NTES

Image source: The Motley Fool. Thursday, Aug. 20, 2026 at 8:00 a.m. ET Chief Executive Officer - William Ding Executive Vice President - Hu Zhipeng Vice President of Finance - Aileen Mo Vice President of Corporate Development - Bill Pang Operator: Good day, and welcome to the NetEase Second Quarter 2026 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brandi Piacente. Please go ahead. Brandi Piacente: Thank you, operator. Please note that today's discussion will contain forward-looking statements relating to the future performance of the company and are intended to qualify for the safe harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect NetEase's business and financial results is included in certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20-F and in announcements and filings on the Hong Kong Stock Exchange's website. The company does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will also discuss certain non-GAAP financial measures, which should not be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the second quarter 2026 earnings news release issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com. Joining us today on the call from NetEase's senior management are Mr. William Ding, Chief Executive Officer; Mr. Hu Zhipeng, Executive Vice President; Ms. Aileen Mo, Vice President of Finance; and Mr. Bill Pang, Vice President of Corporate Development. I will now turn the call over to Bill, who will read the prepared remarks on William's behalf. Bill? Bill Pang: Thank you, Brandi, and welcome, everyone, to today's call. Before we begin, I would like to remind everyone that all percentages are based on RMB. In the first half of 2026, we delivered healthy growth across business segments. Total revenue reached RMB 30.1 billion in the second quarter, driven by the solid performance of our games business. Our games and related value-add services generated net revenues of RMB 25 billion, reflecting the broader appeal of our portfolio in both domestic and overseas markets. The strength of our portfolio stems from our sustained focus on innovation across the full life cycle of our games from original concept and development through long-term live operations. By combining our engineering capabilities, creative design expertise and disciplined execution, we bring new ideas to life and deliver fresh experiences across genres, platforms and markets. One recent example is Sea of Remnants, released in China in July. It showcases our ongoing emphasis on original IP and genre innovation. Built on our in-house game engine, Sea of Remnants combines a distinctive visual style with an open world ocean fantasy setting. Players -- by combining naval combat, extraction gameplay and roguelike progression, the game creates varied adventures that unfold differently each time. Across themed Island, players encounter a wide cast of characters that bring each island to life through meaningful interactions and evolve storylines. A variety of brand and content collaborations have also expanded the game's reach, extending its content ecosystem beyond the core gameplay experience. We are also preparing for the game's global rollout and look forward to introducing Sea of Remnants to players worldwide. Our innovation efforts are not only limited to new launches. They extend across our established titles where we keep evolving gameplay systems, introducing new content and strengthening live operations to sustain player enthusiasm over time. Sword of Justice launched its major anniversary update, New World in June. The comprehensive upgrade to the open world experience improved visual quality, streamlined cultivation system and refined the in-game economy, creating a more enjoyable experience for both returning and new players. It also introduced the Dali, highly immersive new region to expand exploration and add greater storytelling depth. The community response was strong with active players exceeding 10 million on launch day and concurrent users reaching a 2-year high, demonstrating the title's ongoing appeal. Players continue to gravitate to Identity V with a steady cadence of live service updates, including anniversary content, crossover events and new gameplay experiences. In June, the game introduced Cryptic Notes, a new PVE mode that offers a lighter experience beyond its core PVP gameplay, opening up new ways for the community to play. This excitement carried into July with the launch of Season 44, introducing new themed costumes and events alongside the latest Paperbride crossover. This update sparked active discussions across live streaming and social media platforms, helping keep the community engaged and reinforcing the game's long-term appeal. During the second quarter, the NARAKA: BLADEPOINT franchise unified its PC and mobile ecosystems. Players can now enjoy the game's signature melee combat seamlessly across devices while strengthening connections across its broader player community. Building on the increased connectivity, NARAKA: BLADEPOINT kicked off its fifth anniversary celebration in July with a major content update that introduced all new land and underwater battlefields as well as a new underwater combat system. These additions refreshed the game's core experience and drove strong player engagement across platforms. Eggy Party further solidified its position as China's leading party game destination. It reached a new milestone with 700 million registered users and monthly active users remained steadily above 100 million. In June, the game celebrated its fourth anniversary, bringing another wave of player activity, supported by diverse gameplay, a vibrant UGC ecosystem and a rich slate of live operations. This strong momentum continued into the summer with Eggy Party remaining among the top ranked titles on both China's iOS top download and grossing chart and peaking at #3 on the top grossing chart. Peak daily active users also reached a multiyear high for the summer period. UGC remains one of Eggy Party's defining strengths -- over the past year, the ecosystem has continued to thrive, supported by more powerful creation tools and a growing base of engaged creators. Total creator rewards reached a new milestone of RMB 200 million to date, reflecting both the vitality of this creator community and strong player demand for diverse user-generated content. Recent upgrades to the editor, including integration with multiple AI models have also made it easier for creators to learn, create and program. Together, these efforts expand what players can create and support Eggy Party's evolution from a stand-alone party game into a broader content platform. Our flagship MMORPG, Fantasy Westward Journey Online continues to evolve across both its classic and unlimited servers. During the summer, its new expansion pack and Dunhuang in the content further engaged players, underscoring its timely popularity and its healthy community. Meanwhile, Fantasy Westward Journey Mobile carried its record-setting momentum into the second quarter, supported by refinements to the in-game economy and ongoing gameplay iterations. During the quarter, the game introduced a new equipment progression system and an extraction gameplay mode. These additions created fresh progression paths and greater strategic depth, gaining real traction with players. In July, the summer Treasure Pavilion offered a wider selection of costumes and items tailored to players' preferences, driving robust commercial performance. The launch of the Origin server helped the Westward Journey Return build strong momentum in the second quarter. By preserving the iconic appeal of the Westward Journey franchise while introducing a portrait mode interface and more relaxed gameplay, the Origin server delivers a more accessible experience that players can enjoy anytime and anywhere, contributing to the title's strong performance in Q2. Infinite Borders further reinforced its leading position in the SLG genre through new innovative gameplay and initiatives designed to address community needs. New features such as EC Border Q, a social deduction game mode, were well received by players, while its collaboration with Minecraft China helped the game reach a broader and younger audience. The launch of the highly anticipated special servers together with a series of pre-anniversary events ahead of its 11th anniversary, generated renewed excitement across the community, demonstrating the title's enduring appeal and continued relevance in the strategy game market. Alongside our success in the domestic market, we made additional steady progress in broadening our global reach. Where Winds Meet has demonstrated a healthy growth trajectory since its successful launch -- global launch last year. The player base continued to grow in the second quarter with positive reviews on Steam staying above 87%. In June, we brought this immersive open world action RPG to even more players worldwide with the successful launch on Xbox. The game also repeatedly ranked among the top 3 titles on Steam's global top-seller chart following major content updates. This underscores the long-term potential of content-driven games and highlights our proven capabilities in delivering high-quality content and live operations. In the domestic market, Where Winds Meet also expanded its player community in the quarter with major new region additions, including Qingchuan and Hangzhou. The Hangzhou expansion proved particularly popular and pushed the game to #3 spot on China's iOS top grossing chart. This update brought distinctive local culture, fresh narrative and immersive exploration, driving year-over-year growth in quarterly revenue and achieving record high monthly active users. Marvel Rivals continued to build on its global success through a steady stream of seasonal content, live service updates and community initiatives. In June, the game introduced a refreshed 18 versus 18 mode setting K'un-Lun Arena, alongside new heroes, maps and events that broaden gameplay variety. The Rivals summer festival added further momentum with a wide selection of themed costumes for fan favorite characters, help pushing the game to #2 on global top seller chart and #1 in multiple regions, including the United States. Most recently, the franchise extended its reach beyond the screen through real-world touch points across major fan events. At San Diego Comic-Con in late July, Marvel Rivals generated even more excitement among players with new announcements and interactive fan activities. The new season finals was later held in Los Angeles, attracting top players and fans while reinforcing the title's competitive ecosystem and long-term live service foundation. As we continue to grow our existing portfolio, we're also advancing the development of new titles and exploring fresh ideas across diverse genres, gameplay experiences and markets. Ananta is progressing steadily towards launch as a free-to-play urban open world RPG -- the game invites players to experience a vibrant modern city through a variety of characters, lifestyles and activities, providing a high degree of freedom in exploration and interaction. With strong anticipation from player community, we will continue to share more updates as development progresses. Blood Message made a strong impression at the Summer Game Fest, where overseas audience responded positively to the latest gameplay footage. The trailer has since generated around 40 million views globally with players praising its visual fidelity, distinctive storytelling and thematic combat. Our commitment to innovation and long-term operating capabilities also created value for our partner titles. Blizzard titles performed well in China during the quarter, supported by localized operations and a steady stream of updates. World of Warcraft and Hearthstone continue to engage their long-standing communities in China, backed by consistent updates and initiatives tailored to the local market. Overwatch celebrated its 10th anniversary during the quarter with special content, rewards and activities that revitalize players and drove a significant increase in active users. Diablo IV further expanded its presence in China through exclusive localized content, localized events and newly introduced Chinese mythology skins, driving solid growth in both active users and player retention during the second quarter. Together, these achievements reflect the breadth and strength of our portfolio from new releases to essential titles across China and global markets through both our