NetEase Q2 2026 Earnings Report

NetEase EPS Results

• Actual EPS: N/A
• Consensus EPS: $2.31
• Beat/Miss: N/A
• One Year Ago EPS: N/A

NetEase Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $4.33 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

NetEase Announcement Details

• Quarter: Q2 2026
• Date: 8/20/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, August 20, 2026
• Conference Call Time: 8:00AM ET

NetEase (NASDAQ:NTES) (NASDAQ: NTES) is a China-based internet technology company founded in 1997 by William Ding, who serves as the company’s chief executive officer and director. The company develops and operates online services for consumers in China and international markets.

NetEase’s primary business is online games, including role-playing, multiplayer, mobile and personal-computer titles. Its portfolio includes franchises such as Fantasy Westward Journey, Westward Journey Online, Knives Out, Identity V and Onmyoji. The company also publishes games developed by external studios and distributes selected titles in overseas markets.

Beyond gaming, NetEase operates NetEase Cloud Music, an online music platform, and Youdao, which provides education technology, learning content and related services. The company also pursues other internet businesses, including selected content, media and technology initiatives, serving users through digital products and services in China and abroad.

NetEase Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Revenue grew 7% year over year to RMB 60.7 billion in the first half of 2026, with second-quarter revenue up 10% year over year to RMB 30.1 billion, driven by games and related value-added services.
• Positive Sentiment: The games portfolio showed broad engagement, including Sword of Justice reaching more than 10 million active players on its anniversary update launch day, Eggy Party surpassing 700 million registered users, and continued global momentum for Marvel Rivals and Where Winds Meet.
• Positive Sentiment: Second-quarter gross margin improved to 70.5% from 64.7% a year earlier, while lower general and administrative expenses supported operating efficiency; NetEase also maintained RMB 157.5 billion in net cash and continued share repurchases under its $5 billion program.
• Negative Sentiment: Sea of Remnants received criticism over its steep early learning curve after launching in China, although management said player sentiment is improving through content updates and experience optimization. Several upcoming titles, including Ananta, Beneath the Mist, and Tarisland’s Shadow, remain in development or refinement without firm launch dates.

Presentation

[Operator]

Good day, and welcome to the NetEase second quarter 2026 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brandi Piacente. Please go ahead.

[Brandi Piacente, Founder and CEO at The Piacente Group]

Thank you, operator. Please note that today's discussion will contain forward-looking statements relating to the future performance of the company and are intended to qualify for the safe harbor from liability as established by the U.S. Private Securities Litigation Reform Act.

[Brandi Piacente, Founder and CEO at The Piacente Group]

Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions, and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion.

[Brandi Piacente, Founder and CEO at The Piacente Group]

A general discussion of the risk factors that could affect NetEase's business and financial results is included in certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20-F and in announcements and filings on the Hong Kong Stock Exchange's website.

[Brandi Piacente, Founder and CEO at The Piacente Group]

The company does not undertake any obligation to update this forward-looking information except as required by law. During today's call, management will also discuss certain non-GAAP financial measures, which should not be considered in isolation or as a substitute for the financial information prepared and presented in accordance with the U.S. GAAP.

[Brandi Piacente, Founder and CEO at The Piacente Group]

For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the second quarter 2026 earnings news release issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com.

[Brandi Piacente, Founder and CEO at The Piacente Group]

Joining us today on the call from NetEase's senior management are Mr. William Ding, Chief Executive Officer, Mr. Hu Zhipeng, Executive Vice President, Ms. Aileen Mo, Vice President of Finance, and Mr. Bill Pang, Vice President of Corporate Development. I will now turn the call over to Bill, who will read the prepared remarks on William's behalf. Bill?

[Bill Pang, VP of Corporate Development at NetEase]

Thank you, Brandi, and welcome everyone to today's call. Before we begin, I would like to remind everyone that all percentages are based on RMB. In the first half of 2026, we delivered healthy growth across business segments. Total revenue reached RMB 30.1 billion in the second quarter, driven by the solid performance of our games business.

