Group 1 - The company's revenue increased by 8.2% year-on-year to 28.36 billion yuan, which was 3% lower than Bloomberg's expectations [1] - Gross margin was 64.1%, exceeding Bloomberg's expectations by 0.1 percentage points [1] - Adjusted net profit margin reached 33.5%, surpassing Bloomberg's expectations by 0.8 percentage points, with adjusted net profit growing by 26.7% year-on-year to 9.5 billion yuan, slightly below Bloomberg's expectations by 0.6% [1] Group 2 - Self-developed games performed well, generating revenue of 23.33 billion yuan, which was 2.3% lower than Bloomberg's expectations, with a year-on-year growth of 11.8% [1] - The revenue growth was driven by titles such as "Dream of the Red Chamber" PC version, "Egg Party," and new releases like "Yanyun Sixteen Sounds" and "Marvel Showdown" [1] - The gross margin for the gaming segment was 69.3%, exceeding Bloomberg's expectations by 0.6 percentage points, with a year-on-year increase of 0.5 percentage points [1] Group 3 - Cloud Music achieved revenue of 1.96 billion yuan, which was 3.0% lower than Bloomberg's expectations, with a year-on-year decline of 1.8% [2] - Gross margin for Cloud Music was 35.4%, falling short of Bloomberg's expectations by 0.6 percentage points, but showed a year-on-year increase of 2.6 percentage points [2] - Youdao reported revenue of 1.63 billion yuan, which was 1.7% lower than Bloomberg's expectations, with a year-on-year growth of 3.6% [2] Group 4 - The company expects adjusted net profit growth of 18.4%, 8.8%, and 8.6% for 2025-2027, reaching 39.7 billion, 43.2 billion, and 46.2 billion yuan respectively [2] - Corresponding PE ratios for 2025-2027 are projected to be 14.9, 13.7, and 12.6 [2]

Core Insights - The company's Q3 2025 revenue increased by 8% to 28.4 billion yuan, while Non-GAAP net profit rose by 27% to 9.5 billion yuan, slightly below expectations due to unrecognized revenue from some products and higher-than-expected marketing expenses [1] - The company declared a dividend of $0.114 per share and extended its share repurchase program of up to $5 billion until January 2029, having repurchased $2 billion by the end of Q3 2025 [1] Revenue and Profit Trends - Revenue from games and value-added services grew by 12%, driven by flagship products such as "Dream of Dreams" and "Egg Party," showcasing the company's long-term game operation capabilities [1] - Marketing expenses increased by 17% to 4.46 billion yuan, primarily due to seasonal promotional activities and new version marketing for flagship products, leading to a significant increase in deferred revenue [1] Investment and New Game Releases - The company achieved investment income of 1.38 billion yuan, which helped offset the impact of increased marketing expenses on profits [1] - New games "Destiny: Stars" and "Yanyun Sixteen Sounds" are set to launch in overseas and Chinese markets, with the former nominated for the 2025 TGA Best Mobile Game [1] - The company plans to focus on global capabilities and the progress of key new games, with several titles in the pipeline for 2026 [1] Profit Forecast and Valuation - The company maintains its profit forecast, with current valuations at 16/15x for Hong Kong stocks and 15/14x for U.S. stocks for 2025/2026 Non-GAAP P/E [2] - The company retains an outperform rating and a target price of 275 HKD / 177 USD, indicating an upside potential of 29% for Hong Kong stocks and 33% for U.S. stocks [2]

Investment Rating - The investment rating for the company is "Buy" (maintained) [2] Core Views - The company has shown a revenue growth of 8.2% year-on-year, reaching 28.36 billion yuan, which is slightly below Bloomberg's expectations by 3% [7] - The adjusted net profit margin reached 33.5%, exceeding Bloomberg's expectations by 0.8% [7] - The company is expected to see adjusted net profit growth of 18.4%, 8.8%, and 8.6% for the years 2025 to 2027, with corresponding PE ratios of 14.9, 13.7, and 12.6 [7] Financial Performance - Revenue projections for the company are as follows: - 2023A: 103.468 billion yuan - 2024A: 105.295 billion yuan - 2025E: 115.426 billion yuan - 2026E: 125.700 billion yuan - 2027E: 134.863 billion yuan - The net profit for the years is projected as: - 2023A: 29.417 billion yuan - 2024A: 29.698 billion yuan - 2025E: 36.339 billion yuan - 2026E: 39.555 billion yuan - 2027E: 43.252 billion yuan [6][7] Business Segments - The self-developed games segment generated revenue of 23.33 billion yuan, reflecting a year-on-year growth of 11.8% [7] - The cloud music segment reported revenue of 1.96 billion yuan, a decrease of 1.8% year-on-year [7] - The Youdao segment achieved revenue of 1.63 billion yuan, with a year-on-year increase of 3.6% [7] Valuation Metrics - The company’s EPS for the upcoming years is projected as follows: - 2023A: 9.05 yuan - 2024A: 9.28 yuan - 2025E: 11.47 yuan - 2026E: 12.49 yuan - 2027E: 13.65 yuan - The P/E ratios are projected to be: - 2023A: 15.54 - 2024A: 14.91 - 2025E: 18.53 - 2026E: 17.03 - 2027E: 15.57 [6][8]

