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    NTES
    Earnings call· Sep 2025(Q3 FY25)

    NetEase, Inc. NTES

    Nov 20, 2025 Source

    Executive summary

    NetEase Q3 FY25 — Strong Gaming Momentum and Global Expansion

    NetEase delivered a strong third quarter, driven by robust performance in its gaming segment, particularly from new global launches and established franchises. The company emphasized its strategy of focusing on high-quality, enduring titles and leveraging AI in development, while also expanding its global footprint with several successful international game releases. Management highlighted a commitment to continuous innovation and player engagement across its diverse portfolio.

    Highlights

    5

    • Total revenues increased 8% year-over-year, reaching RMB 28.4 billion.

    • Revenues from games and related VAS grew 12% year-over-year to RMB 23.3 billion.

    • Non-GAAP net income attributable to shareholders totaled RMB 9.5 billion, up 27% year-over-year.

    • Fantasy Westward Journey Online achieved 4 successive record peaking concurrent player counts, reaching 3.58 million in early November.

    • Eggy Party's daily active users exceeded 30 million and average play time hit record highs.

    Concerns

    4

    • NetEase Cloud Music net revenue decreased 2% year-over-year.

    • Innovative business and others net revenue decreased 19% year-over-year to RMB 1.4 billion.

    • Youdao's gross profit margin decreased to 42.2% from 50.2% year-over-year, mainly due to online marketing services.

    • Selling and marketing expenses as a percentage of total net revenue increased to 15.7% from 14.5% year-over-year.

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Games and related VAS
    Gross profit margin improved from 68.8% in the same period last year, mainly driven by a higher mix of PC games in China, which typically have higher margins.
    		RMB 23.3 billion12%—69.3%
    Online Games
    Quarter-over-quarter increase due to higher net revenues from self-developed games (Fantasy Westward Journey Online, Sword of Justice) and certain licensed games. Year-over-year increase attributable to self-developed games (Fantasy Westward Journey Online, Eggy Party, Where Winds Meet, Marvel Rivals) and certain licensed games.
    		RMB 22.8 billion13%3%—
    Youdao
    Quarter-over-quarter growth driven by smart devices and online marketing services. Year-over-year revenue rose due to higher contribution from online marketing services. Gross profit margin decreased from 50.2% in the same period last year, mainly due to the declined gross profit margin of online marketing services.
    		RMB 1.6 billion4%15%42.2%
    NetEase Cloud Music
    Revenue from membership subscriptions showed healthy growth sequentially and year-over-year. Revenues from social entertainment services and others stabilized quarter-over-quarter. Gross profit margin improved from 32.8% a year ago, primarily driven by steady growth in core online music business with lower contributions from social entertainment and other lower-margin services.
    		RMB 2 billion-2%stable35.4%
    Innovative business and others
    Sequential decline mainly driven by Yanxuan due to its high base during the 618 e-commerce festival. Year-over-year decrease reflected an increase in certain intersegment transaction elimination and to a lesser extent, decreased net revenue from Yanxuan and certain other businesses. Gross profit margin improved from 37.8% in Q3 2024, mainly driven by better margins at Yanxuan and higher revenue contribution from certain innovative businesses with stronger margins.
    		RMB 1.4 billion-19%-15%43.0%

    Operational metrics

    22
    Total net revenue
    RMB 28.4 billion8% increase year-over-year
    Q3 FY25

    Also USD 4 billion.

    Gross profit
    RMB 18.2 billion10% increase year-over-year
    Q3 FY25

    Primarily driven by increased net revenue from online games.

    Total gross profit margin
    64.1%
    Q3 FY25

    Consolidated gross profit margin.

    Total operating expenses
    RMB 10 billion
    Q3 FY25

    Total operating expenses for the quarter.

    Selling and marketing expenses as percentage of total net revenue
    15.7%vs 14.5% for same period last year
    Q3 FY25

    Primarily due to increased marketing expenditure related to online games.

    R&D expenses as percentage of total net revenue
    16%vs 16.9% for same period last year
    Q3 FY25

    Reflecting consistent investment in content creation and product development.

    Effective tax rate
    13%
    Q3 FY25

    Presented on an accrual basis.

    Non-GAAP net income attributable to shareholders
    RMB 9.5 billion27% increase year-over-year
    Q3 FY25

    Also USD 1.3 billion.

    Non-GAAP basic earnings per ADS
    USD 2.09
    Q3 FY25

    Equivalent to USD 0.42 per share.

    Net cash position
    RMB 153.2 billionvs RMB 142.1 billion at end of last quarter
    as of Sep 30, 2025

    Robust cash position.

