Bilibili BILI Q1 2025 Earnings Call Transcript

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DATE

Tuesday, May 20, 2025 at 8 a.m. ET

CALL PARTICIPANTS

Chief Executive Officer — Rui Chen

Chief Financial Officer — Sam Fan

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TAKEAWAYS

Total Revenue: Total net revenues of RMB 7 billion for Q1 2025, representing 24% year-over-year growth, driven by advertising and mobile games segments.

Advertising Revenue: Advertising revenue of RMB 2 billion for Q1 2025, up 20% year over year, with advertiser count increasing over 35% year over year and AI-related ad revenues increased 400% year over year.

Game Revenue: Game revenue of RMB 1.73 billion for Q1 2025, reflecting 76% year-over-year growth.

Gross Profit: Gross profit of RMB 2.54 billion for Q1 2025, up 58% year over year, with gross margin expanding to 36.3%, up from 28.3% in the same period last year.

Operating Expenses: Total operating expenses of RMB 2.52 billion for Q1 2025, up 4% year over year, including a 26% increase in sales and marketing expenses and decreases of 3% and 13% in G&A and R&D expenses, respectively.

GAAP Net Loss: GAAP net loss narrowed by 99% year over year to RMB 11 million for Q1 2025.

Adjusted Net Profit: Adjusted net profit reached RMB 362 million for Q1 2025, sustaining positive non-GAAP net profit versus a loss in the prior year.

Operating Profit (GAAP/Adjusted): Operating profit (GAAP/Adjusted) was RMB 15 million and RMB 342 million, respectively, for the first quarter of 2025, both improving from losses in the prior year.

Cash Position: RMB 17.4 billion in cash, time deposits, and short-term investments as of March 31, 2025.

Average Daily Time Spent: Average daily time spent reached a record 108 minutes in Q1 2025, up from 105 minutes in the same period last year.

Monthly Active Users (MAUs): MAUs totaled 368 million for Q1 2025, with Daily Active Users (DAUs) reaching 107 million.

Monthly Paying Users: Monthly paying users reached an all-time high of 32 million in the first quarter; premium memberships exceeded 23.5 million as of quarter end with over 80% on annual or auto-renew plans.

VAS Revenue: VAS revenue of RMB 2.81 billion for Q1 2025, up 11% year over year, with fan charging program income up over 200% year over year.

Gross Margin Guidance: Management targets a mid- to long-term gross profit margin of 40% to 45%.

Long-Term Operating Margin Target: Long-term operating margin target is 15%-20%.

SUMMARY

Bilibili Inc. (BILI) delivered significant improvement in profitability metrics in Q1 2025, including a 58% increase in gross profit and a 99% reduction in GAAP net loss, supported by a higher contribution from high-margin games and advertising. The business achieved record levels in operational indicators such as average daily usage and monthly paying users, indicating both sustained engagement and successful monetization initiatives. Management emphasized continued efficiency in operating expenses, with R&D and G&A costs declining, and communicated clear margin targets and confidence in maintaining growth above industry averages in core segments.

Sam Fan stated, "In Q1, our net margin reached a record high of 33.3%, marking eleven consecutive quarters of improvement."

Performance-based advertising revenues grew by over 30% year over year, with AI-generated ad content accounting for over 30% of performance ad spend.

Rui Chen highlighted that "average user age has come to 26." describing a shift toward increased user purchasing power and new monetization opportunities.

Management detailed upcoming initiatives for the "Sunmo" title, including a major update (season eight), multi-device rollout, and international expansion plans targeting traditional Chinese-speaking markets.

INDUSTRY GLOSSARY

SLG: Simulation Strategy Game, a genre focused on strategic management or operational simulation, often with long-term user engagement dynamics.

VAS: Value-Added Services, which in Bilibili’s context includes premium memberships, live broadcasting, and paid fan programs distinct from basic platform services.

AIGC: AI-Generated Content, referring to the use of artificial intelligence to create advertising or user-facing content.

DAU/MAU: Daily/Monthly Active Users, key metrics indicating platform engagement and audience reach.

ARPU: Average Revenue per User, a measure of monetization effectiveness within user cohorts.

