Bilibili - Earnings Call - Q3 2025

Transcript

Speaker 2

Good day and welcome to Bilibili's Third Quarter 2025 Financial Results and Business Update Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Juliet Yang, Executive Director of Investor Relations. Please go ahead.

Speaker 0

Thank you, Operator. During this call, we'll discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially from those mentioned in today's news release and in this discussion due to a number of risks and uncertainties, including those mentioned in our most recent filing with the SEC and Hong Kong Stock Exchange. The non-GAAP financial measure we provide is for comparison purposes only. The definition of this measure and the reconciliation table are available in the news release we issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the Bilibili IR website at ir.bilibili.com. Joining us today from Bilibili Senior Management are Mr. Rui Chen, Chairman of the Board and Chief Executive Officer; Ms.

Carly Li, Vice Chairwoman of the Board and Chief Operating Officer, and Mr. Xin Fan, Chief Financial Officer. I will now turn the call to Mr. Chen.

Speaker 1

Thank you, Juliet, and thank you to everyone for joining us today to discuss our 2025 Third Quarter results. Our 2025 momentum carried through the Third Quarter as we delivered solid growth, improved profitability, and attracted an even larger, more engaged community. As an influential hub of diverse interests, our high-quality content offerings and unique community experience continue to fascinate the hearts and minds of young generations. We are increasingly seeing this in our key user metrics, which have resumed an accelerated growth trajectory since the beginning of the year. In the Third Quarter, our DAUs rose 9% year-over-year to 117 million, MAUs grew 8% to 376 million, and average daily time spent per user increased to 112 minutes, up 6 minutes from the same period last year, each hit an all-time high.

We are very proud of these numbers as they show users' rising demand for quality content and the welcoming community spirit that makes Bilibili unique. We will keep building on this strong user momentum and reinforcing our leading user mindshare as the best PUGV community in China. This solid community growth is translating into increasing commercial value with even greater opportunities ahead. While enjoying engaging content, users are demonstrating a stronger willingness to spend on our platform, both directly and indirectly. Monthly paying users hit a record high of 35 million in the third quarter, up 17% year-over-year, with more users converting through our various games and VAS offerings. We're also seeing deeper engagement around consumption as users increasingly turn to Bilibili for advice and inspiration with real purchasing intent. Our advertising business also accelerated, and revenue grew 23% year-over-year in the third quarter.

With an average user age of 26, a maturing cohort with stronger purchasing power and expanding consumption needs, we're capturing more commercial potential across the platform and realizing greater value from our users' evolving needs. Building on these strong fundamentals, we delivered solid financial results in the third quarter. Total net revenues grew 5% year-over-year to RMB 7.7 billion. As our revenue mix shifts toward high-margin business, gross profit increased 11% year-over-year, with gross margin expanding to 36.7%, marking the 13th consecutive quarter of growth. Supported by disciplined cost management and higher operating leverage, our non-GAAP operating and net profit surged 153% and 233%, respectively, year-over-year. Our non-GAAP operating and net margins reached 9% and 10.2%, respectively, showing meaningful improvements from the same period last year. These metrics underscore the sustainability of our growth model, reflected in our continued profitability expansion.

Notably, we welcomed another blockbuster game, Escape from Duck Hof: Tao Li Ya Ke Fu, in October. This self-developed single-player extraction shooter game became an instant hit after its debut, selling over 3 million copies globally and earning great user reviews. The success illustrates our sharp genre insight, in-house development capabilities, and solid execution in reinventing games for new generations of gamers. There is still a lot of unmet demand in the market, and we are ready to tap into it with our upcoming pipeline and robust game content ecosystem. As we continue to strengthen our business fundamentals, AI is becoming a key enabler of our future growth. Later this year, we plan to launch several AI-powered applications, including multilingual video accessibility features such as AI-enabled dubbing, subtitles, and lip-syncing. We're also developing a new video generation tool tailored to video podcast production, where compelling storytelling defines high-quality output.

Beyond these initiatives, AI is consistently enhancing our operational efficiency, and there is so much more to explore. Looking ahead, our focus remains on empowering our unique PUGV community, strengthening our commercialization capabilities, and sustaining profitability. We will continue to scale our core businesses while exploring opportunities such as innovative games and AI-empowered solutions to enhance user experience and capture additional monetization potential. With that overview, let's take a closer look at our core pillars of content, community, and commercialization, beginning with content and community. Our ecosystems continue to grow stronger as quality content and community connections reinforce each other. This growing synergy is reflected in record engagement and increased commercialization, demonstrating Bilibili's ability to turn cultural relevance into sustainable growth. Average daily time spent hit a new record high of 112 minutes in the third quarter. This is a 6-minute increase over the same period of last year.

Mid-to-long-form videos remain our hallmark. Users continue to show high engagement with our more substantial informative content, and watch time for videos over 5 minutes increased by 20% year-over-year in the third quarter. Our official members grew to 278 million, with ongoing steady 12-month retention of around 80%, reflecting strong user loyalty. JCG remains the legacy category of our cultural ecosystem. Chinese anime content watch time more than doubled this quarter, led by popular series made by Bilibili, such as A Record of Mortal's Journey to Immortality, 凡人修仙传, The Tales of Herding Gods, 木神记, and Linkage: Linglong. The success of these Chinese anime drove premium memberships to a record high of 25.4 million. In addition, game content grew solidly, with watch time up 22% year-over-year.

This momentum further reinforced games as our largest ad vertical, with Bilibili continuing to provide the ideal community for developers to engage players and strengthen their IP influence. Meanwhile, AI-related content remains one of our fastest-growing categories. Watch time was up nearly 50% year-over-year, and revenues from AI advertisers rose around 90% in the third quarter, highlighting Bilibili's position at the intersection of tech innovation, user interest, and commercialization. Lifestyle and consumption-related content also grew as our audience matures and their interests diversify. Our mid-to-long-form, creator-led storytelling content is keeping viewers engaged and drawing more interest from advertisers. For example, automobiles stood out in the third quarter, with watch time up nearly 20% and ad spending rising 35%, demonstrating how our community continues to evolve with our users while expanding opportunities for brands.

