Bilibili's shares dropped 13%, despite its first profit, due to a Tencent deal.

Today (November 15),fx008 Forex Bilibili-W (09626.HK) announced its financial results for the third quarter of 2024, marking the first time the company has achieved profitability in a quarter. However, the company's shares did not benefit from the positive earnings, with Hong Kong stocks plummeting more than 13% at one point during the session. As of press time, the decline was 10.59%, priced at 145.20 HKD. On the US stock market, Bilibili (BILI) closed down 12.60% yesterday, at 18.59 USD, continuing the weak trend of Hong Kong stocks.

Outstanding Performance

According to the announcement, Bilibili's net revenue for the third quarter reached 7.306 billion yuan, a year-on-year increase of 26%. The mobile gaming business was particularly strong, achieving revenue of 1.823 billion yuan, a substantial increase of 84% year-on-year. The advertising business was also impressive, with revenue of 2.094 billion yuan, up 28%. Overall, the company's gross profit for the third quarter was 2.547 billion yuan, an increase of 76% year-on-year, with the gross margin rising from 25.0% in the same period last year to 34.9%, indicating significant improvement in operational efficiency.

Although the company's net loss for the quarter was 79 million yuan, this loss was significantly narrowed by 94% compared to the same period last year. More notably, the adjusted net profit was 236 million yuan, while the adjusted net loss was 863 million yuan in the same period last year. This marks the first profitable quarter for Bilibili, demonstrating significant progress in enhancing its profitability.

Reasons Behind the Stock Price Drop

Despite the positive performance, the sharp drop in Bilibili's stock price has drawn market attention. Analysts believe this is related to the company's recent announcement of a cooperation agreement with Tencent. According to the announcement, Bilibili has reached a series of cooperation agreements with Tencent's affiliates, including payment services, cloud services, and general business cooperation. Under the payment services agreement, Tencent will charge Bilibili service fees of 83 million yuan, 110 million yuan, and 140 million yuan annually from 2025 to 2027.

These fees represent a significant increase compared to the previous three years, during which Bilibili paid Tencent fees of 24.8 million yuan, 31.7 million yuan, and 47.8 million yuan respectively. Analysts point out that this rapid increase in fees will directly affect Bilibili's profit performance, raising investor concerns about the sustainability of its profitability.

Market Outlook

Despite short-term pressure on the stock price, Bilibili's long-term development prospects remain a focus for the market. The strong growth in mobile gaming and advertising businesses indicates significant progress in its commercialization path. However, the cost pressure from cooperation with Tencent and the risk of potentially needing further expansion investments may continue to exert pressure on the stock price in the coming quarters.

Investors will closely monitor the implementation details of Bilibili's cooperation with Tencent and whether the company can continue to improve its profitability despite increased costs.

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.