Core Viewpoint - NetEase (NTES.US) is expected to report improved performance in its upcoming earnings release, with projected revenue and adjusted EBIT growth of 12% and 29% year-over-year, respectively, reaching 28.5 billion and 10.4 billion RMB [1] Group 1: Financial Performance - The anticipated game revenue for NetEase is expected to increase by 17.9% year-over-year [1] - The company's total revenue is projected to be 28.5 billion RMB, while adjusted EBIT is expected to be 10.4 billion RMB [1] Group 2: Game Performance - Key games contributing to revenue include "逆水寒" (Nirvana in Fire) and "蛋仔派对" (Egg Party), which are performing steadily, while "巅峰极速" (Peak Speed) is recovering growth [1] - New games such as "第五人格" (Identity V) and upcoming titles are expected to maintain strong performance [1] Group 3: Future Product Line - NetEase's product line for the second half of the year includes RPG game "漫威秘法狂潮" (Marvel's Secret Magic), ARPG "暗黑II重置版" (Diablo II Resurrected), and FPS game "无主星渊" (Borderlands) [1] - Approximately 21 new games have recently passed regulatory approval, which is believed to further drive company growth [1]

Core Viewpoint - The recent controversy surrounding the AI features of NetEase's martial arts games "Yanyun Shiliusheng" and "Nishuihan" has escalated into a public dispute, with both games' communities actively engaging in discussions about potential plagiarism and originality of their respective AI functionalities [1][6]. Group 1: Company Responses - "Yanyun Shiliusheng" stated that its new feature "Xile Mode" utilizes AIxPose and AIxFace technologies developed by NetEase's AI Lab, emphasizing that the underlying training data was sourced internally and the technology was customized based on the game's needs [2][4]. - NetEase's AI Lab also issued a statement defending the originality of its technology, asserting that the algorithms provided for "Yanyun" were tailored to meet specific product requirements and that the lab has been a deep partner since the game's launch [2][4]. Group 2: Community Reactions - Following the announcement from "Nishuihan" on August 10, which claimed its AI "Film Crew Mode" was unique and not subject to copying, tensions between the two game communities intensified, with players accusing "Yanyun" of plagiarism [5][6]. - Players from both communities have engaged in heated debates regarding the originality of the features, questioning whether "Yanyun" is affiliated with "Nishuihan" and discussing the implications of potential copying in game functionalities [6]. Group 3: Background Information - Both "Yanyun Shiliusheng" and "Nishuihan" are backed by different divisions within NetEase, with "Yanyun" associated with NetEase Interactive Entertainment and "Nishuihan" linked to NetEase Leihuo, highlighting the competitive landscape within the company [7][8]. - The AI Labs of both divisions were established in 2017, focusing on different aspects of AI application in gaming, with NetEase's AI Lab concentrating on game-specific AI technologies [9][11].

Core Viewpoint - Citic Securities expects NetEase-S (09999) to see improved performance in Q2 2025, with total revenue and adjusted profit projected to increase by 12% and 29% year-on-year, reaching RMB 28.5 billion and RMB 10.4 billion respectively [1] Revenue Breakdown - The report anticipates a 17.9% year-on-year increase in NetEase's gaming revenue, driven by an 85% increase in PC game revenue, the successful return of Blizzard Entertainment games, and strong sales of new titles such as "Marvel Rivals" and "Where Winds Meet" [1] Mobile Game Performance - Mobile game revenue is expected to benefit from the solid performance of "Justice Mobile," "Eggy Party," and "Identity V," along with a recovery in "Racing Master" and the launch of new games [1] - NetEase currently has 21 approved games, which is believed to continue driving its growth [1]

Group 1 - The core viewpoint of the report is that NetEase-S (09999) is expected to see improved performance in Q2 2025, with total revenue and adjusted profit projected to increase by 12% and 29% year-on-year, reaching 28.5 billion RMB and 10.4 billion RMB respectively [1] - The report anticipates a 17.9% year-on-year increase in NetEase's gaming revenue, driven by an 85% increase in PC game revenue, the successful return of Blizzard Entertainment games, and strong sales of new titles such as "Marvel Rivals" and "Where Winds Meet" [1] - The mobile gaming revenue is expected to benefit from the solid performance of titles like "Justice Mobile," "Eggy Party," and "Identity V," along with a recovery in "Racing Master" and the launch of new games [1] Group 2 - NetEase currently has 21 approved games, which the report believes will continue to drive its growth [1]