Our creator ecosystem is the key force behind our progress, and creators sit at the center of Bilibili. As a platform, our most important job is to help talented creators build their followers faster and earn more. In the first nine months of 2025, the number of creators with 1,000, 10,000, 100,000, and 1 million followers each grew by over 20% year-over-year. Over the same period, nearly 2.5 million creators earned income on Bilibili through various advertising and VAS products, and average income per creator increased by 22% year-over-year. These trends show how creator success and user engagement reinforce each other, strengthening the foundation of Bilibili's content ecosystem. Now, let's talk about our commercial businesses and their progress. Our commercial momentum continued in the third quarter as we tapped into more of the value behind our highly engaged and growing user base.

Advertisers are increasingly recognizing the strength of Bilibili's influence, and total advertising revenues grew 23% year-over-year to RMB 2.6 billion. In Q3, we continued advancing our ad infrastructure on multiple fronts. By leveraging our multimodal LLM, we gained a deeper understanding of video content, community interaction, and their interconnection with user intent, improving our ad targeting and recommendation efficiency. Meanwhile, our upgraded Smart Ad Placement system automates campaign routing and delivery, maximizing scale, speed, and performance. This drove a 16% year-over-year increase in the number of advertisers seeking incremental value on Bilibili. Beyond ad algorithms and placement, our AIGC creative tools add another layer of ad efficiency. Advertisers can automatically generate compelling titles and thumbnails, saving production time and cost while improving conversion rates.

In the third quarter, over 50% of the performance ads materials had the help from our AIGC tools, assisting advertisers reach users more effectively with content that resonates with their intended audiences. These infrastructure advancements go beyond efficiency. They're reshaping how advertisers connect with our community. By combining intelligent algorithms with authentic engagement, we're turning creativity into conversion and positioning Bilibili's ad business to capture higher value as we continue to scale. This quarter, our top five advertising verticals were games, internet services, digital products and home appliances, e-commerce, and automobiles. As our mid-to-long-form PUGVs deliver more informative content and more real usage scenarios for users, we have become an ideal platform for digital product and home appliance brands to reach and convert young users.

Ad revenues from digital products and home appliances and home decoration both grew by over 60%, as more and more online merchants recognize the commercial value of our unique young user base. They are allocating larger advertising budgets to our platform. In addition to our anchor verticals, we continue to see incremental ad revenue from emerging verticals. In Q3, ad budgets from AI and education both increased meaningfully. Turning to our games business, in the third quarter, game revenues came in at RMB 1.5 billion, down 17% year-over-year, mainly due to the high base from the same period last year when FanMo was initially launched. We continue to focus on building a diversified game portfolio, laying a stronger foundation for long-term growth in our gaming business. In the third quarter, FanMo maintained its popularity.

We further enhanced the user experience by streamlining gameplay and character progression to create a more balanced and enduring title. Building on our success in the domestic market, we plan to launch the traditional Chinese version of FanMo in Q1 2026 for Hong Kong, Macau, and Taiwan, with additional international versions planned for later next year, opening it up to strategy players worldwide. Besides FanMo, our legacy titles FGO and Azur Lane continue to be welcomed by ACG lovers, maintaining loyal fan communities and consistent engagement. On the 16th of October, we launched Escape from Duck Hof: Tao Li Ya Ke Fu, our first single-player extraction shooter game. Developed in-house by a five-man team, the indie game won over millions of users with innovative gameplay and its cute graphics. Over 3 million copies have been sold globally across various platforms, making Escape from Duck Hof: Tao Li Ya Ke Fu the number one popular indie game in China this year.

This was an encouraging debut for us and a prime example of our expanding game development capabilities across genres and platforms. Leveraging our leading game content platform and influential game creators, we are confident we can expand the IP and bring more franchise titles to players next year. Looking at our pipeline, we are preparing to roll out Three Kingdoms: Hundred Battles Card in early 2026, an asymmetric PVP card game inspired by the Three Kingdoms culture, designed for a broad audience of lightweight players. The game features fast-paced matches that last around 3 minutes per round, making it well-suited to casual on-the-go play. As our first step into the casual gaming genre, the title is backed by Bilibili's vibrant gaming community, which provides a strong foundation for player acquisition and long-term engagement.

Results from the beta test have been encouraging, and we will continue refining the game to deliver a creative, unique casual card game experience. Finally, let's look at our VAS business. Revenues increased 7% year-over-year to RMB 3 billion. This quarter, more users joined our live broadcasting universe as we continued expanding content aligned with their interests. Our focus remains on refining operations to ensure steady, sustainable growth while further improving margins. Driven by our popular Chinese anime titles, premium memberships also maintain solid growth, reaching a record high of 25.4 million by the end of the quarter. Around 80% of members are on annual or auto-renewal plans, underscoring their loyalty and deep connection to our community. Other VAS products continue to grow rapidly in the third quarter, led by our fan charging program, which saw its revenue nearly double year-over-year.

This momentum reflects users' willingness to directly support the creators and high-quality content they value most. Beyond the numbers, we remain deeply committed to shaping a healthy culture and community for China's young generation. ESG principles are central to that mission. This year, MSCI ESG reaffirmed Bilibili's A rating, recognizing our ongoing progress in using technology and culture to create meaningful impact. In conclusion, everything we've achieved today comes from more than a decade of staying focused on one thing: building great content and a vibrant community. This long-term focus has created a self-reinforcing cycle where high-quality content attracts younger users, an engaged community adds ongoing value, and monetization follows organically. As we become more profitable, this flywheel will become even more effective. We will stay firmly on this path and continue to create lasting value for all of our stakeholders.

With that, I will turn the call over to Sam to share more financial details. Sam, please go ahead. Thank you, Mr. Chen. Hello everyone, this is Sam. In the interest of time, on today's call, I will review our third quarter highlights. We encourage you to refer to our press release issued earlier today for a closer look at our results. In the third quarter, we continue to grow revenues and expand our margins and profitability, driven by growth across our commercial businesses, particularly in our high-margin advertising businesses. Total net revenues for the third quarter were RMB 7.7 billion, up 5% year-over-year, approximately 39% from VAS, 33% from advertising, 20% from games, and 8% from our IP derivatives and other businesses. Our cost of revenues increased by 2% year-over-year to RMB 4.9 billion in the third quarter, while our gross profit rose 11% year-over-year to RMB 2.8 billion.

