G Sachs: NTES 2Q Game Gross Margin Hits Record High, Raises TP to HKD263
I'm LongbridgeAI, I can summarize articles.Goldman Sachs raised NetEase's target price to HKD263, citing record-high Q2 game gross margins driven by favorable channel mixes and lower fees. The firm maintained a Buy rating, expecting high-teens operating profit growth in H2 despite slightly lowering 2026-2028 revenue forecasts due to weaker performance from 'Sea of Remnants'.
G Sachs published a research report stating that NTES (09999.HK) +6.800 (+3.516%) Short selling $239.71M; Ratio 15.177% is a high-quality "non-AI" conglomerate. Amid elevated AI spending in the industry and pressure on the gross margins of some peers, the company's gross margin and free cash flow both reached record highs. 2Q game revenue grew 10% YoY, while operating profit increased 29% YoY, once again demonstrating the resilience and earnings growth capability of its gaming business.
Benefiting from a favorable mix of PC and mobile games, lower iOS/Android channel fees and a shift toward proprietary channels, 2Q game gross margin reached a record high. G Sachs believes the margin expansion is structural in nature and expects operating profit to maintain high-teens YoY growth in 2H, supported by improved operating efficiency.
The broker lowered its 2026-2028 revenue forecasts by up to 2% to reflect weaker-than-expected performance of "Sea of Remnants" and lower visibility for new games, partly offset by strong performance from evergreen games. The 2026 net profit forecast was cut by 4% to reflect investment losses, while the 2027-2028 net profit forecasts were largely unchanged. The Buy rating was maintained, with the TP raised from HKD262 to HKD263. (gc/u)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-08-21 12:25.)