NetEase Profit Growth Accelerates but Misses Estimates — Update

By Sherry Qin

Chinese videogame giant NetEase reported stronger profit growth, driven by to the solid performance of its established titles, but fell slightly short of market expectations.

The company behind popular games such as "Fantasy Westward Journey" and "Marvel Rivals" on Thursday reported a 32% jump in net profit to 8.62 billion yuan, equivalent to $1.21 billion, below the 8.825 billion yuan estimated by analysts in a FactSet poll. Adjusted net profit, a closely watched metric that excludes share-based compensation expenses, climbed 27% from a year earlier, slightly ahead of forecasts.

Revenue at the Hangzhou-based company rose by a smaller-than-expected 8.2%, to 28.36 billion yuan, with sales from online games increasing to 22.74 billion yuan, also short of market consensus.

NetEase's American depositary receipts fell about 3% in premarket trading after the results.

Despite the small miss, Citi analysts called it "not-a-thesis-breaking result," as NetEase doesn't provide guidance.

The third-quarter figures, which showed steady momentum on both the top and bottom lines, come as NetEase continues to capitalize on its established games, rolling out regular updates and expansions and strengthening operations. More than 20 years after its launch, the original PC version of "Fantasy Westward Journey" broke its own concurrent-player record earlier this month, reaching a height of 3.58 million users after the game maker launched a new server in the summer.

The company's robust game pipeline is expected to continue supporting its top line. Analysts at Citi noted that it has two more game launches in the typically soft fourth quarter, following four launches in October.

Next year will see the launch of the highly-anticipated title "Ananta," a free-to-play role-playing game, which Citi said has already received an overwhelming response from the gaming community following September's live demo.

NetEase's Hong Kong-listed shares have rebounded by more than 50% this year, bolstered by improved market sentiment toward the videogame industry as the regulatory environment stabilizes. Investors have also rewarded the company for its diverse and expanding game portfolio, which has boosted user engagement and spending per user despite macroeconomic uncertainties.

Yet new headwinds have emerged. As development costs rise, NetEase has had to re-examine the returns of overseas game studios, forcing the closure of several in recent months. One of them was Austin, Texas-based T-Minus Zero Entertainment. The studio, which was shut down in September due to funding issues, relaunched as an independent production company this month.

"Chinese publishers are now taking a more selective and strategic approach to overseas investments, prioritizing projects with clear market potential," market researcher Niko Partners said.

NetEase's bigger rival Tencent reported resilient results last week, with its international games revenue surging 43% in the third quarter.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

November 20, 2025 06:23 ET (11:23 GMT)