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]

NetEase, Inc. (NASDAQ:NTES) Q2 2022 Earnings Conference Call August 18, 2022 7:00 AM ET Company Participants Margaret Shi - Director, Investor Relations Charles Yang - Chief Financial Officer William Ding - Chief Executive Officer Conference Call Participants Yang Bai - CICC Thomas Chong - Jefferies Kenneth Fong - Credit Suisse Lincoln Kong - Goldman Sachs Alicia Yap - Citigroup Natalie Wu - Haitong International Charlene Liu - HSBC Alex Poon - Morgan Stanley Operator Good day, and welcome to the NetEase 20 ...

Financial Performance - NetEase's net revenue for Q2 2022 was RMB 23.2 billion (USD 3.5 billion), representing a year-over-year increase of 12.8%[4] - Revenue from games and related value-added services reached RMB 18.1 billion (USD 2.7 billion), up 15.0% year-over-year[4] - Youdao's net revenue was RMB 956.2 million (USD 142.8 million), a decrease of 26.1% year-over-year[4] - Cloud Music's net revenue increased to RMB 2.2 billion (USD 327.2 million), reflecting a year-over-year growth of 29.5%[4] - Gross profit for Q2 2022 was RMB 12.9 billion (USD 1.9 billion), a 15.7% increase compared to the previous year[4] - The company reported a net profit attributable to shareholders from continuing operations of RMB 4.7 billion (USD 696.7 million)[5] - Net revenue for the six months ended June 30, 2022, was RMB 46,714,920, representing an increase from RMB 41,041,712 for the same period in 2021, a growth of approximately 13.5%[32] - Gross profit for the six months ended June 30, 2022, was RMB 25,777,870, up from RMB 22,242,253 in the previous year, indicating a growth of about 15.4%[32] - Net profit attributable to shareholders for the six months ended June 30, 2022, was RMB 9,685,499, an increase from RMB 7,980,906 in the same period of 2021, representing a growth of around 21.3%[32] - Basic earnings per share for the six months ended June 30, 2022, was RMB 2.96, compared to RMB 2.38 for the same period in 2021, an increase of approximately 24.4%[32] Operating Expenses and Margins - Total operating expenses in Q2 2022 amounted to RMB 7,995.2 million (USD 1,193.6 million), an increase from RMB 7,329.3 million in the previous quarter and RMB 7,431.5 million year-over-year, mainly due to higher marketing expenses for games and increased personnel and R&D costs[12] - The gross margin for online education was 42.8%, down from 53.1% in the previous quarter and 52.3% year-over-year, primarily due to the cessation of subject-based extracurricular training services[11] - The gross margin for cloud music improved to 13.0% in Q2 2022, compared to 12.2% in the previous quarter and 4.1% year-over-year, driven by increased revenue from membership subscriptions and social entertainment services[11] - The total operating costs for the six months ended June 30, 2022, were RMB 20,937,050, an increase from RMB 18,799,459 in the same period of 2021, representing a rise of about 11.4%[34] - The gross profit margin for online games and related value-added services was 64.9% for the six months ended June 30, 2022, compared to 63.5% for the same period in 2021[34] Cash Flow and Investments - The net cash inflow from operating activities in Q2 2022 was RMB 6.6 billion (USD 990.0 million), compared to RMB 4.6 billion in the previous quarter and RMB 4.7 billion year-over-year[19] - The company reported a net cash outflow from investing activities of RMB 5,543,230 for the six months ended June 30, 2022, compared to RMB 11,037,737 in the same period of 2021, showing a significant reduction in cash outflow[33] - The net cash inflow from financing activities for the six months ended June 30, 2022, was RMB 1,977,256, an increase from RMB 2,288,974 in the previous year, reflecting a decrease of approximately 13.6%[33] - The company experienced a decrease in cash and cash equivalents at the end of the period, with a balance of RMB 17,376,115 compared to RMB 19,552,450 at the end of the previous year, representing a decline of about 11.1%[33] Shareholder Returns - The company approved a quarterly dividend of USD 0.0720 per share (USD 0.3600 per American