Beijing, China, Dec. 28, 2025 (GLOBE NEWSWIRE) -- Among the many descriptions of China seen from the outside, the country has gained an increasingly prominent image for itself in 2025 as a "cool" place to visit and live, as reflected in multiple global surveys and in foreign vloggers' videos and comments. As the year draws to a close, the Global Times is launching the "Cool China" series to approach the most iconic events and phenomena of the year through the five senses. In this installment, we trace China ...

Summary of China Internet Sector Outlook for 2026 Industry Overview - The report focuses on the **China Internet sector**, providing insights into the expected developments and stock preferences for 2026 [1][12]. Key Themes and Insights AI and Content Growth - The dominant theme in 2025 was "AI AI AI", but for 2026, the focus will shift to companies demonstrating tangible results in AI implementation and content growth [2][8]. - China is expected to remain a fast follower in AI, leveraging its large user base and data resources to enhance AI capabilities [3][17]. E-commerce Dynamics - The competition in e-commerce, particularly between food delivery and traditional e-commerce, will be a significant focus in 2026. The ability of companies to maintain performance while scaling back spending will be critical [4][22]. - Alibaba is anticipated to exert pressure on Meituan, with average order values (AOVs) converging as merchants utilize multiple platforms [4][22]. Policy Environment - The retail consumption growth in China is projected to remain around 3%, influenced by government policies that may shift from supporting the private sector to revenue generation through taxation [5][10][15]. - The approval pipeline for new video games is expected to remain favorable, which could benefit companies like Tencent and NetEase [5][13]. Stock Preferences Tencent - Tencent is highlighted as the top pick, with expectations of strong gaming revenue growth and advertising growth in 2026. The company is well-positioned to leverage its Mini Programs ecosystem for AI services [6][34]. - The gaming business is performing better than perceived, with new game launches expected to drive revenue [26][34]. Alibaba - Alibaba is viewed as a key player in AI growth, with the potential for its new Qwen app to enhance user engagement across its platforms. The focus will be on consolidating its various ecosystems into a coherent super app experience [6][41][42]. - Concerns about ongoing food delivery losses could impact the valuation of its e-commerce business [42][43]. NetEase - NetEase's outlook has improved, with successful game launches expected to contribute to revenue growth. The company is anticipated to achieve close to 10% growth in gaming and value-added services revenue in 2026 [38][39]. PDD and Meituan - PDD faces challenges in user engagement and competition in quick commerce, with potential headwinds from increased delivery charges and tax changes [48][49]. - Meituan's future performance is uncertain, relying on a reduction in food delivery subsidies and a stable competitive environment [50][51]. Valuation Insights - The average forward PE for the China Internet sector is projected at 16.0x for 2026, indicating that while valuations are not excessively high, they are not as low as in previous years [56][59]. - The shift in investor sentiment towards AI and the competitive landscape in e-commerce could impact share price performance across the sector [54][55]. Conclusion - The China Internet sector is expected to navigate a complex landscape in 2026, with a focus on AI implementation, e-commerce competition, and evolving government policies. Companies that can effectively leverage AI and content growth while managing costs will likely emerge as leaders in this environment [1][8][25].

Summary of NetEase Inc. (NTES) Conference Call Company Overview - **Company**: NetEase Inc. (NTES) - **Industry**: Online Gaming and Entertainment Key Highlights Recent Trends by Title and Pipeline - **Game Longevity**: NetEase operates games in a long-lasting cycle with a community mindset, although individual games experience ups and downs [3][4] - **Eggy Party**: Resolved Android channel issues in 2024, achieving record-high average user time spent and active users in Q3 2025 due to new gameplay and UGC tools [4] - **Identity V**: Faced competition in lower-tier cities but is innovating gameplay to meet user needs [4] - **Upcoming Releases**: - **Diablo IV**: Launching in China on December 12, 2024 - **Sea of Remnants**: Scheduled for 2026, no specific date yet - **ANANTA**: Development is on track, timeline not disclosed [4] Overseas Strategy - **Global Ambitions**: Management emphasized ambitions for globalization, with "Where Winds Meet" (WWM) exceeding expectations in overseas performance, appealing to both Chinese and Western players [5] Margin and OPEX Outlook - **Gross Margin**: Expected to stabilize, with annual Sales & Marketing (S&M) ratio projected at 12-13% for FY25 [6][7] - **Domestic Market**: Limited room for further expansion in Gross Profit Margin (GPM) as most improvements have been realized [7] - **Global Market**: Global channel fees are stable, limiting GPM changes for international revenue [7] - **R&D Expenses**: Hiring costs are manageable as the company is not competing aggressively for AI talent [7] AI Application - **AI Integration**: NetEase is leveraging AI in various aspects of game development, including animation, scene alignment, in-game algorithms, and code generation [6] Financial Performance - **Revenue Growth**: Projected revenue growth from RMB 105.3 billion in 2024 to RMB 133.9 billion by 2027, with a CAGR of approximately 8% [10][13] - **Gross Margin**: Expected to increase from 62.5% in 2024 to 65.3% by 2027 [10] - **Net Profit**: Projected to grow from RMB 33.5 billion in 2024 to RMB 46.6 billion by 2027 [10] Price Target and Risks - **Price Target**: Buy rating with a 12-month target price of US$160 (upside of 19.8%) and HK$250 (upside of 22.2%) [11][13] - **Key Risks**: - Weaker performance of legacy games - Slower-than-expected monetization of new games - Increased competition in gaming and other sectors - Rising content costs in music and online education [11] Additional Insights - **Market Capitalization**: Approximately $84.8 billion - **Enterprise Value**: Approximately $65.4 billion - **P/E Ratio**: Projected to be 12.9 in 2024, increasing to 14.7 by 2027 [13] This summary encapsulates the key points from the conference call, highlighting NetEase's strategic direction, financial outlook, and potential risks in the gaming industry.

