Core Insights - Net revenue for the first quarter of 2025 reached RMB 28.8 billion (USD 4 billion), representing a year-on-year increase of 7.4% [1] - The gaming and related value-added services generated net revenue of RMB 24 billion (USD 3.3 billion), up 12.1% year-on-year [1] - The company reported a gross profit of RMB 18.5 billion (USD 2.5 billion), an increase of 8.6% year-on-year [1] Financial Performance - Net income attributable to shareholders was RMB 10.3 billion (USD 1.4 billion) [1] - Non-GAAP net income attributable to shareholders was RMB 11.2 billion (USD 1.5 billion) [1] - Basic earnings per share were USD 0.45, with non-GAAP basic earnings per share at USD 0.49 [1] Dividend Announcement - The board approved a dividend of USD 0.1350 per share for the first quarter of 2025 [1] CEO Commentary - The CEO highlighted the company's strong performance in 2025, attributing it to continuous innovation and the launch of new products [2] - The gaming segment showed robust performance, with strong content updates and gameplay enhancements contributing to the success of long-standing games [2] - The company remains focused on high-quality, technology-driven innovation across its various business segments, including Youdao and other services [2]

Financial Performance - NetEase's net revenue for Q1 2025 was RMB 28.8 billion (USD 4 billion), an increase of 7.4% year-over-year[6] - Revenue from games and related value-added services reached RMB 24 billion (USD 3.3 billion), up 12.1% year-over-year[6] - Youdao's revenue was RMB 1.3 billion (USD 178.9 million), a decrease of 6.7% year-over-year[6] - NetEase Cloud Music's revenue was RMB 1.9 billion (USD 256.1 million), down 8.4% year-over-year[6] - Gross profit for Q1 2025 was RMB 18.5 billion (USD 2.5 billion), an increase of 8.6% year-over-year[6] - Total operating expenses were RMB 8 billion (USD 1.1 billion), a decrease of 14.4% year-over-year[6] - Net profit attributable to shareholders was RMB 10.3 billion (USD 1.4 billion), with a non-GAAP net profit of RMB 11.2 billion (USD 1.5 billion)[6] - In Q1 2025, the net profit attributable to shareholders was RMB 10.3 billion (USD 1.4 billion), an increase from RMB 8.8 billion in the previous quarter and RMB 7.6 billion year-over-year[18] - The basic earnings per share for Q1 2025 was USD 0.45, compared to USD 0.38 in the previous quarter and USD 0.33 in the same quarter last year[18] - The company’s non-GAAP net profit for Q1 2025 was RMB 11.2 billion (USD 1.5 billion), up from RMB 9.7 billion in the previous quarter and RMB 8.5 billion year-over-year[18] - The non-GAAP net profit attributable to shareholders for the first quarter of 2024 was RMB 8,510,844 thousand, reflecting a strong operational performance[37] Cash Flow and Assets - As of March 31, 2025, the company had a net cash balance of RMB 137 billion (USD 18.9 billion), up from RMB 131.5 billion at the end of 2024[20] - The operating cash flow for Q1 2025 was RMB 12.1 billion (USD 1.7 billion), a decrease from RMB 13 billion in the previous quarter and an increase from RMB 9.6 billion year-over-year[20] - Cash and cash equivalents decreased from RMB 51.38 billion to RMB 41.75 billion, a decline of about 18.5%[31] - Total current assets increased from RMB 153.32 billion to RMB 157.67 billion, a growth of about 2.2%[31] - Total assets increased from RMB 195.99 billion on December 31, 2024, to RMB 200.86 billion on March 31, 2025, reflecting a growth of approximately 2.2%[31] - Total liabilities decreased slightly from RMB 53.50 billion to RMB 52.99 billion, indicating a reduction of approximately 0.9%[31] - The company reported a total equity of RMB 142.41 billion as of December 31, 2024, increasing to RMB 147.78 billion by March 31, 2025, representing a growth of about 3.1%[31] - Short-term investments rose significantly from RMB 10.76 billion to RMB 17.36 billion, an increase of approximately 61.5%[31] Shareholder Returns - The company approved a dividend of USD 0.1350 per share for Q1 2025, with the payment date expected around June 10, 2025[21] - The share repurchase program, initiated on January 10, 2023, has seen the company buy back approximately 21.6 million ADS for a total of about USD 1.9 billion as of March 31, 2025[22] Market Position and Strategy - The company continues to focus on expanding its gaming ecosystem and developing new products, leveraging its strong R&D capabilities[26] - The company highlighted ongoing risks related to market growth and competition in the online gaming sector, which could impact future performance[28] - The company emphasized the importance of non-GAAP financial metrics for investors to assess operational performance and future prospects[30] - The company is focused on maintaining its market position and developing innovative online services to adapt to market trends[28] - The company plans to continue expanding its market presence and investing in new technologies to drive future growth[32] - The company plans to continue expanding its market presence and investing in new product development in the upcoming quarters[34] Game Performance - The number of registered players for "Yan Yun Shi Liu Sheng" exceeded 30 million by March 2025[9] - The new game "Jie Wai Kuang Chao" ranked sixth on the Steam global sales chart within three days of its launch[9] - Youdao achieved a record high operating profit in Q1 2025, maintaining positive operating profit momentum over recent quarters[9] Conference and Future Outlook - The management will discuss quarterly performance and future outlook in a conference call scheduled for May 15, 2025[25]