[Bill Pang, VP of Corporate Development at NetEase]

Our games and related value-add services generated net revenues of RMB 25 billion, reflecting the broader appeal of our portfolio in both domestic and overseas markets. The strength of our portfolio stems from our sustained focus on innovation across the full life cycle of our games, from original concept and development to long-term life operations. By combining our engineering capabilities, creative design expertise, and disciplined execution, we bring new ideas to life and deliver fresh experiences across genres, platforms, and markets. One recent example is Sea of Remnants.

[Bill Pang, VP of Corporate Development at NetEase]

Released in China in July, it showcases our ongoing emphasis on original IP and genre innovation. Built on our in-house game engine, Sea of Remnants combines a distinctive visual style with an open-world ocean fantasy setting. By combining naval combat, extraction gameplay, and roguelike progression, the game creates varied adventures that unfold differently each time.

[Bill Pang, VP of Corporate Development at NetEase]

Across themed islands, players encounter a wide cast of NPCs that bring each island to life through meaningful interactions and evolving storylines. A variety of brand and content collaborations have also expanded the game's reach, extending its content ecosystem beyond the core gameplay experience. We are also preparing for the game's global rollout and look forward to introducing Sea of Remnants to players worldwide. Our innovation efforts are not only limited to new launches.

[Bill Pang, VP of Corporate Development at NetEase]

They extend across our established titles, where we keep evolving gameplay systems, introducing new content, and strengthening live operations to sustain player enthusiasm over time. Sword of Justice launched its major anniversary update, New World, in June. The comprehensive upgrade to the open-world experience improved visual quality, streamlined cultivation systems, and refined the in-game economy, creating a more enjoyable experience for both returning and new players.

[Bill Pang, VP of Corporate Development at NetEase]

It also introduced the Dali, a highly immersive new region to expand exploration and add greater storytelling depth. The community response was strong, with active players exceeding 10 million on launch day and concurrent users reaching a two-year high, demonstrating the title's ongoing appeal. Players continue to gravitate to Identity V with its steady cadence of live service updates, including anniversary content, crossover events, and new gameplay experiences.

[Bill Pang, VP of Corporate Development at NetEase]

In June, the game introduced Cryptic Notes, a new PVE mode that offers a lighter experience beyond its core PVP gameplay, opening up new ways for the community to play. This excitement carried into July with the launch of Season 44, introducing new themed costumes and events alongside the latest Paper Bride crossover. This update sparked active discussions across live streaming and social media platforms, helping keep the community engaged and reinforcing the game's long-term appeal.

[Bill Pang, VP of Corporate Development at NetEase]

During the second quarter, the Naraka: Bladepoint franchise unified its PC and mobile ecosystems. Players can now enjoy the game's signature melee combat seamlessly across devices, while strengthening connections across its broader player community. Building on the increased connectivity, Naraka: Bladepoint kicked off its fifth anniversary celebration in July with a major content update that introduced all-new land and underwater battlefields, as well as a new underwater combat system.

[Bill Pang, VP of Corporate Development at NetEase]

These additions refreshed the game's core experience and drove strong player engagement across platforms. Eggy Party further solidified its position as China's leading party game destination. It reached a new milestone, 700 million registered users, and monthly active users remained steadily above 100 million.

[Bill Pang, VP of Corporate Development at NetEase]

In June, the game celebrated its fourth anniversary, bringing another wave of player activity supported by diverse gameplay, a vibrant UGC ecosystem, and a rich slate of live operations. This strong momentum continued into the summer, with Eggy Party remaining among the top-ranked titles on both China's iOS top download and grossing chart, and peaking at number three on the top grossing chart. Peak daily active users also reached a multi-year high for the summer period. UGC remains one of Eggy Party's defining strengths.

