Bilibili (BILI) Q2 2025 Earnings Call Transcript

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DATE

Thursday, August 21, 2025 at 8 a.m. ET

CALL PARTICIPANTS

Chief Executive Officer — Rui Chen

Chief Financial Officer — Sam Fan

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TAKEAWAYS

Total net revenues-- Total net revenues were RMB 7.3 billion in the second quarter, up 20% year over year, with games and advertising as the main growth drivers.

Games revenue-- Increased 60% year over year to RMB 1.6 billion, propelled by new seasons of the SLG title and celebration events.

Advertising revenue-- Grew 20% year over year to RMB 2.4 billion, supported by AI integration, enhanced ad infrastructure, and an increased advertiser base.

Value-added services (VAS) revenue-- Rose 11% year over year to RMB 2.8 billion, led by live broadcasting, premium memberships, and fan-charging programs.

Gross profit-- Grew 46% year over year to RMB 2.7 billion, with gross margin expanding to 36.5%, up from 29.9% in the same period last year.

GAAP net profit-- GAAP net profit was RMB 218 million, compared with a net loss in the same period last year.

Adjusted net profit-- Adjusted net profit was RMB 561 million, shifting from an adjusted net loss ratio of 4.4% in the second quarter of 2024 to an adjusted net profit ratio of 7.6%.

Operating expenses-- Operating expenses were RMB 2.4 billion, remaining stable in absolute terms versus the prior year, with R&D expenses declining 3% year over year.

Operating profit-- Operating profit (GAAP) was RMB 252 million. Adjusted operating profit was RMB 573 million, both reversing a loss in the prior-year period.

Daily active users (DAUs)-- Reached 109 million, up 7% year over year.

Monthly active users (MAUs)-- Grew 8% year over year to 363 million, with average daily time spent increasing by six minutes to 105 minutes.

Monthly paying users-- Increased 9% year over year to 31 million, driven by memberships, fan charging, and live broadcasting.

Premium memberships-- Premium memberships totaled 23.7 million as of the second quarter, with over 80% on annual or auto-renewal plans.

Cash and equivalents-- RMB 22.3 billion (USD 3.1 billion) as of June 30, 2025.

Operating cash flow-- Operating cash flow was approximately RMB 2 billion.

Share buyback-- Repurchased approximately 5.6 million shares for HKD 783 million (USD 100 million), with 6.4 million shares repurchased to date under the approved USD 200 million plan as of June 30, 2025; USD 84 million remains available for future buybacks as of June 30, 2025.

AI-driven results-- AI integration contributed to a more than 10% year-over-year increase in eCPM and a 30% year-over-year rise in performance-based ad revenue, while AI-generated ad covers accounted for over 30% of all covers.

Community engagement-- The number of official members rose 11% year over year to 270 million, with a twelve-month retention rate remaining around 80%.

Offline events-- Bilibili World and Bilibili MacroLink attracted over 400,000 participants, up 60% year over year, establishing status as a leading offline animation expo in China.

Game pipeline-- Four to five new games await licensing approval, including ACG and casual games, with planned international expansion for Samo into Hong Kong, Macau, Taiwan, and overseas markets.

Gross margin outlook-- Management targets a 37% gross margin by the fourth quarter and maintains a midterm gross profit margin target of 40%-45%.

Operating margin outlook-- Aims for a 10% adjusted operating margin in the fourth quarter and a midterm target of 15%-20% operating margin.

AI product launches-- Planned release of tools for human-like mid- and long-form AI-assisted video creation and virtual idol companionship.

June 18 ecommerce performance-- Advertisers during the June 18 campaign increased 60% year over year; GMV climbed over 33% year over year during the June 18 campaign; creators exceeding RMB 10 million GMV grew over 60% year over year during the June 18 campaign; digital appliance GMV grew over 50% during the season, household GMV was up 85% year over year during the June 18 campaign, and categories like maternal care and watches grew over 60% year over year.

