Bilibili Inc.

Good day and welcome to Bilibili's third quarter 2025 financial results and business update conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Juliet Yang, Executive Director of Investors Relations. Please go ahead.

Thank you, Operator. During this call, we'll discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially from those mentioned in today's news release and in this discussion due to a number of risks and uncertainties, including those mentioned in our most recent filing with SEC and Hong Kong Stock Exchange. The non-GAAP financial measures we provide are for comparison purposes only. The definition of this measure and the reconciliation table are available in the news release we issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the Bilibili IR website at ir.bilibili.com. Joining us today from Bilibili Senior Management are Mr. Ray Chen, Chairman of the Board and Chief Executive Officer, Ms. Kali Lee, Vice Chairwoman of the Board, and Chief Operating Officer, and Mr. Sam Phan, Chief Financial Officer. I will now turn the call to Mr. Chen.

Thank you, Juliette, and thank you to everyone for joining us today to discuss our 2025 third quarter results. Our 2025 momentum carried through the third quarter as we delivered solid growth, improved profitability, and attracted an even larger, more engaged community. As an influential hub of diverse interests, Our high-quality content offerings and unique community experience continue to fascinate the hearts and minds of young generations. We are increasingly seeing this in our key user metrics, which have resumed an accelerated growth trajectory since the beginning of the year. In the third quarter, our DAUs rose 9% year over year to 117 million, MAUs grew 8% to 376 million, and average daily time spent per user increased to 112 minutes up six minutes from the same period last year, each hit an all-time high. We are very proud of these numbers as they show users' rising demand for quality content and the welcoming community spirit that makes Bilibili unique. We will keep building on this strong user momentum and reinforcing our leading user mindshare as the best PUGV community in China. This solid community growth is translating into increasing commercial value with even greater opportunities ahead. While enjoying engaging content, users are demonstrating a stronger willingness to spend on our platform, both directly and indirectly. Monthly paying users hit a record high of $35 million in the third quarter, up 17% year over year, with more users converting through our various games and VAS offerings. We're also seeing deeper engagement around consumption as users increasingly turn to Bilibili for advice and inspiration with real purchasing intent. Our advertising business also accelerated and revenue grew 23% year over year in the third quarter. With an average user age of 26, a maturing cohort with stronger purchasing power and expanding consumption needs. We're capturing more commercial potential across the platform and realizing greater value from our users' evolving needs. Building on these strong fundamentals, we delivered solid financial results in the third quarter. Total net revenues grew 5% year-over-year to RMB $7.7 billion. As our revenue mix shifts toward high-margin business, gross profit increased 11% year-over-year, with gross margin expanding to 36.7%, marking the 13th consecutive quarter of growth. Supported by disciplined cost management and higher operating leverage, our non-GAAP operating and net profit surged 153% and 233%, respectively, year-over-year. Our non-gap operating and net margins reached 9% and 10.2%, respectively showing meaningful improvements from the same period last year. These metrics underscore the sustainability of our growth model, reflected in our continued profitability expansion. Notably, we welcomed another blockbuster game, Escape from DuckHoff in October. This self-developed single-player extraction shooter game became an instant hit after its debut. selling over 3 million copies globally and earning great user reviews. The success illustrates our sharp genre insight, in-house development capabilities, and solid execution in reinventing games for new generations of gamers. There is still a lot of unmet demand in the market, and we are ready to tap into it with our upcoming pipeline and robust game content ecosystem. As we continue to strengthen our business fundamentals, AI is becoming a key enabler of our future growth. Later this year, we plan to launch several AI-powered applications, including multilingual video accessibility features such as AI-enabled dubbing, subtitles, and lip-syncing. We're also developing a new video generation tool tailored to video podcast production, where compelling storytelling defines high-quality output. Beyond these initiatives, AI is consistently enhancing our operational efficiency, and there is so much more to explore. Looking ahead, our focus remains on empowering our unique PUGV community, strengthening our commercialization capabilities, and sustaining profitability. We will continue to scale our core businesses while exploring opportunities such as innovative games and AI-empowered solutions to enhance user experience and capture additional monetization potential. With that overview, let's take a closer look at our core pillars of content, community, and commercialization. beginning with content and community. Our ecosystems continue to grow stronger as quality content and community connections reinforce each other. This growing synergy is reflected in record engagement and increased commercialization, demonstrating Bilibili's ability to turn cultural relevance into sustainable growth. Average daily time spent hit a new record high of 112 minutes in the third quarter. This is a six-minute increase over the same period of last year. Mid to long-form videos remain our hallmark. Users continue to show high engagement with our more substantial informative content and watch time for videos over five minutes increased by 20% year over year in the third quarter. Our official members grew to 278 million with ongoing steady 12-month retention of around 80%, reflecting strong user loyalty. ACG remains the legacy category of our cultural ecosystem, Chinese anime content watch time more than doubled this quarter, led by popular series made by Bilibili, such as A Record of Mortal's Journey to Immortality, Fan Ren Xiu Xian Zhuan, The Tales of Hurting Gods, Mo Shen Ji, and Ling Cage, Ling Long. The success of these Chinese anime drove premium memberships to a record high of 25.4 million. In addition, game content grew solidly, with watch time up 22% year over year. This momentum further reinforced games as our largest ad vertical, with Bilibili continuing to provide the ideal community for developers to engage players and strengthen their IP influence. Meanwhile, AI-related content remains one of our fastest growing categories. Watch time was up nearly 50% year over year, and revenues from AI advertisers rose around 90% in the third quarter, highlighting Bilibili's position at the intersection of tech innovation user interest and commercialization. Lifestyle and consumption related content also grew as our audience matures and their interests diversify. Our mid to long form creator led storytelling content is keeping viewers engaged and drawing more interest from advertisers. For example, automobiles