Industrial Securities Co., Ltd. has released a research report highlighting key opportunities in game exports, mini-program games, and AI applications, advocating for a strategic focus on earnings delivery and content reserves to guide investment decisions. During the first half of 2026, revenue and net profits attributable to shareholders in the gaming and advertising marketing sectors grew year-over-year, although profitability showed divergence across different segments of the industry. The firm recommends prioritizing companies with robust capabilities in product research and development, publishing operations, and commercialization, identifying three primary investment themes.
First, the gaming sector demonstrates significant momentum. In the first half of 2026, overseas revenue from self-developed games reached $12.372 billion, representing a substantial year-over-year increase of 30.22%. Meanwhile, revenue from mini-program mobile games soared to 31.657 billion yuan, up 36.01% year-over-year. Second, the content and intellectual property (IP) theme offers vast potential. Companies with high-quality content reserves and strong IP portfolios stand to benefit from expansive development opportunities across film, television, gaming, short dramas, and derivative products. Third, AI applications are experiencing rapid growth, particularly in areas such as AI-driven marketing and short drama production, which are accelerating business expansion.
Reviewing financial performance, the media sector posted steady revenue growth in the first half of 2026, with gaming serving as a primary driver of profit recovery. During this period, the media sector generated total operating revenue of 260.515 billion yuan, reflecting a year-over-year increase of 1.44%. Net profits attributable to shareholders reached 24.071 billion yuan, up 10.21%, while net profits excluding non-recurring items totaled 17.258 billion yuan, down 7.31%. In the second quarter alone, revenue amounted to 130.117 billion yuan, nearly flat year-over-year with a slight decline of 0.03%. Attributable net profits and non-GAAP net profits for the quarter were 13.120 billion yuan and 9.135 billion yuan respectively, showing a growth of 22.18% and a decline of 0.46% compared to the same period last year.
Segment-level performance revealed notable divergence, with gaming and advertising marketing achieving simultaneous growth in both revenue and profits. In the first half of 2026, the gaming segment saw revenue and attributable net profits rise by 20.03% and 65.68% respectively, with profit growth significantly outpacing revenue expansion. The advertising marketing segment posted revenue and profit increases of 7.93% and 23.48%. Conversely, the publishing segment experienced declines in revenue and attributable net profits of 10.82% and 18.43%. Digital media revenue grew 5.46%, yet attributable net profits fell 39.23%, indicating that revenue expansion failed to translate into profit gains. The film and television exhibition segment saw revenue plummet 30.84%, swinging to a net loss. Television broadcasting revenue decreased 6.80%, with non-GAAP profits remaining in negative territory. During the second quarter specifically, the gaming segment's revenue and attributable net profits grew 19.72% and 74.34%, with profit growth accelerating further. Advertising marketing revenue edged up just 0.15% while attributable net profits declined 3.31%, suggesting that second-quarter operational performance faced more pressure compared to the overall first-half results.
From a market perspective, both the index level and valuation multiples have retreated since the end of last year, with fund allocations remaining underweight. As of the close on September 4, 2026, the Shenwan media index stood at 706.57 points, down 13.80% from the end of 2025. The trailing twelve-month price-to-earnings ratio was 35.34 times, an 8.08-times decrease from the previous year-end level. According to fund heavy-position statistics, excluding Hong Kong-listed stocks, the media sector accounted for only 0.45% of total heavy-position market value in all A-shares during the second quarter of 2026. This represents a decrease of approximately 0.53 percentage points from 0.98% in the first quarter of 2026, and a reduction of 0.96 percentage points from 1.41% in the second quarter of 2025. During the same period, the media sector's market cap represented a standard allocation ratio of approximately 1.09% of the total A-share market, implying an underweight position of around 0.63 percentage points. As valuation and allocation levels have both trended lower, future attention should center on earnings delivery and shifts in capital allocation.
Risk warnings include potential changes in regulatory policies, underperformance of gaming, film, and short drama products relative to expectations, and macroeconomic fluctuations.
Comments