Noah (NOAH) Grew Operating Income 34% as Revenue Fell. Can Cost Cuts Keep Working?

Noah Holdings Limited (NYSE:NOAH) reported a 1.5% year-over-year decline in net revenue to RMB619.9 million and a 0.9% sequential drop in Q2. Operating income, however, rose 34% to RMB215.8 million due to lower compensation costs and reduced credit-loss provisions. Operating margin expanded to 34.8% from 25.6%. Noah's GAAP net income attributable to shareholders grew 30% to RMB232.2 million, while non-GAAP net income increased 25.9% to RMB238.0 million.

The company's compensation and benefits expenses fell to RMB260.1 million from RMB299.3 million, primarily due to lower credit-loss provisions tied to the suspended lending business. Client activity improved, with Noah serving 10,296 active clients, a 12.4% year-over-year increase. Mainland China public-securities revenue rose 56.7% to RMB206.5 million, driven by performance-based income from private secondary products.

Noah ended Q2 with RMB4.32 billion in cash and cash equivalents, providing room for growth while protecting its balance sheet. However, international revenue fell 20.5% to RMB236.0 million, and international wealth-management revenue declined 31.3% to RMB88.9 million. These results suggest that Noah's international expansion may not yet be a dependable growth engine.

Investment-product distribution increased to RMB17.1 billion, but assets under management (AUM) declined 2.9% year-over-year to RMB140.9 billion. Noah's cost-cutting efforts are proving effective, but sustaining an operating recovery will depend on stabilizing its international platform and recurring-fee businesses.