Bilibili Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 21, 2025

Key Takeaways

  • Positive Sentiment: Total net revenues grew 20% year-over-year to RMB 7.3 billion, underpinned by a 46% increase in gross profit and an expanded gross margin to 36.5%.
  • Positive Sentiment: Bilibili turned profitable with GAAP net profit of RMB 218 million and adjusted net profit of RMB 561 million, compared with losses in the prior year period.
  • Positive Sentiment: Daily active users reached 109 million (+7% YoY) and monthly active users hit 363 million (+8% YoY), with average daily time spent rising to 105 minutes (+6 minutes YoY), driving deeper engagement.
  • Positive Sentiment: Advertising revenue climbed 20% YoY to RMB 2.4 billion, with eCPM up over 10%, performance-based ads up ~30%, and AI-powered tools boosting ad creation and targeting.
  • Positive Sentiment: Game revenues surged 60% YoY to RMB 1.6 billion thanks to new SLG title seasons, and Bilibili is expanding its pipeline with casual games and planned international rollouts.
AI Generated. May Contain Errors.
Earnings Conference Call
Bilibili Q2 2025
00:00 / 00:00

There are 4 speakers on the call.

Speaker 2

Good day and welcome to the Bilibili second quarter 2025 financial results and Business Updates 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.

Operator

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 measures we provide are 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.

Operator

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.

Speaker 3

Thank you Juliet and thank you to everyone for joining us today to discuss our 2025 second quarter results. We maintained strong momentum in the second quarter, delivering solid revenue growth alongside our thriving community of high value loyal young users. Total net revenues for the second quarter grew by 20% year over year to RMB 7.3 billion, driven by the continued strength of our core game and advertising businesses. Games revenues rose 60% year over year to RMB 1.6 billion, propelled by new seasons of our popular SLG title. Advertising revenues increased 20% year over year to RMB 2.4 billion, supported by greater AI integration that made our ads more efficient and effective, underpinned by operating efficiency. Our growth in games and advertising drove a 46% year over year increase in gross profit, with gross margin expanding to 36.5% from 29.9% in the same period last year.

Speaker 3

As a result, we achieved GAAP net profit of RMB 218 million and adjusted net profit of RMB 561 million. Our performance reflects our growing influence among China's Gen Z+ audience. By providing users with high quality content they love, we fostered deeper engagement that fuels our commercial ecosystem. In the second quarter, DAUs reached a new high of 109 million, up 7% year over year and MAUs grew by 8% to 363 million. MPUs also grew by 9% to 31 million. The average daily time spent rose to 105 minutes, up 6 minutes compared to the same period last year. Reflecting our continued focus on high quality videos that capture and hold our community's interest in meaningful and fulfilling content, our growing influence among our core users is showing up both online and offline. This year's Bilibili World and Bilibili MacroLink grew in record crowds.

Speaker 3

Over 400,000 participants attended the three day event, 60% more than last year, making it one of the largest offline animation expos in China. The strong turnout reflects the vitality of our brand and the power of our community, showing the tremendous potential of our young users. Their tastes are already shaping mainstream trends and countless more interests within our community are waiting to be unleashed. Looking ahead, we will sharpen our focus on delivering the best PUGV community experience, attracting more users and growing alongside them. At the same time, we will continue to proactively invest in monetization initiatives to drive sustainable profitability. Through these efforts, we are confident in our ability to create long-term value for all of our stakeholders. With that overview, let's take a closer look at our core pillars of content, community, and commercialization.

Speaker 3

Beginning with content and community, we remain firm believers that high-quality content and an engaging community are essential to the lives of today's young generation. Gen Z Plus comes to Bilibili not for quick hits, but for meaningful content they care about, and we're seeing that translate into stronger influence, longer watch time, and greater commercial potential across every corner of our platform. Driven by high-quality PUGV content, the average daily time spent reached 105 minutes in the second quarter, up 6 minutes year over year. Notably, the watch time for videos longer than five minutes increased nearly 20% year over year in Q2, proving Bilibili's undeniable user mindshare to consume mid to long-form meaningful content. Not only are people spending more time, but more people are paying for premium content.

