NetEase Announces Second Quarter 2025 Unaudited Financial Results

, /PRNewswire/ -- NetEase, Inc. (NASDAQ: NTES and HKEX: 9999, "NetEase" or the "Company"), a leading internet and game services provider, today announced its unaudited financial results for the second quarter ended June 30, 2025. Second Quarter 2025 Financial Highlights Net revenues were RMB27.9 billion (US$3.9 billion), an increase of 9.4% compared with the same quarter of 2024. Games and related value-added services net revenues were RMB22.8 billion (US$3.2 billion), an increase of 13.7% compared with the same quarter of 2024. Youdao net revenues were RMB1.4 billion (US$197.9 million), an increase of 7.2% compared with the same quarter of 2024. NetEase Cloud Music net revenues were RMB2.0 billion (US$274.8 million), a decrease of 3.5% compared with the same quarter of 2024. Innovative businesses and others net revenues were RMB1.7 billion (US$237.2 million), a decrease of 17.8% compared with the same quarter of 2024. Gross profit was RMB18.1 billion (US$2.5 billion), an increase of 12.5% compared with the same quarter of 2024. Total operating expenses were RMB9.0 billion (US$1.3 billion), a decrease of 0.6% compared with the same quarter of 2024. Net income attributable to the Company's shareholders was RMB8.6 billion (US$1.2 billion). Non-GAAP net income attributable to the Company's shareholders was RMB9.5 billion (US$1.3 billion).[1] Basic net income per share was US$0.38 (US$1.88 per ADS). Non-GAAP basic net income per share was US$0.42 (US$2.09 per ADS).[1] [1] As used in this announcement, non-GAAP net income attributable to the Company's shareholders and non-GAAP basic and diluted net income per share and per ADS are defined to exclude share-based compensation expenses. See the unaudited reconciliation of GAAP and non-GAAP results at the end of this announcement. Second Quarter 2025 and Recent Operational Highlights Extended global traction with new launches across regions: FragPunk ranked No. 2 on PlayStation's North America free-to-play download chart in May, following its April 29 global launch on Xbox Series X|S and PlayStation 5. Dunk City Dynasty gained substantial momentum with its May 22 global launch, topping iOS download charts in multiple regions and reaching No. 2 in the U.S. MARVEL Mystic Mayhem's June 25 launch propelled the game to No. 1 on iOS download charts across multiple regions and No. 2 in the U.S. Sustained player momentum and operating strength across established franchises: Sword of Justice (previously Justice mobile game) hit No. 3 on China's iOS top-grossing chart shortly after its second anniversary update on June 30. Once Human reached No. 4 on Steam's global top sellers chart following its anniversary update on July 3. Identity V ranked No. 6 on the iOS top-grossing chart in China following its seasonal update on July 10. Naraka: Bladepoint mobile game celebrated its first anniversary with the launch of a new version on July 10, propelling it to No. 6 on China's iOS top-grossing chart. Eggy Party reached No. 5 on China's iOS top-grossing chart on July 11 after a series of third-anniversary events. Marvel Rivals ranked No. 2 on Steam's global top-sellers chart and No. 1 in the U.S with its Summer Party Event unveiled on July 17. Fantasy Westward Journey Online reached a new all-time high with over 2.93 million peak concurrent players in August. Further captivated players in China with Blizzard titles. Hearthstone ranked No. 5 on China's iOS top-grossing chart on July 9, fueled by the launch of The Lost City of Un'Goro expansion pack, while World of Warcraft's 20th anniversary celebration in China sparked strong community engagement with the announcement of a new China-exclusive server set to launch in November. Enriched global pipeline with exciting new titles underway, including NetEase's original ocean adventure RPG Sea of Remnants and story-driven action-adventure game Blood Message, along with plans to bring Sword of Justice and Where Winds Meet to the global market. "In the second quarter, we grew our player community with thrilling new content that reinforces our position as a creator of high-impact, genre-defining games," said Mr. William Ding, Chief Executive Officer and Director of NetEase. "At the core of our expansion is product innovation, disciplined execution and deep community engagement, all capabilities we have honed over many years and powered by our strong technological foundation. We will continue to push the boundaries of player experiences, scaling original IP to build lasting franchises and growing alongside our collaborative global partners. "Beyond games, we remain focused on innovation, refining our products and content to deliver long-term value for our users, partners and shareholders," Mr. Ding concluded. Second Quarter 2025 Financial Results Net Revenues Net revenues for the second quarter of 2025 were RMB27.9 billion (US$3.9 billion), compared with RMB28.8 billion and RMB25.5 billion for the preceding quarter and the same quarter of 2024, respectively. Net revenues