own IP and partner collaborations. We aim to keep our games relevant and engaging through new ideas, ongoing content updates and disciplined live operations while responding to evolving player expectations. This innovative mindset will continue to guide us as we build stronger communities and create even more compelling experiences for players worldwide. Turning to our other businesses. Youdao further advanced its AI native strategy and deepen AI-driven innovation across its ecosystem. In the second quarter, Youdao launched its latest large language model Confucius 4 with substantially enhanced capabilities. The new model delivered stronger performance in visual math and physics reasoning, particularly on complex diagrams at lower inference cost. Youdao also upgraded its translation model with an efficient acceleration mechanism, increasing inference speed by approximately 80%. Beyond large language models, it further advanced its AI agent capabilities towards autonomous execution of complex real-world tasks, demonstrating stronger capabilities beyond simple Q&A interactions. The Learning Services segment continued its healthy development, driven by the strong performance of Youdao. Popular features, including AI-powered English essay grading, AI recommendations and AI-based college admission advisers continue to enhance user satisfaction and drive higher user retention. Within the segment, AI-driven subscriptions also maintained strong momentum. The advertising efficiency in Youdao's online marketing services also continued to improve. We recently launched a second-generation AI ad placement optimizer, further enhancing the user experience and advertising efficiency with more streamlined and automated features. While capturing emerging opportunities in areas such as AI application and short-form dramas, Youdao also made steady progress in client acquisition and retention. The smart devices segment sustained its focus on product innovation with the Youdao Victory Pen maintaining a strong market position. In June, we launched the Youdao Dictionary Pen X8, featuring an expanded library of 80 million words and photo-based tutoring across a broad range of subjects. During the 618 Shopping Festival, Youdao Dictionary Pen ranked #1 in sales on JD.com and Tmall within this category for the seventh consecutive year. Looking ahead, Youdao will continue to execute its AI native strategy across learning and advertising scenarios. For NetEase Cloud Music, we further developed its music-centric ecosystem in the first half of 2026, prioritizing exceptional user experiences, distinctive content and a vibrant music community to support healthy and steady growth. Enhancements to user experience and strong brand perception continue to drive higher user engagement and expanding the daily active user base. Our DAU versus MAU ratio remained above 30% in the first half of 2026, increasing both year-over-year and sequentially. The average daily mobile music listing time also rose steadily with penetration rates of community content consumption and interactions improving notably. In particular, retention and renewal rates across our expanded membership base increased both year-over-year and sequentially, reflecting stronger user loyalty and deeper connection to the platform. We also enriched our comprehensive and distinctive content library by expanding copyrighted music and promoting original music. Earlier this year, we renewed partnerships with major labels such as Universal Music Group as well as added new content and Chinese labels, OSPs and variety show music, while enhancing our signature genres. At the same time, we continue to promote original Chinese music with our recent in-house releases such as December 31, gaining widespread acclaim. From a product perspective, we remain focused on user needs, advancing innovation across music discovery and consumption experiences while galvanizing our community by making music exploration more intuitive and engaging on the platform. We also launched innovative functions such as AI-inspired playlist to address users' diverse music discovery preferences. Subscription-based membership grew as well, improving our music-oriented monetization. We further refined membership benefits built around content, features, personalization privileges and office-related offerings, all of which enhance the platform's overall value proposition and support ongoing membership growth. Turning to Yanxuan. Yanxuan once again secured leading positions on e-commerce platforms across its key categories in the second quarter. New products in pet food, home scent and home goods categories performed well, generating healthy growth. Notably, the freshly steamed pet food series, which we launched last year with our differentiated steaming technology and fresh meat recipes continue to deliver solid sales while earning recognition from leading industry organizations. In closing, across the NetEase family of businesses, we remain committed to innovation and staying at the forefront of technology. By integrating leading technologies into every stage of product development and operation, we create compelling user experiences that help shape industry trends. This approach continues to support sustainable growth across our business. In our games portfolio, in particular, it enhances the appeal of both established titles and new releases, extending our success in China to broader global -- throughout the year, we will continue to foster an environment that empowers our developers to push creative boundaries. As we advance our products with cutting-edge technology, we believe we are well positioned to create even more engaging experiences and enduring value for players, communities and shareholders alike. That concludes William's comments, and I will turn the call over to Aileen for more detailed discussion of our financial results. Thank you. Aileen Bin Mo: Thank you, Bill. I will now provide a brief review of our 2026 interim financial results with a focus on the second quarter. Given the limited time on today's call, I will present some abbreviated financial highlights. We encourage you to read through our press release issued earlier today for further details. As a reminder, all amounts are in RMB unless otherwise stated. Our total net revenue for the first half of 2026 were RMB 60.7 billion or USD 8.9 billion, representing a 7% increase year-over-year. For the second quarter, total revenue were RMB 30.1 billion or USD 4.4 billion. During the first half, total net revenue from our games and related VAS were RMB 15.7 billion, up 8% year-over-year. In the second quarter, net revenue grew 10% to reach RMB 25 billion. Specifically, net revenue from online games were RMB 49.5 billion for the first half, up 9% year-over-year. In the second quarter, online games net revenue were RMB 24.5 billion, decreasing 2% quarter-over-quarter and increasing 10% year-over-year. The quarter-over-quarter decrease were mainly due to a slight decline in net revenue from certain self-developed games and licensed games. The year-over-year increase was attributable to higher net revenue from self-development games such as Fantasy Westward Journey franchise and Where Winds Meet. Youdao's net revenue increased 4% to RMB 2.8 billion for the first half of 2026. In the second quarter, net revenue were RMB 1.5 billion, up 9% quarter-over-quarter and 3% year-over-year. The quarter-over-quarter and year-over-year increases were mainly attributable to higher net revenue from its learning services segment. NetEase Cloud Music net revenue increased 3% year-over-year to RMB 4.0 billion for the first half of 2026. In the second quarter, net revenues were RMB 2 billion, remaining broadly stable quarter-over-quarter and year-over-year. Net revenues from the innovative business and others totaled RMB 3.2 billion for the first half of 2026. In the second quarter, net revenue were RMB 1.6 billion, up 6% quarter-over-quarter and down 4% year-over-year. The quarter-over-quarter increase was mainly attributable to higher net revenue from the e-commerce business and several other business within this segment. The year-over-year decrease was mainly due to a modest decline in net revenue from the e-commerce business. For the first half, our gross profit margin was 69.9%. In the second quarter, our gross profit margin increased year-over-year to 70.5% from 64.7% in the prior year period. Looking at our second quarter margin in more detail. Gross profit margin was 76.1% from our games and related VAS compared with 70.2% in the same period of last year. The improvement was primarily driven by lower revenue sharing costs related to platforms. Our gross profit margin for Youdao was 48.9% compared with 43.0% in the same period of last year. The increase was mainly driven by improved gross profit margin from its learning services segment. Gross profit margin for Cloud Music was 37.4% compared with 36.1% in the same period last year. The increase was primarily driven by lower channel fee rates, along with the continued cost structure optimization. For our innovative business and others, gross profit margin was 43.4% compared with 42.3% in the second quarter of 2025. The improvement was primarily driven by the higher contribution from higher-margin business within this segment. Total operating expenses for the second quarter were RMB 9.1 billion, representing 30% of our total net revenue. Taking a closer look at our expense composition. Our selling and marketing expenses accounted for 12.2% of total net revenue in the second quarter compared with 12.8% in the same period of last year, remaining generally stable year-over-year. For the first half, the ratio was 11.7%, remaining broadly in line with the same period last year. Our G&A expenses accounted for 2.7% of total net revenues in the second quarter compared with 3.8% in the same period of last year. For the first half, the ratio was 2.4% compared with 3.5% in the same period of last year. Our R&D expenses remained stable at 15.4% of total net revenues in the second quarter compared with 15.6% in the same period of last year, reflecting our consistent investment in innovation and content development. For the first half, the ratio was 15.0%, remaining broadly in line with the same period of last year. The effective tax rate was 21.7% for the first half and 25.5% for the second quarter. As a reminder, the effective tax rate is presented on an accrual basis and the tax credit vary across each of our entities at different time periods depending on applicable policies and our operations. Our non-GAAP net income attributable to shareholders for the second quarter totaled RMB 7.7 billion or USD 1.1 billion, with the year-over-year decline primarily attributable to investment losses. Non-GAAP basic earnings per ADS for the quarter was USD 1.78 or USD 0.36 per share. For the first half, non-GAAP net income attributable to shareholders was down 8% year-over-year to RMB 19 billion or USD 2.8 billion, which is USD 4.38 per ADS or USD 0.88 per share. Additionally, our cash position remains strong. As of June 30, 2026, our total net cash position was RMB 167.5 billion compared with RMB 163.5 billion at the end of 2025. In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved a dividend of USD 0.096 per share or USD 0.48 per ADS for the second quarter. Lastly, under our current USD 5 billion share repurchase program, we have repurchased approximately 24.8 million ADS as of June 30, 2026, for a total cost of approximately USD 2.3 billion. Thank you for your attention. We would now like to open the call to your questions. Operator: [Operator Instructions] The first question comes from Alicia Yap with Citigroup. Alicis a Yap: [Foreign Language] [Interpreted] So can management share the latest performance of and also the expected closing for the next quarter? What aspects are currently doing well? And then what adjustments are planned in the future to further improve the games performance? William Ding: [Foreign Language] Bill Pang: [Interpreted] Okay. I will do the translation. So in China market, we did receive a lot of user feedback and among which certain amount are critics. Review what we -- all the feedback we received, we realized that while we are trying to explore a very bold visual style and the rogue gameplay, which is the kind of novel open world experience, we did not sufficiently lower the learning curve for players in the early stages, which, to some extent, affected the initial player experience. So