BILI — Q2 2026 Financial Report Analysis

Advertising carried the quarter as the games hit faded

Bilibili's second quarter of 2026 (April–June) came down to two businesses moving in opposite directions. Advertising revenue rose 28% from a year earlier to RMB3.13 billion, while mobile-game revenue fell 14% to RMB1.39 billion as last year's hit strategy game, San Guo: Mou Ding Tian Xia ("San Mou"), settled into a steadier, lower-spending phase. Advertising won: total revenue grew 8% to RMB7.94 billion (about US$1.17 billion), and GAAP net profit rose 55% to RMB339.1 million. Bilibili reports in Chinese renminbi (RMB, also coded CNY). All figures here are in RMB unless stated. The release converts at RMB6.7851 per US dollar.

At a glance

• Advertising was 39% of revenue, up from 33% a year ago. At RMB3.13 billion it is now Bilibili's largest revenue line, ahead of value-added services (memberships, live-stream tipping and similar user payments). Ad growth is now what moves the company's results.
• Operating margin was 4.7%, up from 3.4%. Operating margin is the share of revenue left after running the business, before interest and tax. Bilibili was profitable on a GAAP basis in both Q1 2026 and Q2 2026, but the margin is still thin, so a small revenue miss would show up quickly in profit.
• GAAP diluted earnings per ADS were RMB0.78, up from RMB0.51. An ADS (American Depositary Share) is the US-traded share. At Bilibili one ADS equals one ordinary share. Adjusted EPS of RMB1.58 is about twice the GAAP figure, mostly because the adjusted figure excludes stock-based pay.

Key figures

Source: Bilibili's Q2 2026 earnings release (6-K Exhibit 99.1) and its Hong Kong interim results announcement (Exhibit 99.2), both furnished on August 27, 2026. Percentages are calculated from the reported RMB thousands.

Where the growth came from, line by line

Advertising (+28%). Management attributes the growth to "improved advertising product offerings and enhanced advertising efficiency." The interim announcement adds detail. The five biggest ad categories in the first half were games, internet services, digital products and home appliances, e-commerce, and automotive. Ad revenue from home decoration, footwear and apparel, and automotive each grew more than 50%. Revenue from AI-company advertisers more than doubled. Bilibili is also selling ads in places where viewers are already looking for something, such as search results, watch pages, PCs and smart TVs. Advertising also picked up within the year: it grew 21% from Q1 2026 (RMB2.59 billion) to Q2.

Value-added services (+5%). These are payments users make directly. The release credits premium memberships and other VAS. Premium members reached 25.7 million at June 30, up 9%, and about 80% of them are on annual or auto-renewing plans. Revenue from "fan charging," where users pay creators directly for exclusive content, rose more than 50% in the first half. The company describes live broadcasting, a large part of this line, only as "stable."

Mobile games (-14%). The release puts the decline on "a high base effect, reflecting the exceptional performance of San Guo: Mou Ding Tian Xia in the prior-year period." In other words, the comparison is against a launch-year peak, not a collapse in the current business. Games also fell 9% from Q1 2026 (RMB1.52 billion), so the trend within the year is still down. Older titles Fate/Grand Order and Azur Lane were described as stable.

Excluding games, revenue grew 14.4% (RMB6.55 billion vs RMB5.73 billion). That is the growth rate of the platform businesses Bilibili controls most directly.

Where the margin came from

Gross margin, the share of revenue left after the direct costs of delivering the service, rose to 37.2%. The CFO called this the 16th consecutive quarter of improvement. The largest direct cost is revenue-sharing with creators, streamers and game developers. It grew only 4% to RMB3.08 billion, half the pace of revenue. That fits the mix shift: advertising generally carries less revenue-sharing than games or live-stream tips.

Below gross profit, operating expenses grew 7%, slightly less than revenue:

• Sales and marketing rose 1% to RMB1.06 billion and fell to 13.4% of revenue from 14.3%. Without a major game launch to promote, Bilibili spent little more on marketing.
• Research and development rose 16% to RMB1.01 billion and rose to 12.7% of revenue from 11.8%. The release attributes the increase "primarily" to "higher expenses related to server depreciation."
• General and administrative costs were flat at RMB510.8 million.

The result was operating profit of RMB372.9 million, up 48%, and more than double Q1 2026's RMB166.8 million.

