Good day, and welcome to Bilibili's Third Quarter 2025 Financial Results and Business Update Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Juliet Yang, Executive Director of Investor Relations. Please go ahead.

Thank you, operator. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially from those mentioned in today's news release and in this discussion due to a number of risks and uncertainties, including those mentioned in our most recent filing with the SEC and Hong Kong Stock Exchange. The non-GAAP financial measures we provide are for comparison purposes only. The definition of these measures and the reconciliation table are available in the news release we issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the Bilibili IR website at ir.bilibili.com. Joining us today from Bilibili senior management are Mr. Rui Chen, Chairman of the Board and Chief Executive Officer, Ms. Carly Li, Vice Chairwoman of the Board, Chief Operating Officer, and Mr. Sam Fan, Chief Financial Officer. I will now turn the call to Mr. Chen.

Thank you, Juliet. And thank you to everyone for joining us today to discuss our 2025 third quarter results. Our 2025 momentum carried through the third quarter as we delivered solid growth, improved profitability, and attracted an even larger, more engaged community. As an influential hub of diverse interests, our high-quality content offerings and unique community experience continue to fascinate the hearts and minds of the young generation. We are increasingly seeing this in our key user metrics, which have resumed an accelerated growth trajectory since the beginning of the year. In the third quarter, our DAUs rose 9% year over year to 117 million, MAUs grew 8% to 376 million, and average daily time spent per user increased to 112 minutes, up six minutes from the same period last year. Each hit an all-time high. We are very proud of these numbers, as they show users' rising demand for quality content and the welcoming community spirit that makes Bilibili unique. We will keep building on the strong user momentum and reinforcing our leading user mindshare as the best PUGV community in China. This solid community growth is translating into increasing commercial value, with even greater opportunities ahead. While enjoying engaging content, users are demonstrating a stronger willingness to spend on our platform, both directly and indirectly. Monthly paying users hit a record high of 35 million in the third quarter, up 17% year over year, with more users converting through our various games and VAS offerings. We are also seeing deeper engagement around consumption, as users increasingly turn to Bilibili for advice and inspiration, with real purchasing intent. Our advertising business also accelerated, and revenue grew 23% year over year in the third quarter. With an average user age of 26, a maturing cohort with stronger purchasing power and…

Thank you, Mr. Chen. Hello, everyone. This is Sam. In the interest of time, on today's call, I will review our third-quarter highlights. We encourage you to refer to our press release issued earlier today for a closer look at our results. In the third quarter, we continued to grow revenues and expand our margins and profitability, driven by growth across our commercial businesses, particularly in our high-margin advertising businesses. Total net revenues for the third quarter were RMB 7.7 billion, up 5% year over year. Approximately 39% from VAS, 33% from advertising, 20% from games, and 8% from our IP derivatives and other businesses. Our cost of revenues increased by 2% year over year to RMB 4.9 billion in the third quarter, while our gross profit rose 11% year over year to RMB 2.8 billion. Our gross profit margin reached 36.7% in Q3, compared with 34.9% in the same period last year. Our expanding gross profit and margin show that our model is built to scale. Our total operating expenses were RMB 2.5 billion, down 6% year over year. Sales and marketing expenses decreased 13% year over year to RMB 1.1 billion, mainly due to decreased marketing expenses for our games. G&A and R&D expenses were RMB 509 million and RMB 905 million, respectively, both flat year over year. These efforts allowed us to maintain positive operating results. Our operating profit was RMB 354 million, compared with a loss in Q3 2024. Our adjusted operating profit was RMB 688 million, and our adjusted operating profit margin reached 9% in the third quarter, versus 3.7% in the same period a year ago. Net profit was RMB 469 million, versus a loss in Q3 2024. Our adjusted net profit was RMB 786 million, and our adjusted net profit margin in the third quarter was 10.2%, compared with 3.2% in the same period a year ago. Cash flow-wise, we generated about RMB 2 billion in operating cash flow in the third quarter. As of September 30, 2025, we had cash and cash equivalents, time deposits, and short-term investments of RMB 23.5 billion or USD 3.3 billion. Under our 200 million US dollar share repurchase program, approved by the board in November 2024, we have repurchased a total of 6.4 million shares so far, at a total cost of 116.4 million US dollars, leaving about 83.6 million US dollars available for future buybacks as of September 30, 2025. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.

We will now begin the question and answer session. If you would like to ask a question, please press 1-1 on the telephone and wait for your name to be announced. For the benefit of all participants on today's call, if you wish to ask your questions to management in Chinese, please immediately repeat your question in English. The company will provide consecutive interpretations for management statements during the Q&A session. Please note that English interpretation is for convenience purposes only. In the case of any discrepancy, management statements in their original language will prevail. One moment for the first question. Our first question comes from Alex Liu of Bank of America. Please go ahead.

