Contact for Media and Investors: Email: ir@service.netease.com Tel: (+86) 571-8985-3378 NetEase Announces Fourth Quarter and Fiscal Year 2024 Unaudited Financial Results Hangzhou, China, February 20, 2025 - 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 fourth quarter and fiscal year ended December 31, 2024. Fourth Quarter 2024 Financial Highlights 1 Exhibit 99.1 · Net revenues we ...

HANGZHOU, China, April 15, 2025 /PRNewswire/ -- NetEase, Inc. (NASDAQ: NTES and HKEX: 9999, "NetEase" or "the Company"), a leading internet and game services provider, today announced that it filed its annual report on Form 20-F for the fiscal year ended December 31, 2024. The annual report can be accessed on the Company's investor relations website at http://ir.netease.com/. The Company will provide a hard copy of its annual report containing the audited consolidated financial statements, free of charge, t ...

Revenue and Financial Performance - In 2022, 2023, and 2024, revenues generated by the VIEs accounted for 86.4%, 87.7%, and 87.2% of total net revenues, respectively[25]. - Net revenues from the operation of online games accounted for 92.5%, 92.9%, and 96.2% for the years ended December 31, 2022, 2023, and 2024, respectively[70]. - A significant portion of revenue in the operation of online games comes from mobile games, which generally have lower profit margins compared to PC games due to revenue-sharing arrangements with mobile application stores[70]. - Revenue sharing arrangements for licensed games from third-party developers accounted for 9.5%, 4.6%, and 7.4% of total net revenues in 2022, 2023, and 2024, respectively[76]. - The item-based revenue model generates a significant portion of revenue, but its success depends on attracting players and encouraging in-game purchases[73]. - The company's financial results could be adversely affected by the loss of earnings from divested businesses[196]. Regulatory Environment and Compliance - The PRC government has significant authority to influence the company's ability to conduct business and accept foreign investments[30]. - The company may face regulatory actions if it proceeds with offerings without obtaining necessary approvals from PRC regulatory agencies[30]. - The Chinese government has implemented strict regulations limiting online game playtime for minors, restricting them to 90 minutes on weekdays and three hours on weekends[51]. - New regulations proposed by the NPPA may restrict game features and monetization strategies, including prohibiting inducement rewards and limiting user recharge amounts[53]. - Compliance with PRC regulations on live streaming and online entertainment is critical, with potential penalties for non-compliance impacting business operations[95]. - The company must navigate a complex regulatory environment for its e-commerce and music streaming businesses, with potential impacts on operations if compliance is not maintained[106][107]. - The company may face significant tax obligations if it needs to transfer shareholdings of VIEs, which could adversely affect financial conditions[224]. Market Competition and Strategy - The company operates in a highly competitive environment, making it essential to develop and introduce popular online games to generate revenues[45]. - The company must continue investing in new technologies to enhance user experience and remain competitive in the rapidly evolving mobile game market[46]. - The company is focusing on extending the life of existing online games by adding new features and functionalities to enhance player engagement and loyalty[48]. - The success of online games relies on innovative marketing strategies, with competition from numerous mobile and PC games in the market[92]. - Future growth in e-commerce depends on attracting new customers and adapting to changing consumer preferences[122]. International Operations and Expansion - The company is expanding its online games internationally, having launched titles like Knives Out and Identity V in Japan and other global markets[61]. - The company faces risks associated with international operations, including cultural differences, regulatory changes, and the need for local partnerships[61]. - International expansion poses risks such as regulatory compliance, cultural differences, and potential political instability, which could adversely affect operations[188]. Technology and Innovation - The company has invested in AI technologies, including proprietary algorithms and models, to enhance user experience and develop educational tools, but faces risks related to performance and accuracy over time[169][170]. - The intelligent learning industry is subject to rapid technological changes, and failure to adapt may adversely affect Youdao's business prospects[101]. - The market for AI products and services is rapidly evolving, with consumer acceptance remaining uncertain, potentially impacting the company's ability to expand and diversify its offerings[171]. Risks and Challenges - The company faces risks related to employee retention, particularly in the competitive market for experienced online game software developers, which could disrupt operations[176]. - The online gaming business faces challenges from player cheating, which can negatively impact game popularity and operational results[90]. - Regulatory actions against cheating may lead to account freezes or bans, potentially resulting in legal disputes that could adversely affect financial conditions[91]. - The company is exposed to credit risk on accounts receivable, which may be heightened during uncertain economic conditions[132]. - A prolonged economic slowdown in operating regions could materially affect the company's revenue and net income, leading to reduced demand for services[133]. Corporate Structure and Governance - The company operates primarily through contractual arrangements with VIEs due to legal restrictions on foreign investment in China, which may affect the enforceability of these agreements[208]. - The company's ability to receive dividends from its China mainland subsidiaries and VIEs may be restricted, impacting financial flexibility and growth opportunities[220]. - The majority of share capital in certain VIEs is held by the major shareholder, who may amend agreements in ways that are adverse to the company's interests[217]. - The company's corporate structure may face challenges due to the Foreign Investment Law, which could affect its operational control and governance[211]. Financial Support and Liabilities - Youdao has received RMB 878.0 million in outstanding interest-bearing short-term loans and a US$300.0 million revolving loan facility as of December 31, 2024, indicating reliance on financial support from the NetEase group[109]. - The company may incur significant costs in defending against claims related to user-generated content on its platforms[195]. - The company faces liability for defamation, negligence, and intellectual property infringement claims, which could adversely affect its business and financial condition[194].