[Bill Pang, VP of Corporate Development at NetEase]

Over the past year, the ecosystem has continued to thrive, supported by more powerful creation tools and a growing base of engaged creators. Total creator rewards reached a new milestone of over RMB 200 million to date, reflecting both the vitality of this creator community and strong player demands for diverse user-generated content.

[Bill Pang, VP of Corporate Development at NetEase]

Recent upgrades to the editor, including integration with multiple AI models, have also made it easier for creators to learn, create, and program. Together, these efforts expand what players can create and support Eggy Party's evolution from a standalone party game into a broader content platform. Our flagship MMORPG, Fantasy Westward Journey Online, continued to evolve across both its classic and unlimited servers. During the summer, its new expansion pack and Dunhuang-themed content further engaged players, underscoring its timeless popularity and its healthy community.

[Bill Pang, VP of Corporate Development at NetEase]

Meanwhile, Fantasy Westward Journey Mobile carried its record-setting momentum into the second quarter, supported by refinements to the in-game economy and ongoing gameplay iterations. Through the quarter, the game introduced a new equipment progression system and an extraction gameplay mode. These additions created a fresh progression path and greater strategic depth, gaining real traction with players.

[Bill Pang, VP of Corporate Development at NetEase]

In July, the Summer Treasure Pavilion offered a wider selection of costumes and items tailored to players' preferences, driving robust commercial performance. The launch of the Origin server helped the Westward Journey Returns build strong momentum in the second quarter. By preserving the iconic appeal of the Westward Journey franchise, while introducing a portrait mode interface and more relaxed gameplay, the Origin server delivers a more accessible experience that players can enjoy anytime and anywhere, contributing to the title's strong performance in Q2.

[Bill Pang, VP of Corporate Development at NetEase]

Ethereal Borders further reinforced its leading position in the SLG genre through new innovative gameplay and initiatives designed to address community needs. New features such as Ethereal Border Kill, a social deduction game mode, were well-received by players, while its collaboration with Minecraft China helped the game reach a broader and younger audience.

[Bill Pang, VP of Corporate Development at NetEase]

The launch of the highly anticipated special servers, together with a series of pre-anniversary events ahead of its 11th anniversary, generated renewed excitement across the community, demonstrating the title's enduring appeal and continued relevance in the strategy game market. Alongside our success in the domestic market, we made additional steady progress in broadening our global reach. Where Winds Meet has demonstrated a healthy growth trajectory since its successful global launch last year. Its player base continued to grow in the second quarter, with positive reviews on Steam staying above 87%.

[Bill Pang, VP of Corporate Development at NetEase]

In June, we brought this immersive open-world action RPG to even more players worldwide with the successful launch on Xbox. The game also repeatedly ranked among the top three titles on Steam's global top seller chart following major content updates. This underscores the long-term potential of content-driven games and highlights our proven capabilities in delivering high-quality content and live operations.

[Bill Pang, VP of Corporate Development at NetEase]

In the domestic market, Where Winds Meet also expanded its player community during the quarter with major new region additions, including Qingzhou and Dali. The Dali expansion proved particularly popular and pushed the game to the number three spot on China's iOS top grossing chart. This update brought distinctive local culture, fresh narrative, and immersive exploration, driving year-over-year growth in quarterly revenue and achieving record-high monthly active users. Marvel Rivals continued to build on its global success through a steady stream of seasonal content, live service updates, and community initiatives.

[Bill Pang, VP of Corporate Development at NetEase]

In June, the game introduced a refreshed 18 versus 18 mode set in Kunlun Shenlong Arena, alongside new heroes, maps, and events that broadened gameplay variety. The Marvel Rivals Summer Festival added further momentum with a wide selection of themed costumes for fan-favorite characters, helping push the game to number two on Steam's global top seller chart and number one in multiple regions, including the United States.

