Citi: Expects BILIBILI-W (09626) Q3 results to be in line with expectations; advertising revenue dragged by macro conditions.

Citi released a research report expecting BILIBILI-W (09626) Q3 total revenue to grow 7.1% year-over-year to RMB 8.23 billion, slightly below the market consensus of RMB 8.3 billion, with results in line with expectations. The bank maintains its "Buy" rating on BILIBILI-W (BILI.US) and lowers its US target price from $27 to $26.5. The report noted that BILIBILI-W's Q3 total revenue was mainly driven by mobile games, advertising, and value-added services, which changed year-over-year by -8%, +20%, +5%, and 0%, respectively. The non-GAAP gross margin is expected to be flat quarter-over-quarter at 37.6%, the adjusted operating margin is expected at 10%, up from 8.8% in Q2, and adjusted net profit is estimated at RMB 817 million, in line with market consensus. Citi believes that due to persistently weak consumption and a soft macro environment affecting e-commerce and consumption-related verticals, it has lowered its Q4 advertising revenue growth forecast from 17% to 15%, and also cut its Q3 advertising growth forecast to 20%. On mobile games, "Lumi Master" launched at the end of September performed in line with expectations. Although BILIBILI-W's Q3 2026 adjusted operating profit may be in line with the bank's previous expectations, a further slowdown in the advertising business could somewhat drag on margin performance in Q4 2026. Accordingly, the bank has lowered its EPS forecasts for BILIBILI-W from 2026 to 2028 by 3%, 2%, and 1%, respectively. Despite external pressures, BILIBILI-W's advertising revenue growth is still expected to outperform the industry and major peers, and the bank believes the year-end launch of "Three Kingdoms: Path to the Throne" will be a key catalyst for the stock price.