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NetEase, Inc. reported Q2 revenues of $4.4B, up 8% y/y, but non-GAAP EPADS missed by $0.53 due to $435M in investment losses. Gross margins improved 550bps y/y and operating expenses declined 35% over six months, enhancing operating leverage and cash flow. NTES maintains a strong balance sheet with $3.3B in cash, $15B in time deposits, minimal debt, and robust free cash flow generation.

Overlooked Analyst-Approved Dividend Plays You Can Count OnNetEase 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.

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David Tepper Loads Up on China—These 5 Stocks Stand OutTotal 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.

Margins improve as games portfolio expands 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.

Cash Flow Focus: Thermo Fisher, Energy Transfer, and NetEaseThe 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.

Game updates support engagement in China and overseas 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.

Management addresses pipeline and new-title development 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, Cloud Music and e-commerce results 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.

About NetEase (NASDAQ:NTES)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].

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, /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 second quarter ended June 30, 2026.

In this results announcement, "we", "us", and "our" refer to the Company and where the context otherwise requires, the Group.

"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 Mr. William Ding, Chief Executive Officer and Director of NetEase. "As we continue to strengthen both our live game operations and new title pipeline, we are sharpening our focus on original gameplay, cutting-edge technology and deeper global reach to support our enduring growth.

"Looking ahead, we will remain committed to creating original content that shapes industry trends, building evergreen franchises, and cultivating vibrant communities that sustain player engagement. Backed by disciplined execution and an expanding global presence, we aim to keep pushing creative boundaries, delivering exceptional gaming experiences and creating long-term value for our players, partners and shareholders," Mr. Ding concluded.

FINANCIAL HIGHLIGHTS

Second Quarter 2026 Financial Highlights

Net revenues were RMB30.1 billion (US$4.4 billion), an increase of 7.9% compared with the same quarter of 2025. Games and related value-added services net revenues were RMB25.0 billion (US$3.7 billion), an increase of 9.7% compared with the same quarter of 2025. Youdao net revenues were RMB1.5 billion (US$216.2 million), an increase of 3.5% compared with the same quarter of 2025. NetEase Cloud Music net revenues were RMB2.0 billion (US$291.4 million), which was relatively stable compared with the same quarter of 2025. Innovative businesses and others net revenues were RMB1.6 billion (US$241.6 million), a decrease of 3.5% compared with the same quarter of 2025. Gross profit was RMB21.2 billion (US$3.1 billion), an increase of 17.5% compared with the same quarter of 2025. Total operating expenses were RMB9.1 billion (US$1.3 billion), an increase of 1.5% compared with the same quarter of 2025. Net income attributable to the Company's shareholders was RMB7.0 billion (US$1.0 billion). Non-GAAP net income attributable to the Company's shareholders was RMB7.7 billion (US$1.1 billion).[1] Basic net income per share was US$0.32 (US$1.61 per ADS). Non-GAAP basic net income per share was US$0.36 (US$1.78 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 within this announcement.

Six Months Ended June 30, 2026 Financial Highlights

Net revenues were RMB60.7 billion (US$8.9 billion), an increase of 7.0% compared with the same period of 2025. Games and related value-added services net revenues were RMB50.7 billion (US$7.5 billion), an increase of 8.3% compared with the same period of 2025. Youdao net revenues were RMB2.8 billion (US$414.9 million), an increase of 3.6% compared with the same period of 2025. NetEase Cloud Music net revenues were RMB4.0 billion (US$583.4 million), an increase of 3.4% compared with the same period of 2025. Innovative businesses and others net revenues were RMB3.2 billion (US$469.9 million), a decrease of 4.0% compared with the same period of 2025. Gross profit was RMB42.4 billion (US$6.3 billion), an increase of 16.2% compared with the same period of 2025. Total operating expenses were RMB17.7 billion (US$2.6 billion), an increase of 3.9% compared with the same period of 2025. Net income attributable to the Company's shareholders was RMB17.7 billion (US$2.6 billion). Non-GAAP net income attributable to the Company's shareholders was RMB19.0 billion (US$2.8 billion). [1] Basic net income per share was US$0.81 (US$4.06 per ADS). Non-GAAP basic net income per share was US$0.88 (US$4.38 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 within this announcement.

BUSINESS OVERVIEW

We continue to drive innovation across both newly launched and established titles, while further advancing our pipeline of titles in development.