GAAP: Generally Accepted Accounting Principles, the accounting standard by which net profit and loss are reported in the transcript.

Full Conference Call Transcript

Rui Chen: Thank you, Juliet. And thank you everyone for joining us today to discuss our 2025 first quarter results. We started 2025 on promising ground, delivering solid financial results and healthy community development. In the first quarter, our total revenues accelerated year over year, increasing by 24% to RMB 7 billion, driven by strong performances in our high-margin advertising and game businesses. Advertising revenues were up 20% year over year to RMB 2 billion, supported by our ongoing product enhancements, and infrastructure upgrades. Fueled by the sustained popularity of our SLG type of sumo, our games revenues also rose 76% year over year to RMB 1.73 billion.

The continued top-line expansion in these high-margin businesses combined with operating efficiency provided us with greater operating leverage. In the first quarter, our gross profit increased by 58% year over year, with gross profit margin expanding to 36.3%, up from 28.3% in the same period last year. As a result, we sustained positive adjusted net profit of RMB 362 million and narrowed our GAAP net loss by 99% year over year in the first quarter. While further strengthening our financial performance, we continue to grow our community and enhance user engagement. The successful collaboration with CCTV's Chinese New Year Gala also helps bring the Bilibili name to a broader audience.

In the first quarter, DAUs reached 107 million, and MAUs climbed to a new high of 368 million. Meanwhile, our compelling and diverse content drove users' average daily time spent to a record 108 minutes. Next month, Bilibili will turn sixteen. Looking back, it has been an incredible journey, one that is truly unique. Over the years, our community has grown tremendously. What is most remarkable is that the sense of connection between users and creators and the welcoming, inspiring vibe that defines Bilibili has stayed the same. Over this time, our users have grown with us too.

Today, the average age of our active users is 26, a life stage where consumption needs and purchasing power are both on the rise. As the go-to platform for Gen Z plus to discover high-quality, creative video content in China, we are in a great position to meet their evolving needs and unlock even more monetization opportunities. With that overview, let's take a closer look at our core pillars of content, community, and commercialization. Beginning with content and community, as we look at today's video landscape, it's clear that people have more content than ever, especially with the explosion of short videos. But what really stands out is that people are craving and spending more time on high-quality content.

At Bilibili, that has always been our focus. We have built a community known for the best content out there, and we will keep prioritizing and promoting quality above all else. This commitment is showing up in our numbers. In the first quarter, users spent an average of 108 minutes on our platform every day, compared to 105 minutes in the same period last year, marking a new record. Our monthly paying users also reached an all-time high of 32 million. As our users discover and connect with more quality content, pay off.

Monthly interactions were nearly 16.7 billion in the first quarter, and our official member count reached 264 million by the end of Q1, up 12% from last year. On top of that, their twelve-month retention rate stayed strong at around 80%. The quality of our content is also showing up in our content category. Our core HCT content continues to thrive, and our game content is a great example. In the first quarter, game-related watch time increased 14% year over year, drawing in both long-time fans and new gamers who come to Bilibili for reviews, walkthroughs, and game IP content.

As Gen Z plus users mature and their spending power increases, many are turning to Bilibili with real purchase intent, looking for trusted, unbiased recommendations. That's reflected in our travel and lodging, and home appliance-related content, with watch time growing by over 20% year over year in Q1. Additionally, being the hub for curious minds and the best knowledge video library, we saw a big surge in our AI-related content. More young people are coming to Bilibili to explore and learn about AI, and AI-related watch time more than doubled from Q1 last year, along with a 400% increase in advertiser demand. Behind all of this is our amazing creator community.

By the end of Q1, the number of creators with over 1,000, 10,000, 100,000, and 1 million followers all grew by more than 20% year over year. About 1.5 million creators made money on Bilibili during the quarter, not just through ads or live streaming, but also by using our e-commerce tools and various fan support programs. In fact, creators' total income from our fan charging program was up over 200% in Q1, showing how users truly appreciate and are willing to pay for quality content. Lastly, our partnership with CCTV for the Chinese New Year Gala gave us a big boost in brand awareness. It both attracted new users and strengthened engagement with our existing community.