Investment Rating - The report maintains a "Buy" rating for the company [5] Core Insights - The company's Q3 2025 revenue reached 28.36 billion yuan, a year-on-year increase of 8.2%, which was below Bloomberg consensus expectations of 2.96%, primarily due to product launch timing and revenue recognition delays [1] - Deferred revenue surged to 19.47 billion yuan in Q3 2025, a year-on-year increase of 25.3%, significantly exceeding consensus expectations by 41%, indicating strong player willingness to pay during new game launches [1] - The company is focused on long-term investment strategies and shareholder value, with a strong cash flow performance and a cash reserve of 153.2 billion yuan [3] Revenue and Profit Forecast - The company forecasts revenues of 114.5 billion yuan, 123.6 billion yuan, and 132.2 billion yuan for 2025, 2026, and 2027 respectively, with Non-GAAP net profit estimates of 39 billion yuan, 41.4 billion yuan, and 44.5 billion yuan for the same years [4][9]

Core Viewpoint - The recent withdrawal of NetEase games from OPPO's app store highlights a growing tension between game developers and traditional Android distribution channels, primarily due to high revenue sharing models that limit profit margins for developers [1][4][15]. Group 1: Game Withdrawal from OPPO - NetEase games, including popular titles like "Onmyoji: Yokai House" and "Fantasy Westward Journey," will cease operations on OPPO channels starting from November 2024, with a complete withdrawal expected by October 2025 [1]. - This trend of withdrawing from OPPO channels began last year and reflects a broader industry shift away from traditional Android distribution methods [1][4]. Group 2: Revenue Sharing Issues - The high revenue sharing model, often referred to as "Android tax," has become a critical issue for game developers, with reports indicating that Android channels take up to 50% of revenue, significantly higher than the 30% typically charged by platforms like Apple's App Store [6][15]. - The "hardcore alliance" established by major Android manufacturers in 2014 set a standard revenue share of 50% for game developers, which has persisted in the industry [8]. Group 3: Alternative Distribution Models - Developers are increasingly exploring alternative distribution methods, such as using platforms like TapTap, which do not charge revenue shares, allowing for greater profitability [10][12]. - Successful titles like "Genshin Impact" and "Awakening of Nations" have demonstrated that it is possible to achieve significant revenue without relying on traditional Android channels [12][14]. Group 4: Industry Evolution - The gaming industry is transitioning from a "traffic-driven" model to a "content-driven" model, where the quality of the game itself becomes the primary factor in attracting users [14]. - Despite the shift, the costs associated with customer acquisition through alternative channels have increased, as seen in NetEase's substantial advertising expenditures [14][15].

Core Insights - NetEase reported Q3 2025 net revenue of 28.4 billion yuan, an 8.2% year-on-year increase, with net profit attributable to shareholders rising to 8.6 billion yuan from 6.5 billion yuan in the same period last year [2] - The company’s gaming and related value-added services generated net income of 23.3 billion yuan, up 11.8% year-on-year, while NetEase Youdao's net income was 1.6 billion yuan, a 3.6% increase [2] - Total operating expenses for Q3 were 10.2 billion yuan, up from 9 billion yuan in the previous quarter and 9.3 billion yuan year-on-year, primarily due to increased marketing expenses related to online games [2] Business Segmentation - Gaming and related services: 23.3 billion yuan, +11.8% YoY [2] - NetEase Youdao: 1.6 billion yuan, +3.6% YoY [2] - NetEase Cloud Music: 2 billion yuan, -1.8% YoY [2] - Innovation and other businesses: 1.4 billion yuan, -18.9% YoY [2] Operational Insights - Total operating expenses increased to 10.2 billion yuan, with sales and marketing expenses at 4.5 billion yuan and R&D expenses at 4.5 billion yuan, maintaining a research intensity of 16% [2] - CEO Ding Lei emphasized a focus on existing successful products and a cautious approach to new projects, ensuring competitive content before market launch [3] - The company is undergoing a normal organizational optimization process, with personnel changes aimed at enhancing team focus and efficiency [3] AI Strategy - NetEase is investing significantly in AI technology for game development and operations, with a focus on enhancing content innovation and operational efficiency [4] - The company has seen a nearly 150% year-on-year increase in operating profit for Youdao, with record high revenues in online marketing services and AI subscription sales [4]

