NetEase Announces Second Quarter and Interim 2026 Unaudited Financial Results

HONG KONG, Aug. 20, 2026 /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, 2026.

In this results announcement, "we", "us", and "our" refer to the Company and where the context otherwise requires, the Group.

"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 Mr. William Ding, Chief Executive Officer and Director of NetEase. "As we continue to strengthen both our live game operations and new title pipeline, we are sharpening our focus on original gameplay, cutting-edge technology and deeper global reach to support our enduring growth.

"Looking ahead, we will remain committed to creating original content that shapes industry trends, building evergreen franchises, and cultivating vibrant communities that sustain player engagement. Backed by disciplined execution and an expanding global presence, we aim to keep pushing creative boundaries, delivering exceptional gaming experiences and creating long-term value for our players, partners and shareholders," Mr. Ding concluded.

FINANCIAL HIGHLIGHTS

Second Quarter 2026 Financial Highlights

[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 within this announcement.

Six Months Ended June 30, 2026 Financial Highlights

BUSINESS OVERVIEW

We continue to drive innovation across both newly launched and established titles, while further advancing our pipeline of titles in development.

Below are some recent highlights from our key products and services:

Games and related value-added services

The Fantasy Westward Journey franchise, Identity V, Eggy Party, Sword of Justice and Where Winds Meet sustained solid momentum through ongoing content updates, gameplay innovation and vibrant community activities.

We also advanced our global strategy and enhanced player engagement through strong live operations. For example, Where Winds Meet and Marvel Rivals further broadened their international reach with a steady stream of fresh content and community-focused initiatives in various markets including North America and Europe.

With respect to our pipeline of new titles, Sea of Remnants launched in China in July 2026, while development of Ananta and Blood Message remained on track, strengthening our innovative pipeline across diverse genres, gameplay and markets.

Youdao

Youdao advanced its AI-native strategy and deepened AI-driven innovation across its ecosystem. In the second quarter, it launched the large language model, Confucius 4, which delivers leading mathematical reasoning capabilities at lower inference costs compared to its previous version. Youdao also advanced its AI agent capabilities toward the autonomous execution of complex work and learning tasks.

NetEase Cloud Music

NetEase Cloud Music further developed its music-centric ecosystem by nurturing its distinctive community and enriching its differentiated content offering with original music, thereby driving stronger community engagement. It also further improved music-oriented monetization through continued growth in subscription-based memberships.

Innovative businesses and others

Innovative businesses and others remained focused on sustainable development and efficient operations, with Yanxuan maintaining leading positions on major e-commerce platforms in China across its key categories, including pet food, home scents and home goods.

FINANCIAL REVIEW

Second Quarter 2026 Financial Results

Net Revenues

Net revenues for the second quarter of 2026 were RMB30.1 billion (US$4.4 billion), compared with RMB30.6 billion and RMB27.9 billion for the preceding quarter and the same quarter of 2025, respectively.

Net revenues from games and related value-added services were RMB25.0 billion (US$3.7 billion) for the second quarter of 2026, compared with RMB25.7 billion and RMB22.8 billion for the preceding quarter and the same quarter of 2025, respectively. Net revenues from the operation of online games accounted for approximately 97.7% of the segment's net revenues for the second quarter of 2026, compared with 97.5% and 97.1% for the preceding quarter and the same quarter of 2025, respectively. The quarter-over-quarter decrease was mainly due to a slight decline in net revenues from certain self-developed and licensed games. The year-over-year increase was attributable to higher net revenues from self-developed games, such as the Fantasy Westward Journey franchise and Where Winds Meet.

Net revenues from Youdao were RMB1.5 billion (US$216.2 million) for the second quarter of 2026, compared with RMB1.3 billion and RMB1.4 billion for the preceding quarter and the same quarter of 2025, respectively. The quarter-over-quarter and year-over-year increases were mainly attributable to higher net revenues from its learning services.

Net revenues from NetEase Cloud Music were RMB2.0 billion (US$291.4 million) for the second quarter of 2026, remaining stable compared with the preceding quarter and the same quarter of 2025.