from games and related value-added services were RMB22.8 billion (US$3.2 billion) for the second quarter of 2025, compared with RMB24.0 billion and RMB20.1 billion for the preceding quarter and the same quarter of 2024, respectively. Net revenues from the operation of online games accounted for approximately 97.1% of the segment's net revenues for the second quarter of 2025, compared with 97.5% and 96.1% for the preceding quarter and the same quarter of 2024, respectively. The quarter-over-quarter decrease in online games net revenues was due to certain self-developed and licensed games. The year-over-year increase was attributable to higher net revenues from Identity V, our newly launched games Where Winds Meet and Marvel Rivals and certain licensed games. Net revenues from Youdao were RMB1.4 billion (US$197.9 million) for the second quarter of 2025, compared with RMB1.3 billion each for the preceding quarter and the same quarter of 2024. Net revenues from its online marketing services and learning services increased quarter-over-quarter and year-over-year, while net revenues from its smart devices decreased quarter-over-quarter and year-over-year. Net revenues from NetEase Cloud Music were RMB2.0 billion (US$274.8 million) for the second quarter of 2025, compared with RMB1.9 billion and RMB2.0 billion for the preceding quarter and the same quarter of 2024, respectively. Net revenues from its online music services increased both quarter-over-quarter and year-over-year, while net revenues from its social entertainment services and others increased quarter-over-quarter but decreased year-over-year. Net revenues from innovative businesses and others were RMB1.7 billion (US$237.2 million) for the second quarter of 2025, compared with RMB1.6 billion and RMB2.1 billion for the preceding quarter and the same quarter of 2024, respectively. The quarter-over-quarter increase was led by increased net revenues from Yanxuan. The year-over-year decrease was due to decreased net revenues from Yanxuan, advertising services and certain other businesses in this segment. Cost of Revenues Cost of revenues for the second quarter of 2025 was RMB9.8 billion (US$1.4 billion), compared with RMB10.3 billion and RMB9.4 billion for the preceding quarter and the same quarter of 2024, respectively, with revenue sharing costs related to platforms and royalties for licensed games decreasing quarter-over-quarter, while royalties for licensed games increased year-over-year. Gross Profit Gross profit for the second quarter of 2025 was RMB18.1 billion (US$2.5 billion), compared with RMB18.5 billion and RMB16.0 billion for the preceding quarter and the same quarter of 2024, respectively. Operating Expenses Total operating expenses for the second quarter of 2025 were RMB9.0 billion (US$1.3 billion), compared with RMB8.0 billion and RMB9.0 billion for the preceding quarter and the same quarter of 2024, respectively. The quarter-over-quarter increase was primarily due to increased marketing expenditures related to games and related value-added services. Other Income/(Expenses) Other income/(expenses) consisted of investment income, interest income, net exchange losses/(gains) and others. The quarter-over-quarter decrease was mainly due to fair value changes of equity security investments, and the year-over-year increase was primarily due to net exchange gains in the second quarter of 2025, compared with net exchange losses recorded in the same quarter of 2024. Income Tax The Company recorded a net income tax charge of RMB1.6 billion (US$217.9 million) for the second quarter of 2025, compared with RMB1.9 billion and RMB1.3 billion for the preceding quarter and the same quarter of 2024, respectively. The effective tax rate for the second quarter of 2025 was 14.7%, compared with 15.3% and 16.0% for the preceding quarter and the same quarter of 2024, respectively. The effective tax rate represents certain estimates by the Company as to the tax obligations and benefits applicable to it in each quarter. Net Income and Non-GAAP Net Income Net income attributable to the Company's shareholders totaled RMB8.6 billion (US$1.2 billion) for the second quarter of 2025, compared with RMB10.3 billion and RMB6.8 billion for the preceding quarter and the same quarter of 2024, respectively. Basic net income was US$0.38 per share (US$1.88 per ADS) for the second quarter of 2025, compared with US$0.45 per share (US$2.27 per ADS) and US$0.29 per share (US$1.47 per ADS) for the preceding quarter and the same quarter of 2024, respectively. Non-GAAP net income attributable to the Company's shareholders totaled RMB9.5 billion (US$1.3 billion) for the second quarter of 2025, compared with RMB11.2 billion and RMB7.8 billion for the preceding quarter and the same quarter of 2024, respectively. Non-GAAP basic net income was US$0.42 per share (US$2.09 per ADS) for the second quarter of 2025, compared with US$0.49 per share (US$2.47 per ADS) and US$0.34 per share (US$1.70 per ADS) for the preceding quarter and the same quarter of 2024, respectively. Other Financial