Group 1 - The core index of the China Securities Hong Kong Technology Index reflects the overall performance of leading technology companies listed in Hong Kong, selected based on market capitalization, R&D investment, and revenue growth [1][2] - The China Securities Hong Kong Technology Index has seen a decline of 15.90% over the past month, an increase of 13.74% over the past three months, and a year-to-date increase of 13.70% [1] - The top ten holdings of the index include Xiaomi Group-W (12.3%), Alibaba-W (11.35%), Tencent Holdings (9.92%), BYD Company (8.16%), Meituan-W (7.21%), JD Group-SW (6.39%), NetEase-S (5.66%), Baidu Group-SW (4.24%), SMIC (4.0%), and BeiGene (3.22%) [1] Group 2 - The industry composition of the index shows that consumer discretionary accounts for 41.51%, communication services for 23.64%, information technology for 22.87%, healthcare for 11.57%, and industrials for 0.41% [2] - The sample of the China Securities Hong Kong Technology Index is adjusted semi-annually, with adjustments occurring on the next trading day after the second Friday of June and December [2] - Public funds tracking the Hong Kong technology sector include the Southern China Securities Hong Kong Technology ETF and the China Merchants China Securities Hong Kong Technology ETF [3]

Financial Performance - NetEase reported a net revenue of RMB 105.3 billion for the year ended December 31, 2024, representing a 1.6% increase from RMB 103.5 billion in 2023[7] - Gross profit for 2024 was RMB 65.8 billion, up from RMB 63.1 billion in 2023, indicating a growth of 4.3%[7] - The net profit attributable to shareholders for 2024 was RMB 29.7 billion, a slight increase of 1.0% compared to RMB 29.4 billion in 2023[7] - The company reported a projected net income of RMB 30.26 billion for 2024, indicating a forecasted growth of approximately 3% from 2023[36] - Net profit for the year ended December 31, 2023, reached RMB 29,357,223, representing a 47.5% increase from RMB 19,843,290 in 2022[38] - The company plans to maintain a steady growth trajectory with a projected net profit of RMB 30,256,347 for 2024, representing a 2.4% increase from 2023[38] Assets and Liabilities - Total current assets increased to RMB 153.3 billion in 2024 from RMB 142.7 billion in 2023, reflecting a growth of 7.4%[7] - Total liabilities decreased to RMB 53.5 billion in 2024 from RMB 57.8 billion in 2023, showing a reduction of 7.5%[7] - The total assets of NetEase reached RMB 196.0 billion in 2024, up from RMB 185.9 billion in 2023, marking an increase of 5.7%[7] - Cash and cash equivalents rose significantly from RMB 21.43 billion in 2023 to RMB 51.38 billion in 2024, an increase of approximately 140%[32] - The total liabilities for 2024 are projected to be RMB 21,883,761, an increase from RMB 20,060,196 in 2023[51] Equity and Investments - NetEase's total equity increased to RMB 142.4 billion in 2024 from RMB 128.0 billion in 2023, representing a growth of 11.2%[7] - The total equity attributable to shareholders increased from RMB 124.29 billion in 2023 to RMB 138.69 billion in 2024, a growth of about 11.5%[35] - The group has long-term equity investments with a consolidated balance of RMB 11 billion as of December 31, 2024, which do not have easily determinable fair values[18] - Management regularly conducts impairment tests on these investments, assessing qualitative indicators against their carrying values to identify potential impairment signs[18] Revenue Recognition - Revenue recognition is based on the transfer of control of goods or services to customers, with estimates for returns, discounts, and VAT deducted from the recognized amount[73] - The company's revenue primarily comes from online gaming services, tutoring services, smart hardware sales, online music services, live streaming services, advertising services, e-commerce, and other paid value-added services[73] - Mobile game revenue is generated through the sale of virtual items, with revenue recognized proportionally based on the estimated average gaming time of paying players[75] - The group provides various integrated educational services through Youdao, including tutoring courses, digital learning