Speaker 3

Monthly paying users increased by 9% year over year to 31 million, driven by premium memberships, fan charging program, and live broadcasting. In the meantime, our community remains engaged and loyal. The number of official members was up by 11% year over year to 270 million, with a 12-month retention rate remaining around 80%. We maintained our dominant leadership in ACG content. Chinese anime content performed strongly during the second quarter, with watch time up 34% year over year, driven by popular titles such as A Record of Mortals, Journey to Immortality, Baron Qiu Xian Zhuan, The Tales of Hurting Gods, and Link Cage Season 2 Lin Long Diar Ji. Game content remained one of our top categories, with watch time increasing by 21% year over year, making Bilibili an essential platform for game developers to engage deeply with the gamer community and strengthen their IP.

Speaker 3

It is also no surprise that AI-related content continues to be a breakout category. Watch time grew 61% year over year, cementing Bilibili's role as the go-to platform for Gen Z Plus to learn, explore, and create with AI. Likewise, AI advertiser demand increased by about 150%, highlighting the great synergy between content value and commercial potential. Meanwhile, consumption-related content categories continue to grow, driven by evolving user behavior. As our Gen Z plus users become more financially independent, they increasingly rely on peer creators for trusted reviews and tutorials when making purchase decisions. This has boosted engagement across verticals. Watch time for home appliance content rose 14% year over year, parenting and early education rose more than 50%, and travel and lodging saw an 11% increase, reflecting growing interest in experience-driven consumption. We continue to enhance our products and services to help creators make more money.

Speaker 3

In the first half of the year, about 2 million creators earned income on Bilibili through various channels. Creators' total income from our fan charging program more than doubled in the first half of the year, once again showing users' increasing willingness to pay for quality content. The number of creators monetizing through Sparkle ads and video and livestream e-commerce also grew 19% and 49% year over year, respectively, in the first half of the year. Now let's talk about our commercial businesses and their progress. Our commercial growth demonstrates how our growing influence among younger users is directly translating into commercial value. Advertising is one of the most direct business lines that shows this. In the second quarter, our ad business grew 20% year over year, reaching RMB 2.4 billion and continuing to outpace the industry's average growth rate.

Speaker 3

During the second quarter, we continue to advance our ad infrastructure, improving ad conversion efficiency through recommendation algorithms, creative generation, and smart ad placement. Through deeper LLM integration with multimodal content understanding, we are capturing user intent more precisely and delivering smarter, more personalized ad recommendations. The upgrades we've made to the AIGC tools are also helping advertisers generate high-performing creative ads at scale. In the second quarter, roughly 10% of new ad titles and over 30% of ad covers were created using these tools, helping advertisers reach users more effectively with content that resonates with their target audiences. We also offer smart ad placement tools to allocate, sequence, and monitor ad performance in real time, significantly reducing manual operations at the same ad spend.

Speaker 3

These enhancements are boosting both efficiency and scalability, improving ECPM by more than 10% year over year and fueling around 30% year over year growth in performance-based advertising revenue in the second quarter. Revenues for brand and native advertising also maintained healthy momentum industry wise. Games, digital products and home appliances, e-commerce, Internet services and automotive were our top five advertising verticals. In the second quarter, the number of advertisers increased by over 20% year over year, reflecting our growing appeal to brands. Leveraging our dominant user mindshare, game developers are allocating larger ad budgets to Bilibili to engage more deeply with young gamers. Demand for 3C and digital products remained robust, supported by our leadership in these categories and national subsidy tailwinds. In e-commerce, Bilibili delivered an average new customer acquisition rate of about 60% for advertisers across industries under the Sinhua Plan.

Speaker 3

During this year's 618 season, GMV from products priced above RMB 1,000 increased nearly 50% year over year, further demonstrating our users' strong purchasing power and our ability to convert user engagement into high intent transactions. Turning to our games business, in the second quarter, revenues increased by 60% year over year to RMB 1.6 billion, owing to Sanmo's enduring strength in its first year and evergreen titles Fate/Grand Order and Azur Lane, which recently celebrated their ninth and eighth anniversaries, respectively. To mark Sanmo's first year anniversary, we rolled out and upgraded Season 8 on May 31, featuring new gameplay, characters and in-game events. Backed by a targeted marketing push, both engagement and retention have been solid as we enhanced onboarding, monetization paths and returning user experiences.