Depositary Share) for Q2 2022, with payment expected on September 13, 2022[17] - The company repurchased approximately 23.6 million American Depositary Shares for a total of about USD 2.3 billion under its buyback plan as of June 30, 2022[22] Game Development and Updates - The popular game "Naraka: Bladepoint" received significant updates and launched its Xbox version in June 2022[5] - The game "Diablo® Immortal™," co-developed with Blizzard Entertainment, topped iOS download charts in multiple regions[5] - NetEase plans to expand its game development pipeline with upcoming titles including mobile versions of "Naraka: Bladepoint" and "Harry Potter: Magic Awakened" for overseas markets[5] Company Overview and Strategy - NetEase is a leading internet technology company in China, focusing on content innovation and a rich product matrix in the gaming ecosystem[24] - The company has developed and operated several popular mobile and PC games in China, leveraging its strong internal R&D capabilities[25] - NetEase's other businesses include Youdao, which provides intelligent learning services, and Cloud Music, a leading online music service in China[25] - The company has received an A rating from MSCI for its ESG performance, highlighting its commitment to environmental, social, and governance standards[25] Risks and Future Outlook - Forward-looking statements indicate potential risks, including market growth stagnation and regulatory changes affecting operations[26] - Non-GAAP financial metrics are used to assess operational performance, excluding stock-based compensation expenses[28] - NetEase defines non-GAAP net profit attributable to shareholders as net profit excluding stock-based compensation expenses[28] - The company emphasizes the importance of considering all financial indicators rather than relying solely on non-GAAP metrics[29] Conference Call Information - The earnings conference call is scheduled for August 18, 2022, to discuss quarterly performance and answer questions[23] - The conference call will be available for replay until August 31, 2022, providing further insights into the company's performance[23] Balance Sheet Highlights - Total assets increased from RMB 153.64 billion to RMB 168.18 billion, representing a growth of 9.99%[31] - Current assets rose from RMB 113.12 billion to RMB 128.01 billion, an increase of 13.12%[31] - Cash and cash equivalents increased from RMB 14.50 billion to RMB 16.46 billion, a growth of 13.54%[31] - Total liabilities increased from RMB 54.22 billion to RMB 63.27 billion, reflecting a rise of 16.93%[31] - Short-term borrowings increased significantly from RMB 19.35 billion to RMB 28.03 billion, a jump of 44.73%[31] - Shareholders' equity rose from RMB 99.28 billion to RMB 104.76 billion, an increase of 5.00%[31] - Inventory decreased from RMB 964.73 million to RMB 843.77 million, a decline of 12.52%[31] - Non-current assets totaled RMB 40.52 billion, slightly down from RMB 40.17 billion, a decrease of 0.86%[31] - Accounts receivable net value decreased from RMB 5.51 billion to RMB 5.21 billion, a decline of 5.45%[31] - The company reported a total of RMB 12.13 billion in contract liabilities, a slight increase from RMB 12.32 billion, reflecting a growth of 1.64%[31]

Exhibit 99.1 Contact for Media and Investors: Margaret Shi Email: ir@service.netease.com Tel: (+86) 571-8985-3378 Twitter: https://twitter.com/NetEase_Global NetEase Announces Second Quarter 2022 Unaudited Financial Results (Hangzhou- August 18, 2022)- 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 second quarter ended June 30, 2022. Second Quarter 2022 Financ ...

NetEase, Inc. (NASDAQ:NTES) Q1 2022 Earnings Conference Call May 24, 2022 8:00 AM ET Company Participants Margaret Shi - Director, Investor Relations Charles Yang - Chief Financial Officer William Ding - Chief Executive Officer Conference Call Participants Alicia Yap - Citigroup Jialong Shi - Nomura Felix Liu - UBS Lincoln Kong - Goldman Sachs Natalie Wu - Haitong International Thomas Chong - Jefferies Operator Good day, and welcome to the NetEase First Quarter 2022 Earnings Conference Call. Today’s confere ...