Below are some recent highlights from our key products and services:

Games and related value-added services

The Fantasy Westward Journey franchise, Identity V, Eggy Party, Sword of Justice and Where Winds Meet sustained solid momentum through ongoing content updates, gameplay innovation and vibrant community activities.

We also advanced our global strategy and enhanced player engagement through strong live operations. For example, Where Winds Meet and Marvel Rivals further broadened their international reach with a steady stream of fresh content and community-focused initiatives in various markets including North America and Europe.

With respect to our pipeline of new titles, Sea of Remnants launched in China in July 2026, while development of Ananta and Blood Message remained on track, strengthening our innovative pipeline across diverse genres, gameplay and markets.

Youdao

Youdao advanced its AI-native strategy and deepened AI-driven innovation across its ecosystem. In the second quarter, it launched the large language model, Confucius 4, which delivers leading mathematical reasoning capabilities at lower inference costs compared to its previous version. Youdao also advanced its AI agent capabilities toward the autonomous execution of complex work and learning tasks.

NetEase Cloud Music

NetEase Cloud Music further developed its music-centric ecosystem by nurturing its distinctive community and enriching its differentiated content offering with original music, thereby driving stronger community engagement. It also further improved music-oriented monetization through continued growth in subscription-based memberships.

Innovative businesses and others

Innovative businesses and others remained focused on sustainable development and efficient operations, with Yanxuan maintaining leading positions on major e-commerce platforms in China across its key categories, including pet food, home scents and home goods.

FINANCIAL REVIEW

Second Quarter 2026 Financial Results

Net Revenues

Net revenues for the second quarter of 2026 were RMB30.1 billion (US$4.4 billion), compared with RMB30.6 billion and RMB27.9 billion for the preceding quarter and the same quarter of 2025, respectively.

Net revenues from games and related value-added services were RMB25.0 billion (US$3.7 billion) for the second quarter of 2026, compared with RMB25.7 billion and RMB22.8 billion for the preceding quarter and the same quarter of 2025, respectively. Net revenues from the operation of online games accounted for approximately 97.7% of the segment's net revenues for the second quarter of 2026, compared with 97.5% and 97.1% for the preceding quarter and the same quarter of 2025, respectively. The quarter-over-quarter decrease was mainly due to a slight decline in net revenues from certain self-developed and licensed games. The year-over-year increase was 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 RMB1.5 billion (US$216.2 million) for the second quarter of 2026, compared with RMB1.3 billion and RMB1.4 billion for the preceding quarter and the same quarter of 2025, respectively. The quarter-over-quarter and year-over-year increases were mainly attributable to higher net revenues from its learning services.

Net revenues from NetEase Cloud Music were RMB2.0 billion (US$291.4 million) for the second quarter of 2026, remaining stable compared with the preceding quarter and the same quarter of 2025.

Net revenues from innovative businesses and others were RMB1.6 billion (US$241.6 million) for the second quarter of 2026, compared with RMB1.5 billion and RMB1.7 billion for the preceding quarter and the same quarter of 2025, respectively. The quarter-over-quarter increase was mainly attributable to higher net revenues from e-commerce business and several other businesses included within the segment. The year-over-year decrease was mainly due to decreased net revenues from the e-commerce business.

Cost of Revenues

Cost of revenues for the second quarter of 2026 was RMB8.9 billion (US$1.3 billion), compared with RMB9.4 billion and RMB9.8 billion for the preceding quarter and the same quarter of 2025, respectively. The quarter-over-quarter decrease was mainly due to lower revenue-sharing costs. The year-over-year decrease was mainly due to lower revenue-sharing and product costs.

Gross Profit

Gross profit for the second quarter of 2026 was RMB21.2 billion (US$3.1 billion), compared with RMB21.2 billion and RMB18.1 billion for the preceding quarter and the same quarter of 2025, respectively.

Operating Expenses

Total operating expenses for the second quarter of 2026 were RMB9.1 billion (US$1.3 billion), compared with RMB8.6 billion and RMB9.0 billion for the preceding quarter and the same quarter of 2025, respectively. The quarter-over-quarter increase was primarily due to increased marketing expenditures, staff-related costs and research and development expenditures. The year-over-year increase was primarily due to increased research and development expenditures.

Other Income/(Expenses)

Other income/(expenses) consisted of net investment income/(loss), interest income, net exchange gains/(losses) and others. The quarter-over-quarter and year-over-year fluctuations in other income/(expenses) were mainly due to a decline in the fair value of equity security investments and impairment provisions made during the second quarter of 2026.

