Weibo (WB US & 9898 HK): Cutting estimates on weaker Ads and Al investment; Maintain Neutral

Research evidence excerpt

Asia Pacific Equity Research

20 August 2026

Weibo (WB US & 9898 HK)

Cutting estimates on weaker Ads and AI investment;

Maintain Neutral

We reiterate our cautious view on Weibo and cut FY26/27E adj EPS by

14%/6% on weaker ad revenue and incremental AI investment. We now

expect FY26 ad revenue to be flat yoy, implying a 4% yoy decline in 2H, with

3Q26 the trough. Although valuation screens as inexpensive, trading at 5.5x

2026E P/E on consensus earnings estimates, we see no near-term catalysts to

re-rate the stock ahead of evidence that ad revenue has stabilized and AI

investment has peaked, alongside tangible returns. We maintain our Neutral

ratings on WB US and 9898 HK, with revised Dec-26 price targets of

US$8/HK$60, respectively.

• 3Q26 ad outlook: the trough. We expect ad revenue to decline 4% yoy in

3Q26, the worst quarter of the year, with weakness across verticals: 1) the

food delivery/quick commerce ad budgets seen in 2025, which were mostly

concentrated in 3Q, have essentially gone to zero this year, 2) for the World

Cup, due to advertiser dynamics and Xiaohongshu’s official social media

partnership, the incremental boost to ad budgets this year should be lower

than that of previous tournaments, and 3) ad spend from the AI application

vertical should be lower in 2H vs 1H (1Q-weighted). Auto is the lone bright

spot, with intensive launches of NEV models.

China

Head of China Equity Research

and Co-Head of Asia TMT

Research

Alex Yao AC

(86 21) 6106 6505

SAC Registration Number: S1730523020001

Nancy Liu

(86 21) 6106 6343

SAC Registration Number: S1730524090001

J.P. Morgan Securities (China) Company

Limited

• AI: real traction, but investment drags near-term margin. AI-generated

creatives now carry 50% of performance-ad consumption with ~30% lower

negative user feedback, and AI is driving meaningful efficiency gains in

ad/content moderation. But the P&L impact runs the other way for now: we

expect AI infra investment to be the key reason of margin decline in 2026

(GPM to decline to 71% in 2026E vs 76% in 2025, while we expect OPM to

narrow to 23%, down 3.5ppts yoy), as management remains committed to

AI investment for user retention and long-term engagement.

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