Financial Data and Key Metrics Changes - In the second quarter, total revenue reached RMB 2,070 million, representing a year-on-year decrease [5] - Revenue from office software and services increased by 14% year-on-year to RMB 1,360 million, while online games revenue decreased by 26% year-on-year to RMB 952 million [6][14] - Gross profit decreased by 9% year-on-year to RMB 1,854 million, with a gross profit margin of 81% [15][17] - Profit attributable to owners of the parent was RMB 532 million, compared to RMB 393 million in the previous year [17] Business Line Data and Key Metrics Changes - Office software and services accounted for 59% of total revenue, while online games accounted for 41% [12] - The WPS AI products saw significant enhancements, with monthly active AI users reaching nearly 13 million [6][7] - The online games business is focusing on enriching existing IPs and expanding into new genres, with the flagship IP GX3 Online maintaining a stable user base [8][9] Market Data and Key Metrics Changes - The company is actively expanding into international markets, with the divestment of the new WPS international edition [7] - The online game business is experiencing challenges due to a high base from the previous year, impacting revenue growth [14] Company Strategy and Development Direction - The company is committed to increasing R&D investment in AI and collaboration, aiming to enhance product offerings across various office scenarios [10] - The online game business will focus on premier games and global expansion to strengthen its IP franchise [11] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth of the office software business, particularly with the integration of AI features [30][31] - The gaming industry is facing challenges, but management believes that with time and adjustments, new IPs can achieve success [28][49] Other Important Information - Research and development costs increased by 50% year-on-year, reflecting ongoing investments in AI and new game genres [15] - The company has a cash resource of RMB 25 billion as of June 30, 2025 [18] Q&A Session Summary Question: Performance of MetroBrick after its release and full-year revenue guidance for the gaming sector - Management noted that while initial feedback was positive, adjustments are being made based on player feedback to enhance the gaming experience [24][25] Question: Outlook for WPS office business in the second half of the year - Management is optimistic about maintaining growth rates similar to the first half, driven by AI enhancements [30][31] Question: Trends in active user base and ARPU for JX3 - Management acknowledged slight pressure on active users compared to last year but remains confident in long-term operations [34][35] Question: Differentiation of WPS AI agent from competitors - Management emphasized that their focus is on specific office scenarios, which sets them apart from competitors [39][40]

Group 1: Financial Performance - In Q2 2025, the company achieved revenue of 27.9 billion yuan, a year-on-year increase of 9% [1] - Non-GAAP net profit reached 9.5 billion yuan, up 22% year-on-year, with a Non-GAAP net profit margin of 34.2%, an increase of 3 percentage points [1] - The comprehensive gross profit margin was 64.7%, up 1.8 percentage points year-on-year, while the total operating expense ratio was 32%, down 3 percentage points year-on-year [1] Group 2: Gaming Business - Online gaming revenue for Q2 2025 was 22.1 billion yuan, a 15% year-on-year increase, with strong performance from titles like "Identity V" and "Marvel Duel" [2] - Deferred revenue reached 16.97 billion yuan, a 25% year-on-year increase, indicating healthy future revenue streams [2] - The company is focusing on global expansion with new game releases and updates, achieving significant rankings on various platforms [2] Group 3: Youdao and Cloud Music - Youdao's net revenue for Q2 2025 was 1.4 billion yuan, a 7% year-on-year increase, driven by a 24% growth in advertising services [2] - Net revenue for NetEase Cloud Music was 2 billion yuan, down 4% year-on-year, with a gross margin of 36.1%, up 4 percentage points year-on-year [3] - The company is expected to increase investment in copyright content in the second half of the year, which may lead to a decrease in gross margin [3] Group 4: Investment Outlook - The company is recognized for its strong game development capabilities and is expected to maintain profitability, with adjusted net profit forecasts of 39.3 billion, 42.5 billion, and 46.7 billion yuan for 2025-2027 [3] - Continued focus on high-quality and globalized game offerings is anticipated, with key titles to watch including "Destiny: Stars," "Forgotten Sea," and "Return to Tang" [3]