Income Tax

The Group recorded a net income tax charge of RMB2.5 billion (US$362.4 million) for the second quarter of 2026, compared with RMB2.5 billion and RMB1.6 billion for the preceding quarter and the same quarter of 2025, respectively. The effective tax rate for the second quarter of 2026 was 25.5%, compared with 18.9% and 14.7% for the preceding quarter and the same quarter of 2025, respectively. The effective tax rate represents certain estimates by the Group 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 RMB7.0 billion (US$1.0 billion) for the second quarter of 2026, compared with RMB10.7 billion and RMB8.6 billion for the preceding quarter and the same quarter of 2025, respectively.

Basic net income was US$0.32 per share (US$1.61 per ADS) for the second quarter of 2026, compared with US$0.49 per share (US$2.46 per ADS) and US$0.40 per share (US$1.99 per ADS) for the preceding quarter and the same quarter of 2025, respectively.

Non-GAAP net income attributable to the Company's shareholders totaled RMB7.7 billion (US$1.1 billion) for the second quarter of 2026, compared with RMB11.3 billion and RMB9.5 billion for the preceding quarter and the same quarter of 2025, respectively.

Non-GAAP basic net income was US$0.36 per share (US$1.78 per ADS) for the second quarter of 2026, compared with US$0.52 per share (US$2.60 per ADS) and US$0.44 per share (US$2.20 per ADS) for the preceding quarter and the same quarter of 2025, respectively.

Six Months Ended June 30, 2026 Financial Results

Net Revenues

Net revenues for the six months ended June 30, 2026 were RMB60.7 billion (US$8.9 billion), compared with RMB56.7 billion for the same period of 2025.

Net revenues from games and related value-added services were RMB50.7 billion (US$7.5 billion) for the six months ended June 30, 2026, compared with RMB46.9 billion for the same period of 2025. Net revenues from the operation of online games accounted for approximately 97.6% of the segment's net revenues for the six months ended June 30, 2026, compared with approximately 97.3% for the same period of 2025. The increase was attributable to higher net revenues from self-developed games, such as the Fantasy Westward Journey franchise, Where Winds Meet and Eggy Party.

Net revenues from Youdao were RMB2.8 billion (US$414.9 million) for the six months ended June 30, 2026, compared with RMB2.7 billion for the same period of 2025. The increase was mainly attributable to higher net revenues from its learning services and online marketing services, partially offset by a decrease in net revenues from smart devices.

Net revenues from NetEase Cloud Music were RMB4.0 billion (US$583.4 million) for the six months ended June 30, 2026, compared with RMB3.8 billion for the same period of 2025. The increase was mainly attributable to higher net revenues from online music services, driven by growth in sales of membership subscriptions.

Net revenues from innovative businesses and others were RMB3.2 billion (US$469.9 million) for the six months ended June 30, 2026, compared with RMB3.3 billion for the same period of 2025. The decrease was mainly due to a decline in net revenues from the e-commerce business.

Cost of Revenues

Cost of revenues for the six months ended June 30, 2026 was RMB18.3 billion (US$2.7 billion), compared with RMB20.2 billion for the same period of 2025. The decrease was mainly due to lower revenue-sharing and product costs.

Gross Profit

Gross profit for the six months ended June 30, 2026 was RMB42.4 billion (US$6.3 billion), compared with RMB36.5 billion for the same period of 2025.

Operating Expenses

Total operating expenses for the six months ended June 30, 2026 were RMB17.7 billion (US$2.6 billion), compared with RMB17.0 billion for the same period of 2025. The increase was primarily attributable to higher marketing and research and development expenditures for games and related value-added services.

Other Income/(Expenses)

Other income/(expenses) consisted of net investment income/(loss), interest income, net exchange gains/(losses) and others. The fluctuation in other income/(expenses) was mainly due to a decline in the fair value of equity security investments, increased net exchange losses, and impairment provisions made during the six months ended June 30, 2026.

Income Tax

The Group recorded a net income tax charge of RMB5.0 billion (US$734.3 million) for the six months ended June 30, 2026, compared with RMB3.5 billion for the same period of 2025. The effective tax rate for the six months ended June 30, 2026 was 21.7%, compared with 15.0% for the same period of 2025. The effective tax rate represents certain estimates by the Group as to the tax obligations and benefits applicable to it in each period.