[Bill Pang, VP of Corporate Development at NetEase]

Most recently, the franchise extended its reach beyond the screen through real-world touch points across major fan events. At San Diego Comic-Con in late July, Marvel Rivals generated even more excitement among players with new announcements and interactive fun activities. The Mid-Season Finals was later held in Los Angeles, attracting top players and fans while reinforcing the title's competitive ecosystem and long-term live service foundation.

[Bill Pang, VP of Corporate Development at NetEase]

As we continue to grow our existing portfolio, we're also advancing the development of new titles and exploring fresh ideas across diverse genres, gameplay experiences, and markets. Ananta is progressing steadily towards launch. As a free-spirited urban open-world RPG, the game invites players to experience a vibrant modern city through a variety of characters, lifestyles, and activities, providing a high degree of freedom in exploration and interaction.

[Bill Pang, VP of Corporate Development at NetEase]

With strong anticipation from player community, we will continue to share more updates as development progresses. Blood Message made a strong impression at the Summer Game Fest, where overseas audience responded positively to the latest gameplay footage. The trailer has since generated around 40 million views globally, with players praising its visual fidelity, distinctive storytelling, and cinematic combat. Our commitment to innovation and long-term operating capabilities also created value for our partner titles.

[Bill Pang, VP of Corporate Development at NetEase]

Blizzard titles performed well in China during the quarter, supported by localized operations and a steady stream of updates. World of Warcraft and Hearthstone continue to engage their longstanding communities in China, backed by consistent updates and initiatives tailored to the local market. Overwatch celebrated its 10th anniversary during the quarter with special content, rewards, and activities that revitalized players and drove a significant increase in active users.

[Bill Pang, VP of Corporate Development at NetEase]

Diablo 4 further expanded its presence in China through exclusive localized content, localized events, and newly introduced Chinese mythology-themed skins, driving solid growth in both active users and player retention during the second quarter. Together, these achievements reflect the breadth and strength of our portfolio, from new releases to established titles across China and global markets through both our own IP and partner collaborations.

[Bill Pang, VP of Corporate Development at NetEase]

We aim to keep our games relevant and engaging through new ideas, ongoing content updates, and disciplined live operations while responding to evolving player expectations. This innovative mindset will continue to guide us as we build stronger communities and create even more compelling experiences for players worldwide. Turning to our other businesses, Youdao further advanced its AI-native strategy and deepened AI-driven innovation across its ecosystem.

[Bill Pang, VP of Corporate Development at NetEase]

In the second quarter, Youdao launched its latest large language model, Confucius 4, with substantially enhanced capabilities. The new model delivers stronger performance in visual math and physics reasoning, particularly on complex diagrams at lower inference cost. Youdao also upgraded its translation model with an efficient acceleration mechanism, increasing inference speed by approximately 80%. Beyond large language models, it further advanced its AI agent capabilities towards autonomous execution of complex real-world tasks, demonstrating stronger capabilities beyond simple Q&A interactions.

[Bill Pang, VP of Corporate Development at NetEase]

The learning services segment continued its healthy development, driven by the strong performance of Youdao Xue. Popular features, including AI-powered English essay grading, AI quiz recommendations, and AI-based college admission advisors continue to enhance user satisfaction and drive higher user retention. Within the segment, AI-driven subscriptions also maintained strong momentum.

[Bill Pang, VP of Corporate Development at NetEase]

The advertising efficiency in Youdao's online marketing services also continued to improve. We recently launched the second-generation AI ad placement optimizer, further enhancing the user experience and advertising efficiency with more streamlined and automated features. While capturing emerging opportunities in areas such as AI application and short-form dramas, Youdao also made steady progress in client acquisition and retention. The smart devices segment sustained its focus on product innovation, with the Youdao Dictionary Pen maintaining a strong market position.

[Bill Pang, VP of Corporate Development at NetEase]

In June, we launched the Youdao Dictionary Pen X8, featuring an expanded library of 80 million words and photo-based tutoring across a broad range of subjects. During the 618 shopping festival, Youdao Dictionary Pen ranked number one in sales on JD.com and Tmall within this category for the seventh consecutive year.

