NetEase's first-quarter revenue increased by 7.2% year-on-year, with a 13% year-on-year increase in net profit｜Financial Report Insights

Benefiting from the steady growth of its gaming business, NetEase achieved year-on-year growth in both revenue and net profit in the first quarter.

On Thursday afternoon, NetEase released its financial report, showing that in the first quarter of 2024, NetEase achieved a net revenue of RMB 26.9 billion (approximately USD 3.7 billion), a 7.2% increase year-on-year; gross profit was RMB 17 billion, a 14.2% increase year-on-year; net profit attributable to the company's shareholders was RMB 7.6 billion, a 13% increase year-on-year; basic earnings per share were RMB 2.38, a 13.3% increase year-on-year; total operating expenses were RMB 9.4 billion, a 22.4% increase year-on-year.

In addition, the net profit attributable to the company's shareholders under non-GAAP was RMB 8.5 billion in the first quarter; basic earnings per share under non-GAAP were USD 0.37 (basic earnings per American depositary share were USD 1.84).

After the data was released, NetEase's pre-market drop in U.S. stocks narrowed to 5.6%, after falling nearly 8% earlier.

In terms of business segments, gaming remains NetEase's core business:

• Net revenue from games and related value-added services was RMB 21.5 billion, a 7.0% increase year-on-year; the increase in net profit was mainly due to the increase in revenue from mobile games such as "Egg Party" and several newly launched games.

• NetEase stated that it has updated its distribution agreement with Blizzard Entertainment to bring back beloved games to the Chinese market and will also expand cooperation with Microsoft Games.

• Net revenue from Youdao was RMB 1.4 billion, a 19.7% increase year-on-year; gross profit decreased quarter-on-quarter mainly due to a decrease in revenue from its learning services and smart hardware; gross profit increased year-on-year mainly due to an increase in revenue from its online marketing services.

• Net revenue from Cloud Music was RMB 2 billion, a 3.6% increase year-on-year; both quarter-on-quarter and year-on-year gross profit increased, mainly due to a one-time adjustment of certain copyright fees, an increase in subscription revenue, and continuous improvement in cost control.

• Net revenue from innovation and other businesses was RMB 2 billion, a 6.1% increase year-on-year; gross profit decreased quarter-on-quarter mainly due to seasonal factors, with a decline in net revenue from selected e-commerce and advertising businesses.

Regarding the gaming business, NetEase's CEO and Director Ding Lei stated:

"While witnessing the enduring success of flagship games, we are also continuously exploring diversification in categories, constantly achieving new milestones in game operations, user communities, and external collaborations. A high-quality and diversified product matrix has laid a solid foundation for us to bring premium gaming experiences to players worldwide. With the support of strong R&D capabilities, we are committed to innovation and category expansion, working with global talents and partners to explore more opportunities and achieve win-win outcomes." Looking towards the future and the overall product architecture, William Ding summarized:

"In NetEase's vast family, Cloud Music and Youdao businesses have performed well, continuously delivering innovative content in their respective fields. In 2024, we will continue to pour our passion into focusing on refining products and content, expanding the market, providing excellent experiences, and ultimately creating value for our users and the company."