Financial Performance - NetEase's net revenue for Q1 2023 was RMB 25.0 billion (USD 3.6 billion), representing a year-over-year increase of 6.3%[4] - Revenue from games and related value-added services reached RMB 20.1 billion (USD 2.9 billion), up 7.6% year-over-year[4] - Youdao's revenue decreased to RMB 1.2 billion (USD 169.4 million), down 3.1% year-over-year[4] - Cloud Music's revenue was RMB 2.0 billion (USD 285.4 million), a decline of 5.2% year-over-year[4] - Gross profit for Q1 2023 was RMB 14.9 billion (USD 2.2 billion), reflecting a year-over-year increase of 16.0%[9] - Net profit attributable to shareholders was RMB 6.8 billion (USD 983.6 million), with a non-GAAP net profit of RMB 7.6 billion (USD 1.1 billion)[5] - Basic earnings per share were USD 0.31, with a non-GAAP basic earnings per share of USD 0.34[5] - Net profit attributable to shareholders in Q1 2023 was RMB 6,754.6 million (USD 983.6 million), compared to RMB 3,952.7 million in the previous quarter and RMB 4,394.0 million year-over-year[13] - Net income for Q1 2023 reached RMB 6,710,394, a 79.5% increase from RMB 3,709,695 in Q1 2022[23] - Total net revenue for the three months ended March 31, 2023, was RMB 25,046,287, slightly down from RMB 25,354,129 in the previous year, indicating a decrease of about 1.2%[25] - For the three months ended March 31, 2023, the net profit attributable to shareholders was RMB 6,754,634 thousand, compared to RMB 4,394,023 thousand for the same period in 2022, representing a year-over-year increase of approximately 53.5%[29] - The non-GAAP net profit attributable to shareholders for the same period was RMB 7,566,234 thousand, up from RMB 5,117,626 thousand in 2022, indicating a growth of about 47.9%[29] - Basic non-GAAP earnings per share for the three months ended March 31, 2023, was RMB 2.35, compared to RMB 1.56 for the same period in 2022, reflecting an increase of approximately 50.6%[29] Operating Expenses - Total operating expenses in Q1 2023 were RMB 7,676.5 million (USD 1,117.8 million), a decrease from RMB 8,810.9 million in the previous quarter but an increase from RMB 7,329.3 million year-over-year[11] - The effective tax rate for Q1 2023 was 19.5%, down from 20.2% in the previous quarter and 22.0% year-over-year[12] - Research and development expenses for Q1 2023 totaled RMB 3,749,732, a decrease of 8.4% from RMB 4,090,076 in Q1 2022[23] - General and administrative expenses for the same period were RMB 294,281 thousand, down from RMB 349,444 thousand in 2022, representing a decrease of approximately 15.8%[27] - Sales and marketing expenses for the three months ended March 31, 2023, were RMB 32,353 thousand, a decrease from RMB 33,001 thousand in the same period last year, indicating a decline of about 2.0%[27] - The company reported equity incentive expenses included in operating costs and expenses amounting to RMB 203,514 thousand for the three months ended March 31, 2023[27] Cash Flow and Assets - As of March 31, 2023, the net cash and cash equivalents amounted to RMB 95.1 billion (USD 13.9 billion), slightly down from RMB 95.6 billion at the end of 2022[15] - The company reported cash and cash equivalents of RMB 13,700,778 as of March 31, 2023, compared to RMB 24,889,000 as of December 31, 2022, indicating a decrease of 45.0%[22] - The total cash and cash equivalents balance of RMB 16,784,561 as of March 31, 2023, down from RMB 27,588,325 at the end of the previous year[24] - The company’s investment activities resulted in a net cash outflow of RMB 2,532,523 for the three months ended March 31, 2023, compared to an inflow of RMB 3,864,171 in the same period of 2022[24] - The company’s financing activities generated a net cash inflow of RMB 83,351 for the three months ended March 31, 2023, a significant improvement from a net outflow of RMB 6,182,698 in the previous year[24] Market and Business Outlook - The flagship games like "Fantasy Westward Journey" and "Westward Journey Online" maintained high popularity, contributing to user engagement[6] - Upcoming game releases include "Westward Journey Mobile" on June 30 and "Harry Potter: Magic Awakened" in overseas markets this summer[6] - Cloud Music is expanding its music ecosystem and user community, improving profitability for future growth[6] - The company plans to continue expanding its market presence and investing in new technologies to drive future growth[23] - Future outlook includes the need for continuous innovation in online services to keep pace with market trends[20] - Risks include potential stagnation in the online gaming market and challenges in maintaining