NetEase Q1 2025 Earnings Call Transcript

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Operator

Day, and welcome to the NetEase First Quarter twenty twenty five Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Helen Wu. Please go ahead.

Helen Wu
EVP at The Piacente Group

Thank you, operator. Please note that today's discussion will contain forward looking statements related to the future performance of the company and are intended to qualify for the Safe Harbor from liability as established by The U. S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors.

Helen Wu
EVP at The Piacente Group

Some of those risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and in this discussion. A general discussion of the risk factors that could affect NetEase's business and financial results is included in certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20 F and the announcement and filings on the Hong Kong Stock Exchange website. The company does not take any obligation to update its forward looking statements, except as required by the law. During today's call, management will also discuss certain non GAAP financial measures for comparison purpose only. For a definition of non GAAP financial measures and a reconciliation of GAAP to non GAAP financial results, please see the first quarter twenty twenty five earnings news release issued earlier today.

Helen Wu
EVP at The Piacente Group

As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com. Joining us on the call from NetEase senior management are Mr. William Dean, Chief Executive Officer and Mr. Bill Penn, Vice President of Corporate Development.

Helen Wu
EVP at The Piacente Group

I will now turn the call over to Bill, who will read the prepared remarks on William's behalf.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Thank you, Helen, and thank you everyone for participating in today's call. Before we begin, I would like to remind everyone that all percentages are based on RMB. We started 2025 with strong momentum, innovative content and exceptional operations continue to underpin our growth. As we further globalize and diversify our expanding game portfolio, our total net revenue increased 7% year over year. Alongside the success of our new titles, our flagship titles continue to capture players throughout the first quarter, reaching new record highs after decades of operations.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

This combination of new hits and long time fan favorite drove our total revenue from gaming and value add services up by 12% year over year to RMB24.0 billion. Several new titles have recently debuted globally, and more players around the world are embracing our games than ever before. We now have a rich and growing global portfolio of games that spans a range of diverse genres, reinforcing our competitive edge in the dynamic gaming landscape with innovations that elevate our offerings and the industry as a whole. Starting with Marvel rivals, its successful launch last December marked a major milestone in our portfolio and a meaningful step forward in our globalization journey. Backed by critically acclaimed gaming experience and dedicated live operations, it has continued to build strong momentum among players worldwide.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

In the first quarter, player engagement remained high and the launch of Season two in April brought renewed excitement, seemed around Hellfire Gala, once a year celebration of mutant culture and identity. The seasonal update introduced a new map, a new hero and fresh team outs, welcoming both veteran players and new commerce to the living island. Following the update, Marvel rivals reclaimed its number one position on Steam's global top seller chart. To deepen our connection with player community, we're moving to a two month season cadence, starting with season three, while keeping the momentum high by introducing a new hero each month. With continued development and iteration, we're committed to delivering a distinctive and evolving gaming experience to players worldwide.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Next is FRAGBUNK, our fast paced five versus five tactical shooter game that has energized global fans with a sleek shooting experience, innovative short cars and bold art expression. Within just three days of its PC launch in March, the game achieved over 110,000 peak concurrent players and became number six on Steam's global top center chart. Building on this momentum, we launched chapter two of season one on April 29, with over 70 brand new Shark Cards, along with updated heroes and maps. With update, Frag Punk also debuted on consoles, making the game available to an even broader player base. As we continue pushing the boundaries of the shooter experience with systematic innovation and upgrades, we're also growing the games community and hope to make FRIG PUNK titles.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

