Gross margin for Bilibili-W (09626) has improved sequentially for 15 consecutive quarters, reaching 37.1% in Q1 (up 0.9 percentage points year-on-year and 0.1 percentage points sequentially). The firm is optimistic about AI empowering the platform's development and the growth driven by the launch of new games. It maintains its forecast for net profit attributable to the parent company for 2026-2028 at RMB 1.574 billion, RMB 2.486 billion, and RMB 3.307 billion, respectively. Based on the current stock price, the corresponding P/E ratios are 32.0x, 20.3x, and 15.3x, supporting a continued "Buy" rating. The main points are as follows:
Performance continues its high growth trajectory. The firm is optimistic about AI empowering the platform, with new game launches driving growth. In Q1 2026, the company achieved revenue of RMB 7.472 billion (up 7% year-on-year) and net profit attributable to the parent company of RMB 210 million (turning a profit year-on-year). Adjusted net profit was RMB 585 million (up 62% year-on-year). Value-added service revenue in Q1 2026 was RMB 2.912 billion (up 4% year-on-year), primarily due to increased revenue from services like premium membership. Advertising revenue reached RMB 2.589 billion (up 30% year-on-year), mainly driven by improved ad product supply and efficiency, with AI-related ad spend growing over 170% year-on-year. Mobile game revenue was RMB 1.523 billion, influenced by a high base in 2025 from the game "Three Kingdoms: Strategic Conquest" (abbreviated as "San Mou"). IP derivative and other revenue amounted to RMB 448 million.
Established games remain stable. Three new games, implementing a strategy focused on leading verticals and younger demographics, are set for launch and expected to drive growth. Titles like "FGO" and "Azur Lane" show resilient performance, while "San Mou" remains sequentially stable. A new game mode launched on April 18th lifted its ranking on the mainland iOS game bestseller chart to No. 5. The firm is optimistic that anniversary events on June 6th will re-engage players and significantly boost revenue. The game pipeline is robust. "Escape from Yakovo" has sold over 4 million copies, with console and mobile versions under development. The high-DAU potential game "Three Kingdoms: Hundred Generals Card" conducted a soft launch in April, meeting company expectations, with a formal launch planned for July. The self-developed mobile game "Shine! Lumie" is the industry's first product combining pet-catching with casual gameplay, targeting a global launch in Q4 2026, aiming to capture opportunities in the pet-catching genre. The Three Kingdoms SLG "Romance of the Three Kingdoms: The King's Way" has obtained the "Romance of the Three Kingdoms" IP license, targeting quality-focused, slightly older players, complementing "San Mou," and is planned for launch within 2026.
AI empowers platform development. Increased AI investment is expected to accelerate the platform's flywheel effect. On the user side, Q1 average daily active users (DAU) and monthly active users (MAU) were 115 million and 376 million, respectively (up 8% and 2% year-on-year). Average daily user time reached a record high of 119 minutes, with total user time growing 19% year-on-year. On the creator side, the average number of daily active UP主 and daily submissions increased by 6% and 19% year-on-year in Q1, respectively. Average revenue per UP主 grew 24% year-on-year. AIGC tools are lowering the barriers for creators and advertisers in content creation and ad placement. With algorithm optimization, the click-to-conversion rate (CTCVR) for performance ads increased 25% year-on-year in Q1. Operational metrics like DAU and user time initially reflect the effectiveness of AI investments. The company expects AI-related capital expenditures to increase by approximately RMB 1 billion in 2026. The firm is optimistic that increased AI investment will accelerate the "content creation-distribution-commercialization" flywheel.
Risk factors include the potential for game lifecycles or revenue to fall short of expectations and advertising revenue growth not meeting forecasts.
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