Core Viewpoint - The report from Credit Lyonnais indicates that NetEase's Q2 performance is expected to improve, with total revenue and adjusted EBIT projected to increase by 12% and 29% year-on-year, reaching RMB 28.5 billion and RMB 10.4 billion respectively [1] Revenue and Earnings - Total revenue is forecasted to rise by 12% year-on-year to RMB 28.5 billion [1] - Adjusted EBIT is expected to increase by 29% year-on-year to RMB 10.4 billion [1] Gaming Performance - The gaming revenue for the period is estimated to grow by 17.9% year-on-year [1] - Key games such as "Naraka: Bladepoint" and "Party Animals" have shown stable performance, while "Peak Speed" has resumed growth [1] - "Identity V" and new game titles are performing steadily [1] Future Product Line - The product lineup for the second half of the year includes RPG game "Marvel: Secret Wars," ARPG game "Diablo II: Resurrected," and FPS game "Voidstar" [1] - Approximately 21 new games have recently passed regulatory approval, which is expected to further drive company growth [1]

Core Viewpoint - The report from Credit Lyonnais indicates that NetEase (NTES.US) is expected to see improved performance in Q2, with total revenue and adjusted EBIT projected to increase by 12% and 29% year-on-year, reaching RMB 28.5 billion and RMB 10.4 billion respectively [1] Revenue and Earnings - Total revenue is forecasted to rise by 12% year-on-year to RMB 28.5 billion [1] - Adjusted EBIT is expected to increase by 29% year-on-year to RMB 10.4 billion [1] Gaming Performance - The gaming revenue is estimated to grow by 17.9% year-on-year during the period [1] - Key games such as "Nirvana in Fire" and "Egg Party" have shown stable performance, while "Peak Speed" has resumed growth [1] - "Identity V" and new games are performing steadily [1] Future Product Line - The product lineup for the second half of the year includes RPG game "Marvel Secret Wars," ARPG game "Diablo II Resurrected," and FPS game "No Man's Sky" [1] - Approximately 21 games have recently passed regulatory approval, which is expected to further drive company growth [1]

Core Viewpoint - The report from Credit Lyonnais indicates that NetEase's performance is expected to improve in the second quarter, with total revenue and adjusted EBIT projected to increase by 12% and 29% year-on-year, reaching 28.5 billion and 10.4 billion respectively [1] Revenue and Earnings - Total revenue is forecasted to rise to 28.5 billion, while adjusted EBIT is expected to reach 10.4 billion [1] - Game revenue is estimated to grow by 17.9% year-on-year during the period [1] Game Performance - The decline in mobile game revenue has slowed to 2.9% year-on-year, attributed to stable performances from titles such as "Nirvana in Fire" and "Party of Egg," as well as recovery in "Peak Speed" and steady performance from "Identity V" and new games [1] Upcoming Titles - NetEase's product lineup for the second half of the year includes RPG game "Marvel Secret Law," ARPG game "Diablo II Resurrected," and FPS game "No Man's Sky" [1] - Approximately 21 games have recently passed regulatory approval, which is expected to further drive the company's growth [1] Analyst Rating - Credit Lyonnais maintains a "Outperform" rating for NetEase with a target price of $140 [1]

Core Insights - China has become a major player in the global gaming market, with its gaming footprint expanding worldwide, as highlighted by the success of games like "荒野行动" in various international locations [2][3] - The past decade has been a golden era for mobile gaming in China, with NetEase achieving significant breakthroughs across multiple game genres, including MMORPGs and other categories like racing and sports [2] - NetEase's success in diversifying its game offerings is attributed to its robust industrial foundation, enabling large-scale and efficient development of high-quality products, which is essential for global expansion [2][3] Industry Trends - The collaboration with Blizzard on "Diablo Immortal" has underscored the need for a more localized strategy to penetrate mainstream markets [3] - The gaming industry in China has seen a 60-fold increase in NetEase's gaming revenue over the past 20 years, indicating substantial growth and the ability to support AAA game development [3] - Upcoming high-quality products such as "燕云十六声," "遗忘之海," and "无限大" are set to be launched in overseas markets, marking a new push for global market presence [4]