content, and IT skills training, with revenue recognized proportionally during the estimated average learning time[79] Audit and Compliance - The board of directors is responsible for preparing consolidated financial statements that are free from material misstatement due to fraud or error, and for maintaining necessary internal controls[22] - The audit committee oversees the financial reporting process of the group[23] - The auditor's goal is to obtain reasonable assurance that the consolidated financial statements are free from material misstatement, whether due to fraud or error[24] - The independent auditor's report was issued by PwC on April 15, 2025[30] Cash Flow and Financing - Operating cash flow for 2023 was RMB 35,331,275, up 27.5% from RMB 27,709,233 in 2022[41] - The company’s cash flow statement indicates a strong liquidity position, supporting ongoing investments and operational needs[40] - The company has established multiple guarantee agreements for credit facilities totaling USD 2.7 billion, with USD 1.5 billion remaining undrawn as of December 31, 2024[183] Employee and Incentive Expenses - Employee benefits expenses increased from RMB 3.18 billion in 2023 to RMB 3.19 billion in 2024, showing a slight growth of 0.04%[191] - The total equity incentive expenses for the years ended December 31, 2022, 2023, and 2024 were RMB 32 billion, RMB 32 billion, and RMB 39 billion, respectively, indicating a 21.9% increase in 2024[194] - The company expects to recognize RMB 402.1 million (approximately RMB 2.9 billion) in unrecognized incentive expenses related to the 2019 equity incentive plan by December 31, 2024[196] Regulatory and Legal Risks - The company believes its VIE agreements comply with Chinese law, although uncertainties in the legal framework may pose risks to enforcement[66] - The company may face significant costs and resource expenditures if VIE entities fail to fulfill their obligations under current agreements[66] - Any penalties imposed by the Chinese government could severely impact the company's ability to operate its business and may result in the loss of control over VIE entities[69] Research and Development - Research and development expenses increased from RMB 15.04 billion in 2022 to RMB 16.48 billion in 2023, marking a rise of about 9.7%[36] - Research and development expenses primarily include employee-related costs and technical service fees for online game development and other products[94]

Market Overview - The Hang Seng Index opened up 1.66%, with the Hang Seng Tech Index rising by 3.31%. Notable tech stocks such as NetEase, JD Group, Xiaomi, and Alibaba saw significant gains of 6.8%, 6.49%, 5.76%, and 4.34% respectively [1] Future Outlook for Hong Kong Stocks - According to a report from Founder Securities, the current rally in Hong Kong stocks is supported by the recovery of the Chinese economy, a rebound in corporate earnings, a favorable liquidity environment, and the catalytic logic of the tech industry. The overall market valuation is near historical averages, indicating potential for continued upward movement [1] - CICC's latest report emphasizes that the long-term pricing of Hong Kong stocks is dependent on earnings prospects. If earnings materialize, stock prices may rise while valuations decrease. Short-term fluctuations may occur for stocks that have already seen significant gains, but the long-term revaluation logic for Chinese tech assets remains unchanged [1] Investment Themes - Galaxy Securities identifies three main investment themes for the Hong Kong market: 1. The technology sector, which is expected to transition from valuation uplift to earnings realization due to policy support and technological advancements in AI [2] 2. The consumer sector, which is prioritized by the government to boost consumption, indicating potential for further supportive policies [2] 3. High dividend sectors that offer stable investment returns [2] Economic and Policy Environment - Analysts from Singapore Bank note that while overseas interest rate cuts are slowing, they will gradually decline, alleviating pressure on Hong Kong stocks. The Chinese government's focus on promoting consumption and supporting technological innovation is expected to benefit the stock market [2] - The market is also influenced by U.S. trade policy, with potential tariffs on 15 to 20 countries impacting stock market dynamics. This could lead to shifts in global capital flows and affect Hong Kong's market performance [3] Sector Rotation and Investment Strategy - The market is experiencing sector rotation, with funds flowing into sectors less affected by tariffs. Short-term operations may shift based on the implementation of trade policies [3] - Huatai Securities suggests that the relative return potential for Hong Kong stocks remains, supported by expanding domestic PMI, signs of real estate stabilization, and continuous inflow of southbound funds. Recommended sectors for investment include domestic consumption, hard tech with solid earnings expectations, and dividend stocks with stable earnings [3][4]