Speaker 3

Building on this strong momentum, we are developing new game seasons, piloting mini program offerings and preparing for Sanmo's international rollout later this year. Looking at our game pipeline, we have a number of games in the approval process, including multiple ACG titles and casual games. Once approved, we are prepared to bring them to our community and further expand our presence in the gaming space. Finally, let's look at our VAS business. Revenues grew 11% year over year to RMB 2.8 billion, driven by steady momentum across live broadcasting, premium memberships and other value-added services. Our focus remains on refining live broadcasting operations by fostering more quality content and diversifying monetization features to support steady growth through refined operation. Gross profit margin for live broadcasting continued to improve in the second quarter.

Speaker 3

Premium memberships maintain stable growth, reaching 23.7 million at the end of the period, with over 80% on annual or auto renewal plans, demonstrating their loyalty and commitment to our platform. Meanwhile, our other value-added services products continued to grow rapidly in the second quarter, especially our fan charging program, which increased by more than 100% year over year, with more users showing their support for the creators and high quality content they love. Looking ahead, our focus remains on what sets Bilibili apart: high quality content that resonates with China's Gen Z+ generation. This is the foundation of our growing influence and the engine behind our expanding commercial opportunities. At the same time, we are actively embracing the transformative opportunities brought by AI, from enhancing operational efficiency to elevating user experience, accelerating monetization, and expanding our global reach.

Speaker 3

These advancements further strengthen our foundation for sustained growth and long term profitability. With that, I will turn the call over to Sam to share more financial details. Sam, please go ahead.

Speaker 1

Thank you, Mr. Chen. Hello everyone, this is Sam. In the interest of time on today's call, I will review our second quarter highlights. We encourage you to refer to our press release issued earlier today for a closer look at our results. In the second quarter, we continued to grow revenues, expand our margins, and grow our profitability driven by growth across our commercial businesses, particularly in our high margin advertising and games businesses. Total net revenues for the second quarter were RMB 7.3 billion, up 20% year over year. Our revenue breakdown for Q2 was approximately 39% from value-added services, 33% from advertising, 22% from games, and 6% from our IP derivatives and other businesses. Our cost of revenues increased by 9% year over year to RMB 4.7 billion in the second quarter, while our gross profit rose 46% year over year to RMB 2.7 billion.

Speaker 1

Our gross profit margin reached 36.5% in Q2 compared with 29.9% 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 2.4 billion, remaining stable compared with the same period last year. S&M expenses increased 1% year over year to RMB 1 billion. G&A expenses were RMB 510 million, up 4% year over year. R&D expenses were RMB 866 million, down 3% year over year, mainly related to R&D efficiency improvements. These efforts allowed us to maintain positive operating results. Our operating profit was RMB 252 million and our adjusted operating profit was RMB 573 million, both compared with losses in Q2 2024. Adjusted operating profit margin reached 7.8% in the second quarter. Net profit was RMB 218 million and adjusted net profit was RMB 561 million versus losses in the prior year period.

Speaker 1

Our adjusted net profit ratio in the second quarter was 7.6% compared with an adjusted net loss ratio of 4.4% in the same period a year ago. Cash flow wise, we generated about RMB 2 billion in operating cash flow in the second quarter. As of June 30, 2025, we had cash and cash equivalents, time deposits, and short-term investments of RMB 22.3 billion or $3.1 billion. During the second quarter, we enhanced our shareholder return by repurchasing approximately 5.6 million Class Z ordinary shares, each equal to 1 ADS, for a total of HKD 783 million or $100 million. As part of our ongoing share repurchase program, these shares have all been cancelled as of the end of the second quarter of 2025.

Speaker 1

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 million, leaving about $84 million available for future buybacks as of June 30, 2025. Thank you for your attention. We would now like to open the call to your questions.

Speaker 3

Operator, thank you.

Speaker 2

To ask a question, please press star 11 on your telephone and wait for your name to be announced. To wheel through your question, please press star one and one again for the benefit of all participants on today's call. If you wish to ask your question to Management in Chinese, please immediately repeat your question in English. The Company will provide consecutive interpretation for Management statement during the Q and A session. Please note that English interpretation is for convenient purposes only. In the case of any discrepancy, Management's statements in their original language will prevail. We will now take the first question from the line of Xuexing from CICC. Please go ahead. Thanks Management for taking my question.