that's feedback we have heard and taken. So in the meantime, our team has prepared a substantial amount of large high-quality amount of content and which provide the foundation of the long-term operation and sustainable player community operation. After this initial feedback round, along with the high cadence of content update and experience optimization, we believe we have seen growing recognition from the players group of the games core gameplay and content quality, which with discussions back to the game's content and ongoing operations, the overall sentiment and satisfaction has continued to improve. Looking ahead, we'll continue to serve our core players of this game well and keep optimization -- keep optimizing the experience problems we heard from players. In the meantime, we will streamline the early-stage game content, make sure the innovative game play could be better and wider accepted and experienced by the players. We are confident in the long-term potential of this game. Thank you for your question. Operator: The next question comes from Xueqing Zhang with CICC. Xueqing Zhang: [Foreign Language] I will translate my question. [Interpreted] Could management update us on the development progress of Ananta with several competing titles targeting the urban open world genre. How does the company plan to differentiate the game and stand out from the competition? William Ding: [Foreign Language] Bill Pang: [Interpreted] Okay. I will do the translation. Ananta is well on track with its development as the team is now keep polishing the game experience. We'll unveil the game's latest progress at the Gamescom next week. So please stay tuned. In terms of competition, we believe Ananta has its own distinctive strength as an urban open world experience. The strength come from the product's unique identity, its theme and its gameplay design as well, which can offer players a fresh experience that stands apart from other open world urban games in the market. Ultimately, we believe that the high-quality content, the distinctive narrative identity, the innovative gameplay and thoughtful monetization design will be the key to build a successful -- to being a key part of the -- behind the success of products. Thank you for your question. Operator: Your next question comes from Lincoln Kong with Goldman Sachs. Lincoln Kong: [Foreign Language] [Interpreted] Congrats on a very solid second quarter. So over the past 1 or 2 years, actually, the company proactively reduced the number of new game launches to focus the resources on the key titles. And meanwhile, like a new release like Marvel Rivals delivered a very strong performance. So looking ahead with a relatively lean pipeline of new games and the higher baseline for our existing portfolio, how does the company plan to drive further business growth? So what will be the primary growth driver and operating strategy moving forward? William Ding: [Foreign Language] Bill Pang: [Interpreted] Okay. I will help do the transition. Well, first of all, regarding the really high-quality products, we're not hesitated to keep investment in. And we're actually going to keep investing to keep building really high quality level of premium products, good premium quality of products. Of course, when doing new products, we need to make sure that we have a clear vision as well as making sure the quality is definitely top notch. And secondly, now as of today, with the help of AI capabilities, which we believe is an amplifier that we believe we can expedite the development speed and as well as leveraging AI capabilities to improve the user experience when users playing our game. We have confidence that with the help of AI tools, we can build more high-quality products than most of our peers in the industry, providing a high-quality experience to our players. That's something we have confidence in, and that's our view. And thank you for your question. Operator: Your next question comes from Ritchie Sun with HSBC. Ritchie Sun: [Foreign Language] [Interpreted] So recently, the 2 games undergoing testing, Beneath The Mist and also Tamas: Shadowveil. So how does management view the monetization potential of these 2 games? And when can these games be launched? William Ding: [Foreign Language] Bill Pang: [Interpreted] I will do the translation. So thank you for your question. Both of the products you mentioned are still ongoing intensive refinement. And one is refinements approach a stage that we believe will satisfy the users' demand and we will release them. As the game developer, we believe player experience is the key of everything. We believe delivering an excellent experience is the foundation of achieving commercial success. Thank you for your question. Operator: And that concludes the question-and-answer session. I would like to turn the conference back over to Brandi Piacente for any additional or closing comments. Brandi, please go ahead with your closing comments. Brandi Piacente: Thank you. Sorry for that. Thank you once again for joining us today. And if you have any further questions, please feel free to contact us. Thank you again. Operator: This concludes the conference. You may disconnect your line. Thank you. 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See the 10 stocks » *Stock Advisor returns as of August 20, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool recommends NetEase. The Motley Fool has a disclosure policy. NetEase (NTES) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Track your investments for FREE with Simply Wall St, the portfolio command center trusted by over 7 million individual investors worldwide. NetEase (SEHK:9999) is back on investor radars after reporting second quarter 2026 earnings. Revenue reached CNY 30,106.55 million, while net income and earnings per share from continuing operations both declined year on year. See our latest analysis for NetEase. At a share price of HK$193.4, NetEase has seen short term momentum soften, with a 30 day share price return down 7.2% and year to date share price return down 15.47%, while the 3 year total shareholder return of 26.92% points to stronger longer term value creation. If this earnings move has you reassessing your watchlist, it can help to see what else is gaining attention in adjacent themes using the 54 AI infrastructure stocks. Bulls point to NetEase’s steady revenue and long term returns, while bears focus on the recent profit dip and weaker share price. Which case does the current valuation lean toward as investors reassess the stock? With NetEase last closing at HK$193.4 against a narrative fair value of HK$249.78, the current gap puts extra weight on how credible the growth and margin story really is. Read the complete narrative. Want to see what is baked into that fair value for NetEase? The narrative leans on steady revenue expansion, fatter margins and a richer earnings multiple. Curious which assumptions do the heavy lifting. Result: Fair Value of HK$249.78 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, NetEase still faces real pressure if overseas revenues stay low and regulatory changes or higher R&D spending squeeze the margins that underpin this undervaluation story. Find out about the key risks to this NetEase narrative. With sentiment on NetEase split between optimism and caution, it makes sense to look through the numbers yourself and decide where you stand. To see what some investors view as the main positives, start with the 4 key rewards. If NetEase has you rethinking your next move, now is the moment to widen your watchlist and pressure test your convictions against other potential opportunities. Spot potential bargains early and compare them to NetEase by checking out screener containing 613 high quality undiscovered gems. Strengthen your portfolio foundation with companies that prioritise resilience through the solid balance sheet and fundamentals stocks screener (430 results). Build a stream of potential income ideas alongside NetEase using the 430 dividend fortresses. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include 9999.HK. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

NetEase (NASDAQ:NTES) shares dropped more than 5% in U.S. premarket trading on Thursday after the Chinese gaming and internet group reported second-quarter earnings that fell substantially short of analyst forecasts, outweighing better-than-expected revenue growth. The company posted earnings per share of RMB12.02, well below the consensus estimate of RMB15.54. Revenue provided a more positive signal, increasing 7.9% year on year to RMB30.11 billion and beating analysts’ expectations of RMB29.48 billion. NetEase’s core games and related value-added services division remained the main driver of growth, generating net revenue of RMB25.0 billion during the quarter. That represented an increase of 9.7% from the corresponding period last year, reinforcing the importance of gaming to the group’s overall financial performance. Youdao also delivered growth, with net revenue increasing 3.5% year on year to RMB1.5 billion. Performance elsewhere was more subdued. NetEase Cloud Music generated approximately RMB2.0 billion in net revenue, broadly unchanged from a year earlier. Revenue from innovative businesses and other operations declined 3.5% to RMB1.6 billion. Operating expenses increased during the second quarter, contributing to the weaker-than-expected earnings performance. Total operating expenses reached RMB9.1 billion, compared with RMB8.6 billion in the previous quarter and RMB9.0 billion in the corresponding period last year. NetEase attributed the sequential increase to higher marketing expenditure, employee-related costs and research and development investment. On a year-on-year basis, the increase was primarily driven by greater R&D spending as the company continued investing in its products and technology. While NetEase’s revenue beat and continued growth in gaming demonstrated resilience across its core operations, investors focused more heavily on the substantial shortfall in earnings. The contrast between 7.9% revenue growth and an EPS figure significantly below consensus suggests rising expenses are limiting the extent to which stronger sales translate into bottom-line growth. With gaming revenue continuing to expand and Youdao also delivering modest growth, NetEase retains momentum across important parts of its portfolio. However, Thursday’s share-price decline indicates investors will be watching closely for evidence that the company can manage higher operating costs while maintaining investment in research, development and marketing. NetEase stock price

HANGZHOU, China, Aug. 20, 2026 /PRNewswire/ -- Youdao, Inc. ("Youdao" or the "Company") (NYSE: DAO), an AI solutions provider specializing in learning and advertising, today announced its unaudited financial results for the second quarter ended June 30, 2026. Second Quarter 2026 Financial Highlights Total net revenues were RMB1.5 billion (US$216.2 million), representing a 3.5% increase from the same period in 2025.- Net revenues from learning services were RMB795.6 million (US$117.3 million), representing a 20.9% increase from the same period in 2025.- Net revenues from smart devices were RMB86.8 million (US$12.8 million), representing a 31.5% decrease from the same period in 2025.