Thanks, management. I think it's a great quarter. We see DAU, MAU, and time spent are basically all at their highs, and it's growing, accelerating. So I was just wondering if management can share more about what's really driving this and in terms of user engagement, is there any medium-term target? And also for monthly paying users, it's also accelerating in terms of growth. What are the drivers behind this, and how should we think about the future trends in user payments for content? Thank you.

The fundamental reason for our continuous user growth lies within our focus on high-quality content. High-quality content is always a strong and sustainable growth driver. Actually, we think there has been a fundamental change in video content supply. Currently, the video content supply is very much sufficient and in some ways even oversupplied. Every year, there are tens of billions of new videos being created. Riding on the rapid adoption of AI tools, there are going to be tens of thousands, billions, trillions of new videos being made every year. However, we think that the quantity of video and the quality of the video are two different things. High-quality content is still in short supply. Once someone starts to enjoy or start watching high-quality content, it's very hard for them to go back. They become pickier. They wouldn't go back to the low-quality, time-killing type of videos. That's why Bilibili has a long runway for growth because the demand for high-quality content will continue to rise. The population that will be interested in Bilibili content will grow. Apart from our focus on high-quality content, our unique community aspect of our business also helps further strengthen our advantage. This is because our community can help discover high-quality content and also help our talented content creators to continuously focus on their content creation. Content needs to be discovered with the eye of beauty. We have many users who have a passion for high-quality content and the taste to select and promote those high-quality content. Good content creators need a good audience, and Bilibili is where those two parties meet and resonate with each other, especially for content creators before they become popular and earn a good reputation. There's a relatively long fair wait for them to grow in Bilibili's community, and the…

Thank you for the questions. One moment for the next question. Our next question comes from the line of Thomas Chong of Jefferies. Please go ahead.

Good evening. Thanks, management, for taking my question. My question is about the gaming business. We saw Escape from Duckoff received remarkable results. Can management share about its future business plan? Do we have any plans for developing a mobile game? On the other hand, can management comment about SunBoard and card? With regard to its monetization testing in October, when should we expect it to be released? On the other hand, what are the things in the pipeline to anticipate? For SunMo, did the performance in Q3 meet expectations? How should we think about the performance in the next year? Thank you.

I'll talk about Escape from Duckoff. Truly, this game has been the dark horse of the year in the games market. In less than one month after its debut, it has already sold over 3 million copies across various platforms globally, and the peak concurrent user reached over 300,000. Based on the current momentum, it is safe to say Escape from Duckoff has the potential to become the number two best-selling console game in the history of China. This has been very encouraging. On top of that, besides the sales volume, players have been giving the game extremely high ratings on the Steam platform. There have been tens of thousands of comments, and 96% of them are overwhelmingly positive. Why has it been so successful? I think there are two main reasons as a player myself. First of all, this game is fun to play. There are a lot of games launched every year, but not every one of them is fun to play. We found this game is very carefully designed with different stages and graphics. People will find it's a truly fun game to play. People will enjoy themselves. Secondly, the game has a very light mood. When you play it, you don't feel the stress of PVP. It's just the simple pleasure of collecting and looting. Also, this game doesn't pressure people to spend a lot of time or money. It's just very easy and breezy. At this time of the year, it's very entertaining and fun to play. Those two elements, fun to play and relaxing, are the two main reasons for this game's success. The reason behind that is when we were thinking about setting up a project like this back in 2023, it was just a simple few young developers gathered together who were…

One moment for the next question. The next question comes from Felix Liu of UBS. Please go ahead.

Thank you, management, for taking my question, and congratulations on the very strong results, especially on the advertisement part. How does management see the growth potential in your ad business from here? Can management share more color on the potential improvements in recommendation algorithms and AI on your ad business from here? More on the near term, how does management see the advertisement demand for the recently concluded Double Eleven shopping festival as well as the overall Q4? Thank you.

In Q3, our advertising revenue reached RMB 2.7 billion, up 23% year over year, with our market share continuing to rise. On top of the steady growth for our performance-based ads, we are seeing both brand and sparkle ads grow much faster than the overall market. Based on our complete industry data, the brand ads and sparkle ads growth rate are among the fastest-growing players in the industry. How should we think about the ad revenue growth going forward? I would like to firstly talk about the underlying growth. The underlying logic of Bilibili's ads. As time goes by, more clients are recognizing and tapping into the value of the Bilibili ecosystem and its users. Thanks to the uniqueness of our community, our ad's key advantage is that we can deeply shape and make a big impact on users' purchasing decisions. To put it more simply, Bilibili's advertising business can bring to our advertisers: Number one, it will not be a one-off value hit. Secondly, we are more effective at bringing new users, new customers. Thirdly, we are more likely to drive a sharp increase in repeat purchases from both new and existing users. In other words, we will help our clients achieve both short-term conversion goals and long-term brand-building goals. Yet, anything we haven't fully realized is pure upside for the future. From a client perspective, our top five advertiser verticals in Q3 were gaming, Internet services, consumer electronics and home appliances, e-commerce, and automotive. To better serve our advertising clients, there are three main points. One is to enhance our strategy or service for our super key accounts (SKAs). We will be serving our largest clients with a dedicated service team and a year-round integrated Bilibili marketing solution. Our goal for this team is to achieve over a…

The next question comes from the line of Xueqing Zhang from CICC. Please go ahead.

