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Investors interested in stocks from the Internet - Software and Services sector have probably already heard of NetEase (NTES - Free Report) and Tyler Technologies (TYL - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Right now, NetEase is sporting a Zacks Rank of #1 (Strong Buy), while Tyler Technologies has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NTES has an improving earnings outlook. But this is just one piece of the puzzle for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

NTES currently has a forward P/E ratio of 12.43, while TYL has a forward P/E of 22.39. We also note that NTES has a PEG ratio of 1.42. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. TYL currently has a PEG ratio of 1.49.

Another notable valuation metric for NTES is its P/B ratio of 3.06. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, TYL has a P/B of 3.39.

These metrics, and several others, help NTES earn a Value grade of B, while TYL has been given a Value grade of D.

NTES is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that NTES is likely the superior value option right now.

The global video games industry is entering a period of consolidation that is likely to favour the biggest publishers and developers, according to analysts at Bernstein, who argue that investors should look beyond slowing revenue growth and focus on rising barriers to entry.

The broker estimates the gaming market will generate around $220 billion of revenue in 2026, up 0.7%, following growth of 4.8% last year.

While that points to a softer near-term outlook, Bernstein believes the industry is becoming increasingly concentrated as smaller studios struggle with rising development costs and a tougher funding environment.

The firm said studio closures and restructuring programmes across the industry were reducing competition and strengthening the position of established developers with successful intellectual property and large player communities.

Bernstein highlighted Asian gaming groups as its preferred investments, including Tencent Holdings (HKG:0700, OTC:TCEHY), NetEase (NetEase Inc (NASDAQ:NTES)), Nintendo (OTCMKTS:NTDOY), Capcom (OTCMKTS:CCOEY) and Konami (LON: KNM).

Analyst Robin Zhu argued that Japanese, Chinese and Korean developers continue to benefit from lower development costs and improving productivity compared with many western rivals.

PC gaming was also identified as one of the industry's strongest growth areas, supported by advances in hardware and a growing number of blockbuster releases.

Attention is increasingly turning to the launch of Grand Theft Auto VI, published by Take-Two Interactive Software Inc (NASDAQ:TTWO), which is expected in November.

Zhu said rival publishers had crowded release schedules into September in an effort to avoid competing directly with what is widely expected to be one of the biggest game launches in history.

The broker also dismissed concerns that AI will materially disrupt the industry's economics, arguing that successful franchises, creative storytelling and engaged player communities remain the key drivers of long-term value creation.

Growth stocks are attractive to many investors, as above-average financial growth helps these stocks easily grab the market's attention and produce exceptional returns. But finding a great growth stock is not easy at all.

By their very nature, these stocks carry above-average risk and volatility. Moreover, if a company's growth story is over or nearing its end, betting on it could lead to significant loss.

However, the task of finding cutting-edge growth stocks is made easy with the help of the Zacks Growth Style Score (part of the Zacks Style Scores system), which looks beyond the traditional growth attributes to analyze a company's real growth prospects.

NetEase (NTES - Free Report) is one such stock that our proprietary system currently recommends. The company not only has a favorable Growth Score, but also carries a top Zacks Rank.

Research shows that stocks carrying the best growth features consistently beat the market. And returns are even better for stocks that possess the combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Here are three of the most important factors that make the stock of this internet technology company a great growth pick right now.

Earnings GrowthArguably nothing is more important than earnings growth, as surging profit levels is what most investors are after. For growth investors, double-digit earnings growth is highly preferable, as it is often perceived as an indication of strong prospects (and stock price gains) for the company under consideration.

While the historical EPS growth rate for NetEase is 22.3%, investors should actually focus on the projected growth. The company's EPS is expected to grow 14.2% this year, crushing the industry average, which calls for EPS growth of 12.8%.

Cash Flow GrowthWhile cash is the lifeblood of any business, higher-than-average cash flow growth is more important and beneficial for growth-oriented companies than for mature companies. That's because, growth in cash flow enables these companies to expand their businesses without depending on expensive outside funds.

Right now, year-over-year cash flow growth for NetEase is 17%, which is higher than many of its peers. In fact, the rate compares to the industry average of 8.3%.

While investors should actually consider the current cash flow growth, it's worth taking a look at the historical rate too for putting the current reading into proper perspective. The company's annualized cash flow growth rate has been 16.7% over the past 3-5 years versus the industry average of 15.9%.

Promising Earnings Estimate RevisionsBeyond the metrics outlined above, investors should consider the trend in earnings estimate revisions. A positive trend is a plus here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

There have been upward revisions in current-year earnings estimates for NetEase. The Zacks Consensus Estimate for the current year has surged 7.3% over the past month.

Bottom LineWhile the overall earnings estimate revisions have made NetEase a Zacks Rank #2 stock, it has earned itself a Growth Score of B based on a number of factors, including the ones discussed above.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

This combination positions NetEase well for outperformance, so growth investors may want to bet on it.

NetEase is rated as a Buy, with an estimated fair price of $141.7, 24.2% above the current price, even after discounting risks. NTES will be able to increase revenue thanks to its successful global expansion and longer-lasting live service games, while it will increase its margins from AI efficiency gains and lower distribution costs. The worries of AI being a disruptor for online games are overstated. To truly leverage AI will require vast asset and data libraries, as well as operational expertise.

, /PRNewswire/ -- Youdao, Inc. ("Youdao" or the "Company") (NYSE: DAO), an AI solutions provider specializing in learning and advertising, today announced that it will report its first quarter 2026 financial results on Thursday, May 21, 2026, before the open of the U.S. markets.

The earnings teleconference call with simultaneous webcast will take place at 6:00 a.m. Eastern Time on Thursday, May 21, 2026 (Beijing/Hong Kong Time: 6:00 p.m., Thursday, May 21, 2026). Youdao's management will be on the call to discuss the quarterly results and answer questions.

Dial-in details for the earnings conference call are as follows:

United States (toll free):

+1-888-346-8982

International:

+1-412-902-4272

Mainland China (toll free):

400-120-1203

Hong Kong (toll free):     

800-905-945

Conference ID:

5620376

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 May 28, 2026:

United States:                 

+1-855-669-9658

International: 

+1-412-317-0088

Replay Access Code: 

5620376

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.

For investor and media inquiries, please contact:

In China:

Jeffrey Wang
Youdao, Inc.
Tel: +86-10-8255-8163 ext. 89980
E-mail: [email protected] 

Piacente Financial Communications
Helen Wu
Tel: +86-10-6508-0677
E-mail: [email protected] 

In the United States:

Piacente Financial Communications
Brandi Piacente
Tel: +1-212-481-2050
E-mail: [email protected]   

SOURCE Youdao, Inc.