Financial Performance - NetEase's net revenue for Q1 2022 was RMB 23.6 billion (USD 3.7 billion), representing a year-over-year increase of 14.8%[5] - Online gaming services net revenue reached RMB 17.3 billion (USD 2.7 billion), up 15.3% year-over-year[5] - Youdao's net revenue was RMB 1.2 billion (USD 189.4 million), a decrease of 10.4% year-over-year[5] - Cloud Music's net revenue increased to RMB 2.1 billion (USD 326.1 million), reflecting a year-over-year growth of 38.6%[5] - Gross profit for Q1 2022 was RMB 12.8 billion (USD 2.0 billion), a year-over-year increase of 16.1%[6] - The total operating expenses amounted to RMB 7.3 billion (USD 1.2 billion), an increase of 8.1% year-over-year[6] - Net profit attributable to shareholders was RMB 4.4 billion (USD 693.1 million), with a non-GAAP net profit of RMB 5.1 billion (USD 807.3 million)[6] - The effective tax rate for Q1 2022 was 22.0%, consistent with the previous year but up from 14.2% in the previous quarter[15] Margins and Profitability - The gross margin for online gaming services was 65.1%, compared to 64.1% in the previous quarter and 64.6% year-over-year[11] - Net profit attributable to shareholders for Q1 2022 was RMB 4,394,023 thousand, a slight decrease of 0.1% compared to Q4 2021[30] - Basic earnings per share for Q1 2022 was RMB 1.34, compared to RMB 1.33 in Q4 2021[30] - Non-GAAP net profit attributable to shareholders for Q1 2022 was RMB 5,117,626 thousand, reflecting a slight increase from RMB 5,080,686 thousand in Q1 2021[37] - The diluted non-GAAP earnings per American depositary share for Q1 2022 was RMB 7.81, up from RMB 7.58 in Q1 2021, showing a growth of 3.0%[37] Cash Flow and Investments - The net cash inflow from operating activities for Q1 2022 was RMB 4,582.6 million (USD 722.9 million), down from RMB 8,368.6 million in the previous quarter and RMB 5,542.7 million year-over-year[19] - The company reported a net cash outflow from investing activities of RMB 11,037,737 for the three months ended March 31, 2022, compared to RMB 15,567,468 for the same period in 2021, showing an improvement in cash management[32] - The net cash inflow from financing activities was RMB 2,288,974 for the three months ended March 31, 2022, compared to a net cash outflow of RMB 1,073,556 for the same period in 2021, indicating a positive shift in financing[32] Shareholder Returns - The company announced a quarterly dividend of USD 0.0644 per share, with payment expected on June 20, 2022, for common shareholders[18] - The company has repurchased approximately 20.1 million ADS for a total of about USD 1.9 billion under its share repurchase program as of March 31, 2022[20] Business Strategy and Market Expansion - The company continues to expand its business internationally, including markets in Japan and North America, while also collaborating with leading game developers[23] - The company aims to continue expanding its market presence and investing in new technologies and products[30] - The company plans to continue investing in new product development and market expansion strategies to drive future growth[36] - The company is focusing on enhancing its technological capabilities and exploring potential mergers and acquisitions to strengthen its market position[36] Risks and Challenges - The company highlighted risks including potential market stagnation and regulatory changes affecting operations and financial performance[25] - The company noted that fluctuations in the RMB exchange rate could adversely impact business and financial performance[25] - The company emphasized the importance of non-GAAP financial metrics for investors to assess current operational performance and outlook[26] - The company has no obligation to update forward-looking statements unless required by applicable law[25]

Financial Performance - NetEase's net revenue increased from RMB 73.67 billion in 2020 to RMB 87.61 billion in 2021, representing a growth of 18.9%[3] - Gross profit rose from RMB 38.98 billion in 2020 to RMB 46.97 billion in 2021, an increase of 20.5%[3] - Net profit attributable to NetEase, Inc. shareholders grew from RMB 12.06 billion in 2020 to RMB 16.86 billion in 2021, a 39.8% increase[3] - Net revenue for 2021 reached RMB 87,606,026 thousand (USD 13,747,297 thousand), a significant increase from RMB 73,667,133 thousand in 2020[24] - Gross profit for 2021 was RMB 46,970,801 thousand (USD 7,370,744 thousand), up from RMB 38,983,402 thousand in 2020[24] - Operating profit for 2021 stood at RMB 16,417,070 thousand (USD 2,576,197 thousand), compared to RMB 14,538,405 thousand in 2020[24] - Net profit attributable to NetEase, Inc. shareholders in 2021 was RMB 16,856,842 thousand (USD 2,645,206 thousand), up from RMB 12,062,754 thousand in 2020[24] - Net profit for 2021 was RMB 16,976,190 thousand (USD 2,663,935 thousand), a significant increase from RMB 12,330,235 thousand in 2020[29] - NetEase's total net revenue for 2021 was RMB 75,215.169 million, with third-party revenue contributing RMB 74,406.521 million and intra-group revenue contributing RMB 808.648 million[40] - NetEase's net profit for 2021 was RMB 624.299 million, a decrease from RMB 712.015 million in 2020[40] - Total operating costs and expenses for 2021 were RMB 74,643.007 million, with third-party operating costs and expenses accounting for RMB 17,651.675 million[40] - Net revenue for online game services increased from RMB 46.42 billion in 2019 to RMB 62.81 billion in 2021, representing a growth of 35.3% over two years[185] - Net revenue for Youdao surged from RMB 1.30 billion in 2019 to RMB 5.35 billion in 2021, marking a 310.3% increase over two years[185] - Cloud Music's net revenue grew from RMB 2.32 billion in 2019 to RMB 7.00 billion in 2021, a 201.8% increase over two years[185] - Total net revenue across all segments rose from RMB 59.24 billion in 2019 to RMB 87.61 billion in 2021, a 47.9% increase over two years[185] - Gross profit for online game services increased from RMB 29.45 billion in 2019 to RMB 40.71 billion in 2021, a 38.2% growth over two years[185] - Cloud Music turned a gross loss of RMB 1.06 billion in 2019 into a gross profit of RMB 142.67 million in 2021[185] Assets and Liabilities - Total assets increased from RMB 141.87 billion in 2020 to RMB 153.64 billion in 2021, up by 8.3%[4] - Total liabilities rose from RMB 48.08 billion in 2020 to RMB 54.22 billion in 2021, an increase of 12.8%[4] - Shareholders' equity increased from RMB 83.00 billion in 2020 to RMB 99.28 billion in 2021, up by 19.6%[4] - Cash and cash equivalents increased to RMB 14,498,157 thousand (USD 2,275,077 thousand) in 2021 from RMB 9,117,219 thousand in 2020[19] - Total current assets rose to RMB 113,120,254 thousand (USD 17,751,036 thousand) in 2021 compared to RMB 107,831,043 thousand in 2020[19] - Total assets grew to RMB 153,643,924 thousand (USD 24,110,084 thousand) in 2021 from RMB 141,874,582 thousand in 2020[19] - Total current liabilities increased to RMB 50,501,326 thousand (USD 7,924,760 thousand) in 2021 from RMB 46,743,491 thousand in 2020[21] - Total liabilities rose to RMB 54,220,048 thousand (USD 8,508,308 thousand) in 2021 compared to RMB 48,080,658 thousand in 2020[21] - Long-term investments increased significantly to RMB 18,804,902 thousand (USD 2,950,899 thousand) in 2021 from RMB 11,711,259 thousand in 2020[19] - Property, plant, and equipment (net) grew to RMB 5,433,858 thousand (USD 852,691 thousand) in 2021 from RMB 4,549,943 thousand in 2020[19] - Deferred revenue increased to RMB 12,132,743 thousand (USD 1,903,892 thousand) in 2021 from RMB 10,398,872 thousand in 2020[21] - Accounts receivable (net) rose to RMB 5,507,988 thousand (USD 864,324 thousand) in 2021 from RMB 4,576,445 thousand in 2020[19] - Inventory (net) increased to RMB 964,733 thousand (USD 151,388 thousand) in 2021 from RMB 591,508 thousand in 2020[19] - Total equity attributable to NetEase, Inc. shareholders increased to RMB 95,328,080 thousand (USD 14,959,056 thousand) in 2021 from RMB 82,126,798 thousand in 2020[23] - Total liabilities, redeemable non-controlling interests, and equity amounted to RMB 153,643,924 thousand (USD 24,110,084 thousand) in 2021, up from RMB 141,874,582 thousand in 2020[23] - Total shareholders' equity decreased by RMB 46,025,845[28] - Minority interests decreased by RMB 794,209[28] - Retained earnings increased by RMB 21,509,059[28] - Accumulated other comprehensive loss decreased by RMB 650,457[28] - Statutory reserves increased by RMB 1,228,448[28] - Treasury stock decreased by 96,976 shares[28] - Capital reserve increased by RMB 27,829,431[28] - Ordinary shares increased by 3,446,311 shares[28] - NetEase's total assets as of December 31, 2021, were RMB 20,683.180 million, with current assets totaling RMB 19,189.678 million and non-current assets totaling RMB 1,493.502 million[38] - Total liabilities as of December 31, 2021, were RMB 18,708.525 million, with current liabilities amounting to RMB 18,416.574 million and non-current liabilities amounting to RMB 291.951 million[38] - NetEase's cash and cash equivalents decreased from RMB 2,455.313 million in 2020 to RMB 1,541.763 million in 2021[38] - Restricted cash increased significantly from RMB 1,727.000 million in 2020 to RMB 2,846.372 million in 2021[38] - NetEase's deferred revenue increased from RMB 9,304.037 million in 2020 to RMB 10,751.917 million in 2021[38] - NetEase's total equity attributable to shareholders as of December 31, 2021, was RMB 1,974.655 million[38] - Restricted net assets of the company's Chinese subsidiaries and VIE entities amounted to approximately RMB 13.3 billion as of