    Dividend per share
    USD 0.11
    Q3 FY25

    Approved by Board of Directors, equivalent to USD 0.57 per ADS.

    Share repurchase program authorization
    USD 5 billion
    extended until Jan 9, 2029

    Previously approved program extended.

    Share repurchase program executed
    USD 2 billion
    as of Sep 30, 2025

    Total cost of repurchased ADS under the program.

    Fantasy Westward Journey Online concurrent players
    3.58 million4 successive record peaking counts since Q3
    early November

    Achieved by the unlimited server model.

    Fantasy Westward Journey Mobile MAU
    2-year high
    September

    Driven by a surge of new and returning players after launching a new casual server.

    Eggy Party DAU
    over 30 million
    Q3 FY25

    Achieved during the third anniversary celebration.

    Eggy Party average play time
    record high
    Q3 FY25

    Driving historical engagement level.

    Minecraft China Edition concurrent players
    1.25 million
    August 17

    An impressive milestone.

    Minecraft China Edition creators
    over 300,000
    Q3 FY25

    Supported by enhanced creation tools and expanded exposure for community creators.

    Youdao Lingshi gross billing growth
    over 40%year-over-year
    Q3 FY25

    Growth in learning services.

    Hearthstone registered players in China
    over 100 million
    Q3 FY25

    Achieved by its 11th anniversary.

    Where Winds Meet concurrent players
    190,000
    within 2 days of global launch

    Underscores widespread appeal of the Wuxia universe.

    Industry KPIs

    3
    MetricValueDetails
    Member quality and retention2-year highMAU
    Share buyback capital returnedUSD 2 billionUSD
    Content spend title performance3.58 millionconcurrent players

    Product announcements

    10
    ProductTypeDetails
    Destiny: Risinglaunch
    Marvel Rivalsupdate
    Once Humanupdate
    Where Winds Meetlaunch
    Anantamilestone
    Sword of Justicelaunch
    Tianxia II Classiclaunch
    Diablo IVlaunch
    Starcraft IIlaunch
    Youdao Space Xlaunch

    Deals & partnerships

    6
    Yau Mathematical Science Center of the Tsinghua UniversityProviding technical support to a platform designed to identify and support mathematically gifted students.

    The platform is currently being piloted in top-tier schools with a national rollout plan following further refinement.

    ESL FACEIT GroupCollaboration for Marvel Rivals Ignite grand finals at DreamHack Atlanta.

    Elite players from around the world showcased their skills, reflecting Marvel Rivals' growing appeal.

    PalworldCollaboration event for Once Human.

    Brought popular pros to a dedicated in-game island within Once Human.

    Palace Museum ClassicCollaboration for Identity V.

    Added Majestic rooftops of Forbidden City to Identity V's manner on September 25.

    Armor HeroCollaboration for Naraka: Bladepoint.

    Rolled out new heroes and exciting collaborations in September.

    NierTime-limited return collaboration for Naraka: Bladepoint.

    Rolled out new heroes and exciting collaborations in October.

    Risks & headwinds

    5
    Competitive pressure on Identity VQ3 FY25

    Volatility in grossing and DAU in recent months, particularly during summer holidays.

    Mitigation: Impact eased since back-to-school time; Identity V reached historical high in September. Team is preparing new content and marketing campaigns for Chinese New Year cycle, focusing on diversified gameplays and next chapters.

    Declining performance of World of Warcraft as expansion endsEnd of current expansion

    Expected decline in performance compared to launch period.

    Mitigation: Hearthstone maintained cadence of expansion updates. Both games maintained higher performance than when operations previously closed due to different operation strategies and closer collaboration (e.g., Titan Reforged Server for Warcraft). Will continue to deepen collaboration to sustain competitive offerings.

    Intense competition in ARPG genre for Diablo IVPost-launch (Dec 12)

    More intense competition in the ARPG genre.

    Mitigation: Diablo IV has unique quality and brand-new business plans in place. Management believes it will secure its deserved market share and commercial performance.

    Intersegment transaction elimination impacting Innovative Business revenueQ3 FY25

    Increased intersegment transaction elimination contributed to 19% YoY decrease in Innovative Business and others net revenue.

    Mitigation: Despite this, gross profit margin for Innovative Business and others improved due to better margins at Yanxuan and higher revenue contribution from certain innovative businesses with stronger margins.

    Yanxuan's high base impacting Innovative Business revenueQ3 FY25

    Yanxuan's high base during the 618 e-commerce festival led to a 15% QoQ decline in Innovative Business and others net revenue.