We also just launched the much anticipated Once Human mobile edition on April 24. It quickly gained global attention, claiming the top spot on iOS download chart in more than 160 regions. The optimized handheld experience is highly valued by mobile players, as we retain the depths of PC version, while featuring cross platform play, progression and rewards. Meanwhile, the mobile launch generated even more community enthusiasm across platforms, driving the game to number five spot on Steam's top seller chart. Across PC and mobile, our open world PVP and PVE phenomenon is reaching more users.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Where Wings Meet has continued to draw players into its immersive world since its breakout domestic launch in December. Its ability to blend subtle storytelling, a richly layered historical setting and the high fidelity graphics has made a wherewings meet a game changer in the open world of Wuxia genre. We added more fresh content on March 28, introducing Hexi, a brand new district set against a stunning desert landscape and attracting a growth of new players. By the March, more than 30,000,000 players had joined the community and player engagement continues to be high, reinforcing the game's long term potential. We are excited to build on this success and reach more players with plans to launch the game in more regions across PC, mobile and console platforms later this year.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Visit titles also demonstrated robust performances driven by strategically tailored experiences for local communities. The return of each title in 2024 reignited player enthusiasm, driving engagement to historical highs. This was especially evident by Overwatch, which broke new records of peak concurrent players upon its relaunch on February 19. A brand new stadium mode was launched in China this April, alongside its global release. In addition, momentum has been ongoing for World Warcraft and Hearthstone, also which saw consistent popularity during Chinese New Year with targeted in game events and localized designs.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Notably World of Warcraft achieved the leading sales through live commerce on social media, providing fans with an entertaining experience in a fresh way. Hearthstone came up with culturally resonant content, such as alternative art cards or signature card inspired by Chinese painting and World of Warcraft Suzhou embroidery inspired mounts. These creative designs rejuvenated the long beloved IPs by infusing fresh element that resonate with players, engaging both long time fans and new players. In addition, Diablo three entered technical testing in April, paving the way for its reentry into the Chinese market. Together, these successes demonstrate the stress of our operating capabilities and the close collaboration with our partners.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Looking ahead, we are excited to bring players even more intriguing content created and delivered with care by passionate teams and collaborators. As we celebrate the success of our new and return titles, our established NetEase games continue to play a vital role in our portfolio. Our long standing beloved titles serve as foundational pillars and steady source of revenue with lowering content update and continuous gameplay enhancements that deliver time based appeal. The Fantasy Journey franchise is a prime example. After decades of operations, it continues to be one of China's most influential brands.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

In the first quarter, we celebrated Fantasy Westward Journey Mobile's tenth anniversary with a range of new content updates, including a crossover with renowned animation IP Digimon. The update sparked player engagement, signaling a remarkable beginning for its next decade. Once we're turning online to another cherished classic also maintain healthy traction in the first quarter with festive Chinese New Year events and the interactive live streaming that reignited player passion. Another example is our iconic asymmetric battle arena game, Identity V. First introduced to global market in 2018, the player base greatly expanded in the first quarter, achieving a new quarterly high on top of its record breaking momentum in 2024.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

The excitement extended into April with registered players surpassing 400,000,000 globally during Identity V's seventh anniversary celebration. Similarly, our action based battle royale game Naraka Bay Point has built a strong global player base since 2021. The game saw new record revenue in the first quarter with our updated PVE content. Players can now team up and confront formidable villains side by side, adding another layer of play through strategy, skill building and collaboration. Both Identity V Asian Games version and Naraka Bitcoin have also been named as the official e sports events for the twenty twenty six Iichi Nagoya Asian Games.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Each is the first title in this genre to be included in the Asian Games, marking another breakthrough for domestically developed games on the international stage. Moreover, this veteran title's ability to reach new milestones highlight the strength of our long term operations, premium content, crossover events and our increasing strength in e sports operations. Moving to Aggie Party. The game further solidified its leadership in the party game genre with robust sequential growth in the first quarter. Excitement lit up Aggie Island on Chinese New Year's Eve, featuring vibrant line off of performances.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Players jump into the New Year celebrations, enjoying live entertainment, joining in activities with friends and creating a night to remember. The addition of the beloved Chinese animation IP, Calabash Brothers added another layer of festivity with Aggie Party attracting over 100,000,000 players and new monthly players reaching a record high. As for our groundbreaking MMO game, Justice Mobile, it continues to raise the bar for innovation. In March, we introduced Starry Dreamland, a virtual amusement park in the heart of the Wuxia inspired world, packed with familiar attractions and activities that resonate with the younger generation. This new setting quickly became a hit.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Justice Mobile is also pushing technology boundaries. We continue to elevate the gaming experience, adding enhanced interaction with AI powered NPCs and improve the lighting effect through cutting edge graphic technology. We have also made a lot easier and more fun for players to get creative. With our upgraded creation system, players can produce their own video clips using in game animations, complete with custom script, capture motions, and voiceovers. It's a powerful tool that opens the door to a whole new level of creation, creative expression.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Justice Mobile's strong momentum has expanded to more regions since its launch in Hong Kong, Macau and Taiwan Last November, as has our leading basketball game, Dung City Dynasty. Currently, Dung City Dynasty is targeting expansion to more regions across Western market and Southeast Asia in May. Similarly, Racing Master has secured a solid position in Japan, Korea and Southeast Asia. It's a game topping the iOS download chart across multiple regions with each geographic launch. This solid operational metrics are a great indicator of what we can expect in other market when we bring these titles to more regions.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

