NetEase, Inc. (NASDAQ:NTES) Q2 2025 Earnings Call Transcript

NetEase, Inc. (NASDAQ:NTES) Q2 2025 Earnings Call Transcript August 14, 2025

NetEase, Inc. beats earnings expectations. Reported EPS is $2.07, expectations were $2.04.

Operator: Good day, and welcome to the NetEase Second Quarter 2025 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’s 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 for comparison purposes only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the 2025 Second Quarter 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; 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?

Bill Pang: Thank you, Brandi, and thank you, everyone, for participating in today’s call. Before we begin, I would like to remind everyone that all percentages are based on RMB. During the second quarter, we advanced each of our businesses through the development of high- quality and innovative offerings. Total revenues increased 9% year-over-year driven by our diverse portfolio of games. We saw strong player engagement in our established franchises and released new titles that expanded our reach across genres and geographies. Building on our first quarter year-on-year growth momentum, revenue from our games and related VAS rose 14% in the second quarter compared to the same period last year. As we expand our expertise across more genres, we now offer a diverse range of gaming experiences to players around the world, which we believe lays a solid foundation for our global expansion.

In the second quarter, we launched several new global titles, while also extending the reach of our well-known domestic franchises. Looking first at our newest releases. Our Super Hero team-based technical RPG MARVEL Mystic Mayhem launched on June 25. Game quickly garnered a passionate group of players eager to collect iconic Super Heroes and Super Villains to battle the nightmare dimension. Its player base quickly surpassed 1 million with the game topping the iOS download chart in multiple regions and ranking #2 in the U.S. To further the community’s excitement we plan to introduce more playable characters and expand the storyline approximately every 6 weeks. The global release of our tactical shooter game, FragPunk on Xbox and PlayStation quickly gained traction after its April 29 debut.

In May, it reached #2 spot on PlayStation’s North America free-to-play download chart. Originally launched on PC in March. FragPunk has been winning our players with this groundbreaking Shard Card System. Now with the signature blend of strategy and high-octane shooting experience available on console. It continues to build momentum. Our commitment to growing the existing hit has also brought fresh energy to games already resonated with players. Once Human commemorated its Annual Version 2.0, Dreamveil with a major content update and a series of exciting announcements. Players were introduced to Endless Dream, a new Nightmare-themed PvE Scenario that takes them through multiple layers of dreamscapes, offering a fresh take on the apocalyptic world.

A new class system was also unveiled featuring three classes, Chef, Gardener, and Beastmaster as the first play, each bringing unique abilities to support diverse play styles. This 2.0 update gained massive popularity, propelling the game to #4 on Steam’s global top sellers chart. We also rolled out a new PVP Spin-off of Once Human on July 30 called RaidZone, which amplifies the throw of the game’s survival open world experience. With unrestricted combat, allowing attacks anytime anywhere. This innovation targets on broader PVP audience through more intense and liberated battles. In June, we began testing a new customer server allowing private servers and a customizable seasonal settings that encourage creativity and diversity, giving players even more autonomy.

For Marvel Rivals, we launched Season 3 on July 11, introducing Phoenix as a new playable hero alongside a slate of exciting events and Team-Ups. Second, Klyntar were now starkly spreads. Players join forces and unleash unique skills to save the world. With fast- paced open combat and the fan favorite Phoenix joined the roaster, the game quickly climbed to #1 on team’s top setter chart in the U.S. and subsequently reached #2 globally following their summer party events. Beyond in-game update, we are also deepening community engagement through more offline events at San Diego Comic-Con. And exclusive behind the same look at the hero creation process, generated tremendous excitement among fans. In May, we also kicked off our Marvel Rivals IGNITE e-sports tournament with mid-season finals successfully held at our Guangzhou campus recently.

Partially players from around the world have come to compete, and we look forward to crowning the first champion with our finals at the end of the year. With our domestic IP, we continue to extend our player communities and prepare for global expansion. Players of our Wuxia themed open-world RPG, Where Winds Meet, continue to be impressed by our steady stream of high-quality content. In the second quarter, we launched a new [ Hexi ] themed update, featuring the exhaustive desert landscape of [indiscernible]. The story line centered on the unyielding spirit of both generals and ordinary citizens during the period of unrest resonated deeply with players. By restoring Asian frescos in game, in collaboration with Tsinghua Art Academy. We brought emotional stories to life with stunning visual effect.