stood out in the third quarter with watch time up nearly 20% and ad spending rising 35%, demonstrating how our community continues to evolve with our users while expanding opportunities for brands. Our creator ecosystem is the key force behind our progress, and creators sit at the center of Bilibili. As a platform, our most important job is to help talented creators build their followers faster and earn more. In the first nine months of 2025, the number of creators with 1,000, 10,000, 100,000, and 1 million followers each grew by over 20% year over year. Over the same period, nearly 2.5 million creators earned income on Bilibili through various advertising and VAS products. An average income per creator increased by 22% year over year. These trends show how creator success and user engagement reinforce each other, strengthening the foundation of Bilibili's content ecosystem. Now, let's talk about our commercial businesses and their progress. Our commercial momentum continued in the third quarter as we tapped into more of the value behind our highly engaged and growing user base. Advertisers are increasingly recognizing the strength of Bilibili's influence and total advertising revenues grew 23% year over year to RMB 2.6 billion. In Q3, we continued advancing our ad infrastructure on multiple fronts. By leveraging our multimodal LLM, we gained a deeper understanding of video content. community interaction, and their interconnection with user intent, improving our ad targeting and recommendation efficiency. Meanwhile, our upgraded smart ad placement system automates campaign routing and delivery, maximizing scale, speed, and performance. This drove a 16% year-over-year increase in the number of advertisers seeking incremental value on Bilibili. Beyond ad algorithms and placement, our AIGC creative tools add another layer of ad efficiency, Advertisers can automatically generate compelling titles and thumbnails, saving production time and cost while improving conversion rates. In the third quarter, over 50% of the performance ads materials had the help from our AIGC tools, assisting advertisers reach users more effectively with content that resonates with their intended audiences. These infrastructure advancements go beyond efficiency. They're reshaping how advertisers connect with our community. By combining intelligent algorithms with authentic engagement, we're turning creativity into conversion and positioning Bilibili's ad business to capture higher value as we continue to scale. This quarter, our top five advertising verticals were games, internet services, digital products, and home appliances, e-commerce, and automobiles. As our mid- to long-form PUGVs deliver more informative content and more real usage scenarios for users, we have become an ideal platform for digital product and home appliance brands to reach and convert young users. Ad revenues from digital products and home appliances and home decoration both grew by over 60%. As more and more online merchants recognize the commercial value of our unique young user base, they are allocating larger advertising budgets to our platform. In addition to our anchor verticals, we continue to see incremental ad revenue from emerging verticals. In Q3, ad budgets from AI and education both increased meaningfully. Turning to our games business. In the third quarter, game revenues came in at RMB 1.5 billion, down 17% year over year, mainly due to the high base from the same period last year when Semmo was initially launched. We continue to focus on building a diversified game portfolio laying a stronger foundation for long-term growth in our gaming business. In the third quarter, Senmo maintained its popularity. We further enhanced the user experience by streamlining gameplay and character progression to create a more balanced and enduring title. Building on our success in the domestic market, we plan to launch the traditional Chinese version of Senmo in Q1 2026 for Hong Kong, Macau, and Taiwan. With additional international versions planned for later next year, opening it up to strategy players worldwide. Besides Semmo, our legacy titles FGO and Azure Lane continue to be welcomed by ACG lovers, maintaining loyal fan communities and consistent engagement. On the 16th of October, we launched Escape from Duck Off, our first single-player extraction shooter game. Developed in-house by a five-man team, the indie game won over millions of users with innovative gameplay and its cute graphics. Over 3 million copies have been sold globally across various platforms, making Escape from Duck Off the number one popular indie game in China this year. This was an encouraging debut for us and a prime example of our expanding game development capabilities across genres and platforms. Leveraging our leading game content platform and influential game creators, we are confident we can expand the IP and bring more franchise titles to players next year. Looking at our pipeline, we are preparing to roll out end card San Guo Bai Jiang Pai in early 2026, an asymmetric PvP card game inspired by the Three Kingdoms culture, designed for a broad audience of lightweight players. The game features fast-paced matches that last around 3 minutes per round, making it well-suited to casual on-the-go play. As our first step into the casual gaming genre, the title is backed by Bilibili's vibrant gaming community, which provides a strong foundation for player acquisition and long-term engagement. Results from the beta test have been encouraging, and we will continue refining the game to deliver a creative, unique casual card game experience. And finally, let's look at our VAS business. Revenues increased 7% year-over-year to RMB 3 billion. This quarter, more users joined our live broadcasting universe as we continued expanding content aligned with their interests. Our focus remains on refining operations to ensure steady, sustainable growth while further improving margins. Driven by our popular Chinese anime titles, premium memberships also maintain solid growth, reaching a record high of 25.4 million by the end of the quarter. Around 80% of members are on annual or auto renewal plans, underscoring their loyalty and deep connection to our community. Other VAS products continue to grow rapidly in the third quarter, led by our fan-charging program, which saw its revenue nearly double year over year. This momentum reflects users' willingness to directly support the creators and high-quality content they value most. Beyond the numbers, we remain deeply committed to shaping a healthy culture and community for China's young generation. ESG principles are central to that mission. This year, MSCI ESG reaffirmed Bilibili's A rating, recognizing our ongoing progress in using technology and culture to create meaningful impact. In conclusion, everything we've achieved today comes from more than a decade of staying focused on one thing, building great content and a vibrant community. This long-term focus has created a self-reinforcing cycle where high quality content attracts younger users and engaged community at ongoing value and monetization follows organically. As we become more profitable, this flywheel will become even more effective. We will stay firmly on this path and continue to create lasting value for all of our stakeholders. With that, I will turn the call over to Sam to share more financial details. Sam, please go ahead.