December 31, 2021, representing 13% of the company's total consolidated net assets[190] Revenue Recognition and Business Segments - Online game service revenue for the year ended December 31, 2021, was RMB 62.8 billion[10] - Revenue from mobile game virtual items and PC game unlimited-use virtual items was recognized proportionally based on the estimated average playtime of paying players[10] - The estimated average playtime of paying players is subject to high estimation uncertainty and involves significant judgment, including historical player churn rates and similarities to existing games[10] - Revenue from prepaid points for PC games is initially recorded as deferred revenue and recognized as players use the points for gameplay or in-game purchases[60] - Advertising revenue is primarily generated from short-term online advertising contracts, typically lasting three months or less, with revenue recognized during the ad display period[64] - Revenue from advertising services in exchange for non-cash consideration was not significant for the years ended December 31, 2019, 2020, and 2021[65] - E-commerce revenue mainly comes from the Yanxuan platform, with revenue recognized when control of goods is transferred to customers, typically upon delivery[66] - Paid value-added services revenue is primarily from live streaming, online reading, and other innovative services, with revenue recognized on a straight-line basis over the subscription period[67] - Virtual items sold on live streaming platforms generate revenue, with income recognized upon delivery and consumption of consumable items or proportionally over the usable period for time-based items[68] - Contract assets as of December 31, 2020, and 2021 were not significant[69] - Contract liabilities, presented as deferred revenue, represent the obligation to transfer goods or services to customers after receiving or being entitled to receive consideration[70] - The company's mobile game revenue is generated through in-game virtual item sales, including items, avatars, skills, and consumables, with revenue recognized over the estimated playtime of paying players[59] - For PC games, revenue is recognized based on either playtime (time-based model) or the usage/expiration of in-game items (item-based model), with infinite-use items recognized over the estimated average playtime of paying players[60][61] - The company's tutoring services revenue is recognized proportionally over the estimated average learning time of students, considering general course durations and learning behavior patterns[62] - Cloud Music's subscription revenue is recognized over the subscription period, while revenue from digital album and song sales is recognized immediately upon purchase[63] - Content licensing revenue from Cloud Music is recognized over the licensing period, typically ranging from one to three years[63] - The company's revenue recognition involves significant management judgment, including estimates of virtual item lifespans, unredeemed game points, and sales returns[57] - Revenue is primarily derived from online game services, Youdao's tutoring services, Cloud Music's online music services, advertising, e-commerce, and other paid value-added services[57] - The company operates as the principal for all games, controlling pricing, sales, marketing, and customer service, with payments to developers and distribution channels classified as operating costs[58] Investments and Equity - Equity method investments and long-term equity investments without readily determinable fair values totaled RMB 3.7762 billion and RMB 8.803 billion, respectively, as of December 31, 2021[11] - Impairment provisions of RMB 2.0 million and RMB 19.2 million were recognized for equity method investments and long-term equity investments without readily determinable fair values, respectively, for the year ended December 31, 2021[11] - The impairment assessment for equity method investments and long-term equity investments without readily determinable fair values involves significant judgment, including identifying impairment indicators, selecting valuation methods, and determining key assumptions[11] - Long-term investments under the equity method increased to RMB 3,776,245 thousand as of December 31, 2021, from RMB 1,621,327 thousand in 2020[135] - Equity earnings under the equity method were RMB 1,575.5 million in 2021, up significantly from RMB 172.5 million in 2020 and RMB 4.3 million in 2019[136] - The company made equity investments in three limited partnership companies with a cumulative cash consideration of RMB 897.2 million as of December 31, 2020, and further injected RMB 54.2 million, RMB 42.5 million, and RMB 310.0 million into these companies in 2021. Additionally, the company invested RMB 211.8 million and RMB 127.6 million