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NetEase's Quarterly Profit Slumps as Investment Hit Mars Gaming Gains

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NetEase's Quarterly Profit Slumps as Investment Hit Mars Gaming Gains

NetEase (HKG:9999) reported a double-digit drop in second-quarter attributable net income, as investment losses offset games-driven revenue growth.

Attributable net income fell 18.8% to 6.98 billion yuan, or 12.02 yuan per share, from 8.6 billion yuan, or 14.81 yuan per share, a year earlier, the company said in a Hong Kong bourse filing on Thursday.

The decline was largely due to a 2.95 billion yuan investment loss incurred during the quarter, compared with investment income of 328.4 million yuan a year earlier. The Chinese internet and video game company attributed this to a drop in the fair value of equity investments and impairment charges.

Revenue, however, was up 7.9% to 30.1 billion yuan from 27.9 billion yuan, driven by a 9.7% increase in revenue from games and related value-added services. NetEase said its "Fantasy Westward Journey" franchise and other games sustained "solid momentum" through content updates and community activities.

During the earnings call, executives addressed the mixed reception to NetEase's new title, "Sea of Remnants," released in July. Executive Vice President Hu Zhipeng said the company failed to adequately reduce the initial learning curve for players.

When asked about the lean pipeline of new games in the near term, Hu said the company will use artificial intelligence to accelerate product development and user experience.

Elsewhere, revenue from search engine Youdao inched up 3.5% to 1.5 billion yuan. The quarter saw the unit launch its large language model, Confucius 4.

Revenue at NetEase Cloud Music (HKG:9899) inched up to 1.98 billion yuan from 1.97 billion yuan. The unit further developed its "music-centric ecosystem" in the first half, the parent company said.

The board approved a first-quarter dividend of $0.144 per share and a second-quarter dividend of $0.096 per share, both up from year-ago dividends.

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