Thank you, Mr. Chen. Hello, everyone. This is Sam. In the interest of time, on today's call, I will review our third quarter highlights. We encourage you to refer to our press release issued earlier today for a closer look at our results. In the third quarter, We continue to grow revenues and expand our margins and profitability, driven by growth across our commercial businesses, particularly in our high-margin advertising businesses. Total net revenues for the third quarter were RMB $7.7 billion, up 5% year-over-year, approximately 39% from VAS, 33% from advertising, 20% from games, and 8% from our IP derivatives, and other businesses. Our cost of revenues increased by 2% year-over-year to RMB $4.9 billion in the third quarter, while our gross profit rose 11% year-over-year to RMB $2.8 billion. Our gross profit margin reached 36.7% in Q3, compared with 34.9% in the same period last year. Our expanding gross profit and margin show that our model is built to scale. Our total operating expenses were RMB $2.5 billion, down 6% year-over-year. Sales and marketing expenses decreased 13% year-over-year to RMB $1.1 billion, mainly due to decreased marketing expenses for our games. GNA and R&D expenses were RMB $509 million and RMB $905 million respectively, both flat year-over-year. These efforts allowed us to maintain positive operating results. Our operating profit was RMB 354 million, compared with a loss in Q3 2024. Our adjusted operating profit was RMB 688 million, and our adjusted operating profit margin reached 9% in the third quarter, versus 3.7% in the same period a year ago. Net profit was RMB 469 million, versus a loss in Q3 2024. Our adjusted net profit was RMB $786 million, and our adjusted net profit margin in the third quarter was 10.2%, compared with 3.2% in the same period a year ago. Cash flow-wise, we generated about RMB $2 billion in operating cash flow in the third quarter. As of the 30th of September 2025, we had cash and cash equivalents, time deposits, and short-term investments of RMB 23.5 billion or USD 3.3 billion. Under our 200 million U.S. dollar share repurchase program approved by the Board in November 2024, we've repurchased a total of 6.4 million shares so far at a total cost of 116.4 million U.S. dollars, leaving about 83.6 million U.S. dollars available for future buybacks as of 30 September 2025. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 11 on the telephone and wait for a name to be announced. For the benefit of all participants on today's call, if you wish to ask your questions to management in Chinese, please immediately repeat your question in English. The company will provide consecutive interpretations for management statements during the Q&A session. Please note that English interpretation is for convenience purposes only. In the case of any discrepancy, management statements in their original language will prevail. One moment for the first question. Our first question comes from Alex Liu of Bank of America. Please go ahead.

Thank you, Guan Yicheng. Can you hear me? Yes, we can hear you. Thank you. Congratulations on the strong performance of the company. Thank you. Congratulations on the strong performance of the company. We have seen that the company has achieved good results in the third quarter in terms of users and profits. Especially, we have seen that DAU, MAU, and the market are all innovative. We have also calculated that DAU is Thank you.

Alex, can you translate for yourself?

Yeah, oh, sorry. Yeah, I'll translate myself. I'll translate myself, yes. Thanks, management. I think it's a great quarter, and we see DAU, MAU, and Timespan are basically all at historical high, and it's growing, accelerating. So I was just wondering if management can share more about what's the really drivers behind this, and in terms of future engagement, is there any medium-term target. And also for monthly paying users, it's also accelerating in terms of growth. And what are the drivers behind and how should we think about in the future what are the latest new user paying for content trends? Thank you.

I think the first driving force for B站's user growth is that we are still focusing on high-quality content. I think high-quality content

The fundamental reason for our continuous user growth lies within our focus on high-quality content.

And high-quality content is always a strong and a sustainable growth driver. Actually, we think there has been a fundamental change of video content supply

And currently the video content supply is very much sufficient and in some way even oversupply, oversupply. Every year there's tens of billions of new videos being created and riding on the rapid adoption of AI tools, there are going to be tens of thousands, billions, trillions of new videos being made every year.

Although the video supply is over the top, users will still feel that the quality of the video is far from enough. All the users we have received have responded that they feel that the quality of the video is too little, that they can touch their own quality of the video too little. Therefore, I think the quality of the video itself has a very strong need, and once the user has seen some quality videos, After his aesthetic improvement, he will not be able to lower his level. After he watched high-quality videos, he will not be satisfied with watching some videos that are just boring or killing time. Therefore, the audience of high-quality videos will also increase. Therefore, I think that as long as we insist on the direction of high-quality videos, the user growth of Bilibili itself can continue. This is a future trend.