Our gross profit margin reached 36.7% in Q3, compared with 34.9% 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 2.5 billion, down 6% year-over-year. Sales and marketing expenses decreased 13% year-over-year to RMB 1.1 billion, mainly due to decreased marketing expenses for our games. G&A and R&D expenses were RMB 509 million and RMB 905 million respectively, both flat year-over-year. These efforts allowed us to maintain positive operating results. Our operating profit was RMB 354 million compared with a loss in Q3 2024. Our adjusted operating profit was RMB 688 million, and our adjusted operating profit margin reached 9% in the third quarter versus 3.7% in the same period a year ago. Net profit was RMB 469 million versus a loss in Q3 2024.

Our adjusted net profit was RMB 786 million, and our adjusted net profit margin in the third quarter was 10.2% compared with 3.2% in the same period a year ago. Cash flow-wise, we generated about RMB 2 billion in operating cash flow in the third quarter. As of the 30th of September 2025, we had cash and cash equivalents, time deposits, and short-term investments of RMB 23.5 billion or $3.3 billion. Under our $200 million share repurchase program approved by the board in November 2024, we've repurchased a total of 6.4 million shares so far at a total cost of $116.4 million, leaving about $83.6 million available for future buybacks as of the 30th of September 2025. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead. Thank you.

We will now begin the question and answer session. If you would like to ask a question, please press star 11 on the telephone and wait for your name to be announced. 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 question in English. The company will provide consecutive interpretations for management statements during the Q&A session. Please note that English interpretation is for convenience purposes only. In the case of any discrepancy, management statements in their original language will prevail. One moment for the first question. Our first questions come from Alex Liu of Bank of America. Please go ahead. 谢谢关心，能听到我声音吗？可以听见。谢谢。恭喜公司很强劲的业绩。好，谢谢。恭喜公司很强劲的业绩。然后我们看到三季度其实在公司在用户端和利润端都取得了很好的成绩。那尤其是我们看到其实DAU、MAU还有时长都是创新高。那其实我们也算了一下，可能DAU是从2021年以来可能单季的季增的新高。所以我们想请问关于能不能分享一下这个趋势后面是受到什么因素在驱动的，如何去展望一个可能更中长期的一个用户目标。另外的话也是MPU，就是Paying User，实际上这个季度也是在加速增长的。那我们也想请关于能不能分享一下后面的驱动力是什么，然后有什么未来的用户付费的趋势能分享一下。谢谢。 Alex, can you translate yourself? Yeah, sorry. Translate myself. Translate myself, yes. Thanks, management.

I think it's a great quarter, and we see DAU, MAU, and timespan are basically all at the historical high, and it's growing, accelerating. I was just wondering if management can share more about what's the really drivers behind this in terms of user, in terms of future engagement. Is there any medium-term target? Also for monthly paying users, it's also accelerating in terms of growth. What are the drivers behind, and how should we think about in the future? What are the latest new user paying for content trends? Thank you. 我觉得B站用户增长的第一驱动力是我们还是专注在优质内容这一个方向上吧。我认为优质内容本身就是一个持续能够长期增长的一个赛道。 The fundamental reason for our continuous user growth lies within our focus on high-quality content, and high-quality content is always a strong and a sustainable growth driver.

对，尤其是现在，因为现在视频的内容供给其实已经非常丰富和充分了，甚至我觉得现在的视频的供给已经开始过剩了。目前拿中国来说的话，每年都会新增几百亿个视频，而且随着AI创作工具的应用，我觉得视频的增长未来它还会呈指数级的提升，就可能每年会增加几千亿甚至几万亿个视频。 Actually, we think there has been a fundamental change of video content supply, and currently the video content supply is very much sufficient and in some way even oversupplied. Every year there's tens of billions of new videos being created, and riding on the rapid adoption of AI tools, there are going to be tens of thousands, trillions of new videos being made every year. 对，但是虽然视频的供给在过剩，但是用户会觉得优质的视频仍然是远远不够的。就是我们接触到的所有的用户都反映他们觉得优质的视频太少，自己能够打动自己的优质的视频太少。所以的话，我觉得本身优质视频它的一个需求是非常强烈，而且一旦用户他看过一些优质的视频，就是他的审美提升之后，他就没法降级了。就是他看过优质视频之后，他就不会再满足于看一些，就只是一些这种解除无聊或者是杀时间的一个视频。所以优质视频的受众它也会越来越多。所以我认为只要坚持优质视频这一个方向，本身B站的用户增长它就是能够持续的。这是一个未来的趋势。 However, we think that the quantity of the video and the quality of the video are two different things. The high-quality content is still in the short of supply, and once someone started to enjoy or start watching high-quality content, it's very hard for them to go back. They got peak year. They wouldn't go back to the low-quality, time-killing type of videos.

That's why Bilibili has a long runway for growth, is because the demand for high-quality content will continue to rise, and the population that will be interested in Bilibili content will grow. 对，我这还特别想提一下，就是我们的B站的社区对于优质内容产生的这么一个重要性。我觉得社区是能够帮助我们去挖掘出新的优质内容，而且也能够去帮助优质的创作者去持续创作优质的内容。因为其实很多优质的内容它是需要有审美能力的人去发掘的，包括很多那种新的创作者。而B站的社区正是一群有这样一群热爱内容并且有着比较好审美能力的人组成的。 Apart from our focus on high-quality content, our unique community aspect of our business also helped further strengthen our advantage. This is because our community can help to discover high-quality content and also help our talented content creators to continuously focus on their content creation, because content needs to be discovered with the eye of beauty. And we have that many, many users that they have the passion for high-quality content, that they also have the taste to select and promote those high-quality content. 这个社区非常重要，因为它不会让一个创作者创作出一些创新的内容的时候，他觉得曲高和寡，因为他总能够在这个社区里面去找到能够发掘美的、能够跟他产生共鸣的人。而且这一个社区的这种粉丝也会激励他不断地去创作更好的内容，因为好的作者是需要懂他的观众，然后这些观众能够给他不断的反馈，给他赞美。而且在这些创作者大火之前，其实这一群忠实的粉丝也能够不断地去鼓励他，让他去度过他出名之前那一段寂寞的岁月。所以我们会发现B站有大量的创作者是五年甚至是十多年持续在B站上面创作优质内容，就是有这么一个社区的一个存在，才能够让他们非常开心地坚持地在这里去创作好的内容。 The good content creator needs good audience, and Bilibili is where those two parties meet and resonate with each other.