What's more, viewers can now revisit all the past Chinese New Year galas right here on Bilibili. It's another great example of how we curate quality content and deliver value through our unique community. Meanwhile, our self-produced Chinese anime, The Tales of Herding Gods, was well received. It's garnered over 560 million views so far, and it's showing strong potential to become Bilibili's next long-lasting anime IP. We also released our self-produced title, To Be HeroX, worldwide in April. It quickly gained traction, ranking number one on My Anime List for best spring title 2025. Now let's talk about our commercial businesses and their progress.

Our advertising business continued to deliver solid results in the first quarter, with revenues growing 20% year over year to RMB 2 billion. As our users mature and have more spending power, they increasingly look to Bilibili for content that informs their lifestyle and consumption choices. This trust within our community and the influence of our quality content have become powerful drivers for advertisers. In the first quarter, the number of advertisers placing orders on our platform increased by more than 35% year over year. Meanwhile, we have been integrating a large language model to help us better understand the users' interests and commercial intent, enabling more accurate ad targeting and smarter ad delivery.

We also upgraded our AIGC ad content tools to help advertisers generate more tailored and effective ad titles and covers at scale, allowing them to reach users more efficiently through compelling and user-friendly storytelling. These enhancements have fueled the growth of our performance-based advertising, which grew by over 30% year over year in Q1, while brands and native ads continue to show steady momentum. Industry-wise, we strengthened our position in core verticals while attracting more advertisers from emerging sectors. In the first quarter, our top five added verticals were games, Internet services, e-commerce, digital products, and home appliances. And automotive, powered by our vibrant and highly engaged gaming community.

Gaming ads continue to contribute a strong share of our ad revenues, with new formats, like Bilibili mini-games, driving additional growth. Moreover, we saw a notable increase from sectors targeting younger consumers as they enter new life stages with evolving needs. In the first quarter, ad revenues from home appliances and decorations grew by nearly 40% year over year. Similarly, AI-related ad revenue surged by 400% year over year, reflecting Bilibili's growing appeal to emerging industries looking to engage our young high-value user base through innovative ad formats. Turning to our game business, game revenues rose by 76% year over year to RMB 1.73 billion, attributed to the continued strong performance of our LG title, Sangho.

Meanwhile, our legacy ACG titles, FGO and Azure Lane, continue to deliver stable revenues and demonstrated impressive longevity in the first quarter. We are encouraged to see that Sunmo is evolving into a long-cycle title with enduring appeal. With our expanded game development capabilities and upgraded gameplay, some of those active users and engagement in season seven improved from previous seasons, demonstrating the game's continued draw for core SLG players. On May 31st, we will kick off season eight, marking the game's biggest update since its initial launch. This highly anticipated anniversary edition will include a refreshed map, new characters, and special in-game events.

These updates enhance the gaming experience and are designed to attract more younger players to the SLG genre. We expect this launch to mark a meaningful milestone in Samu's continued growth and long-term success. The momentum behind some of also highlights our gaming community's strength and our ability to build differentiated experiences that resonate with diverse player groups. In addition to Samo's international launch later this year, we have several new games in our pipeline awaiting approval. As we expand our game portfolio, we are focused on creating titles with lasting value by leveraging our leadership in the gaming space to reimagine gameplay for the next generation of gamers. And finally, let's look at our VAS business.

Revenues from our VAS business increased by 11% year over year to RMB 2.81 billion. Our live broadcasting business regained momentum during the first quarter, fueled by the supply of more quality content and more paying users. We also further refined our operations and incentive plan, which led to a meaningful improvement in the business's margin profile. We are also unlocking more value from our broader VAS portfolio. Gen Z plus users show a strong willingness to pay for content they care about. By the end of the quarter, premium memberships exceeded 23.5 million, with over 80% on annual or auto-renew plans, a clear sign of user loyalty.

In addition, revenues from our fan charging program surged by over 200% year over year, highlighting the potential of our direct-to-creator monetization tools. And lastly, while we are making solid progress on our commercialization efforts, we are also staying true to our role as a responsible cultural brand and corporate citizen. In April, we published our 2024 ESG report, sharing the steps we are taking to create social value and build a more sustainable business. We are proud to have received an A rating from MSCI for our ESG performance.

