Bilibili (BILI) Q2 2026 earnings review
Profitability Shines as Ads Carry the Weight of a Shrinking Games Segment
Bilibili delivered its 16th consecutive quarter of margin expansion, pushing Net Profit up 55% YoY. However, the story is a tale of two vastly different segments: Advertising is surging (+28% YoY) on the back of AI-driven efficiency, while the once-dominant Mobile Games segment is bleeding (-14% YoY). As a result, total revenue grew a modest 8%. Management is proving they can squeeze blood from a stone through disciplined cost control, but top-line momentum remains hostage to a struggling gaming pipeline.
🐂 Bull Case
Ad revenues jumped 28% to RMB3.13B, outpacing total revenue growth by 20 percentage points. The AI-driven matching algorithms are successfully converting the platform's high-engagement users into premium ad dollars.
Gross margin hit 37.2%, marking the 16th consecutive quarter of improvement. Adjusted net profit increased 25% YoY to RMB703.6M, proving the business model has true operational leverage.
🐻 Bear Case
Mobile games fell 14% YoY to RMB1.39B. Despite management citing a 'high base effect' from an older title, this is the fourth consecutive quarter of double-digit contraction. The pipeline is failing to replace lost revenue.
Overall revenue growth slowed to 8% YoY. If advertising growth normalizes, the lack of growth in VAS (+5%) and the contraction in Games (-14%) will drag the company into stagnation.
⚖️ Verdict: ⚪
Neutral. Management is executing brilliantly on cost control and advertising monetization, but you cannot shrink your way to long-term prosperity. Until the gaming segment stabilizes, top-line upside is severely capped.
Key Themes
Advertising Engine is Firing on All Cylinders
Advertising revenue reached RMB3.13 billion, up 28% YoY, and now accounts for nearly 40% of total revenue. Management's investments in AI algorithms to improve ad efficiency and product offerings are clearly paying off, allowing Bilibili to capture more budget from advertisers seeking high-conversion formats.
The Gaming Segment is in Structural Decline
Management continues to describe the quarter as 'solid,' but the data shows a glaring contradiction: Mobile games revenue fell 14% YoY to RMB1.39B. Management blamed the 'exceptional performance' of San Guo in the prior year, but relying on a single older title to explain persistent double-digit declines (Q3: -17%, Q4: -14%, Q1: -12%, Q2: -14%) masks a deeper failure in the current game development and publishing pipeline.
Relentless Margin Expansion
Bilibili's gross profit grew 10% YoY, outpacing revenue growth. Gross margin improved to 37.2% from 36.5% a year ago. By holding General and Administrative expenses entirely flat YoY, the company allowed incremental gross profit to drop straight to the bottom line, driving a 55% YoY surge in GAAP Net Profit.
R&D Cost Creep Driven by AI
While most operating expenses were kept in check, Research and Development expenses spiked 16% YoY to RMB1.01 billion. Management explicitly attributed this to 'higher expenses related to server depreciation.' This indicates heavy capital expenditure into AI infrastructure. Investors must monitor whether the ROI on this AI spend continues to outpace the heavy depreciation costs hitting the P&L.
Deepening User Engagement in the Attention Economy
In a macro environment where 'content is abundant yet attention is scarce,' Bilibili is winning the attention war. Average daily active users (DAUs) grew 7% to 116.5 million, and average daily time spent reached 113 minutes. Total user time spent jumped 14% YoY. This sticky, high-intent user base is the foundation that enables the advertising segment's outperformance.
Top-Line Deceleration
Total revenue grew only 8% YoY. This is a significant deceleration from the 20% growth seen in the same quarter last year. With Value-Added Services (VAS) growth slowing to a crawl (+5% YoY) and games contracting, Bilibili is dangerously reliant on a single pillar (Advertising) to keep the company growing.
Other KPIs
Accelerating. Up 25% YoY from RMB 562.0 million in 25Q2. The adjusted net profit margin improved to 8.9% from 7.6% a year ago, proving that the core business is highly scalable once marketing and administrative costs are right-sized.
Decelerating. Growth slowed to just 5% YoY, down from 11% YoY growth in 25Q2. While premium memberships are stable, the easy gains from converting free users to paid subscribers appear to be largely exhausted.
Stable. The company maintains a fortress balance sheet with roughly US$3.58 billion in liquidity, providing ample runway to fund its US$300 million share repurchase program and AI capital expenditures without issuing new debt.
Guidance
Accelerating return of capital. Following the completion of the previous US$200 million program, the Board approved a new two-year US$300 million program in June 2026. As of June 30, US$31.3 million has already been deployed. This signals strong management confidence in free cash flow generation.
Reversing visibility. The company completely omitted forward-looking quantitative revenue guidance in this release, shifting to qualitative statements about remaining 'disciplined in investments.' This lack of top-line visibility is a concern given the deceleration in the Games and VAS segments.
Key Questions
Gaming Pipeline Visibility
With mobile games revenue contracting for four consecutive quarters, what specific new titles in the H2 2026 pipeline do you expect to finally break this trend, and when will they launch?
AI Capex ROI
R&D expenses spiked 16% this quarter due to server depreciation for AI. Can you quantify the direct revenue lift generated by these AI investments versus the heavy fixed costs hitting the P&L?
VAS Saturation
Value-Added Services growth has decelerated to just 5% YoY. Are we reaching a saturation point for premium memberships, and what new monetization levers can you pull to re-accelerate this segment?