NetEase Share Surge on Net Profit Beat

By Kimberley Kao

NetEase shares surged after the Chinese videogame maker reported higher-than-expected revenue and net profit for the first quarter.

The company's Hong Kong-listed shares rose 7.75% to 185.00 Hong Kong dollars, the equivalent to US$23.61, early Friday, keeping it on track for their biggest one-day gain in a year.

The company behind popular games like "Fantasy Westward Journey" said Thursday that net profit rose 3.6% from a year earlier to 10.67 billion yuan, equivalent to US$1.57 billion. Analysts polled by Visible Alpha had expected net profit to fall in the three months ended March.

Citi research analysts retained a buy rating on NetEase's ADRs and raised its target price to US$174 from US$165, citing the solid games performance which reflects the company's "portfolio resiliency and longevity".

ADRs of Netease closed at US$114.34.

Netease's AI adoption is at an early stage, which is a positive driver for game development, Jefferies equity analysts wrote in a note.

"AI is positioned as a productivity tool, not a cost saver," Daiwa Capital Markets analysts said in a note. While AI is widely used across coding, art and production, it hasn't shortened development cycles nor reduced efforts in research and development, making AI useful for increasing content output rather than as an immediate margin driver, they said.

Daiwa raised its earnings estimate for NetEase through 2028 due to the updated games pipeline as well as higher expectations for profit margins and the optimization of operating expenses.

"The anticipated launch of the upcoming title 'Sea of Remnants' could serve as a catalyst to re-accelerate gaming growth in the second half of the year," Nomura research analysts said in a note.

Write to Kimberley Kao at kimberley.kao@wsj.com

(END) Dow Jones Newswires

May 21, 2026 22:55 ET (02:55 GMT)