Bilibili Inc.

Good day and welcome to the Bilibili's second quarter 2026 financial results and business update conference call. Today's conference is being recorded. At this time, I would like to turn the call over to Juliet Yang, Executive Director of Investor 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-gap 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 Fan, Chief Financial Officer. I will now turn the call to Mr. Chen.

Thank you, Juliet, and thank you to everyone joining us today. Our strong momentum carried into the second quarter and we delivered another set of solid results. Both our community and top-line growth remained healthy and profitability continued to expand. As users increasingly seek substance over noise, Our high quality content and authentic community experience keep attracting new users and driving deeper engagement. In Q2, DAUs increased by 7% year over year to 117 million, while MAUs grew to 371 million. Average daily time spent rose to 113 minutes from 105 minutes a year ago, which drove total time spent of over 14%. That engagement is translating into stronger commercial results. Advertising revenue grew 28% year-over-year, marking another quarter of industry-leading growth. Meanwhile, MPUs increased 7% year-over-year to 33.4 million, reflecting users' increasing willingness to pay for the content and community experiences they truly value. You can also see that momentum in our financial results. Total revenues for Q2 rose 8% to RMB 7.9 billion, and Gross Profit grew 10% year-over-year. Gross margin expanded to 37.2%, marking our 16th consecutive quarter of margin improvement. Our top-line growth and increased operating leverage drove our net profit up 55% year-over-year and our adjusted net profit reached RMB $704 million, with our adjusted net profit margin expanding to 8.9%. In the AI era, we see two major tailwinds. AI tools help our creators produce great content much faster, while AI-empowered content understanding is making our recommendations far more efficient. Second, and perhaps more importantly, in a world full of passive algorithmic content, real human connection becomes a rare commodity. People choose Bilibili because they want meaningful content, shared interests, and genuine interaction. And that makes our community even more attractive. That is why we remain committed to our AI strategy while staying highly disciplined in how we invest. We'll use AI to improve content and efficiency without losing sight of our community roots and unique advantage. Strengthening this flywheel of community and monetization will continue to build lasting, compounding value for our users, our creators and our shareholders. With that, let me walk you through our core pillars of content, community and commercialization. Let's start with our content. Across our 17-year history, various content formats have come and gone, but Bilibili's distinct blend of quality content and vibrant interest-driven communities continues to capture users' intentional, high-value time. In Q2, total time spent on our platform expanded by 14% year-over-year. Notably, watch time from videos over five minutes grew by 18% year-over-year, demonstrating users' growing demand for meaningful and high-quality content. Turning to our interest-based content categories, we're seeing steady growth across both core and emerging hubs. Total watch time for game-related content and general entertainment content increased by 20% and 35% year-over-year, respectively. Baby and maternity also grew by 36% year-over-year as more of our users step into parenthood. At the same time, AI tools are expanding creative boundaries across our platform. For instance, Watch time for music content grew 24% year over year, catalyzed by AIGC-driven creation. Beyond content consumption, AI is also supercharging creator output. In Q2, daily video submissions jumped by 28% compared to the same period last year. Video podcasts offer another compelling example of our users embracing immersive content. Last month, average daily watch time for video podcasts exceeded 100 million minutes. This remarkable engagement shows that even in today's world of fast-paced content, there is still a huge and growing appetite for in-depth storytelling. Behind these figures, empowering creators remains a top priority. Through refined algorithms, we now match quality content with interested users much earlier. In Q2, the number of creators with over 1,000 followers grew by 30% year over year. The diverse monetization channels we provide also helped average creator income increase by 21% year over year in the second quarter. Turning to our community, as we touched on earlier, authentic human connection has become rare and valuable in the era of automated, bite-sized content. That is why Bilibili's interactive community feels like a true oasis in today's digital world. Here, hundreds of millions of users connect over shared passions, expressing their feelings through comments and bullet chats to find a genuine sense of belonging. In Q2, monthly interactions grew 9% year over year to 17.4 billion, while deeper connections like long comments jumped over 67%. Meanwhile, by processing these rich user interactions, our algorithms can spot and elevate high-quality content much faster, driving healthy, steady growth in both our user base and time spent. This level of engagement and interaction naturally keeps users coming back and expands our network of trust. In Q2, the average active user followed 96 creators, up 11% from a year ago. By the end of Q2, our official members reached 299 million, with 12-month