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 - 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]

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

Financial Performance - NetEase reported Q2 2021 net revenue of RMB 20.5 billion (USD 3.18 billion), a year-over-year increase of 12.9%[5] - Online gaming services net revenue reached RMB 14.5 billion (USD 2.25 billion), up 5.1% year-over-year[5] - Youdao net revenue was RMB 1.3 billion (USD 200.3 million), showing a significant increase of 107.5% year-over-year[5] - Gross profit for Q2 2021 was RMB 11.2 billion (USD 1.73 billion), reflecting a year-over-year growth of 14.3%[5] - In Q2 2021, the net profit attributable to shareholders was RMB 3,541.8 million (USD 548.5 million), down from RMB 4,439.2 million in the previous quarter and RMB 4,537.8 million in the same quarter last year[14] - The non-GAAP net profit attributable to shareholders for Q2 2021 was RMB 4,227.9 million (USD 654.8 million), compared to RMB 5,080.7 million in the previous quarter and RMB 5,226.0 million in the same quarter last year[15] - The basic earnings per share for Q2 2021 was USD 0.16, down from USD 0.21 in the previous quarter and USD 0.22 in the same quarter last year[15] - Net profit for the three months ended June 30, 2021, was RMB 4,651,280, showing an increase compared to RMB 3,476,364 for the same period in 2020[31] - The company reported a net profit attributable to shareholders of RMB 4,227,865 thousand for the three months ended June 30, 2021, compared to RMB 3,541,754 thousand for the same period in 2020, representing a year-over-year increase of 19.4%[34] Operating Expenses - Operating expenses totaled RMB 7.4 billion (USD 1.15 billion), a year-over-year increase of 32.2%[11] - Total operating expenses for the six months ended June 30, 2021, were RMB 14,208,554, an increase from RMB 10,513,479 in the same period of 2020, reflecting a rise of approximately 35.5%[30] Cash Flow and Investments - As of June 30, 2021, the company's cash and cash equivalents totaled RMB 108 billion (USD 16.7 billion), an increase from RMB 100.1 billion as of December 31, 2020[17] - The net cash inflow from operating activities for Q2 2021 was RMB 4.7 billion (USD 731.5 million), down from RMB 5.5 billion in the previous quarter[17] - The company reported a net cash outflow from investing activities of RMB 22,735,348 for the six months ended June 30, 2021[31] - The net cash inflow from financing activities was RMB 18,784,780 for the six months ended June 30, 2021[31] Market and Product Developments - The flagship game "Naraka: Bladepoint" topped the Steam sales chart after its global launch in August[6] - Upcoming mobile game "Harry Potter: Magic Awakened" is set to launch on September 9, 2021[7] - NetEase's CEO expressed excitement about the upcoming product launches, which are expected to strengthen the company's leading position in the gaming industry[6] - The company has expanded its business into international markets, including Japan and North America, and continues to develop popular online games and services[22] - The company plans to continue expanding its market presence and investing in new technologies and products to drive future growth[32] Regulatory and Market Risks - The company is expected to be significantly impacted by regulatory changes in the K-12 education sector in China, although the extent of the impact remains uncertain[18] - The company faces risks related to market growth, regulatory changes, and competition in the online gaming sector, which could impact future performance[24] Financial Metrics and Ratios - The effective tax rate for Q2 2021 was 24.3%, an increase from 22.0% in the previous quarter and 18.6% in the same quarter last year[13] - The company emphasizes the importance of non-GAAP financial metrics for investors to assess operational performance and future prospects[26] - Net income attributable to shareholders under non-GAAP was defined as net income excluding stock-based compensation expenses, providing a clearer view of operational performance[25] Assets and Liabilities - Total assets increased from RMB 141.87 billion in 2020 to RMB 154.86 billion in 2021, reflecting a growth of approximately 9%[28] - Current assets totaled RMB 115.96 billion as of June 30, 2021, up from RMB 107.83 billion in 2020, indicating an increase of about 7%[28] - Total liabilities rose from RMB 48.08 billion in 2020 to RMB 56.34 billion in 2021, representing an increase of approximately 17%[29] - The company reported a total equity attributable to shareholders of RMB 86.14 billion as of June 30, 2021, up from RMB 82.13 billion in 2020, reflecting an increase of about 5%[29] Research and Development - The company’s research and development expenses for the three months ended June 30, 2021, were RMB 217,766 thousand, slightly up from RMB 212,369 thousand for the same period in 2020[33]

Financial Results Announcement - The board meeting for NetEase, Inc. is scheduled for August 30, 2021, to approve the unaudited financial results for the three and six months ended June 30, 2021[1]. - The financial results will be announced on August 31, 2021, around 6 PM Hong Kong time[1]. - A conference call to discuss the financial results will take place on August 31, 2021, at 8 PM Hong Kong time[1].

