Gaming business under pressure! NetEase Q3 revenue and net profit both shrink, strong growth in PC games | Financial report insights

Due to the drag from the gaming business, NetEase's revenue and net profit both shrank in the third quarter, but the performance of PC games was impressive, achieving double-digit growth in both year-on-year and quarter-on-quarter revenue. On Thursday, November 14, NetEase released its third-quarter financial report: 1) Key Financial Data: Net revenue: RMB 26.2 billion (USD 3.7 billion), a year-on-year decrease of 3.9%, expected RMB 26.59 billion; Gross profit: RMB 16.5 billion (USD 2.3 billion), a year-on-year decrease of 2.9%, expected RMB 16.55 billion; Net profit: RMB 6.5 billion (USD 932 million), a year-on-year decrease of 16.67%, a quarter-on-quarter decrease of 4.41%; Earnings per share: USD 0.29; Operating expenses: RMB 9.3 billion (USD 1.3 billion), a quarter-on-quarter increase of 3.33%, mainly due to increased marketing expenses for games and related value-added services. 2) Main Business: Net revenue from games and related value-added services: RMB 20.9 billion (USD 3 billion), a year-on-year decrease of 4.2%, a quarter-on-quarter increase of 5%, of which net revenue from online games accounted for approximately 96.8%, and net revenue from mobile games accounted for approximately 70.8% of online game net revenue; PC game revenue increased by 29% year-on-year and 30% quarter-on-quarter. Net revenue from Youdao: RMB 1.6 billion (USD 224 million), a year-on-year increase of 2.2%; Net revenue from NetEase Cloud Music: RMB 2 billion (USD 285 million), a year-on-year increase of 1.3%; Net revenue from innovation and other businesses: RMB 1.8 billion (USD 253 million), a year-on-year decrease of 10.3%. Today, NetEase's U.S. stock surged 4.35% before the market opened, trading at USD 76.28 per share, with a market capitalization of USD 49.162 billion. NetEase's PC Game Performance Shines, Revenue Increases by 29% Year-on-Year In the third quarter, NetEase's gaming business performed mediocrely, with net revenue from games at RMB 20.9 billion, a quarter-on-quarter increase of 5%, and a year-on-year decrease of 4.2%. However, the performance of PC games was impressive, with revenue increasing by 29% year-on-year and 30% quarter-on-quarter. According to the report, the quarter-on-quarter increase in gross profit from games and related value-added services was mainly due to the increase in net revenue from PC games, while the year-on-year decline was mainly due to the decrease in net revenue from mobile games. NetEase's games "Identity V" and "Naraka: Bladepoint" have seen stable increases in popularity, with "Naraka: Bladepoint" launching a seasonal update in September and reaching fourth place on the iOS bestseller list. "Peak Speed" quickly topped the free charts on Apple and Google Play after its launch in Japan in August. NetEase's CEO and Director Lei Ding stated: "In the process of diversification and globalization, we continuously launch various new games to attract players from around the world, achieving milestone breakthroughs. We will continue to prioritize player needs, drive development through innovation, and bring excellent gaming experiences to more players both domestically and internationally."