On May 13, 2026, we delve into the DCF analysis for NetEase Inc NTES , a company currently trading at $117.00. The stock has experienced a mixed performance recently, with a year-to-date decline of 14.1% but a year-over-year increase of 12.6%. Here are some key points to consider:

DCF Earnings-based intrinsic value of $186.78 vs current price of $117.00 (margin of safety: 37.4%) DCF FCF-based intrinsic value of $320.05 vs current price (second opinion) GF Score™ of 97/100, indicating high reliability of the DCF inputs What Is NTES Worth? DCF Earnings-Based Model The DCF earnings-based model for NetEase Inc estimates the intrinsic value by projecting future earnings growth and discounting them to present value. The model assumes a 10-year growth phase followed by a terminal phase. Below are the key assumptions used in this analysis:

Parameter Value Current EPS (TTM, excl. non-recurring) $7.82 10-Year Growth Rate 16.0% 10-Year Treasury Rate 4.33% Discount Rate (ceil(Treasury) + 6%) 11% Terminal Growth Rate 4% The two-stage DCF model consists of a growth phase for the first 10 years, where EPS is expected to grow at 16.0% per year, followed by a terminal phase with a growth rate of 4% for the subsequent 10 years. The calculation summary is as follows:

Stage Description Value Growth Stage (Years 1-10) EPS growing at 16.0%, discounted at 11% $100.40 Terminal Stage (Years 11-20) 4% terminal growth, discounted at 11% $86.37 Intrinsic Value Growth + Terminal $186.77 With the current price at $117.00, the intrinsic value of $186.78 indicates that the stock is significantly undervalued, with a margin of safety of 37.4%. It is important to note that GuruFocus utilizes EPS without non-recurring items, as research indicates a stronger correlation between stock prices and earnings than with free cash flow. For further details, visit the NTES DCF Calculator.

What Does the Free Cash Flow DCF Say? The free cash flow (FCF) based intrinsic value for NetEase Inc is calculated at $320.05. This valuation provides a second perspective on the company's worth. When comparing the FCF-based intrinsic value with the earnings-based intrinsic value, both models indicate that NetEase is significantly undervalued, with a margin of safety of 63.4%.

How Does GF Value™ Compare to the DCF Models? The GF Value™ for NetEase Inc is calculated at $117.94, suggesting that the stock is slightly undervalued by 0.8%. GF Value™ is GuruFocus' proprietary measure derived from historical trading multiples, past business growth, and future performance estimates. All three models—the DCF earnings, DCF FCF, and GF Value™—indicate that NetEase is undervalued, reinforcing the findings from the DCF analyses. For more information, visit the GF Value™ page.

What Does NTES's GF Score™ Tell Us? The GF Score™ ranks stocks from 0 to 100 based on five key aspects: Financial Strength, Profitability, Growth, Valuation, and Momentum. Stocks with higher GF Score™ values have been shown to generate higher long-term returns based on backtested data from 2006 to 2021. Below is the breakdown of NTES's GF Score™:

Metric Rating GF Score™ 97/100 Financial Strength 8/10 Profitability 10/10 Growth 10/10 Valuation 9/10 Momentum 5/10 With a predictability rank of 1/5 stars, it is important to note that higher predictability ratings lead to more reliable DCF model estimates for this stock. For more insights, visit the NTES stock page.

Key Assumptions and Limitations It is crucial to recognize that DCF models are highly sensitive to the assumptions made regarding growth rates and discount rates. Additionally, stocks with lower predictability ratings tend to produce less reliable DCF estimates. The terminal growth rate of 4% used in this analysis is a simplifying assumption that may not reflect actual future performance.

What This Means for Investors In synthesizing the findings from the three valuation models—DCF earnings, DCF FCF, and GF Value™—it is clear that NetEase Inc is significantly undervalued. Investors should consider these insights when evaluating their investment strategies. For the full DCF analysis, visit the NTES DCF Calculator. You can also explore the GF Value™ page, or use the GuruFocus Stock Screener to find undervalued predictable companies.

Frequently Asked Questions What is NTES's intrinsic value based on DCF?

Answer: earnings-based $186.78, FCF-based $320.05

Is NTES overvalued or undervalued?

Answer: Based on DCF and GF Value™ consensus, NTES is undervalued.

How reliable is the DCF model for NTES?

Answer: The predictability rank is 1/5, indicating lower reliability for the DCF model.

This stock alert was generated using automated technology and GuruFocus financial data to provide readers with timely and accurate market reporting. This content was reviewed by GuruFocus editorial team prior to publication. Please send any questions or comments about this story to [email protected].

, /PRNewswire/ -- NetEase, Inc. (NASDAQ: NTES and HKEX: 9999, "NetEase" or the "Company"), a leading internet and game services provider, today announced its unaudited financial results for the first quarter ended March 31, 2026.

First Quarter 2026 Financial Highlights

Net revenues were RMB30.6 billion (US$4.4 billion), an increase of 6.1% compared with the same quarter of 2025. Games and related value-added services net revenues were RMB25.7 billion (US$3.7 billion), an increase of 6.9% compared with the same quarter of 2025. Youdao net revenues were RMB1.3 billion (US$195.4 million), an increase of 3.8% compared with the same quarter of 2025. NetEase Cloud Music net revenues were RMB2.0 billion (US$287.2 million), an increase of 6.6% compared with the same quarter of 2025. Innovative businesses and others net revenues were RMB1.5 billion (US$224.6 million), a decrease of 4.6% compared with the same quarter of 2025. Gross profit was RMB21.2 billion (US$3.1 billion), an increase of 14.8% compared with the same quarter of 2025. Total operating expenses were RMB8.6 billion (US$1.2 billion), an increase of 6.5% compared with the same quarter of 2025. Net income attributable to the Company's shareholders was RMB10.7 billion (US$1.5 billion). Non-GAAP net income attributable to the Company's shareholders was RMB11.3 billion (US$1.6 billion).[1] Basic net income per share was US$0.48 (US$2.42 per ADS). Non-GAAP basic net income per share was US$0.51 (US$2.56 per ADS).[1] [1] As used in this announcement, non-GAAP net income attributable to the Company's shareholders and non-GAAP basic and diluted net income per share and per ADS are defined to exclude share-based compensation expenses. See the unaudited reconciliation of GAAP and non-GAAP results at the end of this announcement.

First Quarter 2026 and Recent Operational Highlights

Sustained strong engagement and revenue performance across established titles, including the Fantasy Westward Journey franchise, Identity V, Eggy Party, Sword of Justice and Where Winds Meet, supported by high-cadence content updates and gameplay innovation. Advanced global expansion through key titles, such as Where Winds Meet and Marvel Rivals, amplifying their international reach and deepening player engagement. Blizzard titles maintained stable operations in China with a steady rollout of localized content. "For the first quarter of 2026, we delivered another solid quarter across our established gaming portfolio, while continuing to make steady progress advancing our pipeline of new titles," said Mr. William Ding, Chief Executive Officer and Director of NetEase. "Our recent global launches have demonstrated strong cross-market appeal, supporting the continued execution of our international expansion strategy.

