NetEase Q2 Earnings Preview: Great Games On The Horizon, Great Financial Position

Core Viewpoint - NetEase, Inc. is expected to report Q2 earnings with a focus on its mobile gaming segment and financial health, maintaining a buy rating due to promising game releases and a strong cash position [1][5]. Financial Expectations - Analysts predict a top line of $3.65 billion, with non-GAAP EPS at$1.67 and GAAP EPS at $1.52, indicating a sequential revenue decline of approximately 2$880 million in its first year, contributing around 6% to total FY23 revenues [3]. - Once Human has received positive reviews, and there is interest in its potential console release [3]. - Marvel Rivals has shown improved reception post-closed beta, with expectations for it to generate revenue if the free-to-play model is executed well [4]. Financial Position and Margins - As of Q1 '24, NetEase holds nearly $19 billion in cash and equivalents with minimal debt of$59 million, indicating a robust financial position [4]. - Gross margins are expected to be in the range of 69%-70%, with a year-over-year improvement of around 300 basis points noted in the last quarter [4]. Market Outlook - The company is expected to perform decently in Q2, with future quarters being critical for assessing top-line growth [5]. - The mobile gaming market, particularly in Asia, presents significant opportunities for growth, as many gamers seek engaging mobile experiences [5].