Operator

Congratulations on the strong quarter. My question is about the user ecosystem. We have noticed that the company's DAU and MAU growth accelerated in the first half of this year and the average.

Speaker 2

Daily time span has also continued to increase.

Operator

What are the main drivers and what's your outlook for the future?

Speaker 2

In addition, this summer Bilibili World was set.

Operator

A record with 400,000 solid participants.

Speaker 2

What opportunities can we see for.

Operator

The Bilibili community from Bilibili World's success? Thank you.

Speaker 3

How the.

Operator

In the past 16 years we have been focusing on providing the highest quality content and fostering a thriving, welcoming community culture. Under the current Internet environment, we think the high quality content and supportive, constructive community environment is what's in scarcity. In the current video landscape, there's an oversupply of video content. People are not lacking content to watch, but they're lacking high quality content to watch. The same thing goes with the content, the feedback, the voice from the netizens. There's plenty of voices across all apps, but what is truly missing is those supportive, resonating voices from welcoming, friendly communities. That's what Bilibili will continue to focus on by curating the highest quality content and also fostering a welcoming community environment that allows people to connect over the same interest and designate with each other.

Operator

We believe that by mastering both high quality content and a thriving community culture, users will naturally come, they will be drawn into this unique experience. The user statistics in the second quarter: DAU grew by 7% and MAU grew by 8%. That's a result of us focusing on the quality content as well as a welcoming community environment.

Speaker 3

The Design Tattoo.

Operator

Just like the update we see in light value consumption, content consumption is also evolving, and more importantly, the upgrade in content consumption, particularly in aesthetics and taste, is largely one way. Once someone receives and has watched high quality content, it's very hard for them to go backwards. Over the past 16 years, we have really established a strong presence, users' mind shares in categories like anime, game, and knowledge-based content. There's still a lot of things we can do to further expand surrounding users' interest networks. In addition to that, we think there are more to be done beyond just PGC, for example, podcasts, picture and text-based content, AI-based virtual companionship. There are lots of potentials and tremendous room for us to expand into.

Operator

To summarize, we think that it's an integral part for high quality content as well as a good and welcoming community environment that's actually self-sustaining and ever-evolving. For example, we think the high quality content can attract those people who can truly appreciate this type of content, and the friendly, welcoming, supportive from the users will continue to motivate the content creator to continuously create good content. That's why on Bilibili we've noticed that a talented content creator can be easily discovered by our users, and at the same time, they can quickly adapt and evolve into a larger, more influential content creator. Even for the same content I can see everywhere, the number of interactions and the quality of that interaction is always the best on Bilibili.

Operator

Also, for those high quality content creators, their fan base, their stickiness is the highest, the strongest on Bilibili, and that is a well-established common knowledge among the content creators in China. That's why you see many high quality content has been discovered on Bilibili platform. For example, a few years ago, the first PV of Black Myth: Wukong was discovered by Bilibili user and quickly became viral and so influential across the Internet. Also, a few years ago, we co-produced the mini animation Nobody Lan Wangshan that was also discovered by Bilibili user and became viral, popular, recognized in Bilibili's community. Now we're very glad to see that its big movie is now getting even more wide recipients from audience, and its box office blossom has exceeded RMB 1 billion.

Speaker 3

Hua Zhonghui, Falata, Nigga Nigga, Yoshi and.

Operator

Another example would be flocked yesterday at 4:00 A.M. Black Myth Zhongkui was premiered on Bilibili platform. Within less than 2 days, total video views has already exceeded 12 million, and that's why you see many, many good content will be the most appreciative and be discovered by Bilibili users because we have established that environment that allows high quality content to thrive. This year's Bilibili World has broke many records. We have attracted audience from more than 20 countries and regions, with over 400,000 people attend the events. Among them, 70% came from outside of Shanghai, and 11% of the tickets were purchased by foreign passport. It's safe to say that Bilibili has become the largest ACG event in China, both in terms of scale and influence.