NetEase 3Q25 Investor Presentation Investor Relations November 20, 2025 SAFE HARBOR STATEMENT This announcement contains statements of a forward-looking nature. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar expressions. In addition, statements that are not histo ...

Core Viewpoint - NetEase, Inc. reported solid financial results for Q3 2025, demonstrating healthy growth in both domestic and international markets, particularly in gaming services, while also highlighting the company's commitment to innovation and user experience [5][10]. Financial Highlights - Net revenues for Q3 2025 reached RMB 28.4 billion (US$ 4.0 billion), marking an increase of 8.2% year-over-year [7][10]. - Net revenues from games and related services were RMB 23.3 billion (US$ 3.3 billion), up 11.8% compared to the same quarter in 2024 [8][10]. - Gross profit for the quarter was RMB 18.2 billion (US$ 2.6 billion), reflecting a 10.3% increase year-over-year [14][10]. - Net income attributable to shareholders was RMB 8.6 billion (US$ 1.2 billion), consistent with the previous quarter and up from RMB 6.5 billion in Q3 2024 [18][10]. Operational Highlights - The company emphasized its focus on user experience and innovation in gaming, with notable titles like Fantasy Westward Journey Online achieving record player counts [5][10]. - New game launches, including Destiny: Rising and ANANTA, received positive reception in both Western and Chinese markets [10]. - The company continues to strengthen its global portfolio with diverse game genres and collaborations with international partners [6][10]. Segment Performance - Youdao's net revenues were RMB 1.6 billion (US$ 228.8 million), a 3.6% increase year-over-year, driven by smart devices and online marketing services [9][10]. - NetEase Cloud Music reported stable revenues of RMB 2.0 billion (US$ 275.9 million), unchanged from the previous quarter and the same quarter last year [11][10]. - Innovative businesses and others saw a decline in revenues to RMB 1.4 billion (US$ 202.1 million), down 18.9% year-over-year, primarily due to decreased revenues from Yanxuan [12][10]. Cost and Expenses - Cost of revenues for Q3 2025 was RMB 10.2 billion (US$ 1.4 billion), an increase from RMB 9.8 billion in the previous quarter [13][10]. - Total operating expenses rose to RMB 10.2 billion (US$ 1.4 billion), reflecting increased marketing expenditures related to online games [15][10]. Cash Flow and Financial Position - As of September 30, 2025, the company's net cash totaled RMB 153.2 billion (US$ 21.5 billion), up from RMB 131.5 billion at the end of 2024 [21][10]. - Net cash provided by operating activities was RMB 12.9 billion (US$ 1.8 billion) for the quarter, compared to RMB 10.9 billion in the previous quarter [21][10]. Shareholder Returns - The board approved a dividend of US$ 0.1140 per share (US$ 0.5700 per ADS) for Q3 2025, payable on December 16, 2025 [22][10]. - The company extended its share repurchase program by an additional 36 months, with approximately 22.1 million ADSs repurchased for a total cost of US$ 2.0 billion as of September 30, 2025 [25][10].