Further fueling player enthusiasm. By the end of July, it has amassed over 40 million total players, while the release of the summer version propelled it to #5 on China’s iOS top grossing chart. Furthermore, we are thrilled to have successfully concluded the latest round of overseas testing on PC and PlayStation 5 at the end of July, placing us firmly on track for its global launch. Sword of Justice, previously known as Justice Mobile, marked its second anniversary with the surge in players. We launched a massive update introducing new gameplay features, expanded areas and a wide selection of new costumes, propelling the title to #3 on China’s iOS top grossing chart. Global preregistration opened in May, and we look forward to bringing this groundbreaking MMORPG experience to more players worldwide.

Dunk City Dynastic also met global players on May 22, where it reached #1 our iOS download chart in multiple regions and #2 in the U.S. As we enhance the global appeal of our games, our established franchises continue to keep players highly engaged, highlighting the strength of our operations and content update that stand the test of time. In May, Fantasy Westward Journey Online, drew a strong interest from player community, which is How to Train Your Dragon collaboration, bringing the movies iconic costumes and dragon mounts into the game. The momentum continued with the launch of the innovative unlimited server in July. More notably, this evergreen title reached a new all-time high peak in concurrent players in August, surpassing 2.93 million, an impressive milestone after 22 years of operation.

Our long-term commitment to innovation and maintaining a healthy in-game ecosystem continues to pay off. Similarly, Fantasy Westward Journey Mobile launched a new faction, [indiscernible] which generated strong participation and introduced a vertical screen mode to expand accessibility across play scenarios. Delivering fresh content and elevating player experiences remains central to the game’s enduring success. Its revenue posted another record high in the second quarter. The Westward Journey franchise struck an emotional core with players by launching a series of activities seen around the beloved romantic legend [indiscernible] featuring themed game play, costumes and crossovers with a theme sound all tied to the 2025 year of snake. Westward Journey Online 2 continue to build excitement through its annual PVP finals and content updates.

While Westward Journey Mobile saw strong participation from both loyal and returning players through the launch of a new server. Knives Out continues to showcase our long-term operational capabilities, maintaining its status as a household game in Japan through dedicated content updates and culturally resonant collaborations. This quarter’s crossover with Jujutsu Kaisen, the hit Japanese manga that captivate global audiences, was met with strong player enthusiasm and propelled again to #3 on Japan’s iOS top grossing chart. Identity V once again, broke its quarterly revenue record in the second quarter, supported by an enthusiastic fan base. On July 3, Identity V teamed up with Paper Bride a popular Chinese horror mystery puzzle game to introduce a chilling wedding themed world featuring immersive labs and new costumes.

The crossover drove the game to #7 on China’s iOS top grossing chart. Momentum continued in August when the crossover with Frieren: Beyond Journey’s End generated significant enthusiasm and propelled it to #4 on China’s iOS top grossing chart. For Eggy Party third anniversary on June 27, we introduced effective in-game updates that transformed Eggy Island with candies, cakes and toys, adding new maps and equipment to deepen strategic game play. A wave of anniversary activities, along with the highly anticipated crossover with DongDong ship a strong player excitement and lifted Eggy Party to #5 on China’s iOS top grossing chart on July 11. The Naraka: Bladepoint franchise also hit another milestone. Its PC game entered its fourth year with brand-new extraction mode and iconic IP crossovers, including Bruce Lee and The Degenerate Drawing Jianghu.

The mobile game also introduced enhancements to extraction-based survival feature with dynamic weather and new mechanics. The update, eagerness the player base and pushed the title to #6 on China’s iOS top grossing chart. After a year of close collaboration, Blizzard titles continue to calculate players in China. On July 15, World of Warcraft and its community celebrated the game’s 20th anniversary of operation in China and waiting plans to launch a China exclusive Titan Reforged Server in November. This announcement reignited enthusiasm among local players and attracted significant attention from broader global community. Meanwhile, Hearthstone launched its latest expansion, The Lost City of Un’Goro on July 9, featuring a brand-new path system.

