2Q26 Results in Line; Advertising Resilience and New Game Cycle Support Renewed Growth Acceleration

Overview

The report reviews Bilibili's 2Q26 results, 2H26 guidance, and revisions to 2026—2028 forecasts. Goldman Sachs' core view is that the user ecosystem remains healthy, the advertising business retains relative resilience despite a sequential slowdown, AI investment has not disrupted the margin expansion trend, and new games from 4Q26 through 2027 will initiate a new product cycle. Goldman Sachs reiterates its Buy rating but lowers its 12-month target prices.

Core views

Bilibili's 2Q26 results were broadly in line with expectations, while its 2H26 outlook at least partially alleviated investors' earlier concerns that slowing revenue and higher costs from AI investment would compress margins. The company targets high-single-digit year-on-year total revenue growth and low-20% year-on-year advertising revenue growth in 3Q26, while further increasing its 2H26 operating margin to the 10% to low-teens range despite continued AI investment. Goldman Sachs views these targets as signals that the platform's differentiated competitiveness and cost efficiency remain resilient. The user ecosystem remains healthy. Total platform usage time increased by approximately mid-teens year on year in 2Q26; the financial summary shows approximately 371 million monthly active users and 117 million daily active users in 2Q26, with a DAU/MAU ratio of 31%. Goldman Sachs believes AI-generated content is currently contributing more to content supply, user growth, and community vitality than posing a material competitive threat. Its long-term forecasts indicate that monthly active users are expected to increase from 368 million in 2025 to 392 million in 2028, daily active users from 112 million to 128 million, and the DAU/MAU ratio from 30% to 33%. Although advertising growth is slowing, its relative performance remains strong. Given the weaker macroeconomic environment and a high comparison base in 3Q26, the company set its 3Q26 advertising revenue growth target at the low-20% year-on-year range, below the high-20% year-on-year growth in 1H26. Goldman Sachs considers this slowdown reasonable, and growth above 20% would still be significantly faster than the industry and most internet peers. Higher ad load and improvements in targeting and matching efficiency should help the company continue delivering faster-than-industry advertising growth over the next several quarters. The margin expansion trend has not changed because of AI investment. The operating margin exceeded 8% in 2Q26, while 3Q26 guidance increased further to approximately 10%, reflecting continued benefits from an improved revenue mix and cost discipline. Goldman Sachs believes management has achieved a good balance between profitability and investment; the company currently expects approximately RMB1 billion in AI capital expenditure and investment, mainly for internal applications. Goldman Sachs expects the EBITDA margin to rise from 15.4% in 2025 to 15.5% in 2026, 16.4% in 2027, and 18.6% in 2028, while the net margin is expected to increase from 8.5% to 9.4%, 11.4%, and 13.1% over the same period; gross margin is expected to rise from 37% in 2025—2026 to 39% in 2027 and 40% in 2028. The gaming business is about to enter a new product cycle. Due to a lack of new games, Bilibili previously experienced declining gaming revenue for several consecutive quarters; Goldman Sachs expects growth to accelerate from 4Q26 as a series of new titles is launched. Specific products include "Lumi Master," scheduled for global launch on September 17, 2026, "Three Kingdoms: The Way of the King," scheduled for launch at the end of the fourth quarter of 2026, and key titles such as "Three Kingdoms: The Ravages of Time" and "RO3," scheduled for release in 2027. Goldman Sachs believes this new product portfolio will accelerate total revenue and profit growth in 4Q26 and 2027. Regarding earnings forecasts, Goldman Sachs fine-tuned its 2026—2028 revenue forecasts by approximately 0%—1%, as improved visibility into the new game pipeline and better-than-expected value-added services performance offset weaker advertising growth. The new revenue forecasts are RMB32.971 billion, RMB36.5425 billion, and RMB39.6852 billion, respectively, compared with previous forecasts of RMB32.8264 billion, RMB36.2637 billion, and RMB39.2685 billion; the corresponding revenue growth rates are 8.6%, 10.8%, and 8.6%. However, to incorporate potential AI-related investment, Goldman Sachs lowered its 2026—2028 adjusted net profit forecasts by approximately 1%—8%. Diluted EPS excluding exceptional items is forecast at RMB6.82, RMB8.91, and RMB10.73, respectively, compared with previous forecasts of RMB6.80, RMB9.17, and RMB11.48. Based on the prices in the report, the forecast P/E multiples for 2026—2028 are 15.9x, 12.2x, and 10.1x, respectively, while free cash flow yields are 7.9%, 12.0%, and 13.2%. Regarding valuation, Goldman Sachs continues to use a 12-month DCF framework but lowers its target prices for BILI ADRs and 9626.HK from US$28.9 and HK$226 to US$27.7 and HK$216. The terminal growth rate remains at 3%, while WACC is raised from 12.5% to 12.7% to reflect a slightly higher beta. Based on the current prices of US$16.15 and HK$129.70 listed in the report, the two target prices imply potential upside of 71.5% and 66.5%, respectively. Goldman Sachs therefore reiterates its Buy rating.

Analysis framework

Goldman Sachs first compares the actual 2Q26 results and management's 2H26 guidance with the market's earlier concerns, then assesses the health of the community through user engagement time and activity levels. It subsequently analyzes advertising growth, ad load, and matching efficiency to evaluate monetization resilience, while assessing cost efficiency based on the operating margin and approximately RMB1 billion in AI investment. The report then maps the product cycle according to game launch schedules, adjusts segment revenue and earnings forecasts for 2026—2028, and finally calculates 12-month DCF target prices using updated cash flow forecasts, WACC, and the terminal growth rate.