retention remaining solid at around 80%. Ultimately, our community doesn't just surface the best content, it builds lasting user loyalty and drives enduring platform value. This summer, we brought our community offline once again through our signature event, Bilibili World and Bilibili Macro Link. Over the three-day event, more than 400,000 fans gathered in person in Shanghai, making it one of the largest offline ACG expos in China and a vibrant new cultural landmark for the city. Seeing so many young people come together to share their passions was a powerful reminder of what community means. This is what Bilibili looks like off-screen, authentic, energetic, and deeply connected. Now, let's turn to our commercial businesses, beginning with advertising. In Q2, advertising revenue increased by 28% year-over-year to RMB 3.1 billion, marking our 14th straight quarter of 20% year-over-year growth. This industry-leading growth reflects our high-value, deeply engaged user base, alongside ongoing enhancements to our ad products and technical infrastructure. Growth was broad-based across industries. Games, digital products and home appliances, internet services, e-commerce and automotive were our five largest advertising verticals in Q2. While our core gaming vertical maintained healthy growth, new verticals are also flourishing as our users mature into new life stages with expanding consumption needs. Ad revenues from home decoration, Footwear and Apparel and Automotive each grew more than 60% year-over-year. We also captured incremental budget from emerging industries. AI advertisers continued to scale and revenues from this vertical more than doubled year-over-year, driving sustained growth in internet services. Our ads are also becoming more efficient. By deepening our understanding of product information, creative assets, user interests, and conversion goals, AI helps us deliver more relevant ads and drive better conversion. Our CTC VR continued to improve, increasing 19% year over year in Q2. Beyond matching, we are extending AI across creative production and campaign operations, from AIGC tools to ad placement AI agents, making advertising easier and more efficient for a broader range of clients. We are also extending monetization into deeper high intent user scenarios. Take Search, for example, a high-value scenario sitting right at the moment of decision-making. Search revenues doubled year-over-year in Q2. At the same time, we are unlocking growth across additional scenarios, including PC, Smart TV, and the Watch page. As monetization expands across the entire user journey, we see vast commercial potential ahead. Turning to our games business. Game revenues for the quarter were RMB 1.4 billion, down 14% year-over-year, mainly due to the high base that last year. Sanmo's latest second anniversary season, 15, went well with players, ranking number two on China's iOS top grossing chart. We'll keep focusing on the game's long-term lifecycle by delivering fresh content and carefully balancing user experience with monetization. Meanwhile, our legacy titles including FGO and Azure Lane continue to deliver stable performance during the quarter. In July, we officially launched our casual card game, N-Card, San Guo Bai Jiang Pai. We continue to refine the game and enrich its gameplay while approaching user acquisition with a long-term focus on ROI and retention. Looking at the second half of 2026, our self-developed simulation game, Lumi Master, Xiaoba Lumi, was well-received by global players in recent tests. Building on this encouraging reception, we plan to launch the game on September 17 globally. Our new licensed SLG title is scheduled to roll out in Q4, complementing Sanmo with a differentiated gameplay experience. Beyond Lumi and Sanwang, we also introduced three new titles at Bilibili World, including two licensed games, Ragnarok Online 3, and MMORPG, based on a globally recognized IP that has already secured its publication license, and Mistbound, Guild Wars card game, 机战大牌英雄, which is adapted from another well-known IP. We also announced a new self-developed tactical RPG, Three Kingdoms, The Ravages of Time, 三国,火封燎原. All three titles will be released next year. Together, these titles expand our pipeline across genres and development models, while attracting new player segments. Turning to our VAS business. In Q2, VAS revenues grew 5% year over year to RMB 3.0 billion. Our live broadcasting business maintained its steady performance and we continue to refine our operations to ensure stable and sustainable growth with better margins. At the end of Q2, premium members reached 25.7 million, up 9% year over year, with around 80% on annual or auto renewal plans. Fan charging also kept its momentum, with revenue up nearly 50% year over year. Fan charging turns audience appreciation into direct financial support so creators across a wide range of categories can do what they love and produce quality content over the long term. 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 upgraded Bilibili to an AA rating from an A rating, recognizing our ongoing progress in using technology and culture to create meaningful social impact. At the end of the day, we found that across every technological shift, one thing remains constant, People crave rich, meaningful content and real human connection. Bilibili is uniquely built at the intersection of both. As AI enables us to fulfill this mission with greater precision and scale, I couldn't be more confident in our path ahead. With that, I will turn the call over to Sam to walk through our financials in more detail. Sam?