market position in China and globally[20] - The company faces risks related to government regulation changes and economic uncertainties impacting its operations[20] Company Overview - NetEase is a leading internet and gaming service provider, continuously expanding its gaming ecosystem with a rich product matrix[19] - The company has a strong in-house R&D team focused on mobile, PC, and console games, contributing to a vibrant user community[19] - NetEase's other businesses include Youdao, a smart learning company, and Cloud Music, a well-known online music platform[19] - The company has been recognized for its ESG performance, being included in the 2022 Dow Jones Sustainability World Index and receiving an A rating from MSCI[19] - NetEase uses non-GAAP financial metrics, such as net profit attributable to shareholders, to assess operational performance[21] - The non-GAAP net profit excludes stock-based compensation expenses, providing a clearer view of operational performance[21] - The company acknowledges the limitations of non-GAAP metrics, which may not reflect all income/expense items affecting operations[21] Conference and Communication - The company will hold a conference call on May 25, 2023, to discuss quarterly results and answer questions[18] - The exchange rate used for conversion was 1 USD = RMB 6.8676 as of March 31, 2023[26]

First Quarter 2023 Financial Highlights · Net revenues were RMB25.0 billion (US$3.6 billion), an increase of 6.3% compared with the first quarter of 2022. · Games and related value-added services net revenues were RMB20.1 billion (US$2.9 billion), an increase of 7.6% compared with the first quarter of 2022. · Youdao net revenues were RMB1.2 billion (US$169.4 million), a decrease of 3.1% compared with the first quarter of 2022. · Cloud Music net revenues were RMB2.0 billion (US$285.4 million), a decrease of ...

Financial Performance - Net revenue increased from RMB 87.61 billion in 2021 to RMB 96.50 billion in 2022, representing a growth of approximately 10.1%[6] - Gross profit rose from RMB 46.97 billion in 2021 to RMB 52.77 billion in 2022, an increase of about 12.3%[6] - Net profit attributable to the company's shareholders grew from RMB 16.86 billion in 2021 to RMB 20.34 billion in 2022, a rise of approximately 20.6%[6] - Net revenue increased from RMB 73.67 billion in 2020 to RMB 96.50 billion in 2022, representing a growth of 31.0% over two years[22] - Gross profit rose from RMB 38.98 billion in 2020 to RMB 52.77 billion in 2022, a 35.4% increase over two years[22] - Operating profit grew from RMB 14.54 billion in 2020 to RMB 19.63 billion in 2022, a 35.0% increase over two years[22] - Net profit attributable to the company's shareholders increased from RMB 12.06 billion in 2020 to RMB 20.34 billion in 2022, a 68.7% growth over two years[22] - Net profit for 2022 reached RMB 19,843,290 thousand, a significant increase from RMB 12,330,235 thousand in 2020[25] - Net profit attributable to the company's shareholders in 2022 was RMB 20,724,629,000, reflecting a significant increase compared to previous years[172] - Total net revenue for the company increased from RMB 73,667,133 thousand in 2020 to RMB 96,495,809 thousand in 2022, reflecting a 31% growth[159] - Total gross profit for the company grew from RMB 38,983,402 thousand in 2020 to RMB 52,766,126 thousand in 2022, a 35% increase[159] Assets and Liabilities - Total assets increased from RMB 153.64 billion in 2021 to RMB 172.26 billion in 2022, reflecting a growth of about 12.1%[6] - Total liabilities rose from RMB 54.22 billion in 2021 to RMB 63.89 billion in 2022, an increase of approximately 17.8%[6] - The company's total equity increased from RMB 99.28 billion in 2021 to RMB 108.74 billion in 2022, a growth of approximately 9.5%[6] - Total assets grew by 12.4% from RMB 153,643,924 thousand in 2021 to RMB 172,760,985 thousand in 2022[19] - Total liabilities increased by 17.8% from RMB 54,220,048 thousand in 2021 to RMB 63,887,505 thousand in 2022[20] - Shareholders' equity rose by 9.5% from RMB 99,278,638 thousand in 2021 to RMB 108,737,040 thousand in 2022[21] - Total assets as of December 31, 2022, amounted to RMB 156,385,005,000, indicating growth from RMB 153,643,924,000 in 2021[174] - Total liabilities as of December 31, 2022, were RMB 54,415,183,000, slightly higher than RMB 54,220,048,000 in 2021[174] - The company's total equity as of December 31, 2022, was RMB 101,969,822,000, up from RMB 99,278,638,000 in 2021[174] Revenue Breakdown - The company recognized RMB 74.6 billion in revenue from games and related value-added services for the year