[Bill Pang, VP of Corporate Development at NetEase]

Looking ahead, Youdao will continue to execute its AI-native strategy across learning and advertising scenarios. For NetEase Cloud Music, we further developed its music-centric ecosystem in the first half of 2026, prioritizing exceptional user experiences, distinctive content, and a vibrant music community to support healthy and steady growth. Enhancement to user experience and strong brand perception continue to drive higher user engagement at expanding the daily active user base. Our DAU versus MAU ratio remained above 30% in the first half of 2026, increasing both year-over-year and sequentially.

[Bill Pang, VP of Corporate Development at NetEase]

The average daily mobile music listening time also rose steadily, with penetration rates of community content consumption and interactions improving notably. In particular, retention and renewal rates across our expanded membership base increased both year-over-year and sequentially, reflecting stronger user loyalty and deeper connection to the platform.

[Bill Pang, VP of Corporate Development at NetEase]

We also enriched our comprehensive and distinctive content library by expanding copyrighted music and promoting original music. Earlier this year, we renewed partnerships with major labels such as Universal Music Group, as well as adding new Korean and Chinese labels, OSTs, and variety show music while enhancing our signature genres. At the same time, we continue to promote original Chinese music with our recent in-house releases, such as December 31st, gaining widespread acclaim.

[Bill Pang, VP of Corporate Development at NetEase]

From the product perspective, we remain focused on user needs and advancing innovation across music discovery and consumption experiences while economizing our community by making music exploration more intuitive and engaging on the platform. We also launched innovative functions such as AI-inspired playlists to address users' diverse music discovery preferences. Subscription-based membership grew as well, improving our music-oriented monetization.

[Bill Pang, VP of Corporate Development at NetEase]

We further refined membership benefits built around content, features, personalization privileges, and artist-related offerings, all of which enhance the performance overall value proposition and support ongoing membership growth. Turning to Yanxuan. Yanxuan once again secured leading positions on e-commerce platforms across its key categories in the second quarter. New products in pet food, home scents, and home good categories performed well, generating healthy growth.

[Bill Pang, VP of Corporate Development at NetEase]

Notably, the freshly steamed pet food series, which we launched last year with our differentiated steaming technology and fresh meat recipes, continue to deliver solid sales while earning recognition from leading industry organizations. In closing, across NetEase's family of businesses, we remain committed to innovation and staying at the forefront of technology.

[Bill Pang, VP of Corporate Development at NetEase]

By integrating leading technologies into every stage of product development and operation, we create compelling user experiences that help shape industry trends. This approach continues to support sustainable growth across our business. In our games portfolio, in particular, it enhances the appeal of both established titles and new releases, extending our success in China to broader global. Throughout the year, we will continue to foster an environment that empowers our developers to push creative boundaries.

[Bill Pang, VP of Corporate Development at NetEase]

As we advance our products with cutting-edge technology, we believe we are well-positioned to create even more engaging experiences and enduring value for players, communities, and shareholders alike. That concludes William's comments, and I will turn the call over to Aileen for more detailed discussion of our financial results. Thank you.

[Aileen Mo, VP of Finance at NetEase]

Thank you, Bill. I will now provide a brief review of our 2026 interim financial results, with a focus on the second quarter. Given the limited time on today's call, I will present some abbreviated financial highlights. We encourage you to read through our press release issued earlier today for further details. As a reminder, all amounts are in RMB unless otherwise stated.

[Aileen Mo, VP of Finance at NetEase]

Our total net revenue for the first half of 2026 was RMB 60.7 billion, or $8.9 billion, representing a 7% increase year-over-year. For the second quarter, total revenue was RMB 30.1 billion, or $4.4 billion. During the first half, total net revenue from our games and the related VAS were RMB 15.7 billion, up 8% year-over-year. In the second quarter, net revenue grew 10% to reach RMB 25 billion.