SUMMARY

Management highlighted high-margin growth in games and advertising while reportingBilibili(NASDAQ:BILI) credited AI technology for enhanced ad delivery, creative generation, and content recommendations, resulting in higher advertiser demand and performance. The company underscored sustained user engagement and community expansion, with notable increases in both user base and content consumption duration. Bilibili detailed the success of premium memberships, live broadcasting, and the expanding influence of its Gen Z plus audience, both online and at record-setting offline events. The company reaffirmed commitment to shareholder returns with continued share repurchases and plans for global gaming expansion, supported by a robust cash position and scalable operational model.

CEO Chen emphasized, "For example, advertising revenue grew 20% year over year. And Carly mentioned AI has played an important role behind that number," integrating AIGC tools to scale high-performing ad content and recommending technology to personalize user experiences.

Bilibili established its brand as a cultural lifestyle, evidenced by Bilibili World in 2025 drawing a diverse audience, including 11% with foreign passports, further reinforcing its offline IP influence.

CFO Fan confirmed, "Gross margin (GAAP) has increased sequentially for 12 quarters through [the second quarter of] 2025," and outlined a pathway to reach midterm profitability targets through disciplined OpEx and leveraging operating scale.

Management plans to broaden verticals through AI-driven innovation, including deeper algorithmic targeting, new ad developer products, and expansion into live streaming, search, and trending topics.

INDUSTRY GLOSSARY

SLG: Simulation/Strategy game genre focused on tactical and resource management gameplay.

PUGV: Professional User Generated Video; high-quality user-produced video content distinct from short-form or standard UGC.

ACG: Anime, Comic, and Games; a content vertical popular with Gen Z audiences and central to Bilibili's platform strategy.

AIGC: AI-Generated Content; digital media or advertising materials created with artificial intelligence tools.

ECPM: Effective Cost Per Mille; advertising industry metric measuring revenue per thousand ad impressions.

GMV: Gross Merchandise Value; total value of merchandise sold through a platform within a set period.

Full Conference Call Transcript

Rui Chen: Thank you, Juliet. And thank you to everyone for joining us today to discuss our 2025 second quarter results. We maintained strong momentum in the second quarter, delivering solid revenue growth alongside our thriving community of high-value, loyal young users. Total net revenues for the second quarter grew by 20% year over year to RMB 7.3 billion, driven by the continued strength of our core games and advertising businesses. Games revenues rose 60% year over year to RMB 1.6 billion, propelled by new seasons of our popular SLG title. Advertising revenues increased 20% year over year to RMB 2.4 billion, supported by greater AI integration that made our ads more efficient and effective.

Underpinned by operating efficiency, our growth in games and advertising drove a 46% year-over-year increase in gross profit, with gross margin expanding to 36.5% from 29.9% in the same period last year. As a result, we achieved GAAP net profit of RMB 218 million and adjusted net profit of RMB 561 million. Our performance reflects our growing influence among China's Gen Z plus audience. By providing users with high-quality content they love, we foster deeper engagement that fuels our commercial ecosystem. In the second quarter, BAUs reached a new high of 109 million, up 7% year over year, and MAUs grew by 8% to 363 million.

The average daily time spent rose to 105 minutes, up six minutes compared to the same period last year, reflecting our continued focus on high-quality videos that capture and hold our community's interest in meaningful and fulfilling content. Our growing influence among our core users is showing up both online and offline. This year's Bilibili World and Bilibili MacroLink drew in record crowds. Over 400,000 participants attended the three-day event, 60% more than last year, making it one of the largest offline animation expos in China. The strong turnout reflects the vitality of our brand and the power of our community, showing the tremendous potential of our young users.

Their tastes are already shaping mainstream trends, and countless more interests within our community are waiting to be unleashed. Looking ahead, we will sharpen our focus on delivering the best PUGV community experience, attracting more users and growing alongside them. At the same time, we will continue to proactively invest in monetization initiatives to drive sustainable profitability. Through these efforts, we are confident in our ability to create long-term value for all of our stakeholders. With that overview, let's take a closer look at our core pillars of content, community, and commercialization. Beginning with content and community, we remain firm believers that high-quality content and an engaging community are essential to the lives of today's young generation.