- Net revenues from online marketing services were RMB584.4 million (US$86.1 million), representing a 7.7% decrease from the same period in 2025. Gross margin was 48.9%, compared with 43.0% for the same period in 2025. Income from operations was RMB111.5 million (US$16.4 million), increasing by nearly 2.9 times from the same period in 2025. Basic and diluted net income per American depositary share ("ADS") attributable to ordinary shareholders were RMB0.62 (US$0.09) and RMB0.61 (US$0.09), respectively, compared with basic and diluted net loss per ADS attributable to ordinary shareholders of RMB0.15 for the same period of 2025. Non-GAAP basic and diluted net income per ADS attributable to ordinary shareholders were RMB0.76 (US$0.11) and RMB0.75 (US$0.11), respectively, compared with RMB0.11 and RMB0.10 for the same period of 2025. "We delivered another strong quarter, with continued revenue growth, record operating profit and robust operating cash flow, marking our eighth consecutive quarter of operating profitability," said Dr. Feng Zhou, Chief Executive Officer and Director of Youdao. "These results reflect the progress we are making toward healthier and more sustainable growth." "AI is increasingly translating into tangible business results across Youdao. Learning services maintained strong growth, supported by Youdao Lingshi and our expanding portfolio of AI-driven subscription products, while our disciplined focus on higher-quality opportunities further improved the profitability of online marketing services. With the continued advancement of Confucius 4 and our AI Agent portfolio, we will deepen the application of AI across learning and advertising to enhance user experience, improve operating efficiency and drive sustainable growth," Dr. Zhou concluded. Second Quarter 2026 Financial Results Net Revenues Net revenues for the second quarter of 2026 were RMB1.5 billion (US$216.2 million), representing a 3.5% increase from RMB1.4 billion for the same period of 2025. Net revenues from learning services were RMB795.6 million (US$117.3 million) for the second quarter of 2026, representing a 20.9% increase from RMB657.8 million for the same period of 2025. The year-over-year increase was primarily driven by the strong momentum of tutoring services compared with the same period of 2025. Net revenues from smart devices were RMB86.8 million (US$12.8 million) for the second quarter of 2026, representing a 31.5% decrease from RMB126.8 million for the same period of 2025, primarily due to a decline in demand for smart learning devices. Net revenues from online marketing services were RMB584.4 million (US$86.1 million) for the second quarter of 2026, representing a 7.7% decrease from RMB632.9 million for the same period of 2025. The year-over-year decrease reflects Youdao's disciplined, strategic approach to engagement acceptance, which places greater emphasis on higher ROI (return on investment) engagements. Youdao believes this strategy has enhanced the overall operational efficiency of its business. Gross Profit and Gross Margin Gross profit for the second quarter of 2026 was RMB716.9 million (US$105.7 million), representing a 17.6% increase from RMB609.4 million for the same period of 2025. Gross margin was 48.9% for the second quarter of 2026, compared with 43.0% for the same period of 2025. Gross margin for learning services was 65.5% for the second quarter of 2026, compared with 59.8% for the same period of 2025. The improvement was primarily attributable to improved economies of scale resulting from increased revenues from learning services. Gross margin for smart devices was 32.8% for the second quarter of 2026, compared with 41.5% for the same period of 2025. The decrease was mainly attributable to increased bill-of-materials cost for smart devices. Gross margin for online marketing services was 28.7% for the second quarter of 2026, compared with 25.8% for the same period of 2025. Operating Expenses Total operating expenses for the second quarter of 2026 were RMB605.3 million (US$89.2 million), compared with RMB580.6 million for the same period of last year. Sales and marketing expenses for the second quarter of 2026 were RMB424.1 million (US$62.5 million), representing an increase of 5.5% from RMB401.8 million for the same period of 2025. This increase was primarily driven by increased sales and marketing efforts associated with learning services. Research and development expenses for the second quarter of 2026 were RMB142.0 million (US$20.9 million), representing an increase of 10.7% from RMB128.3 million for the same period of 2025. The increase was primarily driven by Youdao's increased investments in cutting-edge AI technology to enhance product and service quality. General and administrative expenses for the second quarter of 2026 were RMB39.2 million (US$5.8 million), representing a decrease of 22.3% from RMB50.4 million for the same period of 2025. The decrease was mainly attributable to a decrease in expected credit losses on the Company's accounts receivables. Income from Operations As a result of the foregoing, income from operations for the second quarter of 2026 was RMB111.5 million (US$16.4 million), increasing by nearly 2.9 times from RMB28.8 million for the same period in 2025. The margin of income from operations was 7.6%, compared with 2.0% for the same period of last year. Net Income/(Loss) Attributable to Youdao's Ordinary Shareholders Net income attributable to Youdao's ordinary shareholders for the second quarter of 2026 was RMB73.8 million (US$10.9 million), compared with net loss attributable to Youdao's ordinary shareholders of RMB17.8 million for the same period of last year. Non-GAAP net income attributable to Youdao's ordinary shareholders for the second quarter of 2026 was RMB90.6 million (US$13.4 million), surging over sevenfold from RMB12.5 million for the same period of last year. Basic and diluted net income per ADS attributable to ordinary shareholders for the second quarter of 2026 were RMB0.62 (US$0.09) and RMB0.61 (US$0.09), respectively, compared with basic and diluted net loss per ADS attributable to ordinary shareholders of RMB0.15 for the same period of 2025. Non-GAAP basic and diluted net income per ADS attributable to ordinary shareholders were RMB0.76 (US$0.11) and RMB0.75 (US$0.11), respectively, compared with RMB0.11 and RMB0.10 for the same period of 2025. Other Information As of June 30, 2026, Youdao's cash, cash equivalents, current and non-current restricted cash, and short-term investments totaled RMB849.3 million (US$125.2 million), compared with RMB743.2 million as of December 31, 2025. For the second quarter of 2026, net cash provided by operating activities was RMB334.2 million (US$49.3 million). Youdao's ability to continue as a going concern is dependent on management's ability to implement an effective business plan amid a changing regulatory environment, generate operating cash flows, and secure external financing for future development. As of June 30, 2026, Youdao has received various forms of financial support from NetEase Group, including, among others, RMB878.0 million in a short-term loan, and US$118.9 million in long-term loans maturing on March 31, 2030, drawn from a US$300.0 million revolving loan facility. As of June 30, 2026, the Company's contract liabilities, which mainly consisted of deferred revenues generated from Youdao's learning services, were RMB835.1 million (US$123.1 million), compared with RMB847.7 million as of December 31, 2025. Share Repurchase Program On November 17, 2022, the Company announced that its Board of Directors had authorized the Company to adopt a share repurchase program in accordance with applicable laws and regulations for up to US$20.0 million of its Class A ordinary shares (including in the form of ADSs) during a period of up to 36 months beginning on November 18, 2022. This amount was subsequently increased to US$40.0 million in August 2023. In November 2025 and August 2026, the Board approved amendments to this Program, each extending its expiration date by one year, ultimately to November 17, 2027. As of June 30, 2026, the Company had repurchased a total of approximately 7.5 million ADSs in the open market under the share repurchase program for a total consideration of approximately US$33.8 million. Announcement on Change in Management The Company also announced today that Mr. William Lei Ding has resigned from his position as a director of the Company's Board of Directors, effective August 18, 2026, for personal reasons. Mr. Jinhai Chen was appointed as a director of the Company's Board of Directors, effective August 18, 2026. Jinhai Chen currently serves as vice president of NetEase Cloud Music Inc. (HKEX: 9899). Prior to joining NetEase Cloud Music in 2020, Mr. Chen served as technical director at Tencent Holdings Limited from 2014 to 2020. Mr. Chen received his master's degree in information and communication engineering from Harbin Institute of Technology. Conference Call Youdao's management team will host a teleconference call with a simultaneous webcast at 6:00 a.m. Eastern Time on Thursday, August 20, 2026 (Beijing/Hong Kong Time: 6:00 p.m., Thursday, August 20, 2026). Youdao's management will be on the call to discuss the financial results and answer questions. Dial-in details for the earnings conference call are as follows: A live and archived webcast of the conference call will be available on the Company's investor relations website at http://ir.youdao.com. A replay of the conference call will be accessible by phone one hour after the conclusion of the live call at the following numbers, until August 27, 2026: About Youdao, Inc. Youdao, Inc. (NYSE: DAO) is strategically positioned as an AI solutions provider specializing in learning and advertising. Youdao mainly offers learning services, online marketing services and smart devices – all powered by advanced technologies. Youdao was founded in 2006 as part of NetEase, Inc. (NASDAQ: NTES; HKEX: 9999), a leading internet technology company in China. For more information, please visit: http://ir.youdao.com. Non-GAAP Measures Youdao considers and uses non-GAAP financial measures, such as non-GAAP net income attributable to the Company's ordinary shareholders and non-GAAP basic and diluted net income per ADS, as supplemental metrics in reviewing and assessing its operating performance and formulating its business plan. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Youdao defines non-GAAP net income attributable to the Company's ordinary shareholders as net income attributable to the Company's ordinary shareholders excluding share-based compensation expenses, impairment of long-term investments, gain from fair value change of long-term investment and adjustment for GAAP to non-GAAP reconciling item for the loss/(income) attributable to noncontrolling interests. Non-GAAP net income attributable to the Company's ordinary shareholders enables Youdao's management to assess its operating results without considering the impact of these items, which are non-cash charges in nature. Youdao believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating the Company's current operating performance and prospects in the same manner as management does, if they so choose. Non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. Non-GAAP financial measures have limitations as analytical tools, which possibly do not reflect all items of expense that affect our operations. In addition, the non-GAAP financial measures Youdao uses may differ from the non-GAAP measures uses by other companies, including peer companies, and therefore their comparability may be limited. For more information on these non-GAAP financial measures, please see the table captioned "Unaudited Reconciliation of GAAP and Non-GAAP Results" set forth at the end of this release. The accompanying table has more details on the reconciliation between our GAAP financial measures that are mostly directly comparable to non-GAAP financial measures. Youdao encourages you to review its financial information in its entirety and not rely on a single financial measure. Exchange Rate Information This announcement contains translations of certain RMB amounts into U.S. dollars ("US$") at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to US$ were made at the rate of RMB6.7851 to US$1.00, the exchange rate on June 30, 2026 set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred to could be converted into US$ or RMB, as the case may be, at any particular rate or at all. Safe Harbor Statement This press release contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases, forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "target," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. The Company may also make written or oral forward-looking statements in its reports filed with, or furnished to, the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Further information regarding such risks, uncertainties or factors is included in the Company's filings with the SEC. All information provided in this press release is as of the date of this press release, and the Company does not undertake any duty to update such information, except as required under applicable law. For investor and media inquiries, please contact: In China:Jeffrey WangYoudao, Inc.Tel: +86-10-8255-8163 ext. 89980E-mail: [email protected] Piacente Financial CommunicationsHelen WuTel: +86-10-6508-0677E-mail: [email protected] In the United States:Piacente Financial CommunicationsBrandi PiacenteTel: +1-212-481-2050E-mail: [email protected] View original content:https://www.prnewswire.com/news-releases/youdao-reports-second-quarter-2026-unaudited-financial-results-302856265.html