Thank you, Mr. Chen. And hello, everyone. In the interest of time on today's call, I will focus on our second quarter financial highlights. We encourage you to refer to our press release issued earlier today for a closer look at our results. Total revenues for the second quarter were RMB 7.9 billion, up 8% year over year. The breakdown of total revenues by revenue stream was approximately 39% advertising, 37% VAS, 18% mobile games, and 6% from our IP derivatives and other businesses. Cost of revenues increased by 7% year-over-year to RMB 5.0 billion. Gross profit increased around 10% year-over-year to RMB 3.0 billion, while gross margin expanded to 37.2% from 36.5% in the same period last year, marking our 16th consecutive quarter of margin improvement. Our total operating expenses were up 7% year-over-year to RMB 2.6 billion. Sales and marketing expenses increased by 1% year-over-year, G&A expenses were flat, and R&D expenses increased by 16%, primarily due to continued investment in our AI capabilities. Operating profit increased 48% year-over-year to RMB 373 million, while adjusted operating profit increased 21% to RMB 696 million. lifting adjusted operating profit margin to 8.8% from 7.8% in the same period last year. Net profit increased by 55% year-over-year to RMB $339 million, while adjusted net profit increased 25% to RMB $704 million, and adjusted net profit margin reached 8.9%. As of June 30, 2026, we had cash-in-cash equivalents. Time deposits and short-term investments of RMB 24.3 billion, or 3.6 billion U.S. dollars. In June, our board approved a new, two-year, 300 million U.S. dollar share repurchase program. Under this new program, a total of 1.9 million shares had been purchased for a total cost of 31 million U.S. dollars as of June 30, 2026, from the beginning of the year through today. A total of 5.8 million shares had been purchased for a total cost of $118 million. Moving forward, we will continue to evaluate market conditions and execute our repurchase program accordingly to enhance long-term shareholder value. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.

Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star 11 again. For the benefit of all participants on today's call, if you wish to ask a question to management in Chinese, please immediately repeat your question in English. The company will provide consecutive interpretation from the management statement during the Q&A session. Please note that the English interpretation is for the convenience purposes only. In the case of any discrepancy, management statements in the original language will prevail.

And now we're going to take our first question. Just give us a moment.

And the question comes land of Lincoln Kong from Goldman Sachs. Your line is open. Please ask your question.

Thank you for accepting my question, Guan Yicheng. Congratulations to our second quarter for a very stable performance. I want to ask, in the past few years, the content of short videos has been rising rapidly, and the market for long videos has been declining gradually. However, Bilibili Inc. has maintained a very healthy growth in this change. I want to ask what are the main reasons behind this? Thank you, management, for taking my question and congrats on a very solid quarter. So looking back over the past few years, cell phone content has surged while the average length of the Long-form video has also steadily decreased. But Bilibili has sustained a very healthy growth throughout this dynamic period. So what's driving this resilience? And looking ahead to the AI era, how do we expect a user preference and the consumption habits to evolve over time? Thank you.

In the past few years, whether it's short video or long video, there has been an explosive growth. It's just that short videos grow faster And I don't think we make choices between short and long videos We choose good content, high quality content And most of the high quality content is indeed in long videos

Actually, over the past few years, we've seen an explosive growth for both short-reader content and long-form content. And the shorter-form content grows much faster. And looking at Bilibili, we're not choosing the length of the content to be focused on, but rather we are focusing on good content, high-quality content. And naturally, for those high quality content, they are generally more inclined to be in a format of long form, mid to long form content.

Well, we believe whether it's

Whether the length of the content or on the device of the consumption scenario, the ultimate goal from users is everyone wants to watch good content.

After a series of fragmented content, they will also realize that a lot of this short content can only bring a stimulus to the audience. And he himself wants to spend more time on something he thinks is worth watching. So I think this is also the reason why Bilibili has been growing healthily in the past few years. Well, over the past year, we do see an exponential supply growth for video content.

But over time, as people have watched enough low-quality repetitive content, they naturally develop a taste for high-quality content. They are no longer satisfied with the content that just grabbed their attention for one second. They care more and more about whether the time they spend on the content is actually worth it. and that is exactly why Bilibili have been able to keep growing in the past few years. We have been focusing on providing a high quality content that is interesting in depth and really connects with user emotionally. And that's why user are willing to slow down and spend their about intentional time on Bilibili.

I think there are several reasons why we can always produce high-quality content. First, we have a very talented group of upholders. These high-quality creators do agree with our concept of Bilibili Inc. They will continue to create here. The second factor is that we have a long-term high-quality community. because there are a lot of users who like high-quality content and have this aesthetic ability. Over the past decade, they have gathered on our platform and formed a community. This community will also become a filter for high-quality content. It can better filter some high-quality content out of millions of headlines every day. This is a very two-dimensional cycle.

