Investment Rating - The investment rating for the company is "Buy" (maintained) [1][5] Core Views - The company achieved a revenue of 28.4 billion yuan in Q3 2025, representing a year-on-year increase of 8.2% and a quarter-on-quarter increase of 1.7%. The net profit attributable to shareholders was 8.6 billion yuan, up 31.8% year-on-year and 0.2% quarter-on-quarter [5] - The gross margin for Q3 was 64.1%, an increase of 1.2 percentage points year-on-year, with a net profit margin of 31.0%, up 5.4 percentage points year-on-year. This improvement in profitability is attributed to gains from fair value changes in stock investments and lower net exchange losses [5] - The company’s contract liabilities reached 19.5 billion yuan by the end of Q3 2025, reflecting a year-on-year increase of 25% and a quarter-on-quarter increase of 15%, indicating strong growth momentum [5] - The report highlights the strong performance of the game "Dream of the Red Chamber" and the successful launch of new games, which are expected to drive future growth [5] Financial Summary and Valuation Metrics - Revenue projections for 2025-2027 are 357 billion yuan, 383 billion yuan, and 429 billion yuan respectively, with corresponding P/E ratios of 16.6, 15.5, and 13.8 times [5] - The company’s revenue for 2023 is projected at 103.5 billion yuan, with a year-on-year growth of 7.2%, and net profit is expected to be 29.4 billion yuan, showing no growth year-on-year [6] - The gross margin is expected to improve from 60.9% in 2023 to 64.7% in 2025, while the net profit margin is projected to increase from 28.4% in 2023 to 31.4% in 2025 [6]

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]

Core Viewpoint - NetEase reported a net revenue of 28.4 billion RMB for Q3 2025, marking an 8.2% year-on-year increase, with net profit attributable to shareholders rising by 32% to 8.6 billion RMB [1][2] Financial Performance - Q3 net revenue reached 28.4 billion RMB, up 8.2% year-on-year [1] - Net profit attributable to shareholders was 8.6 billion RMB, a 32% increase year-on-year [1] - Non-GAAP net profit attributable to shareholders was 9.5 billion RMB, reflecting a 26.7% year-on-year growth [1] - Investment income increased from 580 million RMB to 1.38 billion RMB year-on-year, while foreign exchange losses decreased from 1.06 billion RMB to 370 million RMB [2] Business Segments - Revenue from online games and related value-added services was 23.3 billion RMB, an 11.8% increase year-on-year, accounting for approximately 97.6% of the segment's net revenue [6] - Major contributors to online game revenue included classic IPs like "Fantasy Westward Journey" and new releases such as "Marvel Showdown" [6] - Other business segments, including Youdao Education and Cloud Music, fell short of analyst expectations, with Youdao's revenue at 1.6 billion RMB (up 3.6%) and Cloud Music's at 2 billion RMB (down 1.8%) [6] Management Strategy - Management emphasized a focus on refining existing successful products rather than diversifying into uncertain new projects [4][5] - The company aims to enhance efficiency and concentrate resources on evergreen projects while being cautious with new project investments [5] - R&D expenditure for Q3 was 4.5 billion RMB, with AI applications significantly improving production efficiency across various processes [7] Market Reaction - Following the earnings report, NetEase's stock fell by 3% in pre-market trading in the US and by 1.39% in Hong Kong, closing at 212.6 HKD per share [3] - Despite recent adjustments, the stock price has increased by over 58% since the beginning of the year [3]

江苏省宿迁市宿豫区人民检察院就办理了一起相关网络诈骗案，受害玩家果果（化名）常在周末及 节假日用父亲的手机玩"蛋仔派对"游戏。果果使用的账号是以父亲的身份信息注册的，关联的是父亲的 手机号，也没有开启未成年人模式。诈骗团伙以"赠送皮肤"为由加了果果的微信后发来链接，告诉她这 是一个虚拟购物订单，果果需要点击链接、付款购买订单里的商品，赠送的皮肤才能被激活，购物的钱 随后原路返还。在购买了共计两万八千余元的商品后，游戏皮肤迟迟没有收到，购物订单的钱款也没有 返还，果果发信息询问时，发现自己已经被拉黑了。直到几天后，果果父亲发现手机里的钱不翼而飞， 才发现孩子被骗。 蛋仔派对官网显示，该游戏为杭州网易雷火科技有限公司版权所有。网易(NASDAQ: NTES； HKEX：9999)，1997年由丁磊在广州创办、2000年在美国NASDAQ股票交易所挂牌上市、2020年在 香港联交所挂牌上市。网易2001年正式成立在线游戏事业部。 骗子会诱导孩子到其他平台联系，再恐吓孩子说公安机关检测出，你是未成年人，属于违规领取皮 肤，如果不抓紧时间解除风险，就会被罚款，爸妈还会被送进去坐牢。孩子慌了之后，骗子下套说能联 系警方解 ...