Investment Rating - The report maintains a "Buy" rating for NetEase-S (09999.HK) [1] Core Views - The strong recovery in PC gaming has led to a positive turnaround in gaming revenue, with the game "Marvel Duel" exceeding expectations [2][22] - The company is expected to continue its growth in gaming revenue in Q1, driven by new product launches [3][23] - The valuation model suggests a target price range of HKD 175-207 for 2025, based on a sum-of-the-parts (SOTP) valuation approach [4] Financial Performance Summary - For the full year, gaming and related services generated revenue of CNY 836 billion, a year-over-year increase of 2.5%, with PC game revenue at CNY 219.46 billion (up 16.56%) and mobile game revenue at CNY 584.96 billion (up 2.7%) [2][22] - In Q4, gaming and related services revenue reached CNY 212 billion (up 1.54% year-over-year), with online gaming revenue at CNY 205.41 billion (up 5.12%) [2][22] - The gross margin for the gaming business in Q4 was 66.70%, reflecting a slight decrease [2][22] Earnings Forecast and Valuation - The forecast for net profit attributable to shareholders for 2025-2027 is CNY 311.99 billion, CNY 339.94 billion, and CNY 361.22 billion, respectively [4] - The current stock price corresponds to a PE ratio of 15.0 for 2025, 13.8 for 2026, and 13.0 for 2027 [4] - The report highlights the importance of new product launches for future revenue growth, with several titles in the pipeline [3][23] Key Financial Metrics - Main revenue for 2024 is projected at CNY 105,295 million, with a year-over-year growth rate of 1.8% [5] - Net profit for 2024 is estimated at CNY 29,698 million, with a growth rate of 1.0% [5] - The report indicates a stable financial position with a debt-to-asset ratio of 27.30% [6]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 174.20 HKD / 160.69 CNY [3][6]. Core Views - The new games "燕云十六声" and "七日世界" are expected to drive revenue growth for the company. The forecasted net profit for the years 2024 to 2026 is 297 billion, 326 billion, and 348 billion CNY respectively, adjusted from previous estimates due to changes in game launch schedules and sales expense rates [3][9]. Financial Summary - The company's revenue for 2022 was 96,496 million CNY, with a year-on-year growth of 10.15%. The projected revenue for 2024 is 105,295 million CNY, reflecting a modest growth of 1.77% [4][15]. - The operating profit for 2022 was 19,629 million CNY, with a significant year-on-year increase of 19.56%. The forecast for 2024 is 29,584 million CNY, indicating a growth of 6.77% [4][15]. - The net profit attributable to the parent company for 2022 was 20,338 million CNY, showing a year-on-year growth of 20.65%. The projected net profit for 2024 is 29,698 million CNY, with a minimal growth of 0.96% [4][15]. - The earnings per share (EPS) for 2022 was 5.89 CNY, expected to rise to 8.60 CNY in 2024 [4][15]. - The gross margin for 2022 was 54.68%, projected to improve to 62.50% in 2024 [4][15]. - The net margin for 2022 was 21.08%, expected to be 28.20% in 2024 [4][15]. - The return on equity (ROE) for 2022 was 20.33%, projected to decrease to 22.59% in 2024 [4][15]. - The price-to-earnings (P/E) ratio is expected to decrease from 25 in 2024 to 17 in 2025 and further to 15 in 2026 [4][15].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 174.20 HKD / 160.69 CNY [3][6]. Core Views - The launch of new games such as "燕云十六声" and "七日世界" is expected to drive revenue growth for the company. The forecasted net profit for the years 2024 to 2026 is 297 billion, 326 billion, and 348 billion CNY respectively, reflecting adjustments in game launch schedules and sales expense rates [3][8]. Financial Summary - The company's revenue for 2022 was 96,496 million CNY, with a year-on-year growth of 10.15%. The projected revenue for 2024 is 105,295 million CNY, with a growth rate of 1.77% [4][15]. - The operating profit for 2022 was 19,629 million CNY, with a year-on-year growth of 19.56%. The projected operating profit for 2024 is 29,584 million CNY, with a growth rate of 6.77% [4][15]. - The net profit attributable to the parent company for 2022 was 20,338 million CNY, with a year-on-year growth of 20.65%. The projected net profit for 2024 is 29,698 million CNY, with a growth rate of 0.96% [4][15]. - The earnings per share (EPS) for 2022 was 5.89 CNY, projected to be 8.60 CNY in 2024 [4][15]. - The gross margin for 2022 was 54.68%, expected to increase to 62.50% in 2024 [4][15]. - The net margin for 2022 was 21.08%, projected to be 28.20% in 2024 [4][15]. - The return on equity (ROE) for 2022 was 20.33%, expected to decrease to 22.59% in 2024 [4][15]. - The price-to-earnings (P/E) ratio for 2024 is projected to be 17 [4][15].