ended December 31, 2022[12] - The company's revenue is primarily derived from online game services, educational services, smart hardware sales, online music services, live streaming, advertising, e-commerce, and other paid value-added services[43] - Net revenue for the Games and Related Value-Added Services segment increased from RMB 58,719,895 thousand in 2020 to RMB 74,566,471 thousand in 2022, representing a growth of 27% over the two-year period[159] - Net revenue for the Youdao segment grew from RMB 3,167,515 thousand in 2020 to RMB 5,013,182 thousand in 2022, with a peak of RMB 5,354,357 thousand in 2021[159] - Net revenue for the Cloud Music segment rose from RMB 4,895,731 thousand in 2020 to RMB 8,992,221 thousand in 2022, marking an 84% increase over the two years[159] Investments and Impairments - Equity method investments and long-term equity investments without readily determinable fair values amounted to RMB 5,239.2 million and RMB 10,463.3 million respectively as of December 31, 2022[13] - Impairment provisions of RMB 197.7 million and RMB 85.2 million were recognized for equity method investments and long-term equity investments without readily determinable fair values respectively for the year ended December 31, 2022[13] - The impairment assessment for equity method investments and long-term equity investments without readily determinable fair values involves significant judgment and is considered a significant risk due to high estimation uncertainty[13] - Long-term investments under the equity method increased from RMB 3,776.2 million in 2021 to RMB 5,239.2 million in 2022[109] - Equity method investment income for 2020, 2021, and 2022 was RMB 172.5 million, RMB 1,575.5 million, and RMB 1,259.9 million, respectively[110] - The company fully impaired its investment in Yixin (formerly Hangzhou Yixin Technology Co., Ltd.) due to underperformance, amounting to RMB 197.7 million in 2022[110] - Fair value losses on equity investments with readily determinable fair values were RMB 3,414.7 million in 2022, compared to gains of RMB 720.6 million in 2020 and RMB 91.1 million in 2021[111] - Gains from the sale of equity securities without readily determinable fair values were RMB 36.1 million, RMB 172.5 million, and RMB 1,784.9 million in 2020, 2021, and 2022, respectively[112] - Impairment provisions for certain equity investments were RMB 55.6 million, RMB 19.2 million, and RMB 85.2 million in 2020, 2021, and 2022, respectively[112] Cash Flow and Liquidity - Cash and cash equivalents increased by 71.7% from RMB 14,498,157 thousand in 2021 to RMB 24,889,000 thousand in 2022[19] - Net cash inflow from operating activities rose to RMB 27,709,233 thousand in 2022, up from RMB 24,888,171 thousand in 2020[25] - Cash, cash equivalents, and restricted cash increased to RMB 27,588,325 thousand at the end of 2022, up from RMB 17,376,115 thousand at the end of 2021[27] - Cash and cash equivalents increased from RMB 1,541,763 thousand in 2021 to RMB 2,303,280 thousand in 2022, a growth of 49.4%[31] - Operating cash flow decreased from RMB 1,548,858 thousand in 2021 to RMB 788,498 thousand in 2022, a drop of 49.1%[33] Tax and Regulatory Matters - Certain Chinese subsidiaries qualified as high-tech enterprises, enjoying a preferential tax rate of 15% in 2020, 2021, and 2022[118] - Total tax exemptions and rate reductions increased from RMB 1,969,414 thousand in 2020 to RMB 2,631,764 thousand in 2022[120] - Basic earnings per share impact from tax benefits rose from RMB 0.60 in 2020 to RMB 0.81 in 2022[120] - Total income tax expense grew from RMB 3,041,849 thousand in 2020 to RMB 5,031,838 thousand in 2022[121] - Effective tax rate increased from 19.8% in 2020 to 20.7% in 2022[122] - Net operating tax loss carryforwards amounted to RMB 15,124,930 thousand as of December 31, 2022[123] - Deferred tax assets increased from RMB 1,297,954 thousand in 2021 to RMB 1,480,789 thousand in 2022[126] - Deferred tax liabilities rose from RMB 1,345,874 thousand in 2021 to RMB 2,126,120 thousand in 2022[126] - Withholding tax liabilities increased from RMB 1,056.9 million in 2020 to RMB 2,144.4 million in 2022[129] - Total taxes payable decreased from RMB 4,537,050 thousand in 2021 to RMB 2,813,096 thousand in 2022[130] VIE Arrangements and Risks - The company has a series of agreements with VIE entities, granting it the right to determine significant economic activities and enjoy economic benefits, consolidating VIE entities in financial statements[37] - The company believes its VIE arrangements comply with Chinese law, but uncertainties in the legal system