[Aileen Mo, VP of Finance at NetEase]

Specifically, net revenue from our online games was RMB 49.5 billion for the first half, up 9% year-over-year. In the second quarter, online games net revenue was RMB 24.5 billion, decreasing 2% quarter-over-quarter and increasing 10% year-over-year. The quarter-over-quarter decrease was mainly due to a slight decline in net revenue from certain self-developed games and licensed games.

[Aileen Mo, VP of Finance at NetEase]

The year-over-year increase was attributable to higher net revenue from self-developed games, such as [Inaudible] and There Be Smiths. Youdao's net revenue increased 4% to RMB 2.8 billion for the first half of 2026. In the second quarter, net revenue was RMB 1.5 billion, up 9% quarter-over-quarter and 3% year-over-year. The quarter-over-quarter and the year-over-year increases were mainly attributable to higher net revenue from its learning services segment.

[Aileen Mo, VP of Finance at NetEase]

NetEase Cloud Music's net revenue increased 3% year-over-year to RMB 4.0 billion for the first half of 2026. In the second quarter, net revenues were RMB 2 billion, remaining broadly stable quarter-over-quarter and year-over-year. Net revenues from the innovative business and others totaled RMB 3.2 billion for the first half of 2026.

[Aileen Mo, VP of Finance at NetEase]

In the second quarter, net revenue was RMB 1.6 billion, up 6% quarter-over-quarter and down 4% year-over-year. The quarter-over-quarter increase was mainly attributable to higher net revenue from the e-commerce business and several other businesses within this segment. The year-over-year decrease was mainly due to a modest decline in net revenue from the e-commerce business. For the first half, our gross profit margin was 69.9%.

[Aileen Mo, VP of Finance at NetEase]

In the second quarter, our gross profit margin increased year-over-year to 70.5%, from 64.7% in the prior year period. Looking at our second quarter margins in more detail. Gross profit margin was 76.1% from our games and related VAS, compared with 70.2% in the same period of last year. The improvement was primarily driven by lower revenue sharing costs related to platforms.

[Aileen Mo, VP of Finance at NetEase]

Our gross profit margin for Youdao was 48.9%, compared with 43.0% in the same period of last year. The increase was mainly driven by improved gross profit margin from its lending services segment. Gross profit margin for NetEase Cloud Music was 37.4%, compared with the 36.1% in the same period last year. The increase was primarily driven by lower channel fee rates, along with the continued cost structure optimization.

[Aileen Mo, VP of Finance at NetEase]

For our innovative business and others, gross profit margin was 43.4%, compared with 42.3% in the second quarter of 2025. The improvement was primarily driven by the higher contribution from higher margin business within this segment. Total operating expenses for the second quarter were RMB 9.1 billion, representing 30% of our total net revenue.

[Aileen Mo, VP of Finance at NetEase]

Taking a closer look at our expense composition. Our selling and marketing expenses accounted for 12.2% of total net revenue in the second quarter, compared with 12.8% in the same period of last year, remaining generally stable year-over-year. For the first half, the ratio was 11.7%, remaining broadly in line with the same period last year. Our G&A expenses accounted for 2.7% of total net revenues in the second quarter, compared with the 3.8% in the same period of last year.

[Aileen Mo, VP of Finance at NetEase]

For the first half, the ratio was 2.4%, compared with 3.5% in the same period of last year. Our R&D expenses remained stable at 15.4% of total net revenues in the second quarter, compared with 15.6% in the same period of last year, reflecting our consistent investment in innovation and content development.

[Aileen Mo, VP of Finance at NetEase]

For the first half, the ratio was 15.0%, remaining broadly in line with the same period of last year. The effective tax rate was 21.7% for the first half and 25.5% for the second quarter. As a reminder, the effective tax rate is presented on an accrual basis, and the tax credit vary across each of our entities at different time periods, depending on applicable policies and our operations.

