Financial Data and Key Metrics Changes - Total revenues increased by 8% year over year, reaching RMB 28.4 billion in Q3 2025 [4][26] - Revenues from games and related VAS grew by 12% year over year, totaling RMB 23.3 billion [26] - Gross profit for Q3 2025 was RMB 18.2 billion, up 10% year over year, with a gross profit margin of 64.1% [28][30] - Non-GAAP net income attributable to shareholders was RMB 9.5 billion, or $1.3 billion, up 27% year over year [31] Business Line Data and Key Metrics Changes - Net revenues from online games were RMB 22.8 billion, up 3% quarter over quarter and 13% year over year [27] - Youdao's net revenue reached RMB 1.6 billion, representing a 15% increase quarter over quarter and a 4% increase year over year [27] - NetEase Cloud Music's net revenue was RMB 2 billion, stable quarter over quarter but down 2% year over year [27] Market Data and Key Metrics Changes - The new game "Destiny Rising" topped the iOS download chart in the U.S. and other major Western markets shortly after its launch [5] - "Where Winds Meet" achieved a peak of 190,000 concurrent players shortly after its global launch, securing a top position on Steam [8][9] Company Strategy and Development Direction - The company aims to advance development capabilities and global reach while scaling original IP into lasting franchises [26] - Focus on long-term development and providing diverse choices within games, particularly for successful titles like "Fantasy Westward Journey" [38] - The strategy includes a prudent approach to launching new games, concentrating resources on high-quality flagship products [60][68] Management Comments on Operating Environment and Future Outlook - Management noted that the gaming trend in China and overseas is positive, with successful experiences in international markets [44] - The company is confident in its ability to bring high-quality content and services to global gamers [45] - Management acknowledged the impact of competition but highlighted a recovery in metrics for "Identity V" since the start of the school year [51] Other Important Information - The company announced an extension of its share repurchase program for an additional 36 months [33] - Cash position remains robust, with net cash of approximately RMB 153.2 billion as of September 30, 2025 [32] Q&A Session Summary Question: Strategy for "Fantasy Westward Journey" and user demographics - Management highlighted the stable economy system and enriched gaming experiences as key factors for the game's longevity, with a focus on attracting both returning and new players [36][38] Question: Gaming trends in China and overseas expansion strategy - Management discussed successful titles in overseas markets and the unique position of NetEase in bringing authentic Chinese games to global audiences [44][45] Question: Performance of "Identity V" and future growth strategies - Management acknowledged recent volatility but noted a recovery in metrics and plans for new content and marketing campaigns [49][51] Question: Impact of organizational changes on game operations - Management stated that recent adjustments are part of normal personnel turnover and aim to enhance focus and efficiency without impacting daily operations [62][63] Question: Integration of AI in games and future game genres - Management emphasized the importance of AI in game development and operation, with a focus on high-quality flagship products rather than a large quantity of new releases [68]

Financial Data and Key Metrics Changes - Operating income reached a Q1 record of RMB104.0 million, surging 247.7% year over year [6] - Net revenues were RMB1.3 billion, declining 6.7% year over year, primarily due to decreased learning services revenue [6][19] - Operating cash outflow narrowed by 34.7% to RMB255.5 million, reflecting stronger financial efficiency [7] - Net income attributable to ordinary shareholders was RMB76.7 million, an increase of over six times from RMB12.4 million for the same period last year [22] - Non-GAAP net income attributable to ordinary shareholders for the first quarter was RMB31.7 million, significantly increased from RMB20.3 million for the same period last year [23] Business Line Data and Key Metrics Changes - Learning services segment net revenues were RMB602.4 million, representing a 16.1% decrease year over year [20] - Smart devices segment revenues were RMB190.5 million, up 5.1% year over year [20] - Online marketing services net revenues rose 2.6% year over year to RMB505.4 million [20] - Gross margin for learning services was 59.8%, down from 63.1% year over year [21] - Gross margin for smart devices improved to 52.3% from 32.6% year over year [21] - Gross margin for online marketing services moderated to 30.5%, a decline of approximately four percentage points year over year [15] Market Data and Key Metrics Changes - The performance of the Youdao Lingxus service showed resilience, with gross billings growing over 25% year over year [41] - The AI-driven subscription services generated nearly RMB70 million in Q1 sales, growing over 40% year over year [10] - The overseas advertising client base grew by 20% year over year in Q1 [13] Company Strategy and Development Direction - The company is executing an AI native strategy, applying large language models to critical learning and advertisement scenarios [8] - Focus on enhancing user experiences through proprietary and open technologies, with a dual approach to model deployment [29] - Plans to deepen focus on educational verticals and expand the capabilities of the Confucius model [34] - Targeting accelerated profit growth and achieving operating cash flow breakeven for the full year 2025 [16] Management Comments on Operating Environment and Future Outlook - Management anticipates the learning services segment's revenue to stabilize and return to growth in the second half of the year [42] - Online marketing services revenue is expected to show stronger growth momentum in the second half of the year, driven by overseas advertising expansion and automated AI-powered advertising solutions [46] - The company acknowledges potential macroeconomic uncertainties that may affect results but remains optimistic about reducing operating losses in Q2 year over year [53] Other Important Information - The company launched several innovative products, including the Youdao Magic Box and the AI Podcaster system, enhancing its product offerings [12][14] - The company achieved a significant milestone by being ranked as the world's number two ad tech company by Time Magazine [34] Q&A Session Summary Question: How does management view the integration of large language models in educational scenarios? - Management emphasized the importance of embracing open technologies and highlighted the advantages of combining open and proprietary technologies for enhanced user experiences and faster responses [28][30] Question: When does management project the learning services segment's revenue to return to growth? - Management indicated that the restructuring of the learning services segment is ongoing and expects revenue stabilization in the second half of the year, driven by the growth of AI college admission advisers [42] Question: When does management anticipate a reacceleration in online marketing services revenue growth? - Management expects stronger growth momentum in the second half of the year, driven by overseas advertising expansion and the launch of AI-powered advertising solutions [46] Question: Is there a possibility of profitability in the second quarter this year? - Management acknowledged that Q2 is traditionally the weakest quarter but expects to significantly reduce operating losses year over year while focusing on strategic priorities [53]