Core Insights - The company is actively developing new products in the toy sector, focusing on AI toys and IP-based trendy products [1] Group 1: AI Toy Development - The company collaborates with major technology solution providers to redefine AI toys, planning to release various innovative products such as AI+IP toys, desktop AI companions, and desktop AI robots [1] - The aim is to enhance user experience by integrating technological advancements into AI toys, providing companionship with emotional warmth [1] Group 2: IP Trendy Products - The company's IP matrix includes a wide range of international and domestic popular IPs, such as Pokémon, Disney (Frozen, Toy Story, Zootopia, Monsters University), SpongeBob SquarePants, and various domestic animations like Super Wings and Pleasant Goat and Big Big Wolf [1] - Future product development will be guided by market trends and the core narratives of these IPs, focusing on creating AI toys and trendy products that carry emotional value [1]

Core Viewpoint - Nomura analysts predict that NetEase's third-quarter revenue may fall short of high market expectations, with game and related value-added service revenue expected to grow by 12% year-on-year, below market forecasts [1] Group 1: Game Revenue Insights - Mobile game revenue is expected to recover, with a projected growth of 4% in the third quarter, driven by evergreen games such as "Party Animals" and "Yanyun Sixteen Sounds" [1] - PC game revenue growth may slow to 32% due to a high base effect from the return of "World of Warcraft" to the Chinese market last year [1] Group 2: Analyst Ratings and Price Target - Nomura maintains a "Buy" rating on NetEase's H-shares, with the target price unchanged at HKD 249.00 [1]

Core Insights - A significant leadership shakeup is occurring at NetEase Games, with multiple high-ranking executives departing, indicating unprecedented organizational changes within the company [1][2][4][6] Group 1: Executive Departures - Li Kaiming, head of NetEase Interactive Entertainment's 10th division, announced his departure for personal career development, marking him as the third senior executive to leave this year [1][2] - Other notable departures include Lin Yunfeng, president of the Dreamland division, and Xuanzi, producer of "World Beyond," suggesting a trend of restructuring similar to last year's disbandment of the Tianxia division [2][4] - The departures reflect a broader trend of leadership changes, particularly among executives overseeing key business areas such as competitive gaming, anime, and strategy games [2][6] Group 2: Organizational Changes - The leadership changes are centered in the Guangzhou headquarters, which has historically been the cradle of NetEase's gaming empire, indicating a potential shift in focus towards the Hangzhou region [4][7][16] - The company is reportedly consolidating its operations in Hangzhou, where the LeiHuo division has seen significant success, contributing approximately 50% to NetEase's total gaming revenue [13][15] - The restructuring aims to inject new energy into the organization by replacing long-standing executives with younger leaders who can better connect with the new generation of players [17][22] Group 3: Performance and Challenges - The Guangzhou divisions have faced significant setbacks, including the failure of the martial arts open-world game "The Legend of the Condor Heroes," which suffered a nearly 80% user attrition rate post-launch [9][10] - The 10th division also faced challenges, with the cancellation of the single-player project "Ten Thousand People Long Song: Three Kingdoms" after four years of development due to poor market feedback [11] - In contrast, the Hangzhou operations have thrived, with successful titles like "Nirvana in Fire Mobile" and "Eternal Return" establishing a strong market presence and contributing to the company's growth [12][13] Group 4: Strategic Shifts - The leadership changes reflect a strategic pivot from product-driven approaches to data-driven methodologies, emphasizing user profiling, monetization models, and predictive analytics in game development [21][22] - The company is focusing on a dual strategy of "data + rhythm" to enhance resource efficiency and mitigate the impact of individual project failures on overall business performance [22] - This shift is expected to lead to a more structured approach to game development, ensuring that new projects are backed by comprehensive market analysis and clear commercialization paths [21][22]

