Bilibili Inc. Q3 FY2025 earnings call

User Metrics - DAUs rose 9% yoy to 117 million, MAUs grew 8% to 376 million, average daily time spent per user increased to 112 minutes, all at all-time highs. Monthly paying users hit a record high of 35 million in the third quarter, up 17% yoy. ### Revenue Growth - Total net revenues grew 5% yoy to RMB 7.7 billion. Advertising revenue grew 23% yoy to RMB 2.6 billion. Game revenues were RMB 1.5 billion, down 17% yoy. VAS revenues increased 7% yoy to RMB 3 billion. ### Game Launches - Escape from Duckhoff, a self-developed single-player extraction shooter game, became an instant hit, selling over 3 million copies globally. ### AI Initiatives - Plan to launch several AI-powered applications later this year, including multilingual video accessibility features and a new video generation tool for video podcast production. ### Content and Community - Mid to long-form videos remain a hallmark, with watch time for videos over five minutes up 20% yoy. Creator ecosystem thriving, with number of creators with various follower counts growing over 20% yoy, and average income per creator up 22% yoy. ### Commercial Businesses - Advertising business advanced with ad infrastructure improvements, leveraging multimodal LLM for better targeting, and AIGC creative tools increasing ad efficiency. Games business focused on diversified portfolio, with SEMMO enhanced and plans for international launches. VAS business saw premium memberships reach a record high of 25.4 million.

Total net revenues for the third quarter were RMB 7.7 billion, up 5% year over year. Revenue mix: approximately 39% from VAS, 33% from advertising, 20% from games, and 8% from IP derivatives and other businesses. Gross profit was RMB 2.8 billion, up 11% year over year, with gross margin expanding to 36.7%.

Gross Margin - Gross margin expanded to 36.7% in Q3 and expected to continue improving, with mid-term target of reaching 37% in Q4. ### Operating Margin - Non-GAAP operating margin reached 9% in Q3, expected to further improve to around 10% in Q4, with mid-term target up to 15% adjusted operating margin. ### Share Buyback - Have repurchased over 100 million US dollars worth of shares this year, with a two-year share buyback plan and ~83 million US dollars left to be utilized.

Q: Alex Liu asked about drivers of user growth, monthly paying users, and medium-term user engagement targets.

A: Rui Chen stated user growth is driven by focus on high-quality content, unique community aspect. Monthly paying users growth driven by users' increasing income, high-quality content fostering personal IP, and younger generation's self-gratification-driven consumption. Medium-term, focus remains on high-quality content and community.

Q: Thomas Chong inquired about gaming business, Escape from Duckhoff's future plan, mobile game development, End Card Sanguo release, and SunMo's performance.

A: Rui Chen said Escape from Duckhoff was successful, with console and mobile adaptations in progress. End Card Sanguo expected to release in Q1 2026. SunMo's Q3 performance in line with expectations, with plans for international launches in 2026.

Q: Felix Liu asked about ad business growth potential, AI in ads, and Double Eleven results.

A: Rui Chen mentioned ad revenue growth driven by clients recognizing Bilibili's ecosystem value, plans to enhance service for SKAs, replicate model into new verticals, expand ad penetration across community scenarios. AI in ads has improved targeting and efficiency, with Double Eleven ad revenue up 30% yoy and new customers doubling.

Q: Xueqing Zhang asked about financial outlook, gross margin, net margin trend, and cash allocation.

A: Sam Fan said gross margin expected to continue improving, mid-term target 37% in Q4. Adjusted operating margin expected to reach ~10% in Q4, with mid-term target up to 15%. Cash to be allocated to supporting revenue growth, new opportunities, and shareholder return via share buybacks.

Q: Yuan Zhang asked about AI application thinking and impact of products like Sora.

A: Rui Chen stated Bilibili has high AI density, with many AI-themed content creators. AI will be a fundamental efficiency booster for high-quality video creation, with plans for multilingual video accessibility features and video generation tools for video podcasts.