Financial Performance - NetEase, Inc. reported a net revenue of RMB 73,667,133 thousand for 2020, representing a 24.4% increase from RMB 59,241,145 thousand in 2019[4] - The gross profit for 2020 was RMB 38,983,402 thousand, up 23.5% from RMB 31,555,300 thousand in 2019[4] - The company reported online gaming service revenue of RMB 54.6 billion for the year ended December 31, 2020[11] - The online gaming services segment generated RMB 54,608,717 in revenue for 2020, up 17.8% from RMB 46,422,640 in 2019[24] - Total comprehensive income for the period was RMB 6,496,041 thousand, a decrease from RMB 21,337,352 thousand in the previous period[26] - Net income attributable to NetEase, Inc. shareholders was RMB 12,062,754 for 2020, a decrease from RMB 21,237,516 in 2019[24] - Basic earnings per share (EPS) was RMB 1.90, compared to RMB 6.59 in the previous year, reflecting a decline of approximately 71%[26] - The diluted EPS was RMB 1.89, down from RMB 6.53 in the previous year, indicating a decline of approximately 71%[26] - The total net revenue for 2020 was RMB 62,191,162,000, up 25.7% from RMB 49,455,146,000 in 2019[38] - The total revenue for the discontinued operations for the year ended December 31, 2019, was RMB 10,571,406, down from RMB 15,977,878 in 2018, representing a decrease of approximately 33.5%[106] Assets and Liabilities - The total assets increased to RMB 141,874,582 thousand in 2020, a rise of 26.6% from RMB 112,124,371 thousand in 2019[5] - The total liabilities rose to RMB 48,080,658 thousand, which is an increase of 23.0% from RMB 39,082,916 thousand in 2019[5] - The total current assets increased to RMB 107,831,043 thousand, reflecting a growth of 26.8% from RMB 85,105,012 thousand in 2019[5] - The total equity attributable to shareholders increased to RMB 82,997,804 thousand, a growth of 32.5% from RMB 62,592,855 thousand in 2019[5] - Cash and cash equivalents rose significantly from RMB 3.25 billion in 2019 to RMB 9.12 billion in 2020, an increase of 180.5%[19] - Total liabilities increased from RMB 38.24 billion in 2019 to RMB 46.74 billion in 2020, an increase of 22.0%[21] - The company maintained a strong liquidity position with current assets significantly exceeding current liabilities in 2020[19] Revenue Recognition and Accounting Policies - The company has adopted ASC 606 for revenue recognition, which did not have a significant impact on the consolidated financial statements[53] - Revenue is primarily derived from online gaming services, online course services, advertising services, e-commerce, and other paid value-added services[54] - The company generates mobile game revenue through the sale of virtual items, with revenue recognized proportionally based on the estimated average gaming time of paying players[56] - The online course services provided by the company are considered a single performance obligation, with revenue recognized proportionally over the estimated average learning time during the student's learning period[59] - Advertising revenue is primarily generated from short-term contracts, with income recognized based on the number of ad impressions or actions completed by users[60] Research and Development - Research and development expenses for 2020 were RMB 10,369,382, which is a 23.2% increase from RMB 8,413,224 in 2019[24] - The company is investing $200 million in research and development for innovative online services and technologies[192] - The company is actively involved in research and development (R&D) initiatives[189] Risks and Compliance - The company faced industry-specific risks, including rapid technological changes and regulatory scrutiny in the Chinese internet and gaming sectors[40] - The company faces significant risks if the Chinese government takes actions that could restrict its business activities, including the potential revocation of business licenses and operational restrictions[49] - The company is subject to various regulatory bodies in China, including the China Securities Regulatory Commission[189] - The company faces various regulatory risks related to compliance with telecommunications, internet, foreign investment, and consumer protection laws in China[197] Shareholder Information - The company declared cash dividends totaling RMB 3,614.8 million (approximately USD 554.0 million) for the fiscal years 2019 and 2020[167] - The company has committed to a quarterly cash dividend policy, distributing approximately 20% to 30% of the estimated after-tax net profit for each fiscal quarter[167] - The company’s ordinary shareholders have the right to receive dividends and participate in the distribution of remaining assets upon liquidation, with no preferential rights[154] Investments and Acquisitions - The company has established several contractual arrangements to provide additional financial support to its VIE entities as needed[39] - The company has established joint ventures with Blizzard for online game operations in China, which are classified as variable interest entities[46] - The company is exploring potential acquisitions in the education technology sector to diversify its service offerings[192] Market and Competitive Landscape - The company is facing competitive pressures from emerging players in the online gaming market, which could affect market share[196] - The competitive landscape in the online gaming industry is rapidly changing, making it challenging for the company to maintain a competitive edge in the mobile gaming market[200] - The company must continue to invest in new technology development to enhance user experience across its gaming platforms[200] Financial Reporting and Internal Controls - The company follows U.S. Generally Accepted Accounting Principles (GAAP) for its financial reporting[186] - The company has implemented internal controls over financial reporting as required by the Sarbanes-Oxley Act[185] - The company reported audited consolidated financial statements for the years ended December 31, 2018, 2019, and 2020[187]