Especially for content creators, before they got popular and earned good reputation, there's a relatively long fair wait for them to grow. Bilibili's community and the users' encouragement will accompany them to go through that process. That's why you see those content creators on Bilibili. They have been creating content on our platform for five years, even ten years long. 对，我接下来我说一下用户付费。我们这个季度的用户付费的人数是创了新高，达到3500万，同比增长17%。然后从我们这个季度来看，大会员是我们付费用户增长的一个主要的驱动力。但是如果从长期来看，我觉得用户付费的一个增长它本身就是一个趋势。 Let's look at the MPU trend. This quarter, our MPU reached a new record high of 35 million, grew by 17% year over year. For third quarter, particularly, it's the premium membership business, which is the primary driver of that. On a long-term horizon, we think the 2C business, the user paying for content type of business model will be a very big growth driver. 对，我说一下就是我们这个，我说用户付费的一个增长本身是趋势的三个原因吧。我觉得第一个原因就是我们的用户他的年龄在慢慢的一个成长。就是我们是个年轻的一个社区，我们现在我们的社区的平均年龄是到了26岁。其实用户年龄的一个增长，就是它无论对于这种2B的广告价值还是对于2C的付费的一个价值，它都会是一个促进。 I'll talk about three reasons that will drive the content consumption-related paying activity. First of all, it's our users.

The average age of our users now at 26 years old. A cohort with increasing income and expanding consumption scenario, they are generating on both the 2B advertising front as well as the 2C, the paying for content, paying for services aspect. 然后第二点，我是认为长期坚持创作的UP主，他就会成为IP，然后他就会能够让用户愿意为他付费。就是我们平台上有大量的长期坚持创作优质内容的UP主，我们会发现当他们在用户心中产生了这种品牌和这种内容的一个信誉过后，他们去做一些类似于像充电的内容，或者说他们去做一些课程，或者说他们去卖一些自己的周边，用户是买单的。 We believe that the second point is that we believe creators who consistently produce high-quality content over a long period of time can foster their personal IP and drive a sustainable monetization. There's a very large group of content creators that has been producing content on Bilibili for a very long time. Through that period, they create their own personal brand, and they have their own reputation. People will follow their new creation. That's why the fan charging program, whenever they sell their own premium courses or even their personal IP derivatives, their followers, their fans will pay for that content or services.

That is also driving the overall MPU's growth. 我觉得第三点的话，就是对于年轻的用户来说，为自己喜爱的内容，为自己喜欢的内容付费，它就是一个趋势。就是我觉得越是年轻的用户，他的消费的动机，他就越倾向于让自己开心。TVB教育我们，人活着开心是最重要的。所以的话，我觉得现在的年轻的一代还是非常认这一点。我觉得从我们现在看到的一个趋势，就是他喜欢一个UP主，他喜欢一个内容，然后他就为他付费，这个趋势会越来越明显。我认为这个也是用户付费会为好的内容付费和为好的UP主付费能够持续增长的一个原因。 The last point is that what we have discovered is for the younger generation, consumption is mainly driven by self-gratification. People will pay for things that make them happy. They will pay for people that they love. This trend has become even more clear nowadays with our initiatives on the fan charging program, helping our content creators to monetize their own personal IP. This will be another very important growth factor behind that continuous growth of our MPU. That concludes the answer for this question. Operator, next question, please. Thank you for the questions. One moment for the next question. Our next questions come from the line of Thomas Chang of Jefferies. Please go ahead. 晚上好，谢谢管理层接受我的提问。公司今年的单季游戏《陶雷鸦》客服取得非常亮眼的成绩，可以分享一下这个项目对未来的规划吗？我们是否有做手游的计划？鸦客服的成功对于我们未来新游戏的开发投入是否有更多的借鉴的意义？另外，我们看三国《百战牌》在10月底进行的付费测试效果如何？我们预计什么时候可以上线？公司还有哪些值得期待的游戏储备？另外，我们看三毛Q3的表现是否符合预期？我们应该如何看待这个产品未来一年的走势？ Good evening, thanks management for taking my question. My question is about the gaming business.

We saw XGIP from Duckwolf receive remarkable results. Can management share about its future business plan? Do we have any plan of developing a mobile game? On the other hand, can management comment about San Guo End Card with regard to its monetization testing at the end of October? When should we expect it to be released? On the other hand, what are the games in the pipeline to be anticipated? For San Mao, is the performance in Q3 meet expectations? How should we think about the performance in the next one year? Thank you. 好，我回答一下吧。《陶雷鸦》客服确实是今年游戏市场的一匹黑马，然后到现在上线已经一个月的时间吧，那个就是全球的一个总销量是过了，已经超过了 3 million 份。而且的话，同时在线人数是达到了 300,000。啊，我觉得如果我这个再看未来的一个趋势，我觉得呃，应该很有可能我们是能够冲击就是国产单机历史第二的一个好成绩。啊，而且的话，这个游戏呃，很难得的是用户对它的这个评价是非常高的。啊，现在应该是在 Steam 的这个呃，数万条评论里面呃，是 96% 的一个好评率。 I'll talk about the XGIP from Duckwolf, and truly this game has been the dark horse of the year in the games market. In less than one month after its debut, it has already sold over 3 million copies across various platforms globally, and the peak concurrent user has reached over 300,000.

Based on the current momentum, it is safe to say Escape from Duck Hof: Tao Li Ya Ke Fu has the potential to become the number two best-selling console game in the history of China. This has been very encouraging. On top of that, besides the sales volume, players have been giving the game extremely high ratings. On Steam platform, there have been tens of thousands of comments, and 96% of them are overwhelmingly positive. 对，然后如果分析它为什么能够取得成功的话，我觉得因为我自己也是个玩家嘛，我觉得原因很简单，两点。第一点的话，第一就是它好玩。其实现在你别看游戏出的新游戏挺多，但是真正满足好玩这一点的游戏是不多的。我认为鸦客服这款游戏在好玩上面还是花了足够多的一个心思的，就是它的各种关卡、玩法、道具的一个设计，我认为是花了很多心思的。然后第二个，我认为成功的点就是它是真的是比较轻松。就是现在的游戏不逼肝不逼克也很少，然后鸦客服应该是就是它既不逼肝也不逼克，而且非常轻松，有娱乐性。我认为就是好玩加轻松这两点应该就是它成功的原因。 Why has it been so successful? I think there are two main reasons. As a player myself, I think first of all, this game is a fun-to-play game. There are a lot of games launched every year; not every one of them is fun to play. We found this game is very carefully designed with different stages and the graphics. People will find it is a really true fun game to play. People will enjoy themselves.