Net revenues from innovative businesses and others were RMB1.6 billion (US$241.6 million) for the second quarter of 2026, compared with RMB1.5 billion and RMB1.7 billion for the preceding quarter and the same quarter of 2025, respectively. The quarter-over-quarter increase was mainly attributable to higher net revenues from e-commerce business and several other businesses included within the segment. The year-over-year decrease was mainly due to decreased net revenues from the e-commerce business.

Cost of Revenues

Cost of revenues for the second quarter of 2026 was RMB8.9 billion (US$1.3 billion), compared with RMB9.4 billion and RMB9.8 billion for the preceding quarter and the same quarter of 2025, respectively. The quarter-over-quarter decrease was mainly due to lower revenue-sharing costs. The year-over-year decrease was mainly due to lower revenue-sharing and product costs.

Gross Profit

Gross profit for the second quarter of 2026 was RMB21.2 billion (US$3.1 billion), compared with RMB21.2 billion and RMB18.1 billion for the preceding quarter and the same quarter of 2025, respectively.

Operating Expenses

Total operating expenses for the second quarter of 2026 were RMB9.1 billion (US$1.3 billion), compared with RMB8.6 billion and RMB9.0 billion for the preceding quarter and the same quarter of 2025, respectively. The quarter-over-quarter increase was primarily due to increased marketing expenditures, staff-related costs and research and development expenditures. The year-over-year increase was primarily due to increased research and development expenditures.

Other Income/(Expenses)

Other income/(expenses) consisted of net investment income/(loss), interest income, net exchange gains/(losses) and others. The quarter-over-quarter and year-over-year fluctuations in other income/(expenses) were mainly due to a decline in the fair value of equity security investments and impairment provisions made during the second quarter of 2026.

Income Tax

The Group recorded a net income tax charge of RMB2.5 billion (US$362.4 million) for the second quarter of 2026, compared with RMB2.5 billion and RMB1.6 billion for the preceding quarter and the same quarter of 2025, respectively. The effective tax rate for the second quarter of 2026 was 25.5%, compared with 18.9% and 14.7% for the preceding quarter and the same quarter of 2025, respectively. The effective tax rate represents certain estimates by the Group 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 RMB7.0 billion (US$1.0 billion) for the second quarter of 2026, compared with RMB10.7 billion and RMB8.6 billion for the preceding quarter and the same quarter of 2025, respectively.

Basic net income was US$0.32 per share (US$1.61 per ADS) for the second quarter of 2026, compared with US$0.49 per share (US$2.46 per ADS) and US$0.40 per share (US$1.99 per ADS) for the preceding quarter and the same quarter of 2025, respectively.

Non-GAAP net income attributable to the Company's shareholders totaled RMB7.7 billion (US$1.1 billion) for the second quarter of 2026, compared with RMB11.3 billion and RMB9.5 billion for the preceding quarter and the same quarter of 2025, respectively.

Non-GAAP basic net income was US$0.36 per share (US$1.78 per ADS) for the second quarter of 2026, compared with US$0.52 per share (US$2.60 per ADS) and US$0.44 per share (US$2.20 per ADS) for the preceding quarter and the same quarter of 2025, respectively.

Six Months Ended June 30, 2026 Financial Results

Net Revenues

Net revenues for the six months ended June 30, 2026 were RMB60.7 billion (US$8.9 billion), compared with RMB56.7 billion for the same period of 2025.

Net revenues from games and related value-added services were RMB50.7 billion (US$7.5 billion) for the six months ended June 30, 2026, compared with RMB46.9 billion for the same period of 2025. Net revenues from the operation of online games accounted for approximately 97.6% of the segment's net revenues for the six months ended June 30, 2026, compared with approximately 97.3% for the same period of 2025. The increase was attributable to higher net revenues from self-developed games, such as the Fantasy Westward Journey franchise, Where Winds Meet and Eggy Party.

Net revenues from Youdao were RMB2.8 billion (US$414.9 million) for the six months ended June 30, 2026, compared with RMB2.7 billion for the same period of 2025. The increase was mainly attributable to higher net revenues from its learning services and online marketing services, partially offset by a decrease in net revenues from smart devices.