could limit enforcement and impact business operations[39] - Potential risks include government actions such as revoking business licenses, restricting operations, or requiring restructuring, which could severely disrupt the company's business[39] - VIE entities accounted for 84.4%, 85.9%, and 86.4% of NetEase's total net revenue in 2020, 2021, and 2022, respectively[192] - VIE entities' total assets (excluding receivables from other NetEase Group companies) represented 8.5% and 7.1% of NetEase's consolidated total assets as of December 31, 2021, and December 31, 2022, respectively[192] - NetEase's operations in China rely on contractual arrangements with VIE entities to comply with foreign investment restrictions and regulations[192] - Contractual arrangements with VIE entities include voting rights agreements, loan agreements, operating agreements, and equity pledge agreements[193] - NetEase faces significant uncertainties regarding the enforceability of VIE contractual arrangements under current and future Chinese laws and regulations[193] - The Foreign Investment Law in China does not explicitly classify contractual arrangements as a form of foreign investment, creating potential regulatory risks[194] - A significant portion of NetEase's revenue is generated by VIE entities, which hold licenses for key businesses such as online gaming, music streaming, and online education[194] - If VIE entities are deemed non-compliant with Chinese laws or regulations, NetEase may face severe penalties or be forced to relinquish control over these entities[194] - The dissolution of VIE entities could severely impact NetEase's operations and lead to a significant decline in the value of its securities[194] - NetEase's ability to consolidate VIE entities' financial results into its consolidated financial statements may be affected by future regulatory actions in China[194] Regulatory and Legal Risks - The company faces risks related to VIE arrangements, including potential regulatory actions that could impact its ability to consolidate VIE entities[40] - The company believes the likelihood of losing control over VIE entities due to regulatory actions is low, and such actions would not lead to liquidation[40] - The company's financial performance could be significantly impacted if it loses control over its subsidiaries and VIEs in China, potentially leading to an inability to repay debts and a decline in the value of its ADS or ordinary shares[195] - Chinese government regulations, including those related to offshore securities issuance, antitrust investigations, and data privacy compliance, pose risks to the company's operations and stock value[195] - The company may face regulatory actions or sanctions if it fails to obtain necessary approvals from Chinese authorities for overseas securities issuance or maintaining its ADS trading status[195] - The Foreign Company Accountability Act (HFCAA) could result in the company's ADS being delisted if PCAOB is unable to inspect its auditors for two consecutive years[197] - The company was identified as a "Commission-Identified Issuer" under HFCAA in 2022 but expects to avoid this designation after the PCAOB's updated decision in December 2022[197] - Future PCAOB determinations on the ability to inspect auditors in China and Hong Kong could impact the company's compliance with HFCAA and its trading status in the U.S.[197] - Risks related to increased restrictions on online gaming imposed by the Chinese government[200] - Risks associated with the uncertainty of obtaining approvals for new games[200] - Risks related to legal, regulatory policies, and guidelines affecting the live streaming and online entertainment industry[200] - Risks associated with the international operation of the company's online games[200] - Risks related to third-party platforms for distributing mobile games and collecting payments[200] - Risks associated with maintaining existing game copyrights or intellectual property rights[200] - Risks related to illegal game servers, player cheating, and the trading of game accounts and virtual items on third-party auction sites[200] - Risks related to changes in the business strategy and service content of Youdao[200] - Risks related to compliance with the "Opinions on Further Reducing the Burden of Homework and Off-campus Training for Students in Compulsory Education" and its implementation rules[200] - Risks related to the company's ability to attract and retain users for its music streaming services and obtain necessary music content licenses[200] Earnings Per Share and Shareholder Equity - Basic earnings