While we keep growing our ecosystem with high-quality content, we are also committed to pushing the industry forward through innovation, both in technology and storytelling, while continuing to spread positive energy and making a real difference in society. As we move through the year, we will focus on advancing our commercialization capability with more enhanced and efficient commercial offerings. At the same time, we will continue promoting high-quality content that defines our vibrant community. In addition, we are actively embracing Gen AI to optimize user experience, monetization efficiency, and unlock new growth opportunities. With that, I will turn the call over to Sam to share more financial details. Sam, please go ahead.

Sam Fan: Thank you, Mr. Chen. Hello, everyone. This is Sam. In the interest of time, on today's call, I will review our first quarter highlights. We encourage you to refer to our press release issued earlier today for a closer look at our results. In the first quarter, we accelerated revenue growth and further expanded our margins, fueled by the strong performance of our high-margin games and advertising businesses, while sustaining positive non-GAAP net profit. Total net revenues for the first quarter were RMB 7 billion, up 24% year over year. Our revenue breakdown by revenue stream for Q1 was approximately 40% VAS, 29% advertising, 25% mobile games, and 6% from our IP derivatives and other businesses.

Our cost of revenues increased by 10% year over year to RMB 4.46 billion in the first quarter, while our gross profit rose 58% year over year to RMB 2.54 billion. Our gross profit margin reached 36.3% in Q1, compared with 28.3% in the same period last year. Our expanding gross profit and margin show how well our model adapts and scales as the business grows. Our total operating expenses increased 4% year over year to RMB 2.52 billion. Sales and marketing expenses increased 26% year over year to RMB 1.17 billion.

The increase was mainly due to a one-off marketing expense related to our partnership with CCTV for the 2025 Chinese New Year Gala, and higher year-over-year promotion expenses for our SLG game, Semol. G&A expenses were RMB 516 million, down 3% year over year. R&D expenses were RMB 841 million, down 13% year over year, mainly related to R&D efficiency improvements. These efforts allowed us to maintain positive operating results. Our operating profit was RMB 15 million, and our adjusted operating profit was RMB 342 million, both compared with losses in Q1 2024. We also maintained a positive adjusted net profit of RMB 362 million versus a loss in the prior year period.

We narrowed our GAAP net loss by 99% year over year to RMB 11 million. Our adjusted net profit ratio in the first quarter was 5%, compared with an adjusted net loss ratio of 8% in the same period a year ago. Cash flow-wise, we generated over RMB 1.3 billion in operating cash flow in the first quarter. As of the 31st of March 2025, we had cash and cash equivalents, time deposits, and short-term investments of RMB 17.4 billion or USD 2.4 billion. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.

Operator: Thank you. We will now begin the question and answer session. For the benefit of all participants on today's call, if you wish to ask your questions to management in Chinese, please immediately repeat your questions in English. The company will provide context to the interpretations for management statements during the Q&A session. Please note that English interpretations are for convenience purposes only. In the case of any discrepancy, management statements in their original language will prevail. One moment for the first question. The first question comes from Lincoln Kong from Goldman Sachs. Please go ahead.

Lincoln Kong: Thank you, management, for taking my question. So congrats on a very solid first quarter result. So my question is about the comp. I think last quarter, Rachel, you mentioned about enhancing building our quality content. So what's our specific plan this year to increase the user mindset or quality contents? And then in terms of the AI applications, is there any progress or specific rollout we should expect? Thank you.

Rui Chen: I think we are in the era where there's too much content, especially where the short video content is becoming increasingly abundant. For example, you can even watch short video content on shopping apps. And what we have observed is that users are not lacking in content to watch; rather, they are seeking high-quality content. And what we observe is that users are dedicating more time to engage with premium quality content. The growing demand for quality content mirrors the changes in consumer habits. People are willing to pay more for content that brings them a sense of fulfillment and quality. Quality content is what we have been focused on and stands for.