Net revenues from NetEase Cloud Music were RMB4.0 billion (US$583.4 million) for the six months ended June 30, 2026, compared with RMB3.8 billion for the same period of 2025. The increase was mainly attributable to higher net revenues from online music services, driven by growth in sales of membership subscriptions.

Net revenues from innovative businesses and others were RMB3.2 billion (US$469.9 million) for the six months ended June 30, 2026, compared with RMB3.3 billion for the same period of 2025. The decrease was mainly due to a decline in net revenues from the e-commerce business.

Cost of Revenues

Cost of revenues for the six months ended June 30, 2026 was RMB18.3 billion (US$2.7 billion), compared with RMB20.2 billion for the same period of 2025. The decrease was mainly due to lower revenue-sharing and product costs.

Gross Profit

Gross profit for the six months ended June 30, 2026 was RMB42.4 billion (US$6.3 billion), compared with RMB36.5 billion for the same period of 2025.

Operating Expenses

Total operating expenses for the six months ended June 30, 2026 were RMB17.7 billion (US$2.6 billion), compared with RMB17.0 billion for the same period of 2025. The increase was primarily attributable to higher marketing and research and development expenditures for games and related value-added services.

Other Income/(Expenses)

Other income/(expenses) consisted of net investment income/(loss), interest income, net exchange gains/(losses) and others. The fluctuation in other income/(expenses) was mainly due to a decline in the fair value of equity security investments, increased net exchange losses, and impairment provisions made during the six months ended June 30, 2026.

Income Tax

The Group recorded a net income tax charge of RMB5.0 billion (US$734.3 million) for the six months ended June 30, 2026, compared with RMB3.5 billion for the same period of 2025. The effective tax rate for the six months ended June 30, 2026 was 21.7%, compared with 15.0% for the same period of 2025. The effective tax rate represents certain estimates by the Group as to the tax obligations and benefits applicable to it in each period.

Net Income and Non-GAAP Net Income

Net income attributable to the Company's shareholders totaled RMB17.7 billion (US$2.6 billion) for the six months ended June 30, 2026, compared with RMB18.9 billion for the same period of 2025.

Basic net income was US$0.81 per share (US$4.06 per ADS) for the six months ended June 30, 2026, compared with US$0.88 per share (US$4.38 per ADS) for the same period of 2025.

Non-GAAP net income attributable to the Company's shareholders totaled RMB19.0 billion (US$2.8 billion) for the six months ended June 30, 2026, compared with RMB20.8 billion for the same period of 2025.

Non-GAAP basic net income was US$0.88 per share (US$4.38 per ADS) for the six months ended June 30, 2026, compared with US$0.96 per share (US$4.81 per ADS) for the same period of 2025.

OTHER FINANCIAL INFORMATION

As of June 30, 2026, 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 loans) totaled RMB167.5 billion (US$24.7 billion), compared with RMB163.5 billion as of December 31, 2025. Net cash provided by operating activities was RMB10.0 billion (US$1.5 billion) for the second quarter of 2026, compared with RMB13.7 billion and RMB10.9 billion for the preceding quarter and the second quarter of 2025, respectively.

EXCHANGE RATE INFORMATION

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.

The conversion of Renminbi (RMB) into US$ is based on the noon buying rate of US$1.00 = RMB6.7851 on the last trading day of June 2026 (June 30, 2026) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on June 30, 2026, or at any other certain date.

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 20, 2026 (Beijing/Hong Kong Time: 8:00 p.m., Thursday, August 20, 2026). NetEase's management will be on the call to discuss the results and answer questions.

Interested parties may participate in the conference call by dialing 1-914-202-3258 and providing conference ID: 10056362, 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: 10056362. The replay will be available through August 27, 2026.

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/.

Contact for Media and Investors:

Email: [email protected]

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 regulatory environment in the markets where NetEase operates, including policy or rule changes on taxation; 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 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 the Company's 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. NetEase encourages you to review its financial information in its entirety and not rely on a single financial measure.