"Looking ahead, we will continue to strengthen our technological capabilities and focus on innovation across both content and development. By combining evolving technologies with our deep operating expertise, we aim to create exceptional content and experiences that exceed players' expectations and reach an even broader global audience," Mr. Ding concluded.

First Quarter 2026 Financial Results

Net Revenues

Net revenues for the first quarter of 2026 were RMB30.6 billion (US$4.4 billion), compared with RMB27.5 billion and RMB28.8 billion for the preceding quarter and the same quarter of 2025, respectively.

Net revenues from games and related value-added services were RMB25.7 billion (US$3.7 billion) for the first quarter of 2026, compared with RMB22.0 billion and RMB24.0 billion for the preceding quarter and the same quarter of 2025, respectively. Net revenues from the operation of online games accounted for approximately 97.5% of the segment's net revenues for the first quarter of 2026, compared with 96.8% and 97.5% for the preceding quarter and the same quarter of 2025, respectively. The quarter-over-quarter and year-over-year increases were attributable to higher net revenues from self-developed games, such as the Fantasy Westward Journey franchise and Where Winds Meet.

Net revenues from Youdao were RMB1.3 billion (US$195.4 million) for the first quarter of 2026, compared with RMB1.6 billion and RMB1.3 billion for the preceding quarter and the same quarter of 2025, respectively. The quarter-over-quarter decrease was mainly due to decreased net revenues from its learning services and smart devices.

Net revenues from NetEase Cloud Music were RMB2.0 billion (US$287.2 million) for the first quarter of 2026, compared with RMB2.0 billion and RMB1.9 billion for the preceding quarter and the same quarter of 2025, respectively.

Net revenues from innovative businesses and others were RMB1.5 billion (US$224.6 million) for the first quarter of 2026, compared with RMB2.0 billion and RMB1.6 billion for the preceding quarter and the same quarter of 2025, respectively. The quarter-over-quarter decrease was led by decreased net revenues from e-commerce and advertising businesses.

Cost of Revenues

Cost of revenues for the first quarter of 2026 was RMB9.4 billion (US$1.4 billion), compared with RMB9.9 billion and RMB10.3 billion for the preceding quarter and the same quarter of 2025, respectively. The quarter-over-quarter decrease was mainly due to lower product costs. The year-over-year decrease was mainly due to lower revenue-sharing costs related to platforms.

Gross Profit

Gross profit for the first quarter of 2026 was RMB21.2 billion (US$3.1 billion), compared with RMB17.7 billion and RMB18.5 billion for the preceding quarter and the same quarter of 2025, respectively.

Operating Expenses

Total operating expenses for the first quarter of 2026 were RMB8.6 billion (US$1.2 billion), compared with RMB9.4 billion and RMB8.0 billion for the preceding quarter and the same quarter of 2025, respectively. The variances in both the quarter-over-quarter and year-over-year results were primarily attributable to fluctuations in marketing expenses and general and administrative expenses.

Other Income/(Expenses)

Other income/(expenses) consisted of investment income/(loss), interest income, net exchange gains/(losses) and others. The quarter-over-quarter increase was mainly attributable to the gain from the disposal of certain long-term investments and lower investment impairment provisions in the first quarter of 2026. The year-over-year decrease was primarily due to fair value changes of equity security investments and higher foreign exchange losses recognized in the first quarter of 2026.

Income Tax

The Company recorded a net income tax charge of RMB2.5 billion (US$365.9 million) for the first quarter of 2026, compared with RMB1.3 billion and RMB1.9 billion for the preceding quarter and the same quarter of 2025, respectively. The effective tax rate for the first quarter of 2026 was 18.9%, compared with 16.4% and 15.3% for the preceding quarter and the same quarter of 2025, respectively. The effective tax rate represents certain estimates by the Company as to the tax obligations and benefits applicable to it in each quarter.

Net Income and Non-GAAP Net Income

Net income attributable to the Company's shareholders totaled RMB10.7 billion (US$1.5 billion) for the first quarter of 2026, compared with RMB6.2 billion and RMB10.3 billion for the preceding quarter and the same quarter of 2025, respectively.

Basic net income was US$0.48 per share (US$2.42 per ADS) for the first quarter of 2026, compared with US$0.28 per share (US$1.42 per ADS) and US$0.47 per share (US$2.35 per ADS) for the preceding quarter and the same quarter of 2025, respectively.

Non-GAAP net income attributable to the Company's shareholders totaled RMB11.3 billion (US$1.6 billion) for the first quarter of 2026, compared with RMB7.1 billion and RMB11.2 billion for the preceding quarter and the same quarter of 2025, respectively.

Non-GAAP basic net income was US$0.51 per share (US$2.56 per ADS) for the first quarter of 2026, compared with US$0.32 per share (US$1.61 per ADS) and US$0.51 per share (US$2.57 per ADS) for the preceding quarter and the same quarter of 2025, respectively.

Other Financial Information

As of March 31, 2026, the Company's net cash (total cash and cash equivalents, current and non-current time deposits and restricted cash, as well as short-term investments balance, minus short-term and long-term loans) totaled RMB167.5 billion (US$24.3 billion), compared with RMB163.5 billion as of December 31, 2025. Net cash provided by operating activities was RMB13.7 billion (US$2.0 billion) for the first quarter of 2026, compared with RMB14.8 billion and RMB12.1 billion for the preceding quarter and the first quarter of 2025, respectively.

Quarterly Dividend

The board of directors approved a dividend of US$0.144 per share (US$0.720 per ADS) for the first quarter of 2026 to holders of ordinary shares and holders of ADSs as of the close of business on June 5, 2026, Beijing/Hong Kong Time and New York Time, respectively, payable in U.S. dollars. For holders of ordinary shares, in order to qualify for the dividend, all valid documents for the transfer of shares accompanied by the relevant share certificates must be lodged for registration with the Company's Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong, no later than 4:30 p.m. on June 5, 2026 (Beijing/Hong Kong Time). The payment date is expected to be June 15, 2026 for holders of ordinary shares and on or around June 18, 2026, for holders of ADSs.

NetEase paid a dividend of US$0.232 per share (US$1.16 per ADS) for the fourth quarter of 2025 in March 2026.

Under the Company's current dividend policy, the determination to make dividend distributions and the amount of such distribution in any particular quarter will be made at the discretion of its board of directors and will be based upon the Company's operations and earnings, cash flow, financial condition and other relevant factors.