Operator

Even for the Shanghai city, has invented the word of ACG consumption for Bilibili because the event drew a large number of young people to Shanghai, boosting local offline consumption and even become a new cultural landmark for the city. At its core, Bilibili is a real world reflection of Bilibili brand and community. Offline, people not only use Bilibili product, they also come to offline events not named after Bilibili. This shows and reaffirms the influence of IP as well as our community. It's safe to say that Bilibili brand has become a part of the lifestyle of the young generation in China. Thank you operator, next question please.

Speaker 2

Thank you. We will now take the next question from the line of Miranda Zhuang from Bank of America Merrill Lynch. Please go ahead.

Operator

Thank you management for taking my question. My question is about the advertising business. The second quarter ad business beat expectation again. Can management share what are the drivers and looking ahead into the second half, what.

Speaker 2

Are the trends you are seeing for?

Operator

The industry and what's your expectation about companies at business trends and what kind of new products and technologies will you roll out? Thank you. In the second quarter, our advertising business maintained a strong growth, outpacing the overall industry. Quarterly revenue reached a record high of RMB 2.4 billion, up 20% year over year. Speaking of a driver behind that growth, we continue to focus on the one horizontal and vertical strategy. In this quarter, we continue to strengthen our ad infrastructure. Product and technology efficiency allow us to further unleash our users' value and traffic value. The following three points will support that. One is during the quarter, we further enhanced our integrated campaign combining seeding and conversion. In the second quarter, over 50% of the SparQL apps also leveraged our Shibei program, which is the traffic acquisition program we have in our ad system.

Operator

Number two is that we continue to strengthen our marketing data infrastructure, leveraging the multimodal large model to significantly improve our ads delivery efficiency. The last thing is we continue to optimize the deep conversion capabilities. The share of deep conversion doubled in the second quarter year over year, and there's still room for us to improve, and that directly leads to uplift in our overall ad ECPM. From an industry standpoint, in the second quarter, on top five advertisers verticals, there's slight change, which are games, digital products and home appliances, e-commerce, online services, and automotive, and the number of advertisers increased over 20% year over year. In the second quarter, looking at more detailed game review remains our largest verticals. We continue to leverage our high quality full chain conversion capability.

Operator

We further strengthened our market share in premium game advertising while expanding to new scenarios such as Bilibili mini-games and game live streaming, creating incremental revenue opportunities, and professional reviews by our professional content creators and in-depth content from those creators continue to attract advertisers to target their young consumers. In second quarter, home decorations ad revenue grew nearly 70% year over year. We will continue to deepen our vertical marketing solutions while consolidating our leadership in key industries. At the same time, we're looking to expand into broader consumer category.

Speaker 3

The.

Operator

I wanted to ask some June 18th data for your reference. First of all, we continue to press on our open loop strategy and attracting more advertisers to come to Bilibili and see us as a must-invest platform during major sell seasons. The number of advertisers during the June 18 campaign increased 60% year over year, and the engagement between creators and consumers continued to rise. During the June 18 campaign, the total GMV grew over 33% year over year, and the number of creators seeding RMB 10 billion GMV grew over 60% year over year. Here are some data points to show the consumer's trend on Bilibili.

Operator

Digital appliances grew over 50% during the season, household up 85%, even for categories such as maternity and child care, food and beverage, and even watches all grew over 60% year over year, showing Bilibili users' strong consumption power as they grow with the platform. For the second half outlook, there are two points we invite you to take a closer look. One is a broader application and linkage of products and technologies across multiple endpoints and scenarios, including but not limited to PC, OTT, Sanmo, live streaming, search, and trending topics. Any scenario that we can link the consumer with the advertiser, we will be putting more effort into.

Speaker 2

Business.

Operator

The second point will be on AI. We believe the AI will continue to drive improvement not only on efficiency but also delivering actual advertising revenue. One thing is that we'll continue to implement ongoing iteration of our recommendation algorithm, enabling deeper content understanding and more precise ad targeting based on our user interest and historical behavior. Another point would be the AIGC advertising tools to help our advertiser to generate ad covers and titles or even content tailored to Bilibili's users' language and creative style at scale. Currently, about 30% of the ad covers are AI-generated, and there will be more room for us to push the number forward.

