2Q25 preview: strong PC; flattish YoY mobile; profit beat. We model total revenue will hike 11% YoY to RMB28.2bn, -1% below consensus. We forecast pure online game revenue will jump 16% YoY to RMB22.4bn, -2% below consensus. PC game revenue will grow at 67% YoY to RMB7.6bn, continuously contributed by Marvel Rivals in overseas, domestic Blizzard games and Where Winds Meet PC domestically. Mobile game revenue will be flattish YoY at RMB14.8bn mainly affected by Justice Mobile being offset by Where Winds Meet ...

Core Insights - The 21st China International Cartoon & Animation Festival showcased the integration of technology and daily services in the animation industry, highlighting Hangzhou's innovative spirit and digital infrastructure [1][11] - Hangzhou High-Tech Zone (Binjiang) is recognized as Zhejiang's leading hub for animation and gaming, contributing significantly to the local digital economy and enhancing the quality of life for residents and businesses [2][8] Industry Highlights - Binjiang's digital economy has gained national and international recognition, with a focus on its thriving animation sector and scientific innovation [3][6] - The district's compact area of 72 square kilometers accounts for 13.2% of Hangzhou's GDP, despite only occupying 0.5% of the city's land area, showcasing its role as an economic engine [8][11] Technological Advancements - The gaming company NetEase demonstrated the use of advanced motion capture and map engine technologies in their open-world game, which reflects Chinese aesthetics and storytelling [6] - Leapmotor, a company based in Binjiang, has achieved significant success in the new energy vehicle market, emphasizing its competitive edge through a talent pool and self-developed manufacturing [9] Community and Lifestyle Integration - Binjiang is developing a "digitized safe school route" and a diversified service ecosystem that includes community canteens and health centers, enhancing urban governance and residents' quality of life [10][11] - Local enterprises are thriving globally while simultaneously enriching the lives of residents, creating a unique blend of innovation and community services [11]

Core Insights - China's technology sector is expected to show resilience in H2 2025, leveraging global trade pressures to foster indigenous innovation despite facing significant U.S. tariffs and export restrictions [2] - Major Chinese tech companies are pivoting investments towards AI infrastructure and emerging technologies, with strong demand for AI outpacing supply [2] - The semiconductor industry in China has captured over 25% of the global market share in advanced packaging technologies, showcasing its competitive edge [5] Company Highlights - **NetEase**: - Demonstrated strong financial momentum with Q1 2025 gaming revenues increasing by 12.1% year over year to RMB24.0 billion and net income rising by 35% to RMB10.3 billion [9][11] - Upcoming game titles and a robust pipeline position the company for growth in the second half of 2025 [10][11] - **Alibaba**: - Reported Q4 fiscal 2025 non-GAAP earnings surged by 23% year over year to $1.73 per ADS, exceeding estimates by 16.89% [12][13] - The Cloud Intelligence segment achieved 18% revenue growth, with AI-related products maintaining triple-digit growth for seven consecutive quarters [12] - **Taiwan Semiconductor**: - Achieved Q1 2025 revenues of $25.53 billion, a 35% year-over-year increase, with net income rising by 53% to nearly $11 billion [15] - Plans to increase capital spending to between $38 and $42 billion in 2025 to meet growing AI-driven demand for advanced chips [16] - **Tencent**: - Reported Q1 revenues of RMB180 billion, a 13% year-over-year increase, with gaming division growth accelerating [17] - Integrated AI capabilities are enhancing user engagement and advertising effectiveness, positioning the company favorably in the market [18][19] Industry Trends - The robotics sector in China is advancing with innovations such as sophisticated humanoid robots, while the electric vehicle ecosystem is bolstered by companies like Zeekr and Great Wall Motor [6] - Augmented reality companies in Beijing are developing advanced AR solutions, reflecting China's strategy to lead in high-tech sectors [7] - The overall technological advancements and significant investments in development present substantial growth opportunities for investors in the Chinese tech landscape [8]

ab 15 May 2025 A: We expect upward consensus revisions given the strong Q1 bottom line beat. Q: How would we expect investors to react? First Read NetEase Q125 results quick take: Very solid Q1 with game revenue and margin beats Q: How did the results compare vs expectations? A: NetEase's Q125 was a beat on both revenue and margin, echoing our constructiveness into results. Q1 revenue grew 7.4% YoY, beat UBSe/consensus by 2/1%, respectively. The core game revenue growth accelerated notably to 15% YoY, up fr ...

Total revenue grew +7% YoY to RMB28.8bn, 1% above consensus. Core onlinegame grew 15% YoY to RMB23.4bn, 5%/ 2% beat consensus/ BOCIe. PC andmobile game revenue delivered +85% YoY/ -4% YoY respectively, 0%/ 3%ahead of BOCIe. Marvel Rivals, Where Winds Meet, Blizzard games and Naraka:Bladepoint contributed to skyrocketed PC game revenue. GPM expanded bothYoY/ QoQ to 64.1%, 61.8% above consensus. Along with disciplined opexespecially S&M (down -33% YoY/ -4% QoQ), operating profit grew 37% YoYwith 36.2% OPM, si ...