Core Viewpoint - The essence of UGC (User Generated Content) is not merely tools and gameplay, but rather the ecosystem it creates [1]. Group 1: UGC Implementation in Genshin Impact - The recent update of Genshin Impact introduced the UGC module "Qianxing Qiyu," which has contributed to the game's rise to the second position on the iOS sales chart [2]. - The "Qianxing Qiyu" module consists of three main components: UGC gameplay content, a creator-oriented editor, and "Qiou" characters [3]. - The pricing for in-game appearances starts at 96 RMB per set, with the most rare five-star appearances requiring significant in-game purchases, potentially costing around 4000 RMB for full collection [3]. Group 2: Industry Expectations and Comparisons - UGC gameplay has become a standard feature in heavy mobile games, primarily aimed at enhancing player retention and community engagement [4]. - The current implementation of "Qianxing Qiyu" does not significantly differ from similar UGC modules in Tencent and NetEase games, which raises concerns about MiHoYo's position as an industry innovator [4]. - Despite having a development team of over 200 people, the output of MiHoYo's UGC module does not show a substantial advantage over Tencent's smaller team, which has only about 40 members [4]. Group 3: Monetization and Future Potential - A significant aspect of UGC is to provide financial incentives for active creators, as seen in NetEase's "Egg Party," which allows top creators to earn revenue [5]. - MiHoYo's approach to monetization, which centralizes all commercial aspects in its appearance shop, may hinder the effectiveness of the UGC module in enhancing player engagement [5]. - "Qianxing Qiyu" is still in its initial version, indicating that there is considerable growth potential, and it could evolve into a significant content engine for Genshin Impact in the future [5].

Core Viewpoint - The report from Credit Lyonnais indicates that Tencent's mobile gaming business showed robust growth in Q3, with a nearly 15% year-on-year increase in domestic revenue, driven by strong performances from "Honor of Kings," "Peacekeeper Elite," and "Crossfire" [1] Tencent - Tencent's mobile gaming revenue grew nearly 15% year-on-year in Q3, attributed to the strong performance of key titles [1] - The company has been given a "Highly Confident Outperform" rating by Credit Lyonnais, with a target price set at HKD 740 [1] NetEase - NetEase's mobile gaming revenue decline narrowed from 8% in Q2 to approximately 4% in Q3, benefiting from a 68% year-on-year increase in revenue from "Party Animals," reaching CNY 1.2 billion [1] - "Nirvana in Fire" contributed a stable revenue of CNY 830 million [1] - NetEase has been assigned an "Outperform" rating with a target price of USD 140 [1] Bilibili - Bilibili's American Depositary Receipts (ADR) received an "Outperform" rating with a target price of USD 25.5 [1]

Investment Rating - The report assigns a "Buy" rating to Tencent (700 HK) and NetEase (NTES US) with target prices of 700.0 and 155.0 respectively, indicating potential upside from current prices [3][4]. Core Insights - Tencent's mobile game revenue showed stability year-on-year, with significant contributions from new games like "Delta Action" and "Clash Royale," offsetting the impact of high base figures from previous titles [4][12]. - NetEase's overseas new games contributed to revenue growth, with a slight increase in domestic revenue driven by new titles [4][15]. - The report highlights the ongoing strong performance of Tencent's evergreen games and the potential for new game releases to drive future revenue growth [4][12]. Summary by Sections Mobile Game Performance - Tencent's domestic mobile game revenue decreased by 27 million yuan (8%) year-on-year, primarily due to high base effects from "MDnF," partially offset by new games [12]. - "Delta Action" achieved a record revenue of 1.5 billion yuan in September, driven by user growth [12]. - NetEase's domestic mobile game revenue slightly increased by 0.7 million yuan (1%), supported by new titles [15]. Overseas Revenue - Tencent's overseas revenue increased by 6.7 million yuan (9%) year-on-year, mainly due to "Clash Royale" and other titles [17]. - NetEase's overseas revenue grew by 1.6 million yuan (18%), benefiting from new game launches [17]. Game Approval and New Releases - In September 2025, 145 domestic and 11 imported game licenses were issued, indicating a stable supply of new games [25]. - The report emphasizes the importance of upcoming titles from Tencent and NetEase, which are expected to enhance their market positions [28].