Share Repurchase Program

On November 20, 2025, the Company announced the extension of its previously approved share repurchase program of up to US$5.0 billion of the Company's ADSs and ordinary shares in open market or other transactions for an additional 36 months until January 9, 2029. As of March 31, 2026, approximately 23.2 million ADSs had been repurchased under this program for a total cost of US$2.1 billion.

The extent to which NetEase repurchases its ADSs and its ordinary shares depends upon a variety of factors, including market conditions. These programs may be suspended or discontinued at any time.

** The United States dollar (US$) amounts disclosed in this announcement are presented solely for the convenience of the reader. The percentages stated are calculated based on RMB.

Conference Call

NetEase's management team will host a teleconference call with a simultaneous webcast at 8:00 a.m. Eastern Time on Thursday, May 21, 2026 (Beijing/Hong Kong Time: 8:00 p.m., Thursday, May 21, 2026). NetEase's management will be on the call to discuss the quarterly results and answer questions.

Interested parties may participate in the conference call by dialing 1-914-202-3258 and providing conference ID: 10054538, 15 minutes prior to the initiation of the call. A replay of the call will be available by dialing 1-855-883-1031 and entering PIN: 10054538. The replay will be available through May 28, 2026.

This call will be webcast live, and the replay will be available for 12 months. Both will be available on NetEase's Investor Relations website at http://ir.netease.com/.

About NetEase, Inc.

NetEase, Inc. (NASDAQ: NTES and HKEX: 9999, "NetEase") is a leading internet and game services provider centered around premium content. With extensive offerings across its expanding gaming ecosystem, the Company develops and operates some of the most popular and longest-running mobile and PC games available in China and globally.

Powered by one of the largest in-house game R&D teams focused on mobile, PC and console, NetEase creates superior gaming experiences, inspires players, and passionately delivers value for its thriving community worldwide. By infusing play with culture, and education with technology, NetEase transforms gaming into a meaningful vehicle to build a more entertaining and enlightened world.

Beyond games, NetEase service offerings include its majority-controlled subsidiaries Youdao (NYSE: DAO), an intelligent learning and advertising solutions provider, and NetEase Cloud Music (HKEX: 9899), a well-known online music platform featuring a vibrant content community, as well as Yanxuan, NetEase's private-label consumer lifestyle brand.

For more information, please visit: http://ir.netease.com/.

Forward Looking Statements

This announcement contains statements of a forward-looking nature. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar expressions. In addition, statements that are not historical facts, including statements about NetEase's strategies and business plans, its expectations regarding the growth of its business and its revenue and the quotations from management in this announcement are or contain forward-looking statements. NetEase may also make forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"), in announcements made on the website of The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange"), in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks related to: the risk that the online games market will not continue to grow or that NetEase will not be able to maintain its position in that market in China or globally; risks associated with NetEase's business and operating strategies and its ability to implement such strategies; NetEase's ability to develop and manage its operations and business; competition for, among other things, capital, technology and skilled personnel; potential changes in regulatory environment in the markets where NetEase operates; the risk that NetEase may not be able to continuously develop new and creative online services or that NetEase will not be able to set, or follow in a timely manner, trends in the market; risks related to evolving economic cycles and geopolitical tensions, including the direct or indirect impacts of national trade, investment, protectionist, tax or other laws or policies as well as export controls and economic or trade sanctions; risks related to the expansion of NetEase's businesses and operations internationally; risks associated with cybersecurity threats or incidents; and fluctuations in foreign currency exchange rates that could adversely affect NetEase's business and financial results. Further information regarding these and other risks is included in NetEase's filings with the SEC and announcements on the website of the Hong Kong Stock Exchange. NetEase does not undertake any obligation to update this forward-looking information, except as required under applicable law.

Non-GAAP Financial Measures

NetEase considers and uses non-GAAP financial measures, such as non-GAAP net income attributable to the Company's shareholders and non-GAAP basic and diluted net income per ADS and per share, 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").

NetEase defines non-GAAP net income attributable to the Company's shareholders as net income attributable to the Company's shareholders excluding share-based compensation expenses. Non-GAAP net income attributable to the Company's shareholders enables NetEase's management to assess its operating results without considering the impact of share-based compensation expenses. NetEase believes that this non-GAAP financial measure provides 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. NetEase also believes that the use of this non-GAAP financial measure facilitates investors' assessment of its operating performance.

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. One of the key limitations of using non-GAAP net income attributable to the Company's shareholders is that it does not reflect all items of expense/ income that affect our operations. Share-based compensation expenses have been and may continue to be incurred in NetEase's business and are not reflected in the presentation of non-GAAP net income attributable to the Company's shareholders. In addition, the non-GAAP financial measures NetEase uses may differ from the non-GAAP measures used by other companies, including peer companies, and therefore their comparability may be limited.

NetEase compensates for these limitations by reconciling non-GAAP net income attributable to the Company's shareholders to the nearest U.S. GAAP performance measure, all of which should be considered when evaluating the Company's performance. See the unaudited reconciliation of GAAP and non-GAAP results at the end of this announcement. NetEase encourages you to review its financial information in its entirety and not rely on a single financial measure.

Contact for Media and Investors:
Email: [email protected]
Tel: (+86) 571-8985-3378

NETEASE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 December 31,  

 March 31, 

 March 31, 

2025

2026

2026

 RMB  

 RMB  

 USD (Note 1) 

Assets

Current assets:

   Cash and cash equivalents

47,167,904

50,815,211

7,366,659

   Time deposits

92,639,378

80,109,903

11,613,497

   Restricted cash

4,319,344

4,502,968

652,793

   Accounts receivable, net

5,337,819

6,492,901

941,273

   Inventories

689,183

546,030

79,158

   Prepayments and other current assets, net

7,658,346

6,212,901

900,682

   Short-term investments

22,803,503

39,978,723

5,795,698

Total current assets

180,615,477

188,658,637

27,349,760

Non-current assets:

   Property, equipment and software, net 

8,425,327

8,311,363

1,204,895

   Land use rights, net

4,047,355

4,014,831

582,028

   Deferred tax assets 

2,831,423

2,894,530

419,619

   Time deposits

2,995,000

3,045,000

441,432

   Restricted cash

3,893

3,344

485

   Other long-term assets

22,496,585

24,469,340

3,547,309

Total non-current assets

40,799,583

42,738,408

6,195,768

Total assets 

221,415,060

231,397,045

33,545,528

Liabilities, Redeemable Noncontrolling Interests
    and Shareholders' Equity

Current liabilities:

   Accounts payable 

643,164

780,921

113,210

   Salary and welfare payables

4,889,708

2,642,579

383,094

   Taxes payable

3,874,143

5,765,891

835,878

   Short-term loans

6,384,417

10,955,460

1,588,208

   Contract liabilities

20,514,540

21,811,530

3,162,008

   Accrued liabilities and other payables

16,062,984

15,480,778

2,244,242

Total current liabilities

52,368,956

57,437,159

8,326,640

Non-current liabilities:

   Deferred tax liabilities

2,637,258

3,232,494

468,613

   Other long-term liabilities

1,304,837

1,377,929

199,758

Total non-current liabilities

3,942,095

4,610,423

668,371

Total liabilities

56,311,051

62,047,582

8,995,011

Redeemable noncontrolling interests 

91,319

93,143

13,503

NetEase, Inc.'s shareholders' equity

160,296,119

164,722,217

23,879,707

Noncontrolling interests

4,716,571

4,534,103

657,307

Total equity

165,012,690

169,256,320

24,537,014

Total liabilities, redeemable noncontrolling 
    interests and shareholders' equity    

221,415,060

231,397,045

33,545,528

The accompanying notes are an integral part of this announcement.