    Mitigation: Yanxuan continued to perform well across major e-commerce platforms, led by steady development in core categories and technology-driven product innovations.

    What to watch in Q4 FY25

    5

    Identity V performance during Chinese New Year

    Q4 FY25 / Chinese New Year cycle
    CurrentRecovered to historical high in September after summer holiday impact
    TargetSustained high engagement and revenue, reflecting success of new content and marketing campaigns

    Why it matters

    Identity V experienced volatility due to competition; its performance during a key holiday period will indicate the effectiveness of mitigation strategies and new content.

    While Q4 historically has never been the peak season for Identity V, the team is focusing on preparing new content and marketing campaigns for the Chinese New Year cycle.

    Q&A highlights

    6

    What are the core driving factors behind the unlimited player server for FWJ PC, what is the user profile (retaining vs. new players), and is this model replicable across other flagship titles?

    The longevity of FWJ PC is due to its stable economic system and rich gaming experiences. The unlimited server removed upfront time-based payments and streamlined gameplay, attracting both former and new players, and also benefited the classic server. The company is committed to innovation and diversified experiences for its broad player community.

    “The longevity of Fantasy Westward Journey online PC is based on highly stable economic system and unique enriched gaming experiences which are very rare in most other games. Our team has been dedicated to providing sustainable fun experience, stable ecosystem and innovative content.”

    asked by Xueqing Zhang · answered by Bill Pang

    2 min read6 chapters

    Detailed Narrative

    01

    Gaming Segment Performance and Global Expansion

    NetEase's games and related value-added services (VAS) revenue grew 12% year-over-year to RMB 23.3 billion, with online games revenue up 13% year-over-year to RMB 22.8 billion. Key drivers included new global launches like Destiny: Rising, which topped iOS download charts in major Western markets, and Where Winds Meet, which achieved a peak of 190,000 concurrent players on PC and PlayStation 5 within two days of its global launch. Established titles like Fantasy Westward Journey Online and Eggy Party also saw significant engagement and user growth.

    02

    AI Integration and Product Strategy

    The company highlighted its extensive use of AI in game development and operations, citing examples in Eggy Party and Sword of Justice. Management emphasized a strategic shift towards focusing resources on high-quality, flagship products with strong conviction for success, rather than aggressively launching numerous new titles. This approach aims to build enduring, long-lasting games and allocate resources to creative teams.

    03

    Fantasy Westward Journey Franchise Longevity

    Fantasy Westward Journey Online, a 22-year-old flagship title, achieved 4 successive record peaking concurrent player counts, reaching 3.58 million in early November, driven by an innovative 'unlimited server' model. This model removed upfront time-based payments and streamlined gameplay, attracting both former and new players. Fantasy Westward Journey Mobile also saw monthly active users reach a two-year high in September with the introduction of a new casual server.

    04

    Blizzard Titles' Return and Performance in China

    Blizzard titles, including World of Warcraft, Overwatch 2, Hearthstone, Diablo 2 Resurrected, Diablo IV, and Starcraft II, continued to perform strongly in China. World of Warcraft launched a China-exclusive Titan Reforged server, and Diablo IV was set to launch on December 12. Hearthstone celebrated its 11th anniversary with over 100 million registered players in China. Management noted that the performance of World of Warcraft and Hearthstone remained higher than when operations previously closed, due to different operational strategies and closer collaboration.

    05

    Youdao and Innovative Businesses

    Youdao's net revenue increased 15% quarter-over-quarter to RMB 1.6 billion, driven by smart devices and online marketing services. Its learning services, Youdao Lingshi, grew gross billing by over 40% year-over-year. Innovative business and others, however, saw a 19% year-over-year decrease in net revenue to RMB 1.4 billion, primarily due to intersegment transaction elimination and decreased revenue from Yanxuan. Gross profit margin for Youdao declined to 42.2% from 50.2% year-over-year.

    06

    Financial Highlights and Capital Allocation

    Total net revenue for Q3 FY25 was RMB 28.4 billion, up 8% year-over-year. Gross profit was RMB 18.2 billion, up 10% year-over-year, with a total gross profit margin of 64.1%. Non-GAAP net income attributable to shareholders was RMB 9.5 billion, up 27% year-over-year. The company reported a robust cash position of RMB 153.2 billion. The Board approved a dividend of USD 0.11 per share and extended its share repurchase program of up to USD 5 billion for an additional 36 months until January 9, 2029.

    AI-generated summary of the company’s earnings call. Not investment advice.