Information As of June 30, 2025, the Company's net cash (total cash and cash equivalents, current and non-current time deposits and restricted cash, as well as short-term investments balance, minus short-term and long-term loans) totaled RMB142.1 billion (US$19.8 billion), compared with RMB131.5 billion as of December 31, 2024. Net cash provided by operating activities was RMB10.9 billion (US$1.5 billion) for the second quarter of 2025, compared with RMB12.1 billion and RMB6.5 billion for the preceding quarter and the second quarter of 2024, respectively. Quarterly Dividend The board of directors approved a dividend of US$0.1140 per share (US$0.5700 per ADS) for the second quarter of 2025 to holders of ordinary shares and holders of ADSs as of the close of business on August 28, 2025, Beijing/Hong Kong Time and New York Time, respectively, payable in U.S. dollars. For holders of ordinary shares, in order to qualify for the dividend, all valid documents for the transfer of shares accompanied by the relevant share certificates must be lodged for registration with the Company's Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong, no later than 4:30 p.m. on August 28, 2025 (Beijing/Hong Kong Time). The payment date is expected to be September 8, 2025 for holders of ordinary shares and on or around September 11, 2025, for holders of ADSs. NetEase paid a dividend of US$0.1350 per share (US$0.6750 per ADS) for the first quarter of 2025 in June 2025. Under the Company's current dividend policy, the determination to make dividend distributions and the amount of such distribution in any particular quarter will be made at the discretion of its board of directors and will be based upon the Company's operations and earnings, cash flow, financial condition and other relevant factors. Share Repurchase Program On November 17, 2022, the Company announced that its board of directors had approved a share repurchase program of up to US$5.0 billion of the Company's ADSs and ordinary shares in open market transactions. This share repurchase program commenced on January 10, 2023, and will be in effect for a period not to exceed 36 months from such date. As of June 30, 2025, approximately 22.1 million ADSs had been repurchased under this program for a total cost of US$2.0 billion. The extent to which NetEase repurchases its ADSs and its ordinary shares depends upon a variety of factors, including market conditions. These programs may be suspended or discontinued at any time. ** The United States dollar (US$) amounts disclosed in this announcement are presented solely for the convenience of the reader. The percentages stated are calculated based on RMB. Conference Call NetEase's management team will host a teleconference call with a simultaneous webcast at 8:00 a.m. Eastern Time on Thursday, August 14, 2025 (Beijing/Hong Kong Time: 8:00 p.m., Thursday, August 14, 2025). NetEase's management will be on the call to discuss the quarterly results and answer questions. Interested parties may participate in the conference call by dialing 1-914-202-3258 and providing conference ID: 10049137, 15 minutes prior to the initiation of the call. A replay of the call will be available by dialing 1-855-883-1031 and entering PIN: 10049137. The replay will be available through August 21, 2025. This call will be webcast live and the replay will be available for 12 months. Both will be available on NetEase's Investor Relations website at http://ir.netease.com/. About NetEase, Inc. NetEase, Inc. (NASDAQ: NTES and HKEX: 9999, "NetEase") is a leading internet and game services provider centered around premium content. With extensive offerings across its expanding gaming ecosystem, the Company develops and operates some of the most popular and longest-running mobile and PC games available in China and globally. Powered by one of the largest in-house game R&D teams focused on mobile, PC and console, NetEase creates superior gaming experiences, inspires players, and passionately delivers value for its thriving community worldwide. By infusing play with culture, and education with technology, NetEase transforms gaming into a meaningful vehicle to build a more entertaining and enlightened world. Beyond games, NetEase service offerings include its majority-controlled subsidiaries Youdao (NYSE: DAO), an intelligent learning and advertising solutions provider, and NetEase Cloud Music (HKEX: 9899), a well-known online music platform featuring a vibrant content community, as well as Yanxuan, NetEase's private label consumer lifestyle brand. For more information, please visit: http://ir.netease.com/. Forward Looking Statements This announcement contains statements of a forward-looking nature. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar expressions. In addition, statements that are not historical facts, including statements about NetEase's strategies and business plans, its expectations regarding the growth of its business and its revenue and the quotations from management in this announcement are or contain forward-looking statements. NetEase may also make forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"), in announcements made on the website of The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange"), in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks related to: the risk that the online games market will not continue to grow or that NetEase will not be able to maintain its position in that market in China or globally; risks associated with NetEase's business and operating strategies and its ability to implement such strategies; NetEase's ability to develop and manage its operations and business; competition for, among other things, capital, technology and skilled personnel; potential changes in regulation environment in the markets where NetEase operates; the risk that NetEase may not be able to continuously develop new and creative online services or that NetEase will not be able to set, or follow in a timely manner, trends in the market; risks related to evolving economic cycles and geopolitical tensions, including the direct or indirect impacts of national trade, investment, protectionist, tax or other laws or policies as well as export controls and economic or trade sanctions; risks related to the expansion of NetEase's businesses and operations internationally; risks associated with cybersecurity threats or incidents; and fluctuations in foreign currency exchange rates that could adversely affect NetEase's business and financial results. Further information regarding these and other risks is included in NetEase's filings with the SEC and announcements on the website of the Hong Kong Stock Exchange. NetEase does not undertake any obligation to update this forward-looking information, except as required under applicable law. Non-GAAP Financial Measures NetEase considers and uses non-GAAP financial measures, such as non-GAAP net income attributable to the Company's shareholders and non-GAAP basic and diluted net income per ADS and per share, as supplemental metrics in reviewing and assessing its operating performance and formulating its business plan. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). NetEase defines non-GAAP net income attributable to the Company's shareholders as net income attributable to the Company's shareholders excluding share-based compensation expenses. Non-GAAP net income attributable to the Company's shareholders enables NetEase's management to assess its operating results without considering the impact of share-based compensation expenses. NetEase believes that this non-GAAP financial measure provides useful information to investors in understanding and evaluating the Company's current operating performance and prospects in the same manner as management does, if they so choose. NetEase also believes that the use of this non-GAAP financial measure facilitates investors' assessment of its operating performance. Non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. Non-GAAP financial measures have limitations as analytical tools. One of the key limitations of using non-GAAP net income attributable to the Company's shareholders is that it does not reflect all items of expense/ income that affect our operations. Share-based compensation expenses have been and may continue to be incurred in NetEase's business and are not reflected in the presentation of non-GAAP net income attributable to the Company's shareholders. In addition, the non-GAAP financial measures NetEase uses may differ from the non-GAAP measures used by other companies, including peer companies, and therefore their comparability may be limited. NetEase compensates for these limitations by reconciling non-GAAP net income attributable to the Company's shareholders to the nearest U.S. GAAP performance measure, all of which should be considered when evaluating the Company's performance. See the unaudited reconciliation of GAAP and non-GAAP results at the end of this announcement. NetEase encourages you to review its financial information in its entirety and not rely on a single financial measure. Contact for Media and Investors:Email: [email protected]Tel: (+86) 571-8985-3378 NETEASE, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) December 31, June 30, June 30, 2024 2025 2025 RMB RMB USD (Note 1) Assets Current assets: Cash and cash equivalents 51,383,310 54,430,728 7,598,237 Time deposits 75,441,355 75,277,705 10,508,362 Restricted cash 3,086,405 3,731,100 520,841 Accounts receivable, net 5,669,027 5,776,412 806,356 Inventories 571,548 591,756 82,606 Prepayments and other current assets, net 6,416,868 6,161,982 860,179 Short-term investments 10,756,143 16,980,429 2,370,376 Total current assets 153,324,656 162,950,112 22,746,957 Non-current assets: Property, equipment and software, net 8,520,101 8,447,022 1,179,159 Land use rights, net 4,172,465 4,111,093 573,886 Deferred tax assets 1,113,435 2,190,156 305,734 Time deposits 3,025,000 2,935,000 409,710 Restricted cash 5,208 5,266 735 Other long-term assets 25,830,685 27,860,004 3,889,107 Total non-current assets 42,666,894 45,548,541 6,358,331 Total