This article first appeared on GuruFocus. Total Revenue (Q2 2026): RMB30.1 billion (USD4.4 billion). Total Revenue (H1 2026): RMB60.7 billion (USD8.9 billion), up 7% year over year. Games and Related VAS Revenue (Q2 2026): RMB25 billion, up 10% year over year. Online Games Revenue (Q2 2026): RMB24.5 billion, up 10% year over year but down 2% quarter over quarter. Youdao Revenue (Q2 2026): RMB1.5 billion, up 3% year over year. NetEase Cloud Music Revenue (Q2 2026): RMB2 billion, broadly stable year over year. Innovative Business and Others Revenue (Q2 2026): RMB1.6 billion, down 4% year over year. Gross Profit Margin (Q2 2026): 70.5%, up from 64.7% in the prior year period. Games and Related VAS Gross Margin (Q2 2026): 76.1%, up from 70.2% year over year. Youdao Gross Margin (Q2 2026): 48.9%, up from 43.6% year over year. NetEase Cloud Music Gross Margin (Q2 2026): 37.4%, up from 36.1% year over year. Innovative Business and Others Gross Margin (Q2 2026): 43.4%, up from 42.3% year over year. Non-GAAP Net Income (Q2 2026): RMB7.7 billion (USD1.1 billion), with a year-over-year decline primarily due to investment losses. Non-GAAP Net Income (H1 2026): RMB19 billion (USD2.8 billion), down 8% year over year. Non-GAAP Basic EPS (Q2 2026): USD1.78 per ADS or USD0.36 per share. Total Net Cash Position: RMB167.5 billion as of June 30, 2026. Dividend: USD0.48 per ADS approved for Q2 2026. Share Repurchase: Approximately 24.8 million ADS repurchased for USD2.3 billion under the USD5 billion program. Warning! GuruFocus has detected 4 Warning Signs with JG. Is NTES fairly valued? Test your thesis with our free DCF calculator. Release Date: August 20, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. NetEase Inc (NASDAQ:NTES) reported strong Q2 2026 revenue growth of 10% year-over-year in its games segment, driven by successful titles like Fantasy Westward Journey and Where Winds Meet. The company's gross profit margin for games and related VAS improved significantly to 76.1% from 70.2% year-over-year, driven by lower revenue sharing costs. Eggy Party reached a new milestone of 700 million registered users and maintained monthly active users above 100 million, with peak daily active users hitting a multi-year high. Where Winds Meet demonstrated strong global growth, with positive Steam reviews at 87% and successful launches on Xbox, ranking among top sellers on Steam. NetEase Inc (NASDAQ:NTES) maintains a robust cash position of RMB167.5 billion and continues to return value to shareholders through dividends and a $5 billion share repurchase program. Non-GAAP net income attributable to shareholders declined year-over-year in Q2 2026, primarily due to investment losses. Online games net revenue decreased 2% quarter-over-quarter, attributed to a slight decline in revenue from certain self-developed and licensed games. The new game Sea of Remnants received criticism for not sufficiently lowering the learning curve for players in early stages, affecting initial player experience. NetEase Inc (NASDAQ:NTES) has a relatively lean pipeline of new game launches, which may limit near-term growth opportunities. Revenue from the innovative business and others segment decreased 4% year-over-year, mainly due to a modest decline in e-commerce business revenue. Q: Can management share the latest performance of Sea of Remnants and the expected outlook for the next quarter? What aspects are currently doing well, and what adjustments are planned to further improve the game's performance?A: CEO Lei Ding acknowledged receiving significant user feedback, including criticism, regarding the game's bold video style and roguelike gameplay. He admitted the team did not sufficiently lower the learning curve for players in the early stages, which affected the initial experience. However, the team has prepared a substantial amount of high-quality content, providing a foundation for long-term operations. After initial feedback and content updates, player recognition of the core gameplay is growing, and sentiment is improving. Looking ahead, the company will continue to serve core players, optimize experience issues, and streamline early-stage content to make the innovative gameplay more accessible. Management expressed confidence in the game's long-term potential. Q: Can management update us on the development progress of Ananta? With several competing titles targeting the urban open-world genre, how does the company plan to differentiate the game and stand out from competition?A: CEO Lei Ding stated that Ananta is on track with development, and the team is polishing the gaming experience. The latest progress will be unveiled at Gamescom the following week. Regarding competition, Ding believes Ananta has distinctive strengths as an urban open-world experience, stemming from its unique identity, theme, and gameplay design. He emphasized that high-quality content, a distinctive narrative identity, innovative gameplay, and thoughtful monetization design will be key to the product's success. Q: Over the past one or two years, the company proactively reduced the number of new game launches to focus resources on key titles. Looking ahead with a leaner pipeline and a higher baseline for existing portfolios, how does the company plan to drive further business growth? What will be the primary growth drivers and operating strategy?A: CEO Lei Ding responded that the company will not hesitate to continue investing in high-quality, premium products, ensuring clear vision and top-notch quality for new releases. He highlighted AI capabilities as an "amplifier" that can accelerate development speed and improve user experience. Ding expressed confidence that with AI tools, NetEase can build more high-quality products than most peers, providing superior experiences to players. Q: Regarding the two games undergoing testing, Beneath the Mist and Tamas: Shadowveil, how does management view their monetization potential, and when can these games be launched?A: CEO Lei Ding stated that both products are still undergoing intensive refinement. He emphasized that the company will release them only when the refinement reaches a stage that satisfies user demands. Ding reiterated that player experience is key to everything, and delivering an excellent experience is the foundation for achieving commercial success. Q: What were the key drivers behind the strong second-quarter financial results, particularly the significant year-over-year improvement in gross profit margin for the Games segment?A: CFO Mo Bin reported that total Q2 revenue reached RMB30.1 billion, with Games and related VAS generating RMB25 billion, up 10% year over year. The Games segment's gross profit margin improved to 76.1% from 70.2% in the prior year period, primarily driven by lower revenue-sharing costs related to platforms. The year-over-year revenue increase was attributable to higher net revenue from self-developed games such as the Fantasy Westward Journey franchise and Where Winds Meet. Q: Can you provide more details on the performance of the company's established titles, particularly Sword of Justice and Eggy Party, during the quarter?A: Management highlighted that Sword of Justice launched its major anniversary update "New World" in June, which improved visual quality, streamlined cultivation systems, and refined the in-game economy. The update drove active players to exceed 10 million on launch day, with concurrent users reaching a two-year high. Eggy Party reached a new milestone of 700 million registered users, with monthly active users remaining steadily above 100 million. The game peaked at number three on China's iOS top-grossing chart, and peak daily active users reached a multi-year high for the summer period. Q: How is the company's global expansion progressing, particularly for titles like Where Winds Meet and Marvel Rivals?A: Management noted that Where Winds Meet has demonstrated healthy growth since its global launch, with positive Steam reviews staying around 87%. The game launched on Xbox in June and repeatedly ranked among the top three titles on Steam's global top-seller chart following major content updates. In the domestic market, the Hangzhou expansion pushed the game to number three on China's iOS top-grossing chart, achieving record-high monthly active users. Marvel Rivals continued its global success with seasonal content updates, and the Summer Festival pushed the game to number two on Steam's global top-seller chart and number one in multiple regions, including the United States. Q: What is the company's capital allocation strategy, and can you provide an update on the share repurchase program and dividend policy?A: CFO Mo Bin reported that the company's total net cash position was RMB167.5 billion as of June 30, 2026. The Board approved a dividend of USD0.48 per ADS for the second quarter. Under the current USD5 billion share repurchase program, the company had repurchased approximately 24.8 million ADS as of June 30, 2026, for a total cost of approximately USD2.3 billion. Q: Can you provide more details on the performance of the company's other businesses, particularly Youdao and NetEase Cloud Music?A: Management highlighted that Youdao launched its latest large language model, Confucius 4, with enhanced capabilities in visual math and physics reasoning. The company also upgraded its translation model, increasing inference speed by approximately 80%. Youdao's net revenue increased 4% to RMB2.8 billion for the first half of 2026. NetEase Cloud Music's DAU versus MAU ratio remained above 30% in the first half, increasing both year over year and sequentially. The company renewed partnerships with major labels, including Universal Music Group, and continued to promote original Chinese music. Q: What is the company's outlook for the second half of 2026, and how does management view the competitive landscape in the gaming industry?A: Management expressed confidence in the company's position, emphasizing its commitment to innovation and long-term operating capabilities. The company plans to continue investing in high-quality content and leveraging AI technologies to enhance development efficiency and user experiences. Management believes the company is well-positioned to create For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Interested in NetEase, Inc.? Here are five stocks we like better. NetEase reported solid second-quarter growth: Revenue rose to RMB 30.1 billion, up 7% year over year, while games and related services increased 10% to RMB 25 billion. Overall gross margin improved significantly to 70.5% from 64.7%. Game engagement remained strong in China and overseas, with Eggy Party surpassing 700 million registered users and Where Winds Meet and Marvel Rivals achieving strong global rankings. NetEase is also refining newer titles such as Sea of Remnants and continuing development of Ananta. The company ended June with RMB 157.5 billion in net cash, approved a quarterly dividend of $0.096 per share, and had repurchased approximately $2.3 billion of ADSs. Management also plans to use AI to accelerate game development and improve player experiences. Overlooked Analyst-Approved Dividend Plays You Can Count On NetEase (NASDAQ:NTES) reported second-quarter revenue of RMB 30.1 billion ($4.4 billion), supported by continued growth in its games business, while management highlighted live-service updates, global expansion and artificial intelligence investments as key parts of its operating strategy. Games and related value-added services generated RMB 25 billion in second-quarter revenue, up 10% from a year earlier. Online-game revenue totaled RMB 24.5 billion, rising 10% year over year but declining 2% sequentially, which Vice President of Finance Aileen Mo attributed mainly to a slight revenue decline from certain self-developed and licensed games. → Datavault AI Locks Down CyberCatch in $94M Security Rollup David Tepper Loads Up on China—These 5 Stocks Stand Out Total revenue for the first half reached RMB 60.7 billion, up 7% from the prior-year period. Second-quarter non-GAAP net income attributable to shareholders was RMB 7.7 billion ($1.1 billion), with the year-over-year decline primarily reflecting investment losses, Mo said. NetEase said its overall second-quarter gross margin increased to 70.5% from 64.7% a year earlier. Gross margin in games and related value-added services rose to 76.1% from 70.2%, primarily due to lower platform revenue-sharing costs. → Michael Burry Is Betting Against Palantir Again—Should Investors Care? Cash Flow Focus: Thermo Fisher, Energy