China Internet Sector: Ad pulse check: Q2 resilient; exploring Al monetisation path

Research evidence excerpt

China Internet Sector: Ad pulse check: Q2 resilient; exploring Al monetisation path

Global Research

30 July 2026ab

First Read

EquitiesChina Internet Sector

Ad pulse check: Q2 resilient; exploring AI China

monetisation path Internet Services

Kenneth Fong

Analyst

kenneth-kc.fong@ubs.com

Growth: Q2 better than expected; H2 momentum to remain resilient +852-3712 3890

1) Q2 trend: China’s digital advertising growth modestly improved to 9% YoY in Q2 (vs. Jenny Yuan

8.3% in Q1), based on our channel checks with leading ad agencies in China. Key Analyst

takeaways: Positives: i) Demand: resilience supported by AI campaigns and S1460525030004

world cup advertising budgets. AI tools/AI wearables remained a key source of jenny-za.yuan@ubs.com

incremental growth, while world cup-related ad budgets provided additional support, +86-21-3866 8912

particularly for FMCG. Other verticals, including mini games, local services, education Sardonna Fong

and 3C, continued to help solid growth; ii) Supply: benefited from AI adoption and Analyst

optimization of ad tax implementation: a) AI adoption across the value chain sardonna.fong@ubs.com

continues to enhance ROI, and GEO marketing is emerging as a new source of advertiser +852-3712 3042

spending; b) The impact of ad tax is easing as more platforms provide merchants with Wei Xiong

flexibility between marketing and technology fee invoicing. Negatives: macro Analyst

weakness and selective regulatory headwinds. E-commerce advertising remains S1460518100005

relatively subdued, with 618 ad budget growth muted. Regulatory tightening around wei.xiong@ubs.com

quick commerce subsidies, app opening ads and AI companion applications also +86-21-3866 8883

weighed on certain categories. 2) Q3/2026 outlook: Experts expect advertising growth Charles Chen