assets 195,991,550 208,498,653 29,105,288 Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity Current liabilities: Accounts payable 720,549 695,414 97,076 Salary and welfare payables 4,683,009 3,560,061 496,965 Taxes payable 2,759,185 3,796,135 529,920 Short-term loans 11,805,051 11,276,303 1,574,111 Contract liabilities 15,299,222 16,966,562 2,368,441 Accrued liabilities and other payables 14,400,641 14,157,432 1,976,301 Total current liabilities 49,667,657 50,451,907 7,042,814 Non-current liabilities: Deferred tax liabilities 2,173,117 2,724,485 380,323 Long-term loans 427,997 - - Other long-term liabilities 1,228,641 1,218,109 170,041 Total non-current liabilities 3,829,755 3,942,594 550,364 Total liabilities 53,497,412 54,394,501 7,593,178 Redeemable noncontrolling interests 84,272 87,741 12,248 NetEase, Inc.'s shareholders' equity 138,685,606 149,587,316 20,881,584 Noncontrolling interests 3,724,260 4,429,095 618,278 Total equity 142,409,866 154,016,411 21,499,862 Total liabilities, redeemable noncontrolling interests and shareholders' equity 195,991,550 208,498,653 29,105,288 The accompanying notes are an integral part of this announcement. NETEASE, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data or per ADS data) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, June 30, June 30, 2024 2025 2025 2025 2024 2025 2025 RMB RMB RMB USD (Note 1) RMB RMB USD (Note 1) Net revenues 25,485,805 28,828,545 27,891,664 3,893,526 52,337,546 56,720,209 7,917,836 Cost of revenues (9,443,587) (10,349,139) (9,839,182) (1,373,497) (19,279,408) (20,188,321) (2,818,181) Gross profit 16,042,218 18,479,406 18,052,482 2,520,029 33,058,138 36,531,888 5,099,655 Operating expenses: Selling and marketing expenses (3,501,737) (2,695,597) (3,578,174) (499,494) (7,523,941) (6,273,771) (875,785) General and administrative expenses (1,091,441) (956,337) (1,056,578) (147,493) (2,287,916) (2,012,915) (280,992) Research and development expenses (4,455,717) (4,386,313) (4,356,646) (608,164) (8,630,475) (8,742,959) (1,220,470) Total operating expenses (9,048,895) (8,038,247) (8,991,398) (1,255,151) (18,442,332) (17,029,645) (2,377,247) Operating profit 6,993,323 10,441,159 9,061,084 1,264,878 14,615,806 19,502,243 2,722,408 Other income/(expenses): Investment income, net 103,674 692,751 328,444 45,849 282,965 1,021,195 142,553 Interest income, net 1,186,219 1,060,886 953,490 133,102 2,463,816 2,014,376 281,196 Exchange (losses)/gains, net (239,375) 1,803 114,037 15,919 (224,364) 115,840 16,171 Other, net 85,694 255,315 192,167 26,825 279,582 447,482 62,466 Income before tax 8,129,535 12,451,914 10,649,222 1,486,573 17,417,805 23,101,136 3,224,794 Income tax (1,300,939) (1,905,143) (1,560,757) (217,873) (2,786,849) (3,465,900) (483,821) Net income 6,828,596 10,546,771 9,088,465 1,268,700 14,630,956 19,635,236 2,740,973 Accretion of redeemable noncontrolling interests (960) (1,049) (1,051) (147) (1,918) (2,100) (293) Net income attributable to noncontrolling interests and redeemable noncontrolling interests (68,887) (244,565) (486,404) (67,899) (236,343) (730,969) (102,039) Net income attributable to the Company's shareholders 6,758,749 10,301,157 8,601,010 1,200,654 14,392,695 18,902,167 2,638,641 Net income per share * Basic 2.10 3.25 2.70 0.38 4.48 5.94 0.83 Diluted 2.08 3.21 2.67 0.37 4.43 5.88 0.82 Net income per ADS * Basic 10.50 16.23 13.49 1.88 22.39 29.71 4.15 Diluted 10.42 16.06 13.36 1.87 22.17 29.41 4.11 Weighted average number of ordinary shares used in calculating net income per share * Basic 3,217,699 3,173,899 3,188,634 3,188,634 3,214,682 3,181,307 3,181,307 Diluted 3,243,056 3,206,362 3,214,681 3,214,681 3,246,254 3,210,563 3,210,563 * Each ADS represents five ordinary shares. The accompanying notes are an integral part of this announcement. NETEASE, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, June 30, June 30, 2024 2025 2025 2025 2024 2025 2025 RMB RMB RMB USD (Note 1) RMB RMB USD (Note 1) Cash flows from operating activities: Net income 6,828,596 10,546,771 9,088,465 1,268,700 14,630,956 19,635,236 2,740,973 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 631,957 480,761 428,427 59,806 1,199,880 909,188 126,918 Fair value changes of equity security and other investments (7,887) (558,499) 55,715 7,778 (376,145) (502,784) (70,186) Impairment losses on investments 210,741 89,071 161,463 22,539 339,158 250,534 34,973 Fair value changes of short-term investments (128,295) (201,609) (344,604) (48,105) (189,105) (546,213) (76,248) Share-based compensation cost 1,079,056 951,872 946,395 132,112 1,973,356 1,898,267 264,988 Allowance for expected credit losses 9,281 16,771 153,179 21,383 20,881 169,950 23,724 (Gains)/losses on disposal of property, equipment and software (326) 20,293 (30,920) (4,316) 1,806 (10,627) (1,484) Unrealized exchange gains (209,311) (28,453) (165,662) (23,126) (226,820) (194,115) (27,097) (Gains)/losses on disposal of long-term investments, business and subsidiaries (141,114) 11,675 (141,078) (19,694) (154,601) (129,403) (18,064) Deferred income taxes (1,280,076) 