Bilibili (Minutes): Content payment is an important growth engine for the future
The following is a summary by Dolphin Research of the 2025 Q3 earnings call minutes for $Bilibili(BILI.US). For financial report commentary, please refer to 《Bilibili: Ecosystem Continues to Recover, the Small Station Grows Again》
I. Review of Core Financial Information
1. The third quarter achieved solid financial results. As the revenue structure shifted towards high-margin businesses, total net revenue increased by 5% year-on-year to RMB 7.7 billion, with value-added services contributing approximately 39%, advertising business contributing 33%, gaming business contributing 20%, and IP business contributing 8%.
2. Operating costs for the quarter increased by 2% year-on-year to RMB 4.9 billion, and gross profit increased by 11% year-on-year to RMB 2.8 billion. The gross margin for the third quarter reached 36.7%, higher than the 34.9% in the same period last year. The continuous improvement in gross profit and gross margin demonstrates the scalability of the business model. Total operating expenses for the quarter were RMB 2.5 billion, down 6% year-on-year. Sales and marketing expenses decreased by 13% to RMB 1.1 billion, mainly due to reduced game marketing expenses.
3. The quarter achieved an operating profit of RMB 354 million, with adjusted operating profit at RMB 688 million, and an adjusted operating profit margin of 9%. Net profit was RMB 469 million, with adjusted net profit at RMB 786 million, and an adjusted net profit margin of 10.2%, significantly up from 3.2% in the same period last year. In terms of cash flow, operating cash flow for the third quarter was approximately RMB 2 billion.
4. In the third quarter, daily active users increased by 9% year-on-year to 117 million, monthly active users grew by 8% to 376 million, and average daily user time increased to 112 minutes, up 6 minutes from the same period last year, setting new records for all metrics. Monthly paying users reached 35 million, up 17% year-on-year, also a record high, with more users converting through various games and value-added services.
5. Key business segments performed steadily, with advertising business maintaining high growth. Advertising revenue increased by 23% year-on-year to RMB 2.6 billion. Value-added services revenue grew by 7% year-on-year to RMB 3 billion; however, the gaming business declined by 17% year-on-year to RMB 1.5 billion due to a high base effect from the same period last year, mainly from the initial release of "Three Kingdoms: Strategy Edition." However, the new release "Escape from Tarkov" achieved global sales of over 3 million copies, injecting new growth momentum into the gaming business.
6. Cash flow and balance sheet structure remain stable. Operating cash flow for the quarter was approximately RMB 2 billion, and as of September 30, 2025, the company held a total of RMB 23.5 billion in cash, term deposits, and short-term investments. Under the $200 million repurchase plan, the company has repurchased 6.4 million shares, amounting to over $116.4 million, with approximately $83.6 million remaining available.
7. Looking ahead,Bilibili will continue to focus on three core areas: empowering the unique PUGV community, enhancing commercialization capabilities, and maintaining profit growth. The company will continue to expand its core business while exploring opportunities in innovative games and AI-enabled solutions to enhance user experience and explore new profit potential.
II. Detailed Content of the Earnings Call
2.1 Key Information from Management Statements
1) As a crucial hub for diverse interest areas, the platform's content ecosystem, high-quality content, and unique community experience reinforce each other, driving user scale and usage time to new highs.
2) The creator ecosystem continues to expand, with high-quality PUGV content accelerating growth. Management stated that viewing time for medium to long videos over 5 minutes increased by 20% year-on-year, and viewing time for domestic anime content doubled,with several self-produced anime works driving the paid membership scale to a record high of 25.4 million. Meanwhile, nearly 2.5 million creators earned income through advertising and value-added services, with average income per creator increasing by 22% year-on-year, reflecting higher activity and commercialization capability of the creator ecosystem.
3) In the third quarter, Bilibili continued to explore the value behind high user activity and scale growth, with strong commercial momentum. Advertising revenue in the quarter benefited from deep user engagement across multiple scenarios (videos, bullet comments, comment sections, community searches, etc.), and the company's upgrades to advertising algorithms, delivery systems, and AIGC creative tools. Over 50% of advertising materials were automatically generated by AIGC, significantly improving production efficiency and conversion effectiveness.
4) The gaming business focuses on self-developed and diverse product layouts, with the hit new release "Escape from Tarkov" validating the development team's cross-genre innovation capability. The single-player escape shooting game "Escape from Tarkov," launched in the third quarter, was developed by a team of 5 and achieved global sales of over 3 million copies with high user acclaim, becoming a key product of the year for the platform. The company also continues to promote optimization of core products like "Three Kingdoms" and plans to launch innovative casual card games like "Three Kingdoms: Hundred Generals" targeting casual players in 2026 to build a long-term stable game product matrix.
5) Artificial intelligence is identified as a key driver of future growth, with Bilibili advancing multiple AI video tools for creators and users. The platform will launch multi-language video support features (AI dubbing, lip-sync, subtitle generation) and text-to-video tools for video podcasts; AI has also significantly improved operational efficiency and content production efficiency, expanding the supply scale of high-quality videos.
6) The value-added service ecosystem maintains growth momentum, with live streaming, paid membership, and fan support systems all trending upwards. Premium membership services continue to grow, driven by popular domestic anime, with 80% of members choosing annual or auto-renewal; fan recharge business revenue nearly doubled year-on-year, reflecting the consumption trend of young users willing to pay for creators and high-quality content.
7) Management emphasized focusing on three long-term strategic directions:strengthening content and community, enhancing commercialization efficiency, and maintaining continuous improvement in profitability. The company will continue to invest in a high-quality content ecosystem, enhance the commercial value of advertising and value-added services, and explore new growth engines through AI and innovative games to maintain the platform's long-term sustainable growth.
