TLDR
- NetEase reported Q1 2025 earnings of $0.49 per share, beating analyst estimates
- Total revenue rose 7.4% year-over-year to RMB 28.83 billion ($4 billion)
- Gaming revenue grew 12%, led by flagship titles and new releases
- Non-gaming segments like Youdao and Cloud Music saw revenue declines
- NTES stock is up 38% year-to-date, with strong Q1 performance boosting sentiment
NetEase Inc. (NASDAQ: NTES) stock closed at $119.58, down 2.59% on the day, but remains up 38% year-to-date. At the same time, shares surged nearly 15% in intraday trading on Thursday, May 15th. The company reported strong first-quarter 2025 results on May 15, driven by significant growth in its gaming division.
Adjusted earnings per share came in at 3.50 yuan ($0.49), surpassing the 2.80 yuan consensus estimate. Revenue totaled 28.83 billion yuan ($4 billion), up 7.4% year-over-year and ahead of expectations.
$NTES … Reports Q1 (Mar) earnings of RMB 17.51 per share, RMB 3.60 better than the FactSet Consensus of RMB 13.91; revenues rose 7.4% year/year to RMB 28.83 bln vs the RMB 28.45 bln FactSet Consensus. pic.twitter.com/mZljNntnFF
— Marty Chargin (@MartyChargin) May 15, 2025
Games and related value-added services generated 24.05 billion yuan in revenue, a 12% increase, and roughly 1 billion yuan above forecasts. Online games alone contributed 23.5 billion yuan, up 15% from a year ago. PC games revenue surged 85% year-over-year, comprising 34% of total online gaming revenue.
Franchise Success and Global Expansion
CEO William Ding highlighted the strength of NetEase’s game portfolio, noting the success of long-standing franchises and recent launches like Marvel Rivals and FragPunk. Global titles such as Once Human and Where Winds Meet also contributed to the segment’s expansion.
The company continues to use AI technology to enhance gameplay, driving engagement and subscription sales across its platforms. NetEase’s innovation strategy has positioned it as a key player in China’s and the global gaming markets.
Non-Gaming Segments Face Pressure
While gaming thrived, other business lines underperformed. Youdao revenue declined 7% year-over-year to 1.3 billion yuan. NetEase Cloud Music fell 8% to 1.9 billion yuan. The Innovative Businesses and Others segment, which includes retail and advertising, declined 17% to 1.6 billion yuan. FragPunk also saw a quick drop in player engagement post-launch, highlighting challenges in sustaining momentum in the FPS genre.
Management acknowledged the need for improved monetization strategies, especially for mobile titles like Once Human, which showed strong user interest but limited revenue conversion.
Strong Profitability and Shareholder Returns
Gross profit for the quarter rose 9% to 18.5 billion yuan, with gross margin improving to 64.1%. Operating expenses were 8 billion yuan, or 28% of net revenue. Non-GAAP net income increased 32% year-over-year to 11.2 billion yuan ($1.5 billion), with basic earnings per ADS at $2.44.
The company declared a dividend of $0.675 per ADS and repurchased 21.6 million ADS for $1.9 billion, supported by a robust cash position of 137 billion yuan as of March 31, 2025.
Outlook
NetEase’s strong Q1 performance reinforces its standing in the global gaming market. With continued investment in new titles and AI integration, the company is well-positioned to drive future growth. Investors will watch closely how NetEase balances gaming strength with improvements in its underperforming segments in the quarters ahead.