Secondly, the game has a very light mood. When you play it, you do not feel the stress of PvP, and it is just the simple pleasure to collect and loot. Also, this game does not pressure people to spend a lot of time or spend a lot of money. It is just very easy-breezy, and at this time of the year, it is very entertaining and fun to play. Those two elements, fun to play and relaxing, are the two main reasons for this game to succeed. 之所以能够做到好玩，我认为这个和我们对这个游戏立项的目标是直接相关的。这个游戏是2023年立项的。那个时候其实就是有几个喜欢塔科夫游戏的游戏部门的同事，然后聚在一起，然后立的这个项。那个时候还没有搜刮车这个说法，就2023年，其实塔科夫还不是一个那么主流的一个玩法。但是我们当时就是想去做一个让年轻人觉得好玩的一个单机游戏，然后就立了这个项目。我觉得本质上是我们就是品类年轻化的大的一个思路吧。就是我认为不逼肝不逼克，然后同时的话就是敢于去做一个细分赛道，但是在这个细分赛道上做到极致。这个其实都是我们在过去两年对于新项目立项的一个思路。我觉得鸦客服应该是我们立项大思路的一个成功案例吧，成功案例之一。 The reason behind that is when we are thinking about setting up a project like this back in 2023, it was just simple; a few young developers gathered together who have been true fans of Escape from Duck Hof: Tao Li Ya Ke Fu, the type of game that has the extraction game fans.

They wanted to create something that's for the young generation, easy to play, relaxing, and with cute graphics. This is a very good example of how we are thinking about our game strategy, reinventing games for the new generation of gamers. It is also an example of how we have been picking a niche genre in the game market and to make it to the best. We think that's the perfect example of how we are executing our game strategy, and this is one of many examples of our pipeline, how we are designing it. 我接下来说一下这个，对，我再说一下鸦客服后面的这个计划。因为我们现在是只有PC单机，然后接下来我们的主机的移植跟手游项目是已经启动了。然后当然因为主机跟手游的，就是它在具体的玩法上，它会跟单机还是会有些差异，所以的话我们会仔细地去打磨产品。然后在主机跟手游项目的研发过程中，我们也会像我们做PC版本的鸦客服的时候一样，我们会充分倾听社区的一个声音。最终我们也希望就是它的主机版本跟手游版本也能够同样获得成功。 On the IP expansion question, because the game currently is only on PC, we have already kicked off the console project and the mobile adoption for Escape from Duck Hof: Tao Li Ya Ke Fu. Because on console and on mobile project, there's going to be difference with the gameplay.

We will be spending a lot of time to fine-tune the project. And while doing so, we'll also continue to listen closely to our gamer community, and we will share updates when the time is appropriate. 接下来我说一下三国《百战牌》。因为《百战牌》我们现在是已经在做过一些这种小范围的一个测试了。玩家的反馈目前来看是非常不错的。我们会继续地去沉下心打磨产品，然后这个游戏应该是在明年Q1的时候会上线。 As for the Three Kingdoms: Hundred Battles Card game, currently the closed beta testing has been going very smooth, and we will be focusing on fine-tuning and polishing the game and make it to its best and introduce to the market. It's currently expected to be released in Q1 next year. 这游戏应该也是我们面对年轻用户推出的一款比较创新的游戏吧。我觉得主要的一个我们打的点就是三分钟一局的这种轻松的一个体验。我们希望也是通过我们的B站的社区，比如说我们的UP主，我们的直播，能够把它推到我们的广大的B站用户的一个眼前。这个游戏因为它在很多点上都比较创新，所以我们就一步一步来吧，就摸索着前进。我们的首先的第一个目标是把用户量先要做大，做成一个大量年轻用户喜欢的这样的一个游戏，然后我们再会把它一步一步往下做。我希望它能够成为B站的新的一款长青游戏。 As for the Three Kingdoms: Hundred Battles Card game, it's designed to cater to the need of casual card game user and genre. It will be a very short on-the-go play for three minutes per round. This is another attempt into catering the new generation of gamers, and there's a lot of innovation within the gameplay.

Hopefully, leveraging our very unique and best-of-the-state gamer community, as well as our talented content creator, leveraging our PUGV community, as well as the live broadcasting community, we can bring this innovative game to all of the Bilibili users. The game, there are a lot of aspects. Lots of the aspects have very great innovation, and we are putting a lot of effort trying to make it the best quality. We will be spending time fine-tuning the game, and when the game is launched, the number one goal for this game is the DAU growth. Hopefully, this game will become Bilibili's another great evergreen title. 最后说一下三毛，三毛肯定是我们现在最重视的游戏之一，然后它Q3的表现是符合我们的预期的。其实现在我们对三毛最重要的一个工作就是我们希望是能够把它做成一个长期健康运营的一个产品。因为我对三毛提的目标就是五年以上的长线运营。所以的话，就是我们现在这个阶段我们会更关注玩家的体验以及关注游戏的一个平衡性。明年一季度就是我们会上线它的港澳台的繁体中文的一个版本，然后明年下半年我们应该会推出更多的国际版本。这个就是我们现在对三毛的这么一个工作的一个规划。 As for Sanmo, it is one of the most important titles in our portfolio. Overall, the performance in the third quarter has been in line with our expectations.