However, we think that the quantity of the video and the quality of the video are two different things. The high-quality content is still in the short of supply. And once someone started to enjoy or start to watch high-quality content, it's very hard for them to go back. They got peakier. They wouldn't go back to the low-quality, time-killing type of videos. That's why Bilibili has a long runway for growth. It's because the demand for high quality content will continue to rise and the population that will be interested in Bilibili content will grow.

Yes, I would like to mention that the community of Bilibili is very important for high quality content. I think the community can can help us to dig up new quality content and can also help this quality creator to continue to create quality content. Because in fact, a lot of quality content needs to be discovered by people with aesthetic abilities, including a lot of new creators. And the community of Bilibili is a group of people with such a group of passionate content and with better aesthetic abilities.

Apart from our focus on high quality content, our unique community aspect of our business also helped further strengthen our advantage. This is because our community can help to discover high quality content and also help our talented content creator to continuously to focus on their content creation. because content needs to be discovered with the eye of beauty. And we have that many, many users that they have the passion for high-quality content, that they also have the taste to select and promote those high-quality content.

This community is very important because it will not let a creator create some innovative content when he feels that it is high because he can always be in this community to find people who can discover beauty, who can resonate with him. And then the fans of this community will also encourage him to continue to create better content because good authors need to understand his audience and then these audiences can give him continuous feedback and praise him. In addition, before these creators are on fire, this group of loyal fans can also continue to encourage them and let them go through the lonely years before they became famous. Therefore, we will find that there are a large number of creators in Bilibili who have been creating quality content on Bilibili for five years or even more than ten years. It is because there is such a community that can make them very happy and insist on creating good content here.

The good content creator needs good audience, and Bilibili is where those two parties meet and resonate with each other. Especially for content creators, before they got popular and earned good reputation, there's a relatively long fair wait for them to grow. And Bilibili's community and the user's encouragement will accompany them to go through that process That's why you see those content creators on Bilibili. They have been creating content on our platform for five years, even 10 years long.

Next, let me talk about user pay. In this quarter, the number of user payers has reached a new high of 35 million, which is 17% of the total increase. In terms of this quarter, the majority of our user payers Let's look at the MPU trend.

This quarter, our MPU reached a new record high of 35 million, grew by 17% year over year. For third quarter, particularly, it's the premium membership business which is the primary driver of that. But on a long-term horizon, we think the 2C business, the user paying for content type of business model will be a very big growth driver.

Let me talk about the three reasons why the growth of user pay is a trend. I think the first reason is that the age of our users is slowly growing. I'll talk about three reasons that will drive the content consumption related paying activity.

First of all, is our users. The average age of our users now at 26 years old. A cohort with increasing income and expanding consumption scenario. They are generating on both the to be advertising front as well as the to see the paying for content, paying for services aspect.

The long-term creator will become an IP and then he will be able to make the user willing to pay for it. There are a lot of long-term creators on our platform. We will find that when they have this brand and this

And we believe that the second point is that we believe creators who consistently produce high-quality content over a long period of time can foster their personal IP and drive a sustainable monetization. There's a very large group of content creator that has been producing content on Buildability for a very long time. Through that period, they create their own personal brand and they have their own reputation. People will follow their new creation. That's why the fan charging program, whenever they sell their own premium courses or even their personal IP derivatives, people, their followers, their fans, will pay for that content or services. That is also driving the overall MPU's growth.

I think the third point is that for young users, paying for the content they like is a trend. I think the younger the user, the more likely they are to be happy. TVB teaches us that the most important thing is to be happy. And the last point is that what we have discovered is for the younger generation,

Assumption is mainly driven by self-gratification. People will pay for things that makes them happy. They will pay for people that they love. And this trend has become even more clear nowadays with our initiatives on the fan charging program, helping our content creator to monetize their own personal IP. So this will be another very important growth factor behind that continuous growth of our MPU. That concludes the answer for this question. Operator, next question, please.

Thank you for the questions. One moment for the next question. Our next question comes from the line of Thomas Chung of Jefferies. Please go ahead.

Good evening. Thank you for introducing my question. Since the company's single-player game, Escape from Yakov, has achieved very good results, can you share with us the plans for the future of this project? Are we going to do a mobile game project? Is the success of Yakov more meaningful for the development of our future new game? In addition, we look at the price of the three countries at the end of October. When do we expect it to be released? What are the expectations of the company? In addition, we look at the performance of Q3. Does it meet the expectations? How should we look at this product in the next year? Good evening. Thanks, management, for taking my question. My question is about the gaming business. We saw Escape from Dark World receive remarkable results. Can management share about its future business plan? Do we have any plan of developing a mobile game? On the other hand, can management comment about sign for end card with regard to its monetization testing at end of October? When should we expect it to be released? On the other hand, what are the games in the pipeline to be anticipated? For Sanmao, is the performance in Q3 meets expectations? How should we think about the performance in the next one year? Thank you.

Okay, let me answer this question. a black horse in the game market. And now it's been a month. The global total sales have exceeded 3 million. And at the same time, the number of online users has reached 300,000. I think if I look at the trend of the future, I think it's very likely that we can hit a good result in the second place in the history of domestic single-player games. And this game I'll talk about the X-Gate from Duck Golf, and truly this game has been the dark horse of the year in the games market.