Transfer, and NetEase The company reported RMB 9.1 billion in total operating expenses for the quarter, equal to 30% of revenue. Research and development spending represented 15.4% of revenue, broadly stable from 15.6% a year earlier, as the company continued investing in innovation and content development. NetEase ended June with RMB 157.5 billion in net cash, down from RMB 163.5 billion at the end of 2025. Its board approved a second-quarter dividend of $0.096 per share, or $0.48 per American depositary share. Under its $5 billion repurchase program, the company had repurchased about 24.8 million ADSs for approximately $2.3 billion as of June 30. → Home Depot Analysts See a Path to $375 and Beyond Bill Pang, NetEase’s vice president of corporate development, said the company’s games portfolio benefited from both new releases and continuing updates to established titles. Eggy Party reached 700 million registered users, with monthly active users remaining above 100 million, according to Pang. The game reached No. 3 on China’s iOS top-grossing chart during the summer period, while peak daily active users hit a multiyear high for the season. NetEase said cumulative creator rewards in the game’s user-generated content ecosystem surpassed RMB 200 million. Sword of Justice released its “New World” anniversary update in June, and active players exceeded 10 million on launch day, Pang said. Concurrent users reached a two-year high. Other domestic titles receiving new content included Identity V, Naraka: Bladepoint, Fantasy Westward Journey Online and Mobile, Westward Journey Returns, and Ethereal Borders. NetEase also cited overseas performance for Where Winds Meet and Marvel Rivals. Where Winds Meet launched on Xbox in June and maintained Steam user reviews above 87%, according to management. The title ranked among the top three games on Steam’s global top-seller chart following major updates. In China, its Dali expansion pushed the game to No. 3 on the iOS top-grossing chart and helped produce year-over-year quarterly revenue growth and record monthly active users. Marvel Rivals added an 18-versus-18 mode, heroes, maps and events during the quarter. Its Summer Festival helped the game reach No. 2 on Steam’s global top-seller chart and No. 1 in several regions, including the United States, Pang said. Responding to an analyst question about Sea of Remnants, Executive Vice President Hu Zhipeng said the game received some criticism following its July release in China. Management concluded that its early-stage experience did not sufficiently reduce the learning curve for players, despite the game’s visual style, roguelike gameplay and open-world design. Pang, translating Hu’s remarks, said NetEase has prepared substantial content for long-term operations and has seen player sentiment improve as it introduced frequent updates and experience optimizations. The company plans to streamline early-game content and continue addressing player feedback, while management said it remains confident in the title’s long-term potential. Management said urban open-world role-playing game Ananta remains on track in development, with the team continuing to polish the player experience. NetEase planned to show the game’s latest progress at Gamescom the following week. Hu said the company believes the game can differentiate itself through its identity, theme, gameplay, narrative and monetization design. Regarding two games in testing, Beneath the Mist and Tarisal’s Shadow, management said both remain in intensive refinement and will be released when their quality meets player expectations. Hu said an excellent player experience is the foundation for commercial success. Looking ahead, management said it would continue investing in premium-quality games while applying AI tools to accelerate development and improve gameplay experiences. Pang said the company views AI as an “amplifier” that can help NetEase build more high-quality products. Youdao generated RMB 1.5 billion in second-quarter revenue, up 9% sequentially and 3% year over year, driven mainly by learning services. NetEase said Youdao launched its Confucius 4 large language model during the quarter and improved its translation model’s inference speed by about 80% through an acceleration mechanism. NetEase Cloud Music reported second-quarter revenue of RMB 2 billion, broadly stable from both the prior quarter and prior year. Management said its daily active user-to-monthly active user ratio remained above 30% in the first half, while retention and renewal rates improved for its membership base. Revenue from innovative businesses and other operations was RMB 1.6 billion, up 6% sequentially but down 4% year over year. The sequential increase was driven primarily by e-commerce and several other businesses, while the annual decline reflected a modest decrease in e-commerce revenue. NetEase said its Yanxuan e-commerce operation saw healthy growth from new pet-food, home-scent and home-goods products. NetEase, Inc (NASDAQ: NTES) is a Chinese technology company headquartered in Hangzhou that develops and operates Internet services and products. Founded in 1997 by William Ding (Ding Lei), the company has grown from an early web portal and e-mail provider into a diversified online services group. William Ding has served as the company's founder and long-time leader, guiding its expansion into games, digital content and consumer services. The company's primary business is interactive entertainment: NetEase Games designs, develops and publishes PC and mobile games for domestic and international audiences, offering a mix of self-developed franchises and titles published under licensing and strategic partnerships. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "NetEase Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

HANGZHOU, China, Aug. 20, 2026 /PRNewswire/ -- NetEase Cloud Music Inc. (HKEX: 9899 or the "Company"), a leading interactive music streaming service provider in China, today announced its financial results for the first half of 2026 ended June 30, 2026. Summary of Key Financial Metrics (RMB in thousands, unless otherwise stated) Note: (1) During the period ended 30 June 2025, the Group recognised a deferred income tax credit of RMB849.4 million which primarily arose from the recognition of deferred tax assets in respect of cumulative tax losses incurred by a wholly-owned subsidiary. These tax losses are available to be carried forward against future taxable income. Deferred tax assets relating to tax losses and temporary differences are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences or tax losses can be utilised. (2) Adjusted operating profit and adjusted net profit are defined as operating profit and profit for the period attributable to the equity holders of the Company adjusted by adding back equity-settled share-based payments as appropriate. For details of the reconciliation of the operating profit and the profit for the period attributable to the equity holders of the Company to the adjusted operating profit and the adjusted net profit of our Group, see the section headed "Financial Review" below. First Half 2026 Key Financial Highlights Revenue was RMB4.0 billion, an increase of 3.4% compared with RMB3.8 billion for the same period of 2025. Gross profit was RMB1.5 billion, a slightly increase of 5.9% compared with RMB1.4 billion for the same period of 2025. Gross margin improved to 37.2% from 36.4% for the same period of 2025. This was primarily due to increased revenue from our online music services. Operating profit was RMB746.2 million, compared with RMB844.5 million for the same period of 2025. This was primarily due to the increase in promotion and advertising expenses to enhance brand awareness and user acquisition. Adjusted operating profit was RMB796.7 million, compared with RMB905.4 million for the same period of 2025. Net profit reached RMB809.2 million, compared with net profit of RMB1,882.1 million for the same period of 2025. Adjusted net profit reached RMB859.7 million, compared with adjusted net profit of RMB1,946.4 million for the same period of 2025. The decrease was primarily due to the deferred tax credit of RMB849.4 million for the six months ended 30 June 2025 arising from the initial recognition of deferred tax assets in respect of cumulative tax losses, as these losses were utilised against taxable profits in the current period. Business Overview We began 2026 by further strengthening our core online music business, prioritising exceptional user experiences, distinctive content and our vibrant music community to support healthy, steady growth. We continued to diversify our content offerings, improve personalised recommendations and innovate product features, enhance the platform's aesthetic and emotional appeal and boost community engagement, while enriching our membership benefits. Our platform continues to be widely recognized by music enthusiasts, demonstrating steady improvement in user engagement and loyalty. These enhancements reinforce NetEase Cloud Music's distinctive community ecosystem and brand perception, underscoring the platform's inherent value and long-term sustainable growth potential. We continued to strengthen our music-centric community ecosystem, with enhancements to the user experience and strong brand perception driving higher user engagement and thus a larger daily active user base in the first half of 2026. Our DAU/MAU ratio remained above 30%, increasing both year-over-year and sequentially. The average daily mobile music listening time rose steadily, and community content consumption and interaction penetration rates also increased notably. In particular, we improved retention and renewal rates across our expanded membership base both year-over-year and sequentially, reflecting stronger user loyalty and connection to the platform. We remain dedicated to engaging young music lovers. Our distinctive music content and experiences, trendsetting aesthetics, and unique emotional appeal continue to drive positive word-of-mouth. We expanded our presence across devices and scenarios, including collaboration with NetEase Games, broadening with more channels to reach and engage young audiences. We have built a diverse and distinctive content library by expanding copyrighted music and promoting original music. Earlier this year, we renewed partnerships with major labels such as Universal Music Group. We added content from Korean and Chinese labels, as well as OSTs and variety show music, and enhanced our signature genres. Notably, original artist Gareth.T's new song "Glass" (《玻璃》) achieved industry-leading streaming performance on our platform, highlighting strong user affinity for our core genres. We also deepened our collaboration with labels to optimise content distribution and co-create value. In parallel, we remained committed to promoting original Chinese music, with recent in-house releases such as "12.31" earning widespread acclaim. Our unique ecosystem of independent artists continues to grow, offering expanded avenues for music creation and promotion. In terms of products, we remained focused on user needs, advancing innovation across music discovery and consumption experiences while revitalizing community engagement. In the first half of 2026, we further refined our new product framework, making music exploration more intuitive and engaging. We further upgraded our self-developed AI generative recommendation model, Climber, and launched innovative functions, such as "AI-inspired Playlist" (AI靈感歌單), to address users' diverse music discovery preferences. We also innovated features such as several new player interfaces and the MV playback entrance on the vinyl player page, enriching users' audio-visual music journey. Meanwhile, we further boosted community interaction by upgrading the "Listen Together" (一起聽) feature, launching voice comments and enhancing our image- and text-based community ecosystem. In the first half of 2026, our subscription-based membership revenue sustained steady growth, driven by an expanded subscriber base, though partially offset by monthly ARPPU (average revenue per paying user) dilution due to changes in the subscriber mix. We further refined our membership benefits built around content, features, dress-up privileges, as well as artist-related offerings. In addition to premium content, we offer more distinctive emotional experiences and innovative ways for users to interact. These enhancements supported both users' willingness to pay for premium