Following the release of Waterdrop Inc.'s (WDH.US) Q3 2025 financial results, Guoyuan International reiterated its Buy rating on the company with a target price of $2.30. The report highlighted that Waterdrop exceeded expectations across all key financial metrics in Q3, benefiting from steady expansion in its core business and significant improvements in operational efficiency through technological advancements.

For the full year of 2025, Guoyuan International raised its profit forecast for Waterdrop to RMB 543 million, citing expectations of sustained high-quality growth driven by technology. In Q3, Waterdrop reported net revenue of RMB 975 million, a 38.4% year-over-year increase, while net profit attributable to shareholders surged 60.1% to RMB 158 million.

Insurance, the company’s cornerstone business, generated RMB 870 million in revenue, up 44.8% YoY. Waterdrop continues to strengthen its moat in internet-based insurance technology, with AI playing a pivotal role in premium growth. For instance, its "AI Medical Insurance Expert" service contributed to an 82% increase in premiums, demonstrating the effectiveness of AI in boosting sales conversion and customer experience.

Operational efficiency also improved significantly, with operating expenses as a percentage of revenue dropping 8.3 percentage points YoY to 39.6%. The insurance segment’s operating profit rose 44.0% YoY, supported by AI-driven cost optimization. AI-powered customer service tools like "Bao Xiaohui" enhanced user experience, while AI-assisted quality inspection improved efficiency to 2.4 times that of manual processes.

Looking ahead, Guoyuan International expects further advancements in AI large models and AI Agent technology to unlock greater potential in operational efficiency, product innovation, and user experience. Waterdrop is actively exploring multimodal AI Agents capable of handling complex insurance inquiries independently, which could further elevate productivity.

Founder and CEO Shen Peng stated, "In Q3, AI served as a key driver for business optimization, fueling double-digit growth in both revenue and profit. Moving forward, we will continue leveraging technological evolution to deepen AI integration across all business segments, ensuring sustainable high-quality growth while delivering long-term value to users, partners, and shareholders."