Summary of Key Points from the Conference Call Industry Overview - **Industry**: China Online Entertainment Sector - **Performance**: Online entertainment has been a significant outperformer year-to-date (YTD) within the China internet sector, driven by robust consumer spending on leisure and favorable investor positioning amid macro uncertainties [2][8] Core Insights - **Earnings Season Expectations**: A mixed Q325 earnings season is anticipated for online entertainment, with potential positive surprises from companies like Bilibili and Kuaishou. NetEase is favored for its revival in evergreen titles and upcoming launches [2][3] - **Gaming Sector Divergence**: Following a strong YTD performance in online gaming, divergence is expected as new game launches from A-share companies are priced in. Preference remains for ADR/H game companies based on new game catalysts and healthy evergreen title portfolios [3][9] - **Advertising Sector**: Slight acceleration in Q3 ad performance is noted, with uncertainty around new tax policies. Companies like Tencent, Bilibili, and Kuaishou are expected to outperform due to improvements in adtech and monetization [4][9] - **Media Sector**: Overall quiet results are expected for the online media sector, with a positive outlook on long-form video (LFV) regulation, although its impact may take time to materialize [5][20] Company-Specific Insights - **Bilibili**: - Price target raised to US$37.00 from US$30.00, reflecting a 23.3% increase. The company is expected to benefit from the successful launch of "Escape From Duckrov," which had a peak of 222k concurrent players on Steam [3][14][17] - Q325 estimates remain unchanged, but Q425 game revenue is raised by 5% due to better-than-expected contributions from new titles [13][17] - **NetEase**: - Expected solid Q325 results with game acceleration, particularly with the upcoming global launch of "Where Winds Meet" on November 15 [3][9][10] - **Kuaishou**: - Positive outlook based on fundamental outperformance and AI capabilities, with key focuses on ad revenue guidance and e-commerce outlook [9][10] - **iQiyi**: - Q325 topline expected to be flat QoQ, with ad revenue projected to decline by 3% due to macro conditions. Adjusted net profit estimates lowered by 17-25% [19][20] - **Weibo**: - Negative revisions expected due to slower consumption trends, although limited valuation downside is noted with a projected 8% dividend yield [9][10] Additional Insights - **Short Dramas Growth**: The growth momentum of short dramas is expected to continue, driven by consumer demand for fragmented video content and a flexible business model compared to LFV [8] - **Regulatory Environment**: The recent LFV regulation is seen as a major positive for iQiyi, although its benefits may take time to materialize [5][20] Financial Metrics - **Bilibili's Financials**: - Non-GAAP operating profit for Q4 expected to be Rmb862 million, with a margin of 10.4% [13][17] - Total revenues for FY2025 estimated at Rmb30.285 billion, with a YoY growth of 12.9% [17][18] - **iQiyi's Financials**: - Expected non-GAAP operating loss of Rmb25 million for Q325, with a net loss of Rmb135 million [19][20] This summary encapsulates the key points from the conference call, highlighting the performance and expectations for the online entertainment sector and specific companies within it.

Core Insights - The company reported a 9% YoY growth in total revenue to RMB27.9 billion, which was 2% below consensus expectations [3] - Operating profit increased by 30% YoY to RMB9.1 billion, also missing consensus by 1% [1] - Cash revenue reached RMB21.2 billion, reflecting a 20% YoY increase and beating forecasts by 3%, indicating successful summer campaigns [1] Financial Performance - Core online game revenue grew 15% YoY to RMB22.1 billion, slightly below consensus estimates [3] - Gross profit margin expanded to 64.7%, exceeding the consensus of 63.4% [3] - The company has a deferred revenue of RMB16.1 billion, which is a 28% YoY increase [3] Strategic Initiatives - The company is focusing on rejuvenating existing game portfolios and improving operational efficiency, prioritizing quality over quantity in game development [1] - Successful summer campaigns for key franchises such as Marvel Rivals and Where Winds Meet were highlighted, supported by strong operational capabilities [1] - Upcoming game launches include Destiny Rising and Diablo II, with a focus on cross-terminal global launches [1] Operational Adjustments - The company has streamlined its game development and marketing operations, leading to improved efficiency [1] - Significant increases in operating expenses (opex) by 6-8% were noted, particularly in sales and marketing (S&M) estimates, which were raised by 10-14% [2] Valuation and Outlook - The target price has been uplifted to US$153/HK$240 based on adjusted earnings per share and net cash [3] - The company has repurchased approximately 0.5 million shares and has a remaining buyback quota of US$3.0 billion until January 2026 [3]

Financial Performance - NetEase's market capitalization was $854 billion as of August 13, 2025[9] - Net revenues for 2Q25 reached $39 billion[9] - Net income attributable to the company's shareholders for 2Q25 was $12 billion[9] - Basic net income per ADS (GAAP) for 2Q25 was $188[9] - Net cash as of June 30, 2025, amounted to $198 billion[9] Revenue Breakdown (2Q25) - Games and related value-added services generated $3184 million in net revenues[12] - Youdao's net revenues were $198 million[20] - NetEase Cloud Music's net revenues reached $275 million[23] - Innovative businesses and others contributed $237 million in net revenues[26] Games Performance - Online games accounted for 97% of games and related value-added services revenue in 2Q25[12] - Fantasy Westward Journey Online reached over 293 million peak concurrent players in August[18] ESG Ratings - NetEase received an AA rating from MSCI[9, 40] - NetEase's Sustainalytics rating indicates a low-risk company[40]

