BILI

• User Engagement & Community Growth: Daily Active Users (DAUs) grew 7% year-over-year to 117 million, with Monthly Active Users (MAUs) at 371 million. Average daily time spent rose to 113 minutes (+14% YoY). Notably, watch time for videos over five minutes grew 18%, indicating a shift toward high-quality, long-form content. Monthly interactions reached 17.4 billion (+9%), with long comments (>100 characters) surging 67%.

• Content Strategy & AI Integration: Bilibili focuses on high-quality, authentic content rather than just short-form trends. AI tools are enhancing creator productivity; daily video submissions jumped 28% YoY. AI aids in better content understanding and recommendation efficiency, helping match quality content with interested users faster. The platform has become a hub for AI-related learning content, with AI vertical ad revenues more than doubling.

• Advertising Business Expansion: Ad revenue growth was broad-based across industries. Key verticals include Games, Digital Products, Home Appliances, Internet Services, E-commerce, and Automotive. New verticals like Home Decoration, Footwear/Apparel, and Automotive grew >60%. Search ad revenue doubled YoY. AI improves ad targeting (CTC VR up 19%) and creative production. Multi-screen scenarios (PC, Smart TV, Watch page) now contribute >50% of total ad inventory value.

• Gaming Pipeline & Performance: Game revenue declined 14% YoY due to a high base. "San Mo" (Three Kingdoms Memento) remains strong, ranking #2 on China’s iOS top-grossing chart during its second anniversary season. Legacy titles FGO and Azure Lane performed stably. New launches planned include "Lumi Master" (global launch Sept 17), a licensed SLG title (Q4), and three new titles next year: "Ragnarok Online 3", "Mistbound", and "Three Kingdoms: The Ravages of Time".

• VAS & Monetization: Premium members reached 25.7 million (+9% YoY), with ~80% on annual/auto-renewal plans. Fan charging revenue grew nearly 50% YoY, supporting creator sustainability. Live broadcasting remained steady.

• ESG & Brand: MSCI ESG rating upgraded to AA from A. Offline events like Bilibili World attracted >400,000 attendees, reinforcing community bonds.

• Full Year Gross Margin Target: Management reaffirmed the mid-to-long-term target of achieving a gross profit margin between 40% and 45%.
• Operating Margin Target: Maintained the target for an operating margin of approximately 15% to 20%.
• Advertising Growth: Expects advertising revenue to maintain a sustainable and healthy growth trajectory despite macroeconomic pressures, driven by AI efficiency and multi-scenario expansion.
• Game Revenue Turnaround: Confident that gaming revenue will resume year-over-year growth starting in Q4 2026, supported by upcoming titles like "Lumi Master" and the licensed SLG.
• AI Investment Pace: The previously announced RMB 1 billion AI investment plan is on track, with 70-80% deployed in H1 2026 primarily for server/compute resources. No change to the full-year capex expectation.
• Shareholder Returns: Continuation of share repurchase programs, with a new $300 million program approved in June. Total YTD repurchases reached $180 million as of end-June.

Total revenue for Q2 2026 was RMB 7.9 billion, an 8% year-over-year increase. The gross profit margin expanded to 37.2%, marking the 16th consecutive quarter of improvement. Net profit increased 55% year-over-year to RMB 339 million, while adjusted net profit reached RMB 704 million (an 8.9% margin). Revenue breakdown by segment is as follows:

• Advertising: RMB 3.1 billion (approx. 39% of total revenue), up 28% year-over-year.
• Value-Added Services (VAS): RMB 3.0 billion (approx. 37% of total revenue), up 5% year-over-year.
• Mobile Games: RMB 1.4 billion (approx. 18% of total revenue), down 14% year-over-year due to a high base from the previous year.
• IP Derivatives and Other: Approx. RMB 0.5 billion (approx. 6% of total revenue).

• Macroeconomic Pressure: Weak consumer spending data in China may impact advertiser budgets and user consumption habits.
• Competitive Landscape: Intense competition for user attention, particularly from short-video platforms, though Bilibili argues users are shifting back to high-quality long-form content.
• AI Dependency & Cost: Significant capital expenditure required for AI infrastructure (servers/compute); failure to effectively integrate AI into content creation/distribution could hinder efficiency gains.
• Gaming Launch Risks: Uncertainty surrounding the performance of new game launches (e.g., "Lumi Master") and regulatory/licensing hurdles for new titles.
• Regulatory Environment: Implicit risks associated with content moderation and platform regulations in China, though not explicitly detailed beyond general forward-looking statement disclaimers.

Q: Goldman Sachs asked why Bilibili maintains healthy growth in long-form video amidst the rise of short videos, and how AI will shape user preferences.

A: CEO Ray Chen explained that Bilibili does not choose between short and long formats but focuses on high-quality content, which naturally leans toward longer forms. As users become saturated with low-quality, fragmented short videos, they increasingly seek meaningful, substantive content that justifies their time. AI will exponentially increase content supply, making high-quality content the only viable option for viewer retention. Bilibili’s community acts as a filter, rewarding talented creators who use AI to enhance, not replace, human creativity, thereby driving higher engagement metrics like time spent and interaction rates.

Q: Morgan Stanley asked about the outlook for advertising growth in H2 given weak macro data, the role of AI advertisers, and vertical breakdowns.

A: COO Kali Lee stated that despite macro headwinds, ad revenue grew 28% YoY in Q2, driven by strong user value and trust. AI-related ad revenues more than doubled, benefiting from users’ interest in learning about AI. In H2, advertisers demand higher conversion efficiency but also seek sustainable brand-building channels, aligning with Bilibili’s engaged young demographic (avg age 26.5). Multi-screen scenarios (search, PC, TV) now account for >50% of ad inventory, providing resilient growth drivers beyond traditional feed ads.

Q: JP Morgan asked about the most anticipated game launch timing and the future performance of "San Mo" after two years.

A: CEO Ray Chen highlighted "Lumi Master" as a key near-term global launch (Sept 17), targeting casual gamers with innovative gameplay. A licensed Three Kingdoms SLG is scheduled for Q4, complementing "San Mo" by targeting a more mature audience. Regarding "San Mo," it has consistently ranked in the top 5 on iOS charts since its first anniversary, demonstrating strong long-term operational health. The company plans to continue refining seasons to ensure longevity, leveraging its "Three Kingdoms Universe" strategy to cross-pollinate users across different IP adaptations.

Q: CICC asked for details on AI benefits beyond advertising (community, user activity) and the pace of the RMB 1 billion AI capex.

A: CEO Ray Chen clarified that AI investments are strictly focused on three areas: video understanding, distribution, and creation. AI enhances recommendation accuracy and helps users find quality content faster, boosting DAU and time spent. In creation, AI empowers individual creators to produce high-quality animation/film content previously requiring large teams, evidenced by a surge in submissions and viral hits from AI-assisted campaigns. CFO Sam Fan confirmed the RMB 1 billion AI capex is on track, with 70-80% deployed in H1 for compute resources, maintaining the full-year guidance unchanged.

Q: Jefferies asked about margin upside potential, AI’s impact on fixed cost leverage, and capital allocation priorities.

A: CFO Sam Fan reiterated confidence in achieving a 40-45% gross margin and 15-20% operating margin mid-to-long term. AI is expected to drive significant operating leverage by improving commercialization efficiency and reducing relative costs. With advertising becoming the largest revenue contributor (39%), sustained ad growth supports margin expansion. Shareholder returns remain a priority, with ongoing share repurchases under a new $300 million program, aiming to create long-term value while balancing strategic AI investments.