Net Income and Non-GAAP Net Income

Net income attributable to the Company's shareholders totaled RMB17.7 billion (US$2.6 billion) for the six months ended June 30, 2026, compared with RMB18.9 billion for the same period of 2025.

Basic net income was US$0.81 per share (US$4.06 per ADS) for the six months ended June 30, 2026, compared with US$0.88 per share (US$4.38 per ADS) for the same period of 2025.

Non-GAAP net income attributable to the Company's shareholders totaled RMB19.0 billion (US$2.8 billion) for the six months ended June 30, 2026, compared with RMB20.8 billion for the same period of 2025.

Non-GAAP basic net income was US$0.88 per share (US$4.38 per ADS) for the six months ended June 30, 2026, compared with US$0.96 per share (US$4.81 per ADS) for the same period of 2025.

OTHER FINANCIAL INFORMATION

As of June 30, 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 loans) totaled RMB167.5 billion (US$24.7 billion), compared with RMB163.5 billion as of December 31, 2025. Net cash provided by operating activities was RMB10.0 billion (US$1.5 billion) for the second quarter of 2026, compared with RMB13.7 billion and RMB10.9 billion for the preceding quarter and the second quarter of 2025, respectively.

EXCHANGE RATE INFORMATION

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.

The conversion of Renminbi (RMB) into US$ is based on the noon buying rate of US$1.00 = RMB6.7851 on the last trading day of June 2026 (June 30, 2026) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on June 30, 2026, or at any other certain date.

CONFERENCE CALL

NetEase's management team will host a teleconference call with a simultaneous webcast at 8:00 a.m. Eastern Time on Thursday, August 20, 2026 (Beijing/Hong Kong Time: 8:00 p.m., Thursday, August 20, 2026). NetEase's management will be on the call to discuss the results and answer questions.

Interested parties may participate in the conference call by dialing 1-914-202-3258 and providing conference ID: 10056362, 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: 10056362. The replay will be available through August 27, 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/.

Contact for Media and Investors:

Email: [email protected] 

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, including policy or rule changes on taxation; 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 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 the Company's 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. NetEase encourages you to review its financial information in its entirety and not rely on a single financial measure.

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

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

June 30,

June 30,

2025

2026

2026

2026

2025

2026

2026

RMB

RMB

RMB

US$

RMB

RMB

US$

Net income attributable to the
  Company's shareholders

8,601,010

10,674,106

6,980,656

1,028,821

18,902,167

17,654,762

2,601,989

Add: Share-based compensation

930,921

600,718

766,058

112,903

1,866,491

1,366,776

201,438

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

9,531,931

11,274,824

7,746,714

1,141,724

20,768,658

19,021,538

2,803,427

Non-GAAP net income per share

Basic

2.99

3.53

2.42

0.36

6.53

5.94

0.88

Diluted

2.96

3.49

2.40

0.35

6.46

5.90

0.87

Non-GAAP net income per ADS

Basic

14.95

17.63

12.09

1.78

32.64

29.72

4.38

Diluted

14.81

17.46

12.02

1.77

32.32

29.49

4.35

NETEASE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

December 31, 

June 30, 

June 30, 

2025

2026

2026

RMB

RMB

US$

Assets

Current assets:

Cash and cash equivalents

47,167,904

22,814,542

3,362,447

Time deposits

92,639,378

101,978,645

15,029,792

Restricted cash

4,319,344

4,447,483

655,478

Accounts receivable, net

5,337,819

5,746,080

846,867

Inventories

689,183

511,896

75,444

Prepayments and other current assets, net

7,658,346

5,965,371

879,188

Short-term investments

22,803,503

50,599,638

7,457,464

Total current assets

180,615,477

192,063,655

28,306,680

Non-current assets:

Property, equipment and software, net

8,425,327

8,180,276

1,205,623

Land use rights, net

4,047,355

3,982,017

586,877

Deferred tax assets

2,831,423

2,695,809

397,313

Time deposits

2,995,000

260,000

38,319

Restricted cash

3,893

3,775

556

Long-term investments

18,462,883

21,336,343

3,144,588

Other long-term assets

4,033,702

3,686,261

543,287

Total non-current assets

40,799,583

40,144,481

5,916,563

Total assets

221,415,060

232,208,136

34,223,243

Liabilities, Redeemable noncontrolling interests and
  Shareholders' equity

Current liabilities:

