NetEase, Inc. (NASDAQ:NTES) Q4 2025 Earnings Call Transcript

NetEase, Inc. (NASDAQ:NTES) Q4 2025 Earnings Call Transcript February 11, 2026

NetEase, Inc. misses on earnings expectations. Reported EPS is $1.57 EPS, expectations were $2.03.

Operator: Good day, and welcome to the NetEase Fourth Quarter and Full Year 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, 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 fourth quarter and full year 2025 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 on the call today from NetEase’s senior management are Mr. William Ding, Chief Executive Officer; Mr. Hu Zhipeng, Executive Vice President; and Mr. Bill Pang, Vice President of Corporate Development. And I will now turn the call over to Bill, who will read the prepared remarks on William’s behalf.

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. In 2025, our total annual net revenues reached RMB 111.2 — RMB 112.6 billion, with RMB 92.1 billion from games and value-add services. These metrics represent another milestone for our company, reflecting 23 consecutive years of online games operation revenue growth since we started the business a quarter of a century ago. In our 25 years in the gaming business, our pursuit has always been trying to provide extraordinary player experiences, and we have never stopped investing in continuous exploration of creativity and pushing technical boundaries. In our early years, our proprietary 2D game engine made Fantasy Westward Journey Online the benchmark of its time.

When we moved to mobile in the early of 2010s, our flagship in-house engines enabled us to deliver low latency, high-performance experiences on smaller pocket-sized screens. This new capability was instrumental in unleashing the full potential of iconic titles such as Knives Out and Diablo Immortal on mobile devices. Today, as we continue refining these engines to support AAA quality cross-platform experiences, they have laid the indispensable foundation for the success of our recent global transitions like Where Winds Meet. In conjunction with the evolution of our in-house proprietary game engine, we also built our full stack 2 chains that empowers our team to innovate at scale. Drawing on our DNA as an Internet company, we continually scale new technologies that can improve the game development process.

We study emerging technological trends determining if they can be harnessed to enhance our game development and developed proprietary solutions to incorporate the solutions — to incorporate the most impactful ones into our production pipeline. This long-standing practice has enabled us to integrate complex new technologies, substantially boosting productivity over the years. Back in 2017, we saw that artificial intelligence would have transformative impact on our industry. Because AI research is closer to academic science than traditional technology, we set up 2 dedicated research labs: NetEase Fuxi Lab and NetEase Game AI Lab to study AI and explore its real-time real-world applications in gaming. These teams have made exceptional strides over the years in both research and practice winning dozens of AI algorithm competitions, publishing hundreds of papers and securing hundreds of patents.

We’re now far beyond the experimental phase and the combination of this work is the full integration of our AI technology into the game development process with AI playing an important role across our portfolio. AIGC has accelerated quickly in recent years. We have been monitoring the progress closely and making a substantial effort to embed it into our production pipeline. Importantly, we don’t see AI as a replacement for human creativity. We see it as a force multiplier, one that can bring paradigm shifting to the game development process when used responsibly. It can elevate creative work and introduce real change in how games are built. As a new technology with core attributes that are fundamentally different from traditional technologies, such as its probabilistic nature, AI presents unique challenges.

Figuring out how to harness it, how to fit it into the sophisticated game software engineering process and how to turn probabilistic AI output into reliable, high-quality components is far from easy. There are very few precedents in the industry of game making. Fortunately, with our many years of game-making experiences, we have deep expertise in building production tool chains, along with data and asset library spanning hundreds of games. Most importantly, we have over 10,000 top-tier developers, which put us in a strong position to approach these challenges pragmatically. Over the past 3 years, our engineers have worked closely with our designers to explore how to unleash the power of AI while building clear guardrails. At the same time, we focus on how to use AI to take on the tedious repetitive noncreative task without getting in the way of human creativity.

After many iterations, we believe we have established robust human oversight and feedback loop in place and AI has become a highly effective part of our game development process. Today, we’re pleased to report that we have comprehensively integrated AI across our internal workflows, encompassing design, programming, art and QA. This integration is not limited to a few BD teams, it is broadly accessible to developers at NetEase, driving meaningful efficiency across the board. In programming, our self-developed tool, CodeMaker, has evolved from a single AI-powered code completion tool to providing agent-level services. Our internal data shows qualitatively shift in developer habits. They have moved from using AI to complete a line of software code to leveraging AI to solve a complete development task.