[Aileen Mo, VP of Finance at NetEase]

Our non-GAAP net income attributable to shareholders for the second quarter totaled RMB 7.7 billion or $1.1 billion, with the year-over-year decline primarily attributable to investment losses. Non-GAAP basic earnings per ADS for the quarter was $1.78 or $0.36 per share. For the first half, non-GAAP net income attributable to shareholders were down 8% year-over-year to RMB 19 billion or $2.8 billion, which is $4.38 per ADS or $0.88 per share.

[Aileen Mo, VP of Finance at NetEase]

Additionally, our cash position remains strong. As of June 30, 2026, our total net cash position was RMB 157.5 billion, compared with RMB 163.5 billion at the end of 2025. In accordance with our dividend policy, we are pleased to report that our board of director has approved a dividend of $0.096 per share, or $0.48 per ADS for the second quarter.

[Aileen Mo, VP of Finance at NetEase]

Lastly, under our current $5 billion share repurchase program, we have repurchased approximately 24.8 million ADS as of June 30, 2026, for a total cost of approximately $2.3 billion. Thank you for your attention. We would now like to open the call to your questions.

[Operator]

Thank you. If you wish to ask a question, please press star, then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star, then two. If you are on a speakerphone, please pick up the handset to ask your question. The first question comes from Alicia Yap with Citigroup. Please go ahead. Ms. Yap, please go ahead with your question. Your line is open. Is your phone muted accidentally?

[Alicia Yap, Analyst at Citigroup]

[Non-English content]

[Operator]

Okay.

[Alicia Yap, Analyst at Citigroup]

Yeah.

[Operator]

Thank you.

[Alicia Yap, Analyst at Citigroup]

[Non-English content] Yeah, hello, can you hear me now?

[Alicia Yap, Analyst at Citigroup]

[Non-English content]

[Alicia Yap, Analyst at Citigroup]

So can management share the latest performance of Sea of Remnants and also the expected closing for the next quarter? What aspects are currently doing well? What adjustments are planned in the future to further improve the game's performance? Thank you.

[Hu Zhipeng, EVP at NetEase]

[Non-English content]

[Bill Pang, VP of Corporate Development at NetEase]

Okay. I will do the translation. When Sea of Remnants first came into China market, we did receive a lot of user feedback and among which a certain amount are critics. Review all the feedback we received, we realized that while we are trying to explore a very bold video style and the roguelike gameplay which is the kind of novel open world experience, we did not sufficiently lower the learning curve for players in the early stages which to some extent affected the initial play experience.

[Bill Pang, VP of Corporate Development at NetEase]

That's feedback we have heard and being taken. In the meantime, our team has prepared a substantial amount of large, high quality amount of content, which provide the foundation of the long-term operation and sustainable player community operation.

[Bill Pang, VP of Corporate Development at NetEase]

After this initial feedback round, along with the high cadence of content update and experience optimization, we believe we have seen growing recognition from the players group of the core gameplay and content quality, which with discussions shift back to the game's content and ongoing operations, the overall sentiment and satisfaction has continued to improve.

[Bill Pang, VP of Corporate Development at NetEase]

Looking ahead, we will continue to serve our core players of this game well and keep optimizing the experience problems we heard from players. In the meantime, we will streamline the early stage game content, make sure the innovative gameplay could be better and wider accepted and experienced by the players. We are confident in the long-term potential of this game. Thank you for your question.

[Operator]

Thank you. The next question comes from Xueqing Zhang with CICC. Please go ahead.

[Xueqing Zhang, Analyst at CICC]

[Non-English content]

[Xueqing Zhang, Analyst at CICC]

Thanks, management, for taking my question. Could management update us on the development progress of Ananta? With several competing titles targeting the urban open world genre, how does the company plan to differentiate the game and stand out from the competition? Thank you.

