Nomura maintains a Neutral rating on Bilibili with a USD26 target price

Overview

This report is Nomura's quick take on Bilibili Inc's company research. The core conclusion is that 1Q26 results and 2Q26 guidance were broadly in line with expectations overall, but the internal mix was clearly divergent. 1Q26 revenue met consensus expectations, while profit beat due to improved operating efficiency; the advertising business continued strong growth and was the main offset to weaker gaming. Nomura keeps its Neutral rating and USD26 target price, and believes short-term gaming headwinds, the AI investment cycle, and relative valuation versus large internet peers such as Tencent will limit the rebound potential for the mid-cap internet stock.

Core views

First, advertising is the key support for current performance: 1Q26 ad revenue grew 30% y/y, and management guided 2Q26 ad growth to the high-20% range, also expecting 2H26 ad growth to outpace the broader ad market. Second, online gaming remains the main drag: 1Q26 gaming revenue fell 12% y/y, and 2Q26 is expected to decline by low double digits, weaker than the market's prior expectation of roughly a 7% decline. Third, AI investment is entering a ramp-up phase: FY26 AI-related capex is budgeted at about CNY1.0bn, which could create about CNY500mn of gross profit pressure, though management said optimization measures will partially offset that. Fourth, on shareholder returns, the original USD200mn buyback authorization has been used up, and the board is assessing a new authorization.

Analysis framework

The report uses an earnings quick-take framework, comparing 1Q26 revenue, profit, and segment performance against consensus expectations, and then assessing 2Q26 management guidance, advertising growth quality, gaming product cycles, AI capex, and relative valuation. On valuation, Nomura uses P/E as the primary method, deriving the USD26 target price from 25x FY26F P/E, and compares Bilibili's roughly 19x FY26F P/E with Tencent's roughly 14x FY26F P/E on a relative basis.

Methodology notes

• Valuation methodsP/E multiple valuation

  Deriving the USD26 target price from 25x FY26F P/E

  Nomura says P/E is the main valuation method for Bilibili, and the 25x multiple corresponds to the company's historical average P/E over the past year; the stock currently trades at about 19x FY26F P/E.

• Performance verificationConsensus comparison

  Deviation between actual results/guidance and market expectations

  The report compares 1Q26 revenue, non-GAAP net profit, and 2Q26 revenue and operating profit guidance against Bloomberg/market consensus, concluding that revenue was in line, profit beat, and 2Q guidance was broadly in line overall but diverged by segment mix.

• Segment analysisRevenue mix decomposition

  Ad growth offsetting gaming revenue declines

  The report treats advertising and online gaming as the key segments, emphasizing high ad growth, improving eCPM, and a higher share of performance-driven ads, while noting that gaming was affected by a high base and accounting deferral adjustments.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• BILI.US

  covered name

  Strengths

  High ad revenue growth, improved operating efficiency, non-GAAP net profit beat, and pause ads in video not yet included in FY26 ad growth guidance.

  Weaknesses

  Declining online gaming revenue, 2Q26 gaming guidance weaker than market expectations, and rising AI capex and expense pressure.

  Comparison

  The report says Tencent (700 HK, Buy) trades at about 14x FY26F P/E and has more resilient core ad and gaming businesses, making it more attractive on a relative basis than Bilibili at about 19x FY26F P/E.

  Risks

  Gaming product cycles falling short of expectations, lower-than-expected AI investment returns, slower ad growth, and reduced market risk appetite for mid-cap internet stocks.

• Tencent (700 HK)

  relative valuation benchmark

  Strengths

  The report says its core ad and gaming businesses are more resilient and its valuation at about 14x FY26F P/E is cheaper.

  Weaknesses

  The report does not discuss Tencent's weaknesses in detail, using it mainly as a comparison point.

  Comparison

  Tencent is used as the benchmark for Bilibili's valuation and upside potential; the report argues that Tencent's sharp pullback may cap the rebound of mid-cap internet stocks.

  Risks

  The appendix says risks to Tencent's target price realization include high market expectations, aggressive spending on WeChat Pay and overseas marketing, and potentially disruptive products or business models from competitors.

Key data

• 1Q26 total revenueCNY7.5bn, up 7%Broadly in line with consensus.
• 1Q26 advertising revenueCNY2.6bn, up 30%Ad growth offset the decline in online gaming revenue.
• 1Q26 online gaming revenueCNY1.5bn, down 12%Gaming was the main pressure point in the revenue mix.
• 1Q26 non-GAAP net profitCNY593mn, up 63%11% above market expectations.
• 1Q26 non-GAAP operating margin7.0%, up 2.1 percentage points y/yDriven by efficiency improvements.
• 2Q26 advertising revenue guidanceHigh-20% y/y growthAbove the roughly 23% y/y growth expected by the market before the report.
• 2Q26 online gaming revenue guidanceLow double-digit y/y declineWeaker than the market's prior expectation of about a 7% decline, mainly due to the high base from San Mou.
• FY26 AI-related capex budgetAbout CNY1.0bnManagement estimates about CNY500mn of gross profit impact, of which about CNY100mn was already recognized in 1Q26.
• Target priceUSD26Based on 25x FY26F P/E; rating maintained at Neutral.
• Current valuationAbout 19x FY26F P/EThe report notes Tencent is at about 14x FY26F P/E and has a more stable core business, creating relative valuation pressure.

Impact & implications

For investors, Bilibili's near-term fundamentals show a combination of strong ads, weak gaming, improving profit efficiency, and rising AI investment. Continued high growth in the ad business and potential monetization from pause ads in video offer upside, but falling gaming revenue, the impact of an extended deferred revenue period for San Mou starting in 3Q26 on reported 2H26 gaming revenue, and the earnings pressure from AI spending mean Nomura does not see a clear re-rating catalyst yet. Relative to large internet peers, especially Tencent, which has a lower FY26F P/E and more resilient ad and gaming businesses, Bilibili's appeal as a mid-cap internet name is also weaker.

Risks

• Continued declines in online gaming revenue or weaker-than-expected launches for new games such as Lumi and San Wang.
• From 3Q26, the extension of San Mou's revenue deferral period from three months to four months may weigh on reported 2H26 gaming revenue.
• If optimization measures are insufficient, the roughly CNY1.0bn of FY26 AI-related capex could create greater earnings pressure than management expects.
• If ad growth falls short of the high-20% guidance, or if improvements in eCPM and the mix shift toward performance-driven ads slow, earnings support will weaken.
• Relative valuation remains unattractive, especially if large internet peers such as Tencent trade at lower multiples and maintain more resilient core businesses, limiting the rebound in mid-cap internet stocks.

What to watch

• Whether 2Q26 ad revenue can achieve high-20% y/y growth.
• Whether the low double-digit decline in 2Q26 online gaming revenue widens.
• The actual impact of the 3Q26 accounting change on San Mou and 2H26 reported gaming revenue.
• The launch progress and grossing performance of Lumi and San Wang in 4Q26.
• The testing, launch pace, and actual monetization contribution of pause ads in video.
• FY26 AI-related capex, the pace of expense recognition, and the actual impact on net profit.
• Whether the board approves a new share repurchase authorization.