Gen Z plus comes to Bilibili Inc. not for quick hits, but for meaningful content they care about. And we are seeing that translate into stronger influence, longer watch time, and greater commercial potential across every corner of our platform. Driven by high-quality PUGV content, the average daily time spent reached 105 minutes in the second quarter, up six minutes year over year. Notably, the watch time for videos longer than five minutes increased nearly 20% year over year in Q2, proving Bilibili Inc.'s undeniable user mindshare to consume mid to long-form meaningful content. Not only are people spending more time, but more people are paying for premium content.

Monthly paying users increased by 9% year over year to 31 million, driven by membership, fan charging, and live broadcasting. In the meantime, our community remains engaged and loyal. The number of official members was up by 11% year over year to 270 million, with a twelve-month retention rate remaining around 80%. We maintained our dominant leadership in ACG content. Chinese anime content performed strongly during the second quarter, with watch time up 34% year over year, driven by popular titles such as A Record of Mortal's Journey to Immortality, The Tales of Hurting God, and Linkage Season Two.

Game content remained one of our top categories, with watch time increasing by 21% year over year, making Bilibili Inc. an essential platform for game developers to engage deeply with the gamer community and strengthen their IP. It is also no surprise that AI-related content continues to be a breakout category. Watch time grew 61% year over year, cementing Bilibili Inc.'s role as the go-to platform for Gen Z plus to learn, explore, and create with AI. Likewise, AI advertiser demand increased by about 150%, highlighting the great synergy between content value and commercial potential. Meanwhile, consumption-related content categories continue to grow, driven by evolving user behavior.

As our Gen Z plus users become more financially independent, they increasingly rely on peer creators for trusted reviews and tutorials when making purchase decisions. This has boosted engagement across verticals. Watch time for home appliance content rose 14% year over year, parenting and early education rose more than 50%, and travel and lodging saw an 11% increase, reflecting growing interest in experience-driven consumption. We continue to enhance our products and services to help creators make more money. In the first half of the year, about 2 million creators earned income on Bilibili Inc. through various channels.

Creators' total income from our fan charging program more than doubled in the first half of the year, once again showing users' increasing willingness to pay for quality content. The number of creators monetizing through Sparkle Ads and video and livestream ecommerce also grew 1949% year over year, respectively, in the first half of the year. Now let's talk about our commercial businesses and their progress. Our commercial growth demonstrates how our growing influence among younger users is directly translating into commercial value. Advertising is one of the most direct business lines that shows this. In the second quarter, our ad business grew 20% year over year, reaching RMB 2.4 billion and continuing to outpace the industry's average growth rate.

During the second quarter, we continued to advance our ad infrastructure, improving ad conversion efficiency through recommendation algorithms, creative generation, and smart ad placement. Through deeper LLM integration with multimodal content understanding, we are capturing user intent more precisely and delivering smarter, more personalized ad recommendations. The upgrades we have made to the AIGC tools are also helping advertisers generate high-performing creative apps at scale. In the second quarter, roughly 10% of new ad titles and over 30% of ad covers were created using these tools, helping advertisers reach users more effectively with content that resonates with their target audiences.

We also offer smart ad placement tools to allocate, sequence, and monitor ad performance in real-time, significantly reducing manual operations at the same ad spend. These enhancements are boosting both efficiency and scalability, improving ECPM by more than 10% year over year, and fueling around 30% year-over-year growth in performance-based advertising revenue in the second quarter. Revenues for brand and native advertising also maintained healthy momentum. Industry-wise, games, digital products, home appliances, ecommerce, Internet services, and automotive were our top five advertising verticals in the second quarter. The number of advertisers increased by over 20% year over year, reflecting our growing appeal to brands.

Leveraging our dominant user mindshare, game developers are allocating larger ad budgets to Bilibili Inc. to engage more deeply with young gamers. Demand for three C and digital products remained robust, supported by our leadership in these categories and national subsidy tailwinds. In ecommerce, Bilibili Inc. delivered an average new customer acquisition rate of about 60% for advertisers across industries under the SIMPLE plan during this year's 6.18 season. GMV from products priced above RMB 1,000 increased nearly 50% year over year, further demonstrating our users' strong purchasing power and our ability to convert user engagement into high-intent transactions.