The reason why Bilibili are able to constantly curate high quality content for two reasons. One is that we have amassed a very talented group of content creator who believes in the community, who believes in the Bilibili platform. Secondly is over the past decade, we have viewed a very engaging community with a lot of users who truly appreciate high quality content. They have the view of what is good high quality content and forms of community that appreciate and also can select and define the quality, what is the good quality content. They can choose and promote among millions of daily video submissions and allow this high quality content and talented content creator to emerge from our platform.

In the second quarter, the average interaction of B站 users was more than 174 times, which increased by 9%. More than 100 long comments increased by 67%. This kind of real, high-density interaction is able to help us to identify quality content faster and better.

In the second quarter, our monthly user interaction were over 17 billion, up 9% year over year. Long comments that over 100 characters grew even faster by 67%. This high level of real human interaction helped us to better identify high quality content.

You just asked about the age of AI. I think the biggest change in the age of AI is that I think the video itself will become less scarce, and even become superior. Because AI itself creates a lot of videos, it will also improve the efficiency of people making videos. Therefore, after entering the age of AI, I think the number of videos may be a thousand times or even a hundred times more. And regarding in the AI era, how the video landscape is going to change, we believe that the AI tools will exponentially unleash the supply of video content.

And over time, the High-quality content is the only solution or the only answer among those oversupply of video content. We believe over time, only high-quality content will have viewership. Those low-quality content will have no traffic.

I think in the AI era, we will have a huge improvement in terms of production and distribution. In terms of content production and distribution. In terms of content production, I will pay more attention to how creative creators use AI, rather than AI to produce homogenized content. I don't think homogenized content is meaningful, but how good creators and creative creators use AI is very meaningful, because it will greatly improve the productivity of high-quality creators. In the AI era, I would be very focused on two aspects

One is on video creation, content creation. Second is on content distribution. First of all, on the content creation, I will pay very close attention to those content creators with high intelligence and high creative power, how they are leveraging AI to create content, to realize their creation into actual work. We believe that 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. And in the past half year, we have been paying very close attention on this aspect, and it's generating very positive results. As a matter of fact, in the second quarter, Our monthly content submissions increased by 28%. This is a hard evidence to support that AI tools is enlarging, enhancing, uplifting our creators' creative output.

and so on. and others.

Secondly, on content distribution, compared with the short videos that only have a few seconds, the longer form videos contain much comprehensive information and structures. Traditional recommendation algorithms often struggle to fully understand and recommend this type of content. And also, users generally have more complex intent when they come to choose much longer form content. That's why we are focusing on our AI on helping our content distribution become more efficient. And we think this new generation of AI tool is helping us to comprehend, understand the content, the meaning of the content and better understand our user intention. And here's a few number two support. Our progress in second quarter, DAU grew by 7% year over year. And our total user time spent increased by 14% year over year. And the number of creator with over 1000 followers grew by 30% year over year. A lot of the driver behind those numbers are from using AI to make our algorithm working better.

That concludes the first questions answer.

Operator, next question, please.

Perfect. Thank you so much. Now we're going to take our next question. And the question comes to the line of Yan Liu from Morgan Stanley. Your line is open. Please ask your question.

Thank you for the opportunity to ask a question. First of all, congratulations. I have a question about advertising business. Since Q2, China's overall PR and consumption data have been weak. What is the growth expectation of the advertising business in the second half of the year? Is there any changes in the trend of advertising from the AI industry? How is the management layer divided? Let me translate my question. My question is about the advertisement business. Since 2Q, we started to see weakening macro and consumption data in China. How to think about the future second half advertisement business growth and also what is the marginal change for the advertisement from the AI industry and also could management help to break down the 2Q and the second half advertisement growth driver and also in second half we start to have a little bit higher base which verticals can support the advertisement business to sustain a relatively high growth. Thank you.

In the second quarter, despite macroeconomic pressure on consumer spending

Our ad business delivered a very strong performance with revenue reaching 3.13 billion RMB, up 28% year over year. This resilient growth reflects a strong market recognition of our user base and our community value. More and more advertisers realize it's a must invest platform for them to gain access to the young generation. We also achieved early success in our vertical industry strategies and our ad scenario expansion.