In art and animation, AI is easily accelerating the early-stage exploration process with our in-house tools, DreamMaker and Danqing turning creative ideas into deliverable outputs in minutes. Our AI animation technologies, including multi-camera motion capture, facial motion capture and generative AI-driven animation tools have significantly reduced the production cost and time required for character movement and expression animation workflows while substantially expanding our animation asset libraries and empowering artists to deliver richer and more expressive virtual characters and worlds. Furthermore, in quality assurance, we utilize AI to model more than 1 million diverse player behaviors to ensure stability in increasingly complex game world.

This augments traditional time-consuming manual testing with data-driven validation, providing us with greater mathematically confidence in game balance and stability before public launch. But beyond efficiency, the ultimate goal is gameplay innovation. We have unlocked massive new interactive experiences for our players that were previously out of reach, and we still remain at a relatively early stage in exploring all the possibilities. Our exploration of AI-driven interactive characters began early with Sword of Justice, which pioneered one of the industry’s earliest commercial implementation of intelligent NPC systems powered by large language models in a live game environment. This laid important technological groundwork for expanding AI-driven character ecosystem.

In Where Winds Meet, we have deployed over 10,000 AI-powered NPCs that engage players with natural language, realistic voices and potential for unexpected story outcomes, creating a level of vivid interaction that was previously impossible. Most importantly, these AI-powered NPCs are not static quest givers. They reflect the shadow of real human existence. Some may be struggling with poverty and resorting to [indiscernible] in village. If a player has the patience to follow them, they could discover sub stories like the hardship of adult life. These NPCs may not always be brilliant or lucky, but they’re leaving their lives within their own reality, nearing our own world. This level of detail creates a world that was not just a sandbox but a leading society.

This is the essence of the open world we are building, places where every iteration, every interaction feels authentic, unpredictable and deeply immersive. This not only provides players with more depth and in-game experiences, but it has also helped to address the challenge that players consuming content much faster than developers can create it. We’re also seeing AI act as a powerful personalized copilot and ecosystem multiplier. In NARAKA: BLADEPOINT mobile game, the voice AI teammate system represent a major inflection point, AI that doesn’t just follow, it collaborates. As Copilot teammates, AI provides customized interactive assistant to help players to learn the rules of the game, making the complex high skill-based gameplay more accessible to much broader audience and significantly increase newcomer retention.

Meanwhile, The Crew Mode in the Sword of Justice empowers players to direct their own short videos with simple AI workflow, attracting millions of players who have created tens of millions of UGC works. Meanwhile, integrating these tools into Eggy Party toolchain and empowered over 15 million creators to transform a single game into a self-evolving platform driven by collective creativity of its players. Beyond enhancing our existing portfolio, we’re also exploring new frontiers in AI native gameplay. Moving beyond fixed presale logic, we’re trying to utilize AI as a core engine to dynamically construct the in-game world and tailor real-time elements like missions, events and other content to individual players’ unique behaviors, unlocking infinite potential through deep customization.

Underpinning this work is our experiment in AI-native production pipelines that leverage integrated toolchains to streamline workflow and significantly accelerate our innovation cycle. 2025 has been a year in which our long-term vision for AI has reached a critical point. We’re no longer just talking about the potential of AI. We’re seeing the results in the form of enhanced productivity, deeper player engagement and expanded creative boundaries. We’re on the threshold of a paradigm shift, and we believe we are well positioned to serve as epic center of industry-defining innovations. We have built a very solid technological foundation, the proprietary engine, the full stack toolchains, which already internalized artificial intelligence capabilities, including AIGC capabilities, and we have seen early results from AI-powered gameplay.

What we have achieved in the first 25 years of our game business was unimaginable when we started. We’re at the dawn of a new time in our industry where productivity can be much more enhanced and creativity can be much more amplified. As we look ahead, we believe AI will fundamentally empower our creators to transcend the traditional development limits and reshape how interactive entertainment is created and experienced in the years to come. We think this is going to be the best time of the industry. With that, I would like to walk through several recent operational highlights, starting with our global expansion achievements. Where Winds Meet has gained strong global traction through a staged cross-platform launch, surpassing 80 million cumulative players and marking a meaningful milestone in our global expansion.