Accounts payable

643,164

702,263

103,501

Salary and welfare payables

4,889,708

3,764,789

554,861

Taxes payable

3,874,143

3,720,498

548,334

Short-term loans

6,384,417

12,604,170

1,857,625

Contract liabilities

20,514,540

19,297,191

2,844,054

Accrued liabilities and other payables

16,062,984

15,529,221

2,288,724

Total current liabilities

52,368,956

55,618,132

8,197,099

Non-current liabilities:

Deferred tax liabilities

2,637,258

3,727,316

549,338

Other long-term liabilities

1,304,837

1,300,994

191,742

Total non-current liabilities

3,942,095

5,028,310

741,080

Total liabilities

56,311,051

60,646,442

8,938,179

Redeemable noncontrolling interests

91,319

94,938

13,992

Shareholders' equity:

Ordinary shares

2,631

2,632

388

Additional paid-in capital

9,837,460

8,781,946

1,294,299

Treasury stock

(1,518,573)

(1,617,961)

(238,458)

Statutory reserves

2,457,371

2,457,371

362,172

Accumulated other comprehensive loss

(237,770)

(1,644,123)

(242,314)

Retained earnings

149,755,000

159,110,675

23,450,011

NetEase, Inc.'s shareholders' equity

160,296,119

167,090,540

24,626,098

Noncontrolling interests

4,716,571

4,376,216

644,974

Total equity

165,012,690

171,466,756

25,271,072

Total liabilities, redeemable noncontrolling interests and
  shareholders' equity

221,415,060

232,208,136

34,223,243

NETEASE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME

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

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

June 30,

June 30,

2025

2026

2026

2026

2025

2026

2026

RMB

RMB

RMB

US$

RMB

RMB

US$

Net revenues

27,891,664

30,591,281

30,106,546

4,437,156

56,720,209

60,697,827

8,945,753

Cost of revenues

(9,839,182)

(9,374,209)

(8,889,221)

(1,310,109)

(20,188,321)

(18,263,430)

(2,691,697)

Gross profit

18,052,482

21,217,072

21,217,325

3,127,047

36,531,888

42,434,397

6,254,056

Operating expenses:

Selling and marketing expenses

(3,578,174)

(3,441,485)

(3,678,809)

(542,189)

(6,273,771)

(7,120,294)

(1,049,401)

General and administrative
  expenses

(1,056,578)

(636,597)

(805,268)

(118,682)

(2,012,915)

(1,441,865)

(212,505)

Research and development
  expenses

(4,356,646)

(4,482,157)

(4,643,910)

(684,428)

(8,742,959)

(9,126,067)

(1,345,016)

Total operating expenses

(8,991,398)

(8,560,239)

(9,127,987)

(1,345,299)

(17,029,645)

(17,688,226)

(2,606,922)

Operating profit

9,061,084

12,656,833

12,089,338

1,781,748

19,502,243

24,746,171

3,647,134

Other income/(expenses):

Investment income/(loss), net

328,444

5,472

(2,953,671)

(435,317)

1,021,195

(2,948,199)

(434,511)

Interest income, net

953,490

890,267

863,201

127,220

2,014,376

1,753,468

258,429

Exchange gains/(losses), net

114,037

(622,108)

(436,492)

(64,331)

115,840

(1,058,600)

(156,018)

Other, net

192,167

438,978

62,858

9,264

447,482

501,836

73,961

Income before tax

10,649,222

13,369,442

9,625,234

1,418,584

23,101,136

22,994,676

3,388,995

Income tax

(1,560,757)

(2,523,838)

(2,458,674)

(362,364)

(3,465,900)

(4,982,512)

(734,331)

Net income

9,088,465

10,845,604

7,166,560

1,056,220

19,635,236

18,012,164

2,654,664

Accretion of redeemable
  noncontrolling interests

(1,051)

(1,104)

(1,087)

(160)

(2,100)

(2,191)

(323)

Net income attributable to
  noncontrolling interests

(486,404)

(170,394)

(184,817)

(27,239)

(730,969)

(355,211)

(52,352)

Net income attributable to the
  Company's shareholders

8,601,010

10,674,106

6,980,656

1,028,821

18,902,167

17,654,762

2,601,989

Net income

9,088,465

10,845,604

7,166,560

1,056,220

19,635,236

18,012,164

2,654,664

Other comprehensive income

Foreign currency translation
  adjustment

(389,857)

(728,683)

