BILI: Ads holding up; the platform is in a tough patch---

After HK market close on Mar 5 (Beijing time), $Bilibili(BILI.US) reported Q4 FY2025 results. Ads were the standout, while other segments were broadly in line.

In detail: Key takeaways below.

1. Ads: strong growth with runway: Q4 ad revenue grew 27% YoY, slightly beating the Street. The drivers include healthy ecosystem expansion (users and creator content both growing), deliberate execution (higher ad load, better ad efficiency, AIGC ad tools), and tailwinds from content formats like short dramas, mini-games, and AI that fit Bilibili’s user profiling.

At the year-start AD Talk marketing conference, management outlined 2026 commercialization moves — unlocking inventory and launching automated marketing tools. We expect high ad growth to persist in the near to mid term.

2. User expansion: less of a surprise: Q4 MAU fell by 10 mn QoQ due to seasonality, while engagement improved YoY (DAU/MAU and Avg. daily time). The MAU drop was expected for the off-season, but as a metric that stood out last year, Q4 did not break the seasonal pattern, so the surprise factor was limited.

QM data show total user time in Jan slowed slightly vs. Q4 but remains solid versus peers. Excluding ByteDance and Xiaohongshu in their high-growth phases, Bilibili is among the few top platforms still near double-digit growth.

2. Games: decline easing, recovery in sight: Q4 declined 14% YoY on a tough comp from 'Three Schemes,' with the drop moderating. 'The Legend of Three Kingdoms: Hundred Generals' is slated for late Q1, so Q1 game revenue remains under pressure. Per the pipeline, H2 will be richer, and with a low base, growth should visibly re-accelerate.

Deferred revenue was up 23% YoY at Q4-end, also slightly higher QoQ — atypical for an off-season. Combining VAS and games as total content spend, Q4 gross billings rose 7% QoQ. With VAS soft and premium subscriptions down QoQ (long-form video is weak industry-wide), beyond possibly more paid video, the increase mainly reflects games.

This includes the Oct launch of the PC title 'Escape from Yakov,' and existing titles appear not to be deteriorating further. Once 'Hundred Generals' launches by end-Q1, the boost to Q2 game revenue should be clear.

3. Live-streaming and premium subs: lackluster: VAS growth remained modest at +5.8% YoY. Premium memberships, resilient in Q3, weakened this quarter, down 50k QoQ. Small in magnitude, but it breaks the uptrend — typical for long-form video. Outside premium, live-streaming likely dragged more than fan economy.

QM indicates iQIYI/Youku/Tencent Video saw free-fall in total watch-time in Q4, as fewer hit shows and films coincided with competition from short videos, short dramas, and AI comics. Bilibili’s premium subs look better versus peers thanks to curated licensing tailored to core user preferences.

4. Efficiency gains as expected: Profit modestly beat on stronger ads. GPM improved naturally on mix, and operating efficiency kept trending better, with the three opex lines down YoY in absolute terms and ratio lower QoQ.

Adj. net profit reached RMB 880 mn, with a margin of 10.6%, up 40 bps QoQ, notably slower vs. Q3’s step-up. Relative to the 10–15% mid-term margin target, further ad commercialization plus the H2 game cycle should re-accelerate profit improvement.

5. More short-term debt due, but ample cash flow: Q4 net cash (cash, deposits and ST investments minus ST debt) was RMB 19.3 bn, down RMB 2.6 bn QoQ, mainly as ~RMB 2.2 bn of LT debt moved into ST due within a year.

Under the $200 mn 2-year buyback authorized at end-2024, less than $70 mn remains, tracking ahead of schedule. In Q4, Bilibili repurchased 0.6 mn shares for $14.7 mn, down from $16 mn in Q3, as buybacks were moderated amid a rising market cap. With nearly RMB 20 bn cash and estimated quarterly FCF in the low-teens RMB bn, the company can support a long-term buyback.

6. Key metrics

Dolphin Research Viewpoint See our take below.

Until self-developed/exclusive game pipeline momentum returns, we expect limited change in reported trends: steady ad load and ROI on the top line, and margin aided by mix and operational efficiency. This trajectory is largely internal execution rather than competitive dynamics, so actual results vs. company preview should be close.

Since last year, improving user ecosystem metrics have been evident across several quarters, supporting our constructive medium-to-long-term view. While ByteDance’s time share keeps surging on AI, and Xiaohongshu remains strong, Bilibili is one of the few incumbents with positive watch-time growth.

Drivers likely include better content search and recommendation algorithms, and stronger incentives for high-quality creators as monetization for UPs has matured. A healthy ecosystem provides a floor during a game pipeline vacuum, preventing a downward spiral of performance.

We reiterate last quarter’s stance: before the game pipeline monetizes (H2 2026), Bilibili is more likely to oscillate around a neutral valuation range, with liquidity and near-term policy shifts amplifying sentiment up or down.

Given Q4’s slight beat, we raise profit estimates by 13% (rev. +3%; margin from 10% to 11%). Our updated neutral valuation is higher than Q3’s $10.5–14.0 bn range, but varies with sentiment:

(1) If China ADR sentiment stays as is, a 15x Adj. P/E on a 15% long-term margin yields ~$11.0 bn (above peers’ ~13x to reflect growth).