Turning to our games business, in the second quarter, revenues increased by 60% year over year to RMB 1.6 billion, owing to Samo's enduring strength in its first year and evergreen titles, FGO and Azerlane, which recently celebrated their ninth and eighth anniversaries respectively. To mark Samo's first-year anniversary, we rolled out an upgraded season eight on May 31, featuring new gameplay, characters, and in-game events. Backed by a targeted marketing push, both engagement and retention have been solid as we enhanced onboarding, monetization path, and returning user experiences. Building on this strong momentum, we are developing new game seasons, piloting mini-program offerings, and preparing for Samo's international rollout later this year.

Looking at our game pipeline, we have a number of games in the approval process, including multiple ACG titles and casual games. Once approved, we are prepared to bring them to our community and further expand our presence in the gaming space. And finally, let's look at our VAS business. Revenues grew 11% year over year to RMB 2.8 billion, driven by steady momentum across live broadcasting, premium memberships, and other value-added services. Our focus remains on refining live broadcasting operations by fostering more quality content and diversifying monetization features to support steady growth. Through refined operation, gross profit margin for live broadcasting continued to improve in the second quarter.

Premium memberships maintained stable growth, reaching 23.7 million at the end of the period, with over 80% on annual or auto-renewal plans, demonstrating their loyalty and commitment to our platform. Meanwhile, our other VAS products continue to grow rapidly in the second quarter, especially our fan charging program, which increased by more than 100% year over year, with more users showing their support for the creators and high-quality content they love. Looking ahead, our focus remains on what sets Bilibili Inc. apart: high-quality content that resonates with China's Gen Z plus generation. This is the foundation of our growing influence and the engine behind our expanding commercial opportunities.

At the same time, we are actively embracing the transformative opportunities brought by AI, from enhancing operational efficiency to elevating user experience, accelerating monetization, and expanding our global reach. These advancements further strengthen our foundation for sustained growth and long-term profitability. With that, I will turn the call over to Sam to share more financial details.

Sam Fan: Thank you, Mr. Chen. Hello, everyone. This is Sam. In the interest of time on today's call, I will review our second quarter highlights. We encourage you to refer to our press release issued earlier today for a closer look at our results. In the second quarter, we continued to grow revenues, expand our margins, and grow our profitability, driven by growth across our commercial businesses, particularly in our high-margin advertising and games businesses. Total net revenues for the second quarter were RMB 7.3 billion, up 20% year over year. Our revenue breakdown for Q2 was approximately 39% from VAS, 33% from advertising, 22% from games, and 6% from our IP derivatives and other businesses.

Our cost of revenues increased by 9% year over year to RMB 4.7 billion in the second quarter, while our gross profit rose 46% year over year to RMB 2.7 billion. Our gross profit margin reached 36.5% in Q2, compared with 29.9% in the same period last year. Our expanding gross profit and margin show that our model is built to scale. Our total operating expenses were RMB 2.4 billion, remaining stable compared with the same period last year. S and M expenses increased 1% year over year to RMB 1 billion. G and A expenses were RMB 510 million, up 4% year over year.

R and D expenses were RMB 866 million, down 3% year over year, mainly related to R and D efficiency improvements. These efforts allowed us to maintain positive operating results. Our operating profit was RMB 252 million, and our adjusted operating profit was RMB 573 million, both compared with losses in Q2 2024. Adjusted operating profit margin reached 7.8% in the second quarter. Net profit was RMB 218 million, and adjusted net profit was RMB 561 million versus losses in the prior year period. Our adjusted net profit ratio in the second quarter was 7.6% compared with an adjusted net loss ratio of 4.4% in the same period a year ago.

Cash flow-wise, we generated about RMB 2 billion in operating cash flow in the second quarter. As of June 30, 2025, we had cash and cash equivalents, time deposits, and short-term investments of RMB 22.3 billion, or USD 3.1 billion. During the second quarter, we enhanced our shareholder return by repurchasing approximately 5.6 million Class Z ordinary shares, each equal to one ADS, for a total of 783 million Hong Kong dollars, or 100 million US dollars, as part of our ongoing share repurchase program. These shares have all been canceled as of the end of 2025.

Under our 200 million US dollar share repurchase program, approved by the board in November 2024, we have repurchased a total of 6.4 million shares so far, at a total cost of 116 million US dollars, leaving about 84 million US dollars available for future buybacks as of June 30, 2025. Thank you for your attention. We would now like to open the call to your questions.