Rooted in Eastern aesthetics and Wuxian storytelling, the game demonstrates how authentic culture content can resonate with players worldwide. Following its global launch, it ranked #2 on Steam’s global top sellers chart, won PlayStation’s November Players’ Choice Award and topped iOS download chart across more than 60 regions. Ongoing live service updates resulted in sustained strong engagement globally and domestically, with the title delivering its highest monthly revenue and daily active user on record in China in December, reinforcing its long-term momentum. Meanwhile, Sword of Justice successfully expanded internationally in November, introducing its next-generation MMO experience to more audiences, topping download chart in multiple key Asian regions.

This title is another example that illustrates how AI integrated production pipeline now directly elevate gameplay in large-scale online walls, delivering richer responsiveness, deeper interactivity and more immersive player experiences globally. Domestically, player engagement remains strong, supported by innovative live events and culturally grounded content that continues to deepen community resonance. Marvel Rivals, our superhero team-based PVP shooter, continues to build strong global momentum. The title earned broad industry recognition, including being named one of Time’s Best Video Games of 2025, winning the Grand Award at PlayStation Partner Award of 2025 and ranking Steam’s Platinum tier of Best of 2025. Continued seasonal update on new character releases has sustained strong player engagement with Season 6 featuring Deadpool, propelling the game to #2 globally and #1 in multiple markets, including the United States and Canada.

A rapid expanding international player community is further reinforcing the long-term durability of this growing franchise. Looking ahead, we continue to strengthen our pipeline to support the next wave of global growth. Sea of Remnants began technical testing across China and selected global markets earlier this month, featuring a distinctive art style and richly imagined open wall. This ambitious original title aims to deliver a deeply immersive exploration experience with extensive player freedom where every naval journey feels unique. Development is also progressing steadily on ANANTA, our highly anticipated urban open wall title. Building on our available insight from previous testing, the team is diligently refining core systems and content to meet high expectations from our global community.

Shifting to our domestic portfolio. Our long-standing franchises continue to demonstrate strong vitality supported by continuous content innovation and deeply engaged player communities. These titles remain a testament of our ability to operate a large-scale live service ecosystem over decades. Now in its 23rd year of operation, Fantasy Westward Journey Online delivered record high annual revenue in 2025, driven by historical peak revenue in the fourth quarter. Its ecosystem continues to evolve through innovative content designed to meet diverse player needs while preserving the classic mechanics cherished by long-term fans. The unlimited server, which is streamlined accessible gameplay, has been particularly effective at reigniting player enthusiasm.

Fantasy Westward Journey Mobile also maintained strong momentum, delivering record high annual revenue in 2025. Diversified server models and ongoing content initiatives reinforce its leadership position within the MMO category. Beyond these legacy franchises, several established titles continue to deliver stable engagement and underscore the breadth of our diversified portfolio. Identity V is strengthening its global e-sports ecosystem through a major competitive events and ongoing content updates. Eggy Party maintains strong player engagement, supported by expanding gameplay modes and continued investment in its fast-growing UGC ecosystem. Infinite Borders continue to drive long-term retention through innovative gameplay updates and specialized server models that deepen strategic complexity.

NARAKA: BLADEPOINT is expanding its global community and e-sports presence, highlighted by the successfully hosting the J-Cup World Championship and active content road map updates designed to sustain long-term player engagement. Beyond the games we developed in-house, we also continue to expand our ecosystem through strategic partnerships. Original titles have driven sustained engagements for the past year, achieving a record high revenue in China and reaffirming our long-term commitment to the market. The launch of World of Warcraft’s, China-exclusive Titan Reforged server on November 14 sparked strong excitement among domestic players and interest from international influencers. World of Warcraft too once again saw enthusiastic support from Chinese players and set a new record in daily active users in China.

Through close collaboration with our partners and shared commitment to putting player first, we remain focused on delivering high-quality experiences while strengthening our long-term global gaming ecosystem. We’re also committed to delivering exceptional user experiences across our other business lines. Youdao continued to advance its AI-native strategy in 2025, driving healthy business development and achieving its first ever net cash inflow from operating activities. Its Learning Services segment delivered robust growth through ongoing iterations of its tutoring features, while online marketing services applied to improve advertisement, effectiveness and streamline advertising production. Smart Devices segment was supported by ongoing popularity of Youdao tutoring pen products.

NetEase Cloud Music continued to advance the high-quality development of its ecosystem. Platform enriched its differentiated music catalog through both copyright collaborations and our in-house music production, while introducing new features and experience upgrades that enhance music discovery and listening. In 2025, the platform delivered steady year-over-year growth in both its active user base and overall engagement. Yanxuan continued to strengthen its positioning as a private label brand known for premium quality product across its key categories, supported by an expanded product lineup and enhancement to key products. In closing, the results and operational milestones we have discussed highlight a clear trajectory. NetEase is not merely adapting to the AI era.