Operator

Lastly, on AI-powered automated ad delivery products, we will be launching more of those products to improve our advertisers' cost control capability as well as scaling capabilities. From an industry vertical standpoint, in the near term, we think the advertisers' budget are migrating from multiple platforms to a few core platforms. Platforms that are indispensable and unique will capture larger shares of the client budget. In the longer term, as China's consumer market evolves, advertisers will be placing more emphasis on building their brands on top of the pure sales conversion budget because no advertiser can afford to ignore the influence and purchasing power of young people. On that aspect, we really are in a very unique position. In summary, whether in long term or short term, as long as our community continues to thrive, the value of Bilibili's advertising business will become increasingly evident over time.

Operator

We remain confident in our ability to sustain the growth above industry average. Thank you, operator. Next question please.

Speaker 2

Thank you. We will now take the next question from the line of Felix Liu from UBS. Please go ahead.

Speaker 3

Thank you management for taking my question. My question is on the game business, can management share any color on the recently concluded Sanmo 1st Anniversary Season 8, how should we think about the second half trend for Sanmo as well as for next year and on your new game pipeline, what are the key games that you would like to highlight? Thank you.

Operator

On June 13th, Sanmo celebrated its first anniversary and during that season the DAU broke a record, a new record, and within the year of 2020 the achievement of Sanmo on its first anniversary truly demonstrates that the game has established itself and laid a foundation to become a long-lasting title. We are confident that Sanmo will become a lifestyle with a life cycle of over five years and continue to contribute solid game revenue for us. During the season eight and anniversary celebration event, we have launched multiple new monetization tools such as the limited edition skins, which is well received by our users. We believe, for example, like the skin sales during the anniversary have met with our expectations and shows that we have explored a new monetization tool that's even more healthy and sustainable compared to other tools.

Operator

Going forward, we'll have the new card monetization combining with the skins as well as new innovative monetization model that will help us to make Sanmo even more sustainable and healthy. The most important thing for us is to focus on making every game season the best game season. As long as we continue to provide that experience, we think the users will naturally stay and continue to play with this game. On one hand, we think the overall development capacity for Sanmo has improved quite a lot and each new game season will be featuring richer content and moving forward we will continue to optimize the gameplay, make it more fun, more balanced, and make the game even more engaging on top of the new user acquisition.

Operator

Going forward, we'll be putting more emphasis on retaining and activating the old users because this game has sustained eight game seasons and there will be a lot of old users or dormant users. It's very important for us to activate and awaken those existing users who have played Sanmo but have left or left the game for some reason. This will be a very important channel for us to maintain a healthy game community. As far as we see so far, the user retention rate has been maintained at a very healthy level. We are expecting to launch the traditional Chinese version of Sanmo at the end of this year or early next year to the players in Hong Kong, Macau, and Taiwan. We are also going to request for potential releases in overseas markets such as Japan and Korea.

Operator

Looking at our pipeline, we currently have four to five games that's waiting for licensing approval, and once the approval is being obtained, the game will be releasing accordingly. In short term, we will be expecting to release a casual game based on Non Sango IP, which I believe is quite fun and entertaining to look forward to. Going forward, we'll continue to execute on the strategy of creating games, reinventing games for the new generation of gamers, and we'll be exploring new game genres and making innovation across different genres. There are a number of potential categories in the pipeline, and we're quite looking forward to offer your next question, please. Thank you.

Speaker 2

Thank you. We will now take the next question from the line of Lincoln Kong from Goldman Sachs. Please go ahead.

Speaker 3

Thank you for taking my questions. My question is about our profit margin. We have in our group profit margin continue to trend high. What are the potential areas of our cost efficiency and the cost discipline going forward? How should we think about the second half in terms of our profitability outlook and any timeline to achieve our media target, the 15% above operating margin, and in terms of use of the cash? What are the future areas of capital allocation? How should we think about our shareholder return policy? Thank you.

Speaker 1

Thank you. Lincoln, this is Sam. I will take your question. In Q2 our top line grew by 20%, our gross profit increased by 46%, so we saw very strong operating leverage here. Our gross margin has been increased sequentially for 12 quarters. We expect the same trend to continue in the second half of this year, reaching around 37% by Q4, let's say. We still maintain our mid term gross profit margin target of 40% to 45%. For the OpEx, we have continued to improve our efficiency of the operation. If you look at the absolute dollar amount of our OpEx in the first half of this year, it keeps flat year over year.

