China Literature (772) H1 2026 earnings summary

Executive summary

• Revenue grew 10.7% year-over-year to RMB3,531.4 million in H1 2026, driven by strong IP operations, short drama, AI-animated drama, and merchandise growth, despite a decline in online business revenues.

• Net profit attributable to equity holders dropped 84.1% year-over-year to RMB135.4 million, mainly due to a RMB300 million tax-related impact and absence of prior year one-off gains.

• Non-IFRS net profit attributable to equity holders was RMB258.8 million, down 49% year-over-year.

• AI integration accelerated content production, with over 1,000 titles adapted into AI-animated dramas and 30,000+ AI-translated works on WebNovel, contributing 40% of novel revenue.

• Strategic focus on premium content, ecosystem expansion, and global growth, leveraging a vast IP library and creator network.

Financial highlights

• Gross profit increased 11.1% year-over-year to RMB1,792.1 million; gross margin stable at 50.7%.

• Operating profit fell 69.1% year-over-year to RMB270.8 million; EBITDA was RMB302.6 million, with adjusted EBITDA margin at 10.9%.

• Online business revenue declined 7.3% year-over-year to RMB1,840.0 million, while IP operations and others surged 40.3% to RMB1,691.4 million.

• Merchandise GMV reached RMB780 million, up over 60% year-over-year.

• Cost of revenues rose 10.2% year-over-year, mainly due to higher production costs for short dramas and AI-animated content.

Outlook and guidance

• Plans to produce at least 200 short dramas in 2026, a 70% year-over-year increase, and premium AI-animated drama production capacity exceeds 100 titles.

• Overseas business to launch over 1,000 AI-animated drama titles and expand original local IP adaptations.

• Management emphasizes AI-driven global expansion and continued investment in original creators and technology.

• Game licensing to contribute recurring revenue, with several major titles launching in H2 2026.

• Merchandise business to focus on product iteration, channel expansion, and operational efficiency for sustainable growth.