(770,419)

(113,546)

(628,819)

(1,499,102)

(220,940)

Total comprehensive income

8,698,608

10,116,921

6,396,141

942,674

19,006,417

16,513,062

2,433,724

Comprehensive income
  attributable to noncontrolling
  interests

(470,857)

(121,843)

(140,619)

(20,725)

(690,158)

(262,462)

(38,682)

Comprehensive income
  attributable to the
  Company's shareholders

8,227,751

9,995,078

6,255,522

921,949

18,316,259

16,250,600

2,395,042

Net income per share

Basic

2.70

3.34

2.18

0.32

5.94

5.52

0.81

Diluted

2.67

3.31

2.17

0.32

5.88

5.47

0.81

Net income per ADS

Basic

13.49

16.69

10.90

1.61

29.71

27.58

4.06

Diluted

13.36

16.53

10.83

1.60

29.41

27.37

4.03

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

Basic

3,188,634

3,198,123

3,203,046

3,203,046

3,181,307

3,200,598

3,200,598

Diluted

3,214,681

3,227,325

3,221,637

3,221,637

3,210,563

3,224,495

3,224,495

NETEASE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

June 30,

June 30,

2025

2026

2026

2026

2025

2026

2026

RMB

RMB

RMB

US$

RMB

RMB

US$

Cash flows from operating activities:

Net income

9,088,465

10,845,604

7,166,560

1,056,220

19,635,236

18,012,164

2,654,664

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

Depreciation and amortization

428,427

430,583

439,439

64,765

909,188

870,022

128,225

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

55,715

1,117,717

2,023,477

298,224

(502,784)

3,141,194

462,955

Impairment losses on investments

161,463

344,871

1,281,917

188,931

250,534

1,626,788

239,759

Share-based compensation cost

946,395

616,180

781,656

115,202

1,898,267

1,397,836

206,015

Allowance for expected credit losses

153,179

6,719

1,309

193

169,950

8,028

1,183

Gains on disposal of property, equipment and
  software

(30,920)

(565)

(13,983)

(2,061)

(10,627)

(14,548)

(2,144)

Unrealized exchange (gains)/losses

(165,662)

643,942

487,982

71,920

(194,115)

1,131,924

166,825

(Gains)/losses on disposal of long-term investments

(141,078)

(1,071,442)

5,550

818

(129,403)

(1,065,892)

(157,093)

Deferred income taxes

(853,764)

532,257

693,742

102,245

(525,492)

1,225,999

180,690

Share of results on equity method investees

13,479

442,575

96,645

14,244

(5,189)

539,220

79,471

Fair value changes of short-term investments

(344,604)

(385,395)

(372,234)

(54,861)

(546,213)

(757,629)

(111,661)

Changes in operating assets and liabilities:

Accounts receivable

953,295

(1,188,837)

726,762

107,111

(135,665)

(462,075)

(68,101)

Inventories

(73,944)

143,099

34,048

5,018

(20,171)

177,147

26,108

Prepayments and other assets

583,484

116,152

(16,816)

(2,478)

288,306

99,336

14,640

Accounts payable

119,644

134,445

(105,340)

(15,525)

(28,432)

29,105

4,290

Salary and welfare payables

920,662

(2,253,559)

1,107,729

163,259

(1,164,449)

(1,145,830)

(168,874)

Taxes payable

(764,372)

1,895,324

(2,038,642)

(300,459)

1,031,751

(143,318)

(21,122)

Contract liabilities

(718,719)

1,384,445

(2,511,144)

(370,097)

1,807,479

(1,126,699)

(166,055)

Accrued liabilities and other payables

530,718

(21,044)

184,272

27,158

240,344

163,228

24,057

Net cash provided by operating activities

10,861,863

13,733,071

9,972,929

1,469,827

22,968,515

23,706,000

3,493,832

Cash flows from investing activities:

Purchase of property, equipment and software

(189,842)

(312,148)

(18,785)

(2,769)

(643,913)

(330,933)

(48,774)

Proceeds from sale of property, equipment and
  software

21,499

1,673

14,539

2,143

22,835

16,212

2,389

Purchase of intangible assets, content and licensed
  copyrights

(313,349)

(290,019)

(61,554)

(9,072)

(612,120)

(351,573)

(51,815)

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

776,428

(15,766,308)

(1,594,496)

(235,000)

(5,362,128)

(17,360,804)

(2,558,666)