Core Viewpoint - NetEase's stock price has increased by approximately 80% over the past six months, reflecting a strong recovery in investor sentiment tied closely to its performance data [1] Financial Performance - For Q1 2025, NetEase reported revenue of 28.8 billion RMB, a year-on-year increase of 7.4%, and a net profit of 11.2 billion RMB, up approximately 31.8% year-on-year [1][2] - The gaming segment generated net income of 24 billion RMB, showing a year-on-year growth of about 12.1% and a quarter-on-quarter increase of approximately 13.2% [1] Market Dynamics - Despite a challenging 2024, where NetEase faced a decline in net income and revenue due to setbacks in its core gaming business, the company has managed to regain investor confidence [3][4] - The decline in performance was attributed to older game titles losing traction and new releases failing to meet expectations [4][8] Product Performance - Several new games launched in 2023, such as "Nirvana in Fire Mobile" and "Peak Speed," have seen significant drops in popularity by 2024, with "Peak Speed" falling from the top 10 in the App Store to around 100 [4][6] - The highly anticipated RPG "The Legend of the Condor Heroes" underperformed shortly after its launch, leading to management changes and a rework of the game [8][10] Strategic Adjustments - CEO Ding Lei has taken a more hands-on approach to management, implementing structural changes and a series of personnel adjustments to improve decision-making and project viability [12][14] - The company has actively shut down underperforming projects, with over ten games being discontinued in 2024, including "Marvel Super War" and "The Awakening of the Apocalypse" [14][15] Cost Management - NetEase has significantly reduced its operating expenses, with total operating costs dropping to 8 billion RMB in Q1 2025, a year-on-year decrease of approximately 14% [15][16] - Marketing expenses were cut by about 33% compared to the previous year, reflecting a strategic shift towards cost efficiency [15] New Opportunities - In late 2024, NetEase launched two new titles, "Marvel Showdown" and "Yanyun Sixteen Sounds," which have shown promising initial performance, attracting millions of users shortly after release [19][20] - The shift towards PC gaming is becoming more pronounced, with PC game revenue increasing from 29.2% to 34.7% of total revenue in Q4 2024 compared to the previous year [19][26] Industry Trends - The global PC gaming market is experiencing growth, with a reported 4% increase in revenue, while marketing costs for PC games remain significantly lower than for mobile games [26][29] - As the mobile gaming landscape becomes increasingly competitive and costly, NetEase's focus on PC gaming may provide a more sustainable path forward [26][32]

Core Viewpoint - Guangdong has officially released high-quality development policy documents for six areas of the cultural industry, aiming to promote a new round of high-quality development in the cultural sector, particularly focusing on the gaming industry [1][2]. Group 1: Support for Original and Technological Innovation - The policy emphasizes support for original high-quality projects and technological innovation, offering up to 5 million yuan in one-time support for projects with significant cultural impact and technological breakthroughs [2]. - Guangdong's gaming revenue is projected to reach 260.43 billion yuan in 2024, accounting for 79.94% of the national total, highlighting the province's leading position in the gaming industry [2]. - The policy aims to address the challenge of producing fewer blockbuster games by providing substantial rewards for quality projects, thereby enhancing global competitiveness [2]. Group 2: Industry Cluster Development and Cross-Industry Integration - The policy encourages the development of specialized gaming industry parks and the integration of gaming with tourism, manufacturing, and new consumption sectors [3][4]. - Guangzhou has established a gaming ecosystem that spans software development to hardware design, while Shenzhen focuses on innovation through the application of AI and virtual reality in game development [4][5]. - The integration of gaming with other industries is expected to create new growth opportunities and development points for the gaming sector [4][5]. Group 3: International Expansion of the Gaming Industry - The policy aims to guide and support gaming companies in leading more small and medium enterprises to expand internationally, creating a "Guangdong Gaming Export Matrix" [6]. - In 2024, Guangdong's gaming export revenue is expected to reach 42.36 billion yuan, with a year-on-year growth of 9.9%, indicating a robust international presence [6]. - The support for standardized export services will alleviate financial pressures and operational risks for companies venturing abroad, promoting high-quality international development [6]. Group 4: Optimizing the Business Environment - The policy includes measures to significantly improve the business environment for gaming companies, providing comprehensive support to help them overcome practical challenges [7][8]. - Establishing service centers for gaming companies in Guangzhou and Shenzhen will facilitate more convenient administrative services [7]. - The introduction of new support systems, such as traffic and computing vouchers, aims to create a positive cycle of support for high-quality projects and enterprises [7][8].