per share grew from RMB 3.65 in 2020 to RMB 6.23 in 2022, a 70.7% increase over two years[23] - Basic earnings per ADS increased from RMB 18.25 in 2020 to RMB 31.16 in 2022, a 70.7% growth over two years[23] - Total comprehensive income attributable to the company's shareholders rose from RMB 12.27 billion in 2020 to RMB 21.60 billion in 2022, a 76.0% increase over two years[23] - Total equity attributable to shareholders increased to RMB 108,737,040 thousand in 2022, up from RMB 82,997,804 thousand in 2020[24] - Retained earnings grew by 17.5% from RMB 77,494,475 thousand in 2021 to RMB 91,074,675 thousand in 2022[21] - Retained earnings increased to RMB 91,074,675 thousand in 2022, up from RMB 64,162,689 thousand in 2020[24] - Basic earnings per share (EPS) attributable to shareholders for 2020, 2021, and 2022 were RMB 3.65, RMB 5.07, and RMB 6.23, respectively[149] - Diluted EPS attributable to shareholders for 2020, 2021, and 2022 were RMB 3.60, RMB 5.01, and RMB 6.17, respectively[149] - The weighted average number of shares outstanding (basic) for 2020, 2021, and 2022 were 3,305,448 thousand, 3,325,864 thousand, and 3,263,455 thousand, respectively[149] - The weighted average number of shares outstanding (diluted) for 2020, 2021, and 2022 were 3,349,759 thousand, 3,367,478 thousand, and 3,296,014 thousand, respectively[149] - The total number of restricted share units with anti-dilutive effects excluded from diluted EPS calculations for 2020, 2021, and 2022 were approximately 6.0 million, 6.7 million, and 11.3 million shares, respectively[149] Revenue Recognition and Accounting Policies - The company's key audit matters included estimating the average playtime of paying players to confirm revenue related to in-game virtual items[11] - The company's financial statements were prepared in accordance with U.S. GAAP and were audited by PricewaterhouseCoopers[8] - The company's revenue from mobile games is generated through the sale of in-game virtual items, with revenue recognized proportionally over the estimated average playtime of paying players[45] - For PC games, the company uses two revenue models: time-based and item-based. Time-based revenue is recognized proportionally based on playtime, while item-based revenue is recognized based on usage or expiration time[46] - The company's revenue recognition for in-game items depends on their usage type: one-time use, limited use, or unlimited use. Unlimited use items are recognized over the estimated average playtime of paying players[46] - The company estimates the average playtime of paying players based on historical player churn rates, average playtime, and other behavioral patterns, with adjustments made quarterly[46] - The company's financial statements are prepared under US GAAP, and management makes estimates and assumptions that affect reported revenue and expenses, including estimates for in-game virtual item revenue[42] - The company's tutoring services, including online live courses, digital learning content, and customized learning plans, are recognized as revenue proportionally over the estimated average learning period[47] - Smart hardware revenue, such as dictionary pens and translation devices, is recognized when the goods are transferred to customers, typically upon delivery to end customers or distributors[48] - Online music service revenue, including subscription fees and digital album sales, is recognized over the subscription period or upon transfer of control to customers[49] - Live streaming service revenue from virtual gifts is recognized either upon consumption or proportionally over the usable period of time-based virtual items[50] - Advertising service revenue is recognized over the display period, with performance-based arrangements tied to impressions or actions (e.g., clicks)[51] - E-commerce revenue from NetEase Yanxuan is recognized when control of goods is transferred to customers, typically upon delivery, with discounts treated as reductions in revenue[52] - Paid value-added services revenue, such as online reading and email services, is recognized over the subscription period or upon service provision[53] Investments and Fair Value Measurements - Short-term investments decreased by 37.9% from RMB 12,281,548 thousand in 2021 to RMB 7,622,673 thousand in 2022[19] - Short-term investments are measured at fair value, with changes reflected in "Other Income/(Expenses)" in the consolidated financial statements[64] - Long-term

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR i Table of Contents ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15 ...