We are advancing it through industrial application of technologies we have been building for years. Our large-scale integration of AI is a natural extension of our long-standing strategy and leadership in technological innovation. By embedding AI into the core of our production pipelines and product design from the living breathing world of our games to intelligent productivity tools of Youdao and the personalized discovery algorithm of NetEase Cloud Music, we are exploring and shaping what’s possible to future user experiences across a range of scenarios. Looking ahead, we remain focused on advancing technology and creative innovation to drive sustained growth. We view AI not as a replacement but a powerful amplifier of human ingenuity, enabling us to deliver to our users worldwide what was previously out of reach.

By staying at the epicenter of this technical paradigm shift, we’re uniquely positioned to unlock unprecedented long-term value for our users, creators and all of our stakeholders. That concludes William’s comments. I will now provide a brief review of our 2025 annual results with a focus on the fourth quarter. Given the limited time on today’s call, I will present some financial highlights in a streamlined manner. 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. Our total net revenue for 2025 were RMB 112.6 billion or USD 16.1 billion, representing a 7% increase year-over-year. For the fourth quarter, total revenues were RMB 27.5 billion or USD 3.9 billion.

In 2025, net revenues from games and related value-added services reached RMB 92.1 billion, up 10% from 2024. In the fourth quarter, net revenues grew 3% year-over-year to RMB 22 billion. Specifically, net revenues from online games were RMB 89.6 billion for the full year, up 11% from 2024. In the fourth quarter, online game net revenues increased 4% year-over-year to RMB 21.3 billion. The quarter-over-quarter decrease in online games net revenue reflected the fact that the prior quarter benefited more — benefited from the seasonal trends of more events triggering the summer holidays. The year-over-year growth in the fourth quarter was attributable to higher net revenues from self-developed games such as Fantasy Westward Journey Online and the newly launched games like Where Winds Meet and Marvel Rivals.

Youdao’s net revenues from 2025 increased approximately 5% year-over-year to RMB 5.9 billion. In the fourth quarter, net revenues rose 17% year-over-year to RMB 1.6 billion and were broadly stable quarter-over-quarter. The year-over-year increase in the fourth quarter was due to increased net revenues from Youdao’s online marketing services and learning services. NetEase Cloud Music net revenue decreased 2% year-over-year to RMB 7.8 billion for the full year. In the fourth quarter, net revenues were RMB 2 billion, representing a 5% year-over-year increase and remaining broadly stable quarter-over-quarter. The year-over-year growth in the fourth quarter was driven by continued healthy growth in membership subscriptions. Revenue from social entertainment services and others, however, remained lower compared with the same period of last year.

Net revenues from innovative business and others totaled RMB 6.8 billion for the full year. In the fourth quarter, net revenues were RMB 2 billion, representing a 10% decrease year-over-year, while increasing 42% quarter-over-quarter. The year-over-year decrease reflected an increase in certain intersegment transaction eliminations. The quarter-over-quarter increase was led by increased net revenues from Yanxuan advertising services and several other businesses included within that segment. For the year, our total gross profit margin was 64.3%. In the fourth quarter, our gross profit margin increased year-over-year to 64.2% from 60.8% in the year before. Looking ahead at the fourth quarter margins in more detail. Gross profit margin was RMB 17.5 billion for our games and related VAS compared with 66.7% in the same period of last year.

The improvement reflects changes in product mix, including a lower proportion of net revenues from licensed games, which generally have lower margins than our self-developed titles. Our gross profit margin for Youdao was 45.1% compared with 47.8% in the same period of last year. The decrease was primarily driven by higher net revenue contribution from online marketing services, which has lower gross profit margin. Gross profit margin for NetEase Cloud Music was 34.7% in the fourth quarter versus 31.9% in the same period a year ago, primarily driven by steady growth in its core online music business. For innovative business and others, gross profit margin was 39.6% compared with 37.8% in the fourth quarter of 2024. The improvement was primarily driven by margin expansion in certain innovative business within the segment, along with the impact of certain intersegment elimination.