In less than one month after its debut, It has already sold over 3 million copies across various platforms globally, and the peak concurrent user has reached over 300,000. And based on the current momentum, it is safe to say Escape from DocOps has the potential to become the number two best-selling console game in the history of China. So this has been very encouraging. And on top of that, besides the volume, the sales volume, players have been giving the game extremely high ratings. On Steam platform, there have been tens of thousands comments, and 96% of them are overwhelmingly positive.

Right. And if we analyze why it was successful, I think I am a gamer myself. The reason is simple. The first reason is that it is fun. There are many new games out now, but there are not many games that are really fun. I think the game Yakov has put a lot of thought into it. I think it took a lot of effort to design the game. The second thing I think was successful was that it was really easy to play. Nowadays, there are very few games that don't force you to play. Yakuza should not force you to play, and it's very easy and entertaining. I think the two things, fun and easy, are what made it successful.

And why it has been so successful, I think there are two main reasons. As a player myself, I think first of all, this game is a fun-to-play game. There's a lot of games launched every year. Not every one of them is fun to play. And we found this game is very carefully designed with different stages and the graphics people will find it's a really true fun game to play. People will enjoy themselves. And secondly is that the game has a very light mood. When you play it, you don't feel the stress of PvP. And it's just the simple pleasure to collect and loot. And also this game doesn't pressure people to spend a lot of time or spend a lot of money. It's just very easy breezy. And at this time of the year, it's very entertaining and fun to play. So those two elements, fun to play and relaxing, are the two main reasons for this game to success.

The reason why we can make it fun, I think it's directly related to our goals for this game. This game was made in 2023. At that time, there were a few people who liked the Tarkov game. They were colleagues in the game department, and then they got together and set up this project. At that time, there was no such thing as search-and-search. In fact, Tarkov was not such a mainstream game in 2023. But at that time, we wanted to make a single-player game that young people would enjoy, and then we set up this project. I think Basically, it's a big idea of our kind of young people. I don't think it's necessary. And then at the same time, I'm willing to go on a detailed track, but on this detailed track to the extreme. This is actually what we did in the past two years. It's an ideal idea for a new project. I think Yakov should be a successful case of our ideal big idea.

And the reason behind that is when we are thinking about setting up a project like this back in 2023, it was just simple. A few young developers gathered together who have been a true fan of Escape from Tuckoff, the type of game that has the extraction game fans. They wanted to create something that's for the young generation, easy to play, relaxing, and with cute graphics. This is a very good example of how we are thinking about our game strategy, reinventing games for the new generation of gamers. It is also an example of how we have been picking a niche genre in the in the game market and to make it to the best. And we think that's the perfect example of how we're executing our game strategy. And this is one of many examples of our pipeline, how we are designing it.

Oh, yes, let me talk about the plan behind Yakov. Because we only have the PC unit now, and then our mainframe and mobile game projects have been launched. Of course, because of the specific gameplay of the mainframe and mobile game, it will still be different from the unit, so we will polish the product carefully. And on the IP expansion question, because the game currently is only on PC, we have already kicked off the console project and the mobile adaption.

for escape from dark off because on console and on mobile project there's there's going to be difference with the gameplay we will be spending a lot of time to fine-tune the project and while doing so we'll also continue to listen closely to our gamer community and we will share updates when the time is proper appropriate um

As for the Anchor game, currently the closed beta testing has been going very smooth and we will be focusing on fine-tuning and polishing the game

and make it to its best and introduce to the market. It's currently expected to be released in Q1 next year.

This game is also a relatively innovative game for young users. I think the main thing we aim for is a three-minute easy experience. We hope that through our the community of Bilibili, for example, our app team, our live stream, can push it to the eyes of a large Bilibili user. This game, because it is innovative in many ways, so we come step by step, just looking forward. Our first goal is to increase the number of users, to make it a game that a large number of young users like. Then we

And for the in-car game, it's designed to cater the need of a casual car game user and genre. And it will be a very short on-the-go play for three minutes per round. This is another attempt into catering the new generation of gamers. And there's a lot of innovation within the gameplay. And hopefully, leveraging our very unique and best-of-the-date gamer community, as well as our talented content creator, leveraging our PUGB community, as well as the live broadcasting community, we can bring this innovative game to all of the Bilibili users. Because the game, there's a lot of aspects. Lots of the aspects have very great innovation. And we are putting a lot of effort trying to make it the best quality. And we will be spending time fine-tuning the game. And when the game is launched, the number one goal for this game is the DAU growth. And hopefully this game will become Bilibili's another great evergreen title.

Finally, let's talk about Sammo. Sammo is definitely one of our most important games right now. And its Q3 performance is in line with our expectations. Actually, one of the most important tasks for us at XAML is that we hope to make it into a long-term healthy operating product. Because my goal for XAML is to run it for more than five years. So at this stage, we will pay more attention to the player's experience and the balance of the game. In the first quarter of next year, we will launch its which is a version of Hong Kong and Taiwan's universal Chinese. And then next year, we should launch more international versions. This is our current plan for SEMO.