At Bilibili Inc., you can see that the AI knowledge content and consumer market are growing very well. There is a growth of 72% in the same ratio. Users continue to track AI changes at Bilibili Inc. and learn big models and AI tools. Bilibili has become the largest AI learning video community across the internet as users actively come to our platform to track and learn about large language models and AI tools. At the same time,

have been absent from AI sector by over 100% year-over-year in the second quarter, benefiting from the strong match between AI target audiences and our user base. As AI is a major long-term trend, we expect continuous demand from various clients across different stages, and we remain very optimistic about this incremental opportunity.

In the second half of the year, advertisers may require a higher conversion rate for the short-term requirements of the budget. But in fact, all customers would prefer to find a one-time investment, but a sustainable and effective channel. It's not a one-time consumption and that's it. It can establish long-term brand value. As for the second half outlook, we're seeing more advertisers demanding higher conversion efficiency in the short term. But at the same time, they also want channels that deliver sustained

Long-term impacts, rather just one-off impressions, to help them to build lasting brand value. They are also prioritizing their limited budget on high-value users with genuine purchasing power. All of these demands precisely match with Bilibili's unique strengths.

Bilibili's average age is around 16.5 years old. They are already the most important core consumers in the society. In the past two years, they have been watching videos and interacting with each other at Bilibili Inc. They have become good friends. In the past two years, Bilibili Inc. has also gradually formed a new consumer mindset. It represents the advertising that I am willing to recommend to the platform and the advertising bill recommended by Up主. The average age of Bilibili users now is 26.5 years old, making them the primary driver or the main consumption force in the current Chinese society.

Over the past two years, they also have established a strong purchasing mindset on Bilibili, demonstrating a clear winning list to buy products recommended by the platform or by the content creators. In the second quarter, our top five ad verticals were game, consumer electronics, internet services, e-commerce, and automotive, while our total advertiser base expanded by 14% year over year.

Bilibili Inc. is different from other content platforms. There is also a very solid strategy called a multi-scale scenario strategy. In fact, this is a strategy that can achieve Bilibili Inc.'s content all day long to accompany users in different periods of time. Whether you are alone or doing home work, you can listen to Bilibili Inc. Or when you are in the car, you can watch videos and listen to Bilibili Inc.'s videos. Unlike other platforms, we have a multi-screen, multi-scenario strategy that allows visibility to accompany users

seamlessly throughout their day, whether it's listening or watching Bilibili during commute or casting Bilibili content on TV screen at home with their family or using our apps or iPad during prayer time for learning.

当你使用不同屏幕的B站的时候,我们又会做什么呢? 其实我们可以去看视频,可以去发弹幕,我们也可以去发视频。 We can search for your favorite content and creators repeatedly. At the same time, you can also watch live interaction, animation, documentaries, play games, etc. In fact, these different scenarios and different corners of the ad can accompany the user's daily consumption. So in the first half of the year, whether it's the search and playback in the app, or OTT, or PC, or our small programs, they all provide us with new effective ad storage. These scenes have more than 50% of the total number of ads.

Across these different screens, users can watch and upload video, interact through bullet chats, commentaries, search their favorite content or creators, during livestreams, watch anime or documentaries, and play games. And ads naturally follow users through ads or daily touchpads. That's why in the first half of this year, The in-app search, watch page, smart TV portal, PC, and mini programs have all unlocked valuable new app inventories with revenue from this multi-scenario placement, who buy 50% year-over-year in the first half.

Of course, there is one thing that is particularly important, but there is also a lot of space, which is AI. AI has invested a lot of effort to transform the entire advertising system. It's used to understand users, including the match of content, the production of materials, and the improvement of algorithmic efficiency, and so on. This will be of help to the continuous efficiency changes and growth of advertising in the future. So now we can actually see some specific data that our automated system also allows us to enter more new customers seamlessly and at a lower cost.

A lot of knowledge is AI is also empowering our ad efficiency from several angles, including improving our user comprehension, including user profiling, content matching, ad creative generation, and algorithm efficiency to continuously lift our monetization. And also we have launched our automated ad placement system that also has made it much easier for new advertisers to join us. This is driving a double-digit growth for our new advertisers' client base.

As you said, I think there will be a lot of changes in the future industry budget.

As we mentioned, it is indeed a very challenging macro environment and there will be a lot of changes across different industry players. However, given what we just mentioned, we still remain quite confident about our continuous growth for our app business. Thank you. Operator, next question, please.

Yes, of course. And now we're going to take our next question. And the question comes in the line of Daniel Chan from JP Morgan. Your line is open. Please ask your question.