As we work to build on the success of our existing games and introducing them to more players around the world. We have a range of exciting upcoming titles on the way. The new titles in our pipeline will continue to push the envelope of creativity and interaction, elevating our portfolio and the overall gaming experience we bring to our gaming communities. Marvel Mystic Mayhem, our superhero team based tactical RPG is currently preparing for its official worldwide launch. The close beta test two point zero conducted in March, sparked massive passion within the community, where we gather valuable feedback from players to aid in the final touches.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

With more details to be announced shortly, we eagerly anticipate introducing players to this exciting confrontations on global scale. Some of our other titles under development include Destiny Rising, our epic sci fi RPG shooter game featuring a new adventure set in the alternative Destiny timeline. This one is currently in active development and progressing as planned. ANATHA, our highly anticipated metropolitical RPG is also deep in development. The game draws on our years of experience in the gaming industry to deliver innovative gameplay shaped by deep player insights.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

As across our portfolio and pipeline, we're reaching more players through a wider range of genres and expanding our global footprint. We're launching new titles and building on the momentum of our existing kids with updates players love, all while delivering new inspiring experiences that resonate with fans around the world. By continuing to reimagine what's possible in gaming, we help advance the industry as a whole. Our commitment to quality and innovation shapes each area of our business. Looking now at Youdao, with a relentless focus on technology driven innovation integrated into the user experience and a disciplined effort to foster long term sustainability, Youdao achieved record high first quarter operating profit, maintaining the profitability momentum of previous quarters.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Turning services revenue declined in Q1, as we continue to prioritize core services with strong long term potential. By focusing on high demand subjects, we advanced quality operations and further strengthened the profitability. As a part of this effort, our online intelligent learning platform, Youdao Link, its college entrance planning system to deliver more seamless and personalized guidance based on individual needs, driving exceptional user engagement and loyalty. By prioritizing AI technology in the development of our products and services, we have seen strong user reception and robust growth in AI subscription sales. Our existing applications continue to evolve, with our dictionary and translation services now delivering industry leading accuracy and a smooth user experience, powered by our proprietary large language model Confucius.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

This model innovatively integrates multiple models and leverage online direct preference optimization during training, which enhances its ability to generate responses that are aligned with users preferences. This elevated experience has driven increasing engagement in our AI translation services. Udong's online marketing services remained focused on high quality growth. In the first quarter, sales from overseas grew sharply, driven by strengthened collaboration with overseas partners and the KOLs. We also boosted operational efficiency through advanced technologies.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

For example, we launched Youdao Magic Box, a video creation tool that simplifies the production of high quality advertising videos through intuitive inputs, making ad content creation easier and more time efficient. Our smart devices segments maintained healthy year over year growth. Building our leading position in China's Dictionary Pen market, we continue to bring new innovations to the industry. In the first quarter, we launched Youdao Space one, a next generation device equipped with a larger screen than dictionary pens and the ability to answer students open ended questions in real time, much like a human tutor. Powered by advanced large language models, Udall Space one can accurately interpret images, respond with natural voice interactions and deliver highly accurate answers across a wide range of school grade levels.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

As our online businesses continue to explore avenues for delivering meaningful experiences in entertainment and learning, the NetEase family remains committed to enriching people's life and lifestyle and product with services that consistently impress our users with exceptional quality. Take Yanxuan as an example, a strong commitment to quality and innovation drove another quarter of healthy performance across our core product categories. In the first quarter, our pet product and household cleaning items remain top sellers within their category on major e commerce platforms, particularly the signature product maintained a strong momentum, while new releases such as our CarSense cup and limited edition New Year bathroom frequency saw strong consumer demand. We were especially delighted that in March, '1 of our cat food products, especially formulated to support healthy fur received the 2025 Pet Orange Dot Award, a notable recognition from the pet industry. Additionally, ESG initiatives are ongoing priorities for NetEase.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Earlier today, we published our sixth annual ESG report outlining our progress towards sustainable growth, transparency and social responsibility. We believe that technology can both empower and inspire. Through AI driven innovations, we're redefining entertainment experiences, while modernizing traditional industries for safer, more efficient production. Our business growth reflect the trust our user place in us, further motivating our efforts to serve our communities. While our business has limited environmental impact, due to its predominantly online nature, we continue to enhance our carbon reduction efforts across data centers and office campuses to strengthen operational resilience.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

