NetEase, Inc. (NASDAQ:NTES) Q1 2026 Earnings Call Transcript

NetEase, Inc. (NASDAQ:NTES) Q1 2026 Earnings Call Transcript May 21, 2026

NetEase, Inc. beats earnings expectations. Reported EPS is $2.53, expectations were $2.19.

Operator: Good day, and welcome to the NetEase First Quarter 2026 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Brandi Piacente. Please go ahead.

Brandi Piacente: Thank you, operator. Please note that today’s discussion will contain forward-looking statements relating to the future performance of the company and are intended to qualify for the safe harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company’s control and could cause actual results to differ materially from those mentioned in today’s press release and this discussion. A general discussion of the risk factors that could affect NetEase business and financial results is included in certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20-F and in announcements and filings on the Hong Kong Stock Exchange’s website.

The company does not undertake any obligation to update this forward-looking information, except as required by law. During today’s call, management will also discuss certain non-GAAP financial measures, which should not be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the first quarter 2026 earnings news release issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com. Joining us today on the call from NetEase’s senior management are Mr. William Ding, Chief Executive Officer; Mr. Hu Zhipeng, Executive Vice President; Ms. Aileen Bin Mo, Vice President of Finance; and Mr. Bill Pang, Vice President of Corporate Development.

I will now turn the call over to Bill, who will read the prepared remarks on William’s behalf. Bill, please go ahead.

Bill Pang: Thank you, Brandy, and welcome, everyone, to today’s call. Before we begin, I would like to remind everyone that all percentages are based on RMB. 2026 is off to a solid start, with total revenue reaching RMB 30.6 billion in the first quarter, driven by continued momentum in our games business. Our games and related value-add services generated net revenues of RMB 25.7 billion, reflecting our strength in long-term game operations and growing global appeal. Our performance of this quarter was underpinned by continued strength of our game portfolio, both internationally and domestically. Overseas, our titles demonstrated growing cross-market fuel across genres and platforms. at home, our established franchises sustain strong player activity through consistent content delivery and live service innovation.

Together, these results reflect the breadth and revelance of what we have been built across genres, platforms and the player communities worldwide. Now let me walk through some of the highlights. Since its overseas launch in last November, Where Winds Meet has become a global phenomenon, resonating across cultures and maintaining momentum well beyond the initial launch window. In March, we launched its first major expansion, use, bringing players to a better environment with distinctive settings and uniquely designed in-game enemies. More recently, the game introduced a version 1.6, featuring a new region, intra alongside a novel wind-based exploration system that further enhance merchant and player freedom in the open world experience. The update was well received by players.

Preparing the game to #2 on STEAM’s global top seller chart. Strong momentum across both overseas and domestic market, backed by sustained player engagement translated into another record in quarterly revenue, a result that reflects the compounding value of high-quality content and reinforces our confidence in this type of long-term potential. Our rivals continue to expand its reach among global hero shooter audiences, supported by a steady cadence of seasonal updates and high-quality content. On April 10, the game introduced a new SIM cosmetic content, including made of fit for [ Deadpool ] and Jeff land chart, which generated strong community engagement driving it to #2 on team’s top center chart in the U.S. In addition to the content update, Marvel expanded its PV experience with a blood in Season 7.

featuring new hospitals and refresh mechanics as players engage in intensified against the lode umpires. It also introduced its past to doom say event. — year-long road map, featuring new molds and in-game events inspired by the Infinity [indiscernible]. This initiative is deepening player engagement while creating natural links to broader Marvel story talent, leading into the release of Marvel Studios Avenger do stay in December. Together, these efforts reinforce Marvel’s position as a dynamic evolving place with strong cross-media resonance. In March, Liat launched a crossover with the iconic Tokyo Go franchise, integrating its SIMs into the in-game world and allowing players to engage with its universe. The collaboration sparked strong responses on social media and generated high player engagement supported by the IT switch and well-designed event execution outreach #3 on Japan’s LS top crossing charge.

In the same genre, BlackStripe celebrated the second anniversary office global mobile launch in March, achieving a record high daily active users, demonstrating the enduring strength of its player community. Alongside international expansion, our domestic performance remains solid. We sustained strong engagement and revenue in the first quarter across estate titles supported by ongoing content updates and gameplay innovation. Multiple titles reached highs in player base and activity, demonstrating the enduring appeal of our extreme franchises. Chinese was majorly online, our flagship continues to evolve through new mechanics and content that keeps our players engaged. In the first quarter, the unlimited server rolled out a series of updates that enrich gameplay and PVP events, including the family system, which allows players to build in-game social balls, cultivate compact companions and experience a refreshed progression art.

