Guosen: GEO accelerates the breakout and commercial landing of AI applications, seizing sector investment opportunities catalyzed by AI.

Guosen released a research report stating that GEO is reconstructing the traffic and content service ecosystem, with AI applications catalyzing sector performance; the focus is on the AI marketing sector, seizing investment opportunities in AI comics and text direction. GEO is accelerating the application and commercialization of AI, benefiting from marketing intermediaries to high-quality texts and large model platforms; at the same time, the 26-year multi-modal application is expected to accelerate towards maturity, with a focus on the AI comics direction. AI applications are expected to enhance the overall valuation level of the sector, seizing opportunities in gaming, publishing, and other directions with both performance and valuation; strong new product cycles are expected to drive continuous performance and valuation upgrades in the gaming sector, focusing on product cycles, performance, as well as related targets with AI product landing capabilities. The publishing industry is looking at the catalytic potential of GEO's text library and focusing on state-owned publishing directions. Key Points from Guosen: Underperforming the market in December 1) In December 25th, the media sector (Shenwan Media Index) fell by 1.60%, underperforming the Shanghai and Shenzhen 300 index by 3.88 percentage points, ranking 25th out of 31 industries in the first level of Shenwan; 2) Three's, Beijing Baination Pictures, Hunan TV & Broadcast Intermediary, and Guangxi Beitou Technology had the highest increase, while ST Rebates, Zhewen Interactive Group, Huayi Brothers Media Corporation, and Guizhou BC&TV Information Network had the highest decrease; 3) in terms of valuation, the current Shenwan Media Index corresponds to a TTM-PE of 45.8x, placing it at the 69.7th percentile in the past 5 years. The number of copyright approvals remains high, focusing on the new product cycle, market sentiment, and sector opportunities driven by AI applications 1) In December, a total of 144 domestic games and 3 imported games were approved, with a total of 1772 game copyrights issued in 2025, a year-on-year growth of 25.1%; 2) In 2025, the Chinese game market revenue reached 350.79 billion yuan, a year-on-year growth of 7.7%; among them, the actual sales revenue of mobile/desktop games was 257.1 billion/78.2 billion yuan, a year-on-year growth of 7.9/15.0%; 3) Under new products, regulatory policies, and AI application drivers, the sector is expected to have upward potential in the medium to long term, with a focus on new product performance. Tencent excels in the variety show market, with continued popularity of short dramas and comics 1) Total box office revenue reached 3.712 billion yuan in December 25th, a year-on-year increase of 58.0%, mainly due to the contribution of "Zootopia 2"; 2) In the drama market, "Big Businessman" topped the list with 754 million views. It was followed by "Uncle" and "Chang'an Chronicles of the Tang Dynasty" with 667 million and 567 million views respectively; 3) In the variety show market, Tencent's "Start Now Season 3" had a 22.93% market share on the entire network; in terms of online variety shows, Mango/ Tencent/ iQiyi occupied 4/3/4 spots in the top ten; 4) The hottest short drama/comic in December were "Under the Aristocratic Skin Lies Yama" and "Under the Execution Platform, I Shocked the Gods". AI Applications: GEO is reconstructing traffic and content service ecosystem, poised to benefit from content to services 1) The global GEO market size is expected to reach 24 billion US dollars in 2026 and is expected to reach 100 billion US dollars by 2030. In China, it is expected to reach 11.1 billion yuan in 2026 and 36.5 billion yuan in 2028. In 2026, it is expected to go from partial pilot to full application, with the potential for exponential market growth in the future; 2) GEO is restructuring the traffic pattern, shifting from "list links" to "direct answers," compressing intermediary value and amplifying content source value. Traditional agent models face elimination; marketing service providers with MarTech (marketing technology) and text libraries will have high-growth opportunities; meanwhile, the value of high-quality textual content will continue to grow; under the GEO trend, focus on investment opportunities from upstream text libraries, midstream marketing services to downstream platform traffic entry. Risk Warning: lower-than-expected performance, lower-than-expected technological progress, regulatory policy risks, etc.