I think Bilibili is probably one of the biggest plot content platforms that holds high-quality content standards. And when people come to Bilibili, what they are consuming stands for a long-term sense of fulfillment, not for a shortened stimulation or a hormone-driven type of satisfaction. And this will help Bilibili to stand and thrive in the next era of video competition. This is showing in our Q1 data. For example, in Q1, the average daily user time spent reached a historical high of 108 minutes. Additionally, users are increasingly willing to pay for premium content. Our average monthly paying user hit a new record of 32 million, and revenue from our fan charging feature grew over 200% year over year.

And this is all highlighting the potential substantial revenue of in-video platforms, which is people directly paying for content that they love and care about. Quality will stand for a place that is even bigger and more important in our strategy into 2025. We will continue to position high-quality content as one of the most important attributes. We will also help our content creators, the talented content creators, to gain fans more quickly and also receive better monetary rewards. The whole uploading high quality as the standard, we can see the strategy working from the content category development. First of all, on the core ACG content, the pen knowledge content, and it's gradually evolving into lifestyle-related, consumption-related.

All of these content categories are thriving and expanding on Bilibili. For me, personally, I learned great knowledge and consumption-related advice on Bilibili, such as how to wash a duvet cover and how to pick the right sofa. This is very easy, and content is really super helpful and fulfilling. In addition to the content category involvement, we are also providing various monetization avenues to help our quality content creators to make more money. For example, last month, I discovered this content creator with less than one million followers made over one million RMB in a month through the fan charging program, and he's a knowledge sector content creator.

Even though what he's talking about is quite niche and professional, probably won't bring him a lot of followers. But if you do something really good in the segment category, you can also earn a lot of love and appreciation and even monetary rewards on Bilibili through our monetization avenues. Video content has become a necessity in terms of spiritual consumption. We discovered that the quality video in the longer term will gradually pick up its potential and show great value. Probably for people who just have access to short video content or to do the video content, they might be attracted to those very short, stimulative content in a short period of time.

But over a longer time horizon, let's say, five years, people will naturally choose content that brings them a sense of fulfillment. And those quality content. That's why we have been focused and will continue to focus on promoting quality content, fulfilling content. Lastly, I wanted to touch upon how high-quality content combined with AI can bring great potential to our business. First of all, is that the quality content can transcend times from early 2000 till now, we can easily see that only the quality content can live and continue to produce value. And, currently, with the evolution of AI models, hinges on the access to high-quality training data.

And Bilibili happens to own the world's largest repository of Chinese video content. The high-quality video content data will provide us a very unique and advantageous position in the time of AI-related opportunity. And, currently, I would say the model itself has great computing power and inferencing power, and all the historical text-based data corpus has already been provided to the various different models. But can they generate something new and provide a creative and additional information is what all of the video manufacturing is trying to resort. And from that aspect, Bilibili stands a great advantage because our video content carries a much more dense set of information.

For example, when I asked our own AI model which mobile phone can take a better human portrait, our AI model can analyze the historical video and video data and summarize and subtract the right information to provide me with that solution. And this is something, literally Bilibili can do. Well, probably AI can take a lot of text-based messages online as of now, but it's still a long way for AI to produce high-quality, reliable, trustworthy video content. And from that perspective, Bilibili holds a very valuable data asset. On that. And Bilibili holds a unique and leading offering in certain content categories such as animation, gaming, and knowledge.

And this, with the help of AI translation, we can easily multiply those values into multiple languages and unleash much greater potential in value of that content categories. And also from a commercial aspect, AI can also help us to improve our commercialization efficiency. I can elaborate on that in the later question if there's any. That concludes Mr. Chen's answer. Operator, next question, please.

Operator: Thank you. One moment for the next question. Our next question comes from Xueqing Zhang from CICC. Please go ahead.

Xueqing Zhang: Thank you, management, for taking my question. My question is about your game business. Can management review the performance of Zengo in seasons six and seven? SAML has been launched for one year in June. So what are your expectations for the anniversary version? How does management view the growth rate of the game business in the second half of the year, and what's your game plan? Thank you.