This new adventure invites players to embark on the quest set for the lost city with 145 collectible card and a new keywords Kindred to empower their decks. Shortly after the update, the game climbed to #5 on China’s iOS top grossing chart. In April, Overwatch launched its new stadium mode, which has been very popular with players. And in June, they introduced its 17th season featuring a series of updates to power up the game experiences. At Bilibili World 2025, its collaboration with Porsche sparked more fun excitement, featuring a special in-game skin of the iconic Porsche model. We are also thrilled to announce that Diablo Resurrected — Diablo 2 Resurrected will be returning to China on August 27, with plans for launch of Diablo 4 underway.

This will enhance the classic franchise for a dedicated fan base. Innovation remains at the core of how we build and operate games. We bring the same creative ambition and operational rigor to every new titles and the development. Several exciting new games are in the pipeline, each powered by creative game play, bold designs and cutting-edge technology. These titles reflect our commitment to pushing the boundaries of gaming experiences and will position us to expand our player community and further fuel our long-term growth. Sea of Remnants, our upcoming cross-platform ocean adventure RPG received encouraging feedback from its first testing at the end of June. The game invites players into an exciting open water exploration where they uncover the truth behind the forgotten identity through accelerating naval combats and turn-based battles.

Players recruit a crew of allies, build ships and interact with characters, adding strategic depth as players shape the faith of the surrounding world based on each decision they make. Currently, we are actively refining the game for its release in 2026. In June, we are excited to unveil plans for Blood Message, our first AAA single-player title. This cinematic story-driven action- adventure will be available on PC and consoles, inviting players to step into the heart of Dunhuang uprising as the nameless messenger and his young son. With immersive third-person game play and powered by cutting-edge technology. Blood Message is designed to deliver an epic blockbuster experience for players worldwide. Planet Party Time, our cross-platform game branding social simulation and party game play has undergone a series of tests to further refine experiences ahead of its official launch.

Players can express their creativity on a cosmic journey where they can design, build and cultivate their own planets, while enjoying over 120 exciting mini games with friends. Destiny: Rising, a new free-to-play mobile sci-fi RPG shooter that delivers players to a new alternative timeline of Destiny universe will launched on August 28 and across mobile devices. In addition, we plan to launch several licensed titles in China. Most recently, on July 24, we launched SUPERVIVE, an innovative competitive multiplayer game on PC that provides a unique blend of mobile, better royale and hero shooter elements. And we expect Wildgate, a PVP multi-player shooter game that blends tactical ship-to-ship combat with fast-paced first-person action to meet players in China later this year.

The development for ANANTA, our highly anticipated urban themed open-world title is also well underway. Across our portfolio, we remain focused on building lasting success through continuous innovation and high-quality operations that keeps our games relevant and exciting for players. From evergreen franchises that keep breaking records to build new titles shaping the next generation of game plan. We are committed to delivering distinctive experiences that players love. As we continue raising the bar of the engagement and creativity, we are paving the way for long-term growth domestically and worldwide. Turning to our other businesses. In Q2, Youdao executed its AI native strategy effectively across both its learning and advertising businesses, delivering its first second quarter operating profit.

For learning services, Youdao Lingshi continue to drive product innovation with our proprietary LLM, Confucius, while we continue to iterate other AI applications, such as Mr. P AI Tutor, gaining increasing user traction. The online marketing services, our newly launched AI advertising placement optimizer an end-to-end AI-driven agentic solution covering demand analysts, strategy formation, data analytics and iteration optimization. Achieving capabilities that previously relied on human expertise. Leveraging our LLM, Confucius, we now offer comprehensive AI-empowered advertisement services. Spending creative ad production, placements and post-campaign analysis. NetEase Cloud Music remained committed to driving quality development across its core music ecosystem.