328,272 (853,764) (119,181) (795,022) (525,492) (73,356) Share of results on equity method investees 39,200 (18,668) 13,479 1,882 203,471 (5,189) (724) Changes in operating assets and liabilities: Accounts receivable 1,410,478 (1,088,960) 953,295 133,075 51,767 (135,665) (18,938) Inventories 29,552 53,773 (73,944) (10,322) 120,930 (20,171) (2,816) Prepayments and other assets 530,856 (295,178) 583,484 81,451 856,996 288,306 40,246 Accounts payable (126,862) (148,076) 119,644 16,702 (133,863) (28,432) (3,969) Salary and welfare payables 879,058 (2,085,111) 920,662 128,520 (1,299,550) (1,164,449) (162,551) Taxes payable (1,462,700) 1,796,123 (764,372) (106,702) (190,878) 1,031,751 144,027 Contract liabilities (1,270,324) 2,526,198 (718,719) (100,329) 303,762 1,807,479 252,314 Accrued liabilities and other payables (490,048) (290,374) 530,718 74,085 (247,978) 240,344 33,551 Net cash provided by operating activities 6,531,832 12,106,652 10,861,863 1,516,258 16,089,001 22,968,515 3,206,281 Cash flows from investing activities: Purchase of property, equipment and software (168,880) (454,071) (189,842) (26,501) (583,898) (643,913) (89,887) Proceeds from sale of property, equipment and software 660 1,336 21,499 3,001 4,166 22,835 3,188 Purchase of intangible assets, content and licensed copyrights (399,533) (298,771) (313,349) (43,742) (588,354) (612,120) (85,449) Net changes of short-term investments with terms of three months or less (8,194,289) (6,138,556) 776,428 108,385 (5,792,640) (5,362,128) (748,524) Purchase of short-term investments with terms over three months - (2,970,000) (5,800,000) (809,649) - (8,770,000) (1,224,245) Proceeds from maturities of short-term investments with terms over three months - 2,708,601 5,745,454 802,034 - 8,454,055 1,180,141 Investment in long-term investments and acquisition of subsidiaries (193,450) (90,966) (2,741,641) (382,718) (675,254) (2,832,607) (395,417) Proceeds from disposal of long-term investments, businesses, subsidiaries and other financial instruments 840,649 77,428 784,855 109,562 926,105 862,283 120,370 Placement/rollover of matured time deposits (61,775,606) (49,601,807) (27,980,605) (3,905,942) (96,334,442) (77,582,412) (10,830,087) Proceeds from maturities of time deposits 55,211,839 43,926,482 33,617,510 4,692,823 101,260,221 77,543,992 10,824,724 Change in other long-term assets (172,543) (678) (27,367) (3,820) (207,168) (28,045) (3,915) Net cash (used in)/provided by investing activities (14,851,153) (12,841,002) 3,892,942 543,433 (1,991,264) (8,948,060) (1,249,101) Cash flows from financing activities: Net changes from loans with terms of three months or less (2,085,053) (2,254,415) 2,017,570 281,642 (2,484,779) (236,845) (33,062) Proceeds of loans with terms over three months 1,069,020 2,747,550 1,231,000 171,841 8,067,270 3,978,550 555,384 Payment of loans with terms over three months (10,681,827) (2,935,677) (1,804,730) (251,930) (11,638,827) (4,740,407) (661,735) Net amounts received related to capital contribution from of noncontrolling interests shareholders 50,572 42,517 42,400 5,919 92,786 84,917 11,854 Cash paid for repurchase of NetEase's ADSs/purchase of subsidiaries' ADSs and shares (2,007,030) (303,601) (355,563) (49,635) (3,240,810) (659,164) (92,016) Dividends paid to NetEase's shareholders (2,264,799) (5,584,532) (3,082,122) (430,248) (7,209,815) (8,666,654) (1,209,818) Net cash used in financing activities (15,919,117) (8,288,158) (1,951,445) (272,411) (16,414,175) (10,239,603) (1,429,393) Effect of exchange rate changes on cash, cash equivalents and restricted cash held in foreign currencies 8,234 (56,932) (31,749) (4,432) (34,904) (88,681) (12,380) Net(decrease)/ increase in cash, cash equivalents and restricted cash (24,230,204) (9,079,440) 12,771,611 1,782,848 (2,351,342) 3,692,171 515,407 Cash, cash equivalents and restricted cash, at the beginning of the period 46,085,520 54,474,923 45,395,483 6,336,965 24,206,658 54,474,923 7,604,406 Cash, cash equivalents and restricted cash, at end of the period 21,855,316 45,395,483 58,167,094 8,119,813 21,855,316 58,167,094 8,119,813 Supplemental disclosures of cash flow information: Cash paid for income taxes, net 2,848,493 1,206,555 2,184,556 304,952 4,031,204 3,391,111 473,381 Cash paid for interest expenses 152,943 97,424 64,366 8,985 299,398 161,790 22,585 The accompanying notes are an integral part of this announcement. NETEASE, INC. UNAUDITED SEGMENT INFORMATION (in thousands) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, June 30, June 30, 2024 2025 2025 2025 2024 2025 2025 RMB RMB RMB USD (Note 1) RMB RMB USD (Note 1) Net revenues: Games and related value-added services 20,055,819 24,048,007 22,806,459 3,183,659 41,516,197 46,854,466 6,540,631 Youdao 1,321,721 1,298,262 1,417,541 197,881 2,713,580 2,715,803 379,111 NetEase Cloud Music 2,040,952 1,858,388 1,968,729 274,824 4,070,493 3,827,117 534,245 Innovative businesses and others 2,067,313 1,623,888 1,698,935 237,162 4,037,276 3,322,823 463,849 Total net revenues 25,485,805 28,828,545 27,891,664 3,893,526 52,337,546 