Earning Date, Transcript Summary & Report

Earnings Surprise Achieved: NetEase, Inc. beats earnings expectations with reported EPS of $2.07, exceeding expectations of $1.77.

Net Revenue Increase: Total net revenue reached RMB 105.3 billion for 2024, marking a 2% increase year-over-year.

Record High Game Revenue: Revenue from games and related services was RMB 83.6 billion, also a record high, contributing to the 22nd consecutive year of revenue growth from online games operations.

Successful Game Launch: Marvel Rivals launched successfully, achieving over 40 million players and topping Steam’s charts shortly after release, showcasing strong player engagement.

Game Launch Success: Where Winds Meet, launched in December, garnered 3 million downloads within four days and over 50 million players in two weeks, indicating strong market interest.

Blizzard Games Return Excitement: The return of Blizzard games to China, including World of Warcraft and Hearthstone, has been met with enthusiasm, driving community engagement and record attendance at events.

Record High Revenue Achievement: Identity V achieved record high revenue in 2024, demonstrating the success of its operational strategies and player engagement initiatives.

First Annual Operating Profit: Youdao achieved its first-ever annual operating profit in 2024, with a year-over-year increase in operating profit of over 10% in Q4.

Net Revenue Increase: NetEase Cloud Music saw a slight increase in net revenue for the full year, with improvements in gross profit margin due to membership subscriptions and cost management.

Strong Cash Position: The company maintains a strong cash position with net cash of approximately RMB 131.5 billion, up from RMB 110.9 billion at the end of 2023.

Revenue Growth Slowdown: NetEase's total net revenue for 2024 was RMB 105.3 billion, representing only a 2% increase year-over-year, indicating a slowdown in growth compared to previous years.

Gaming Revenue Stagnation: The net revenue from games and related services was RMB 83.6 billion, up just 3% from 2023, suggesting that the gaming segment is not experiencing significant growth despite new releases.

Learning Services Revenue Decline: Youdao's Learning Services revenue declined by 9.5% year-over-year in Q4, primarily due to a focus on long-term growth and profitability, which may indicate challenges in the education sector.

Revenue Decline in Q4: NetEase Cloud Music's revenue decreased by 5% year-over-year in Q4, reflecting lower revenue from social entertainment services, which could signal difficulties in maintaining user engagement.

Gross Profit Margin Decline: The gross profit margin for games and related services decreased from 69.5% to 66.7% year-over-year, attributed to a higher proportion of revenue from licensed games, which typically have lower margins.

Gross Profit Margin Decline: The gross profit margin for Youdao also declined from 49.9% to 47.8% year-over-year, indicating challenges in maintaining profitability in its learning services segment.

Innovative Segment Revenue Decline: The innovative business segment saw a revenue decline of 6% year-over-year, suggesting that new initiatives may not be generating expected returns.

Operating Expenses Analysis: Operating expenses for Q4 were RMB 8.5 billion, accounting for 32% of total net revenue, which may raise concerns about cost management as the company continues to invest in R&D and marketing.