Episode Details

Bilibili (BILI) Q2 2026 — Shares rose +3.84% on the print to $16.77, on 3.0x the thirty session median volume - the 26th best session of the twelve months, not the first. One session later they sit at $16.60, +2.79% against the pre-print close, with 27% of the move handed back. The shares are -29% on the year and 54% under the January high. Bilibili reported Q2 2026 revenue of RMB7.94B, +8% year on year, a record gross margin of 37.2% and net profit +55%. We dispute none of it. What we dispute is the MARGIN RUN behind it. This was the SIXTEENTH consecutive quarter of gross-margin improvement - and it measured 10 bp. The first ten quarters of the same run averaged 210 bp each; the last six have averaged 19 bp. The reason is on the balance sheet: property and equipment went from RMB695M in December to RMB2.08B at 30 June, roughly 2.99x in six months, on the three-year straight-line life the annual report specifies. Research and development rose +16%, which the company attributes to higher expenses related to server depreciation - and that one line is 90% of the entire increase in operating expenses. Headcount fell by 136 over the same six months. We rate BILI a HOLD at $16.00 against $16.60. THE CALL: HOLD (3/5, MODERATE) — base-case value ~$16.0 vs ~$16.6 today. KEY METRICS: - Revenue RMB7.94B, +8% YoY; gross margin a record 37.2% from 36.5% - The 16th consecutive margin gain was 10 bp - the first ten of the run averaged 210 bp - Revenue sharing saved 168 bp of revenue; everything else in COGS took 94 bp back - Property and equipment RMB695M to RMB2.08B in six months (2.99x), three-year life - R&D +16% on server depreciation = 90% of the whole opex rise; headcount -136 - Operating profit RMB373M +48%; net profit +55%; adjusted net profit +25% - Advertising +28% and now the largest line; mobile games -14% - H1 operating cash RMB2.95B vs RMB3.29B while net profit went +161% - Net cash RMB14.79B = $2.18B = 31% of market value; EV $4.77B - EV/reported operating profit 23.1x; EV/adjusted 11.8x - Fair value $16.00 = DCF $15.07, exit multiple $16.54, trailing multiple $16.40, equal weights - Bear $10.83, bull $22.04; three live targets $27 to $30, mean $28.67 - We match consensus on EARNINGS (our RMB8.56 vs RMB8.86 for 2027) and differ on the MULTIPLE: 8.9x vs 18.9x ex-cash - Reported in RMB; price and valuation in USD at RMB6.7851, the company's own June 30 rate What to watch: A September-quarter gross-margin step of 30bp or more (it was 10 bp this quarter), the property and equipment line holding near RMB2.08B instead of doubling again, or six-month operating cash turning back up (it was -10% while profit went +161%), would each move this call Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.