Good evening. Thank you for giving me this opportunity to ask a question. I want to ask about the game. In the company's earlier sharing, you mentioned a lot of game My question is on the online game. So the company just shared quite a lot of information on the game pipelines. I was wondering which one is the most anticipated one, and also what's the expectation for the launch timing? And besides this, Sunmo, the Three Kingdoms strategy game has been launched for two years. So how should we look at the future performance of this game? Thank you.

From the second half to next year, it will be a harvesting season for Bilibili Games. We do have several exciting titles lined up for launch. The first title in our pipeline is Dreaming Master.

Vumi Master is Bilibili's self-developed light casual game that involves pet catching and simulation gameplay. It received a lot of positive feedback during its global test in May, and also recent testing feedback has been very well. We are planning for a global launch on September 17th next month. and we have developed a very innovative gameplay and artistic graphic designs to cater to young generation teams. We believe with this lighter gameplay and appeal to younger players, we hope this game can catch a broader casual gaming audiences on a global base, especially for young gamers.

The second game is The King of the Three Kingdoms. This is a strategy game for the third-party market. And our plan is to release it at the end of this year. The target audience of this game is a more mature player group that has feelings for the third-party IP, which is about my age. And its picture quality and gameplay have been greatly improved in terms of the original third-party technology. We will continue to improve our products. We hope that

The second title in our pipeline is San Wang, which is a strategy game officially licensed from the classic Three Kingdom IP. We expect to launch this game towards the end of this year. Compared to San Mo, it targets a more mature audience with a strong interest. in Sangu Zhi IP. And both of the visual style and gameplay have been significantly upgraded from the classic IP. And while we are launching another Three Kingdom Night title, we think it really complements Sunmo in both gameplay and target audiences, and it can further strengthen our presence in the strategy game genre. We also gained a lot of valuable feedback from the second beta testing we just finished, and we will continue to fine-tune this game. We hope our goal is to build another strategy game that can be lasting and popular for our audiences.

In the previous BW, we also released a few products that will be released next year. Let me introduce them to you. The first one is the Three Kingdoms of Fire and Wind. It's our team's self-produced strategic battle type RPG game. First of all, Fire and Wind is a comic book IP for 20 years. At the same time, it's also our own animation. We've also produced the animation of Fire and Wind. We want to turn this classic IP And beyond that, we have also introduced several new pipeline titles in the region's BBB world and will be launched next year. The first one is Three Kingdoms, The Ravage of Time.

This is another... self-developed title that is focused on tactical RPG genre. This title is based on a classic manga IP with a history of over 20 years and Bilibili platform has also produced and published the anime that based on this IP. Our goal is to make this classic IP, revitalize this classic IP, and make it a great tactical RPG for younger generation.

The second game is R3, and I won't talk much about this RO. This should be a classic MMORPG with almost 20 years of influence. And it also has A lot of old players of this RO hope that this IP can return. And this is also one of the reasons why we are doing this work. And this game has already got the license plate number. And it started the technical test today. Currently, the players' feedback is pretty good. This is also what we plan to launch next year.

and the second title for next year is RO3. Needless to say, this is a very classic IP with a large audiences that last over 20 years. It's a very classic MMORPG and we received a lot of users demand for bringing this title back to them. That is why we have signed and licensed this IP and hopefully to bring and this classic IP back to its fan base. Currently, the team has already secured its license and we actually we started to launch technical testing today within mainland. Currently, the user feedback has been quite positive and we are targeting to launch this game next year.

have received the update of the two-year version, and the players' feedback is also positive and positive. From last year's S8, the one-year anniversary, to this year's S15, the two-year anniversary, all the games of the past year have been kept in the top five of the scale. So we can see that in the past two years, S3 is a very stable, long-term operation. In the future, we will continue to do every season seriously and maintain the long-term health operation of SEMO. Because in the past, I would emphasize in every press conference that the long-term operation of SEMO is our strategy to do games. So we will continue to do every season of SEMO well.

To answer your question on our classic Sunmole game, this game has just celebrated its second year anniversary with a major update in June, and the new content has been well received by our players. As a matter of fact, from Season 8, our first anniversary season last year, two outs Season 15, our second anniversary season in this year, Dunmo has ranked among the top five on the ILS top closing chart every game season, which is quite impressive. And for this game, our goal has remained unchanged. Our target is to build a lasting strategy game that can accompany gamers for life. Our goal or strategy for our business remains to focus on the vertical genre to either become the best or first in its own segment and make sure every title has a long life cycle. That is the strategy we'll continue to be focusing on.