In 2024, by prioritizing energy saving measures within our operations, We successfully achieved a 16% reduction in greenhouse gas emissions compared to the previous year. Leading ESG rating organizations have also recognized our progress in sustainability. Notably, MSCI upgraded us from A to AA in this latest assessment, designating NetEase as a leader among two thirty seven companies in the global media and entertainment sector. S and P Global included us in this 2025 sustainability yearbook and the seasonality has rated us as a low risk company for the six consecutive years. Each of this honors speak to the dedication and ESG standard we uphold across our company.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

As we look to the months ahead, we are encouraged by the global momentum we have established and the breadth of opportunities across our increasingly diversified game portfolio and broader NetEase family of businesses. With a robust pipeline of new releases, continued global expansion and ongoing enhancement to our most iconic franchises, we are well positioned to sustain our growth and deepen our connection with players worldwide, creating more value for players, partners and shareholders. That concludes William's comment. I will now provide a brief review of our twenty twenty five first quarter financial results. Given the limited time on today's call, I'll be presenting some abbreviated financial highlights.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

We encourage you to read through our press release issued earlier today for further details. Total net revenue for the first quarter were RMB28.8 billion or US4.0 billion dollars representing a 7.4% increase year over year. Meanwhile, current contract liabilities were RMB17.7 billion, up 16% quarter over quarter. Total net revenue from our games and related VAS were RMB24.0 billion, up 12% year over year. Specifically, net revenues from online games were billion, up 14% quarter over quarter and 15% year over year.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

This growth was primarily driven by increased revenue contributions from key PC games, such as newly launched titles, Whirlwinds Meas and Marvel Rivals, as well as established mobile games like Identity V. Specifically, net revenues for our PC games accounted for approximately 34% of our total online games revenue, representing an increase of 13% quarter over quarter and an increase of 85% year over year. Udolph's net revenue were RMB1.3 billion, representing declines of 7% year over year and 3% quarter over quarter. This was primarily due to strategic structural improvement in the learning services segment, which is increasingly focused on high demand subject. NetEase Cloud Music net revenue were RMB1.9 billion, declining 8% from same period last year, 1% from previous quarter.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

This was primarily due to decreased revenue from social entertainment services. Net revenue for innovative businesses and others were RMB1.6 billion, decreasing by 17% year over year and 29% quarter over quarter. The decline was mainly due to decreased net revenue from Yuanquan, advertising services and certain other businesses in this segment. Gross profit for the first quarter of twenty twenty five was RMB18.5 billion, up 9% year over year and 14% quarter over quarter. This was primarily driven by increased net revenues from online games as mentioned above.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Our total gross profit margin was 64.1% in the first quarter compared with 63.4% for the same period in 2024. Specifically in more detail, gross profit margin for our games and related VAS was 68.8% compared with 69.5% in the same period last year. The change was primarily due to fluctuations in product mix. The operating expense for the first quarter was 8,000,000,000 or 28% of our net revenues. Taking a closer look at our cost composition, our selling and marketing expenses as a percentage of total net revenue were 9.4% compared with 15 for the same period last year, mainly due to decreased spending on gaming promotions during the quarter.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Our R and D expenses as a percentage of total net revenues remained stable year over year at 15.2% in the first quarter compared with 15.5% for the same period last year. We remain committed to investing in content creation and product development. The effective tax rate was 15.3% for the first quarter. As a reminder, the effective tax rate is presented on an accrual basis, depending on applicable policies and our operations. Our non GAAP net income attributable to shareholders for the first quarter totaled RMB11.2 billion or US1.5 billion dollars up 32% year over year.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Non GAAP basic earning per ADS for the quarter was US2.44 dollars or US0.49 dollars per share. Additionally, our cash position remains robust with net cash of approximately billion as of 03/31/2025, compared with RMB131.5 billion at the end of twenty twenty four. In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved a dividend of US0.13.5 dollars per share or US0.67.5 dollars per ADS. Lastly, under our current US5 billion dollars share repurchase program, which started in mid January of twenty twenty three, we had repurchased approximately US21.6 million ADS as of 03/31/2025, for a total cost of approximately US1.9 billion dollars Thank you for your attention. We will now like to open the call to your questions.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Operator, please.

