Bilibili Says Advertising Is Outrunning a Weak Chinese Consumer at 28% Growth, While Games Stay a Drag Until Q4
Second-quarter 2026 earnings call, August 27, 2026
Bilibili reported second-quarter revenue of RMB 7.9 billion, up 8% year over year, but the quarter was defined by the widening gap between advertising and everything else. Advertising revenue rose 28% to RMB 3.1 billion, the 14th consecutive quarter of growth above 20%, and now accounts for 39% of total revenue. Games fell 14% to RMB 1.4 billion against a difficult comparison, and value-added services grew only 5% to RMB 3.0 billion. Profit still expanded. Adjusted net profit rose 25% to RMB 704 million, an 8.9% margin, and gross margin reached 37.2%, the 16th straight quarter of improvement.
Advertising Is Holding Up Against a Softer Macro, With AI Advertisers an Incremental Source
Asked by Morgan Stanley about weakening consumption data in China and a tougher second-half comparison, management did not guide to a number but defended the trajectory. Management acknowledged that "it is indeed a very challenging macro environment" but said it remains confident in continued growth. The argument rests on three supports. Advertisers are prioritizing conversion efficiency and high-value users, and the company says its audience, with an average age of 26.5, fits that demand. The advertiser base grew 14% year over year. Ad inventory is also expanding beyond the core feed.
On that last point, revenue from multi-scenario placements, including in-app search, the watch page, smart TV, PC and mini programs, grew 50% in the first half. Search revenue doubled in the second quarter. AI-sector advertisers more than doubled their spending, and time spent on AI-related knowledge content rose 72%. Management described Bilibili as "the largest AI learning video community across the Internet." That claim is unaudited, but it explains why AI model and tool vendors are buying reach here. Several newer verticals, including home decoration, footwear and apparel, and automotive, each grew more than 60%, which reduces dependence on gaming advertisers.
On efficiency, click-to-conversion rates (CTCVR) improved 19% year over year. An automated ad placement system is lowering the barrier for smaller advertisers and is driving double-digit growth in new advertiser accounts. The risk is that a campaign-level sales slowdown is not yet visible in these figures. The second-half base is higher, and management offered no explicit target, so the 28% pace should not be extrapolated.
AI Spending Is on Plan and Bounded, With Costs Landing in R&D
Responding to CICC, management said the previously announced RMB 1 billion AI investment is "well on track," with 70% to 80% already deployed in the first half, mostly on server computing power. CFO Sam Fan said the expected hit to full-year 2026 R&D expense remains RMB 500 million, unchanged. R&D expense rose 16% in the quarter on AI costs, while sales and marketing rose 1% and G&A was flat, which is where the operating leverage is coming from.
The company drew a clear boundary around its AI strategy. It will invest only in video understanding, video distribution and video creation, and said there are "a lot of things in the AI chain we won't be engaged with." That is a reassuring signal for investors worried about open-ended capital intensity, though management gave no spending outlook beyond 2026.
The operational evidence for AI is mixed but directionally supportive. Daily video submissions rose 28%, creators with more than 1,000 followers grew 30%, and average creator income increased 21%. Management cited a creator animation campaign launched in May that generated more than 180 million views in three months, with six series passing 10 million views each. The company argues that AI makes individual creators competitive with studio teams. The flip side, which management addressed only indirectly, is a surge in low-quality supply that the recommendation system must filter. Management's stated view is that "only high-quality content will have viewership."
Engagement Metrics Are Healthy, and Long-Form Is a Deliberate Positioning
Daily active users rose 7% to 117 million, monthly active users reached 371 million, and average daily time spent increased to 113 minutes from 105. Total time spent rose more than 14%. Watch time for videos longer than 5 minutes grew 18%. Monthly interactions rose 9% to 17.4 billion, and long comments of more than 100 characters grew 67%. Twelve-month retention for official members, now 299 million, held at about 80%.
Goldman Sachs asked how Bilibili has grown while short-form video proliferated. Management said it does not choose by length but by quality, and that "they are no longer satisfied with content that just grabs their attention for 1 second." Video podcasts passed 100 million minutes of average daily watch time last month. User growth of 7% is solid but not rapid, and the investment case rests more on monetization depth than on user acquisition.
Games Remain the Weak Segment, With a Recovery Pledged From Q4
Game revenue fell 14% because of the high base set by San Mou, the Three Kingdoms strategy title, in the prior-year period. San Mou ranked second on China's iOS top-grossing chart during its season 15 anniversary update, and management said it has stayed in the top 5 each season since season 8. Legacy titles FGO and Azur Lane were stable.
The CFO said, "We are confident that our gaming revenue will resume a year-over-year growth trend starting in the fourth quarter." The case depends on a pipeline of five titles: Lumi Master, a self-developed casual pet-simulation game launching globally on September 17, and San Wang, a licensed Three Kingdoms strategy game due toward the end of the year. Three more arrive in 2027: Ragnarok Online 3, which has its license and began technical testing in mainland China on the day of the call, the card game MISTBOUND, and the tactical RPG Three Kingdoms: The Ravages of Time. The recently launched card game NCard saw lifetime value in its July version double versus April, and a second season is planned for October.
The pipeline is broad, but the near-term launches are unproven and the Three Kingdoms theme is increasingly crowded within Bilibili's own lineup. Management argues the titles cross-sell and that its video community lowers marketing costs. Q4 growth in particular will have to be earned by launches rather than by the declining base.
Margins and Capital Returns
Operating profit rose 48% to RMB 373 million and adjusted operating profit rose 21% to RMB 696 million, an 8.8% margin versus 7.8% a year earlier. Net profit increased 55% to RMB 339 million. Management left its mid- to long-term targets unchanged at a 40% to 45% gross margin and a 15% to 20% operating margin. Those targets are well above the current 37.2% and roughly 9%, and no timeline was given. Management said it will "carefully balance" AI investment against monetization, which implies the pace of margin expansion may be moderated by compute spending.
Bilibili held RMB 24.3 billion ($3.6 billion) in cash, time deposits and short-term investments at June 30. A new two-year $300 million buyback was authorized in June, with 1.9 million shares repurchased for $31 million under it by quarter-end. Year-to-date repurchases total 5.8 million shares for $118 million. Management said it would buy opportunistically. With the shares down about 43% over one year and the company trading near 13.6 times forward earnings, the buyback is a visible but modest support relative to a market capitalization of roughly $6.3 billion.