Let's talk about the Shang Guo Bai Jiang Tai. We released the deck earlier this year. The air TV of the deck was doubled in July than in April. And in October, we will launch the S2 season. The goal is to improve the product's long-term flow and increase the game play. As you just heard, in the past two years, we have launched a series of games based on three countries. We are also known as the Three Kingdoms Universe. The advantage of this is that these players themselves are able to have a positive flow in these games. In these games, there is only a three-minute game like this, which is very easy and leisurely, and there is a social fun game. There is also a game like this, and San Mo and San Wang. It's a game that allows players to have a immersive experience. In addition, we have a video community in B-Side, and a lot of content can be spread in this community and interact with users. It can form a very good player environment. This also allows us to make this series of games as a good foundation for long-term operations.

And when I mentioned, based on the end card game, which was recently launched officially, we've noticed that the LTV for July version has doubled compared to the April version. And we also plan to launch the game season two in October with a focus on improving long-term retention and adding more interactive fun gameplay. You will notice that recently we have launched many different Three Kingdom IP titles including this light casual poker game and also we have immersive hardcore strategy game like Sunmo and Sunwong. The reason why we We are exploring this IP in a such dynamic way. First of all, we think that there's a lot of overlap for users who are interested in this IP and they can cross sell from each other. And secondly, is that we have a very high quality video community that with a lot of gamers who can share their experience and promote this game and also provides a very good platform for us to engage with users and continue to improve our game. That is why we are hoping to achieve long-term operations across different IPs and different titles and continue to provide good gaming experience for our gamers. That concludes this question. Operator, next question, please.

Thank you so much. Now we're going to take our next question. And the question comes line of Xueqing Zhang from CICC. Your line is open. Please ask a question.

Thank you for accepting my question, and congratulations to the company for its steady performance this quarter. My question is about AI. The company previously shared on the Investors' Day event that AI improves advertising algorithms and helps with eCPM. Can you share with us in more detail the benefits of AI for Bilibili Inc., community ecosystem, user activity, and other businesses? Thanks management for taking my question and congratulations on the solid quarter. My question about AI, the company discussed how AI has improved its advertising and helped increase ECPM at the investor's day. Conventual elaborate a little more on how AI is enhancing bilibili's community ecosystem, user engagement, and different business lines. In addition, how much of the previously announced $1 billion in AI-related cap tax has been deployed so far, and what's the expected pace of spending going forward? Thank you.

So the next era is the era of AI. This should be the common sense of the industry. So I think what we need to think about is not how important AI is, but what our company should do. Most of the things in the field of AI don't need our company to do. I think our company's investment in AI is focused on what is closely related to our business. Well, we believe AI is already a consensus for the next era and

For us, it's not to think about how important AI is for us. It's to think about how we will use AI in our own business. As a matter of fact, there are a lot of things in the AI chain we won't be engaged with. The things where we invest will be very closely tied to our core business, which is video. And to be more specific, Some three areas, video understanding, video distribution, and video creation. All of our investments will be strictly focused on those three areas.

are key to improving user experience and business efficiency. Through AI-enhanced video understanding, AI-enhanced distribution, recommendation, and search capabilities, we can help users find more interesting content with higher efficiency, and help the advertising system to accurately match users' needs. This can both improve our...

First of all, AI is helping us to better understand both content and users. Bilibili has a huge amount of video library, and this video carries much more information, and our users have a very diverse interest. To be able to better understand the value of our content, the meaning of the content, and What Users Want is a key component in both improving user experience and our commercialization efficiency. With AI, we're improving our video understanding, search and recommendation capability. It is helping users to find content they're interested in more efficiently matter while helping our ad system to better match ads with users' needs. And for us, this investment not only is working on our user growth, it is also working on our commercialization results.

然后第二的话,我们是很重视如何用AI去提升我们的视频的一个供给。 我们是那个,我们在这个领域里面,我们是非常看重就是我刚才提到的就是有创意的 are all able to use AI well. In the past two seasons, we can see that many creators have been able to use AI to greatly enhance their creative efficiency. In the past, a professional team or even a company needed animation and visual content. Now, a creator can do it very well. In the past few months, there have been many creators using AI to create high-quality works that have reached tens of millions of views. And we can see that in the fields of animation, film, music, and horror, the creators of AI are extremely open-minded, which obviously increases the number of headlines and gold pieces. So I think this direction is also one of the directions we will focus on. Because the origin of the quality content comes from these creative creators. In May, we launched the Abdu animation theater. In a short time of three months, the total playing history reached 270 million minutes. The number of plays is 180 million, and the number of plays of six seasons has exceeded 10 million. This is what we can see clearly.