(2) If sentiment turns positive, we apply PEG-style multiples. On a 25–30% EPS CAGR over three years, 25–30x Adj. P/E implies $13.0–16.0 bn.

Recent geopolitical frictions lifted systemic risk and pulled China ADRs lower; Bilibili is down 25% from the peak to ~$11.6 bn, roughly at neutral valuation under current sentiment. China ADRs face compressed multiples broadly, and within that cohort Bilibili has limited relative re-rating room near term, but no premium baked in either.

If sentiment recovers, Bilibili’s valuation elasticity is higher, with 12–38% upside, especially into Q2 as the game pipeline nears and participation increases.

If geopolitical risk escalates further (though near-term deterioration looks less likely), then at 15x on 2026E profit the stock would be ~$8.5 bn (27% downside), which we see as a conservative floor with improving risk-reward as it approaches.

Detailed analysis follows See below.

I. User ecosystem healthy; expansion pace less surprising

Q4 is seasonally soft for pan-entertainment; MAU fell by 10 mn QoQ. Engagement improved YoY, with DAU/MAU up to 30.9%, and Avg. daily time hitting a record 107 minutes (+8 minutes YoY).

QuestMobile shows Jan total viewing time up ~9% YoY, with slight QoQ deceleration. Outside ByteDance and Xiaohongshu, Bilibili remains among the few leading platforms with positive growth.

II. Ads: acceleration is the highlight

Q4 ad revenue was RMB 3.04 bn, up 27% YoY, with accelerating growth slightly above expectations. Ads benefited from longer user time (+19% YoY, also accelerating) and higher ad load, plus algorithm optimization and AIGC ad tools.

At the early-year marketing conference, the company flagged continued ad inventory expansion in 2026 and a one-stop ad delivery platform. With ad load still having room and the base not large vs. peers, Bilibili should continue to enjoy high growth in the near term.

III. Games: decline moderating; recovery ahead

Q4 game revenue remained pressured by a tough comp and a pipeline gap, down 14% YoY, slightly better than expected.

Deferred revenue looks to have bottomed, up 5% QoQ and +23% YoY with faster growth. Combining games and VAS as paid content, total gross billings rose ~10% YoY. With weak live-streaming and premium subs, and a small fan-economy base, Q4 game performance was not bad.

This includes Oct’s hit PC release 'Escape from Yakov,' which is mostly buy-to-play at a low price, contributing little to deferred revenue. It suggests existing titles’ attrition is easing, and as new releases roll in, game revenue should keep warming.

Pipeline outlook: Plans include overseas distribution of 'Three Schemes' (HKT end-year; JP/KR in Q2 next year), the anime-style mobile title 'Trick RE:VIVE' (global launch in H2), and 'The Legend of Three Kingdoms: Hundred Generals' in late Q1. 'Escape from Yakov' mobile and console versions just restarted development, with no timeline.

IV. VAS: live-streaming and long-form video both soft

VAS (mainly live-streaming plus premium subs) grew 5.8% YoY in Q4, with further deceleration.

Premium subs fell by 50k QoQ to 25.35 mn, likely after a Q3 spike. Industry-wide long-form video is struggling (QM shows sharp Q4 time declines for iQIYI/Youku/Tencent Video), hit by short videos, short dramas, and AI comics.

Outside premium, live-streaming likely accounts for most of the drag.

V. Profitability: margin improving, but at a slower pace

Core OP (GP minus opex) reached RMB 500 mn with a 6% margin. Adj. net profit was RMB 880 mn (main adjustment: SBC at 3.6% of revenue), with a 10% margin; both cost and opex improved.

1) GPM inching up

GPM gains are driven by sustained high-growth ads. On cost mix, revenue-sharing is the largest component (~40%), tied to games, live-streaming, and Huahuo ads. Q4 revenue-sharing cost rose to RMB 3.4 bn (+8% YoY), likely reflecting paid video and Huahuo ads.

2) Selling expenses down again

With no major new games this quarter (vs. last year’s 'Three Schemes'), selling expenses fell 9%, with the ratio down 240 bps YoY. R&D and G&A were flat to slightly up, but lagged revenue growth, so overall opex ratio contracted modestly.

On monetization efficiency (revenue vs. acquisition/maintenance costs), ad acceleration lifted coverage QoQ. Given management’s strategy at the marketing conference, ads should remain the primary monetization driver and efficiency should continue to improve.

Dolphin Research on 'Bilibili': archive

Earnings season (recent)

Nov 15, 2025 call recap 'Bilibili (Trans): Content pay is a key growth driver ahead'

Nov 15, 2025 earnings take 'Bilibili: Can the platform enter a second growth phase?'

Aug 21, 2025 call recap 'Bilibili (Trans): Reiterating 15–20% long-term OP margin target'

Aug 21, 2025 earnings take 'Bilibili: After the 'Three Schemes' boom, what's next?'

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