The unaudited reconciliation of GAAP and non-GAAP results is set out as follows in RMB and US$ (in thousands, except per share data or per ADS data):

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

2025

2026

2025

2026

RMB

US$

RMB

US$

Net income attributable to the

Company's shareholders

8,601,010

10,674,106

6,980,656

1,028,821

18,902,167

17,654,762

2,601,989

Add: Share-based compensation

930,921

600,718

766,058

112,903

1,866,491

1,366,776

201,438

Non-GAAP net income attributable

to the Company's shareholders

9,531,931

11,274,824

7,746,714

1,141,724

20,768,658

19,021,538

2,803,427

Non-GAAP net income per share

Basic

2.99

3.53

2.42

0.36

6.53

5.94

0.88

Diluted

2.96

3.49

2.40

0.35

6.46

5.90

0.87

Non-GAAP net income per ADS

Basic

14.95

17.63

12.09

1.78

32.64

29.72

4.38

Diluted

14.81

17.46

12.02

1.77

32.32

29.49

4.35

NETEASE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

December 31,

June 30,

2025

2026

RMB

US$

Assets

Current assets:

Cash and cash equivalents

47,167,904

22,814,542

3,362,447

Time deposits

92,639,378

101,978,645

15,029,792

Restricted cash

4,319,344

4,447,483

655,478

Accounts receivable, net

5,337,819

5,746,080

846,867

Inventories

689,183

511,896

75,444

Prepayments and other current assets, net

7,658,346

5,965,371

879,188

Short-term investments

22,803,503

50,599,638

7,457,464

Total current assets

180,615,477

192,063,655

28,306,680

Non-current assets:

Property, equipment and software, net

8,425,327

8,180,276

1,205,623

Land use rights, net

4,047,355

3,982,017

586,877

Deferred tax assets

2,831,423

2,695,809

397,313

Time deposits

2,995,000

260,000

38,319

Restricted cash

3,893

3,775

556

Long-term investments

18,462,883

21,336,343

3,144,588

Other long-term assets

4,033,702

3,686,261

543,287

Total non-current assets

40,799,583

40,144,481

5,916,563

Total assets

221,415,060

232,208,136

34,223,243

Liabilities, Redeemable noncontrolling interests and

Shareholders' equity

Current liabilities:

Accounts payable

643,164

702,263

103,501

Salary and welfare payables

4,889,708

3,764,789

554,861

Taxes payable

3,874,143

3,720,498

548,334

Short-term loans

6,384,417

12,604,170

1,857,625

Contract liabilities

20,514,540

19,297,191

2,844,054

Accrued liabilities and other payables

16,062,984

15,529,221

2,288,724

Total current liabilities

52,368,956

55,618,132

8,197,099

Non-current liabilities:

Deferred tax liabilities

2,637,258

3,727,316

549,338

Other long-term liabilities

1,304,837

1,300,994

191,742

Total non-current liabilities

3,942,095

5,028,310

741,080

Total liabilities

56,311,051

60,646,442

8,938,179

Redeemable noncontrolling interests

91,319

94,938

13,992

Shareholders' equity:

Ordinary shares

2,631

2,632

388

Additional paid-in capital

9,837,460

8,781,946

1,294,299

Treasury stock

(1,518,573)

(1,617,961)

(238,458)

Statutory reserves

2,457,371

362,172

Accumulated other comprehensive loss

(237,770)

(1,644,123)

(242,314)

Retained earnings

149,755,000

159,110,675

23,450,011

NetEase, Inc.'s shareholders' equity

160,296,119

167,090,540

24,626,098

Noncontrolling interests

4,716,571

4,376,216

644,974

Total equity

165,012,690

171,466,756

25,271,072

Total liabilities, redeemable noncontrolling interests and

shareholders' equity

221,415,060

232,208,136

34,223,243

NETEASE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

(in thousands except per share data or per ADS data)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

2025

2026

2025

2026

RMB

US$

RMB

US$

Net revenues

27,891,664

30,591,281

30,106,546

4,437,156

56,720,209

60,697,827

8,945,753

Cost of revenues

(9,839,182)

(9,374,209)

(8,889,221)

(1,310,109)

(20,188,321)

(18,263,430)

(2,691,697)

Gross profit

18,052,482

21,217,072

21,217,325

3,127,047

36,531,888

42,434,397

6,254,056

Operating expenses:

Selling and marketing expenses

(3,578,174)

(3,441,485)