We will be focusing on fostering a very balanced character progression, and we will be focusing on the user satisfaction. The goal for this title, the most important goal for this title, is longevity. We are hoping to make this game at least five years, to operate over five years long. In the first quarter of next year, we plan to launch the traditional Chinese version of FanMo in Hong Kong, Macau, Taiwan. In the second half of next year, we will be rolling out additional international versions. Thank you. That concludes this question's answer. Operator, next question, please. 稍等一下, one moment for the next question. The next question comes from Felix Liu of UBS. Please go ahead. 谢谢管理层接受我的提问，也恭喜我们三季度非常好的业绩。我的问题是关于广告业务。广告业务三季度增长持续强劲，管理层会怎么样看广告业务后续的进一步变现的空间？我们对于推荐算法和AI在广告上的应用应该如何期待？另外，更近期的展望，管理层在四季度看到双十一广告需求目前是怎样的趋势？谢谢。 Thank you, Management, for taking my question, and congratulations on the very strong results, especially on the advertisement part.

How does management see the growth potential in your ad business from here? Can management share more color on the potential of improvements in recommendation algorithm and AI on your ad business from here? And more on the near term, how does management see the advertisement demand for the recently concluded Double 11 shopping festival as well as the overall Q4? Thank you. Q3 B站整体的广告收入是 RMB 2.57 billion, 同比增长有 23%。应该是赞还是在持续的提升？这个季度可以看到，除了效果类型的广告保持张数以外，本季度能看到像品牌类型的以及花火的收入，就是 UP 主的广告，也远领先于市场的张数。根据我们自己的不完全统计，应该是市场上张数最快的。 In Q3, our advertising revenue reached RMB 2.57 billion, up 23% year over year, with our market share continuing to rise. On top of the steady growth for our performance-based ads, we're seeing both brand and sparkle ads grow much faster than overall market. Based on our complete industry data, the brand ads and sparkle ads growth rate are among the fastest growing players in the industry. 怎么看 B站的广告收入往后的情况会怎么样？其实还是得回顾一下，看一下底层的逻辑。就是 B站的生态跟人群的价值还是会随着时间的推移，会得到更多客户的认知跟参与的。一旦参与跟认识了这个社区之后，就离不开。B站的生态的特点也会导致于 B站投放广告的优势，其实优势是深度影响用户的消费心智。 And how should we think about the ad revenue growth going forward?

I would like to firstly talk about the underlying logic of Bilibili's ads. As time goes by, more clients are recognizing and tapping into the value of Bilibili ecosystem and its users. Thanks to the uniqueness of our community, our ads' key advantage is that we can deeply shape and make a big impact on users' purchasing decisions. 通俗一点说，说人话，其实就是投放B站的广告第一，投放的价值不是一次性消费。第二，就更容易再获得新客。第三，就是让新客跟老客的消费复购率会进一步的，就是斗争的概率会变大。这就能让客户去实现他短期的转化或者长线的品牌沉淀双目标。 To put it more simply, Bilibili's advertising business can bring to our advertiser, number one, it will not be a one-off value hit. Secondly, we are more effective at bringing new users, new customers. Thirdly, we are more likely to drive a sharp increase in repeat purchase from both new and existing users. In other words, we will help our clients to achieve both short-term conversion goals and long-term brand building goals. 除了底层逻辑以外，其实做得不够好的都是我们的增量空间。从客户来看，其实在Q3我们前五大的广告主客户就是游戏、网服、数码家电、电商跟汽车。 Yet anything we haven't fully perfectionized, realize the underlying logic is pure upside for the future.

From a client perspective, our top five advertiser verticals in Q3 were gaming, internet services, consumer electronics and home appliances, e-commerce, and automotive. 在客户层面上，我们会做三点持续对广告收入有增长的趋势。第一个是我们会加强SKA的策略，就服务好我们的大客户，专人专团队提供B站全年的整合营销方案。目标还是要实现90%以上的复购以及市场预算占比的持续提升。这个对于B站的客户策略还是很重要的一点。 To better serve our advertising clients, there are three main points. One is to enhance our strategy or service for our super key accounts, SKAs. We will be serving our largest clients with a delicate service team and a year-round integrated Bilibili marketing solution. Our goal for this team is to achieve over 90% repurchase rate and keep increasing our share of their spending on Bilibili. 第二点是我们在耐销广告上形成一定的模式，也形成一定的规模。所以用成功的模式去适配其他垂直行业，例如食品饮料、宠物母婴、美妆鞋服等。其实这还是在行业预算比较大的一些板块，我们现在的规模还是很少的。在大快销领域，在未来预期因为有一波新的客户跟预算的可能。 Secondly, we are hoping to replicate our successful model into multiple new verticals. We're using an always-on performance model to better serve our other verticals, especially for those with big spending budgets, such as big FMCG categories like food and beverage, pet and baby, beauty, and apparel.

We expect a new wave of clients and budget to come onto our platform. 在今年下半年跟明年，我相信竞争格局也会进一步的多样化。所以在2026年，我们还是很有信心在原来比较擅长的板块，包括游戏、平台电商跟内容消费等，还是持续能存在一定的增量空间的。 As the competitive landscape becomes more diversified in the second half of this year and even next year, we are still very confident that by 2026, there is still substantial growth potential in gaming, platform e-commerce, and content consumption-related advertisers. 对，除了客户层面，我们有不太足的可以去有比较大增量空间。第二块其实是我们商业渗透到不同的社区场景，其实也会将是一个很大的增量。因为B站是个社区，我们的消费场景特别的多，也会区别于其他平台只有一个视频流的核心消费场景。我们现在B站的广告在场景中的渗透还是比较浅的。B站的用户会活跃在哪里呢？会看视频，对吧？看视频他就会在这个视频的播放器框内会消费时间很长，会看评论，必须看评论，看弹幕。所以这个就看视频的场景。第二，看直播，看直播上面也有很多互动的场景，对吧？第三个就是使用搜索，这个你也必须看一看。第四个就是看一看热门热搜，还有B站的用户也习惯于在不同的场景用多端去看B站，例如我们的手机端，接着我们的PC端，我们的电视端等等。所以Q3在场景带给我们的广告收入同比增速已经超过50%了，但这个渗透还是进度远远还是低于我们现在的预期的。所以在往后的空间应该还是比较大。 Third point is we are planning to expand our ad penetration across different community scenarios, and this will be another growth driver because Bilibili by itself, it has many consumption scenarios within our products, unlike other platforms where most consumption happens in a single video feed. Our users are spending a lot of time watching videos within the players, within the commentary session, and also in the bullet chats. They also watch livestreams; they also engage with livestream content.

