Online Gaming Is Still The Biggest Source Of Income. Diablo Immortal Is The Most Downoloaded Game On The IOS

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NetEase is a Chinese technology company that operates in three segments - online games, search engine (Youdao) and online music (Cloud Music). The company operates both in China and internationally. It is famous for games such as 'The Lord of the Rings: Rise to War', 'Vikingard', 'Lifeafter' and 'Knives Out'.

Its shares have fallen more than 10% since the beginning of the year, along with other companies in the Chinese technology sector, by the Chinese government's ambiguous action in the area of interference in their operations, fears of delisting in the US and deteriorating economic indicators in China. However, it is fair to say that its price has still proved to be far more resilient to the issues mentioned above than those of Tencent, Alibaba and Baidu.

The company's revenue was 23.2 billion renminbi (US$3.5 billion) in the second quarter, growing 12.8 % year-on-year, slightly beating Wall Street analysts' expectations. Cloud Music revenue grew the most to 2.2 billion renminbi ($327.2 million), rising 29.5% year on year.

Online gaming remains the most important revenue stream, with Q2 revenue of 18.1 billion renminbi ($2.7 billion). This increased by 15% compared to the same period a year ago.

This was mainly due to the debut of Diablo Immortal, co-developed by NetEase with Blizzard Entertainment. According to the company's report, it became the most downloaded game on the IOS platform in some regions. Major franchise titles had their longevity extended, including the fantasy series Westward Journey and Westward Journey Online, as well as Identity V and Infinite Lagrange.

"Players continued to gravitate to our longstanding games in the second quarter, highlighting our strength in game operations longevity. Moreover, the launch of Diablo® Immortal™ attracted the attention of gamers around the world, showcasing our exceptional mobile game development capabilities" - stated CEO William Ding.

Revenue fell sharply in the Youdao area, down 29.5% year on year. However, this is the smallest source of revenue and only amounted to 956.2 million renminbi ($142.8 million) in the quarter.

Q2 saw a net profit of $790 million, due to lower costs of player retention costs compared to new player acquisitions. Earnings per share (EPS) for those listed in New York were $1.22 on an adjusted basis, beating analysts' estimates by 17 cents. NetEase shares gained almost 3% before the market opened.


Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service)

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

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Source: NetEase increases profits despite declining revenues

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