NETEASE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data or per ADS data)

 Three Months Ended 

March 31,

December 31, 

March 31,

 March 31, 

2025

2025

2026

2026

 RMB 

 RMB 

 RMB 

 USD (Note 1) 

Net revenues

28,828,545

27,546,973

30,591,281

4,434,804

Cost of revenues

(10,349,139)

(9,854,598)

(9,374,209)

(1,358,975)

Gross profit

18,479,406

17,692,375

21,217,072

3,075,829

Operating expenses:

Selling and marketing expenses 

(2,695,597)

(3,888,256)

(3,441,485)

(498,911)

General and administrative expenses

(956,337)

(1,050,701)

(636,597)

(92,287)

Research and development expenses 

(4,386,313)

(4,434,260)

(4,482,157)

(649,776)

Total operating expenses

(8,038,247)

(9,373,217)

(8,560,239)

(1,240,974)

Operating profit

10,441,159

8,319,158

12,656,833

1,834,855

Other income/(expenses):

Investment income/(loss), net

692,751

(1,669,086)

5,472

793

Interest income, net

1,060,886

1,002,404

890,267

129,062

Exchange gains/(losses), net

1,803

(517,965)

(622,108)

(90,187)

Other, net

255,315

485,863

438,978

63,638

Income before tax

12,451,914

7,620,374

13,369,442

1,938,161

Income tax

(1,905,143)

(1,250,430)

(2,523,838)

(365,880)

Net income

10,546,771

6,369,944

10,845,604

1,572,281

Accretion of redeemable noncontrolling
    interests

(1,049)

(1,122)

(1,104)

(160)

Net income attributable to noncontrolling
    interests and redeemable noncontrolling
    interests

(244,565)

(126,866)

(170,394)

(24,702)

Net income attributable to the
    Company's shareholders

10,301,157

6,241,956

10,674,106

1,547,419

Net income per share *

Basic

3.25

1.96

3.34

0.48

Diluted

3.21

1.93

3.31

0.48

Net income per ADS *

Basic

16.23

9.78

16.69

2.42

Diluted

16.06

9.66

16.53

2.40

Weighted average number of ordinary
    shares used in calculating net income
    per share *

Basic

3,173,899

3,191,805

3,198,123

3,198,123

Diluted

3,206,362

3,227,907

3,227,325

3,227,325

*  Each ADS represents five ordinary shares.

The accompanying notes are an integral part of this announcement.

NETEASE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 Three Months Ended 

 March 31, 

 December 31, 

 March 31, 

 March 31, 

2025

2025

2026

2026

 RMB  

 RMB  

 RMB  

 USD (Note 1) 

Cash flows from operating activities:

    Net income 

10,546,771

6,369,944

10,845,604

1,572,281

    Adjustments to reconcile net income to net cash provided
        by operating activities:

    Depreciation and amortization

480,761

720,367

430,583

62,421

    Fair value changes of equity security, other investments and
        financial instruments

(558,499)

1,308,861

1,117,717

162,035

    Impairment losses on investments

89,071

857,796

344,871

49,996

    Fair value changes of short-term investments

(201,609)

(283,560)

(385,395)

(55,871)

    Share-based compensation cost

951,872

847,194

616,180

89,329

    Allowance for expected credit losses

16,771

17,478

6,719

974

    Losses/(gains) on disposal of property, equipment and software 

20,293

(20,063)

(565)

(82)

    Unrealized exchange (gains)/losses

(28,453)

514,469

643,942

93,352

    Losses/(gains) on disposal of long-term investments and subsidiaries

11,675

(273,438)

(1,071,442)

(155,326)

    Deferred income taxes

328,272

204,920

532,257

77,161

    Share of results on equity method investees

(18,668)

153,645

442,575

64,160

    Changes in operating assets and liabilities: 

        Accounts receivable

(1,088,960)

594,561

(1,188,837)

(172,345)

        Inventories

53,773

(51,881)

143,099

20,745

        Prepayments and other assets

(295,178)

701,921

116,152

16,839

        Accounts payable

(148,076)

(59,225)

134,445

19,490

        Salary and welfare payables

(2,085,111)

1,859,384

(2,253,559)

(326,698)

        Taxes payable

1,796,123

(436,268)

1,895,324

274,764

        Contract liabilities

2,526,198

1,048,151

1,384,445

200,702

        Accrued liabilities and other payables

(290,374)

749,075

(21,044)

(3,051)

    Net cash provided by operating activities

12,106,652

14,823,331

13,733,071

1,990,876

Cash flows from investing activities:

    Purchase of property, equipment and software

(454,071)

(137,818)

(312,148)

(45,252)

    Proceeds from sale of property, equipment and software

1,336

21,790

1,673

243

    Purchase of intangible assets, content and licensed copyrights

(298,771)

(183,986)

(290,019)

(42,044)

    Net changes of short-term investments with terms of three months or less

(6,138,556)

(400,836)

(15,766,308)

(2,285,635)

    Purchase of short-term investments with terms over three months

(2,970,000)

(5,600,000)

(5,885,000)

(853,146)

    Proceeds from maturities of short-term investments with terms over three months

2,708,601

7,695,328

4,861,483

704,767

    Investment/prepayment for investment in long-term investments and
        acquisition of subsidiaries

(90,966)

(1,617,947)

(3,204,395)

(464,540)

    Proceeds from disposal of long-term investments and subsidiaries

77,428

624,662

1,353,947

196,281

    Placement/rollover of matured time deposits

(49,601,807)

(39,787,587)

(30,608,133)

(4,437,247)

    Proceeds from maturities of time deposits

43,926,482

39,781,381

42,018,869

6,091,457

    Change in other long-term assets

(678)

(7,658)

65,909

9,555

    Net cash (used in)/provided by investing activities

(12,841,002)

387,329

(7,764,122)

(1,125,561)

Cash flows from financing activities:

    Net changes from loans with terms of three months or less  

(2,254,415)

(56,405)

1,182,383

171,410

    Proceeds of loans with terms over three months

2,747,550

92,700

6,134,520

889,319

    Payment of loans with terms over three months

(2,935,677)