(3,678,809)

(542,189)

(6,273,771)

(7,120,294)

(1,049,401)

General and administrative

expenses

(1,056,578)

(636,597)

(805,268)

(118,682)

(2,012,915)

(1,441,865)

(212,505)

Research and development

expenses

(4,356,646)

(4,482,157)

(4,643,910)

(684,428)

(8,742,959)

(9,126,067)

(1,345,016)

Total operating expenses

(8,991,398)

(8,560,239)

(9,127,987)

(1,345,299)

(17,029,645)

(17,688,226)

(2,606,922)

Operating profit

9,061,084

12,656,833

12,089,338

1,781,748

19,502,243

24,746,171

3,647,134

Other income/(expenses):

Investment income/(loss), net

328,444

5,472

(2,953,671)

(435,317)

1,021,195

(2,948,199)

(434,511)

Interest income, net

953,490

890,267

863,201

127,220

2,014,376

1,753,468

258,429

Exchange gains/(losses), net

114,037

(622,108)

(436,492)

(64,331)

115,840

(1,058,600)

(156,018)

Other, net

192,167

438,978

62,858

9,264

447,482

501,836

73,961

Income before tax

10,649,222

13,369,442

9,625,234

1,418,584

23,101,136

22,994,676

3,388,995

Income tax

(1,560,757)

(2,523,838)

(2,458,674)

(362,364)

(3,465,900)

(4,982,512)

(734,331)

Net income

9,088,465

10,845,604

7,166,560

1,056,220

19,635,236

18,012,164

2,654,664

Accretion of redeemable

noncontrolling interests

(1,051)

(1,104)

(1,087)

(160)

(2,100)

(2,191)

(323)

Net income attributable to

noncontrolling interests

(486,404)

(170,394)

(184,817)

(27,239)

(730,969)

(355,211)

(52,352)

Net income attributable to the

Company's shareholders

8,601,010

10,674,106

6,980,656

1,028,821

18,902,167

17,654,762

2,601,989

Net income

9,088,465

10,845,604

7,166,560

1,056,220

19,635,236

18,012,164

2,654,664

Other comprehensive income

Foreign currency translation

adjustment

(389,857)

(728,683)

(770,419)

(113,546)

(628,819)

(1,499,102)

(220,940)

Total comprehensive income

8,698,608

10,116,921

6,396,141

942,674

19,006,417

16,513,062

2,433,724

Comprehensive income

attributable to noncontrolling

interests

(470,857)

(121,843)

(140,619)

(20,725)

(690,158)

(262,462)

(38,682)

Comprehensive income

attributable to the

Company's shareholders

8,227,751

9,995,078

6,255,522

921,949

18,316,259

16,250,600

2,395,042

Net income per share

Basic

2.70

3.34

2.18

0.32

5.94

5.52

0.81

Diluted

2.67

3.31

2.17

0.32

5.88

5.47

0.81

Net income per ADS

Basic

13.49

16.69

10.90

1.61

29.71

27.58

4.06

Diluted

13.36

16.53

10.83

1.60

29.41

27.37

4.03

Weighted average number of

ordinary shares used in

calculating net income per

Basic

3,188,634

3,198,123

3,203,046

3,181,307

3,200,598

Diluted

3,214,681

3,227,325

3,221,637

3,210,563

3,224,495

NETEASE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

2025

2026

2025

2026

RMB

US$

RMB

US$

Cash flows from operating activities:

Net income

9,088,465

10,845,604

7,166,560

1,056,220

19,635,236

18,012,164

2,654,664

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation and amortization

428,427

430,583

439,439

64,765

909,188

870,022

128,225

Fair value changes of equity security, other

investments and financial instruments

55,715

1,117,717

2,023,477

298,224

(502,784)

3,141,194

462,955

Impairment losses on investments

161,463

344,871

1,281,917

188,931

250,534

1,626,788

239,759

Share-based compensation cost

946,395

616,180

781,656

115,202

1,898,267

1,397,836

206,015

Allowance for expected credit losses

153,179

6,719

1,309

193

169,950

8,028

1,183

Gains on disposal of property, equipment and

software

(30,920)

(565)

(13,983)

(2,061)