Operator

Thank you. Question. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. Please limit your questions to one at a time. Your first question comes from Miranda Zong with Bank of America.

Miranda Zhuang
Miranda Zhuang
Analyst at Bank of America

Thank you for taking my question. My question is about Identity V. So this game had a consistent and strong performance throughout last year and is now one of the top game among company's game portfolio. Can management share the reasons behind and how to think about the game growth going forward after the comp base becomes higher? Any implication to the revival of your other games?

Miranda Zhuang
Miranda Zhuang
Analyst at Bank of America

Thank you.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Thank you for your question. Yes, you're right. IDENTIFY being a very unique asymmetric PVP game has been there for six years. And during the past six years, we never stopped, keep investing, keep optimizing, keep improving this game. And as a result, the game is not only very successful in China, it's actually in a very leading position in Japan as well.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

You're right, our other teams actually, they learn a lot from the hands on experience of IDentify's team to how to keep improving the operations, continuous operation and improvement of our other games. Looking to the future, identify, we'll keep investing to more and more resources into the game identify, and to bring the fun of asymmetric PVP to more players. Thank you.

Operator

Your next question comes from Lincoln Kung with Goldman Sachs. Please go ahead.

Lincoln Kong
Lincoln Kong
Analyst at Goldman Sachs

Thank you, management, for taking my question. My question is about mobile arrival. So we have seen some user number volatility in the recent months. How should we think about to ensure the life cycle or the longevity of this IP? I think the management talking about we're going to shorten the season length season time going forward and also introduce more frequently of the hero and the characters.

Lincoln Kong
Lincoln Kong
Analyst at Goldman Sachs

So going forward, should we think about more adjustments and in terms of the long term operation and monetization strategy? Thank you.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Thank you for your question. As you mentioned, we introduced the Season two update in April, which achieved wide popularity among players and resulted in the significant boost over operating metrics. For season based products, it's normal to observe fluctuations in operating metrics that align with the cadence of seasonal updates. And the process itself will actually also help to solidify the user base. So starting from season three, we'll reduce the seasonal update internal from three months to two months.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

And additionally, we will initialize Marvel Rivals Esports event in May to develop our Esports ecosystem. We believe that with more efficient content updates and our evolving eSports ecosystem, we'll see gradual improvement across all in game metrics. Thank you.

Operator

Your next question comes from Felix Liu with UBS. Please go ahead.

Felix Liu
Felix Liu
Executive Director at UBS Group

Let me translate myself. First, thank you management for taking my question. Congratulations on the strong results and the strong performance of Marvel Rivals and Frank Punk. Can management share how you think about your latest strategy for overseas markets given the backdrop of the strong performance of your domestically developed games and the news of shutdowns of some of your overseas studios? Thank you.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Thank you. Thank you for your questions. Yes, for long period of time, we have actually paying a lot of attention to the oversea market, including European market, North American market, Japan and Korea market. In the past period of time, we did close some of our overseas studio, but those decisions was purely made based on the positioning of the future product and consideration of product quality. Looking as you see, since last December, our domestic made games named the FACT:Pong and More Rivals, they indeed achieved not bad result in overseas markets.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

And we believe this is in line with our judgment and how we see the overseas market according to our plan. And we believe that in the future NetEase will make more and more games suitable for global market. Thank you.

Operator

Your next question comes from Yang Liu with Morgan Stanley. Please go ahead.

Yang Liu
Yang Liu
Executive Director at Morgan Stanley

Let me do the translation. The whirlwind meat saw improving feedback and monetization. What has NetEase done here? It's proven effective. And what is the next step for this title's operation?

Yang Liu
Yang Liu
Executive Director at Morgan Stanley

Thank you.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Thank you for your question. Where We a game that we spent five years to develop a Asian Chinese historical background open world game. One is released in late December last year. It got a lot of acclaimed reviews from users. We actually pay a lot of attention to this game.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

It's a very important game to us. And the we are the future, we're going to keep investing to the game, namely to further polishing the art representations, keep polishing the game place. So it'll be a long term game for us. When players play the game, we actually we encourage players to play on PC because on the PC, it has a much better graphical presentations. When we've made the success so far has provided us a lot of hands on experiences.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

And we're going to learn from the experiences and deploy them into other product to help our other product to be successful. We believe we're wins made in the coming five to ten years, it's gonna be one of our evergreen titles. Thank you.

