NetEase reported second-quarter revenue of RMB 30.1 billion ($4.4 billion) for 2026, a 7% increase from the same period last year and surpassing the $29.48 billion consensus estimate by $0.63 billion. First-half revenue reached RMB 60.7 billion ($8.9 billion), also up 7% year-over-year. The company’s adjusted earnings per share, however, missed expectations, coming in at $12.02 compared with the $15.54 forecast, representing a 22.65% shortfall.
Gross margins expanded significantly, with the overall margin rising to 70.5% from 64.7% a year earlier. The games and value-added services segment, which generated RMB 25 billion in revenue (up 10% year-over-year), posted a gross margin of 76.1%, compared with 70.2% in the prior-year period. Online games revenue totaled RMB 24.5 billion, a 10% year-over-year increase but a 2% decline from the first quarter.
NetEase maintained a strong cash position, reporting RMB 157.5 billion in net cash as of June 30. The company repurchased approximately 24.8 million American Depositary Shares (ADS) for about $2.3 billion under a $5 billion buyback program. The board also approved a quarterly dividend of $0.096 per share, or $0.48 per ADS. Shares fell 4.53% to $121.49 in premarket trading, extending declines from the prior close of $127.25.
Executives highlighted progress across multiple game franchises during the quarter. Eggy Party surpassed 700 million registered users, with monthly active users exceeding 100 million and creator rewards totaling over RMB 200 million. Identity V introduced a new PVE mode, Cryptic Notes, while Fantasy Westward Journey titles launched expansion packs and new content, including Dunhuang-themed updates. Naraka: Bladepoint celebrated its fifth anniversary with new battlefields, and Sea of Remnants debuted in China, combining naval combat with roguelike mechanics.
Collaborations with Blizzard Entertainment continued, with titles such as World of Warcraft, Hearthstone, and Diablo 4 marking key milestones. NetEase also advanced its AI initiatives, including the Confucius 4 large language model and an AI-powered ad placement optimizer for its Youdao subsidiary. Executives emphasized the company’s focus on leveraging AI to enhance product quality and player experience, with Bill Pang noting that high-quality content and innovative monetization would drive future success.
The earnings report follows a period of volatility for NetEase shares, which have traded between $106.06 and $159.55 over the past 52 weeks.
