China Merchants Securities: BILIBILI-W 1Q26 Revenue In Line; Net Profit Beats

China Merchants Securities released a report stating that BILIBILI-W (09626.HK) -9.000 (-6.052%) Short selling $469.33M; Ratio 43.650% , also known as Bilibili, reported 1Q26 revenue in line with expectations, while net profit beat forecasts. Total revenue was RMB7.47 billion, up 7% YoY, meeting expectations. Advertising/value-added services (VAS)/gaming revenue increased 30%/4% YoY and declined 12% YoY, respectively. Advertising revenue exceeded expectations by 3%, marking the 13th consecutive quarter of double-digit growth. VAS was 1% below expectations. Gaming revenue declined due to a high base from last years title San Mou, but was in line with market expectations. Gross margin reached 37.1%, up 0.9 ppts YoY, meeting expectations. Non-GAAP operating profit was RMB524 million, up 53% YoY, beating expectations by 1%. Non-GAAP net profit was RMB593 million, up 63% YoY, exceeding expectations by 11%, mainly driven by operating leverage and better-than-expected expense optimization. Non-GAAP net margin expanded 2.8 ppts YoY to 7.9%.

In 1Q26, daily active users reached 115.2 million, up 8% YoY. Monthly active users increased 2% YoY to 376 million. Average daily usage time rose to 119 minutes, up 10% YoY and 11% QoQ. Management noted that mid- to long-form video viewing time grew significantly faster than short-form video. The supply of mid- to long-form content is considered best-in-class within the industry, while video podcasts recorded growth of over 200% YoY. AI tools have begun to amplify the value of the content ecosystem. Full-year AI capital expenditure is approximately RMB1 billion, mainly allocated to video distribution and content creation tools. Management emphasized that further investment will depend on achieving positive returns, with incremental AI spending partially offset by operating expense savings. Full-year profit is expected to maintain healthy growth.

For advertising, the broker expects Bilibilis ad revenue to sustain high growth of 25% to 30%, significantly outpacing the industry average. In gaming, the second-half pipeline is strong. Three Kingdoms: Baijiang Card is expected to launch in July, featuring hero-plus-card competitive gameplay, with potential to become a long-lasting title with high daily active users. Shining LUMI is scheduled for global launch in 4Q, combining pet and casual gameplay. Three Kingdoms: Royal Path is expected to launch in 4Q, featuring officially licensed IP and 3D graphics, targeting relatively older, quality-focused players with a more traditional high-end positioning, forming clear differentiation and complementarity with San Mou. In addition, management highlighted that PC game Escape from Duckov has surpassed 4 million copies sold, with mobile and console versions under development.

The broker maintained its Overweight rating and USD25 TP on Bilibili Inc. (BILI.US) . The company repurchased USD60.3 million worth of shares during the quarter. The USD200 million buyback program approved in November 2024 is nearly fully utilized, and management expects to announce a new repurchase plan in the future. The broker remains optimistic about earnings growth driven by accelerated advertising monetization and operating leverage, while AI investment is expected to enhance the value of Bilibilis content ecosystem and support stronger commercial revenue growth. (ha/da)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-05-20 16:25.) (Real-time Streaming US Stocks Quote; Except All OTC quotes are at least 15 minutes delayed.)