Bilibili's Ad Business Doubles AI-Sector Revenue as Five-Title Game Pipeline Sets Up Q4 Turnaround
Q2 2026 Earnings Call, August 27, 2026
Bilibili posted its 16th consecutive quarter of gross margin expansion and 55% year-over-year net profit growth in the second quarter, but the more revealing data points came from management's granular breakdown of where AI is actually showing up in the business: advertiser demand, content supply, and a still-modest but disciplined capital budget. With total revenue up 8% to RMB 7.9 billion and advertising growing 28% for a 14th straight quarter above 20%, the quarter reinforces a thesis that Bilibili's community moat, not just cost discipline, is the primary margin driver as it scales toward a stated medium-term target of 40% to 45% gross margin and 15% to 20% operating margin.
AI Advertisers Are Now a Real Vertical, Not a Rounding Error
The most concrete new data point on the call was the size and speed of AI-sector ad spend. CFO Sam Fan and COO-level executive Ni Li disclosed that ad revenue from AI advertisers more than doubled year-over-year in the second quarter, a standalone driver behind sustained growth in Bilibili's internet services vertical. This is paired with a demand-side statistic that explains why: time spent on AI-related knowledge content on the platform surged 72% year-over-year, with management asserting Bilibili has "become the largest AI learning video community across the internet" as users track large language model releases and new AI tools. That combination, AI companies advertising to an audience that is actively researching AI products, is a structural tailwind that is unlikely to be cyclical, unlike the broader Chinese consumer environment referenced repeatedly by analysts on the call.
Executives were candid that the macro backdrop is deteriorating. Morgan Stanley's Yang Liu pressed directly on weakening Chinese consumption data since the second quarter and how it flows through to second-half ad guidance. Management's response leaned on mix rather than denying the pressure, noting the average Bilibili user is now 26.5 years old and has developed "a strong purchasing mindset," with advertisers increasingly prioritizing high-conversion, high-intent channels over broad impressions. Search revenue, for instance, doubled year-over-year in the quarter as advertisers chase decision-moment placements. Multi-scenario ad inventory, spanning in-app search, watch pages, smart TV, PC, and mini-programs, grew 50% year-over-year in the first half, giving Bilibili a diversification argument against a softening ad market that most peers cannot make as credibly.
Games Pipeline Front-Loads Five Titles Into a Q4/2027 "Harvest Season"
Game revenue fell 14% year-over-year to RMB 1.4 billion, but this was flagged as a base-effect issue against last year's San Guo: Mou Ding Tian Xia launch rather than a demand problem, and the pipeline disclosed on this call is the most detailed investors have seen. Chairman and CEO Rui Chen laid out a sequenced rollout: the self-developed casual title Lumi Master launches globally on September 17, followed by a new licensed SLG title in the fourth quarter designed to run alongside San Mou rather than cannibalize it. Three additional titles, including a revival of the 20-year-old Ragnarok Online franchise (RO3, which has already secured its publication license and began mainland technical testing the day of the call) and a new tactical RPG built on Three Kingdoms IP, are slated for 2027. CFO Fan explicitly guided that "gaming revenue will resume a year-over-year growth trend starting in the fourth quarter," a specific and testable commitment that gives investors a concrete checkpoint.
Management also disclosed an early monetization proof point for its casual card game, noting that lifetime value for the July cohort had doubled versus the April cohort ahead of a Season 2 relaunch in October, a signal the company is iterating quickly on retention economics before scaling user acquisition spend.
AI Capex Discipline: RMB 1 Billion Budget Nearly Exhausted, No Escalation Signaled
On capital intensity, Fan confirmed the company has already deployed 70% to 80% of its previously announced RMB 1 billion AI capex target within the first half of the year, mostly on server and computing procurement, and reiterated that the expected RMB 500 million full-year impact to R&D expense remains unchanged. This is a notably contained figure relative to peers' AI spending trajectories, and management was explicit that the strategy is narrow by design. Chen described the investment scope as strictly limited to three areas tied to the core video product: video understanding, video distribution, and video creation, stating plainly that "there are a lot of things in the AI chain we won't be engaged with." For investors worried about AI capex creep diluting the margin story, this is the clearest signal yet that Bilibili intends to keep its AI spend narrow and directly monetizable rather than participating in a broader infrastructure arms race.
Engagement Metrics Show Depth, Not Just Reach
Daily active users grew 7% to 117 million and monthly actives reached 371 million, unremarkable by itself, but the qualitative engagement data is what management leaned on hardest. Average daily time spent rose to 113 minutes from 105 minutes a year earlier, pushing total time spent up over 14%, while watch time on videos longer than five minutes grew 18%. Long-form comments over 100 characters jumped 67% year-over-year, and creators with over 1,000 followers grew 30%, with average creator income up 21%. Chen framed this as evidence of a self-reinforcing content flywheel, arguing that as generative AI floods the internet with cheap short-form content, scarcity value shifts to authentic long-form material and community curation, a moat argument that will be tested as AI content generation tools proliferate industry-wide. He was direct about the risk to low-effort content specifically: "the repetitive low-quality content will have no room for survival, but those talented content creators will be extremely beneficial from this evolution of creation tools."
Capital Return Continues Alongside Profit Inflection
Bilibili has repurchased $180 million in shares year-to-date under its buyback authorization, including $31 million of the new $300 million, two-year program approved by the board in June. With cash, time deposits, and short-term investments of RMB 24.3 billion ($3.6 billion) on the balance sheet, the company has ample flexibility to sustain repurchases even as it funds the game pipeline launches and incremental AI infrastructure spend heading into the back half of the year.