The features were well received by the community and the unlimited server continues to serve as an effective entry point for both returning and new players. Brought in the active user base while retaining the loyalty of long-standing fans. [ Piccart ] users reached a new high of $3.9 million. and the Tipo recorded its highest ever quarterly revenue, underscoring its continued vitality. [ Sweden Mogo ] also maintained strong momentum, which is specialized server continuing to refine progression systems and steadily expanding active player base. The game’s 11th anniversary events in March was a particular highlight, driving daily active users to its highest level since 2017. In April, more updates to the in-game economic system continued to strengthen the long-term health and balance of the game’s overall ecosystem.

[indiscernible], a long-running MMO franchise with over 18 years of operations delivered a record commercial performance in the first quarter, supported by a small community and stable life operations cadence. The game continues to evolve through player cocreation with ongoing content updates, sustaining engagement, while more new features are being explored to enhance personalization and deepen player connections. GoldStar immobile, one of Mary’s most enduring MMORPG franchises, recently celebrated its test anniversary, a milestone reflecting the strength of our long-term life service capabilities. Since its 2016 launch, the title has attracted over 200 million registered users, which is longevity both on the consistent content update, evolving gameplay experiences and a deeply loyal community.

As a pioneer of film and television crossovers in gaming, Go Store immobile once again partnered with heat TV drama, Love O2O and and actors with test anniversary realizing players with beloved characters and classic experiences from the series, reaffirming the title’s momentum as it enters into a second decade. Take Parking continues to hold its position as China’s leading party game destination. Screen festival events have become a meaningful annual tradition. Bringing players together with friends and family through seem content on IP Island, reinforcing the game’s identity as a sheer social space. Building on the festive atmosphere, in February, the introduction of Serrablo IPs, including my Litecoin, drove strong community participation and push the game to the top of China’s LS closing charge.

Identity maintained steady engagement and momentum throughout the first quarter, with enriched gameplay systems that reinforced its unique position in the ACmetric-bet arena genre. During the spring festival event, it added more depth by introducing new characters and same content alongside limited time gameplay experiences within the caustic when we formate. In March is a anniversary for new variations to the classic will be for more with the sizes of survivors and hunters, shipped during matches based on player actions. It also added more dynamics to the fast-paced IBA mode with new car-based mechanics that influence real-time battle progression. As an integral part of its broader continent operation strategy e-sports remains a core pillar of the game’s long-term engagement.

Coop [indiscernible] begins premier global tournament reached its climax with global finals held in Shanghai earlier this month. It led teams from regions across the globe delivered highly competitive matches that ignited community excitement. It loaders, our fixture SLG title, continues to push the genres foundry with updates like the Pes addition that streamline time consumer actions and rebalance better pacing, enhancing the overall strategic experience. Beyond this addition, the game continued to enrich its seasonal update with fresh landscape designs, [indiscernible] smarter portraits and crossovers with popular IPs, all of which were well received by the players over the past months. These updates resonated strongly with the community, drove a meaningful improvement in daily active users and continue to strengthen the game’s foundation for long-term operations.

The NARAKA: BLADEPOINT franchise continued to refine its male-focused combat experience through new hero, new maps and updated better mechanics that keep the fast pace game play fresh. A tube crossover event with Overwatch in China helped expand the game switch, connecting to distinct clear communities. Sword of Justice maintained a vibrant player community to reach content and a likely open world that continues to evolve. The title continues to enrich player interaction and creative gameplay experiences introducing features such as tax item generation and in-game narrative creation. These innovations not only deepen the player engagement but also fostered a thriving ecosystem of user-generated content. — strengthening player connections.

Innovation is a driving force for the content creation in our existing portfolio as well as our games under development. new titles in our pipeline remain on track. We see our radome and Enanta making steady progress towards launch. Both titles are designed with a clear intent to deliver all new player experiences and explore gameplay directions that have the potential to shape future trends. Feedback from C of relevant latest round of testing was positive. And we’re in the final stages of preparation ahead of launch. As for Blizzard titles, their popularity was reinforced through diversified live service operations and localized content in the first quarter. World [indiscernible] Cup launched its midnight expansion in China on March 3 alongside the global release, bringing players back to the Albin Kingdom.

