NetEase NASDAQ: NTES reported second-quarter revenue of RMB 30.1 billion ($4.4 billion), supported by continued growth in its games business, while management highlighted live-service updates, global expansion and artificial intelligence investments as key parts of its operating strategy.
Games and related value-added services generated RMB 25 billion in second-quarter revenue, up 10% from a year earlier. Online-game revenue totaled RMB 24.5 billion, rising 10% year over year but declining 2% sequentially, which Vice President of Finance Aileen Mo attributed mainly to a slight revenue decline from certain self-developed and licensed games.
Total revenue for the first half reached RMB 60.7 billion, up 7% from the prior-year period. Second-quarter non-GAAP net income attributable to shareholders was RMB 7.7 billion ($1.1 billion), with the year-over-year decline primarily reflecting investment losses, Mo said.
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.
The company reported RMB 9.1 billion in total operating expenses for the quarter, equal to 30% of revenue. Research and development spending represented 15.4% of revenue, broadly stable from 15.6% a year earlier, as the company continued investing in innovation and content development.
NetEase ended June with RMB 157.5 billion in net cash, down from RMB 163.5 billion at the end of 2025. Its board approved a second-quarter dividend of $0.096 per share, or $0.48 per American depositary share. Under its $5 billion repurchase program, the company had repurchased about 24.8 million ADSs for approximately $2.3 billion as of June 30.
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.
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