Investment Rating - The report maintains a "Buy" rating for NetEase, with a target price increase to USD 130 from USD 120, implying a 21.4% upside from the current share price of USD 107.11 [6][11][100] Core Insights - NetEase's recent earnings report showed a 25% beat in earnings, a 5% beat in game revenue, and an 11% beat in deferred revenue, leading to a revision of EPS growth to +18% year-on-year in 2025 [2][11] - The strong deferred revenue growth of 19% year-on-year indicates potential for accelerating game revenue growth in the upcoming quarters [2][97] - Upcoming game launches, including Marvel Mystic Mayhem and Destiny Rising, are anticipated to be key focus areas following the annual product launch event [2][11] Financial Performance - In Q1 2025, NetEase reported total revenue of RMB 28,829 million, reflecting a year-on-year growth of 7% [91] - Online game revenue grew by 15% year-on-year, driven by strong performances from titles such as Identity V, Where Winds Meet, and Marvel Rivals [94] - The gross profit margin (GPM) for games and related value-added services (VAS) was reported at 67%, with a non-GAAP operating profit of RMB 11,393 million, representing a 34% year-on-year increase [91][94] Game Highlights - Mobile game revenue only fell by 4% year-on-year, outperforming consensus expectations of a 6% decline, thanks to strong performances from Identity V and Where Winds Meet [3][94] - PC game revenue saw an impressive growth of 85% year-on-year, significantly above the consensus estimate of 67%, driven by contributions from WWM PC and Blizzard titles [3][94] - The launch of Once Human mobile resulted in 6 million new users in its first week, boosting the PC version's revenue by 500% [3][94] Margin Discussions - The report notes an increase in games and related VAS gross profit margin quarter-on-quarter, attributed to a reduced focus on non-game businesses and a shift towards profitability [4][94] - The report anticipates that it will take a few quarters for sales and marketing expenses as a percentage of revenue to normalize [4] Valuation Metrics - The report provides estimates for future financial performance, projecting revenue of RMB 116,721 million for 2025, with a year-on-year growth of 11% [98] - The estimated price-to-earnings (PE) ratio for 2025 is 12.6, indicating a favorable valuation compared to historical averages [7][14] Pipeline and Future Outlook - The report highlights key upcoming titles such as Ananta, expected to launch in 2026, which could significantly contribute to future revenue streams [2][90] - The successful return of Overwatch in China has set new records for peak concurrent users, indicating strong market demand for NetEase's offerings [94]

ab 16 May 2025 First Read NetEase A hard earned victory Strong Q125 with significant bottom line beat NetEase's Q125 was very strong with beat in both mobile and PC game revenue and notable margin beat, driven by higher than expected game margin and lower than expected S&M. Net, Q1 was 30/25% beat to UBSe/consensus bottom line. See our quick take. Key takeaways from conference call 1) PC game revenue grew strongly by 85% YoY, mainly driven by 1) the strong launch of Marvel Rivals; 2) record performance of e ...

Core Viewpoint - NetEase, Inc. reported strong financial results for the first quarter of 2025, driven by robust performance in its gaming segment and ongoing innovation across its business lines [1][5][10]. Financial Highlights - Net revenues for Q1 2025 were RMB 28.8 billion (US$ 4.0 billion), a 7.4% increase year-over-year [7][10]. - Net revenues from games and related value-added services reached RMB 24.0 billion (US$ 3.3 billion), marking a 12.1% increase compared to the same quarter of 2024 [8][10]. - Gross profit for the quarter was RMB 18.5 billion (US$ 2.5 billion), an increase of 8.6% year-over-year [13][10]. - Net income attributable to shareholders was RMB 10.3 billion (US$ 1.4 billion), up from RMB 7.6 billion in Q1 2024 [17][10]. - Non-GAAP net income attributable to shareholders was RMB 11.2 billion (US$ 1.5 billion), reflecting a significant increase from RMB 8.5 billion in the same quarter of the previous year [18][10]. Operational Highlights - The company launched several successful titles, including "Marvel Rivals" and "Where Winds Meet," which contributed to increased engagement and revenue [10][8]. - Youdao's net revenues were RMB 1.3 billion (US$ 178.9 million), consistent with the previous quarter but down 6.7% year-over-year due to a focus on core services [9][10]. - NetEase Cloud Music reported revenues of RMB 1.9 billion (US$ 256.1 million), a decrease of 8.4% compared to the same quarter of 2024 [11][10]. - Innovative businesses and others generated RMB 1.6 billion (US$ 223.8 million), down 17.6% year-over-year, primarily due to reduced revenues from advertising services [12][10]. Cash Flow and Dividend - As of March 31, 2025, the company's net cash totaled RMB 137.0 billion (US$ 18.9 billion), an increase from RMB 131.5 billion at the end of 2024 [20][10]. - The board approved a dividend of US$ 0.1350 per share for Q1 2025, payable in June 2025 [21][10]. Share Repurchase Program - The company has repurchased approximately 21.6 million ADSs for a total cost of US$ 1.9 billion under its ongoing share repurchase program [24][10].