56,720,209 7,917,836 Cost of revenues: Games and related value-added services (6,008,604) (7,495,262) (6,792,240) (948,161) (12,563,915) (14,287,502) (1,994,458) Youdao (684,942) (684,035) (808,181) (112,817) (1,395,298) (1,492,216) (208,305) NetEase Cloud Music (1,385,756) (1,175,777) (1,258,855) (175,729) (2,644,762) (2,434,632) (339,862) Innovative businesses and others (1,364,285) (994,065) (979,906) (136,790) (2,675,433) (1,973,971) (275,556) Total cost of revenues (9,443,587) (10,349,139) (9,839,182) (1,373,497) (19,279,408) (20,188,321) (2,818,181) Gross profit: Games and related value-added services 14,047,215 16,552,745 16,014,219 2,235,498 28,952,282 32,566,964 4,546,173 Youdao 636,779 614,227 609,360 85,064 1,318,282 1,223,587 170,806 NetEase Cloud Music 655,196 682,611 709,874 99,095 1,425,731 1,392,485 194,383 Innovative businesses and others 703,028 629,823 719,029 100,372 1,361,843 1,348,852 188,293 Total gross profit 16,042,218 18,479,406 18,052,482 2,520,029 33,058,138 36,531,888 5,099,655 The accompanying notes are an integral part of this announcement. NETEASE, INC. NOTES TO UNAUDITED FINANCIAL INFORMATION Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00 = RMB7.1636 on the last trading day of June 2025 (June 30, 2025) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on June 30, 2025, or at any other certain date. Note 2: Share-based compensation cost reported in the Company's unaudited condensed consolidated statements of comprehensive income is set out as follows in RMB and USD (in thousands): Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, June 30, June 30, 2024 2025 2025 2025 2024 2025 2025 RMB RMB RMB USD (Note 1) RMB RMB USD (Note 1) Share-based compensation cost included in: Cost of revenues 319,949 233,711 291,326 40,668 574,884 525,037 73,292 Operating expenses Selling and marketing expenses 42,865 32,578 37,300 5,207 60,734 69,878 9,755 General and administrative expenses 286,350 261,259 207,202 28,924 575,986 468,461 65,395 Research and development expenses 429,892 424,324 410,567 57,313 761,752 834,891 116,546 The accompanying notes are an integral part of this announcement. Note 3: The financial information prepared and presented in this announcement might be different from those published and to be published by NetEase's listed subsidiary to meet the disclosure requirements under different accounting standards requirements. Note 4: The unaudited reconciliation of GAAP and non-GAAP results is set out as follows in RMB and USD (in thousands, except per share data or per ADS data): Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, June 30, June 30, 2024 2025 2025 2025 2024 2025 2025 RMB RMB RMB USD (Note 1) RMB RMB USD (Note 1) Net income attributable to the Company's shareholders 6,758,749 10,301,157 8,601,010 1,200,654 14,392,695 18,902,167 2,638,641 Add: Share-based compensation 1,059,939 935,570 930,921 129,952 1,936,837 1,866,491 260,552 Non-GAAP net income attributable to the Company's shareholders 7,818,688 11,236,727 9,531,931 1,330,606 16,329,532 20,768,658 2,899,193 Non-GAAP net income per share * Basic 2.43 3.54 2.99 0.42 5.08 6.53 0.91 Diluted 2.41 3.50 2.96 0.41 5.03 6.46 0.90 Non-GAAP net income per ADS * Basic 12.15 17.70 14.95 2.09 25.40 32.64 4.56 Diluted 12.05 17.51 14.81 2.07 25.15 32.32 4.51 * Each ADS represents five ordinary shares. The accompanying notes are an integral part of this announcement. Note 5: Reconciliation between U.S. GAAP and IFRS Accounting Standards The unaudited condensed consolidated financial information is prepared in accordance with U.S. GAAP, which differ in certain respects from IFRS Accounting Standards. The effects of material differences between the unaudited condensed consolidated financial information prepared under U.S. GAAP and IFRS Accounting Standards ("Reconciliation Statement") are as follows in RMB (in thousands). PricewaterhouseCoopers, the auditor of the Company in Hong Kong, has performed a limited assurance engagement on the Reconciliation Statement in accordance with International Standard on Assurance Engagements 3000 (Revised) "Assurance Engagements Other Than Audits or Reviews of Historical Financial Information". Reconciliation of unaudited condensed consolidated statements of income (Extract): For the Six Months Ended June 30, 2024 Amounts as reported under U.S. GAAP Investments measured at fair value Redeemablenoncontrolling interests Amounts as reported under IFRS Accounting Standards (Note (a)) (Note (b)) Fair value changes of redeemable noncontrolling interests - - (571) (571) Investment income, net 282,965 (108,548) - 174,417 Income before tax 17,417,805 (108,548) (571) 17,308,686 Income tax (2,786,849) 7,127 - (2,779,722) Net income 14,630,956 (101,421) (571) 14,528,964 Accretion of redeemable noncontrolling interests (1,918) - 1,918 - Net income attributable to noncontrolling interests and redeemable noncontrolling interests (236,343) - 571 (235,772) Net income attributable to the Company's shareholders 14,392,695 (101,421) 1,918 14,293,192 For the Six Months Ended June 30, 