Comment on gaming trends in China and overseas, and discuss the overseas expansion strategy.

NetEase has accumulated successful overseas experience, powered by strong development capabilities, citing games like Knives Out, Marvel Rivals, and Where Winds Meet. They are the only company bringing truly authentic Chinese online games to the global market, receiving positive feedback. They are confident in bringing more high-quality content and services globally, also mentioning Sword of Justice, Naraka: Bladepoint, ANANTA, and Sea of Remnants. “In the -- what we see is that in the overseas market, NetEase as one of the most prominent game developing powerhouses in our industry. And we are the only company that bring the purely truly Chinese authentic online games to global market.”

Discuss reasons for Identity V's volatility and strategy to improve performance. Comment on World of Warcraft and Hearthstone performance vs. a year ago and future growth plans. Discuss Diablo IV's monetization potential given ARPG competition.

Identity V was impacted by summer holiday competition but recovered to historical highs in September. The team is preparing new content for Chinese New Year. World of Warcraft and Hearthstone performance is higher than when operations previously closed due to different strategies and closer collaboration, exemplified by the Titan Reforged Server. Diablo IV has unique quality and new business plans to secure market share in ARPG. StarCraft II also achieved record user engagement. “Indeed, it's true that there has been some influence from competing products during the summer holidays, particularly among general users in lower-tier cities. However, we also have noticed that the impact has eased since the start of back-to-school time. And in fact, talking about September, Identity V actually has reached historical high starting from the new semester compared to the same period in previous years.”

The number of new games seems smaller. What is the current strategy for launching new games, and what will be the growth driver if fewer games are launched?

The company will focus on successful products, refining and optimizing them, and will be more prudent and focused on new projects, ensuring strong conviction in content and market. Being focused is a core competence. They believe this approach will lead to breakthroughs and sustained growth. “The whole company will be very focused on our success products. And among the already success product, we'll keep refining and keep focusing. We don't want to distract too much focus to charter many, many new products, which we don't have super confidence.”

NTES

NetEase (NTES) Q3 FY25 earnings call: the analyst Q&A

Earnings call· Sep 2025 (Q3 FY25)· Information Technology· Nov 20, 2025

Source: earnings call transcript

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

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

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

Segment	Revenue	YoY	QoQ	Margin
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 billion	12%	—	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 billion	13%	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 billion	4%	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%	stable	35.4%
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%

Product announcements

Product	Type	Timeline
Destiny: Rising	launch	global launch on August 28; China debut on October 16
Marvel Rivals	update	fourth season on September 12
Once Human	update	October 30
Where Winds Meet	launch	November 14 (global market); mobile version preregistration soon
Ananta	milestone	Tokyo Game Show 2025
Sword of Justice	launch	November 7 (global)
Tianxia II Classic	launch	October (closed beta concluded)
Diablo IV	launch	December 12 (China)
Starcraft II	launch	October 28 (return to China)
Youdao Space X	launch	Q3 FY25

Deals & partnerships

Yau Mathematical Science Center of the Tsinghua University Providing 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 Group Collaboration for Marvel Rivals Ignite grand finals at DreamHack Atlanta.

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

Palworld Collaboration event for Once Human.

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

Palace Museum Classic Collaboration for Identity V.

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

Armor Hero Collaboration for Naraka: Bladepoint.

Rolled out new heroes and exciting collaborations in September.

Nier Time-limited return collaboration for Naraka: Bladepoint.

Rolled out new heroes and exciting collaborations in October.

Risks & headwinds

Competitive pressure on Identity V Q3 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 ends End 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 IV Post-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 revenue Q3 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 revenue Q3 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

Identity V performance during Chinese New Year

Q4 FY25 / Chinese New Year cycle

Current Recovered to historical high in September after summer holiday impact

Target Sustained 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.

Find out whether NTES delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.