Financial Performance - NetEase reported Q2 2020 net revenue of RMB 18.2 billion (USD 2.6 billion), a year-over-year increase of 25.9%[3] - Online gaming services net revenue reached RMB 13.8 billion (USD 2.0 billion), up 20.9% year-over-year[3] - Youdao's net revenue was RMB 623.3 million (USD 88.2 million), reflecting a significant year-over-year growth of 93.1%[3] - Gross profit for Q2 2020 was RMB 9.8 billion (USD 1.4 billion), an increase of 26.6% compared to the previous year[3] - Operating expenses totaled RMB 5.6 billion (USD 795.8 million), marking a year-over-year increase of 40.1%[3] - Net income attributable to shareholders from continuing operations was RMB 4.5 billion (USD 642.3 million) for the quarter[4] - The net profit attributable to shareholders for Q2 2020 was RMB 4,537.8 million (USD 642.3 million), compared to RMB 3,551.0 million in the previous quarter and RMB 3,354.2 million year-over-year[13] - The net profit attributable to shareholders for the six months ended June 30, 2020, was RMB 8,088,812, up from RMB 5,453,485 in the same period of 2019, reflecting a growth of around 48.1%[31] - The company reported a net profit margin of approximately 22.9% for the six months ended June 30, 2020, compared to 19.0% for the same period in 2019, indicating improved profitability[31] Revenue Growth - Net revenue for the six months ended June 30, 2020, was RMB 35,247,173, representing a significant increase compared to RMB 28,870,651 for the same period in 2019, reflecting a growth of approximately 22.5%[31] - Total net revenue for the company was RMB 18,184,806 thousand, compared to RMB 14,448,442 thousand in the same period last year, reflecting a growth of approximately 25.2%[33] Operating Costs and Expenses - The company experienced a significant increase in operating costs, which rose to RMB 16,077,376 for the six months ended June 30, 2020, from RMB 13,396,129 in the same period of 2019, reflecting a growth of about 19.9%[31] - Total operating expenses in Q2 2020 amounted to RMB 5,622.3 million (USD 795.8 million), an increase from RMB 4,891.2 million in the previous quarter and RMB 4,012.5 million year-over-year[10] - The total operating costs amounted to RMB 8,392,631 thousand, an increase from RMB 6,711,594 thousand in the previous year, indicating a rise of approximately 25%[33] Cash Flow and Liquidity - As of June 30, 2020, the company had cash and cash equivalents totaling RMB 102,993.6 million (USD 14,577.8 million), compared to RMB 74,406.0 million at the end of 2019[17] - The net cash inflow from operating activities for the six months ended June 30, 2020, was RMB 6,500,649, compared to RMB 4,928,126 for the same period in 2019, representing a year-over-year increase of approximately 32%[32] - The total cash and cash equivalents at the end of June 30, 2020, were RMB 9,100,323, a decrease from RMB 10,206,538 at the end of the previous year[32] Shareholder Returns - The company announced a quarterly dividend of USD 1.485 per American Depositary Share for Q2 2020, compared to USD 1.16 in Q1 2020[15] - The company repurchased approximately 2.3 million American Depositary Shares for a total of about USD 755.7 million as part of its share repurchase plan[18] Market Presence and Strategy - The company completed its listing on the Hong Kong Stock Exchange in June 2020, enhancing its market presence[6] - NetEase is a leading internet technology company in China, focusing on innovative and diversified online services, including popular mobile and PC games[24] - The company has expanded its business into international markets, including Japan and North America, in recent years[24] - The company plans to continue expanding its market presence and investing in new technologies to enhance user engagement and retention[34] Research and Development - Research and development expenses for the six months ended June 30, 2020, totaled RMB 4,550,955, compared to RMB 3,983,482 in the same period of 2019, indicating an increase of about 14.2%[31] - Research and development expenses were RMB 212,369 thousand, reflecting a year-over-year increase from RMB 172,021 thousand[34] Risks and Challenges - NetEase's financial performance may be affected by various risks, including market competition and regulatory changes[25] - The company acknowledges the limitations of non-GAAP financial metrics, which may not reflect all operational costs and income items[27] Earnings Call - The earnings conference call is scheduled for August 13, 2020, at 7:30 AM New York time[23] - The company will provide a live broadcast of the earnings release on its investor relations website, with a replay available for 12 months[23]