable market, especially among underinsured demographics.

Shareholder returns rise with increased dividend and ongoing repurchases

The Board approved a 50% dividend per share increase to $0.3 per ADS, in addition to maintaining an annual share repurchase plan, with Waterdrop having repurchased approximately 55.7 million ADS for $109 million as of Aug. 31, 2025, since 2021. This marks the fourth consecutive year of open-market buybacks, underscoring a consistent capital return strategy.

"To keep repaying shareholders' trust, our Board recently approved two new initiatives. On one hand, we are pleased to announce that our Board has recently approved an enhanced cash dividend of $10.9 million, representing a 50% increase over the previous dividend. The dividend per ordinary share was $0.3 and this dividend per ADS will be $0.3. The Board has also authorized its annual share repurchase plan. Since our first share repurchase program was launched in 2021, we have repurchased approximately 55.7 million ADS for $109 million as of August 31, 2025."
-- Peng Shen, Founder, Chairman and CEO

Consistently returning capital demonstrates balance sheet strength and management's confidence in the company’s cash flow prospects.

Looking Ahead

Management reaffirmed its intent to meet 2025 annual and long-term development goals, with an explicit commitment to continued investment in AI and technology applications across insurance and healthcare units. No specific quantitative financial guidance or projections for coming quarters were given.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.