(975,000)

(2,620,900)

(379,951)

    Net amounts received/(paid) related to capital contribution from or repurchase of
       noncontrolling interests shareholders

42,517

819

(23,418)

(3,395)

    Net amounts paid related to repurchase of NetEase's ADSs/purchase of
        subsidiaries' shares      

(303,601)

(15,398)

(1,314,003)

(190,490)

    Dividends paid to NetEase's shareholders

(5,584,532)

(2,575,287)

(5,156,320)

(747,509)

    Net cash used in financing activities

(8,288,158)

(3,528,571)

(1,797,738)

(260,616)

    Effect of exchange rate changes on cash, cash equivalents and
        restricted cash held in foreign currencies

(56,932)

(175,895)

(340,829)

(49,410)

Net (decrease)/increase in cash, cash equivalents and restricted cash               

(9,079,440)

11,506,194

3,830,382

555,289

Cash, cash equivalents and restricted cash, at the beginning of the period

54,474,923

39,984,947

51,491,141

7,464,648

Cash, cash equivalents and restricted cash, at the end of the period

45,395,483

51,491,141

55,321,523

8,019,937

Supplemental disclosures of cash flow information:

    Cash paid for income taxes, net

1,206,555

1,068,868

1,464,650

212,330

    Cash paid for interest expenses

97,424

18,313

78,326

11,355

The accompanying notes are an integral part of this announcement.

NETEASE, INC.

UNAUDITED SEGMENT INFORMATION

(in thousands)

 Three Months Ended 

 March 31, 

 December 31, 

 March 31, 

 March 31, 

2025

2025

2026

2026

RMB

RMB

RMB

USD (Note 1)

Net revenues:

Games and related value-added services 

24,048,007

21,966,634

25,712,975

3,727,598

Youdao

1,298,262

1,564,692

1,348,022

195,422

NetEase Cloud Music

1,858,388

1,968,270

1,981,234

287,219

Innovative businesses and others

1,623,888

2,047,377

1,549,050

224,565

Total net revenues

28,828,545

27,546,973

30,591,281

4,434,804

Cost of revenues:

Games and related value-added services

(7,495,262)

(6,472,229)

(6,482,431)

(939,755)

Youdao

(684,035)

(859,314)

(745,729)

(108,108)

NetEase Cloud Music

(1,175,777)

(1,285,937)

(1,247,066)

(180,787)

Innovative businesses and others

(994,065)

(1,237,118)

(898,983)

(130,325)

Total cost of revenues

(10,349,139)

(9,854,598)

(9,374,209)

(1,358,975)

Gross profit:

Games and related value-added services

16,552,745

15,494,405

19,230,544

2,787,843

Youdao

614,227

705,378

602,293

87,314

NetEase Cloud Music

682,611

682,333

734,168

106,432

Innovative businesses and others

629,823

810,259

650,067

94,240

Total gross profit

18,479,406

17,692,375

21,217,072

3,075,829

The accompanying notes are an integral part of this announcement.

NETEASE, INC.

NOTES TO UNAUDITED FINANCIAL INFORMATION

Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00 = RMB 6.8980 on the last trading day of March 2026 (March 31, 2026) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on March 31, 2026, or at any other certain date.

Note 2: Share-based compensation cost reported in the Company's unaudited condensed consolidated statements of comprehensive income is set out as follows in RMB and USD (in thousands):

 Three Months Ended 

March 31,

December 31,

March 31,

March 31,

2025

2025

2026

2026

RMB

RMB

RMB

USD (Note 1)

Share-based compensation cost included in:

Cost of revenues

233,711

212,072

269,336

39,046

Operating expenses

718,161

635,122

346,844

50,283

The accompanying notes are an integral part of this announcement.

Note 3: The financial information prepared and presented in this announcement might be different from those published and to be published by NetEase's listed subsidiary to meet the disclosure requirements under different accounting standards requirements.

Note 4: The unaudited reconciliation of GAAP and non-GAAP results is set out as follows in RMB and USD (in thousands, except per share data or per ADS data):

Three Months Ended

 March 31, 

 December 31, 

 March 31, 

 March 31, 

2025

2025

2026

2026

RMB

RMB

RMB

USD (Note 1)

Net income attributable to the Company's shareholders

10,301,157

6,241,956

10,674,106

1,547,419

Add: Share-based compensation

935,570

831,031

600,718

87,086

Non-GAAP net income attributable to the Company's shareholders

11,236,727

7,072,987

11,274,824

1,634,505

Non-GAAP net income per share *

Basic

3.54

2.22

3.53

0.51

Diluted

3.50

2.19

3.49

0.51

Non-GAAP net income per ADS *

Basic

17.70

11.08

17.63

2.56

Diluted

17.51

10.95

17.46

2.53

*  Each ADS represents five ordinary shares.

The accompanying notes are an integral part of this announcement.

SOURCE NetEase, Inc.

NetEase is a cash-rich gaming compounder with solid fundamentals, shareholder-friendly management, and attractive headline valuation but faces a persistent China discount. Q1 results showed margin quality with 6.1% revenue growth and 14.8% gross profit growth, but EPS stagnation underscores the need for new titles to drive earnings. NTES remains heavily concentrated in gaming (81.9% of FY25 revenue), with limited diversification and ongoing China policy risks impacting valuation multiples.

$10,000 dropped into the iShares Asia 50 ETF (NYSEARCA:AIA) on the last trading day of 2025 was worth roughly $15,267 by the close on June 3, 2026. That is the kind of half-year a US large-cap investor doesn’t get out of the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) in a calendar year, let alone five months. AIA is up 52.67% year to date through June 3, while SPY is up 10.61% over the same window. The headline writes itself. The mechanism, which is what you actually need, is more interesting and a little narrower than the headline implies.

The Arithmetic, Stripped Down AIA opened the year at $97.51 and closed June 3 at $148.87. The one-year number is even larger, with the fund up 100.7% from June 2025, when shares traded near $74.18. SPY’s twelve-month return over that same window is 26.53%. The gap is not a rounding error. It is the widest stretch of Asia mega-cap outperformance versus the S&P 500 in a decade.

One number flips the framing. AIA’s five-year return is 79.67%. SPY’s, over the identical five-year window, is 78.48%. AIA spent most of 2021 through late 2025 going sideways or worse while the S&P compounded. The 2026 surge is largely the long delayed catch-up of a single sector inside this fund finally getting paid.

What Did the Work AIA is marketed as the 50 largest companies across developed and emerging Asia. In practice, as of the March 31, 2026 N-PORT filing, it is a concentrated semiconductor bet wearing a diversified suit. Taiwan Semiconductor Manufacturing (NYSE:TSM | TSM Price Prediction) alone was 22.42% of net assets. Samsung Electronics added another 12.69% in common shares (and roughly 14.12% counting preferreds), and SK hynix brought in 4.15%. The three combined ran 39.26% of the fund, with broader semiconductor and electronics exposure (MediaTek, Hon Hai, Delta, UMC, ASE) pushing the cluster past 45%.