Purchase of short-term investments with terms over
  three months and debt securities

(5,800,000)

(5,885,000)

(12,851,707)

(1,894,107)

(8,770,000)

(18,736,707)

(2,761,449)

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

5,745,454

4,861,483

3,515,814

518,167

8,454,055

8,377,297

1,234,661

Investment in equity method investees

(100,986)

(94,021)

(3,040,753)

(448,152)

(155,089)

(3,134,774)

(462,009)

Investment in other equity investments

(2,640,655)

(3,110,374)

(453,871)

(66,892)

(2,677,518)

(3,564,245)

(525,304)

Proceeds from disposal of long-term investments

784,855

1,353,947

50,733

7,477

862,283

1,404,680

207,024

Placement/rollover of matured time deposits

(27,980,605)

(30,608,133)

(50,216,128)

(7,400,941)

(77,582,412)

(80,824,261)

(11,912,022)

Proceeds from maturities of time deposits

33,617,510

42,018,869

30,056,765

4,429,819

77,543,992

72,075,634

10,622,634

Change in other long-term assets

(27,367)

65,909

(58,891)

(8,679)

(28,045)

7,018

1,034

Net cash provided by/(used in) investing activities

3,892,942

(7,764,122)

(34,658,334)

(5,108,006)

(8,948,060)

(42,422,456)

(6,252,297)

Cash flows from financing activities:

Net changes from loans with terms of three months or
  less 

2,017,570

1,182,383

420,940

62,039

(236,845)

1,603,323

236,300

Proceeds of loans with terms over three months

1,231,000

6,134,520

1,326,090

195,441

3,978,550

7,460,610

1,099,558

Payment of loans with terms over three months

(1,804,730)

(2,620,900)

—

—

(4,740,407)

(2,620,900)

(386,273)

Dividends paid to shareholders

(3,082,122)

(5,156,320)

(3,138,873)

(462,613)

(8,666,654)

(8,295,193)

(1,222,560)

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

42,400

(23,418)

4,874

718

84,917

(18,544)

(2,733)

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

(355,563)

(1,314,003)

(1,795,596)

(264,638)

(659,164)

(3,109,599)

(458,298)

Net cash used in financing activities

(1,951,445)

(1,797,738)

(3,182,565)

(469,053)

(10,239,603)

(4,980,303)

(734,006)

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

(31,749)

(340,829)

(187,753)

(27,671)

(88,681)

(528,582)

(77,903)

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

12,771,611

3,830,382

(28,055,723)

(4,134,903)

3,692,171

(24,225,341)

(3,570,374)

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

45,395,483

51,491,141

55,321,523

8,153,384

54,474,923

51,491,141

7,588,855

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

58,167,094

55,321,523

27,265,800

4,018,481

58,167,094

27,265,800

4,018,481

Supplemental disclosures of cash flow information:

Cash paid for income taxes, net

2,184,556

1,464,650

2,487,225

366,572

3,391,111

3,951,875

582,434

Cash paid for interest expenses

64,366

78,326

25,374

3,740

161,790

103,700

15,283

Supplemental schedule of non-cash investing and
  financing activities:

Fixed asset purchases financed by accounts payable
  and accrued liabilities

744,596

463,033

522,371

76,988

744,596

522,371

76,988

NETEASE, INC.

UNAUDITED SEGMENT INFORMATION

(in thousands)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

June 30,

June 30,

2025

2026

2026

2026

2025

2026

2026

RMB

RMB

RMB

US$

RMB

RMB

US$

Net revenues:

Games and related value-added services

22,806,459

25,712,975

25,022,788

3,687,903

46,854,466

50,735,763

7,477,527

Youdao

1,417,541

1,348,022

1,466,861

216,189

2,715,803

2,814,883

414,862

NetEase Cloud Music

1,968,729

1,981,234

1,977,472

291,443

3,827,117

3,958,706

583,441

Innovative businesses and others

1,698,935

1,549,050

1,639,425

241,621

3,322,823

3,188,475

469,923

Total net revenues

27,891,664

30,591,281

30,106,546

4,437,156

56,720,209

60,697,827

8,945,753

Cost of revenues:

Games and related value-added services

(6,792,240)

(6,482,431)

(5,973,965)

(880,453)

(14,287,502)

(12,456,396)

(1,835,846)

Youdao

(808,181)

(745,729)

(749,986)

(110,534)

(1,492,216)

(1,495,715)