To build on our unique content offerings, we continue to expand our catalog of copyrighted content while strengthening our original music library. During the second quarter, we expanded collaborations with Korean music labels and renowned Chinese artists, while generating strong traction with several in-house tracks such as Liang Nan. We also continue to innovate our product features and optimize our music-centric community to deliver even better music experiences for our users. For example, our innovative music playing feature, Magic Light Player, which is designed to recreate the immerse field of live concert enhanced with less cape orientation support, received a widespread acclaim from music lovers. We’re constantly advancing our music-centric monetization and further expanded our subscriber base, resulting in healthy growth in subscription-based membership revenues.

Turning to Yanxuan. We continue to maintain our leading position in key categories. For example, Yanxuan [indiscernible] such as bathroom frequency and car refreshers, has been widely recognized by consumers, secure a solid market position with leading sales. Other iconic products such as cat food also maintained a stable market position. Across our NetEase family of businesses, we are focused on innovation and refining our product and content to deliver long-term value for users and stakeholders. Looking ahead, we will continue to push the boundaries of player experiences, scaling original IP to build lasting franchises and growing alongside with collaborative global partners to reinforce our position as a creator of high-impact genre-defining game.

That concludes William’s comments. I will now provide a brief review of our 2025 second quarter financial results. Given the limited time on today’s call, I will be presenting abbreviated financial highlights. We encourage you to read through our press release issued earlier today for further details. As a reminder, all amounts are in RMB unless otherwise stated. Total net revenue for the second quarter were RMB 27.9 billion or USD 3.9 billion, representing a 9.4% increase year-over-year. Total net revenue from our games and related VAS were RMB 22.8 billion, up 14% year-over-year. Specifically, net revenues from online games were RMB 22.1 billion, a quarter-over-quarter decrease of 6% and a year-over-year increase of 15%. The sequential decline was primarily attributable to decreased revenue following the Chinese New Year push, while the year-over-year growth was mainly driven by increased revenue contribution from newly launched titles such as Where Winds Meet and Marvel Rivals as well as established games like Identity V.

Youdao’s net revenue were RMB 1.4 billion, up 7% year-over-year and 9% quarter-over-quarter. This growth was primarily driven by the enhanced utilization of AI technology to boost our learning services and online marketing services. NetEase Cloud Music net revenue were RMB 2 billion, up 6% from previous quarter, while declining 4% from the same period last year. Notably, revenues from online music services maintained healthy development, both quarter-over-quarter and year-over-year. Net revenue from innovative businesses and others were RMB 1.7 billion, up 5% from previous quarter, while declined 18% year- over-year. The quarter-over-quarter growth was primarily driven by Yanxuan while the year-over-year decline was mainly due to decreased net revenue from Yanxuan advertising services and certain other businesses in this segment.

Gross profit for the second quarter of 2025 was RMB 18.1 billion, up 13% year-over-year. This was primarily driven by increased net revenue from online games, as previously mentioned. This quarter, our total gross profit margin was 64.7%, looking at our second quarter margin in more detail. Gross profit margin was 70.2% of our games and related VAS compared with 70% in the same period last year at 68.8% in the last quarter. The quarter-over-quarter improvement was mainly from the higher proportion of net revenues from our self-developed games, which carry a higher margin than licensed game. Our gross profit margin for Youdao was 43% compared with 48.2% in the same period last year. The decrease was mainly due to the increased revenue contribution from online marketing services with relatively lower gross profit margin.

Gross profit margin for NetEase Cloud Music was 36.1% in the second quarter versus 32.1% in the same period a year ago. The margin improvement primarily resulted from strong monetization of our core online music business and ongoing cost of optimization. For our innovative business and others, gross profit margin was 42.3% compared with 34% in the second quarter of 2024. Total operating expenses for the second quarter were RMB 9 billion or 32% of our net revenues. Taking a closer look at our cost composition. Our selling and marketing expenses as a percentage of total net revenue was 12.8% compared with 13.7% for the same period last year, mainly due to increased revenue contribution from games and VAS over the past year. Our R&D expenses as a percentage of total net revenue remained stable year-over-year at 15.6% in the second quarter compared with 15.2% for the last quarter.