They do search; they browse trendy topic and hot searches on our platform, and also consuming content across multiple devices, including mobile, PC, OTT, and etc. In Q3, ad revenue from these different scenarios all grew by more than 50% year over year, but the current penetration is still very behind where we think it can be, which means there's still a lot of room to grow. 第四，刚才你也提到AI技术对于整个B站广告收入的变化。就是我们跟团队也反复在讨论，其实AI这个命题很容易会让大家很乐观地预期AI对广告短期能带来巨大的收益。接着同时也特别容易忽略，其实AI在往后一个周期可能会颠覆掉现有的所有的模式。所以先说说变化吧，肯定是有成绩的。就是AI机器相关的素材的消耗占比现在在我们55%，也在持续的提升，包括一些网服的行业，小说，支持文生视频，我们也支持短剧的高光剪辑等等。客户的AI视频的素材消耗其实占比也在60%以上。我觉得这些还是解放了不少的这种生产力的。 The fourth point is about your question on AI. We have been discussing intensively internally that AI as a topic that can be easily making people overly optimistic about the short-term boost to the advertising revenue, while overlooking its potential to fundamentally reshape the industry over the long term. However, there's still a lot of positive changes we are seeing. First of all, it's on the AIGC creatives.

Now it is account for 55% of the total creative volume in the performance-based ads, and it is continued to rise. We are providing video generation tools to our clients in the internet service sector, such as for online novels. We support text-to-video generation. For short drama advertisers, we supported the AI highlight editing. In these sectors, AI-generated video creatives already account for over 60% of the creative consumption, and this upgrade has freed up a lot of productivity. 那第二点的话，其实智能投放，我们通过这种自动的智能投放，广告的消耗渗透其实也超过了45%。大多数客户在这个模式上都可以取得消耗的增长。我觉得这是第二点。第三点的话，在分发效率上，其实结合多模态的内容理解，包括生成式的一些推荐算法，我们累计整体效率还是提升了10%以上。听上去AI对我们整个Q还是带来了一些颇有成效的，一些效率的变化已经收益的。但是可能我们跟团队也会更长远地去看待AI带来的更多未来可能性的变革，会做更多大胆的尝试，并不是只看短期的一些数据跟收入。 The second application for our AI is on the smart delivery system. Currently, the automated buy-in smart delivery advertisement system is already accounting for 45% of the overall performance-based ad spend. Most clients have been seeing their spend scale up through this model. Thirdly is on the recommendation efficiency.

By combining the multi-modal content understanding with the generative recommendation algorithms, we have been lifting our distribution efficiency by more than 10% in total. All of the above are the tangible results and benefits that AI has brought to us this quarter. However, we do think that AI has—we do think AI with a long-term mindset. The real significance lies with the new opportunities and the structural change that will unlock over time. We will be trying a lot of innovation with a long-term mindset, not just a short-term bump in a few metrics and revenue lines. 最后聊聊双11。就是我们在观察用户，特别是B站的Z世代的用户，年轻消费的特点，他们的消费力应该是历史所有世代里面的消费力的两到三倍。他们在习惯上也会在线上消费会是常态化，开心才买，喜欢才买，需要才买。就不再会在一个时间段麻木地去追求价格的绝对优势。这些观察的结果其实是比较对B站的用户画像跟生态优势，商业巨大潜力的层面是有一个比较大的刚好相互印证。 Lastly, on our double 11 results. First of all, looking at our users, especially the Gen Z consumers, their spending power is two to three times that of the previous generations.

They are used to online consumption as their default shopping avenue, and they buy when it makes them happy. It buys when they like something or they truly need something. They no longer chase the rock bottom prices in a single promotion time window in a mechanical way. All of this observation is pointing to the huge commercial potential embedded in the Bilibili user profile and our ecosystem. 话说回来，其实双11的成绩单还是超出预期的交付的。今年的话，在双11期间，B站的广告同比增长在30%左右，客户数的同比增长超过100%。就在双11的促销期间，B站全为所有行业带来的平均新客率是55%。其中有几个行业更突出一些，例如钟表饰品、家庭的日用品、食品饮料、美妆等等的新客超过60%以上。 Given that our double 11 report card this year still exceeded our expectations, during this year's double 11, Bilibili's ad revenue grew 30% year over year, and the number of advertisers more than doubled. Over the double 11 campaign period, Bilibili delivered an on-average new customer rate of 55% for all industries. In categories such as watches and jewelry, household daily goods, food and beverage, and beauty, the new customer rate even exceeded 60%.

Lastly, on the outlook for Q4 and next year, we remain upbeat about the advertising business. More importantly, we're hoping to deliver something more meaningful and new breakthroughs and changes within our business. Thank you. I'll bring our next question, please. Next question, 刚上到来，我想请张 from CICC, please go ahead. 感谢管理层接受我的提问，恭喜这个季度亮眼的业绩表现。那我的问题是关于财务展望的，公司的利润率持续走高。那如果展望四季度和2026年，我们该如何看待毛利率和净利率的一个趋势？然后公司的现金储备也非常丰富，那未来现金的一个使用规划是怎么样的？谢谢。 Thanks management for taking my question and congratulations on the strong result. My question is regarding your financial outlook. The company's profitability has continued to strengthen and looking ahead to Q4 and into 2026. How do you expect the gross margin and the net margin trends? As we maintain a strong cash position, how do you plan to allocate the cash in the future? Thank you. Thank you, Xueqing. This is Sam. I will take your question. Yeah, we continue to see strong operational leverage in our business.

In Q3, our top line grew by 5%, and our gross profit grew by 11% year over year. Our gross profit margin has improved for 13 consecutive quarters. We expect this trend to continue this year and reaching 37% in Q4. We keep our midterm gross profit margin target that's 40-45% unchanged. Additionally, our adjusted operating profit, that's the profit before the other income, jumped over 150% year over year. With adjusted operating margin expanding from 3.7% to 9% year over year, we expect that number to further improve to around 10% in Q4 this year and keeping us on a steady path to our midterm target of 15-30% adjusted operating margin. We already saw the resilience of Bilibili's business model and our strategy of focusing on healthy revenue growth and the leveraging scale of our sustainable profit expansion.