Operator: Thank you. To ask a question, and wait for your name to be announced. To whisper your question, please press 1 and 1 again. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. The company will provide consecutive interpretation for management's statement during the Q and A session. Please note that English interpretation is for convenience purposes only. In the case of any discrepancy, management's statements in the original language will prevail. We will now take the first question from the line of Xueqing Zhang from CICC. Please go ahead.

Xueqing Zhang: Thank you for taking my question, and congratulations on the strong quarter. My question is about the user ecosystem. We have noticed that the company's DAU and MAU growth accelerated in the first half of this year, and the average daily time spent has also continued to increase. So what are the main drivers, and what is your outlook for the future? In addition, some are Bilibili Inc., etcetera, 400,000 solid participants. So what opportunities can we see for the 3BD community from BWS success? Thank you.

Rui Chen: Okay. In the past sixteen years, we have been focusing on providing the highest quality content and fostering a thriving, welcoming community culture. And under the current Internet environment, we think the high-quality content and supportive constructive community environment are what's in scarcity. In the current video landscape, I think there is an oversupply of video content. People are not lacking content to watch, but they are lacking high-quality content to watch. The same thing goes with the content, the feedback, the voice, from the netizens. There are plenty of voices across all apps. But what truly matters are those supportive resonating voices from welcoming friendly communities.

So that is what Bilibili Inc. will continue to focus on by curating the highest quality content and also fostering a welcoming community environment that allows people to connect over the same interest and resonate with each other. We believe that by mastering both high-quality content and the thriving community culture, users will naturally come. They will be drawn into this unique experience. In the second quarter, our DAU grew by 7%, and MAU grew by 8%. That is a result of us focusing on the quality content as well as a welcoming community environment. Just like the upgrade we see in lifestyle consumption, content consumption is also evolving.

And more importantly, the upgrade in content consumption, particularly in taste, is largely one way. Once someone receives and has watched high-quality content, it is very hard for them to go backwards. Over the past fifteen years, we have really established a strong presence in users' mind shares in categories like anime, games, and knowledge-based content. And there is still a lot of things we can do to further expand surrounding the user's interest network. In addition to that, we think there is more to be done beyond just PUGV, for example, podcasts, picture and text-based content, AI-based virtual companionship, there are lots of potentials and tremendous room for us to expand into.

So to summarize, we think that it is an integral part for high-quality content as well as a good and welcoming community environment that is actually self-sustaining and ever-evolving. For example, we think the high-quality content can attract those people who can truly appreciate this type of content. And the friendly, welcoming, supportive users continue to motivate us content creators to continuously create good content. That is why on Bilibili Inc., we have noticed that a talented content creator can be easily discovered by our users. And at the same time, they can quickly adapt and evolve into a larger, more influential content creator. And even for the same content, I can see everywhere.

But the number of interactions and the quality of that interaction is always the best on Bilibili Inc. And, also, for those high-quality content creators, their fan base, their stickiness, is the highest, the strongest on Bilibili Inc., and that is a well-established and common knowledge among the content creators in China. And that is why you see many high-quality content has been discovered on Bilibili Inc. platform. For example, a few years ago, the first PV of Blackness Recall was discovered by Bilibili Inc. user and quickly became viral and so influential across the Internet.

And also a few years ago, we co-produced the mini animation Nobody that was also discovered by Bilibili Inc. user and became viral popular recognizing Bilibili Inc.'s community. And now we are very glad to see that its big movie is now well, it is getting more even more wide recipients from the audience. And its box office has exceeded 1 billion RMB. And another example would be Flask yesterday at 4 AM. Black Lecon Black Blackness with Pine Pioneer premiered on Bilibili Inc. platform. In less than two days, its total video views have already exceeded 12 million.

And that is why you have seen many, many good content will be the most appreciative and be discovered by Bilibili Inc. users because we have established that environment that allows high-quality content to thrive. This year's Bilibili World has broken many records. We have attracted an audience from more than 20 countries and regions with over 400,000 people attending the events. Among them, 70% came from outside of Shanghai, and 11% of the tickets were purchased by foreign passport holders. And it is safe to say that Bilibili Inc. has become the largest ACG event in China, both in terms of scale and influence.