Rui Chen: The most critical important goal for SAML operation team is to achieve a long-term healthy operation with at least a five-year or longer life cycle. And user retention is something that I care most about, and this is also the most important topic every time we have a staff meeting on this game operation. My ultimate goal is to help Sunmo to become a game that the gamer can play for a lifetime. The season-based game system is one of the most important mechanisms to help this game to the long-term operation. Every game season, we listen very carefully to users' feedback and adapt that into the next game design and promotion.

As a matter of fact, the first day of game season seven marks the highest DAU on daily record in the year of 2025. It also represents how we are incorporating each new season to optimize the game design and attract and retain users. As one of the largest gaming content communities in China, the Bilibili community itself empowers the long-term operation of Sunmo. For example, we did a joint marketing campaign with Sunmo, with the leading game streamers PDD and YMD, and the campaign was quite successful and helped us to attract a lot of new users and awaken a lot of the dormant users.

And also, another example is our virtual streamers are actually attracting their followers to join Bilibili and do the live streaming sessions. And we find it quite interesting that one user probably has both ACG and SLG interest habits, and this is also bringing a lot of increment new users to the game. Combined with those efforts and our offering strategy, we can see that Sunmo's current DAU level and paying ratio and ARPU has ranked among the top level in the industry. Later this month, on May 31st, we will launch season eight, and also, this marks the anniversary edition of SAML.

And we will start the campaign to celebrate the anniversary with a refreshed map, major new characters, limited anniversary scheme features, and a lot of interesting in-game events. We hope this anniversary edition will bring Samu to a new level and a long-lasting life cycle. Alright. Many people will ask me what's the next step after Sunmo. My answer has always been we wanted to be super focused on making Sunmo sustainable and even more successful. I often said the next Sunmo will be the next game season. We will be focusing on making a better season each time and bringing new experiences to our users. On top of that, we have two more initiatives with this game.

One is at the end of this year, we are looking to launch an international version in traditional Chinese. This version is targeting users in Hong Kong, Taiwan, and Macau. And the second initiative is that we are planning to bring SAML into multiple devices. At the end of last Q4, we launched the PC version, which helped us to win over a lot of the PC users. The next step, we are looking to bring this game on the mini-game platform. This potentially will also open doors for us to attract new additional users. On top of SAML, we will have two more important jobs to do.

One is to sustain our legacy titles, One on our domain and FGO. We will be celebrating the ZeroLink eighth-year anniversary this month and celebrating the ninth anniversary at the end of July. And for both of the games, people you might be very familiar with, with the long-term, very sustainable, and successful long-term operation. And from time to time, we can witness a new incremental increase from those two games. And we believe with the anniversary promotion, we should be welcoming a new peak of DAUs and MAUs. The second strategy is on the new games. Currently, we have four to five games in line waiting for approval.

We will also actively explore more opportunities in new genres similar to what we have done with Sunmo. To reinvent games catering to new generations of gamers' preferences. We do think there are a few opportunities there, and we will continue to invest and explore. Okay. That concludes Mr. Chen's answer. Next question, please.

Operator: Thank you. The next question will come from Yuan Zhang from China Renaissance. First, congrats on the very solid print. So my question is regarding our advertisement business. In Q1, we maintained 20% annual revenue growth, ahead of the industry average. Can you elaborate on what are the underlying drivers? Also, can you discuss how these drivers will play out in the future? And what is our outlook for ad growth this year? Thank you.

Rui Chen: In Q1, our advertising business continued to grow at a rate that is above the industry average, reaching RMB 2 billion in revenue and up 20% year over year. Notably, our high-margin performance-based ads grew by over 30% year on year, contributing significantly to our overall revenue growth and driving continued improvement in our gross margin. The key driving factor behind that growth is the combination of high-value users and our strong brand association with high-quality content. This year, our average user age has come to 26. The year of 26, the audiences represent increasing disposable income and diverse consumption scenarios. On top of the spiritual consumption, they also come with various product consumption.

And the professional in-depth nature of our content continues to foster deep connections with our users and the content creators. And all of that is leading to continued growth in ad revenue per DAU. In the past, we have stuck to the strategy of one horizontal, multiple vertical strategies, and the one horizontal refers to our product and infrastructure ability, and the multiple verticals refer to our integrated ad solution across different ad verticals. Let me elaborate on this a little bit. Within the one horizontal strategy, we have continuously built a stronger ad inflection and product capabilities. And in Q1, what we have really improved is in the AI-related product improvement.