We are confident in reaching our mid to long-term margin targets. Regarding the cash usage, we will allocate our resources carefully. Currently, we already generate over $1 billion free cash flow every quarter. First of all, we will support our high-quality revenue growth engine like advertising business. Secondly, we will invest in some new opportunities, for example, to expand our business boundaries, like reinventing some games for new generations, just like Escape from Duck Hof: Tao Li Ya Ke Fu. We already announced a plan to explore Escape from Duck Hof: Tao Li Ya Ke Fu's opportunities to the console game and the mobile game. Last but not least, we will also capture some major industry opportunities. For example, we are also seeking for the new talent in areas like AI. Regarding the shareholder returns, we have repurchased over $100 million worth of shares this year already. We have a two-year share buyback plan as approved by our board.

We still have around $83 million left. We expect to fully utilize that amount in the remaining period of the plan. Thank you. That's all for my question. Operator, next question, please. Thank you. One moment for the next question. Our next question comes from Liwei Wenzhang from China Renaissance. Please go ahead. 谢谢管理层接受我的提问。同样也恭喜很好的业绩。我的问题是关于AI应用的。刚刚管理层在Prepary Marks也说到公司在近期上线了不少AI功能跟产品。想问一下咱们后续对AI在B站体系里面的赋能有哪些思考跟期待？同样也想问一下像Sora这样的产品未来是否会改变视频消费和创作的方式？ So thanks for taking my question. I have a question regarding AI application. In your script, you discussed a few AI functions and products you have just launched. What is your think and expectation on future AI application on Bilibili? Also, what kind of impact do you think products like Sora will bring to video production and consumption? Thank you. 我觉得B站的UP主和用户群，就是它在国内含AI量肯定是最高的。就是中国最好的去讲AI的UP主和中国最对AI感兴趣的用户都聚集在B站。 Bilibili has the highest AI density among both of our content creators and our users.

Many of China's best AI-themed content creators and the users who are most interested in AI talent, they are all active and gathered on Bilibili. 对，就是在第三季度，每个月都有接近100,000的AI相关的UP主活跃在B站。他们要么是做AI学习和科普的内容，要么就是在教AI的应用，或者说是用AI辅助创作。在第三季度AI相关的内容的日均投稿量同比增长是83%。 In the third quarter, nearly 100,000 creators were active on Bilibili every month, working on AI-related content. Some of them are doing the latest machine learning explaining. Some of them are breaking down and teaching new AI applications or using AI for video creations. The average daily number of AI-related video uploads in the third quarter increased over 80% year over year in the third quarter. 而且我觉得这块还有很大的增长潜力，因为B站聚集了中国三分之二以上的年轻用户，而年轻用户肯定是想学习或者是想使用AI的最核心的力量。 There is lots of potential for us to further discover because we have gathered over two-thirds of young generation in China on Bilibili. That is the exact cohort who's eager to learn about AI or leverage AI technology to create things.

对，刚才你问到Sora，Sora当然很新，Sora 2，但我是觉得Sora 2它更像是一个产品交互的demo，而它不仅是一个AI生成的demo。其实我是，你问我Sora 2这类产品会不会改变视频消费和创作的方式，我刚才已经说了，其实我觉得现在短视频已经足够多了。我认为AI它可能会再更增加一些短视频的供应，但是我觉得它并不会对视频的消费带来太大的一个影响，因为现有的供给已经很丰富了。然后在优质内容的一个领域，我认为优质内容现在更多的AI它其实是创作者的一个工具，因为优质内容它并不是说我一帧画面或者是一段场景它就能够达到的，它其实是需要构思和需要一个，你可以认为它更多的体现的是创作者的多种能力，它并不是一两种效果。我觉得在优质内容的创作方面，AI它是能够成为优质创作者的一个，就是优秀创作者的好的工具，它能够提高我们创作者的一个效率。这一点其实在B站上面我们可以看到已经有一些例子涌现出来了，就是我们的有些品类，比如说音乐，比如说动漫，比如说鬼畜这些品类，它其实最近是冒出了一批我认为挺好的AI辅助UP主创作的作品。我认为在这个领域，AI它作为一个工具，它在优质视频创作方面，它的提效的一个作用，我认为未来应该是明显的。 When you asked me about whether Sora will change how people create or consume content, personally, I think Sora is a new demo on both video content creation and also user interface. As I said earlier on, there's already an oversupply of short video content. The adoption of AI tools will only increase that video supply and it will not change how people consume the content. However, on the high-quality video aspect, there's still a scarcity in terms of the high-quality content supply, and the adoption of these tools will help us to increase the supply and improve the talented content creators' efficiency in producing such content. We've seen this on many of those content categories that AI is becoming the new paradigm.

For example, in the auto-tune remix sector, in the music sector, or even the animation sector, there is a lot of very good quality videos that were made with the help of AI tools. To summarize, we do think that the AI will be a fundamental efficiency booster for high-quality video creation, and Bilibili will be most benefited from that technology innovation. 我觉得这个也是我们B站做AI的一个方向上，我们会专注在视频的AI的一个解决方案，而且我们会专注在利用AI辅助创作者去做出更多更好的一个视频。比如说我们现在大家应该注意到，我们现在已经提供了AI翻译视频的功能，因为它翻译的不仅是字幕，因为那个很基础，还包括声音，然后还包括口型。这个是大家应该看到我们APP上已经有了。同时的话，我们也计划去推出一个能够去帮助创作者去做视频播客这一类视频的一个AI的这么一个工具。陆续大家会看到我们在这方面能够陆续去拿出一些新的一个产品或者是解决方案。我们也希望在视频的方向上，我们能够成为行业走在前面的人。 Based on that observation, we will be very focused on the video track of the AI applications. We wanted to make AI to be effective tools to help our content creators to produce higher quality videos. You have probably already seen some of the functions we have launched lately. For example, there will be multilingual video accessibility features, including dubbing, subtitles, and even lip syncing. We are also planning to launch an AI-enabled text-to-video tool tailored for video podcast type of content.

We believe these products will help bring more high-quality content on Bilibili and to our users. That concludes the question and answer session. Operator, back to you. Thank you once again for joining Bilibili's Third Quarter 2025 Financial Results and Business Subject Conference call today. If you have any further questions, please contact Juliet Yang, Bilibili's Executive Director of Investor Relations, or Piasan Jie of Financial Communications. Contact information for IR in both China and the United States can be found on today's press release. Thank you and have a great day.