Even for the Shanghai City, it has invented the word of ACG consumption for Bilibili Inc. because the event drew a large number of young people to Shanghai, boosting local offline consumption and even becoming a new cultural landmark for the city. And at its core, it is a real-world reflection of Bilibili Inc.'s brand and community offline. People not only use Bilibili Inc.'s product, but they also come to offline events named after Bilibili Inc. This shows and reaffirms the influence of IP as well as our community. It is safe to say that Bilibili Inc.'s brand has become a part of the lifestyle of the young generation in China.

Operator: We will now take the next question from the line of Miranda Tsong from Bank of America Securities. Please go ahead.

Miranda Tsong: Thank you, management, for taking my question. My question is about the advertising business. So the second quarter ad business beat expectations again. Can management share what are the drivers? And looking ahead into the second half, what are the trends you are seeing for the industry? And what is your expectation about the company's business trend? And what kind of new products and technologies will you roll out? Thank you.

Rui Chen: In the second quarter, our advertising business maintained strong growth, outpacing the overall industry. Quarterly revenue reached a record high of RMB 2.4 billion, up 20% year over year. Speaking of the driver behind that growth, we continue to focus on the one horizontal and vertical strategy. In this quarter, we continued to strengthen our ad infrastructure product, and technology efficiency allowed us to further unleash our users' value and traffic value. Of the following three points, will support that. One is during the quarter, we further enhanced our integrated campaign combining feeding and conversion.

In the second quarter, over 50% of the Sparkle app also leveraged our Tuesday program, which is the topic acquisition program we have in our app system. Number two is that we continue to strengthen our marketing data infrastructure, leveraging the multimodal large model to significantly improve our ad delivery efficiency. The last thing is we continue to optimize the deep conversion capabilities. The share of deep conversion doubled in the second quarter year over year, and there is still room for us to improve. And that directly leads to an uplift in our overall ad eCPM.

And from an industry standpoint, in the second quarter, our top five advertisers' verticals saw a slight change, which are games, digital products, home appliances, ecommerce, online services, and automotive. And the number of advertisers increased over 20% year over year in the second quarter. Looking at more details, games remain our largest vertical. We continue to leverage our high-quality full-chain conversion capability, we further strengthened our market share in premium game advertising while expanding to new scenarios such as Bilibili Inc. mini-games and game live streaming, creating incremental revenue opportunities. And professional reviews from our professional content creators and in-depth content from those creators continue to attract advertisers to target the young consumers.

In the second quarter, home decorations ad revenue grew nearly 70% year over year. So we will continue to deepen our vertical marketing solutions while consolidating our leadership in key industries. At the same time, we are looking to expand into broader consumer categories. I wanted to add some June 18 data for your reference. First of all, we continue to press on our open lead strategy and attract more advertisers to come to Bilibili Inc. and see us as a must-invest platform during major sell seasons. The number of advertisers during the June 18 campaign increased 60% year over year, and the engagement between creators and consumers continued to rise.

During the June 18 campaign, the total GMV grew over 33% year over year, and the number of creators exceeding RMB 10 million GMV grew over 60% year over year. And here are some data points to show the consumer's trend on Bilibili Inc. Digital appliance grew over 50% during the season. Household up 85%, even for categories such as maternity and child care, food and beverage, and even watches, all grew over 60% year over year, showing Bilibili Inc.'s users' strong consumption power as they grow with the platform. For the second half outlook, there are two points we invite you to take a closer look at.

One is a broader application and linkage of products and technologies across multiple endpoints and scenarios, including but not limited to PC, OTT, store mode, live streaming, search, and trending topics. And any scenario that we can link the consumer with the advertiser, we will be putting more effort into. The second point will be on AI. We believe that AI will continue to drive improvement not only on efficiency but also delivering actual advertising revenue. One thing is that we will continue to implement ongoing iteration of our recommendation algorithm, enabling deeper content understanding and more precise app targeting based on our user interest and historical behavior.

