NetEase Profit Falls on Heavy Investment Loss; Revenue Beats — Update

By Sherry Qin

NetEase's revenue topped market expectations as the Chinese game maker's self-developed games continued to attract gamers, but its net profit fell on a heavy investment loss.

The company behind popular games such as "Fantasy Westward Journey" and "Eggy Party" said Thursday that second-quarter revenue rose 8% to 30.11 billion yuan, equivalent to $4.47 billion. That exceeded the 29.10 billion yuan estimate of analysts polled by FactSet.

Revenue from games and related value-added services increased 9.7%, picking up from the previous quarter's 6.9% growth, supported by popular self-developed titles such as "Where Winds Meet."

However, China's second-largest game company recorded a 19% drop in net profit to 6.98 billion yuan. Analysts were looking for a 13% increase.

Adjusted net profit, a closely watched metric that excludes share-based compensation expenses, fell 19% to 7.7 billion yuan, also lower than the consensus.

Ahead of the results, Nomura analysts said the game maker's bottom line could come up short, weighed by bigger investment losses stemming from its holdings of Alibaba and PDD shares.

With the advent of AI, the company has been incorporating the technology into game production to speed up content creation. But as AI models become more powerful and can now create simple games, this poses another threat to creative fields such as the game industry.

NetEase launched its highly anticipated role-playing game "Sea of Remnants" last month, but the title has experienced moderate demand so far. Still, analysts reckon NetEase has strong operational capability to gather game feedback and further refine the game.

Amid doubts about its new game performance, shares of the company have shed about 4% this quarter, bringing its year-to-date decline to nearly 10%.

Still, a handful of games in the pipeline could gain mass appeal and give investor sentiment a much-needed boost. Citi estimates that NetEase has a pipeline of 57 games, 23 of which have been approved for domestic launch. Among the most sought-after games are "Ananta" and "Blood Message," it said.

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

(END) Dow Jones Newswires

August 20, 2026 06:34 ET (10:34 GMT)