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• NetEase’s core business, which is games and related value-added services, drove the revenue surge, rising 9.7% year-on-year.
• The company attributed the increase primarily to higher revenue from self-developed games, including the “Fantasy Westward Journey” franchise and “Where Winds Meet.”
• It also highlighted continued international expansion for “Where Winds Meet” and “Marvel Rivals,” while “Sea of Remnants” launched in China in July.

Shares of NetEase Inc. (NTES) were in focus on Thursday after the company reported a mixed second quarter, with higher research and development expenses contributing to the pressure on profits.

NetEase reported revenue of RMB30.1 billion ($4.47 billion), up 7.9% year over year, while earnings per American Depositary Receipt (ADR) stood at RMB12.02. Wall Street expected NetEase to report revenue of RMB29.5 billion and earnings per ADR of RMB15.54.

NetEase CEO William Ding struck an optimistic note, saying that the company will focus on creating original content, building long-lasting franchises and strengthening communities to sustain player engagement.

NetEase’s American Depositary Receipts were down more than 3% in Thursday’s pre-market trade.

Higher R&D Spending Pushes Up Operating Expenses

NetEase's total operating expenses rose 1.5% year-on-year and 5.8% quarter-on-quarter to RMB9.1 billion in Q2.

The company said the year-on-year increase was primarily due to higher research and development expenses, while quarter-over-quarter growth also reflected increased marketing expenditures and staff-related costs.

NetEase ended the quarter with RMB167.5 billion in net cash, up from RMB163.5 billion at the end of 2025.

Q2 Revenue Grows On Strength In The Gaming Business

NetEase’s core business, which comprises games and related value-added services, drove the revenue surge, rising 9.7% year-on-year to RMB25.0 billion during the quarter.

The company attributed the increase primarily to higher revenue from self-developed games, including the “Fantasy Westward Journey” franchise and “Where Winds Meet.”

“Our robust performance in the first half of 2026 reflects players' growing enthusiasm for both our newly launched and established games, underscoring our ability to create distinctive and refreshing experiences with lasting appeal,” said NetEase CEO William Ding.

NetEase's total gross profit increased 17.5% year over year to RMB21.2 billion, while cost of revenues declined to RMB8.9 billion from RMB9.8 billion a year earlier. Revenue from Youdao increased 3.5% to RMB1.5 billion, while NetEase Cloud Music revenue was relatively stable at RMB2.0 billion.

The company also highlighted continued international expansion for “Where Winds Meet” and “Marvel Rivals,” while “Sea of Remnants” launched in China in July.

How Retail Traders Reacted To NTES Stock

Retail sentiment on Stocktwits around NetEase was in the ‘bearish’ territory at the time of writing.

NTES ADR is down 9% year-to-date and 1% over the past 12 months. The Avantis Emerging Markets Equity ETF (AVEM) is up 31% over the past 12 months, while the VanEck Video Gaming and eSports ETF (ESPO) is down 14%.

(Exchange Rate: RMB1 = $0.15)

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