Another point would be the AIGC advertising tools to help our advertisers to generate covers and titles or even content tailored to Bilibili Inc.'s users' language and creative style at scale. Currently, about 30% of the ad covers are AI-generated, and there will be more room for us to push the number forward. And lastly is on AI-powered automated ad developer products. We will be launching more of those products to improve our advertisers' cost control capability as well as scaling capabilities. From an industry vertical standpoint, in the near term, we think the advertisers' budgets are migrating from multiple platforms to a few core platforms. Platforms that are indispensable and unique will capture larger shares of the client budget.

And in the longer term, as China's consumer market evolves, advertisers will be placing more emphasis on building their brand on top of the Pure Self conversion budget. Because no advertiser can afford to ignore the influence and purchasing power of young people. And on that aspect, we believe Bilibili Inc. is in a very unique position. So in summary, whether in the long term or short term, as long as our community continues to thrive, the value of Bilibili Inc.'s advertising business will become increasingly evident over time. We remain confident in our ability to sustain the growth above the industry average. Thank you. Operator, next question, please.

Operator: We will now take the next question from the line of Felix Liu from UBS.

Felix Liu: Thank you, management, for taking my question. My question is on the game business. Can management share any color on the recently concluded Samo first anniversary season eight? How should we think about the second half trend for Samo as well as for next year? And on your new game pipeline, what are the key games you would like to highlight? Thank you.

Rui Chen: On June 13, Samo celebrated its first anniversary, and during that season, the DAU broke a new record within the year of 2025. The achievement of Samo on its first anniversary truly demonstrates that the game has established itself and laid a foundation to become a long-lasting title. We are confident that Samo will become a lifestyle with a life cycle of over five years and continue to contribute solid game revenue for us. During the season eight and anniversary celebration event, we have launched multiple new monetization tools such as the limited edition skins, which were well received by our users.

We believe, for example, the skin sales during the anniversary have met our expectations and show that we have explored a new monetization tool that is even more healthy and sustainable compared to other tools. Going forward, we will have the new card monetization combining with this skin, as well as new innovative monetization models that will help us to make Samo even more sustainable and healthy. The most important thing for us is to focus on making every game season the best game season. As long as we continue to provide that experience, we think the users will naturally stay and continue to play with this game.

On the one hand, we think the overall development capacity for Samo has improved quite a lot, and each new game season will be featuring richer content. Moving forward, we will continue to optimize the gameplay, make it more fun, more balanced, and make the game even more engaging. On top of the new user acquisition going forward, we will be putting more emphasis on retaining and activating the old users because this game has sustained eight game seasons, and there will be a lot of old users or dormant users. It is very important for us to activate and awaken those existing users who have played Samo but have left the game for some reason.

This will be a very important channel for us to maintain a healthy game community. So as far as we see so far, the user retention rate has been maintained at a very healthy level. We are expecting to launch the traditional Chinese version of Samo at the end of this year or early next year to the players in Hong Kong, Macau, and Taiwan. And we are also going to explore full potential release in overseas markets such as Japan and Korea. Looking at our pipeline, we currently have four to five games that are waiting for licensing approval. And once the approval is obtained, the game will be released accordingly.

In the short term, we will be expecting to release a casual game based on nonfungible IP, which I believe is quite fun and entertaining to look forward to. And going forward, we will continue to focus on the strategy of creating games, reinventing games, for the new generation of gamers, and we will be exploring new game genres and making innovations across different genres. There are a number of potential categories in our pipeline, and we are quite looking forward to them.

Operator: We will now take the next question from the line of Lincoln Kong from Goldman Sachs. Please go ahead.

Lincoln Kong: Thank you, management, for taking my questions. So my question is about our profit margin. We have seen our group profit margin continue to trend high. So what are the potential areas of our cost efficiency and cost discipline going forward? How should we think about the second half in terms of our profitability outlook? And any timeline to achieve our mid-year target of 15% above operating margin? And in terms of the use of cash, what are the future areas of our capital allocation? How should we think about our return policy? Thank you.

Sam Fan: Thank you, Lincoln. This is Sam. I will take your question. In Q2, our top line grew by 20%. Our gross profit increased by 46%. So we saw very strong operating leverage here. Our gross margin has been increased sequentially for 12 quarters. We expect the same trend to continue in the 37% by Q4, let's say. So we still maintain our midterm gross profit margin target of 40% to 45%. And for the OpEx, we have continued to improve our efficiency of the operation. So if you look at the absolute dollar amount of our OpEx in the first half of this year, it's pretty flat year over year.

