Shares of iQiyi Inc. (NASDAQ: IQ) are soaring 5% in pre-market trading on Thursday following a significant upgrade from UBS. The Swiss investment bank raised its rating on the Chinese video streaming platform from Neutral to Buy, signaling increased confidence in the company's prospects.

The upgrade comes at a crucial time for iQiyi, which has been facing challenges in its core business. According to the company's recent second-quarter 2025 financial results, total revenue declined 11% year-over-year to 6.63 billion yuan, with membership services revenue dropping 9% and online advertising services revenue falling 13%. Despite these headwinds, iQiyi has been actively pursuing growth strategies, including investments in AI applications, mini-dramas, experience businesses, and overseas operations.

Investors appear to be responding positively to UBS's vote of confidence, as well as iQiyi's efforts to diversify its content offerings and revenue streams. The company's hit drama "Growing All Things" has been gaining popularity, potentially contributing to improved market sentiment. Additionally, recent reports suggest that iQiyi is planning a secondary listing in Hong Kong, aiming to raise $200-300 million, which could provide further financial flexibility for the company's growth initiatives.