8月1日，中国国际数码互动娱乐展览会(以下简称"ChinaJoy")拉开帷幕。这场吸引了全球数字娱乐产业 厂商和观众参展的盛会，首日人流量达到5.5万余人次，较去年同期提升10%。 面对"出海"竞争，林文彬表示："现在国家都在鼓励文化'出海'。因此'出海'的竞争也愈发激烈。'出 海'面临的对手不仅有国际厂商的作品，还有国内厂商的作品，所以在'出海'的地区上也要有所选择，尝 试将不同文化融合其中。同时，公司也做了很多精准营销。目前，贪玩游戏拥有多个专注海外业务的团 队，在全球设立了30多家办事处，让具有中国特色的游戏被更多海外用户接受。" 除了本土公司，不少海外游戏厂商也看好中国市场，携新款游戏亮相Chinajoy。例如，韩国游戏公司 PearlAbyss在Chinajoy展出了买断制3A游戏《红色沙漠》。PearlAbyss相关负责人告诉《证券日报》记 者："《红色沙漠》以全球市场为目标进行发行。我们认为中国是一个非常重要的市场，未来将致力于 与全球所有玩家直接沟通，拓展更多接触的机会。" 值得一提的是，会上还有众多能帮助中国游戏"出海"的支付、发行公司汇集在这里。 具体来看，上半年，中国游戏产业国内游戏市场 ...

Core Insights - The 22nd ChinaJoy will take place from August 1 to 4 in Shanghai, highlighting the growth of the Chinese gaming industry and its international expansion [1] - In 2024, China's domestic game revenue is projected to reach 325.783 billion yuan, with self-developed games generating 132.1 billion yuan from overseas markets, accounting for approximately 40% of total revenue [1] - The key to entering overseas markets lies in diversification of game genres and industrialized development practices, with a focus on regional strategies for mainstream market penetration [1] Company Highlights - NetEase's game "Marvel Duel" achieved 40 million global users within three months of its launch, marking it as a significant success on the Steam platform [1] - The development of AAA games is considered essential for the global expansion of Chinese gaming companies, with high budgets, craftsmanship, and quality being the current trends in game development [1] - NetEase's project "Return to Tang" is highlighted as an important attempt in creating AAA titles, showcasing the company's commitment to high-quality game development [1]

Core Viewpoint - The Chinese gaming industry in 2024 is characterized by a duality of "stronger becoming stronger" and "innovative disruption," with leading companies leveraging IP and technology while smaller teams utilize AI and differentiated content to break through [1] Group 1: Globalization Strategy - The survival rule in the gaming industry is "if you don't go global, you will be eliminated," which is exemplified by the company's financial report showing overseas revenue reaching 623 million yuan, a 44.9% increase from 430 million yuan in 2023, accounting for 11.2% of total revenue [2] - The company has successfully launched and operated over 30 multilingual games in various international markets, including Southeast Asia, Hong Kong, Macau, Taiwan, Japan, South Korea, and Europe and the United States [2] - The classic IP "Miracle MU: Infinite Golden Egg" gained 800,000 new users in Vietnam within its first month, dominating local app store sales charts [2] Group 2: Product Diversification - The company has addressed previous criticisms of over-reliance on legacy IPs by successfully launching new products in 2024, maintaining stable user engagement for classic IPs like "Legend" and "Miracle" [4] - The upcoming game "Dragon Legend" is set to launch in January 2025, featuring high gameplay freedom and innovative elements, ensuring the longevity of the legacy game genre [4] - The company has expanded its IP portfolio through partnerships, with the game "Douluo Dalu: Shrek Academy" achieving top rankings on app stores upon release [5] Group 3: Financial Stability and AI Strategy - The company has strengthened its financial position, with cash reserves increasing by 5.8% to 515 million yuan and a significant reduction in notes payable by 45.5%, improving liquidity [7] - The establishment of a wholly-owned subsidiary in Hong Kong focuses on AI technology applications in the gaming industry, enhancing game art production, creative writing, and marketing efficiency [6] - The integration of AI technology aims to optimize user acquisition and improve return on investment in marketing, with plans to explore AI applications in various game functionalities [6] Group 4: Future Outlook - The company's strategies of global expansion, AI integration, and diversified product offerings are expected to drive future growth, with overseas business becoming a new growth engine [8] - The focus on product matrix innovation, technology-driven strategies, and financial stability positions the company well for the next growth cycle [8]