Management, congratulations on the strong result. My question is regarding your financial outlook. The company's profitability has continued to strengthen. Looking ahead to Q4 and into 2026, how do you expect the gross margin and net margin trend as we maintain a strong cash position? How do you plan to allocate cash in the future? Thank you.

Thank you, this is Sam. I will take your question. Yes, we continue to see strong operational leverage in our business. In Q3, our top line grew by 5%, and our gross profit grew by 11% year over year. Our gross profit margin has improved for thirteen consecutive quarters. We expect this trend to continue this year. We keep our mid-term gross profit margin target of reaching 37% in Q4. That's 40% to 45% unchanged. Additionally, our adjusted operating profit, that's a profit before other income, jumped over 150% year over year, with adjusted operating margin expanding from 3.7% to 9% year over year. We expect that number to further improve to around 10% in Q4 this year, keeping us on a steady path to our mid-term target of up to 15% adjusted operating margin. We already saw the resilience of Bilibili's business model and our strategy of focusing on healthy revenue growth and leveraging scale for sustainable profit expansion. We are confident in reaching our mid to long-term margin targets. Regarding cash usage, we will allocate our resources carefully. Currently, we already turn over one billion free cash flow every quarter. First, we will support our high-quality revenue growth engine like the advertising business. Secondly, we will invest in some new opportunities. For example, to expand our business boundaries, like reinventing some games for new generations, just like Escape from Duckoff. We already announced a plan to explore opportunities in the console game and the mobile game. Last but not least, we will also capture some major industry opportunities. For example, we are also seeking new talent for new areas like AI. Regarding shareholder return, we have repurchased over 100 million US dollars worth of shares this year already, and we have a two-year share buyback plan as approved by our board. We still have around 83 million US dollars left. We expect to fully utilize that amount in the remaining period of the plan. Thank you. That's all for my question. Operator, next question, please. Thank you.

One moment for the next question. Our next question comes from the line of Yuan Zhang from China Renaissance. Please go ahead.

Thanks for taking my question. I have a question regarding AI application. You asked to discuss a few AI functions or products you have just launched. What is your thinking and expectation of future AI application on Bilibili? Also, what kind of impact do you think your products like Sora will bring to video production and consumption? Thank you.

Bilibili has the highest AI density among both our content creators and our users. Many of China's best AI-themed content creators and users who are most interested in AI talent are all active and gathered on Bilibili. In the third quarter, nearly 100,000 creators were active on Bilibili every month working on AI-related content. Some of them are doing the latest learning explanations, some of them are breaking down and teaching new AI applications or using AI for video creations. The average daily number of AI-related video uploads in the third quarter increased over 80% year over year. There is a lot of potential for us to further discover because we have gathered over two-thirds of the young generation in China on Bilibili. That is the exact cohort eager to learn about AI or leverage AI technology to create things. When you asked me about Sora, whether Sora will change how people create or consume content, we think personally, I think Sora is a new gamble on both content video creation and user interface. As I said earlier, there is already an oversupply of short video content. The adoption of AI tools will only increase that video supply and will not change how people consume the content. However, on the high-quality video aspect, there is still a scarcity in terms of high-quality content supply. The adoption of these tools will help us increase the supply and improve the talented content creators' efficiency in producing such content. We've seen this in many content categories where AI is becoming the new paradigm. For example, in the AutoTune remix sector, in the music sector, or even the animation sector, there are a lot of very good quality videos made with the help of AI tools. To summarize, we do think that AI will be a fundamental efficiency booster for high-quality video creation, and Bilibili will benefit most from that technology innovation. Based on that observation, we will be very focused on the video pack of AI applications. We want to make AI effective tools to help our content creators produce higher quality videos. You probably already saw some of the functions we have launched lately. For example, there will be multilingual video accessibility features, including dubbing, subtitles, and even lip-syncing. We are also planning to launch AI-enabled text-to-video tools tailored for video podcast-type content. We believe this product will help bring more high-quality content to Bilibili and our users. That concludes the question and answer session. Operator, back to you.

Thank you once again for joining Bilibili's third quarter 2025 financial results and business update conference call today. If you have any further questions, please contact Juliet Yang, Bilibili's Executive IR Director, or Pierre Santiv Financial Communications. Contact information for IR in both China and the US can be found on today's press release. Thank you, and have a great day.