(220,441)

NetEase Cloud Music

(1,258,855)

(1,247,066)

(1,237,231)

(182,345)

(2,434,632)

(2,484,297)

(366,140)

Innovative businesses and others

(979,906)

(898,983)

(928,039)

(136,777)

(1,973,971)

(1,827,022)

(269,270)

Total cost of revenues

(9,839,182)

(9,374,209)

(8,889,221)

(1,310,109)

(20,188,321)

(18,263,430)

(2,691,697)

Gross profit:

Games and related value-added services

16,014,219

19,230,544

19,048,823

2,807,450

32,566,964

38,279,367

5,641,681

Youdao

609,360

602,293

716,875

105,655

1,223,587

1,319,168

194,421

NetEase Cloud Music

709,874

734,168

740,241

109,098

1,392,485

1,474,409

217,301

Innovative businesses and others

719,029

650,067

711,386

104,844

1,348,852

1,361,453

200,653

Total gross profit

18,052,482

21,217,072

21,217,325

3,127,047

36,531,888

42,434,397

6,254,056

SOURCE NetEase, Inc.

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So far this year, NetEase (NASDAQ:NTES | NTES Price Prediction) has lost more than 14%. But since its year-to-date low on April 23, the stock has rallied more than 15%. Now, investors may want to consider buying it before Aug. 20. Here’s why.

The Bull Thesis in One Line The pre-earnings setup on NetEase heading into the Aug. 20, 2026 pre-market Q2 print: a mega-cap gaming compounder trading at a value multiple, paying a real dividend, buying back stock aggressively and executing on a global game portfolio that keeps setting records. The math does the talking.

Three Reasons This Is Easy 1. Valuation you rarely see on a growth compounder. NTES trades at a trailing P/E of 16 and a forward P/E of 13, with operating margins of 41.4% and return on equity of 22.1%. The Street’s consensus price target of $161.99 sits well above the $126.24 price where shares traded on Wednesday, Aug. 19, and 31 of 32 covering analysts rate it Buy or Strong Buy.

2. Capital returns fit a retirement mandate. The dividend yields 2.43%, and the board extended the $5 billion buyback through January 2029, with 23.2 million ADSs already retired. Net cash sits at RMB 167.5 billion. That is a fortress balance sheet funding real shareholder returns.

3. The catalyst is live and loaded. Where Winds Meet reached #2 on Steam’s global top-seller chart after its version 1.6 update, Fantasy Westward Journey posted 3.9 million peak concurrent users (a new high), and Marvel Rivals keeps expanding. Q1 games revenue grew 6.9% year over year, and history is friendly: post-earnings one-week returns have averaged +3.19% across the last four quarters.

Why NTES Beats the Obvious Alternatives Compare it to the US gaming names retirement investors default to. Electronic Arts (NASDAQ:EA) yields materially less than NTES’s 2.43% payout, and Take-Two Interactive (NASDAQ:TTWO) pays no dividend at all. Meanwhile, NTES’s forward P/E of 13 undercuts both. You get better income, cheaper multiple, and a bigger installed franchise stable.

The Risk, Dismissed China regulatory overhang is the standard pushback. MSCI upgraded NetEase to a triple-A ESG rating, positioning it as a leader among 200-plus global media and entertainment peers, and the company has now been on Forbes’ World’s Best Employer list for nine consecutive years. Governance risk is priced in, and the scorecards say it is overpriced.

What to Watch Keep an eye on the stock into Thursday’s opening bell, with valuation, capital returns,and franchise momentum framing the setup.

Contact [email protected] for any questions or corrections.

, /PRNewswire/ -- NetEase Cloud Music Inc. (HKEX: 9899 or the "Company"), a leading interactive music streaming service provider in China, today announced that it will report its financial results for the first half year of 2026 ended June 30, 2026 on Thursday, August 20, 2026, after the Hong Kong market closes.

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 Call
Registration 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.

Chinese Mainland:

400-120-9216

Hong Kong:

800-930-639

United States:

1-855-883-1031

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 for 12 months following the call.

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.

Investor Enquiries:

Angela Xu
NetEase Cloud Music Inc.
[email protected]

SOURCE NetEase Cloud Music

, /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 second quarter 2026 financial results on Thursday, August 20, 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, 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 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:

2290552

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:

United States:               

+1-855-669-9658

International:

+1-412-317-0088

Replay Access Code:

2290552

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.

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.