We remain committed to invest into content creation and product development. The effective tax rate was 14.7% for the second quarter. As a reminder, the effective tax rate is presented on an accrual basis, depending on applicable policies and our operations. Our non- GAAP net income attributable to shareholders for the second quarter totaled RMB 9.5 billion or USD 1.3 billion, up 22% year-over- year. Non-GAAP basic earnings per ADS for the quarter was USD 2.8 or USD 0.42 per share. Additionally, our cash position remains robust. With net cash of approximately RMB 142.1 billion as of June 30, 2025, compared with RMB 137 billion at the end of last quarter. In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved a dividend of USD 11.4 per share or USD 0.57 per ADS.

Lastly, under our current USD 5 billion share repurchase program, which started in mid-January of 2023. We had repurchased approximately 22.1 million ADS as of June 30, 2025, for a total cost of approximately USD 2 billion. Thank you for your attention. We would now like to open the call to your questions. Operator, please.

Q&A Session

Operator: [Operator Instructions] Your first question comes from Yang Liu with Morgan Stanley.

Yang Liu: [Foreign Language] [Interpreted] Let me translate my questions. My first question is regarding the Where Winds Meet in terms of the monetization in management view. Is it as early success? Or is it meeting expectations? Or it’s already fully ramped up? And my second question is regarding Once Human. What drives the grossing rebound for this title? Does this have the good potential to become evergreen game? And what is user or revenue split in China and overseas?

Lei Ding: [Foreign Language]

Bill Pang: [Interpreted] Thank you for the answer, and I will do the translation. So first question is regarding Where Winds Meet. Where Winds Meet has delivered a solid performance as we have explained and exceeded our initial expectation before launch in both in terms of active players and monetization. And more notably, the long term — we believe the long-term performance has been quite stable, demonstrating the promising potential for the sustainable success. Where Winds Meet uniquely adopt a business model that combines high-quality content and cosmetic only monetization strategy. With a well-planned cadence for releasing high-quality content, along with the cosmetic only approach that does not impact the character cultivation process.

Where Winds Meet — we believe Where Winds Meet has potential for healthy and lasting monetization cycle. And we are very confident in the future of the game. And in terms of the future continuous development for the content for this game, we’ll make continuous, if not bigger investments in the future. And the second question is regarding Once Human. Behind the balance of performance of Once Human, we actually — we launched a welcomed significant updates, which we call the annual 2.0 version in early July. The new scenario, Endless Dream and the new class system has been well both well received by players. The 2.0 version game massive popularity. That’s why the game was pushed on to #4 position on Steam’s global top seller chart following the amount of the update.

Additionally, we also rolled out a new PVP Spin-Off called RaidZone by the end of July — on July 30, offering players what we call that rule-free combat experience that enhance the intensity of the game’s PVP game plays. Look back, the success of the new scenario demonstrate that the seasonal scenario mode has great potential, and we will continue to launch new scenarios to meet players’ seasonal demand. In the meanwhile, we have also introduced a private server called Custom Server in China called Server [ VIE ] which allow players to customize their own setting. We’re looking forward with ongoing updates of the scenario experiences and the health ecosystem built around the customer service, the product has potential for long-term sustainability.

Regarding your question on the user distribution between China and international. The user distribution is about 50-50 between China and the rest of the world. And revenue distribution is about 2% to 3% compared with China versus rest of all. Hope that answers your question.

Operator: Your next question comes from Alicia Yap with Citigroup.

Alicia Yap: [Foreign Language] [Interpreted] Can management share — so additional color on the overall Blizzard games performance on the sequential basis. Do you think you have targeted or the potential old and new gamers? Or do you think they are still untapped user for Blizzard’s title? Will the future growth of Blizzard titles mainly to be driven by content update and promotional activities on the monetization upside? Or is it will also come from the new user growth?