Core Insights - NetEase's revenue growth in Q3 2025 was primarily driven by its game "Evergreen Games," achieving a net income of 28.4 billion yuan, a year-on-year increase of 8.2% [2] - The company reported a net profit of 9.5 billion yuan under non-GAAP standards, reflecting a significant year-on-year growth of 33.3% [2] Financial Performance - In Q3 2025, NetEase's net income reached 28.4 billion yuan, compared to 27.9 billion yuan in the previous quarter and 26.2 billion yuan in the same quarter last year [3] - Revenue from games and related services was 23.3 billion yuan, with a 2.2% increase from the previous quarter and a 11.5% increase year-on-year [3] - Online games accounted for approximately 97.6% of the revenue in this segment, up from 97.1% in the previous quarter and 96.8% year-on-year [3] Game Performance - The increase in online game revenue was attributed to self-developed games like "Dream of the Westward Journey" and "Reverse Water Cold," as well as several agency games [3] - "Dream of the Westward Journey" achieved a record high of 3.58 million concurrent players, marking a strong performance in long-term game operation [3][4] - The launch of the "Dream of the Westward Journey" free play server aimed to attract long-lost users and new players by simplifying gameplay and removing time-based charges [4][5] New Game Development - NetEase introduced several new games in Q3, including "Fate: Stars" and "Reverse Water Cold," which performed well in both domestic and international markets [6] - The company is focusing on the upcoming game "Forgotten Sea," which is being developed with a self-built engine and will be available on multiple platforms [7] Industry Context - Tencent's gaming revenue in Q3 was 63.6 billion yuan, with significant growth in both domestic and international markets, highlighting the competitive landscape [7] - Analysts noted that while NetEase's older games are evolving into IP extensions, Tencent's established titles continue to perform strongly, indicating differing strategies in a saturated market [8] Internal Adjustments - Following the return of CEO Ding Lei, NetEase has undergone organizational adjustments, including staff changes aimed at enhancing focus and efficiency [9][10] - The company is prioritizing long-term projects and optimizing resources towards successful teams while being decisive about underperforming ones [10]

Group 1 - NetEase reported Q3 revenue of 28.4 billion, a year-on-year increase of 8.2%, and an adjusted net profit of 9.5 billion, up 13% year-on-year, indicating steady growth despite a slow pace [1] - High valuations for NetEase are attributed to its consistent performance, which contrasts with more aggressive competitors that have struggled [1] - Goldman Sachs significantly raised its copper price forecast, predicting a decade-long bull market due to limited existing copper mine supply, with a projected timeline of ten years to achieve supply-demand balance [1]

Core Insights - NetEase Inc reported mixed fiscal third-quarter results with a revenue increase of 8.2% year-on-year to $3.98 billion, which missed the analyst consensus estimate of $4.11 billion [1] - The adjusted EPADS of $2.07 exceeded the analyst consensus estimate of $1.88 [1] Company Performance - CEO William Ding highlighted the company's solid execution and healthy growth in China, emphasizing their innovation capabilities and exceptional gaming experiences [2] - NetEase shares gained 1% to $135.26 following the earnings announcement [2] Analyst Ratings and Price Targets - Benchmark analyst Fawne Jiang maintained a Buy rating on NetEase and raised the price target from $145 to $158 [5] - Barclays analyst Jiong Shao maintained an Equal-Weight rating and raised the price target from $120 to $135 [5]

Group 1 - The article discusses the Asia Value & Moat Stocks research service, which targets value investors looking for Asia-listed stocks with significant discrepancies between price and intrinsic value, focusing on deep value balance sheet bargains and wide moat stocks [1][2] - The 3rd quarter financial metrics of a company were below market expectations, primarily due to delays in sales recognition and growth investments in new games [1] Group 2 - The Value Pendulum is highlighted as an Asian equity market specialist with over a decade of experience, particularly in the Hong Kong market, focusing on deep value balance sheet bargains and wide moat stocks [2]