Operator: Thank you. Your next question comes from Henry Sun with JPMorgan. Please go ahead.
Henry Sun: [Foreign Language] Thanks, management, for taking my question. Could management share more details on the deployment of AIGC application into the product planning? What are the current progress in application? Thank you.
David Xueling Li: [Foreign Language] [Interpreted] This is David. I will answer your question on AI and AIGC. Actually, we have been having a huge commitment in AI and heavily invested into our AI team as well. And as we’ve shared in our previous quarters, our team mainly leverages AI for in-depth user profiling, differentiated intelligent recommendations, and content quality management. And AI has enabled us to identify user interest and direct users toward a more relevant and personalized content. And it has also improved our users’ social and content experience. We believe that AI has been very valuable for developing our interest-based community. And we’re also actively exploring other applications, especially on – in improving user interactions and also helping users to freely spread their digital personality.
For example, Hago’s – in Hago’s previously launched 3D Space feature, it empowers users to create their own 3D virtual avatars and interact with each other in various virtual themes and it actually enables users to engage in immersive social experience. And by simply uploading a photo or videos of those users, users can easily create their personalized 3D digital avatar. And you could drive the movement of mouse, facial expressions, body gestures of the avatar in real time within – with the input of text and audio. And recently – and then we can also recreate the voice of a real person through the – in the 3D avatar as well. And recently, at Bigo Live, we are testing our AI-enabled chatbot, which can serve as a – as an assistant to streamers and interact intelligently with their fans improving the efficiency of streamer-fan communication and potentially helping the KOL to further expand their fan base.
So currently, these AIGC-related features are still in the early stage of development. And therefore, we need to continue to iterate and optimize based on user feedback. We remain committed to bring innovative interactive experiences to our users. Thank you. Next question, please.
Operator: Thank you. Your next question comes from Thomas Chong with Jefferies. Please go ahead.
Thomas Chong: [Foreign Language] Thanks, management, for taking my questions. My question is about the cost side. Can management comment about our cost optimization strategies as well as the trend in operating expenses and as well as margin outlook in the second half and 2024? Thank you.
Alex Liu: [Foreign Language] [Interpreted] This is Alex. I will answer your questions. So for the second quarter, we actually deliver better-than-expected profits. Especially for BIGO segment, it achieved a non-GAAP operating margin of 16%, up by 2.4 percentage points from 13.6% in Q1. And BIGO’s non-GAAP gross margin was improved from 37.4% to 39% and that was mainly due to optimization of content cost, our server depreciation expenses and payment channel expenses. And in addition, Likee continue to deliver profitability in Q2 and contributed to profit improvement in the BIGO segment. As I just mentioned in my prepared remarks, starting from Q2 in line with our global positioning, we have strategically streamlined and implemented certain proactive adjustments to some of our non-core operations, so that we can concentrate our resources towards our core global business and further enhance the healthiness of our global ecosystem.
We expect these adjustments would have adverse impacts on our topline and bottom line in Q2 and the following quarters. Looking ahead to the second half of the year, we expect BIGO’s revenue to resume positive Q-o-Q growth. And as we enter the peak season of operational activities, we expect BIGO’s sales and marketing expenses to increase Q-o-Q as well. Therefore, because non-GAAP operating margins are in the second half, well Likee be lower as compared to the first half of the year. However, given that how much we have already achieved in the first half of the year regarding operational efficiency improvement for the full-year of 2023, we still expect the non-GAAP operating profit margin of BIGO to remain roughly stable compared to last year.