As for SEMO, it is one of the most important titles in our portfolio. And overall, the performance in the third quarter is in line with our expectations. And we will be focusing on fostering a very balanced and use character progression, and we will be focusing on the user satisfaction. So the goal for this title, the most important goal for this title is longevity. We're hoping to make this game at least five years, to operate over five years long. And in the first quarter of next year, we plan to launch the traditional Chinese version of Sanmo in Hong Kong, Macau, Taiwan. And in the second half of next year, we'll be rolling out additional international versions. Thank you. That concludes this question's answer. Operator, next question, please.

Certainly. One moment for the next question. The next question comes from Felix Liu of UBS. Please go ahead.

Thank you, Director Guan, for accepting my question. I also congratulate our three-season team for their excellent performance. My question is about advertising business. Advertising business has continued to grow in the third quarter. How will the management team look at the space for further transformation of advertising business? What should we expect from the recommendation algorithm and the application of AI in advertising? In addition, in the near future, how will the management team look at the demand for advertising in the fourth quarter? Thank you. Thank you, management, for taking my question and congratulations on the very strong results, especially on the advertisement part. How does management see the growth potential in your ad business from here? Can management share more color on the potential of the improvement in recommendation algorithm and AI on your ad business from here? And more on the near term, how does management see the advertisement demand for the recently concluded 2011 shopping festival as well as the overall Q4? Thank you.

Q3 B站整体的广告收入是25.7亿,同比增长有23%的,因为市站还是在持续的提升。 In Q3, our advertising revenue reached RMB 2.7 billion.

up 23% year over year, with our market share continuing to rise. On top of the steady growth for our performance-based ads, we're seeing both brand and sparkle ads grew much faster than overall market based on our incomplete industry data. The brand ads and sparkle ads growth rate are among the fastest growing players in the industry.

How do we see the future of Bilibili's advertising revenue? We still need to look at the underlying logic. The value of Bilibili's ecosystem and people will be recognized and participated by more customers as time goes by. Once you are involved and know the community, you can't leave it. The characteristics of Bilibili's ecosystem will also lead to the advantage of Bilibili's advertising.

And how should we think about the ad revenue growth going forward? I would like to firstly talk about the underlying logic of Bilibili's ads. As time goes by, more clients are recognizing and tapping into the value of Bilibili ecosystem and its users. Thanks to the uniqueness of our community, our key advantage is that we can deeply shape and make a big impact on users' purchasing decisions.

通俗一點說,說人話其實就是投放B站的廣告第一,投放的價值不是一次性消費。 第二,就更容易再獲得新客。 To put it more simply, Bilibili's advertising business can bring to our advertiser, number one, it will not be a one-off value hit.

Secondly, we are more effective at bringing new users, new customers. Thirdly is we're more likely to drive a sharp increase in repeat purchase from both new and existing users. In other words, we will help our clients to achieve both short-term conversion goals and long-term brand building goals.

Yeah, yet anything we haven't fully perfectionized, realize the underlying logic is pure upside for the future.

From a client perspective, our top five advertiser verticals in Q3 were gaming, internet services, consumer electronics and home appliances, e-commerce, and automotive.

At the customer level, we will do three things to continue the growth of advertising. First, we will strengthen the strategy of SKA. We will serve our big customers. We will provide a full-year comprehensive marketing plan for Bilibili. And to better serve our client, advertising client, there are three main points.

One is to enhance our strategy or service for our super key accounts, SKAs. We will be serving our largest clients with a dedicated service team and a year-round integrated Bilibili marketing solutions. Our goal for this team is to achieve over 90% repurchase rate and keep increase our share of their spending on Bilibili.

第二點是我們在耐銷廣告上形成一定的模式,也形成一定的規模。 Secondly, we are hoping to replicate our successful model into multiple new verticals.

We're using an always-on performance model to better serve our other verticals, especially for those with big spending budgets, such as big FMCG categories like food and beverage, pet and baby, beauty and apparel. We expect a new wave of clients and budgets to come onto our platform.

As the competitive landscape becomes more diversified in the second half of this year and even next year, we are still very confident that by 2026,

there is still substantial growth potential in gaming platform, e-commerce, and content consumption-related advertisers.

Yes, in addition to the customer side, we don't have much room for growth. The second thing is that the different community scenarios that our business penetrates will also be a big growth. Because Bilibili is a community, We have a lot of consumer scenes, which is also different from other platforms. There is only one video stream in the core consumer scene. Now our Bilibili ads are still relatively shallow in the scene. Where will Bilibili users live? They will watch the video, right? Watching the video, they will spend a lot of time in the video player box. They will watch the comments, they must watch the comments, watch the bulletin board. So this is the scene of the video. Second, watch the live broadcast. There are also many interactive scenes on the live broadcast, right? The third one is to use search. Then you have to take a look at the fourth one, which is to take a look at the hot search. Also, Bilibili users are also used to using multiple pages to view Bilibili in different scenarios. For example, our mobile phone page, then our PC page, our TV page, and so on. So in the scenario, Q3 has brought us over 50% of our ad revenue. But this penetration is still far below our current expectations. So the space in the future should still be relatively large.

