Financial Data and Key Metrics Changes - Total net revenue for Q1 2025 was RMB 28.8 billion (approximately USD 4.0 billion), representing a 7.4% year-over-year increase [34] - Total net revenue from games and related value-added services was RMB 24.0 billion, up 12% year-over-year [34] - Gross profit for Q1 2025 was RMB 18.5 billion, up 9% year-over-year and 14% quarter-over-quarter [36] - Non-GAAP net income attributable to shareholders for Q1 totaled RMB 11.2 billion (approximately USD 1.5 billion), up 32% year-over-year [38] Business Line Data and Key Metrics Changes - Net revenues from online games were RMB 22.5 billion, up 14% quarter-over-quarter and 15% year-over-year, driven by key PC games and established mobile games [34][35] - NetEase Cloud Music's revenue was RMB 1.9 billion, declining 8% year-over-year and 1% quarter-over-quarter, primarily due to decreased revenue from social entertainment services [36] - Innovative businesses and others saw a revenue decline of 17% year-over-year and 29% quarter-over-quarter, mainly due to decreased revenue from advertising services [36] Market Data and Key Metrics Changes - The gaming segment continues to show strong performance, with flagship titles achieving record highs in player engagement and revenue [5][6] - The mobile version of Once Human quickly gained global attention, reaching the top spot on iOS download charts in over 160 regions [10] - The game Identity V surpassed 400 million registered players globally during its seventh anniversary celebration [17] Company Strategy and Development Direction - The company is focused on globalizing and diversifying its game portfolio, with a commitment to innovative content and exceptional operations [5][6] - Plans to deepen connections with player communities through more frequent content updates and esports events [48][49] - The company aims to enhance its esports operations and leverage its successful titles in international competitions [80][81] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the global momentum established and the breadth of opportunities across the diversified game portfolio [33] - The company is committed to investing in long-term sustainability and innovation, particularly through AI technologies [30][85] - Management highlighted the importance of continuous improvement and adaptation in response to market demands and player feedback [44][59] Other Important Information - The effective tax rate for Q1 was 15.3%, and the company reported a robust cash position with net cash of approximately RMB 131.5 billion as of March 31, 2025 [39] - The Board of Directors approved a dividend of USD 0.135 per share [39] - The company has a share repurchase program with approximately USD 1.9 billion spent as of March 31, 2025 [39] Q&A Session Summary Question: About Identity V's strong performance and future growth - Management attributed Identity V's success to continuous investment and optimization over six years, with plans to keep enhancing the game [42][44] Question: On mobile title Marvel Rivals and its lifecycle - Management acknowledged user number volatility but emphasized the introduction of shorter seasonal updates and esports events to maintain engagement [46][48] Question: Strategy for overseas markets amid studio closures - Management clarified that studio closures were based on product positioning and quality, with a focus on creating games suitable for global markets [52][53] Question: Performance and monetization of Once Human - Management reported significant user growth and increased monetization on PC following the mobile launch, with plans for new gameplay features [61][63] Question: Differentiation strategy for Fragpunk in the FPS market - Management expressed satisfaction with Fragpunk's foundation and emphasized ongoing support and market engagement strategies [67][70] Question: Resource allocation between domestic and overseas markets - Management confirmed sufficient resources to support both domestic and overseas markets simultaneously [72][73] Question: Evaluation metrics for new titles and esports strategy - Management highlighted the importance of team passion and experience in evaluating new projects, with ongoing investment in esports operations [76][78][80]

Financial Data and Key Metrics Changes - Operating income reached a Q1 record of RMB104.0 million, surging 247.7% year over year [7] - Net revenues were RMB1.3 billion, declining 6.7% primarily due to decreased learning services revenue [7][19] - Operating cash outflow narrowed by 34.7% to RMB255.5 million, reflecting stronger financial efficiency [8] - 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 - Net revenues from learning services segment declined by 16.1% year over year, but the rate of decline narrowed by approximately five percentage points compared to the previous quarter [9][20] - Net revenues from digital content services within the learning services segment were RMB410.8 million in Q1 [9] - Net revenue from smart devices was RMB190.5 million, representing a 5.1% year over year growth [20][16] - Net revenue from online marketing services rose 2.6% year over year to RMB505.4 million [20][13] Market Data and Key Metrics Changes - The performance-based advertising client base grew by 20% year over year in Q1 [13] - Gross margin from online marketing services moderated to 30.5%, an approximately four percentage point decline year over year [15] - Gross margin for learning services was 59.8%, compared with 63.1% for the same period of 2024 [21] Company Strategy and Development Direction - The company is executing an AI native strategy, applying large language models to critical learning and advertisement scenarios [8] - The launch of Confucius one, an open-source reasoning model, and Youdao Magic Box, an AI-powered app creator suite, are key strategic initiatives [8][9] - The company aims to maintain a positive trajectory, targeting accelerated profit growth and achieving operating cash flow breakeven for the full year 2025 [17] Management Comments on Operating Environment and Future Outlook - Management emphasized the importance of embracing open technologies and integrating proprietary models to enhance user experiences [28] - The company anticipates completing its segment restructuring in the second half of the year, with revenue stabilization expected thereafter [41] - Management expects online marketing services revenue to show stronger growth momentum in the second half of the year, driven by overseas advertising expansion and automated AI-powered advertising solutions [44] Other Important Information - The upgraded Mr. P AI Tutor achieved over 92% accuracy in K-12 problem solving, significantly surpassing standalone models [12][32] - The company has secured official Google Partner certification, complementing its existing TikTok partnership, which enhances its advertising capabilities [13] Q&A Session Summary Question: How does management view the integration of large language models in educational scenarios? - Management highlighted the advantages of combining open and proprietary technologies, enhancing user experiences and accelerating technology growth [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, with expectations for revenue stabilization in the second half of the year [41] 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 new automated solutions [44]