NetEase reports 17% drop in Q2 profit, with its video game revenue rising 6.7% to $2.8 billion

Once Human

Financial highlights

• According to its unaudited financial results, NetEase reached 25.5 billion yuan ($3.5 billion) in net revenue in Q2, up 6.1% compared to the same period last year.
• NetEase’s gaming division generated 20.1 billion ($2.8 billion), up 6.7% year-over-year. A small portion of that includes “value-added services” such as live streaming service NetEase CC and game-related merchandise.
• Online games accounted for 96.1% of the total, and the share of mobile titles in the segment’s revenue was 76%.

NetEase’s quarterly game revenues and gross margins

• Net income fell 17% year-over-year to 6.8 billion yuan ($930 million), short of analysts’ expectations. As a result, NetEase shares plunged 13% to $15.98 on Friday (via WSJ).

NetEase’s game results and future releases

• One of the highlights for NetEase in Q2 was the renewal of its publishing agreement with Blizzard, which led to the return of World of Warcraft to China.
• Shooter Lost Light topped the iOS download charts in China following its mobile launch in June. Another major Q2 release, Once Human, peaked at over 230k CCU on Steam and recently surpassed 10 million downloads.
• NetEase also recorded increased net revenues from its mobile games, Identity V and Justice Mobile.

• Naraka: Bladepoint reached record-high DAUs during the quarter. The game also updated its CCU record on Steam, peaking at over 385k concurrent players following the launch of Season 13.
• Its mobile version hit the top 3 on iOS revenue charts soon after its July launch in China and ranked 1st in downloads for over a week. Analysts previously forecasted Naraka: Bladepoint Mobile to generate $880 million in its first year.
• NetEase currently has several titles in its pipeline, including 5v5 shooter FragPunk and Marvel Rivals. The latter will launch globally on December 6, with its beta test having peaked at over 52k concurrent players on Steam.