(10,627)

(14,548)

(2,144)

Unrealized exchange (gains)/losses

(165,662)

643,942

487,982

71,920

(194,115)

1,131,924

166,825

(Gains)/losses on disposal of long-term investments

(141,078)

(1,071,442)

5,550

818

(129,403)

(1,065,892)

(157,093)

Deferred income taxes

(853,764)

532,257

693,742

102,245

(525,492)

1,225,999

180,690

Share of results on equity method investees

13,479

442,575

96,645

14,244

(5,189)

539,220

79,471

Fair value changes of short-term investments

(344,604)

(385,395)

(372,234)

(54,861)

(546,213)

(757,629)

(111,661)

Changes in operating assets and liabilities:

Accounts receivable

953,295

(1,188,837)

726,762

107,111

(135,665)

(462,075)

(68,101)

Inventories

(73,944)

143,099

34,048

5,018

(20,171)

177,147

26,108

Prepayments and other assets

583,484

116,152

(16,816)

(2,478)

288,306

99,336

14,640

Accounts payable

119,644

134,445

(105,340)

(15,525)

(28,432)

29,105

4,290

Salary and welfare payables

920,662

(2,253,559)

1,107,729

163,259

(1,164,449)

(1,145,830)

(168,874)

Taxes payable

(764,372)

1,895,324

(2,038,642)

(300,459)

1,031,751

(143,318)

(21,122)

Contract liabilities

(718,719)

1,384,445

(2,511,144)

(370,097)

1,807,479

(1,126,699)

(166,055)

Accrued liabilities and other payables

530,718

(21,044)

184,272

27,158

240,344

163,228

24,057

Net cash provided by operating activities

10,861,863

13,733,071

9,972,929

1,469,827

22,968,515

23,706,000

3,493,832

Cash flows from investing activities:

Purchase of property, equipment and software

(189,842)

(312,148)

(18,785)

(2,769)

(643,913)

(330,933)

(48,774)

Proceeds from sale of property, equipment and

software

21,499

1,673

14,539

2,143

22,835

16,212

2,389

Purchase of intangible assets, content and licensed

copyrights

(313,349)

(290,019)

(61,554)

(9,072)

(612,120)

(351,573)

(51,815)

Net changes of short-term investments with terms of

three months or less

776,428

(15,766,308)

(1,594,496)

(235,000)

(5,362,128)

(17,360,804)

(2,558,666)

Purchase of short-term investments with terms over

three months and debt securities

(5,800,000)

(5,885,000)

(12,851,707)

(1,894,107)

(8,770,000)

(18,736,707)

(2,761,449)

Proceeds from maturities of short-term investments

with terms over three months

5,745,454

4,861,483

3,515,814

518,167

8,454,055

8,377,297

1,234,661

Investment in equity method investees

(100,986)

(94,021)

(3,040,753)

(448,152)

(155,089)

(3,134,774)

(462,009)

Investment in other equity investments

(2,640,655)

(3,110,374)

(453,871)

(66,892)

(2,677,518)

(3,564,245)

(525,304)

Proceeds from disposal of long-term investments

784,855

1,353,947

50,733

7,477

862,283

1,404,680

207,024

Placement/rollover of matured time deposits

(27,980,605)

(30,608,133)

(50,216,128)

(7,400,941)

(77,582,412)

(80,824,261)

(11,912,022)

Proceeds from maturities of time deposits

33,617,510

42,018,869

30,056,765

4,429,819

77,543,992

72,075,634

10,622,634

Change in other long-term assets

(27,367)

65,909

(58,891)

(8,679)

(28,045)

7,018

1,034

Net cash provided by/(used in) investing activities

3,892,942

(7,764,122)

(34,658,334)

(5,108,006)

(8,948,060)

(42,422,456)

(6,252,297)

Cash flows from financing activities:

Net changes from loans with terms of three months or

less

2,017,570

1,182,383

420,940

62,039

(236,845)

1,603,323

236,300

Proceeds of loans with terms over three months

1,231,000

6,134,520

1,326,090

195,441

3,978,550

7,460,610

1,099,558

Payment of loans with terms over three months

(1,804,730)

(2,620,900)