Speaker 1

We expect the year over year.

Speaker 1

Decline of the OPEX in the second half because in the second half last year we have more marketing spending on Sanmo at the first two quarters. For the profitability over the past two years our gross margin grow very well and our operating profit has grown even faster outpacing our gross margin improvements. In Q2 the operating margin was 7.8%. We are confident that we can achieve quarter over quarter improvement to achieve like 10% adjusted operating margin in Q4 this year. We met our midterm target of 15 to 20% for our operating margin. Regarding the cash usage to enhance our shareholder returns, we already repurchased $100 million shares in our Hong Kong line in Q2 and we have canceled all those repurchased shares. Under the current $200 million buyback program, we still have $83 million remains available and we have sufficient US dollar cash reserve offshore.

Speaker 1

The structures will continue based on the market conditions. Thank you for your question.

Speaker 2

Thank you.

Operator

Over to your next question, please.

Speaker 2

Thank you. We will now take the next question from the line of Yuwen Tsang from China Renaissance. Please go ahead.

Speaker 3

Thank you for taking my question. My question is on AI. Can you discuss what kind of AI application we have on platform and what is the latest progress? Thank you, Chance.

Operator

As a matter of fact, the AI application or adoption across multiple scenarios has already started to generate. For example, the advertising revenue grew by 20% year and Carly Lee mentioned AI has played an important role behind that number. For example, the AIGC cover title generation has meaningfully improved the click-through rate and also from behind the MAU and DAU number increases. AI also played a vital role in terms of delivering the right content to the right users, and on the topic of providing high quality content and fostering a friendly community, we have also leveraged the AI capability to amplify visibility strength through early identification of high quality content through understanding the user's commentary session, and that has helped us to promote high quality content at a very early stage and allow that content to be seen by more people.

Operator

This has already shown in our user matrix and community engagement.

Speaker 3

Kalani.

Operator

I'll elaborate on three aspects of how AI is helping Bilibili to become better. One is that AI can really amplify Bilibili's strength from one aspect. One example would be every day there will be over 1 million long comments generated by our users. In that era of AI, that means about 1 billion people helping the AI to map the content to identify the content as good content, good data points, and this asset, this type of long comment generated by real Bilibili users, is a truly unique data asset for us to identify high quality content at a very early stage and promote that across our platform. We already have specific tools to help us to amplify that strength, and we will be adapting that technology going forward across multiple content categories and scenarios.

Speaker 3

Ginger.

Operator

The second is on AI-assisted content creation for mid to longer form video. We've seen other players have made even open source tools for short video creation, but that's merely just on the video material itself, no longer than 30 seconds. Whether AI can make mid to longer form video, the question, we think the answer is yes. On one hand, we've seen other players in the market have tools to make mid to longer form videos, but it just seems at first look it's produced by AI. However, we think we have the ability to make human-like mid to longer form video because we have the best and most talented content creators on our platform who can help us to make this into reality.

Operator

We will be launching that product very soon, and we think it might be the best human-like mid to longer form AI video creation tool that's out there.

Speaker 3

Shanajan so.

Operator

The purpose of that tool of course goes back to help our content creator to lower their barriers and improve their production efficiency and contributing to overall content supply rather than making AI-generated video. We think another analogy is to make a very good Chinese food, you will have the Chinese ingredients not just to offer them microwave. We are here to offer the ingredients and on areas that Bilibili has key advantage on, for example such as animation, virtual idol and big virtual streamers, AI also has a strong potential to help us to meet the demand of those ACG lovers. It can for example the virtual companionship by a virtual streamer or virtual idol that can be very effectively resolved by the help of AI and we have already dabbled on that area and there will be product launched soon to the market. All right, thank you operator.

Operator

That concludes the question and answer session. Back to you.

Speaker 2

That concludes the question and answer session. Thank you once again for joining Bilibili second quarter 2025 financial results and business update conference call today. If you have any further questions, please contact Juliet Yang, Bilibili's Executive IR Director or Piacme 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.

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