In line with market expectation. In 2Q26, total revenue was up by 8% YoY to RMB7.94bn, in line with market expectation of RMB7.92bn; adjusted net income increased by 26% YoY to RMB708mn, in line with market expectation of RMB690mn. Looking ahead, we see Bili’s target to deliver high-single-digit% yoy topline, low 20% yoy ads in 3Q and continued OP margin expansion towards 10% to low-teen% level in 2H despite the AI investment as a solid indicator of resilience in the company’s differentiated platform in the AI era and cost efficiency potential. Looking into 4Q26 and 2027, we believe Bili will enter a fresh product cycle for games and see accelerating topline/profit growth.

Healthy user community and margin expansion. Bili’s overall mid-teens% yoy timespent growth suggests still healthy user community status, and we believe AI generated content is so far fueling the growth and user dynamics on the platform, rather than potential competitive threats. For the margin, 2Q26 OPM at 8%+ and 3Q guided to further expansion of 10%, suggesting continued favorable revenue mix and cost discipline. We see the management balancing well profits vs. investment, and believe the company is now on track for RMB1bn AI capex/investment, mainly for internal AI usage.

Ads sequentially slower but still show relative strength. Given the weak macro into 3Q, Bili is now targeting low 20% yoy ads growth in 3Q, slower vs. high 20% yoy in 1H26. This slowdown is reasonable given the high comp, and we note that the 20%+ yoy growth is still much faster vs. industry and ahead of most of Internet peers. Ad load lift and better ads target/matching efficiency should help Bili sustain a faster-than-industry growth in coming quarters.

Games set for accelerate from 4Q26 onwards. While Bili has experienced a few quarters of game revenue decline due to lack of new games, we believe growth is set to accelerate with the launch of series new games. We expect Lumi Master (global release on Sep 17, 2026) and Sangokushi: Wangdao Tianxia (end-4Q26) launch by year-end and another few key titles including Sanguo: The Ravages of Time and RO3 for 2027, as BILI renews fresh product cycles.

Key Catalysts & Upside Drivers, and Downside Risks.

Key Catalysts & Upside Drivers

* Accelerated Share Repurchase Program: Year-to-date, the company has repurchased 5.8 million shares for $118 million (approximately 2% of current market cap). In June 2026, the board approved an upsized $300 million buyback authorization spanning two years—a step-up in capital return relative to the previous program. Execution has progressed rapidly, with $30 million completed in June alone.

* Favorable Base Effect & Pipeline Momentum: Growth is set to re-accelerate in H2 as high comparison baselines fade. As the company approaches the launch of its new gaming cycle in 4Q26, market sentiment is expected to recover further.

Key Downside Risks

* Overhang from Major Shareholder Divestment: Tencent’s recent stake reduction presents a short-term headwind for the stock. With Tencent still holding a 4% equity interest in Bilibili, potential further divestment may continue to weigh on valuation in the near term.

Bilibili’s stock is currently trading at US$16.77 per ADS, with a diluted EPS of US$ 0.56/0.86 in 26E/27E, corresponding to 30x/20x P/E. This compares to the peer group, which is trading at 20x and 16x P/E, respectively. We project the company to sustain upper-single-digit top-line growth and 20%+ bottom-line growth over the next two years, outpacing industry peers.