2.2 Q&A Session
Q: What are the driving factors behind the record highs in user scale and usage time? Are there any mid-term targets for future user engagement? What are the reasons and trends for the accelerated growth of monthly paying users (MPU)? How has the consumption of paid content by new users changed?
A: User growth mainly stems from the platform's continued focus on high-quality content. Despite the explosive growth in the number of videos across the internet, truly high-quality content remains scarce, and once users develop a habit for high-quality content, they will not return to low-quality videos, giving Bilibili long-term growth potential. Additionally, the platform's unique community culture can discover, amplify, and support excellent creators, helping them grow long-term, and creating a virtuous cycle between high-quality content and high-quality audiences, thereby strengthening user stickiness and growth momentum. This quarter, MPU reached 35 million, up 17% year-on-year, mainly driven by the premium membership business. Management believes that content payment will continue to be an important growth engine in the future, benefiting from increased user spending power, enhanced fan payment willingness brought by creator IP, and the platform providing richer content consumption scenarios for new users. Overall, user engagement and payment willingness are both maintaining a healthy upward trend.
Q: What are the future plans for the payment business? Will there be mobile game development? What is the latest progress of games like "Escape from Tarkov" and "Three Kingdoms," and the overall gaming business?
A: "Escape from Tarkov" surpassed 3 million sales within a month of launch, with a 96% positive rating on Steam, becoming the dark horse of the year. Its relaxed, fun, and stress-free gameplay resonates with young players and is a representative work of the company's gaming strategy. The team has initiated development for console and mobile versions and will continue to optimize based on player feedback.
This game was initiated in 2023 by several colleagues in the gaming department who liked Tarkov, at a time when extraction shooters were not mainstream. The company aimed to create a single-player game that young people would find fun, essentially a strategy to appeal to younger demographics, with a focus on not being grindy or pay-to-win, but daring to excel in niche tracks.
New works like "Three Kingdoms: Hundred Generals" are progressing well in testing, with positive player feedback, also focusing on a relaxed and fun style, with three-minute rounds, expected to launch in the first quarter of next year, and will be combined with the community ecosystem to create a sustainable product.
"Three Kingdoms" is one of the most valued games, currently performing as expected, with a goal to become a long-term product operable for over five years, and plans to launch a traditional Chinese version for Hong Kong, Macau, and Taiwan in Q1 next year, with more international versions in the second half of the year. Overall, the company remains confident in the growth of the gaming business over the next year, continuing to deepen multi-platform layouts and content innovation.
Q: What is the growth potential of the advertising business? How much room for improvement is there from AI and recommendation algorithms? How did Double Eleven and Q4 advertising demand perform?
A: Advertising revenue grew by 23% year-on-year to RMB 2.57 billion in the third quarter, with brand advertising and Huahuo advertising leading the industry, and platform e-commerce and content consumption advertisers still having great potential. Multi-scenario advertising penetration (comment sections, playback pages, live streaming, search, PC, OTT, etc.) brought over 50% incremental revenue, with penetration rates still far below potential space.
AI-driven creative generation and intelligent delivery significantly improve efficiency: AIGC creative accounts for 55%–60%, automated intelligent delivery accounts for 45% of performance advertising spending, and multimodal algorithms further improve recommendation efficiency by over 10%.
The company observed that Bilibili's Gen Z young users have a consumption power 2-3 times the average level of all generations. Their consumption habits are normalized online consumption, buying for happiness, for liking, for need, rather than blindly pursuing absolute low prices at specific times. During Double Eleven, advertising revenue grew by 30% year-on-year, the number of advertisers doubled +100%, and the average conversion rate of new customers reached 55% (over 60% in some categories), showing strong performance. The company remains optimistic about Q4 and 2026 advertising business, expecting continuous breakthroughs in brand building and performance conversion through the SKA strategy and new vertical expansion. Some industries are more prominent, such as watches and jewelry, household goods, food and beverages, beauty, with new customers exceeding 60%.
Q: How do you foresee the trend of gross margin and net margin in Q4 and 2026? What is the company's future cash allocation strategy?
A: Operating leverage continues to manifest, gross margin has improved for 13 consecutive quarters, expected to rise to about 37% in Q4 this year, with a mid-term target of 40%–45% unchanged;
adjusted operating profit margin has risen to 9% in Q3, expected to increase to about 10% in Q4, and steadily move towards a mid-term target of 15%–30%.
The company's quarterly free cash flow has exceeded RMB 1 billion, and future priorities will be to invest in advertising business growth, new business incubation (such as exploring new game types like "Escape from Tarkov"), and AI talent recruitment, while continuing the stock repurchase plan (with about $83 million remaining), to drive long-term value growth.
Q: What is the future direction of AI applications on the Bilibili platform?
A: Bilibili has the highest AI content density across the platform, being the most concentrated AI creation and consumption community for the young generation in China. Nearly 100,000 creators create AI-related content monthly in Q3, with daily AI video uploads growing by over 80% year-on-year, showing strong growth potential.
Although short video supply is becoming more excessive due to AI tools, high-quality videos are still in short supply, and AI will significantly enhance creation efficiency in areas like automatic music remixing and animation production, driving the expansion of high-quality content.
The company will focus on AI applications in video scenarios, launching enhanced features like multi-language dubbing and subtitles, lip-sync, and plans to launch text-to-video tools for video podcasts to help creators produce more high-quality content, making Bilibili the biggest beneficiary of AI innovation.
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