Bilibili - Earnings Call - Q3 2025
November 13, 2025
Transcript
Operator (participant)
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.
Juliet Yang (Executive Director of Investor Relations)
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 Lee, Vice Chairwoman of the Board and Chief Operating Officer, and Mr. Sam Fan, Chief Financial Officer. I will now turn the call to Mr. Chen.
Rui Chen (Chairman and CEO)
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 Duckov: 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, [Foreign language], The Tales of Herding Gods, [Foreign language], and Ling Cage: Ling long. 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 San Mou 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, San Mou 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 l aunch the traditional Chinese version of San Mou 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 San Mou, 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 Duckov, 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 Duckov 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 [Foreign language] 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.
Sam Fan (CFO)
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 September 30th 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 September 30th 2025. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.
Operator (participant)
Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 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.
Alex Liu (VP)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
Alex, can you translate yourself?
Alex Liu (VP)
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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Operator (participant)
Thank you for the questions. One moment for the next question. Our next questions come from the line of Thomas Chong of Jefferies. Please go ahead.
Thomas Chong (Managing Director and Regional Head of Internet and Media)
[Foreign language] Good evening, thanks management for taking my question. My question is about the gaming business.
We saw Escape From Duckov 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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
I'll talk about the Escape From Duckov, 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 Duckov 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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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 Tarkov, 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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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 Duckov. 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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
As for the [in] 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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
As for the [in] 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.
Rui Chen (Chairman and CEO)
[Foreign]
Juliet Yang (Executive Director of Investor Relations)
As for San Mou, 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 San Mou 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.
Operator (participant)
Certainly. One moment for the next question. The next question comes from Felix Liu of UBS. Please go ahead.
Felix Liu (Executive Director of China Internet and Media and Education Research Analyst)
[Foreign language] 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.
Carly Lee (Vice Chairwoman of the Board and COO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Carly Lee (Vice Chairwoman of the Board and COO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Carly Lee (Vice Chairwoman of the Board and COO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Carly Lee (Vice Chairwoman of the Board and COO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Carly Lee (Vice Chairwoman of the Board and COO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Carly Lee (Vice Chairwoman of the Board and COO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Carly Lee (Vice Chairwoman of the Board and COO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Carly Lee (Vice Chairwoman of the Board and COO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Carly Lee (Vice Chairwoman of the Board and COO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Carly Lee (Vice Chairwoman of the Board and COO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Carly Lee (Vice Chairwoman of the Board and COO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Carly Lee (Vice Chairwoman of the Board and COO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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%.
Carly Lee (Vice Chairwoman of the Board and COO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Operator (participant)
Next question, comes from the line of Xueqing Zhang from CICC, please go ahead.
Xueqing Zhang (Media Analyst)
[Foreign language] 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.
Sam Fan (CFO)
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 Duckov. We already announced a plan to explore Duckov'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.
Juliet Yang (Executive Director of Investor Relations)
Operator, next question, please. Thank you.
Operator (participant)
One moment for the next question. Our next question comes from Liwei Wenzhang from China Renaissance. Please go ahead.
[Foreign language] 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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Rui Chen (Chairman and CEO)
[Foreign language]
Juliet Yang (Executive Director of Investor Relations)
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.
Operator (participant)
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 [Piacente] of Financial Communications. Contact information for IR in both China and the U.S can be found on today's press release. Thank you and have a great day.