TSM did exactly what a 22%-weighted top holding has to do to power a 52% fund return. The stock is up 44.1% year to date and 123.65% over twelve months. Q2 2026 revenue reached NT$1.13 trillion, with net income up 43.82% year over year and gross profit up 37.26%. Management cited "surging demand for advanced AI and high-performance computing chips" and authorized $31.28 billion in new capex plus a $20 billion equity injection into TSMC Arizona. At a forward P/E of 28 on a market cap of roughly $2.32 trillion, TSM now trades as critical AI infrastructure rather than a cyclical foundry.

The China Internet Story Was a Drag If you assumed the AIA rally was a China tech recovery, the underlying data argues otherwise. Alibaba (NYSE:BABA), AIA’s fourth-largest holding at 4.38%, is down 13.21% year to date. NetEase (NASDAQ:NTES), a smaller position at roughly 0.98%, is down 10.02%. Tencent, the third-largest holding at 7.13%, did its share, but the China internet basket as a whole has been a drag on the fund this year, not the engine.

Alibaba’s Q4 fiscal 2026 captured why. Revenue grew just 3% to $35.28 billion and the company posted a $123 million operating loss as adjusted EBITA collapsed 84% on aggressive cloud and quick-commerce spending. Cloud Intelligence Group revenue did accelerate 40%, with CEO Eddie Wu noting "Alibaba’s full-stack AI investments have progressed from incubation to commercialization at scale." The market is still digesting whether to reward that pivot or punish the margin compression.

The other ballast was financials. HSBC Holdings is up 23.15% year to date and 65.64% over twelve months, riding banking NII guidance raised to roughly $46 billion despite a brutal Q1 ECL print. HSBC isn’t an AIA holding directly, but AIA’s roughly 12% combined weight to Asian banks, insurers, and exchanges (DBS, OCBC, UOB, AIA Group itself, ICBC, CCB) caught the same regional re-rating that lifted HSBC.

The Numbers Side By Side Holding / Benchmark YTD 2026 Return Role in AIA AIA (the fund) 52.67% Subject SPY (benchmark) 10.61% Reference TSM 44.1% 22.42% top holding BABA -13.21% 4.38% holding (drag) NTES -10.02% ~1% holding (drag) HSBC 23.15% Sector proxy The Retail Tell The crowd noticed TSM before they noticed AIA. A viral wallstreetbets post titled "TSMC is the Hormuz Strait of semiconductors. I moved 30% of my portfolio over today" hit 507 upvotes over Memorial Day weekend, with sentiment scoring very bullish (80+) through six consecutive measurement windows on May 29-30. The framing tells you what kind of trade this has become. Retail is treating TSM as critical infrastructure. That is also how it has been priced.

What Has To Hold For The Run To Continue The forward question is simple and the answer is not. AIA’s 2026 is a leveraged bet on three things continuing in roughly their current shape. First, AI capex must keep its current cadence, because TSM, Samsung, SK hynix, and the Taiwanese supply chain that surrounds them are doing one thing right now, which is selling leading-edge silicon into hyperscaler buildouts. TSM’s $31.28 billion capex authorization is a vote of management confidence. It is also a forward bet that needs the demand curve to keep cooperating.

Second, Taiwan Strait geopolitical risk has to stay theoretical. With roughly 27% of AIA in Taiwan-domiciled companies and about 20% in South Korea, this fund is closer to a single-region tech bet than its "Asia 50" label suggests.

Third, the China internet basket cannot get worse. It is already a drag, with BABA down 13% and NTES down 10% year to date despite a 52% fund-level return. If China tech stays flat from here while semiconductors continue running, AIA keeps working. If China tech rolls over while AI capex normalizes, the fund’s concentration becomes its problem.

Goldman Sachs Asset Management framed the China piece honestly in its 2026 outlook, noting that recent support for China equities stems from "abundant liquidity, increasing retail participation, and limited alternative investment options" and that long-term outperformance "hinges on translating this liquidity into durable earnings growth." The translation has not happened yet inside AIA’s China sleeve. The fund is up 52% despite that China sleeve, with the gains coming from elsewhere.

The thing to actually watch is TSM’s next earnings print and the direction of hyperscaler capex commentary out of US mega-caps. AIA now functions as a leveraged TSM trade with a Samsung kicker, a Tencent sidecar, and a China internet weight that has been actively working against shareholders rather than as a diversified pan-Asia index. If that arrangement keeps working, the run continues. If TSM gives back the AI premium, AIA gives back the year. The 52% return tells you what happened. The 22.42% top weight tells you what to watch next.

Shares of NetEase (NTES - Free Report) have gained 2.1% over the past four weeks to close the last trading session at $118.7, but there could still be a solid upside left in the stock if short-term price targets of Wall Street analysts are any indication. Going by the price targets, the mean estimate of $159.84 indicates a potential upside of 34.7%.

The mean estimate comprises 19 short-term price targets with a standard deviation of $13.89. While the lowest estimate of $132.00 indicates an 11.2% increase from the current price level, the most optimistic analyst expects the stock to surge 55.9% to reach $185.00. It's very important to note the standard deviation here, as it helps understand the variability of the estimates. The smaller the standard deviation, the greater the agreement among analysts.

While the consensus price target is highly sought after by investors, the ability and unbiasedness of analysts in setting price targets have long been questionable. And investors making investment decisions solely based on this tool would arguably do themselves a disservice.

However, an impressive consensus price target is not the only factor that indicates a potential upside in NTES. This view is strengthened by the agreement among analysts that the company will report better earnings than what they estimated earlier. Though a positive trend in earnings estimate revisions doesn't give any idea as to how much the stock could surge, it has proven effective in predicting an upside.

Price, Consensus and EPS Surprise

Here's What You May Not Know About Analysts' Price TargetsAccording to researchers at several universities across the globe, a price target is one of many pieces of information about a stock that misleads investors far more often than it guides. In fact, empirical research shows that price targets set by several analysts, irrespective of the extent of agreement, rarely indicate where the price of a stock could actually be heading.

While Wall Street analysts have deep knowledge of a company's fundamentals and the sensitivity of its business to economic and industry issues, many of them tend to set overly optimistic price targets. Are you wondering why?

They usually do that to drum up interest in shares of companies that their firms either have existing business relationships with or are looking to be associated with. In other words, business incentives of firms covering a stock often result in inflated price targets set by analysts.