Lei Ding: [Foreign Language]

Bill Pang: [Interpreted] Thank you for your question. First of all, please products are extremely high-quality work, high-quality games. As we explained in this call and previous calls, after a year of returning the product operation in China market via various mechanics with the online and offline rich market activities. The game metrics has surpassed level — surpassed the level previous prior to the shutting down of the servers. And thanks for our dedication of the local operation for both online and off-line. As we continue to deepen our collaboration with Blizzard developing team, our mutual trust and the coordination is increasing. Looking to the future. As long as we implement more improvements that align with the local tastes and habits of local Chinese players.

We believe there is a good opportunity that we can attract even more new players as well as engaging those who haven’t returned yet. Long story short, we believe there’s big potential for Blizzard games in China market.

Operator: Your next question comes from Yang Bai with CICC.

Yang Bai: [Foreign Language] [Interpreted] Thank you management. The company has a number of shooting games set to launch in the second half of 2025, including PC and mobile games as well as self-developed and licensed products. What is your perspective on the overall competitive landscape of your current shooting game sector?

Lei Ding: [Foreign Language]

Bill Pang: [Interpreted] Yes. Thank you for your question. Yes, the shooting game genre is a very big genres. And also a very big [indiscernible] as well. And the players have very high expectation on the quality of games. For example, you have to have very high-quality art production, and you have to have gameplay innovation. It’s a high bar to entry. For NetEase, we will keep investing to this genre. And we believe in the future, we can continue to come up with competitive market in this big genre.

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

Ritchie Sun: [Foreign Language] [Interpreted] Thank you, management. So first of all, regarding Marvel Rivals, after the launch of Season 3 received the Steam revenue ranking rebounded but then drop to below top 10 afterwards. So how would you evaluate the effectiveness of the new strategy so far? Have we already seen the peak? And what are the new gameplay games or characters in the backlog that we should watch out for to drive the game to regain its momentum? And secondly, regarding Sea of Remnants, can management share the feedback of the first testing in June? And what would be the monetization model? And how would you evaluate the addressable market and longevity of this genre of the games?

Lei Ding: [Foreign Language]

Bill Pang: [Interpreted] Okay. So first, regarding your question on Marvel Rivals. Marvel Rivals recently launched Season 3 and the Mid-Season Finals of Marvel Rivals IGNITE also concluded. We have observed upward and stabilized trend on both DAU and revenue, which make us believe that the new seasonal content update and strategy are effective. Looking forward, we’ll continue to introduce more new gameplay mechanics, new heroes, new popular costumes based on our new cadence of seasonal update. For your questions regarding Sea of Remnants. Sea of Remnants is a very important product to us, and we have high confidence that will make this top-tier successful game and the game will be launched next year. So regarding the detail of this game, please stay tuned. Thank you.

Operator: Your next question comes from Felix Liu with UBS.

Felix Liu: [Foreign Language] [Interpreted] I have 2 questions. Number one is on your evergreen titles. We noticed recovery in quite a few of your evergreen titles such as Eggy Party and Fantasy Westward Journey Online. Could management share more color on the status of the mentioned 2 titles? Any reasons for their recent recovery? And in the long run, how does management think about resourcing on existing titles and IPs versus developing new games from ground up? My second question is on another game in your pipeline, which is ANANTA. What is the R&D status of ANANTA? When do you expect this game to launch? And how should we think about the competition landscape for ANANTA considering there are a few new games from your competitors that also fall into this genre.

Lei Ding: [Foreign Language]

Bill Pang: [Interpreted] Okay. So yes, let me translate the answers in different parts. So first, regarding your question, the first part, Mr. William Ding answered about the Westward Journey PC version. So after a year of continuous experience optimization, various metrics of Fantasy Westward Journey Online has observed recovery and stable improvement. And also, as we mentioned, the newly launched unlimited server has been well received by players. And we’re super excited to announce that the number of peak and current users set a new record on early August at the 2.93 million PC number. And we have been running this game for so many years, and we are confident that with continuous innovation Fantasy Westward Journey PC will be continuing growing in the future.