Our total operating expenses for the fourth quarter were RMB 9.4 billion or 34% of our net revenues. Taking a closer look at our cost composition. Our selling and marketing expenses accounted for 14.1% of the total net revenue in the fourth quarter. For the full year 2025, the ratio was 13%, remaining broadly in line with prior year. Our R&D expenses remained stable at 16.1% of total net revenues in the fourth quarter. For the full year 2025, the ratio was 15.7%, broadly in line with 2024, reflecting our continued and consistent investment into content creation and product development. The effective tax rate was 14.8% for the full year and 16.4% for the fourth 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 applicable policies and our operations.

Our non-GAAP net income attributable to shareholders for the fourth quarter totaled RMB 7.1 billion or USD 1 billion, down 27% year-over-year. Non-GAAP basic earnings per ADS for the quarter was USD 1.58 or USD 0.32 per share. For the full year, non-GAAP net income attributable to shareholders was up 11% to RMB 37.3 billion or USD 5.3 billion, which is USD 8.38 per ADS or USD 1.68 per share. Additionally, our cash position remains strong. As of year-end, our net cash position was about RMB 163.5 billion compared with RMB 131.5 billion at the end of 2024. In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved a dividend of USD 0.232 per share or USD 1.16 per ADS. Lastly, our current USD 5 billion share repurchase program, we have repurchased approximately 22.1 million ADS at the end of December 31, 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 Jialong Shi with Nomura.

Jialong Shi: [Foreign Language] I will translate my question. [Interpreted] Management has touched upon this AI topic in your opening remarks. I would like to explore a bit deeper into the impact of AI on the online gaming industry. We noticed Google’s recent Project Genie, which some media claimed is the DeepSeek moment. Yes, some people believe AI tools like Google were for game development and therefore, accelerate the entry of new game developers. I mean, what’s the impact of AI on the competitive landscape for the online industry? My follow-up question is we saw many Chinese Internet companies have decided to ramp up investments in both AI foundation models and computing power. Just wonder where NetEase primarily focused its AI investments?

William Ding: [Foreign Language]

Bill Pang: [Foreign Language] [Interpreted] Okay. Thank you, William. I will help on the translation. Yes. So first, you asked about the Genie, this — regarding the potential impact of AI on the competitive landscape to our industry. First of all, we believe the market has largely misinterpreted Genie’s impact on the gaming industry. Talking about lower barriers, we can look at what happened in other industry. For example, the handheld — from the handheld cameras to smartphones, the barrier of video shooting has been continually lowered. However, the threshold for producing Hollywood level of movie has continued to rise. AI does lower the barriers on entry of game development. However, it has also significantly raised the success threshold for top-tier games.

Surely, the widespread adoption of AI tools will help the explosion of creative content. However, the core barrier for commercial blockbuster hit has transited from pure production into integration capabilities, specifically how to seamlessly integrate AI technology with complex numeric system, long-term economies of the games and engaging social ecosystems. This requires extensive design, expertise and operational experiences, which create a deep moat that newcomers can hardly cross. In the year of AI, production cost is falling, but soft skills has becoming scarce — more scarce and more valuable than ever, including the judgment — the sense of judgment on high-level gameplay designs, insights into players’ demand and refined aesthetic taste.

On the other hand, we believe that the greater value of the Wan model is to inspire brand-new type of entertainment that differ from traditional games. Currently, Wan models are still far away from practical application. Today’s games are built on certainty, predefined rules, strict events and logics. However, Wan model are probabilistic where every step is based on inference. The advantage is that they provide extremely high degree of freedom for creativity, while the disadvantage is their high uncertainty and difficult to control, making them unsuitable for traditional games. Furthermore, they currently face issues like severe latencies and high cost. Of course, we see the rapid iteration and evolution of these models, and it’s just the beginning.

We believe that it will be a real opportunity for action teams. NetEase will also actively embrace these cutting-edge technologies to explore brand-new interactive experiences. Regarding the focus on investment, we don’t bluntly pursue general large language models. Instead, we aim at building AI expertise who understand the game best and achieve highly efficient AI applications through comprehensive and deep integration. In vertical areas, high-quality private data is more important than computing power with application scenarios more important than parameter scales. In terms of differentiated competitive advantages, data and proprietary vertical model is very important. Vertical models trained on our years of gaming data can improve our internal industrialization efficiency more accurately than general ones.