Core Viewpoint - NetEase, Inc. reported its unaudited financial results for the second quarter of 2025, highlighting a slight decrease in net revenues compared to the previous quarter, but a year-over-year increase, driven primarily by growth in its gaming segment and new game launches [1][2]. Financial Highlights - Net revenues for Q2 2025 were RMB27.9 billion (US$3.9 billion), a decrease of 3.1% from RMB28.8 billion in Q1 2025 but an increase of 9.4% from RMB25.5 billion in Q2 2024 [7][14]. - Net revenues from games and related services were RMB22.8 billion (US$3.2 billion), down 5.0% from RMB24.0 billion in Q1 2025 but up 13.7% from RMB20.1 billion in Q2 2024 [8][14]. - Net income attributable to shareholders was RMB8.6 billion (US$1.2 billion), down from RMB10.3 billion in Q1 2025 but up from RMB6.8 billion in Q2 2024 [17][18]. - Non-GAAP net income attributable to shareholders was RMB9.5 billion (US$1.3 billion), compared to RMB11.2 billion in Q1 2025 and RMB7.8 billion in Q2 2024 [18][19]. Operational Highlights - The company emphasized its commitment to product innovation and community engagement, which are seen as key drivers for future growth [5][6]. - New game launches, including "FragPunk," "Dunk City Dynasty," and "MARVEL Mystic Mayhem," achieved significant rankings in download charts across various platforms [14]. - Established franchises like "Sword of Justice" and "Identity V" maintained strong player engagement, contributing to the overall performance [14]. Segment Performance - Youdao's net revenues were RMB1.4 billion (US$197.9 million), showing a slight increase from both the previous quarter and the same quarter last year [9]. - NetEase Cloud Music generated RMB2.0 billion (US$274.8 million), remaining stable compared to Q1 2025 but slightly down from Q2 2024 [10]. - Innovative businesses and others reported RMB1.7 billion (US$237.2 million), reflecting a quarter-over-quarter increase but a year-over-year decrease [11]. Cost and Profitability - Cost of revenues for Q2 2025 was RMB9.8 billion (US$1.4 billion), a decrease from RMB10.3 billion in Q1 2025 [12]. - Gross profit was RMB18.1 billion (US$2.5 billion), an increase of 12.5% compared to Q2 2024 [13]. - Total operating expenses were RMB9.0 billion (US$1.3 billion), showing a slight decrease from the same quarter last year [14]. Cash Flow and Financial Position - As of June 30, 2025, the company's net cash totaled RMB142.1 billion (US$19.8 billion), an increase from RMB131.5 billion at the end of 2024 [20]. - Net cash provided by operating activities was RMB10.9 billion (US$1.5 billion) for Q2 2025, down from RMB12.1 billion in Q1 2025 [20]. Dividend and Share Repurchase - The board approved a dividend of US$0.1140 per share for Q2 2025, payable in September 2025 [21]. - The company has repurchased approximately 22.1 million ADSs for a total cost of US$2.0 billion under its share repurchase program [23].

Core Insights - NetEase (NTES) is set to announce its second-quarter 2025 results on August 14, with revenue expectations of $3.86 billion, reflecting a 10.02% year-over-year growth [1] - The consensus estimate for earnings per share (EPS) is $2.04, an increase of 2 cents over the past month, compared to $1.66 in the same quarter last year [1][9] - NTES has exceeded earnings expectations in three of the last four quarters, with an average surprise of 9.17% [2] Revenue Drivers - The anticipated growth in Q2 2025 is attributed to strong gaming revenues and successful global launches, building on the momentum from Q1 [3] - Key titles such as Marvel Rivals, FragPunk, and Once Human are expected to contribute significantly to revenue, with Marvel Rivals maintaining high engagement after its Season 2 update [4][9] - Established titles like Where Winds Meet and Identity V are also projected to provide stable contributions, supported by ongoing content releases and regional expansions [5] Challenges - Despite the positive outlook, certain segments are expected to face challenges, particularly Youdao's learning services and NetEase Cloud Music, which may continue to struggle with revenue pressures [6] - The innovative businesses segment, including the Yanxuan e-commerce platform, is likely to experience intensified competition, impacting revenue growth [6] Earnings Expectations - The Zacks model indicates that NTES currently has an Earnings ESP of -0.25% and a Zacks Rank of 2 (Buy), suggesting a lower likelihood of an earnings beat compared to previous quarters [7]