experiences and membership retention. Looking ahead, we will remain committed to enhancing the music experience and deepening user engagement across our platform by expanding high-quality content offerings, advancing product and feature innovation, and further strengthening our community. Our strategic priorities include the following initiatives: Further diversifying and enhancing our differentiated content offerings, with greater efficiency. We plan to deepen collaborations with copyright holders and strengthen our independent artist incubation and in-house music production capabilities, focusing on our signature music genres; Optimising music listening experiences and recommendation features to meet users' needs and deliver ultimate music experience; Nurturing our music-oriented community ecosystem and exploring innovative inter-person interaction via enhancements to our comprehensive product offerings, including broadening communicative scenarios and ecology; Cultivating our users' willingness to pay and subscribe to premium offerings by improving user experience, deepening user engagement, enhancing membership privileges and broadening consumption scenarios; and Improving profitability through continued cost optimisation, operating efficiency enhancement and disciplined cost control. Diverse and differentiated content ecosystem We are committed to expanding our distinctive content library by further diversifying our content mix across both licensed tracks and original music. We actively promote original Chinese music by supporting independent artists and developing in-house music. At the same time, we continue to advance music genres that resonate strongly with our users, including hip-hop and Western music. Enhancing partnerships with copyright holders Throughout the Reporting Period, we further strengthened our copyrighted content ecosystem, maintaining a disciplined and collaborative approach to renew major labels, expand offerings particularly in signature genres and deepen collaborations with artists. Expansive catalogue of music labels. In the first half of 2026, we continued to enrich our copyrighted music catalogue by renewing strategic partnerships with major record labels such as Universal Music Group, Warner Music and CJ Entertainment, and added extensive Chinese content from partners such as Forward Music (豐華唱片), as well as K-Pop titles from labels including DSP Media. As a result, our library now features a wider selection of hit tracks from artists including Faye Wong (王菲), YOUNG POSSE, Lee Hyori and LNGSHOT. We also expanded our OST offerings by incorporating TVB drama soundtracks and music from several popular variety shows. Amplifying offerings in signature music genres. We further enriched our music library with high-quality selections across our signature genres such as hip-hop and Western music. These included the latest releases from hip-hop artists such as BENZO (李大奔), Melo, Boss Shady (謝帝), and emerging artists including Echo, Chun (春), and BroFA. We also expanded audience engagement across these genres through targeted artist initiatives, including offline events for BENZO's (李大奔's) new album "MODEL" and artist IP-themed virtual outfits. Furthermore, we advanced our copyright collaborations with popular Western artists such as Madilyn Bailey, DEMXNTIA, and Emma Stevens. In-depth collaborations with copyright partners. We deepened our cooperation with music labels and fostered mutual value creation through tailored campaigns designed to expand the reach and engagement of new releases. Gareth.T's new song "Glass" (《玻璃》) surpassed 100 million cumulative plays on NetEase Cloud Music, demonstrating strong user affinity for our signature genres such as R&B. For Western artists, we collaborated with Bruno Mars on an exclusive badge campaign tied to album listening, complemented by offline events, generating over 15 million streams. Also, our comprehensive campaign supporting Kanye West's album launch generated nearly 20 million total streams. Online and offline artist-centric activities. We worked closely with labels and artists to deliver artist-centric campaigns both online and offline, engaging younger audiences. During the period, we launched a series of integrated online and offline events centered around the Mayday anniversary, Hua Chenyu's (華晨宇's) birthday, Chris Lee's (李宇春's) concert tour, BENZO's (李大奔's) new album release, among others. We also promoted ticketing collaborations for MAMAMOO's 12th-anniversary tour, providing fans with a premium ticketing experience while supporting SVIP membership conversions. Additionally, we rolled out the innovative "Lyric Stamp" (歌詞郵票) feature, introducing 16 themed sets tailored to different contexts and scenarios, and upgraded our "Listen Together" (一起聽) function with artist participation. Strengthening our leading independent artists' ecosystem Beyond licensed content, we continued to strengthen our independent artist ecosystem, supported by initiatives covering creation, distribution and commercial opportunities. By the end of June 2026, more than 1.25 million registered independent artists had contributed over 7.3 million tracks to our platform. Supporting musicians in content creation.Through collaborations with original musicians and deeper integration with NetEase Games IPs, we connect original music creation with the gaming ecosystem. These efforts have produced several hit tracks, including "For the Next Goal" (《為下一球》), a World Cup-themed song by rapper Wang Yitai (王以太) for eFootball. Enhancing musician visibility and commercial opportunities. We advanced the NetEase Cloud Music Original Campus Tour, launching in April at Nanjing Agricultural University and hosting a graduation event in June at Guizhou Normal University, connecting artists directly with student audiences. We expanded commercial exposure for independent artists through collaboration with brands and IPs. Through partnership with the "HOPICO Music Awards," we created more opportunities for our independent musicians to perform at popular music festivals. Via the special collaboration series with JD, we co-created three concerts across different cities and musical genres, featuring artists including Jude Chiu (裘德), Vanessa Jin (金玟岐) and Orange Ocean (橘子海樂隊). Developing and promoting differentiated in-house music Our in-house studios focus on producing distinctive, high-quality original music content to enrich our content matrix. In the first half of 2026, they successfully produced and popularised multiple hit songs that gained traction both across our community and on external platforms, such as "12.31". Diversified audio-based content offerings In addition to music, we expanded our audio offerings to cater to users' diverse interests. In the first half of 2026, our growing audio content library drove increased user consumption, with average listening time per user continuing to rise steadily. PGC – audiobooks & radio dramas. We continued to expand our audiobook offerings by adding top-tier IP titles such as《斗羅大陸》and《元始法則》, alongside bestsellers like Mo Yan's (莫言's) new novel "People! !《人吶》," and the children's story "《貓平安逆襲傳奇》." Our in-house audiobooks like《靈境行者》have also become new hits on our platform. In terms of content cooperation, we have established stable partnerships with leading domestic copyright organizations – including Tomato Novel, and COL Group – consistently advancing our audiobook business toward higher quality and excellence. PUGC/UGC – podcast. Our podcast offerings focused on music-themed audio content and cultural podcast IPs, introducing over ten new podcast programs in the first half of 2026. We have partnered with Shan Jixiang (單霽翔) for his debut personal podcast "100 Events in the Century of the Palace Museum" (《故宮博物院百年百事》). We have also collaborated with musicians Li Runqi (李潤祺) and Si Nan (司南), as well as the well-known Japanese artist KOKIA, to produce music-themed podcasts. Additionally, we've welcomed hosts Chen Xiaonan (陳曉楠) and Li Sisi (李思思), author Liu Tong (劉同), and philosophy professor Chen Guo (陳果) to lead various podcast series. Furthermore, we launched a dedicated video podcast segment titled "Live Dialogues" (對話現場), featuring 13 high-quality video programs from labels such as "Midnightalks" (大內密談) and Story FM. Product innovation and community ecosystem In the first half of 2026, we advanced personalised music discovery and listening experiences, introduced new AI-powered capabilities and expanded opportunities for users to interact around music, keeping our community vibrant. These enhancements improved user engagement, increased in-app music listening time, and drove greater user participation in community content, further deepening engagement across our platform. Optimising users' music discovery and consumption experience We continued to advance personalised recommendations and innovative features to make music discovery and listening more intuitive, personalised and engaging. In the first half of 2026, we introduced new features that give users more choices and better control over how they find, experience and interact with music. Music content discovery and distribution. We are dedicated to providing users with a precise and personalised music journey. During the Reporting Period, we further refined the new framework within the NetEase Cloud Music App and expanded our AI-powered recommendation capabilities. The updated "Heartbeat Mode" (心動模式) page now displays the rationale behind song recommendations, providing users with greater context around personalised suggestions. We also upgraded Climber, our self-developed AI generative recommendation model, and introduced new, AI-powered music discovery features. For example, the AI-inspired playlist feature enables users to quickly generate custom algorithmic playlists, catering to diverse user needs. Enhancing the music consumption experience. We continued to broaden the ways users can personalise and experience music through new innovative audio-visual features. We launched several new player interfaces to drive consumption including the customisable "Diamond Player style" (鑽石播放器樣式), which features extensive DIY customisation options and has gained broad user adoption. We also promoted the "Full-Screen Cover" (全屏封面) player on the Heartbeat page and added direct access to music videos on the Vinyl Player page, offering a more immersive audio-visual experience. In addition, we introduced a series of AI-powered functions designed to create more personalised and emotionally engaging experiences, including the "AI Mood Tuner" (AI 情緒調音師) & "Mood Player" (情緒播放器), "AI Pet Player" (AI 寵物播放器), and "AIGC Personal Profile Backgrounds" (AIGC 個人主頁背景). Enhancing distinctive and evolving community We further strengthened our distinctive and evolving music-oriented community by creating more ways for users to connect and interact around music. In the first half of 2026, we expanded and enhanced interactive scenarios across the platform, increasing the proportion of users consuming and interacting with community content. We upgraded the "Listen Together" (一起聽) feature, further strengthening the shared listening experience and sense of companionship for users, and introduced voice comments to enable richer interaction within comment sections. We also continued refining our music-inspired image- and text-based community ecosystem, which encouraged deeper community participation and engagement. Expanding music consumption scenarios We are committed to building a music consumption ecosystem across a broad range of scenarios, integrating music into everyday life, and making our music experience more accessible for younger audiences. IoT layouts. In the first half of 2026, we continued to expand and refine a unified IoT multi-device experience, enhancing user reach and engagement. For in-vehicle use, we expanded our coverage to, among others, Chery, XPeng Robotaxi, and FAW Jiefang. For TVs, we introduced the "Spring Festival Lucky Journey" immersive experience and optimised the homepage layout and remote-control interface. For smartwatches, we added new player designs and watch faces. For PCs, we improved the desktop recommendation experience, added features like "AI Audio Master" (AI 調音大師) and enhanced compatibility for desktop use. Game collaborations. We continued to integrate NetEase Cloud Music into core gaming scenarios in NetEase Games' ecosystem, enriching in-game content experiences while conveying NetEase Cloud Music's brand essence, building cross-scenario