NetEase, Inc. (NASDAQ:NTES) Q4 2022 Earnings Conference Call February 23, 2023 7:00 AM ET Company Participants Margaret Shi - Director of IR Charles Yang - CFO William Ding - CEO Conference Call Participants Alicia Yap - Citigroup Yang Bai - CICC Lincoln Kong - Goldman Sachs Natalie Wu - Haitong International Alex Poon - Morgan Stanley Felix Liu - UBS Operator Good day and welcome to the NetEase 2022 Fourth Quarter and Yearend Earnings Conference Call. Today's conference is being recorded. At this time, I w ...

N et E ase 4Q22 Investor Presentation Investor Relations SAFE HARBOR STATEMENT This announcement contains statements of a forward-looking nature. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such ...

Exhibit 99.1 (Hangzhou- February 23, 2023)- NetEase, Inc. (NASDAQ: NTES and HKEX: 9999, "NetEase" or the "Company"), one of China's leading internet and online game services providers, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2022. · Net revenues were RMB25.4 billion (US$3.7 billion), an increase of 4.0% compared with the fourth quarter of 2021. · Youdao net revenues were RMB1.5 billion (US$210.8 million), an increase of 9.0% compared with the ...

Call Start: 07:00 January 1, 0000 8:03 AM ET NetEase, Inc. (NASDAQ:NTES) Q3 2022 Earnings Conference Call November 17, 2022 07:00 ET Company Participants Margaret Shi - Director of Investor Relations Charles Yang - Chief Financial Officer William Ding - Chief Executive Officer Conference Call Participants Kenneth Fong - Credit Suisse Lincoln Kong - Goldman Sachs Charlene Liu - HSBC Alex Poon - Morgan Stanley Felix Liu - UBS Natalie Wu - Haitong International Operator Good day and welcome to the NetEase 2022 ...

Financial Performance - NetEase's net revenue for Q3 2022 was RMB 24.4 billion (USD 3.4 billion), representing a year-over-year increase of 10.1%[3] - Youdao's net revenue reached RMB 1.4 billion (USD 197.2 million), a year-over-year increase of 1.1%[3] - NetEase Cloud Music's revenue was RMB 2.4 billion (USD 331.4 million), reflecting a 22.5% year-over-year growth[3] - Gross profit for Q3 2022 was RMB 13.7 billion (USD 1.9 billion), an increase of 16.4% year-over-year[3] - The net profit attributable to shareholders in Q3 2022 was RMB 6,699.4 million (USD 941.8 million), compared to RMB 5,291.5 million in the previous quarter and RMB 3,181.8 million year-over-year[14] - The company reported a net profit margin of approximately 25.5% for the nine months ended September 30, 2022, compared to 22.5% in the same period of 2021[31] - The company reported a net profit attributable to shareholders of RMB 6,699,364 thousand for the nine months ended September 30, 2022, an increase of 43.3% compared to RMB 4,666,612 thousand in the same period of 2021[35] Gaming Revenue - Revenue from games and related value-added services was RMB 18.7 billion (USD 2.6 billion), up 9.1% year-over-year[3] - The flagship game series "Fantasy Westward Journey" continues to perform strongly, contributing to sustained revenue growth[6] - The game "Diablo® Immortal™" launched in mainland China, quickly topping the iOS download charts[4] - New mobile games such as "Naraka: Bladepoint" and "Nirvana in Fire" are set to be released soon, expanding the game portfolio[4] - Net revenue for the gaming and related value-added services segment reached RMB 18,699,106 thousand for the three months ended September 30, 2022, representing a year-over-year increase of 8.5%[33] Operating Expenses and Profitability - Operating expenses totaled RMB 9,002.1 million (USD 1,265.5 million) in Q3 2022, an increase from RMB 7,995.2 million in the previous quarter and RMB 8,035.6 million year-over-year[11] - The gross margin for gaming and related value-added services in Q3 2022 was 65.0%, compared to 64.9% in the previous quarter and 61.3% year-over-year[9] - The gross profit margin for the gaming and related value-added services segment improved to 65.0% for the three months ended September 30, 2022, compared to 64.9% in the previous quarter[33] Cash Flow and Dividends - The company reported a net cash inflow from operating activities of RMB 7.5 billion (USD 1.1 billion) in Q3 2022, compared to RMB 6.6 billion in the previous quarter and RMB 6.3 billion year-over-year[18] - The company approved a quarterly dividend of USD 0.0870 per share (USD 0.4350 per American Depositary Share) for Q3 2022, with payment