Focus on — and also focus on user experiences and commercialization. We focus on how AI translates into player experience. Currently, AI-native gameplay intelligence such as intelligent NPCs and also UGC tools implemented in several titles have effectively improved user retention, proving our capability to translate technology into commercial value. And we also have a group of versatile talent who are highly skilled in our industry. They’re not only proficient in algorithm and graphic engines, but also they have deep understanding of game design. This cross-discipline capabilities is the key to ensure AI technology truly leads, truly lands and generate funds. We believe that the explosion of AI technology will accelerate the industry’s integration process of the so-called survivor of the fittest process.

We’ll continue to maintain high-intensity investment vertical models on AI-native gameplay and talent nurturing process, leveraging AI technology to further expand our advantages in high-quality game development and long-term operations. Thank you.

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

Alicis a Yap: [Foreign Language] [Interpreted] My question is related to Where Winds Meet. The game has recently been a game of a very positive feedback among the overseas users. Could management share the retention rate of this overseas user? And also, what are the key factors contributing to the game’s strong performance in abroad? And then furthermore, what unique gameplay mechanics or the content have particularly resonated with and attracted the international players?

William Ding: [Foreign Language]

Bill Pang: [Foreign Language] [Interpreted] Thank you, William. I will do the translation. Where Winds Meet, the overseas version launched on November 15. And after its global launch, it quickly gained overwhelming popularity and positive review rates across multiple markets. With continuous operation, it topped various global chart for multiple times, and it demonstrated outstanding performance in various operational metrics, including retention rate. Where Winds Meet has received widespread acclaim from global players for its immersive high-quality Wuxian open-world experience and with its low-pressure, high-freedom gameplay experience raised by separating single player and multiplayer models and its operational focus of free-to-play, high-frequency updates and custom-based monetization.

At the same time, the cross-platform availability accommodates modern players’ diverse habits and meet the varied needs from different type of players. Where Winds Meet features of Chinese Wuxian built a vivid and high-film Jianghu from multiple experience dimensions, including narrative comeback exploration. The combination of Eastern Wuxian-styled martial arts, likely in its skill system and open-world experiences deliver a fresh, deeply immersive experience for players. The combination of single player and multiplayer modes ensure that both those who enjoy immerse — in-part exploration and players who enjoy social cooperation can find content they love at the same time. The continuous update of new maps, new Dungeons and competitive gameplay, along with constantly expanding huge and casual gameplay, it caters to a wide range of player preference, including single player, multiplayer combat and casual experiences.

Thank you.

Operator: Your next question comes from Alex Liu with Bank of America.

Alex Liu: [Foreign Language] [Interpreted] Given the recent success of FWJ PC Unlimited server, can the management discuss whether this business model will be replicated across other legacy titles? And if that’s the case, how should we think about the pace of rolling out of that gameplay?

William Ding: [Foreign Language]

Bill Pang: [Interpreted] Thank you, William. I will do the translation. In quick summary, Fantasy Westward Journey Online, the unlimited server has done 3 things: first is restore the most classic gameplay experience while providing a differentiated gameplay experience at the same time. The second is restructure the economy system while keeping the most important free trading. The third one is to comprehensively optimize the gaming process, specifically for the unlimited servers. And the classic experience lowers the entry barrier for players and differentiated experience that allow the overall player base to expand. The feasibility of this approach has been validated in this unlimited server. Our product team always maintain close interaction with the player community and listens to players’ voice. We believe we’ll continue to introduce updates across more titles, provide richer and smoother fresh experiences while restoring the confidence.

Operator: The next question comes from Yang Liu with Morgan Stanley.

Yang Liu: [Foreign Language] [Interpreted] Let me translate my question. My question is about Sea of Remnants, this new game. Could management update us in terms of the current development status and the feedback in the recent testing? And what is — what will be the commercialization method? And what is the expected timing to launch the game, whether it’s possible to launch that in summer this year and whether it will be a cross-platform global launch?

Unknown Executive: [Foreign Language]

Bill Pang: [Interpreted] Yes. Currently, the development is fully on track, and our plan is to launch that officially in Q3. In the current round of technical test that started on February 5, we are pleased to see active participation from players. Our second promotional video for word-of-mouth creepy MS to more than 10 million views on Bilibili. Based on the initial feedback, we’re glad to see positive feedback regarding product quality and reputations from various parties. We’re still observing and collecting player feedbacks, and we’ll carry out targeted improvement on optimizations to further enhance the gaming experience and prepare for the official launch later this year. Thank you.