user engagement and brand affinity. We expanded music features across diverse gameplay scenarios, providing users with multiple ways to access our music player within various game titles, including scenarios in Identity V, Where Winds Meet, Minecraft and Sky. Through these tailored collaborations, NetEase Cloud Music continues to strengthen its connections with younger users and enhance brand perception with this demographic. Conference Call The Company's management will host an earnings conference call at 7:00 p.m. Beijing/Hong Kong Time on Thursday, August 20, 2026 (7:00 a.m. U.S. Eastern Time on the same day). Details for the conference call are as follows: Event Title: NetEase Cloud Music Inc. First Half 2026 Earnings Conference CallRegistration Link: https://s1.c-conf.com/diamondpass/10056360-8au2z2.html All participants must use the link provided above to complete the online registration process in advance of the conference call. Upon registering, each participant will receive a set of dial-in numbers, an event passcode, and a personal access PIN, which will be used to join the conference call. A replay of the call will be accessible by phone at the following numbers and entering PIN: 10056360. The replay will be available through August 27, 2026. Additionally, a live and archived webcast of the conference call will be available on the Company's investor relations website at http://ir.music.163.com. About NetEase Cloud Music Inc. Launched in 2013 by NetEase, Inc. (NASDAQ: NTES; HKEX: 9999), NetEase Cloud Music Inc. (HKEX: 9899) is a well-known online music platform featuring a vibrant content community. Dedicated to providing an elevated user experience, NetEase Cloud Music Inc. provides precise, personalised recommendations, promotes user interaction and creates a strong social community. Its focus on discovering and promoting emerging musicians has made NetEase Cloud Music Inc. a destination of choice for exploring new and independent music among music enthusiasts in China. The platform has been recognised as the most popular entertainment app among China's vibrant Generation Z community. Please see http://ir.music.163.com/ for more information. Forward Looking Statements This press release contains forward-looking statements relating to the business outlook, estimates of financial performance, forecast business plans and growth strategies of the Company. These forward-looking statements are based on information currently available to the Company and are stated herein on the basis of the outlook at the time of this press release. They are based on certain expectations, assumptions and premises, some of which are subjective or beyond our control. These forward-looking statements may prove to be incorrect and may not be realised in the future. Underlying these forward-looking statements are a lot of risks and uncertainties. In light of the risks and uncertainties, the inclusion of forward-looking statements in this press release should not be regarded as representations by the Board or the Company that the plans and objectives will be achieved, and investors should not place undue reliance on such statements. Non-IFRS Measure To supplement our consolidated results, which are prepared and presented in accordance with International Financial Reporting Standards ("IFRS"), our Company uses adjusted operating profit and adjusted net profit as additional financial measures, which are not required by, or presented in accordance with IFRS. We believe that these measures facilitate comparisons of operating performance from period to period and company to company by eliminating the potential impact of items that our management does not consider to be indicative of our Group's operating performance, such as certain non-cash items. The use of these non-IFRS measures has limitations as an analytical tool, and shareholders and potential investors of our Company should not consider them in isolation from, as a substitute for, as an analysis of, or superior to, our Group's results of operations or financial condition as reported under IFRS. In addition, these non-IFRS financial measures may be defined differently from similar terms used by other companies, and may not be comparable to other similarly titled measures used by other companies. Our presentation of these non-IFRS measures should not be construed as an implication that our future results will be unaffected by unusual or non-recurring items. Investor Enquiries: Angela XuNetEase Cloud Music [email protected] View original content:https://www.prnewswire.com/apac/news-releases/netease-cloud-music-inc-reports-first-half-2026-financial-results-302856309.html

NetEase’s core business, which is games and related value-added services, drove the revenue surge, rising 9.7% year-on-year. The company attributed the increase primarily to higher revenue from self-developed games, including the “Fantasy Westward Journey” franchise and “Where Winds Meet.” It also highlighted continued international expansion for “Where Winds Meet” and “Marvel Rivals,” while “Sea of Remnants” launched in China in July. Shares of NetEase Inc. (NTES) were in focus on Thursday after the company reported a mixed second quarter, with higher research and development expenses contributing to the pressure on profits. NetEase reported revenue of RMB30.1 billion ($4.47 billion), up 7.9% year over year, while earnings per American Depositary Receipt (ADR) stood at RMB12.02. Wall Street expected NetEase to report revenue of RMB29.5 billion and earnings per ADR of RMB15.54. See what 10M+ investors are talking about. Get the Stocktwits Daily Rip for what retail is watching right now, free to your inbox NetEase CEO William Ding struck an optimistic note, saying that the company will focus on creating original content, building long-lasting franchises and strengthening communities to sustain player engagement. NetEase’s American Depositary Receipts were down more than 3% in Thursday’s pre-market trade. NetEase's total operating expenses rose 1.5% year-on-year and 5.8% quarter-on-quarter to RMB9.1 billion in Q2. The company said the year-on-year increase was primarily due to higher research and development expenses, while quarter-over-quarter growth also reflected increased marketing expenditures and staff-related costs. NetEase ended the quarter with RMB167.5 billion in net cash, up from RMB163.5 billion at the end of 2025. NetEase’s core business, which comprises games and related value-added services, drove the revenue surge, rising 9.7% year-on-year to RMB25.0 billion during the quarter. The company attributed the increase primarily to higher revenue from self-developed games, including the “Fantasy Westward Journey” franchise and “Where Winds Meet.” “Our robust performance in the first half of 2026 reflects players' growing enthusiasm for both our newly launched and established games, underscoring our ability to create distinctive and refreshing experiences with lasting appeal,” said NetEase CEO William Ding. NetEase's total gross profit increased 17.5% year over year to RMB21.2 billion, while cost of revenues declined to RMB8.9 billion from RMB9.8 billion a year earlier. Revenue from Youdao increased 3.5% to RMB1.5 billion, while NetEase Cloud Music revenue was relatively stable at RMB2.0 billion. The company also highlighted continued international expansion for “Where Winds Meet” and “Marvel Rivals,” while “Sea of Remnants” launched in China in July. Retail sentiment on Stocktwits around NetEase was in the ‘bearish’ territory at the time of writing. NTES ADR is down 9% year-to-date and 1% over the past 12 months. The Avantis Emerging Markets Equity ETF (AVEM) is up 31% over the past 12 months, while the VanEck Video Gaming and eSports ETF (ESPO) is down 14%. (Exchange Rate: RMB1 = $0.15) Also See: GRRR's $5.5B Commercial Book Catches Wall Street's Attention — Compass Point Sees A 193% Upside Potential For updates and corrections, email newsroom[at]stocktwits[dot]com. Rounak Jain has no position in any of the stocks mentioned in this article. StockTwits' news team content is for informational purposes only and is not intended as investment advice. For more, see our editorial policy. This article was originally published on StockTwits. Related: MRVL Stock Jumps 6% As Top Wall Street Firms Furnish Bullish Signals Ahead Of Marvell Earnings ROST Stock Soars 8% After-Hours On Blowout Q2 — CEO Highlights Off-Price as ‘Winning Sector’ Amid Retail Order Cancellations AVGO Stock Inches Higher — Broadcom Reportedly Eyes Nearly $100B Debt Package To Fund AI Infrastructure Expansion

Alibaba (BABA) edges out NetEase (NTES) as the top growth pick, with 23% implied upside to analyst targets and 40% cloud revenue growth last quarter. Despite Polymarket pricing an 80% chance Alibaba misses earnings, its AI reinvestment targets RMB 30 billion in MaaS ARR by year-end. Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Alibaba didn't make the cut. Grab the names FREE today. Alibaba (NYSE:BABA) and NetEase (NASDAQ:NTES) both step onto the earnings stage before the open on Thursday, August 20, 2026, with Alibaba reporting fiscal Q1 2027 and NetEase reporting Q2 2026. This simultaneous reporting gives investors a real choice for a growth allocation: the AI and cloud reinvestment story or the cash-generative gaming franchise. For a growth-oriented investor, which stock is more attractive ahead of the report? The sell side is heavily bullish on both, but the degree differs. Alibaba shows 8 Strong Buy, 30 Buy, one Hold, no Sell, and one Strong Sell ratings, with 95% bullish sentiment and 3% bearish. NetEase counts 6 Strong Buy, 25 Buy, one Hold, and zero Sell ratings, with 97% bullish sentiment and 0% bearish. NetEase has a cleaner consensus with no bearish analyst on record, while Alibaba still has one Strong Sell dissenter. Winner: NetEase. Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Alibaba didn't make the cut. Grab the names FREE today. Alibaba last traded at $128.15, compared with an analyst target of $189.73 and a 24/7 Wall St. model base case of $157.65, implying 23.0% upside, with a 0.9 confidence score. NetEase closed at $124.75, compared with a $161.82 analyst target and a 24/7 Wall St. model target of $151.67, implying 21.58% upside at 0.9 confidence. Note that the prediction-markets dashboard shows a separate NetEase AI target of $147.61 with 18.33% upside, a small discrepancy suggesting the model is sensitive to Q2 earnings assumptions. Alibaba offers greater upside to the analyst consensus and a longer runway if AI cloud monetization continues to accelerate. Winner: Alibaba. Alibaba is running hot. Shares are up 11.5% over the past month and 5.6% over one year, though year to date is −13.0%, with a beta of 0.51. That momentum comes with a cautionary signal: Polymarket assigns an 80% probability that Alibaba will not beat quarterly earnings, based on 1,734.26 contracts of volume. NetEase has drifted the other way, down 5.0% on the month, 11.2% year to date, and 4.3% over one year, with a beta of 0.80. No active prediction markets exist on NetEase earnings. Alibaba faces a higher expectations bar and bearish sentiment; NetEase faces a lower bar and weaker price momentum. Winner: NetEase. NetEase wins two of three scored dimensions, but the growth case belongs to Alibaba. The Q4 FY2026 report showed Cloud Intelligence Group external revenue accelerating to 40% growth, AI-related product revenue posting an 11th consecutive quarter of triple-digit growth, and MaaS ARR expected to exceed RMB 10 billion in the June quarter and RMB 30 billion by year-end, alongside quick commerce revenue up 57% year over year. NetEase, by contrast, grew total Q1 2026 revenue 6% and games 7% year over year, with gross margin expanding from 54.1% to 69.4%. Cleaner, but slower. A growth portfolio bets on companies reinvesting for future returns, and Alibaba best represents that thesis. The single biggest risk to owning the winner is structural, and it applies to both tickers: U.S.-listed ADRs of China-based operators trade through VIE structures rather than direct equity ownership in the mainland business, and both Chinese regulatory intervention and U.S. audit-oversight and delisting risk loom over every fundamental consideration. That risk is the price of entry into this growth story. For now, Alibaba is the more attractive growth pick. Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Alibaba didn't make the cut. Grab the names FREE today. Contact [email protected] for any questions or corrections.