What the headline numbers hide

• Most of the adjusted profit comes from exclusions. Adjusted net profit (RMB703.6m) is RMB364.5m higher than GAAP net profit (RMB339.1m). That means about half of the adjusted figure is items management leaves out. The largest is stock-based compensation, RMB282.7m or 3.6% of revenue. Stock-based pay is a real cost to shareholders because it increases the share count. The other exclusions are RMB40.7m of amortization of intangible assets from past acquisitions and a RMB42.9m loss on stakes in listed companies, offset by a RMB1.7m tax effect. GAAP profit is the better guide to whether shareholders are earning money. On that measure Bilibili is profitable, but its net margin is only 4.3%.
• Below-the-line items roughly cancelled out. Total other income and expense netted to a RMB1.4m loss, against a RMB7.0m loss a year earlier. That net figure hides some large moving parts: a RMB74.1m investment loss, RMB89.7m of exchange losses (versus RMB11.7m a year ago), and RMB99.1m of "others, net" income (versus a RMB4.5m loss) that the release does not explain. Because these items offset, the 55% rise in net profit reflects the operating business rather than a one-time gain. The effective tax rate was low at about 8.7%.
• Share buybacks did not raise EPS. Convertible-bond dilution lowered it slightly. Diluted EPS rose 53%, a little less than net profit attributable to shareholders (+57%). The diluted share count was 3.7% higher at 453.6m, mainly because shares that holders of Bilibili's convertible notes could receive are now counted. In H1 these added 29.2m shares, versus 6.6m a year earlier. Basic shares were 0.2% lower. The roughly US$118m of buybacks so far in 2026 (5.8m securities through August 27) has not offset that dilution.
• Cash flow is well above profit but fell from last year. First-half operating cash flow was RMB2.95 billion, about 5.5 times H1 net profit of RMB541.1m. Non-cash charges such as stock pay and depreciation, plus users and advertisers paying in advance, explain much of the gap. However, operating cash flow fell 10% from RMB3.29 billion in H1 2025, even though net profit more than doubled. The interim announcement includes no cash-flow statement that explains the decline.
• Spending on servers rose sharply. Property and equipment rose from RMB695m at December 31 to RMB2.08 billion at June 30, roughly tripling in six months. The filing gives no capital-spending breakdown. The higher server depreciation already showing up in R&D suggests a computing build-out, and the depreciation cost will keep weighing on R&D in later quarters.
• Receivables grew faster than sales. Net accounts receivable, mostly money owed by advertisers, rose 33% since December to RMB1.68 billion. H1 revenue rose 7%. Nearly all of the increase is in balances less than 3 months old (RMB1.50 billion vs RMB1.10 billion), which fits faster ad billing rather than older bills going unpaid, but it is worth watching.
• The balance sheet is strong. Cash, time deposits and short-term investments were RMB24.30 billion. Short- and long-term debt totalled about RMB9.51 billion, so Bilibili had roughly RMB14.8 billion more cash than debt. About RMB4.88 billion of that debt is due within a year and is more than covered by cash.

Users: more time spent per person, slower user growth

DAUs grew 7% to 116.5 million, and the CEO cited 371 million monthly active users. Average daily time spent was 113 minutes, so total time spent on the platform rose 14%. Engagement is growing faster than the user base. That is the main support for advertising: Bilibili has more viewing time to sell ads against, and the company says those ads are converting better. In the first half, watch time on videos longer than five minutes grew 20%, and the number of creators with more than 1,000 followers grew 30%.

Takeaway: Bilibili now depends on advertising. Ad revenue grew 28% and is about two-fifths of sales, which offset a 14% fall in games and lifted GAAP operating margin to 4.7%. Its profitability now rests on advertising rather than on producing another hit game.

Outlook

Bilibili does not give numerical revenue or profit guidance, and the release contains none. Management's stated priorities are continued ad monetization, partly through AI-driven ad targeting and ad creation, along with "disciplined" spending and buybacks under a new two-year, US$300 million repurchase program approved in June 2026.

Our read on the next few quarters:

• Games are the swing factor. Bilibili launched the licensed card game NCard in July 2026 and has regulatory approval for a self-developed simulation game, Lumi Master, and two licensed titles, San Wang (strategy) and Ragnarok Online 3 (an MMORPG, a large multiplayer online role-playing game). None has a disclosed launch date beyond NCard. Until one of them succeeds, game revenue will keep falling against the San Mou comparisons.
• Operating leverage depends on advertising holding up. Gross margin keeps improving, and marketing spend is roughly flat, so each extra yuan of ad revenue adds disproportionately to profit. R&D is rising faster than revenue because of server depreciation, which reduces that benefit.
• GAAP margin is still low. A 4.7% operating margin leaves little room for error. A slowdown in Chinese ad spending, or a costly marketing push for a new game, could quickly cut GAAP profit. The improvement is real, but it has not yet reached the margins of more mature ad-funded platforms.

The full-year 2026 annual report (Form 20-F) will contain more segment and cash-flow detail. This analysis uses the quarterly earnings release and Hong Kong interim announcement, both furnished on Form 6-K.