We have continued to up marketing data infrastructure by using the multimodal AI ability to better understand our users' purchase intent and on category level interest, boosting our overall ad efficiency. We have also improved our deep conversion capabilities, leading to a greater budget allocation towards deep conversion campaigns. The proportion of deep conversion ads spent more than doubled in Q1 and led to an increase in our performance-based ad CPM. Another big improvement is in our Gen AI-assisted ad material creation. Because Bilibili's product nature covers and ad materials are quite important in terms of improving click-through rates and improving our ad efficiency.

We have upgraded our commercial AIGC tools using those AI gen AI models to help advertisers to auto-generate cover images and titles that really align with Bilibili's user language and creative style. Currently, AI GC created accounts for over 30% of the performance ads spent. But we talk a little bit about our different ad verticals. First of all, games continue to remain our largest advertiser segment. And we continue to improve our conversion path and tools and increase our market share in the game ads market. And we also launched new formats such as Bilibili mini-games and also in-stream game live stream. Apps that help open up new ad inventories and new opportunities.

Secondly, as our user matures and becomes age 26, they have come to a life stage where they have to face a lot of choices in terms of consumption-related needs. And we have helped them and also our trustworthy content creators have done a lot of reviews and walkthroughs and evaluations on those categories. And it's such a great connection between their followers. For example, in Q1, our home appliances-related advertising revenue grew over 35%, and baby maternity and pets-related advertisement revenue grew over 300% year over year. On AI, as everybody knows, we hosted, but most curious minds who understand the AI-related knowledge. And Bilibili also hosts the largest AI-related knowledge type of video content.

That's why almost all AI manufacturers and companies just put a lot of effort and ad budget trying to connect with Bilibili users and convert them to become their users. And that's why we are seeing a big surge in AI-related advertising spending, and also this helps us to drive the overall online services sector to become the top two ad vertical. As for the guidance for the second half of this year, we're still quite confident to continue to grow at a pace that's above the industry average.

Combined with our key advantage of high-quality premium content user mindset as well as the increasing user value, we remain very confident about our advertising business development and continue to expand our market share. Okay. Next question, please.

Operator: Thank you. One moment for the next questions. Our next question comes from Felix Liu of UBS. Please go ahead.

Felix Liu: First, thank you, management, for taking my questions, and congratulations on the very strong Q1 results, especially the record level of profitability on both GP margin and net profit margin. The question is, first, on the margin trend, how in the rest of this year. Can management share your outlook on that? And my second question is on your midterm GP margin and the profit margin target. Thank you.

Sam Fan: Thank you, Felix. This is Sam. I will take your question. In Q1, our net margin reached a record high of 33.3%, marking eleven consecutive quarters of improvement. The key contributors to this improvement include the rising share of high-margin gaming, advertising revenue, which account for, if you add it together, like, 50% of the total revenue, compared with 47% in Q1 last year. Secondly, the relatively fixed cost includes content, staff, server cost remains stable in terms of the absolute dollar value. So decline their proportion of revenue from 25% last year to 20% this year. And the growth margins of advertising and live broadcasting business have been improving in Q1.

We are confident that both our gross margin and net margin will achieve gradual improvement throughout the year. In the mid to long term, we are confident that our gross profit margin will reach 40% to 45%. In Q1, the proportion of operating expenses to revenue declined from 43% last year to 36% this year. Our adjusted operating margin improved from negative 9% in the same period last year to 5% in Q1 this year. For 2025, we expect R&D and G&A expenses to remain stable, while marketing expenses will fluctuate with game promotion cycles. As a result, the operating expenses as a percentage of total revenues will continue to decline.

Our long-term operating margin target remains the same, that will be 15% to 20%. Thank you for your question.

Operator: Thank you. And that concludes the question and answer session. Thank you once again for joining Bilibili's first quarter 2025 financial results and business update conference call today. If you have any further questions, please contact Juliet Yang, Bilibili Tech IR, or PSMPA financial institution. 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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