CICC has released a research report maintaining its 25/26 Non-GAAP net profit forecasts for BILIBILI-W (09626). The Hong Kong and US shares are currently trading at 33/25x 25/26 Non-GAAP P/E ratios respectively. The firm maintains its outperform rating and, considering the company's user ecosystem and AI empowerment, has raised the target price for Hong Kong shares by 5.7% to HK$204 and US shares by 8.0% to US$27, corresponding to 34/35x 25 Non-GAAP P/E and 26/26x 26 Non-GAAP P/E ratios respectively, with upside potential of 3.7%/6.7%.

**Q2 2025 Non-GAAP Net Profit Slightly Above Expectations**

The company announced Q2 2025 results with revenue of 7.338 billion yuan, up 19.8% year-over-year, essentially in line with consensus expectations (7.33 billion yuan) and CICC's forecast (7.321 billion yuan). Non-GAAP net profit reached 562 million yuan, slightly above consensus expectations (520 million yuan) and CICC's forecast (539 million yuan), primarily due to lower-than-expected selling expenses and R&D costs.

**Advertising Revenue Up 20%, Focus on New Gaming Projects in H2**

**Advertising**: Q2 2025 revenue increased 20.2% year-over-year to 2.449 billion yuan. The company mentioned during its earnings call that Q2 2025 advertising eCPM improved significantly year-over-year, with gaming remaining the largest advertiser industry. CICC suggests monitoring the potential of multi-screen and multi-terminal advertising inventory release in Q3 2025, expecting H2 2025 advertising revenue to maintain approximately 20% year-over-year growth.

**Gaming**: Q2 2025 revenue surged 60.1% year-over-year to 1.612 billion yuan. "Romance of the Three Kingdoms: The Land of Strategic Warfare" maintained stable DAU performance quarter-over-quarter, having entered a high-base period. For new games, CICC recommends monitoring progress of projects including the traditional Chinese version of "Three Kingdoms Strategy," agency games "Codename: Three Kingdoms Ncard" and "Dudu Face Prank," and self-developed game "Escape from Duckov," with revenue contributions expected to materialize from Q4 2025 to 2026.

**Value-added Services**: Q2 2025 revenue grew 10.6% year-over-year to 2.837 billion yuan.

**Gross Margin Continues Sequential Improvement, Focus on Steady Profit Release**

Q2 2025 gross margin improved 0.2 percentage points quarter-over-quarter to 36.5%, primarily due to impressive performance advertising revenue growth and operating leverage. Q2 2025 selling/administrative expenses decreased slightly in absolute terms quarter-over-quarter, while R&D expenses showed modest sequential growth but remained relatively controlled.

CICC believes that in the medium to long term, the company's costs and expenses will remain relatively stable, with revenue growth and structural improvements potentially releasing operating leverage. The firm expects gross margin to gradually improve to 37% by Q4 2025, with long-term potential to reach 40%-45%. Combined with the company's relatively controlled expenses, CICC expects Q4 2025 Non-GAAP operating margin to potentially reach 10%.

**User Operating Metrics Show Healthy Growth, Commitment to Quality Content and Community Atmosphere**

The company's Q2 2025 MAU, DAU, and average daily usage time per user all achieved year-over-year growth, with DAU reaching 109 million in Q2 2025. CICC believes the company's community attributes are distinct and user stickiness remains at high levels.

The company mentioned during its earnings call that advertising budgets are currently shifting from multiple platforms to core platforms, with platforms having differentiated positioning potentially being more favored. Looking ahead, on the commercialization front, as the company continues to refine its commercialization infrastructure capabilities and young user community attributes, CICC recommends continued attention to the development potential of advertising, gaming, and charging programs.