Methodology notes

• Valuation MethodDiscounted Cash Flow (DCF)

  12-Month DCF Target Price

  The report discounts the company's future cash flows to present value and adds a terminal value to calculate the target price. This valuation uses a WACC of 12.7% and a terminal growth rate of 3%; WACC was raised from the previous 12.5%, resulting in lower target prices for the securities listed in both markets.

• Event Trading and Behavioral FinanceEvent-driven analysis

  Quarterly Results and Forward Guidance Analysis

  Using the 2Q26 results and management's 3Q26 and 2H26 guidance as catalysts, the report tests market concerns about slowing revenue and AI investment squeezing margins, and updates its revenue, earnings, and valuation views accordingly.

Asset mapping & comparison

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

• Bilibili ADR (BILI)

  A US-listed security that reflects changes in the company's fundamentals arising from its user ecosystem, advertising monetization, margin expansion, and new game cycle.

  Strengths

  User engagement time maintained mid-teens year-on-year growth, advertising growth outpaced the industry and most internet peers, and the operating margin continued to expand.

  Weaknesses

  Advertising growth slowed from 1H26, gaming revenue previously declined for several consecutive quarters due to a lack of new titles, and AI investment reduced some earnings forecasts.

  Comparison

  The report believes its advertising growth of more than 20% year on year remains significantly faster than the industry and most internet peers.

  Risks

  Advertising may slow due to macroeconomic conditions or monetization execution, game revenue and its sustainability may fall short of expectations, and content costs or revenue-sharing expenses may fail to decline as a percentage of revenue.

• Bilibili H Shares (9626.HK)

  A Hong Kong, China-listed security representing the same company fundamentals and Goldman Sachs' Buy view as the ADR.

  Strengths

  A healthy user community, improved advertising matching efficiency, cost discipline, and an upcoming new game cycle.

  Weaknesses

  The advertising business faces macroeconomic and high-base pressures, AI investment is increasing, and gaming growth depends on new title launches and commercial performance.

  Comparison

  The report believes its advertising growth is faster than the industry and most internet peers; it does not differentiate between the operating fundamentals of the two listed securities.

  Risks

  Advertising may slow due to macroeconomic conditions or monetization execution, game revenue and its sustainability may fall short of expectations, and content costs or revenue-sharing expenses may fail to decline as a percentage of revenue.

Key data

• 12-Month Target PriceBILI: US$27.7; 9626.HK: HK$216Previously US$28.9 and HK$226, respectively; Buy rating reiterated.
• Current Price and Potential UpsideBILI: US$16.15, 71.5%; 9626.HK: HK$129.70, 66.5%Calculated based on the prices and target prices listed on the report's cover page.
• 3Q26 Operating GuidanceHigh-single-digit year-on-year total revenue growth; low-20% year-on-year advertising growth; operating margin of approximately 10%Advertising growth is below the high-20% year-on-year growth in 1H26, but the report believes it remains faster than the industry and most internet peers.
• 2Q26 Users and MarginMAU 371 million; DAU 117 million; DAU/MAU 31%; operating margin above 8%Total platform usage time increased by approximately mid-teens year on year.
• AI InvestmentApproximately RMB1 billionMainly for internal AI applications.
• 2026—2028 Revenue ForecastsRMB32.971 billion, RMB36.5425 billion, RMB39.6852 billionFine-tuned by approximately 0%—1% from previous forecasts; corresponding year-on-year growth rates are 8.6%, 10.8%, and 8.6%.
• 2026—2028 Diluted Adjusted EPSRMB6.82, RMB8.91, RMB10.73Previous forecasts were RMB6.80, RMB9.17, and RMB11.48; adjusted net profit forecasts were lowered by approximately 1%—8% due to AI investment.
• 2026—2028 ValuationP/E 15.9x, 12.2x, 10.1x; FCF yields 7.9%, 12.0%, 13.2%Based on Goldman Sachs forecasts and the prices in the report.
• DCF ParametersWACC 12.7%; terminal growth rate 3%WACC was previously 12.5% and was raised this time due to a slightly higher beta.
• Key Game Launch Schedule"Lumi Master" global launch on September 17, 2026; "Three Kingdoms: The Way of the King" launch at the end of the fourth quarter of 2026Key titles such as "Three Kingdoms: The Ravages of Time" and "RO3" are scheduled for release in 2027.

Impact & implications

Goldman Sachs believes Bilibili's user engagement, relative advertising growth, and cost discipline demonstrate that its platform remains differentiated and resilient in the AI era. If new games launch as scheduled, revenue and profit growth could accelerate from 4Q26; however, increased AI investment and a higher discount rate have reduced near-term earnings forecasts and target prices. The report's positive view therefore depends more on operational improvement and the new product cycle than on higher valuation assumptions.

Risks

• A weaker macroeconomic environment or slower-than-expected advertising monetization execution could cause advertising revenue growth to decelerate further.
• Revenue from new games and its sustainability may be weaker than expected.
• The company could incur losses if content costs or revenue-sharing expenses fail to decline as a percentage of revenue as revenue grows.

What to watch

• Monitor whether 3Q26 can achieve high-single-digit year-on-year total revenue growth, low-20% year-on-year advertising growth, and an operating margin of approximately 10%.
• Monitor the execution of approximately RMB1 billion in AI investment and whether the 2H26 operating margin can continue expanding toward the 10% to low-teens range.
• Monitor the performance of "Lumi Master" following its global launch on September 17, 2026.
• Monitor whether "Three Kingdoms: The Way of the King" can launch as scheduled at the end of the fourth quarter of 2026.
• Monitor the launch progress and revenue sustainability of key 2027 games such as "Three Kingdoms: The Ravages of Time" and "RO3."
• Monitor whether ad load, targeting, and matching efficiency can continue supporting faster-than-industry growth.