Investment Rating - The report assigns a "Buy" rating for the company with a target price of $125.00, indicating a potential upside of 23.44% for the US stock and 21.64% for the HK stock [1]. Core Insights - The company's revenue growth is driven by Blizzard games, with a notable increase in PC game revenue, while mobile game revenue is anticipated to improve with new product launches [2][3]. - The forecasted revenue CAGR for the company from 2025 to 2027 is 11.4%, with Non-GAAP net profit CAGR expected at 10.5% [2]. Financial Performance Summary - Total revenue for the fiscal year ending December 31 is projected to grow from $14,232 million in 2023 to $17,966 million by 2027, reflecting a compound annual growth rate (CAGR) of 6.2% [2]. - Non-GAAP net profit is expected to increase from $4,485 million in 2023 to $5,633 million in 2027, with Non-GAAP earnings per ADS rising from $6.9 to $8.5 over the same period [2]. - The company achieved a GAAP net profit of 87.7 billion RMB in Q4 2024, a year-on-year increase of 33.2%, exceeding Bloomberg consensus estimates [2]. Game Segment Performance - The revenue from games and related value-added services grew by 1.5% year-on-year to 212.4 billion RMB, with PC game revenue increasing by 56.6% to 71.3 billion RMB, driven by titles like "World of Warcraft" and "Hearthstone" [2]. - Mobile game revenue, however, declined by 10.5% to 134 billion RMB due to a lack of new product releases, but upcoming titles are expected to boost this segment [2]. Other Business Segments - Youdao is projected to achieve its first profitable year in 2024, with revenue expected to grow by 4.4% to 56.3 billion RMB, driven by AI subscription services [2]. - Cloud Music's revenue for 2024 is forecasted to reach 79.5 billion RMB, with a year-on-year growth of 1.1%, supported by increased subscription revenue and cost control measures [2].

Investment Rating - The report maintains a "Buy" rating for the company [10] Core Insights - The company achieved revenue of 26.75 billion yuan in Q4 2024, a year-over-year decrease of 1.4% but a quarter-over-quarter increase of 2.1%. The gross profit was 16.27 billion yuan, with a gross margin of 60.8%, down 1.2 percentage points year-over-year. Adjusted net profit reached 9.68 billion yuan, reflecting a year-over-year increase of 31.2% and a net margin of 36.2%, up 9.2 percentage points year-over-year [6][10] - The launch of the PC game "Marvel Showdown" on December 6, 2024, significantly boosted user engagement, with over 10 million registered users within 72 hours and a current user base exceeding 40 million. The new game "Yanyun Sixteen Sounds" also performed well, achieving over 3 million downloads in four days and topping the iOS download charts for two weeks [6][10] - The company has a strong pipeline of games, including "Destiny: Rising" and "Marvel Secret Frenzy," which enhances its product matrix and long-term operational capabilities [8] - The profitability of the cloud music and Youdao businesses is improving, with cloud music subscription revenue growing by 22% year-over-year and a gross margin of 33.7%, up 7 percentage points year-over-year. Additionally, Youdao achieved its first annual operating profit due to AI integration [9] Financial Summary - The company’s projected revenues for CY 2025, 2026, and 2027 are 113.44 billion yuan, 122.35 billion yuan, and 132.98 billion yuan, respectively. The projected net profits (Non-GAAP) for the same years are 35.91 billion yuan, 39.16 billion yuan, and 42.96 billion yuan, respectively [10][13] - Key financial metrics include a return on equity (ROE) of 24% in 2024, projected to decline to 18% by 2027. The earnings per share (EPS) is expected to grow from 10.37 yuan in 2024 to 13.40 yuan in 2027 [13][15]