Goldman Sachs: Bilibili's Advertising Growth Sustains, AI Empowers Content and Monetization

Overview

This report summarizes Goldman Sachs' non-deal roadshow (NDR) with Bilibili, focusing on user growth under differentiated content ecosystem, strong advertising momentum, and gaming pipeline improvements. The firm believes AI is enhancing Bilibili's content supply and distribution efficiency, driving DAU and user time growth. Advertising revenue surged 30% YoY in 1Q26 due to traffic growth and scenario expansion, with management confident in outperforming industry in H2. Gaming visibility improves with multiple new titles launching in H2 2026. Goldman maintains Buy rating with substantial upside target price.

Core views

Content & Community: AI as structural catalyst. Bilibili's high-quality mid/long video strategy combined with AI-driven production efficiency and recommendation accuracy accelerated DAU and user time growth. AI lowered creator barriers, especially in PUGC, with 1Q26 daily active creators +6% YoY and daily submissions +19% YoY. AI-powered verticals like AI music grew triple digits, driving overall music category growth over 25%. Creator ecosystem expanded across tiers, with top creators seeing significant income growth via diversified monetization (e.g., 'charging' income +50% YoY). Advertising: Strong momentum sustainable. 1Q26 ad revenue +30% YoY driven by total user time (+19% YoY), efficiency gains, and new monetization scenarios. Top verticals: gaming, internet services, consumer electronics, e-commerce, and auto. Notably, mature user base (avg. age 26.5) drove 130%+ YoY growth in home appliances; AI-related ads grew 170%+ YoY. Management expects high 20%+ growth in 2Q26 and continued industry outperformance in H2, supported by PC/OTT ads (+50%+ YoY) and new scenarios like search/mini programs. Gaming & AI Investment: Pipeline tilts to H2. Gaming: 'Three Kingdoms: Ncard' launches in July with good retention; self-developed casual game 'Shine! Lumy' targets global release in Q3/Q4; SLG 'Three Kingdoms: Path of Kings' expected in Q3/Q4 with meaningful revenue contribution due to high ARPU/pay rate. AI investment: FY26 capex guided at RMB1 billion with ~RMB500 million P&L impact, partially offset by efficiency gains (net profit impact <RMB500 million). AI tools like 'Peanut' and 'Updream' show commercialization potential, latter achieving >RMB100 million ARR within one month of soft launch.

Analysis framework

Goldman employs fundamental-driven, segment-verified analysis. First, examines how AI infrastructure optimizes content supply/distribution efficiency, translating to quantifiable user time/stickiness growth (DAU, Timespent data). Second, maps user traffic growth directly to ad monetization by decomposing ad revenue drivers (traffic, efficiency, scenarios) and vertical performance to assess sustainability. Finally, evaluates gaming visibility via product pipeline timing and characteristics (e.g., SLG's high ARPU), while conducting cost-benefit analysis on AI investment to distinguish capex from net profit impact, addressing market concerns about profit drag.

Methodology notes

• Valuation MethodDCF Discounted Cash Flow

  DCF discounted cash flow model

  Goldman uses DCF for target price (WACC 12.5%, terminal growth 3%), forecasting future free cash flows to assess intrinsic value—ideal for growth-stage companies like Bilibili with improving cash flows.

• Industry Analysis FrameworkSupply-demand framework

  Content ecosystem supply-demand balance

  Report analyzes how AI lowers creation barriers (supply) and improves recommendation efficiency (demand matching), breaking past high-quality content supply constraints—core logic behind user growth/stickiness.

• Corporate Fundamentals & Financial Framework

  AI investment cost-benefit analysis

  Report quantifies AI capex (RMB1 billion) and P&L impact (~RMB500 million), noting efficiency offsets, clarifying short-term profit impact—helping investors gauge tech investment effects.

Asset mapping & comparison

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

• Bilibili Inc. (BILI.US / 9626.HK)

  Primary beneficiary: Core benefits from strong ad growth, new game releases, and AI-driven efficiency gains

  Strengths

  Differentiated mid/long video ecosystem, AI-enhanced content supply/distribution, advertising outperformance, improved gaming pipeline

  Weaknesses

  Content cost/revenue share may sustain losses if not aligned with income; gaming revenue sustainability needs monitoring

  Comparison

  Vs. short-video platforms: Structural advantages in user stickiness/community; vs. traditional gaming firms: Lower user acquisition costs via content ecosystem

  Risks

  Macro-driven ad slowdown, underperforming games, uncontrolled content costs

Key data

• 1Q26 Advertising Growth+30% yoyDriven by total user time +19% yoy
• 1Q26 Daily Submissions Growth+19% yoyAI lowers creation barriers, expanding content supply
• 1Q26 Fan Charging Income Growth+50% yoyHigh-paying fans support top creators (>20% pay rate)
• FY26 AI Capex GuidanceRMB1 billionNet profit impact expected under RMB500 million
• Updream Tool ARR>RMB100 millionAchieved within one month of soft launch, showing strong creator demand
• US Target PriceUS$28.9Based on DCF, implying ~67.8% upside

Impact & implications

Bilibili is transitioning from pure user growth to high-quality monetization. AI deepens moat in mid/long video while boosting ad efficiency and creating new scenarios (e.g., AI advertisers). Gaming pipeline diversifies revenue, providing H2 upside. Investors see clearer profit path with AI efficiency gains supporting valuation recovery.

Risks

• Macro slowdown reducing ad spend or slower-than-expected monetization
• Gaming revenue sustainability below expectations
• Persistent losses if content cost/revenue share ratio doesn't decline

What to watch

• 2Q26 ad revenue: Whether high 20%+ YoY growth materializes
• 'Three Kingdoms: Ncard' post-July launch user scale/retention
• 'Three Kingdoms: Path of Kings' and 'Shine! Lumy' Q3/Q4 launch progress/early feedback
• AI tools (e.g., Updream) commercialization and creator adoption