And third point is we are planning to expand our ad penetration across different community scenarios. And this will be another growth driver because Bilibili by itself, it has many consumption scenario within our products, unlike other platform where most consumption happens in a single video feed. our users are spending a lot of time watching videos within the players, within the commentary session, and also in the bullet chat. And they also watch live streams. They also engage with the live stream content. They do search. They browse 20 topics and hot searches on our platform. and also consuming content across multiple devices, including mobile, PC, OTT, and etc. And in Q3, ad revenue from these different scenarios all grew by more than 50% year-over-year, but the current penetration is still very behind where we think it can be, which means there's still a lot of room to grow.

Fourth, you just mentioned AI technology's change in revenue for the entire Bilibili ad. We have been discussing with the team that it is easy for AI to make everyone optimistic and expect AI to make huge profits in the short term. At the same time, it is also very easy to overlook that AI may subvert all existing models in the future. So let's talk about the changes first. There must be results. The consumption ratio of AI-based related materials is now 55%. And the fourth point is about your question on AI.

We have been discussing intensively internally that AI as a topic that can be easily making people overly optimistic about the short-term boost to the advertising revenue while overlooking its potential to fundamentally reshape the industry over the long term. However, there's still a lot of positive changes we're seeing. First of all is on the AIGC creatives. Now it accounts for 55% of the total creative volume in the performance-based path, and it continues to rise. We are providing video generation tools to our clients in the internet service sector, such as for online novels, we support text-to-video generation, and for short drama advertisers, we support AI highlight editing. In this sector, AI-generated video creatives already account for over 60% of the creative consumption, and this upgrade has freed up a lot of productivity.

第二點的話,其實智能投放, 我們通過這種自動的智能投放, 廣告的消耗滲透其實也超過了45%, 就大多數客戶在這個模式上都可以取得消耗的增長, 我覺得這是第二點。 第三點的話,在分散效率上, Actually, combined with multi-modal content understanding, including deep city recommendations, we have accumulated a total efficiency of more than 10%. It sounds like AI has brought some quite effective and efficient changes to our entire queue, but maybe we and the team will also look at the future possibilities of AI in the long run. We will make more bold attempts, not just looking at some data and income in the short term.

And the second application for our AI is on the smart delivery system. Currently, the automated buy-in smart delivery advertisement system is already counting for 45% of the overall performance base as spent. And most clients have been seeing their spend scale up through this model. Thirdly is on the recommendation efficiency. By combining the multi-model content understanding with the generative recommendation algorithms, we have been lifting our distribution efficiency by more than 10% in total. All of above are the tangible results and benefits that AI has been brought to us this quarter. However, we do think that AI has We do think AI with a long-term mindset, the real significance lies with the new opportunities and the structural change that will unlock over time. And we will be trying a lot of innovation with a long-term mindset, not just a short-term bomb in a few matrix and revenue lines.

之后聊聊双11, 就是我们在观察用户, 特别是B站的Z日代的用户, 年轻消费的这个特点, Their consumption should be two to three times that of all times in history. They are used to the fact that online consumption is commonplace. They are happy to buy, they like to buy, they need to buy. They will no longer blindly pursue the absolute advantage of price at one time. And lastly, on our double 11 results.

So first of all, looking at our users, especially the Gen Z consumers, their spending power is two to three times that of the previous generations. They are used to online consumption as their default shopping avenue and they buy when it makes them happy. It buys when they like something or they truly need something. They will longer chase the rock bottom prices in a single promotion time window in a mechanical way. All of this observation is pointing to the huge commercial potential embedded in the Bilibili user profile and our ecosystem.

But to put it another way, Double 11's results are better than expected. During Double 11, Bilibili's advertising growth was about 30% and the number of customers was more than 100%. During Double 11's cancellation, Bilibili's average new customer rate for all industries was 55%.

And given that our Double 11 report card this year still exceeded our expectations, during this year's Double 11, Bilibili's ad revenue grew 30% year-over-year, and the number of advertisers more than doubled. Over the Double 11 campaign period, Bilibili delivered, on average, a new customer rate of 55% for all industries. And in categories such as watches and jewelry, household daily goods, food and beverage, and beauty, the new customer rate even exceeded 60%.

Lastly, on the outlook for Q4 next year, we remain upbeat about the advertising business.

And more importantly, we're hoping to deliver something more meaningful and new breakthroughs and changes within our business. Thank you. Operator, next question, please.

Next question comes from the line of Xueqing Zhang from CICC. Please go ahead.

感谢管理层接受我的提问,恭喜这个季度亮眼的业绩表现。 那我的问题是关于财务展望的。 Thanks management for taking my question and congratulations on the strong result. My question is regarding your financial outlook. The company's profitability has continued to strengthen, looking ahead to Q4 and into 2026. How do you expect the growth margin and the net margin trends as we maintain a strong cash position? How do you plan to allocate the cash in the future?