With the continued deepening of our localized operations in China, we have implemented extensive optimizations and a dedicated life of events tailored to the China market. This efforts have successfully sustained a high level of player retention and engagement, leading to a solid year-on-year commercial performance in the first quarter. In April, Diablo IV launched its lot of trade expansion, simultaneously across China and global markets. Meanwhile, Diablo II resected a title with a 20-year legacy reignite its player base with a new DRC. This update drove a strong increase in monthly active users in the first quarter, further reflecting its enduring appeal. In February, or watch and MarkerBot collaborated on 2 crossover events featuring character integration and CMskins.

Combined with the spring festival seemed content, the event generated strong cost community engagement and elevated player activity. With strong user engagement in Q1, the active users grew with key bids while showing improved stability. Through strong partnerships and sustained engagement across our growing portfolio, we are well positioned packing into the rest of the year, with continued investment in innovation an unwavering commitment to quality and deep rooted operational expertise. We aim to create unique and unforgettable gaming experiences for players in China and around the world. Turning to our other businesses. We would not further advance its AI native strategy in the first quarter by driving continued situation on its confuses large language model and more deeply embedded AI throughout its ecosystem.

The Learning Services segment made steady progress. supported by strong growth in yield outline and AI equivalent subscription offerings. UNO also enriched its AI agent metric, adding 2 new AI native applications lobster AI and open source personal AI desktop system and Dokanative knowledge base designed for complex information senses. Online marketing services benefited from increased demand for performance-based advertising as AI-driven tools enhance the targeting and streamlined cotton production. While the Smart Devices segment maintained its physical discipline, prioritizing execute profitability over volume. Yanxuan celebrated its tenth anniversary this year. marking a decade of dedication to high-quality products. As part of this effort, we continue to build out our pet category.

Strengthening capabilities across R&D, supply chain, quality control and membership operations. Yanxuan maintained consistent execution across key categories in the first quarter with path home sand and home goods continuing to introduce new products and securing leading positions in their segment across e-commerce platforms. Additionally, sustainable development remains a core focus for NetEase. We believe long-term success of a company is in line with the value increase for users, for communities and employees. Earlier today, we published our seventh annual ESG report, onlining our latest progress across sustainability, governance and social impact. As our business continues to grow and evolve, we stand steadfast along our employees who share our values and the dedication to continuous innovation and passion in service of our users.

We provide resources and opportunities for them to develop strive and keep innovating. By focusing on these kind of initiatives, we have once again been included in the World’s Best Employer list published by Forbes marking 9 consecutive years for our company. We’re also mindful of social impact of our technology and strive to integrate corporate social responsibilities into product innovation and business practices, expanding the accessibility and inclusiveness of technology. On the environmental side, while our online business by nature has relatively low carbon footprint, we nonetheless actively explore ways to make our operation even greener and cleaner. For example, we have improved energy efficiencies across our data centers and compasses, helping reduce greenhouse gas emission by 12% year-over-year.

On the governance side, we continue to improve our board and management oversight on material issues. External recognition continues to reflect this progress. MSCI upgraded us to a AAA ranking, positioning us as a leader among our 200 companies in the global media and entertainment industry. Whilst the analytic maintained our low risk rating with improved profile, placing us among the top companies in our industry. In closing, across our operations and our development pipeline, we are seeing results from our long-held commitment to creativity, innovation and the evolving technologies that PowerEdge. We see this momentum building as established titles continue to see record new titles advanced towards launch with clear ambition. And our international footprint continues to grow.

Working through all of it is our ongoing effort to build an environment where our developers are free to push creative boundaries and deliver experiences that are relevant with players, communities around the world. We believe we are still in the early stages of what this can deliver for our players, our communities and shareholders alike. That concludes William’s comments. And I will turn the call over to Aileen for more detailed discussion of our financial results. Thank you.

Aileen Bin Mo: [Interpreted] we encourage you to resume our press release issued earlier today for further details. As a reminder, all amounts are in RMB unless otherwise stated. Hello — thank you, Bill. I will now provide a brief review of our 2026 first quarter results. Given the limited time on today’s call, I will present some obliviate financial highlights. We encourage you to list to our press release issued earlier today for further details. As a reminder, all amounts are in RMB unless otherwise stated. Our total net revenue for the first quarter were RMB 3.6 billion or USD 4.4 billion, representing a 6% increase year-over-year. Total net revenue from our games and related viral acid services were RMB 25.7 billion. up 7% year-over-year.