Operator

Your next question comes from Richie Sun with HSBC. Please go ahead.

Ritchie Sun
Ritchie Sun
Analyst at HSBC

Congrats on a very robust quarter results. My question is about Once Human. The mobile version has done well in the download rank, but monetization remains quite conservative. So how would management rate the performance of one human and its potential? And what are the key competitive edge and differentiation of this product?

Ritchie Sun
Ritchie Sun
Analyst at HSBC

And what are the plans you'll further enhance the commercialization going forward? Thank you.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Thank you for your question. Once human mobile launched, it's very successful. It's achieved top downloading spot on 166 regions on iOS. In the first week, we got more than 6,000,000 users. Regarding what do you observe on the top crossing chart, One of the nature of this game is that it's a cross play game.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Players, they play, they can play, choose to play on PC and on mobile, it's the same account. So a lot of top players, they play on both clients and they choose to play more or pay on the PC side. Actually, after the mobile version launch, from the PC side, the concurrent user, they increased by 90% and payment actually drove by 500%. And the payment on PC actually increased the payment ratio from PC actually is more than 50%. And that's why this you see when we launched a mobile game, on steam rates rank onto one of the top set of charts.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

And so probably the players who play on PC actually kind of impacted the top crossing chart ranking on mobile. For the specialty of this game, this is kind of a script based seasonal based game. That's one difference compared to other SOC type of game. In the future, we're going to further satisfy the gamers' demand from two angles. One is we're going to add new gameplays, new scripted based gameplays that can further satisfy the demand from users from PV kind of exploration or PVP kind of confrontation.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

And the other front that we're exploring is we're going to explore the prioritized ecosystem. Some of the SOC players, they have demands to, for example, open their private servers. So that's a different kind of gameplay experience. And we're going to explore how to satisfy this kind of demand. Thank you.

Operator

Your next question comes from Yang Liu with Morgan Stanley. Please go ahead.

Yang Liu
Yang Liu
Executive Director at Morgan Stanley

Let me do the translation. Fragpunk's popularity declined fast after the launch stage. What can that do to help the help Fragpunk to differentiate better in the overseas FPS game competition? Thank you.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Thank you for your question. First part was actually made by a new team. From new team perspective, we're satisfied with the performance so far. The first the the game actually has a solid foundation. It's innovative.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

The card mechanism allows for rapid updates and iterations regarding gameplay modes. We have been telling the team that it's important that we keep engaged in this market and keep refreshing and seeking for opportunities for gameplay expansions. We're committed to supporting this product in the long run, to support the long term operations. To achieve this, we encourage the team that, to make sure that we have a very solid, stable team and give the team more room and more time to keep grow. From the market operation perspective, we'll continue to invest into oversea market, maintaining visibilities through all sorts of vehicles, like including tournaments, including collaboration with influencers and other IP crossovers.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

This will maintain our loyal player base while we're seeking for a breakthrough opportunities. Thank you.

Operator

The next question comes from Thomas Chong with Jefferies. Please go ahead.

Thomas Chong
Thomas Chong
Managing Director at Jefferies

Management for taking my question. My question is about resource allocation. Can management comment about the allocation of resources in domestic and overseas market over the next few years? Thank you.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Yes.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

From NetEase perspective, we believe we do have sufficient resources to do both domestic and overseas market at the same time. From the twenty years history, we have been doing this business, we have accumulated a lot of tools to train and talents. Of course, there are we have shortcoming as well. For example, like how to understand the demands from overseas gamers. On that part, we'll keep improving.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

But from resource allocation perspective and execution perspective, we do have sufficient resources to do both market. Thank you.

Operator

The next question comes from Suking Chang with CICC International Corporation. Please go ahead.

Xueqing Zhang
Media Analyst at China International Capital Corporation (CICC)

Thanks management for taking my questions and congratulations on the solid quarter. I have two questions. My first one about your new titles. We have noticed that several new titles achieved a great performance. Which key evaluation metrics are prioritized during the product ideation and approval basis in the company?

Xueqing Zhang
Media Analyst at China International Capital Corporation (CICC)

And how shall we expect the pipeline in one to two years? My second question is a one Congratulations Identify and Nirapar being selected for the twenty twenty six Asia Games for the first time. May I ask whether management plans to take this opportunity to develop international eSports operations? And what's the company's long term strategy for the eSports games?