expected on December 13, 2022[16] - The company has repurchased approximately 27.0 million American Depositary Shares for a total of about USD 2.5 billion under its share repurchase program as of September 30, 2022[20] Assets and Liabilities - Total assets increased from RMB 153.64 billion to RMB 172.71 billion, representing a growth of approximately 12.0%[30] - Current assets rose from RMB 113.12 billion to RMB 131.59 billion, an increase of about 16.3%[30] - Total liabilities increased from RMB 54.22 billion to RMB 63.06 billion, reflecting a rise of around 16.5%[30] - Shareholders' equity rose from RMB 99.28 billion to RMB 109.51 billion, an increase of approximately 10.3%[30] Research and Development - Research and development expenses totaled RMB 10,948,938 for the nine months ended September 30, 2022, reflecting an increase of 7.1% from RMB 10,228,287 in the same period of 2021[31] - The company’s R&D expenses for the nine months ended September 30, 2022, totaled RMB 288,598 thousand, indicating a focus on innovation and technology development[34] Market Strategy and Future Outlook - NetEase plans to prepare for the overseas launch of "Harry Potter: Magic Awakened" in 2023[4] - The company continues to expand its gaming ecosystem and develop popular mobile and PC games in China[23] - The company plans to continue expanding its market presence and investing in new technologies to drive future growth[32] - Forward-looking statements indicate potential risks, including market growth sustainability and regulatory changes affecting operations[25] ESG Performance - The company has received an A rating from MSCI for its ESG performance, highlighting its commitment to environmental, social, and governance standards[24] Non-GAAP Metrics - Non-GAAP financial metrics are used to assess operational performance, excluding stock-based compensation expenses[27] - The company emphasizes the importance of considering all financial indicators rather than relying on a single metric for performance evaluation[28]

Financial Performance - Net revenues for Q3 2022 were RMB 24.4 billion (US$ 3.4 billion), a 10.1% increase year-over-year[2] - Net revenues from games and related value-added services were RMB 18.7 billion (US$ 2.6 billion), up 9.1% compared to Q3 2021[2] - Cloud Music net revenues increased by 22.5% year-over-year to RMB 2.4 billion (US$ 331.4 million)[3] - Gross profit for Q3 2022 was RMB 13.7 billion (US$ 1.9 billion), reflecting a 16.4% increase year-over-year[3] - Net income attributable to shareholders was RMB 6.7 billion (US$ 941.8 million), compared to RMB 3.2 billion in Q3 2021[27] - Non-GAAP net income from continuing operations was RMB 7.5 billion (US$ 1.1 billion), up from RMB 3.9 billion in Q3 2021[28] - Basic net income per share was US$ 0.29, an increase from US$ 0.13 in Q3 2021[29] - Operating profit for the three months ended September 30, 2022, was RMB 4,741,776, a decrease of 4.2% compared to RMB 4,946,331 for the three months ended June 30, 2022[55] - Net income attributable to the Company's shareholders for the three months ended September 30, 2022, was RMB 6,699,364, an increase of 26.6% from RMB 5,291,476 in the previous quarter[55] - Basic net income per share for the three months ended September 30, 2022, was RMB 2.05, up from RMB 1.62 in the previous quarter[55] - The company reported a net income from continuing operations of RMB 6,699,364 for the three months ended September 30, 2022, compared to RMB 4,666,612 for the previous quarter[55] - The company’s net income from discontinued operations for the nine months ended September 30, 2022, was RMB 624,864, reflecting a consistent performance in this segment[55] - NetEase reported a net income of RMB 6,621,000 for the three months ended September 30, 2022, representing a 30.0% increase from RMB 5,096,835 in the previous quarter[58] - Non-GAAP net income from continuing operations attributable to the Company's shareholders for the nine months ended September 30, 2022, was RMB 17,997,055, a 36.5% increase from RMB 13,166,332 for the same period in 2021[66] - The net cash provided by operating activities for the three months ended September 30, 2022, was RMB 7,486,309, up from RMB 6,631,159 in the previous quarter, indicating a growth of 12.9%[58] Expenses and Costs - Total operating expenses rose to RMB 9.0 billion (US$ 1.3 billion), a 12.0% increase