Specifically, net revenues from online games were RMB 25.1 billion. up 18% quarter-over-quarter and 7% year-over-year. The quarter-over-quarter and year-over-year increase in online game net revenues were attributable to higher net revenue from sales developed games such as sentence virtual general franchise and wellness. Yordon’s net revenue increased 4% year-over-year to RMB 1.3 billion. primarily driven by increased net revenue from Jonas on marketing services. Its net revenue was down 14% quarter-over-quarter due to a decreased net revenue from Jonas learning services and the smart devices. NetEase cloud muted net revenue were RMB 2 billion, representing a 7% year-over-year decrease and remaining broadly stable quarter-over-quarter. Net revenue from innovated business and others were RMB 1.5 billion, decreasing 5% year-over-year and 24% quarter-over-quarter.

The quarter-over-quarter decrease was mainly driven by declines across e-commerce and the advertising services. Our gross profit margin increased year-over-year to 69.4% from 54.1% in the prior year period. Looking at our first quarter margin for before details. Gross profit margin was 74.8% for our game and related value-added services, compared with 68.8% in the same period of last year. The improvement was primarily driven by lower revenue sharing costs related to the platform. Our gross profit margin for Youdao was 44.7%, compared with 47.3% in the same period of last year. The decrease was mainly due to the decline in Smart Devices gross margin. Gross profit margin for NetEase cloud matics were 37.1% compared with 36.7% in the same period of last year, remaining generally stable year-over-year.

For our innovative business and others, gross profit margin was 42%, compared with 38.8% in the first quarter of 2025. The improvement was primarily driven by margin expansion in certain innovative business within the segment. Total operating expenses for the first quarter were RMB 8.6 billion, representing 28% of our net revenue. Taking a closer look at our cost composition. Our selling and marketing expenses accounted for 11.2% of total net revenues in the fourth quarter, compared with 9.4% in the same period last year, primarily due to the increased marketing expenses related to same and the related VAS. Our G&A expenses were accounted for 2.1% of the total net revenue in the first quarter compared with the 3.3% in the same period last year.

Our R&D expense remained stable at 14.7% of total net revenue in the first quarter compared with 15.2% in the same period last year, reflecting our consistent investment in innovation and content development. The effective tax rate was 18.9% for the first quarter. As a reminder, the effective tax rate is presented on an accrual basis and the tax credit vary across each of our entities at different time periods, depending on at policies and our operations. Our non-GAAP net income attributable to the shareholder third quarter totaled RMB 11.3 billion, or 1.6 billion, broadly stable year-over-year. Non-GAAP basic earnings per ADS for the quarter was U.S. or USD 0.51 per share. Additionally, our cash position remains strong as of March 31, 2026.

Our net cash position was RMB 167.2 billion compared with RMB 153.5 billion at the end of 2025. In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved a dividend of USD 0.44 per share or USD 720 per ADS for the first quarter. Lastly, under our current USD 5 billion share repurchase program, we had repurchased of [ USD 23.2 ] million as of March 31, 2026 for a total cost of opportunity USD 3.1 billion. Thank you for your attention. We would now like to open the call to your questions.

Q&A Session

Operator: [Operator Instructions]. Your first question comes from Lincoln Kong with Goldman Sachs.

Lincoln Kong: [Interpreted] Congrats on the very solid first quarter results. I have 2 questions related to the new games pipeline. First of all is on the Cement — could management share us a more detailed update in terms of the latest progress of the game, especially along with — how is the product — the monetization design, game plate and user feedback has been changed over the past few months. And what is the latest rollout schedule for global and across platforms. My second question is about Ananta. So I wonder what’s our competitive strategy in this sort of open world type of general. Specifically, we have seen a few of our peers has recently released some new titles, a bit similar to Ananta along with there going to be a potential heavyweight blockbuster like GTA before the year-end. — how this company will ensure Ananta game can successfully break through the competition and capture incremental user growth?

William Ding: [Foreign Language].

Bill Pang: [Interpreted]. Okay. I will translate the answer to the first question first. So thank you for your question regarding elements. Following the technical test in February in the past month is we received valuable feedback from players. And our team is now actively preparing for the upcoming down breaker test. — in this next round will showcase a bigger picture of the in-game wall and richer gameplay details as we work towards our targeted Q3 launch window. In terms of monetization, we’re designing it as a natural extension of the overall game plan with characters at the heart of the experience and cosmetics customization at the core of our monetization design, keeping the experience reached but without too much further. Please stay tuned for more details in our upcoming test and the future announcement.