So we expect to achieve the year-over-year decline of the OpEx in the second half because in the second half of last year, we had more marketing spending on Samo, right, at the first two quarters. So for the probability, over the past two years, our gross profit margin grew very well. And our operating profit has grown even faster, outpacing our gross margin improvement. In Q2, the OP margin was 7.8%. So we are confident that we can achieve quarter-over-quarter improvement to achieve a 10% adjusted operating margin in Q4 this year. So, again, we maintain our midterm target of 15% to 20% for our OP margin.

And regarding the cash usage, to enhance our shareholder returns, we already repurchased 100 million US dollar shares in our Hong Kong line in Q2, and then we have canceled all those shares. So under the current 200 million buyback program, we still have 83 million remaining available. As we have sufficient US dollar cash reserve offshore, the repurchase will continue based on the market condition. So thank you for your question.

Operator: We will now take the next question from the line of Yiwen Zhang from China Renaissance. Please go ahead.

Yiwen Zhang: Thank you for taking my question. So my question is about AI. Can you discuss what kind of AI application we have on the platform? And what is the latest progress? Thank you.

Rui Chen: As a matter of fact, the AI application or adoption across multiple scenarios from Bilibili Inc. has already started to generate value. For example, the advertising revenue grew by 20% year over year. And Carly mentioned AI has played an important role behind that number. For example, the AIGC cover title generation has meaningfully improved the click-through rate. And, also, from behind the MAU and DAU number increases, AI also played a vital role in terms of delivering the right content to the right users.

On the topic of providing high-quality content and fostering a friendly community, we have also leveraged the AI capability to amplify Bilibili Inc.'s strength through early identification of high-quality content through understanding the user's commentary session. And that has helped us to promote high-quality content at a very early stage and allow that content to be seen by more people. This has already shown in our user matrix and community engagement. I'll elaborate on three aspects of how AI is helping Bilibili Inc. to become better. One is that AI can really emphasize Bilibili Inc.'s strength from one aspect. One example would be every day, there will be over 1 million long comments generated by our users.

In that era of AI, that means about 1 million people helping the AI to map the content to identify the content as good content. Good data points. And this asset, this type of long comments generated by real Bilibili Inc. users, is a truly unique data asset for us to identify high-quality content at a very early stage and promote that across our platform. And we already have specific tools to help us to amplify that strength, and we will be adapting that technology going forward across multiple content categories and scenarios. And the second is on AI-assisted content creation.

For mid to longer-form video, we've seen other players have made even for open-source tools for short video creation, but that's merely just on the mid the video material itself, no longer than thirty seconds. Whether AI can make mid to longer-form video, the question we think the answer is yes. On the one hand, we've seen other players in the market have tools to make mid to longer-form videos. But it just seems at first look, it's produced by AI. However, we think we have the ability to make human-like mid to longer-form video because we have the best and most talented content creators on our platform who can help us to make this into reality.

And we will be launching that product very soon, and we think it might be the best human-like mid to longer-form AI video creation tool that's out there. Well, the purpose of that tool, of course, goes back to help our content creators to lower their barriers and improve their production efficiency and contributing to overall content supply rather than making AI-produced video. So we think another analogy is to make very good Chinese food, you will have the Chinese ingredients. Not just to have them microwave. And we are here to offer the ingredients.

And on areas that Bilibili Inc. has key advantages on, for example, such as animation, virtual idols, and big virtual streamers, AI also has a strong potential to help us to meet the demands of those ACG lovers. For example, the virtual companionship by a virtual streamer or virtual idol, that can be very effectively resolved by the help of the AI. And we have already dabbled in that area, and there will be a product launched soon to the market.

Operator: And that concludes the question and answer session. Thank you once again for joining Bilibili Inc.'s second quarter 2025 Financial Results and Business Update Conference Call today. If you have any further questions, please contact Juliet Yang, Bilibili Inc.'s Executive IR Director, or Pearson Financial Communication. Contact information for IR in both China and the US can be found on today's press release. Thank you, and have a great day.

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