And secondly, AI is helping creating new types of content and unleashing productivity on visibility. As I mentioned, we're very focused on seeing those high quality content creator, talented content creator, how they are using leveraging AI to produce content. Good Content. And in the past two quarters, we've seen so many good examples of how AI tools is unleashing those talented brains to bring good content on our platform. We're seeing some animation or film content that used to require a whole professional team or even a company to create now can be created by individual content creators. that the quality is so premium that they achieve tens of millions of video views. We're also seeing AI inspire new types of content across animation, film, music, also to remix categories. It is truly unleashing the creator's talent, their creativity. We've seen a surge in content submission. and the number of high quality content videos are emerging on our platform. Here's a very vivid example for your reference. In May, we launched our creator animation campaign on our platform. Just in three months, these videos in this campaign has generated 270 minutes of watch time and over 180 million views. and six theories, each surpassing 10 million views. Those are the perfect example of how AI tools is helping bilibili to unleashing creators output and unleashing the supply of high quality content.

Yeah, this is Sam. As Mr. Chen mentioned, our AI investments

We are now highly focused. Regarding our previous target of 1 billion RMB, it is well on track. We have already achieved 70% to 80% of it in the first half of the year, primarily on the procurement of servers computing our resources. This was expected to be an RMB extension for the whole year, and it has been by 500 million RMB, which remains unchanged.

Operator, next question, please.

Yes, of course. And now we're going to take our last question for today. And the question comes from Thomas Cheung from Jefferies. Your line is open. Please ask your question.

Good evening. Thank you, Manager Cheung, for accepting my question. My question is about how the company views the space for increasing revenue of different business lines. and many more. For the next few years of AI investment, do we have a direction of direction? How does the management view the main up and down factors of interest rates in the first half of this year and the second half of this year? Good evening. Thanks, management, for taking my questions and congratulations on a very solid set of results. My question is, how does management view the margin upside across different business lines? On AI, how should we think about AI empowerment to fixed cost leverage and rooms for the lowering in op-pax ratio and any color about the AI spending over the next couple of years? On the other hand, How do management view the potential upside or downside to margin in second half in 2027? And lastly, what are management thoughts on capital allocation? Thank you.

Thank you. This is Sam. I will take your question. In Q2, our financial performance continues a strong momentum. Both revenue and gross profit grow nicely, with our gross profit margin expanding to 37.2%, marking the 60% are a conservative quarter of sequential improvement. Meanwhile, our operating leverage continues to expand. Net profit grew by 55% year-over-year, and our adjusted net profit margin increased to 8.9%. Looking at the mid- to long-term, we believe there's still significant role for B2B's commercialization. Driven by the sustained and healthy development of our business life, More efficient operation gains empowered by AI, we are highly confident in our future probability improvement. First, our high-margin advertising business continues to grow and has become our largest revenue contributor, accounting for 39% of total revenue. Despite some microeconomic pressure, we expect our advertising revenue to maintain a sustainable and healthy growth trajectory going forward. We have a robust pipeline of five new titles set to launch in Q4 of this year and into next year. We are confident that our gaming revenue will resume a year-over-year growth trend starting in the fourth quarter. We remain confident in our future profit expansion and our mid-to-long-term target remains unchanged, a gross profit margin of 40% to 45% and an operating margin of around 15% to 20%. We are confident in maintaining healthy running growth while continuously improving our operating efficiency, also to drive the profit utilization. We will carefully balance our AI investment with commercial monetization, and we firmly believe that today's investment will play a virtual role in BDB's sustainable development in the future. Regarding to the shareholder return, delivering shareholder return is also a priority for us. From the beginning of this year to date, we have accumulated 180 million US dollars in share repurchases. In June of this year, our board of directors approved a new 300 million US dollar share repurchase program. As of the end of June, we have already repurchased 1.9 million shares for over 31 million US dollars under this new program. Going forward, we will continue to execute repurchases are approaching the market windows to create long-term sustainable value for our shareholders.

Thank you, operator.

That concludes our question and answer session today.

And that concludes the question and answer session. Thank you once again for joining Bilibili's second quarter 2026 financial results and business update conference call today. If you have any further questions, please contact Juliet Bilibili's Executive IR Director or PR Center Financial Communications. Contact information for IR in both China and the US can be found on today's press release. Thank you and have a great day.