William Ding: [Foreign Language].

Bill Pang: [Interpreted]. Okay. Let me translate this answer. First of all, thank you for your question. We addressed your question from several angles. First, regarding the competitive landscape, we do not shy away from competition, but our focus is more on differentiation. Yes, open world category is crowded in 2026, and players have more choices than ever. But from another angle, it also means that the genre has a high seating and strong user demand. Competition in our industry is not a zero-sum game. Great products expand the overall market rather than just fighting our fixed market share. Secondly, what makes Ananta different? Ananta is built around an urban open world concept, which is fundamentally different from traditional open world RPGs or animal sell action games.

Whether you look at the IP building generic structure or gameplay design. We are not following existing formulas what we are building as an open wall setting more than city, driven by immersive daily living experiences. The competitive edge here is not about NetEase or flashy combat. It’s about where the players can truly feel like they are living in the world. shopping, for example, shopping, social interactions, exploration running businesses. These activities with their strong sense of Urban Life are where our differentiation really lies. Right now, the team is focused on refining the game’s content quality. We believe players always have strong appetite for innovative and polished experiences. What decides what the product succeeds is not the long window of how many competitors are out there.

It is whether or not the experience is distinctive enough and good enough to the players. We’d rather take the time to get it right than ship something on average in a rush. Lastly, but importantly, we do not think Ananta is a traditional animal style game. Our goal is to achieve a genre breakthrough within the urban open wall space, reaching players who are interested in the idea of 3D leaving in the virtual city. This means that our direction, our narrative ton, our gameplay design, are all being shaped to appeal to a broader audience, rather than putting ourselves in the fixed box. In summary, distinctive urban open world positioning, a relentless pursuant for content quality and broad unconstrained vision for who this game is for. That’s how Enanta stands out.

The competition is real, but we are confident in the direction that we have chosen. Next question please.

Operator: Your next question comes from Xueqing Zhang with CICC.

Xueqing Zhang: [Interpreted] My question about globalization. What management feel the progress in global expansion. In particular, how do you assess the overseas growth potential of well wins meat as well as the opportunities for the MMO Gara in international markets.

William Ding: [Foreign Language].

Bill Pang: [Interpreted]. Okay. Let me translate this answer. We win Smith has demonstrated very strong and sustained momentum in this global expansion. Within 6 months of launch, it has held very high scores like 78% positive rating on steam. And as repetitively ranked among top 2 often global top seller chart when we have major updates, including West markets that have traditionally been difficult for Chinese Wishagame to penetrate. This has set a new benchmark for this genre overseas. This clearly shows that overseas players not only appreciate the game’s high immersive [indiscernible], but also highly receptive to the free-to-play, high-quality and no pay-to-way model. Once again, it reinforces that the unique experiences delivered by Weine is something that resonates globally.

Going forward, we’ll continue to unlock the games overseas potential oversee growth potential with — by enhancing cross-device compatibilities, strengthening global publishing capabilities, expanding on to more platform and deepening localization effort. More updates on this will be shares. In short, we’ll continue to invest resources into where wins made making it another flagship title in our global portfolio with the goal of achieving long-term sustainable success worldwide.

Operator: Your next question comes from Ritchie Sun with HSBC.

Ritchie Sun: [Interpreted]. Congrats on a very good set of results. I want to ask about FWJ PC. The PC version has launched a limited server close to 1 year now. Can management share the latest update on this game? And how do you plan to further sustain or even expand the successful sort of response from this game going forward?

William Ding: [Foreign Language].

Bill Pang: [Interpreted]. Yes. [indiscernible] has hit another record of Picanco user at $3.9 million in Q1, which clearly shows that the unlimited server has successfully expanded the player base. Beyond the strong performance of the unlimited server the time-based classic server has also been growing steadily. With the development team’s years of experience in long-term life operations, the oral game ecosystem is in good shape with all key metrics trending in the right direction. We remain committed to the long-term operation strategy and keep exploiting the opportunities along the way. Thank you.

Operator: And that concludes the question-and-answer session. I would like to turn the conference back over to Brandi Piacente for any closing additional comments.

Brandi Piacente: Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly to have a wonderful day. Thank you.