in two other limited partnership companies for online gaming business investments[137] - As of December 31, 2021, the company's equity investments with readily determinable fair values included RMB 2,111.4 million in AppLovin Corporation, RMB 1,356.7 million in Alibaba, RMB 618.7 million in Devolver Digital, Inc., RMB 559.0 million in Shenzhen Transsion Holdings Co., Ltd., RMB 534.8 million in Embracer Group AB, RMB 498.4 million in Huatai Securities Co., Ltd., and RMB 208.0 million in tinyBuild Inc. The company recorded fair value gains of RMB 763.2 million, RMB 720.6 million, and RMB 91.1 million for these investments in 2019, 2020, and 2021, respectively[138] - The company received cash dividends of RMB 12.7 million, RMB 12.7 million, and RMB 18.9 million from Huatai Securities Co., Ltd. in 2019, 2020, and 2021, respectively[138] - The company's equity investments without readily determinable fair values had a book value adjustment of RMB 380.8 million in 2021, compared to zero in 2019 and 2020. The company recognized gains of RMB 86.1 million, RMB 36.1 million, and RMB 172.5 million from the sale of these investments in 2019, 2020, and 2021, respectively[139] - The company recognized impairment provisions of RMB 168.4 million, RMB 55.6 million, and RMB 19.2 million related to certain equity investments in 2019, 2020, and 2021, respectively[139] - The company's goodwill increased from RMB 318.9 million in 2020 to RMB 595.3 million in 2021, with no impairment recognized during the year[141] - The fair value of equity investments with readily determinable fair values increased from RMB 3.74 billion in 2020 to RMB 5.89 billion in 2021, a 57.3% increase[188][189] Cash Flow and Financing - Net cash inflow from operating activities in 2021 was RMB 24,926,727 thousand (USD 3,911,547 thousand), maintaining a strong cash flow position[29] - Net cash outflow from investing activities in 2021 was RMB 7,078,294 thousand (USD 1,110,739 thousand), a significant reduction from RMB 29,192,407 thousand in 2020[31] - Net cash outflow from financing activities in 2021 was RMB 12,585,569 thousand (USD 1,974,950 thousand), compared to a net inflow of RMB 9,913,087 thousand in 2020[31] - Cash, cash equivalents, and restricted cash at the end of 2021 were RMB 17,376,115 thousand (USD 2,726,692 thousand), up from RMB 12,168,605 thousand in 2020[32] - Short-term investments net change in 2021 showed a significant increase, with a net inflow of RMB 3,694,890 thousand (USD 579,809 thousand)[31] - Equity incentive expenses in 2021 were RMB 3,041,492 thousand (USD 477,276 thousand), reflecting continued investment in employee retention and motivation[29] - Deferred revenue in 2021 was RMB 1,351,261 thousand (USD 212,042 thousand), indicating strong future revenue recognition potential[29] - The company's cash flow from operations remained robust, with a net inflow of RMB 24,926,727 thousand (USD 3,911,547 thousand) in 2021[29] - Net cash inflow from third-party transactions increased from RMB 37.63 million in 2019 to RMB 61.27 million in 2021[42] - Net cash outflow from intra-group technical consulting and services decreased from RMB 37.55 million in 2019 to RMB 59.44 million in 2021[42] - Net cash outflow from investment activities decreased significantly from RMB 495,160 in 2019 to RMB 39,430 in 2021[42] - Net cash outflow from financing activities increased from RMB 26,520 in 2019 to RMB 1.30 million in 2021[42] - VIE entities' registered capital increased from RMB 512.4 million in 2020 to RMB 519.7 million in 2021[42] - The company had unused credit facilities of USD 1,503.9 million as of December 31, 2021, under various uncommitted credit agreements with financial institutions[156] - The company's subsidiaries secured multiple credit facilities totaling $1,730.0 million in 2021, with $621.7 million remaining unused as of December 31, 2021[157] - A five-year term loan and revolving credit facility agreement was signed on June 2, 2021, with a total commitment of $1.0 billion, and $200.0 million remained outstanding as of December 31, 2021[160] - Cloud Music repurchased redeemable minority interests for $66.3 million in 2020, and the excess over the carrying amount was recognized as deemed dividends to preferred shareholders[161] - Youdao issued preferred shares with a total cash consideration of $70.0 million in 2018, which were later converted into Class A ordinary shares upon its IPO in 2019[162] Expenses and Costs - Research and development expenses increased to RMB 14,075,991 thousand (USD 2,208,830 thousand) in 2021 from RMB 10,369,382 thousand in 2020[24] - Depreciation and amortization expenses in 2021 were RMB 3,275,727 thousand (USD 514,033 thousand), slightly lower than RMB 3,457,782 thousand in 2020[29] - Advertising expenses for the years 2019, 2020, and