In the future that we can foresee. And the next question is regarding Eggy Party. Eggy Party, as you know, is one of this kind UGC game — UGC platform kind of game. And after 3 years of exploration, we have mastered the methodology of operating this type of game. And in the future, we’re going to keep investing to the game, keep encouraging high-quality UGC content to prosper the ecosystem. And also, we’re going to keep investing to the marketing to keep promoting the game to make it household game for everyone in China and have everyone in China understand that is the associated game with this whole family party game kind of concept. So that’s for the Eggy Party. And for your question regarding ANANTA. ANANTA is now well underway in the mass production stage.

And with ongoing efforts to strengthen the core experience and prepare for the long-term content pipeline as well. In the face of competitors, we are more focused on whether we are able to create superior gaming quality that differentiate us from existing market offerings. And also, we — looking forward, we anticipate that new content and progress will be reviewed around Tokyo Game Show Time late September. Please stay tuned for product news. Thank you.

Operator: Your next question comes from Miranda Zhuang with Bank of America.

Xiaomeng Zhuang: [Foreign Language] [Interpreted] Can management share your marketing and operational strategies for your old game and also new games? What are your key focuses? And if any changes that you would like to highlight this year? And what kind of results are you seeing? What is your expectation for the sales and marketing expenses?

Lei Ding: [Foreign Language]

Bill Pang: [Interpreted] Yes. So we have been doing this business for 20-something years. For new games or old games, how to operate, how to market, we have developed a mature methodology and standard operating procedures. We know how to invest into marketing and when to invest into marketing. And of course, this — now we’re embracing new method like the social media like the power of AI, everything. So we believe we know when to spend, where to spend precisely and when to — when and where not to spend as well. So in the future, you will see our marketing is going to be more precise and more effective in the future.

Operator: Your next question comes from Lincoln Kong with Goldman Sachs.

Lincoln Kong: [Foreign Language] [Interpreted] I have 2 questions. The first one is on AI. So in recent months, the rapid development of AI multi-model has been quite notable. So has company seen any acceleration in being empowered through AI. So what are the existing bottlenecks that still remain? And what are our plans to — for AI adoption in our existing games? And when can we expect some truly AI-native games? My second question is on the overseas market. Company actually recent games has been globally published by ourselves. So what are the important directions or game genres, we are focused for future overseas expansion?

Lei Ding: [Foreign Language]

Bill Pang: [Interpreted] Yes. So regarding your first question about AI, there’s a joke saying that every — the life span of every big model is only 3 months. Basically, every new model comes out every couple of months. We have been investing a lot of resources to embrace AI to leverage AI in our development, in our operations, how to embrace AI in our tool chain, everything. So looking to the future. AI is going to play a more and more important roles. And we are looking into the future that some there might be games designed by AI, could be fun game, that’s the future we’re looking forward to. And regarding your next question for the overseas publishing, yes, this is a critically important capability of us to be able to publish game globally in different geos.

The global market is kind of geo-based in North America, in South America, in Japan, every market has its own attribute. And we have learned through a bunch of global game operation from Marvel Rivals, Once Human and also in West market and Identity V and Knives Out in Japan market, we have learned a tremendous amount of firsthand hands-on experience as well from operation. And looking forward, in the next couple of years, you will see our global operation — global operation will keep growing, fueled by our more important new games. And we do believe growing globally is going to be a very important task for us. Thank you for your question. And operator, let’s go with one last question, please.

Operator: Your last question comes from Jialong Shi with Nomura.

Jialong Shi: [Foreign Language] [Interpreted] So I just have one question. Can management share the performance of MARVEL Mystic Mayhem in overseas markets so far. In addition, are there any updates on the expected launch time for the domestic version? What are the company’s expectation or specific targets for this game going forward?

Lei Ding: [Foreign Language]

Bill Pang: [Interpreted] Okay. So as you know, MARVEL Mystic Mayhem was officially launched in overseas market on June 26, with this unique art style and innovative game design. The game has received multiple features from Google and App Store and also editor interview as well. And the update with fantastic full release at the end of July has been well received by players as well. In the meantime, we do face some long-term growth challenges for the game, and we’re in the process of figuring out how should we grow the game and keep your game in the long run. Thank you.

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

Brandi Piacente: Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly, and have a great day and good evening. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]