NTES(HK:09999) Sou Hu Cai Jing·2025-05-22 06:16Core Viewpoint - NetEase is undergoing significant adjustments in its gaming business, led by founder Ding Lei, in response to the slowest revenue growth in nearly 20 years, with 80% of its net income historically derived from gaming and related services [1][14]. Financial Performance - In Q1, NetEase reported a net income of 28.8 billion RMB, reflecting a quarter-on-quarter increase of 7.87% and a year-on-year increase of 7.06% [5]. - The net income from gaming and related services was 24 billion RMB, up from 21.2 billion RMB in the previous quarter and 21.5 billion RMB in the same quarter last year [7]. - The net profit attributable to shareholders for the quarter was 10.3 billion RMB, showing a quarter-on-quarter increase of 17.05% and a year-on-year increase of 35.53% [11]. Revenue Structure - The gaming segment accounted for approximately 97.5% of the net income from the gaming division, with significant contributions from titles like "Identity V" and new releases [8]. - Non-gaming revenue saw a decline, with Youdao's net income dropping to 1.3 billion RMB from 1.4 billion RMB year-on-year, and NetEase Cloud Music's revenue decreasing by 5% to 1.9 billion RMB [9][10]. - The overall revenue structure remains heavily reliant on gaming, with projections indicating that gaming and related services will account for 79.42% of total net income by 2024 [12]. Management and Staffing - NetEase has reduced its workforce by 3,100 employees, marking a 10.64% decrease, while the proportion of R&D staff remains at 49% [16]. - Despite workforce reductions, cash compensation for senior management and directors increased by 8.47 times, from 49.2 million RMB in 2023 to 4.66 billion RMB in the previous year [17]. Legal Matters - NetEase faced a lawsuit from Krafton regarding copyright infringement related to two mobile games, resulting in a settlement where NetEase was ordered to pay 6 million USD in damages [21].