However, a tight clustering of price targets, which is represented by a low standard deviation, indicates that analysts have a high degree of agreement about the direction and magnitude of a stock's price movement. While that doesn't necessarily mean the stock will hit the average price target, it could be a good starting point for further research aimed at identifying the potential fundamental driving forces.

That said, while investors should not entirely ignore price targets, making an investment decision solely based on them could lead to disappointing ROI. So, price targets should always be treated with a high degree of skepticism.

Here's Why There Could be Plenty of Upside Left in NTESThere has been increasing optimism among analysts lately about the company's earnings prospects, as indicated by strong agreement among them in revising EPS estimates higher. And that could be a legitimate reason to expect an upside in the stock. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

The Zacks Consensus Estimate for the current year has increased 7.3% over the past month, as four estimates have gone higher while one has gone lower.

Moreover, NTES currently has a Zacks Rank #1 (Strong Buy), which means it is in the top 5% of more than 4,000 stocks that we rank based on four factors related to earnings estimates. Given an impressive externally-audited track record, this is a more conclusive indication of the stock's potential upside in the near term. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>> .

Therefore, while the consensus price target may not be a reliable indicator of how much NTES could gain, the direction of price movement it implies does appear to be a good guide.

On June 10, 2026, we present a DCF analysis for NetEase Inc NTES , which has experienced a mixed price performance recently. Over the past week, the stock has decreased by 2.6%, while it has gained 4.8% in the last month. However, year-to-date, NTES is down 10.9%, and it has declined 5.0% over the past year.

DCF Earnings-based intrinsic value of $189.60 compared to the current price of $120.73, indicating a margin of safety of 36.3%. DCF Free Cash Flow (FCF)-based intrinsic value of $335.46, providing a second opinion on valuation. GF Score™ of 92/100, suggesting high reliability of the DCF inputs. What Is NTES Worth? DCF Earnings-Based Model The DCF earnings-based model for NetEase Inc NTES utilizes a two-stage growth approach. In the first stage, we project earnings growth for the next ten years, followed by a terminal growth phase. The assumptions used in this model are outlined in the table below:

Parameter Value Current EPS (TTM, excl. non-recurring) $7.93 10-Year Growth Rate 16.0% 10-Year Treasury Rate 4.53% Discount Rate (ceil(Treasury) + 6%) 11% Terminal Growth Rate 4% In the first stage (Years 1-10), we assume that EPS will grow at a rate of 16.0% per year, discounted at a rate of 11%. The calculated value for this growth stage is $101.92 per share. In the second stage (Years 11-20), we assume a terminal growth rate of 4%, also discounted at 11%, yielding a terminal stage value of $87.68 per share. The summary of the calculations is presented in the table below:

Stage Description Value Growth Stage (Years 1-10) EPS growing at 16.0%, discounted at 11% $101.92 Terminal Stage (Years 11-20) 4% terminal growth, discounted at 11% $87.68 Intrinsic Value Growth + Terminal $189.60 With a current price of $120.73 compared to the intrinsic value of $189.60, NTES appears significantly undervalued, reflecting a margin of safety of 36.3%. It is important to note that GuruFocus uses EPS excluding non-recurring items, as research indicates that stock prices correlate more closely with earnings than with free cash flow. For further details, you can access the NTES DCF Calculator.

What Does the Free Cash Flow DCF Say? In addition to the earnings-based DCF model, we also consider the Free Cash Flow (FCF)-based intrinsic value, which is calculated at $335.46. This value provides a second perspective on the company's valuation. When comparing the FCF-based intrinsic value with the earnings-based intrinsic value, both models indicate that NTES is significantly undervalued, with a margin of safety of 64.0%.

How Does GF Value™ Compare to the DCF Models? The GF Value™ for NetEase Inc is calculated at $119.42, suggesting that the stock is 1.1% overvalued based on this third valuation perspective. GF Value™ is GuruFocus' proprietary measure, derived from historical trading multiples, past business growth, and future performance estimates. While the DCF models indicate that NTES is undervalued, the GF Value™ presents a slightly different view, suggesting a need for caution. For more information, visit the GF Value™ page.

What Does NTES's GF Score™ Tell Us? The GF Score™ ranks stocks from 0 to 100 based on five key aspects: Financial Strength, Profitability, Growth, Valuation, and Momentum. Stocks with higher GF Score™ values have been shown to generate higher long-term returns based on backtested data from 2006 to 2021. The GF Score™ for NTES is 92/100, indicating strong fundamentals. Below is a summary of the GF Score™ metrics:

Metric Rating GF Score™ 92/100 Financial Strength 7/10 Profitability 10/10 Growth 9/10 Valuation 9/10 Momentum 4/10 With a predictability rank of 1/5 stars, it is important to note that higher predictability ratings typically indicate that the DCF model is more reliable for this stock. For additional insights, visit the NTES stock page.

Key Assumptions and Limitations It is essential to recognize that DCF models are highly sensitive to the assumptions made regarding growth rates and discount rates. Stocks with low predictability ratings, such as NTES, tend to produce less reliable DCF estimates. Additionally, the terminal growth rate of 4% is a simplifying assumption that may not accurately reflect future conditions.

What This Means for Investors In synthesizing the three valuation models—DCF earnings, DCF FCF, and GF Value™—we find that while the DCF earnings and FCF models indicate that NTES is significantly undervalued, the GF Value™ suggests a slight overvaluation. Overall, the consensus points towards NTES being undervalued. For the full DCF analysis, visit the NTES DCF Calculator. You can also explore the GF Value™ page, or use the GuruFocus Stock Screener to find undervalued predictable companies.

Frequently Asked Questions What is NTES's intrinsic value based on DCF?

[Answer: earnings-based $189.60, FCF-based $335.46]

Is NTES overvalued or undervalued?

[Answer using DCF + GF Value™ consensus]

How reliable is the DCF model for NTES?

[Answer using predictability rank 1/5]

This stock alert was generated using automated technology and GuruFocus financial data to provide readers with timely and accurate market reporting. This content was reviewed by GuruFocus editorial team prior to publication. Please send any questions or comments about this story to [email protected].

NetEase (NTES - Free Report) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this internet technology company, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

Consensus earnings estimates for the next quarter and full year have moved considerably higher for NetEase, as there has been strong agreement among the covering analysts in raising estimates.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate RevisionsThe company is expected to earn $2.35 per share for the current quarter, which represents a year-over-year change of +13.5%.

Over the last 30 days, two estimates have moved higher for NetEase compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 12.53%.

Current-Year Estimate RevisionsFor the full year, the company is expected to earn $9.46 per share, representing a year-over-year change of +14.1%.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for NetEase. Over the past month, four estimates have moved higher compared to one negative revision, helping the consensus estimate increase 7.32%.

Favorable Zacks RankThe promising estimate revisions have helped NetEase earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom LineWhile strong estimate revisions for NetEase have attracted decent investments and pushed the stock 8% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.