[Hu Zhipeng, EVP at NetEase]

[Non-English content]

[Bill Pang, VP of Corporate Development at NetEase]

Okay. I will help do the translation. Ananta is well on track with its development as the team now keeps polishing the game experience. We will unveil the game's latest progress at the Gamescom next week, so please stay tuned. In terms of competition, we believe Ananta has its own distinctive strengths as an urban open world experience.

[Bill Pang, VP of Corporate Development at NetEase]

The strengths come from the product's unique identity, its theme, and its gameplay design as well, which can offer players a fresh experience that stands apart from other open-world urban games in the market. Ultimately, we believe that the high-quality content, the distinctive narrative identity, the innovative gameplay, and the thoughtful monetization design will be the key part behind the successful product. Thank you for your question. Operator, next question please.

[Operator]

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

[Lincoln Kong, Analyst at Goldman Sachs]

[Non-English content]

[Lincoln Kong, Analyst at Goldman Sachs]

Thank you, management, for taking my question. Congrats on the very solid second quarter. Over the past one or two years, actually, the company proactively reduced the number of new launches to focus the resources on the key titles. Meanwhile, a new release like Marvel Rivals delivered very strong performance. Looking ahead with a relatively lean pipeline of new games and the higher baseline for our existing portfolio, how does company plan to drive further business growth? What will be the primary growth driver and operating strategy moving forward? Thank you.

[Hu Zhipeng, EVP at NetEase]

[Non-English content]

[Bill Pang, VP of Corporate Development at NetEase]

Okay, I will help do the translation. Well, first of all, regarding the really high quality products, we're not hesitated to keep investment in and we're actually going to keep investing to keep building really high quality level of premium products, premium quality of products. Of course, when doing new product, we need to make sure that we have a clear vision as well as making sure the quality is definitely top-notch.

[Bill Pang, VP of Corporate Development at NetEase]

Secondly, as of today, with the help of AI capabilities, which we believe is an amplifier, we believe we can accelerate the development speed, as well as leveraging AI capabilities to improve the user experience when user playing our game. We have confidence that with the help of AI tools, we can build more high quality products than most of our peers in the industry, providing high quality experience to our players. That's something we have confidence in, and that's our view. Thank you for your question. Operator, next question, please.

[Operator]

Yes, your next question comes from Ritchie Sun with HSBC. Please go ahead.

[Ritchie Sun, Analyst at HSBC]

[Non-English content]

[Ritchie Sun, Analyst at HSBC]

Thank you management for taking my questions. Recently two games undergoing testings, Beneath the Mist and also Tarisal's Shadow. How does management view the monetization potential of these two games? When can these games be launched? Thank you.

[Hu Zhipeng, EVP at NetEase]

[Non-English content]

[Bill Pang, VP of Corporate Development at NetEase]

Okay, I will do the translation. Thank you for your question. Both of the product you mentioned are still ongoing intensive refinements. One refinement approach a stage that we believe will satisfy the user's demand and we will release them. As the game developer, we believe player experience is a key of everything. We believe delivering an excellent experience is a foundation of achieving commercial success. Thank you for your question.

[Operator]

That concludes the question and answer session. I would like to turn the conference back over to Brandi Piacente for any additional or closing comments. Brandi, please go ahead with your closing comments.

[Brandi Piacente, Founder and CEO at The Piacente Group]

Thank you. Sorry for that. Thank you once again for joining us today. If you have any further questions, please feel free to contact us. Thank you again.

[Operator]

This concludes the conference. You may disconnect your line. Thank you.

Participants

Executives

• Bill Pang, VP of Corporate Development
• Aileen Mo, VP of Finance
• Hu Zhipeng, EVP

Analysts

• Brandi Piacente, Founder and CEO at The Piacente Group
• Alicia Yap, Analyst at Citigroup
• Xueqing Zhang, Analyst at CICC
• Lincoln Kong, Analyst at Goldman Sachs
• Ritchie Sun, Analyst at HSBC