Xueqing Zhang
Media Analyst at China International Capital Corporation (CICC)

Thank you.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Yes. So thank you for question. We'll answer the first question first. Over the past twenty five years, we have accumulated a lot of experience, tools and talents. And our talents, our teams, they're really passionate about gaming.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

And talk about when we chart a new project, we welcome all sorts of talents with thinking creative thinking about game ideas. When we consider a new product case, actually the first attribute that we consider is whether or not the core team members, they're passionate about gaming, are they passionate about the specific game project they're proposing and including how to execute them out over years. And if they satisfies all this threshold, we'll actively evaluate and think about this product. Of course, we do have a internal evaluation system. And in the future, actually, we'll open this platform to more game lovers outside, talent outside if they want to join us, they have creative ideas, we welcome them.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Specific about the pipeline in the next couple of years, rest assured, don't need to worry. We have other very good products that our pipeline has not been announced yet. Thank you. Yes. So thank you for question and interest about our product in the Asian games.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

For a long period of time, we have been actually paying a lot of attention to esports. And this time, two of our product been selected. That's a testimony of not only the quality of the game, but also the gamer base of the games. And we hope our self driven game nonstop at being part of Asian game. We hope them to be included in the higher level on an Esports Olympic games.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Talking about Esports operation, in Hangzhou we have the largest esports stadium and we continue to run esports tournaments here. And we also in Shanghai, we have our own private esports stadium, one of the biggest and we have continuous Esports operation based there as well. In the long run, we're going to in the long term continues to invest into Esports operations. Thank you. And operator, for the sake of time, we have time for one more questions.

Operator

Thank you. Your final question comes from Alicia Yap with Citigroup. Please go ahead.

Alicia Yap
Alicia Yap
Analyst at Citigroup

Thanks management for taking my questions. With the help of AI, it seems like the game studios are able to produce content update very quickly and then also shorten the overall development time for the expansion pack. Would that affect and change how NetEase plans to your plans to expansion pack release timing and also the game promotion targeting as AI increasingly taking a more important part of the game development and game publishing? Thank you.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Thank you for your question. We actually have been using AI in our game development and gamers experience for a long time, at least five years, in the past five years. So we never stopped investing into technologies, including AI technologies. And a lot of this result actually has been deployed in our, advocated in our game development and content per production. For AI in general, we believe it's not specifically attached to specific one companies.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

It should be a whole industry kind of thing. In the whole industry, everyone are or will be actively adopting AI technology. It's just every company with their different contracts, maybe the brands or the deepness, how they apply AI technology might be different. I want to emphasize again, actually AI is critically important not only to game industry and too many other business as well. It's been a critically important thing.

Bill Pang
Bill Pang
Vice President of Corporate Development at NetEase

Thank you.

Operator

And that concludes the question and answer session. I would like to turn the conference back over to Helen Wu for any additional or closing comments.

Helen Wu
EVP at The Piacente Group

Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly. Have a nice day. Goodbye.

Executives
    • Bill Pang
      Bill Pang
      Vice President of Corporate Development
Analysts

Key Takeaways

  • Total net revenue rose 7.4% YoY to RMB 28.8 billion, led by a 12% increase in gaming & VAS to RMB 24.0 billion, driving a 9% gross profit gain and 32% jump in non-GAAP net income to RMB 11.2 billion.
  • Marvel Rivals and FRAGPUNK launches achieved global traction—Marvel Rivals reclaimed Steam’s #1 top-seller spot post-Season 2, while FRAGPUNK hit over 110,000 peak concurrent PC players within three days of launch.
  • The mobile edition of Once Human topped iOS download charts in 160+ regions and spurred a 90% increase in PC concurrency, as “Where Wings Meet” reached 30 million players and plans multi-platform global expansion.
  • Long-standing franchises like Fantasy Westward Journey, Identity V, Naraka, and Aggie Party set new engagement and revenue records, with Identity V and Naraka named official esports titles for the 2026 Asian Games.
  • Youdao’s AI-driven learning and device segments delivered record Q1 operating profit, while NetEase cut 2024 greenhouse gas emissions by 16% and earned an MSCI AA sustainability rating.
AI Generated. May Contain Errors.
Earnings Conference Call
NetEase Q1 2025
00:00 / 00:00

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