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

Ritchie Sun: [Foreign Language] [Interpreted] First of all [indiscernible] in January. So how is the testing feedback? And how far away in terms of number of months before the launch? And do we have any plans to launch it in different market as well as different [indiscernible]. Secondly, regarding our plans to launch Auto Chess titles, there are 2 Auto Chess titles under testing [indiscernible] game license. Given that there has been some very top competitor in this genre, so what is the rationale and strategic thinking behind also entering this market? And how does NetEase product differentiate against the experienced competitor?

Unknown Executive: [Foreign Language]

Bill Pang: [Interpreted] Yes. The data and feedback from the closed test in January both met our expectations, first of all. The retention rate and player feedback on the content have both proved that the current product direction is sufficiently innovative and attractive. Currently, our product is still undergoing continuous refinement, aiming to deliver a higher degree of completion and richer content when it meets the market and launch as scheduled. We’re targeting a simultaneous global launch across all platforms, including PC, mobile and console. Thank you. And William will answer the next — the Auto Chess question.

William Ding: [Foreign Language]

Bill Pang: [Interpreted] So yes, the Auto Chess category is a mature category, and we are doing an elevation and differentiation within this proven category. We select the Chinese Demon and Ghost culture, making it unique in this genre. It inherently contains strong narrative tension and aesthetic potential. We aim to build a high-quality Auto Chess game that belongs to the domestic players and also building on the traditional classic of our historically proven high-quality development capabilities. Thank you.

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

Yang Bai: [Foreign Language] [Interpreted] I will translate by myself. The company has made remarkable progress in the game globalization in recent years with early successes such as NARAKA and Marvel Rivals followed by titles like Where Winds Meet. I would like to ask the management — in terms of overseas expansion strategies, can we see that the company has developed a replicable path to success? Regarding game render expansion, how does the company plan its product pipeline for high potential markets such as U.S. and Europe? About talent, what is company’s global team structure and the future talent strategy?

William Ding: [Foreign Language]

Bill Pang: [Interpreted] Yes, sure. Our developed market expansion starting from 2018, starting from Lifestyle success in Japan. And now as you mentioned, we have NARAKA and we have Marvel Rivals and Where Winds Meet, all of them are very successful in Western market. And we have to say this success is not easily got. We spent a lot of efforts to make that happen. That reflects the company with the most R&D capabilities we have started to grasp a sense of the core success element in overseas market in Japan and Western market. And we believe we’ll be able to produce more titles to be successful in this market in the future. And also regarding the question on talent, we believe China possesses the world’s deepest talent pool in game development. And we are fully committed to cultivating top-tier creative minds to deliver premium games that resonate on a global scale. Thank you.

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

Lincoln Kong: [Foreign Language] [Interpreted] So the first question is about Marvel Rivals. So now that it has been alive for a year, how is the team evaluating its future life cycle? So what strategy are in place to sustain its momentum and continued product innovation here? My second question is a follow-up on AI. Basically, the AI application in the gaming industry is primarily focused on R&D assistance and NPC interaction at the moment. So as the capability continue to evolve, how does management view the potential for AI in gameplay design, content generation and long-term live service? So do we see any opportunity for AI-driven as a core gameplay to become the next major growth engine for the industry? So is planning any products where all those AI as a core-driven gameplay is in place? And additionally, how should we think about those personalized or service-oriented monetization model based on AI?

William Ding: [Foreign Language]

Bill Pang: [Interpreted] Yes. So first, we answered the Marvel Rivals question. First of all, Marvel Rivals rivals remain stable after 1 year of its launch, and our team continues to deliver innovative content and gameplay. Our recently launched Season 6 that will the first triple row hero has been widely welcomed by players. We believe that only excellent content with innovative experiences can sustain player engagement. Therefore, while maintaining our regular updates, we will continue to explore innovative experiences driven by new heroes, new gameplay modes and social interactions. So that’s the question for Marvel Rivals. And regarding the question on AI. Yes, AI has been comprehensively integrated into our production workflow, becoming an indispensable asset in that significantly enhanced art programming and QA.

The — regarding AI’s potential to deliver transformative player experiences, we are certain of this impact. It will happen. We believe NetEase is a pioneer in this field and is one of the companies and most well positioned to explore this opportunity, and we will aggressively to explore this opportunity. We have built a robust pipeline of R&D reserves for this next generation of AI-driven gameplay. 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 additional or closing comments.

Brandi Piacente: Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly. Have a great day. And for those listening from China, we wish you a Happy New Year. Thank you, everyone. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]