Thank you. Thank you, Xuejing. This is Sam. I will take your question. Yeah, we continue to see strong operation leverage in our business. In Q3, our top line grew by 5% and our gross profit grew by 11% year-over-year. Our gross profit margin has improved for 13 consecutive quarters. We expect this trend to continue this year, reaching 37% in Q4. We keep our mid-term gross profit margin target that's 40% to 45% unchanged. Our adjusted operating profit, that's a profit before the other income, jumped over 150% year-over-year, with adjusted operating margin expanding from 3.7% to 9% year-over-year. We expect that number to further improve to around 10% in Q4 this year, and keeping us on a steady path to our mid-term target of 15% adjusted operating margin. We already saw the relevance of Bilibili's business model and our strategy of focusing on healthy revenue growth and the leveraging scale of our December POP expansion. We are confident in reaching our mid to long-term margin targets. Regarding to the cash usage, we will allocate our resources carefully. Currently, we already generate over one billion free cash flow every quarter. So first of all, we will support our high-quality revenue growth engine like advertising business. And secondly, we will invest in some new opportunities, for example, to expand our business boundaries, like reinventing some games for new generations, just like Docker. We already announced a plan to explore Docker's opportunities to the console game and the mobile game. The least but not last, we will also capture some major industry opportunities. For example, we are also seeking for the new talent for areas like AI. But regarding to the shareholder returns, we have repurchased over $100 million worth of shares this year already, and we have a two-year share buyback plan as approved by our board. We still have around $83 million left we expect to fully utilize that amount in the remaining period of the pen. Thank you. That's all for my question.

Operator, next question, please. Thank you.

One moment for the next question. Our next question comes from the line of Yiwen Zhang from China Renaissance. Please go ahead.

Thank you, Mr. Guan. Congratulations on your performance. My question is about AI applications. Thank you for taking my question. I have a question regarding AI application. In your script, you discuss a few AI functions and products you have just launched. So what is your thinking and expectation on future AI application on BD? Also, what kind of impact do you think a product like Soda will bring to media production and consumption? Thank you.

I think B站's app group and user group must have the highest amount of AI in China. China's best AI app group

Bilibili has the highest AI density among both of our content creators and our users. Many of China's best AI-themed content creators and the user who is most interested in AI talent, they are all active and gathered on Bilibili.

Yes, in the third quarter, there are nearly 100,000 AI-related Up主 active in Bilibili every month. They either do AI learning and collaboration content, or teach AI applications, or create with AI support. In the third quarter, the number of Japanese articles related to AI has increased by 83%.

And in the third quarter, nearly 100,000 creators were active on Bilibili every month working on AI-related content. Some of them are doing the latest machine learning explaining. Some of them are breaking down and teaching new AI applications or using AI for video creation. And the average daily number of AI-related video uploads in the third quarter increased over 80% year-over-year in the third quarter.

And I think there is still a lot of potential for growth in this area, because Bilibili has gathered more than two-thirds of Chinese young users. And young users must be the core power of learning or using AI.

And there's lots of potentials for us to further discover because we have gathered over two-thirds of young generation in China on Billy Billy. That is the exact cohort who's eager to learn about AI or leverage AI technology to create things.

You just mentioned Sora. Of course, Sora 2 is very new. But I think SORA2 is more like a product interaction demo. It's not just an AI-generated demo. You asked me if SORA2 will change the way of video consumption and creation. I just said that I think there are enough short videos now. I think AI may increase the supply of short videos, but I don't think it will have a big impact on video consumption because there is already a lot of supply. In the field of high quality content, I think high quality content and more AI are actually a tool for creators. Because the quality content is not something that can be achieved with a single frame or a single scene. It actually needs a concept and you can think of it as more of a representation of It's not one or two effects. I think in terms of creating high quality content, AI can be a good tool for high quality creators. It can improve the efficiency of our creators. We can see some examples of this on Bilibili. Some of our products, such as music, animation, and horror, have recently emerged. I think it's a good AI support for the creation of this work. I think in this field, AI as a tool, in terms of high-quality video creation, its performance should be obvious in the future.

Well, when you asked me about whether Sora will change how people create or consume content, we think, personally, I think Sora is a new demo on both video content creation and also user interface. But as I said earlier on, there's already oversupply of short video content, the adoption of AI tools will only increase that video supply and it will not change how people consume the content. However, on the high-quality video aspect, there's still a scarcity in terms of the high-quality content supply. And the adoption of these tools will help us to increase the supply and improve the talented content creator's efficiency in producing such content. And we've seen this on many of those content categories that AI is becoming the new paradigm. For example, in the auto-tune remix sector, in the music sector, or even the animation sector. there's a lot of very good quality videos that were made with the help of ai tools so um to to summarize we do think that the ai will be a fundamental efficiency booster for high quality video creation and billy billy will be most benefited from that technology innovation

On the other hand, we will focus on the video AI solution and we will focus on using AI to assist creators to do more and better things. For example, we Now you should notice that we have provided the function of AI translation of this video. Because it translates not only subtitles, because that is very basic, it also includes sound and then it also includes voice. This is what you should see on our app. At the same time, we also plan to launch a video that can help the creator to make this video broadcast. And based on that observation we'll be very focused on the

video tracks of the AI applications. We wanted to make AI to be effective tools to help our concentrator to produce higher quality videos. You've probably already seen some of the functions we have launched lately. For example, they will be a multilingual video accessibility feature. including dubbing, subtitles, and even lip-thinking. We also plan to launch an AI-enabled text-to-video tool tailored for video podcast type of content. We believe these products will help bring more high-quality content on Bilibili and to our users. That concludes the question and answer session. I'll bring it back to you.

Thank you once again for joining Bilibili's third quarter 2025 financial results and business subject conference call today. If you have any further questions, please contact Juliet Yang, Bilibili's Executive IR Director of Pia Sanjay Financial Communications. Contact information for IR in both China and the U.S. can be found on today's press release. Thank you and have a great day.