2025 Amounts as reported under U.S. GAAP Investments measured at fair value Redeemablenoncontrolling interests Amounts as reported under IFRS Accounting Standards (Note (a)) (Note (b)) Investment income, net 1,021,195 (167,094) - 854,101 Income before tax 23,101,136 (167,094) - 22,934,042 Income tax (3,465,900) 7,924 - (3,457,976) Net income 19,635,236 (159,170) - 19,476,066 Accretion of redeemable noncontrolling interests (2,100) - 2,100 - Net income attributable to noncontrolling interests and redeemable noncontrolling interests (730,969) - - (730,969) Net income attributable to the Company's shareholders 18,902,167 (159,170) 2,100 18,745,097 Reconciliation of unaudited condensed consolidated balance sheets (Extract): As of December 31, 2024 Amounts as reported under U.S. GAAP Investments measured at fair value Redeemablenoncontrolling interests Amounts as reported underIFRS Accounting Standards (Note (a)) (Note (b)) Other long-term assets 25,830,685 (13,800,189) - 12,030,496 Financial assets at fair value through profit or loss - 15,682,924 - 15,682,924 Total Assets 195,991,550 1,882,735 - 197,874,285 Deferred tax liabilities 2,173,117 26,600 - 2,199,717 Total Liabilities 53,497,412 26,600 - 53,524,012 Redeemable noncontrolling interests 84,272 - (84,272) - Total equity 142,409,866 1,856,135 84,272 144,350,273 Total liabilities, redeemable noncontrolling interests and shareholders' equity 195,991,550 1,882,735 - 197,874,285 As of June 30, 2025 Amounts as reported under U.S. GAAP Investments measured at fair value Redeemablenoncontrolling interests Amounts as reported under IFRS Accounting Standards (Note (a)) (Note (b)) Other long-term assets 27,860,004 (15,990,681) - 11,869,323 Financial assets at fair value through profit or loss - 17,706,322 - 17,706,322 Total Assets 208,498,653 1,715,641 - 210,214,294 Deferred tax liabilities 2,724,485 18,676 - 2,743,161 Total Liabilities 54,394,501 18,676 - 54,413,177 Redeemable noncontrolling interests 87,741 - (87,741) - Total equity 154,016,411 1,696,965 87,741 155,801,117 Total liabilities, redeemable noncontrolling interests and shareholders' equity 208,498,653 1,715,641 - 210,214,294 Notes: Basis of Preparation The Company is responsible for preparation of the Reconciliation Statement in accordance with the relevant requirements of the Hong Kong Listing Rules and relevant guidance in HKEX-GL111-22. The Reconciliation Statement was prepared based on the Company's unaudited condensed consolidated financial information for the six months ended June 30, 2025 prepared under U.S. GAAP, with material adjustments made (if any) thereto in arriving at the unaudited financial information of the Company prepared under IFRS Accounting Standards. The adjustments reflect the material differences between the Company's accounting policies under U.S. GAAP and IFRS Accounting Standards. Note a. Investments measured at fair value Under U.S. GAAP, NetEase applied the measurement alternative to record the investments in equity securities (including preferred shares and ordinary shares without significant influence) without readily determinable fair values at cost, less impairment, and plus or minus subsequent adjustments for observable price changes recognized in the consolidated income statements. Under IFRS Accounting Standards, these investments were classified as financial assets at fair value through profit or loss and measured at fair value with changes in fair value recognized through profit or loss. Note b. Redeemable noncontrolling interests Under U.S. GAAP, SEC guidance provides for mezzanine-equity (temporary equity) category in addition to the financial liability and permanent equity categories. The purpose of this "in-between" category is to indicate that a security whose redemption is outside the control of the issuer may not be classified as a permanent part of equity. NetEase classified the redeemable preferred shares issued by certain subsidiaries as redeemable noncontrolling interests in the condensed consolidated balance sheets and recorded them initially at fair value, net of issuance costs. NetEase recognized accretion to the respective redemption value of the redeemable preferred shares over the period starting from issuance date to the earliest redemption date. Under IFRS Accounting Standards, there is no concept of mezzanine or temporary equity classification. NetEase designated the redeemable preferred shares as financial liabilities at fair value through profit or loss which are measured at fair value. Subsequent to initial recognition, the amounts of changes in fair value that were attributed to changes in credit risk of the issuer were recognized in other comprehensive income, and the remaining amounts of changes in fair value were recognized in the profit or loss. SOURCE NetEase, Inc. WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM? 440k+ Newsrooms & Influencers 9k+ Digital Media Outlets 270k+ Journalists Opted In

NetEase Announces Second Quarter 2025 Unaudited Financial Results

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