China Galaxy Securities has released a research report noting that since 2025, driven by AI-related catalysts and earnings recovery in some sectors, the media industry recorded significant gains during the year, but these gains have been largely erased in 2026. Looking ahead, the core of the media industry remains the production and creation of high-quality content, which occupies the mid-to-upper reaches of the media industry chain and value chain and has always been a scarce resource in the sector. Therefore, the long-term value of high-quality content production companies remains intact. The brokerage believes that although market sentiment in the earlier period favored hardware-side AI infrastructure, as hardware-side AI infrastructure continues to develop, it will ultimately transmit to downstream segments of the industry chain, and earnings-driven growth combined with AI empowerment remains the core driver of growth for the media and internet industry. The main views of China Galaxy Securities are as follows:
Revenue grows year-on-year while profit declines year-on-year
A review of the performance of 125 companies in the SW media industry for the first three quarters of 2026 shows that the media industry (excluding ST companies, as of October 31) achieved operating revenue of 394.1 billion yuan in the first three quarters of 2026, up 2.0% year-on-year. By segment, advertising and marketing, gaming, and publishing accounted for relatively high proportions of revenue at 34.7%, 25.5%, and 22.0%, respectively. In terms of net profit attributable to parent company shareholders, the media industry recorded 30.76 billion yuan in the first three quarters of 2026, down 5.9% year-on-year.
Gross margin rises steadily while net margin fluctuates slightly
In the first three quarters of 2026, the average gross selling margin of the media industry was 33.8%, a slight increase compared with the same period in 2025 (yoy+1.0pct); the average net selling margin was 8.0%, down 0.6pct from the same period in 2025. The increased revenue share of high-gross-margin segments drove an overall improvement in the industry's gross margin, but at the same time, some segments turning to negative profit year-on-year dragged down the industry's overall net margin performance. Compared over a longer time frame, the industry's overall gross selling margin has remained stable, while the net selling margin has fluctuated slightly.
AI continues to empower core sub-sectors, and the industry still has relatively high growth potential
At present, the media industry's average price-to-earnings ratio is 30.9% lower than the historical average since 2013, while the average price-to-earnings ratio of all A-shares is 2.2% lower than the historical average since 2013. As of the end of October 2026, the overall price-to-earnings ratio of the media industry was 22.9 times (TTM overall method, excluding negative values), while that of all A-shares was 14.9 times. The brokerage believes that the sector experienced overall volatile adjustment during the year, and the current valuation level has retreated from earlier levels. In the long run, AIGC technology continues to empower core sub-sectors within the sector, including film and television, gaming, and advertising and marketing, and the sector as a whole has considerable room for growth in the future.
Sub-sector performance diverges, with growth segments contributing the main increment
From the perspective of sub-sectors, revenue growth rates diverged among media industry sub-sectors in the first three quarters of 2026: the top three sub-sectors by year-on-year growth rate were gaming (YOY+18.4%), advertising and marketing (YOY+6.1%), and digital media (YOY+2.6%), with operating revenue of 100.43 billion yuan, 136.65 billion yuan, and 18.81 billion yuan, respectively. Among them, companies in the gaming segment successively began new product cycles, contributing incremental performance; the advertising and marketing market maintained year-on-year growth throughout the year, and growth segments contributed the main increment to industry revenue.
Risk warnings
Risks include changes in policy and regulatory environment, intensifying market competition, new releases performing below expectations, and the development of AIGC technology and applications falling short of expectations.