compared to Q3 2021[5] - Total operating expenses for the three months ended September 30, 2022, were RMB 9,002,116, an increase from RMB 7,995,160 in the previous quarter[55] - Research and development expenses for the three months ended September 30, 2022, amounted to RMB 3,969,156, compared to RMB 3,581,700 for the three months ended June 30, 2022[55] - The total cost of revenues for the three months ended September 30, 2022, was RMB 10,682,868, reflecting a 2.9% increase from RMB 10,379,981 in the same period of 2021[62] - The Company reported a share-based compensation cost of RMB 190,645 included in the cost of revenues for the three months ended September 30, 2022[65] Assets and Liabilities - As of September 30, 2022, total cash and cash equivalents were RMB 94.6 billion (US$ 13.3 billion), up from RMB 85.6 billion at the end of 2021[33] - Total current assets increased from RMB 113.1 billion on December 31, 2021, to RMB 131.6 billion on September 30, 2022[54] - Total assets rose from RMB 153.6 billion on December 31, 2021, to RMB 172.7 billion on September 30, 2022[54] - Total liabilities increased from RMB 54.2 billion on December 31, 2021, to RMB 63.1 billion on September 30, 2022[54] - NetEase's shareholders' equity grew from RMB 95.3 billion on December 31, 2021, to RMB 105.4 billion on September 30, 2022[54] Shareholder Actions - The Company announced a new share repurchase program of up to US$5.0 billion, effective for a period not to exceed 36 months[36] - As of September 30, 2022, approximately 27.0 million ADSs had been repurchased for a total cost of US$2.5 billion under the previous program[35] - NetEase purchased approximately 2.3 million ADSs of Youdao for a total cost of US$20.7 million as of September 30, 2022[37] - The Company also acquired approximately 0.7 million ordinary shares of Cloud Music for a total cost of US$6.9 million during Q3 2022[38] - The company paid dividends totaling RMB 1,617,574 to shareholders during the three months ended September 30, 2022, an increase from RMB 1,403,637 in the previous quarter[60] Market Outlook and Risks - Forward-looking statements indicate potential risks including market growth and regulatory changes that could impact operations and financial results[46] Other Financial Metrics - The company experienced a significant increase in exchange gains, reporting RMB 1,398,045 for the three months ended September 30, 2022, compared to RMB 865,283 in the previous quarter[55] - The total depreciation and amortization expense for the three months ended September 30, 2022, was RMB 713,852, compared to RMB 609,036 in the previous quarter, reflecting increased investment in assets[58] - The fair value changes of equity security investments resulted in a gain of RMB 680,019 for the three months ended September 30, 2022, down from RMB 735,159 in the previous quarter[58] - The company reported an allowance for expected credit losses of RMB 44,126 for the three months ended September 30, 2022, compared to RMB 10,965 in the previous quarter, indicating a rise in credit risk provisions[58] - Net cash used in financing activities for the three months ended September 30, 2022, was RMB 7,184,847, a decrease from RMB 14,894,466 in the previous quarter, showing improved cash management[60] - Net cash provided by investing activities for the three months ended September 30, 2022, was RMB 987,020, a recovery from a cash outflow of RMB 1,183,181 in the previous quarter[60] - The effect of exchange rate changes on cash and cash equivalents was a gain of RMB 3,470 for the three months ended September 30, 2022, compared to RMB 74,898 in the previous quarter[60] Segment Performance - The Company’s innovative businesses and others segment generated net revenues of RMB 1,967,972 for the three months ended September 30, 2022, up 13.5% from RMB 1,733,106 in the same period of 2021[62] - The Company achieved a gross profit margin of 14.2% for Cloud Music in the three months ended September 30, 2022, compared to 2.2% in the same period of 2021[62] - The gross profit margin for games and related value-added services improved to 65.0% for the three months ended September 30, 2022, compared to 61.3% in the same period of 2021[62] - The Company’s total net revenues for the nine months ended September 30, 2022, were RMB 71,141,680, an increase of 12.5% from RMB 63,232,461 for the same period in 2021[62]