—

(4,740,407)

(2,620,900)

(386,273)

Dividends paid to shareholders

(3,082,122)

(5,156,320)

(3,138,873)

(462,613)

(8,666,654)

(8,295,193)

(1,222,560)

Net amounts received/(paid) related to capital

contribution from or repurchase of noncontrolling

interests shareholders

42,400

(23,418)

4,874

718

84,917

(18,544)

(2,733)

Net amounts paid related to repurchase of NetEase's

ADSs/purchase of subsidiaries' shares

(355,563)

(1,314,003)

(1,795,596)

(264,638)

(659,164)

(3,109,599)

(458,298)

Net cash used in financing activities

(1,951,445)

(1,797,738)

(3,182,565)

(469,053)

(10,239,603)

(4,980,303)

(734,006)

Effect of exchange rate changes on cash, cash

equivalents and restricted cash held in foreign

currencies

(31,749)

(340,829)

(187,753)

(27,671)

(88,681)

(528,582)

(77,903)

Net increase/(decrease) in cash, cash equivalents

and restricted cash

12,771,611

3,830,382

(28,055,723)

(4,134,903)

3,692,171

(24,225,341)

(3,570,374)

Cash, cash equivalents and restricted cash, at the

beginning of the period

45,395,483

51,491,141

55,321,523

8,153,384

54,474,923

51,491,141

7,588,855

Cash, cash equivalents and restricted cash, at end of

the period

58,167,094

55,321,523

27,265,800

4,018,481

58,167,094

27,265,800

4,018,481

Supplemental disclosures of cash flow information:

Cash paid for income taxes, net

2,184,556

1,464,650

2,487,225

366,572

3,391,111

3,951,875

582,434

Cash paid for interest expenses

64,366

78,326

25,374

3,740

161,790

103,700

15,283

Supplemental schedule of non-cash investing and

financing activities:

Fixed asset purchases financed by accounts payable

and accrued liabilities

744,596

463,033

522,371

76,988

744,596

522,371

76,988

NETEASE, INC.

UNAUDITED SEGMENT INFORMATION

(in thousands)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

2025

2026

2025

2026

RMB

US$

RMB

US$

Net revenues:

Games and related value-added services

22,806,459

25,712,975

25,022,788

3,687,903

46,854,466

50,735,763

7,477,527

Youdao

1,417,541

1,348,022

1,466,861

216,189

2,715,803

2,814,883

414,862

NetEase Cloud Music

1,968,729

1,981,234

1,977,472

291,443

3,827,117

3,958,706

583,441

Innovative businesses and others

1,698,935

1,549,050

1,639,425

241,621

3,322,823

3,188,475

469,923

Total net revenues

27,891,664

30,591,281

30,106,546

4,437,156

56,720,209

60,697,827

8,945,753

Cost of revenues:

Games and related value-added services

(6,792,240)

(6,482,431)

(5,973,965)

(880,453)

(14,287,502)

(12,456,396)

(1,835,846)

Youdao

(808,181)

(745,729)

(749,986)

(110,534)

(1,492,216)

(1,495,715)

(220,441)

NetEase Cloud Music

(1,258,855)

(1,247,066)

(1,237,231)

(182,345)

(2,434,632)

(2,484,297)

(366,140)

Innovative businesses and others

(979,906)

(898,983)

(928,039)

(136,777)

(1,973,971)

(1,827,022)

(269,270)

Total cost of revenues

(9,839,182)

(9,374,209)

(8,889,221)

(1,310,109)

(20,188,321)

(18,263,430)

(2,691,697)

Gross profit:

Games and related value-added services

16,014,219

19,230,544

19,048,823

2,807,450

32,566,964

38,279,367

5,641,681

Youdao

609,360

602,293

716,875

105,655

1,223,587

1,319,168

194,421

NetEase Cloud Music

709,874

734,168

740,241

109,098

1,392,485

1,474,409

217,301

Innovative businesses and others

719,029

650,067

711,386

104,844

1,348,852

1,361,453

200,653

Total gross profit

18,052,482

21,217,072

21,217,325

3,127,047

36,531,888

42,434,397

6,254,056

SOURCE NetEase, Inc.