Summary of NetEase, Inc. Conference Call Company Overview - **Company**: NetEase, Inc (NTES.O) - **Industry**: China Internet and Other Services - **Market Capitalization**: US$64.68 billion - **Current Stock Price**: US$99.72 (as of February 28, 2025) - **Price Target**: US$117.00 - **52-Week Range**: US$113.77 - US$75.85 - **Shares Outstanding**: 649 million - **Average Daily Trading Value**: US$149 million Key Points Relaunch of Condor Heroes - **Event**: NetEase announced the relaunch of Condor Heroes 2.0 on March 13, 2025, after a 10-month suspension of the 1.0 version [1] - **Investment**: The original version incurred approximately Rmb1 billion in R&D costs [1] - **Improvements**: The new version includes: 1. Rebuilt character image models 2. Upgraded martial arts skills for heroes 3. Changes to PVP gameplay [1] Financial Implications - **Refund Policy**: NetEase will refund all grossing from the 1.0 version to gamers [2] - **User Engagement**: As of March 2, 2025, over 1.4 million gamers have made appointments to join the game [2] - **Previous Performance**: Condor Heroes was noted as the biggest failure among NetEase's new games in 2024, suspended two months post-launch due to poor feedback [2] - **Forecast Impact**: The relaunch is not included in the 2025 financial forecast, thus any revenue contribution is considered as option value [2] Analyst Ratings and Industry View - **Stock Rating**: Overweight [3] - **Industry View**: Attractive [3] - **Valuation Methodology**: Based on a sum of the parts approach [7] Risks and Opportunities - **Upside Risks**: - Better-than-expected performance of existing or new game titles - Faster-than-expected overseas expansion [9] - **Downside Risks**: - Weaker-than-expected margins, particularly from loss-making businesses [9] Market Context - **P/E Ratio**: NetEase's gaming segment is valued at 14x 2025 estimated P/E, compared to 15-30x for US/EU publishers, indicating slower growth and limited overseas exposure [9] Additional Insights - **User Base**: The significant number of appointments for the relaunch indicates potential for user engagement and revenue generation [2] - **Financial Strategy**: The decision to refund gamers reflects a commitment to customer satisfaction and may help rebuild brand loyalty after the previous failure [2] This summary encapsulates the critical aspects of NetEase's recent conference call, focusing on the relaunch of Condor Heroes, its financial implications, and the broader market context.

Group 1 - NetEase reported 4Q24 results with net revenue below consensus due to steady progress in the gaming business being offset by weakness in non-game segments [1] - Mobile games showed softness during the quarter, while PC gaming performance was not detailed [1] Group 2 - Astrada Advisors provides actionable recommendations to enhance portfolio performance and uncover alpha opportunities, leveraging a strong track record in investment research [1] - The firm specializes in technology, media, internet, and consumer sectors across North America and Asia, identifying high-potential investments and navigating complex industries [1] - Astrada Advisors integrates rigorous fundamental analysis with data-driven insights to offer a nuanced understanding of key trends, growth drivers, and competitive landscapes [1]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of $125.50, reflecting an expected return exceeding 15% over the next 12 months [2][26]. Core Insights - The company reported a stable performance in Q4 2024, with total revenue decreasing by 1.4% year-on-year to RMB 26.7 billion, aligning with market expectations. Operating profit increased by 13.9% year-on-year to RMB 7.8 billion, surpassing market expectations by 8% due to cautious control of sales and marketing expenses, which decreased by 33% year-on-year [1][2][3]. - For FY25, the company anticipates the launch of several new game titles to drive revenue growth, although total revenue forecasts for FY25-26 have been adjusted downwards by 2-3%. However, due to prudent operational expense control, the non-GAAP net income forecast for FY25-26 has been revised upwards by 2-3% [1][2][3]. Financial Summary - The company’s revenue is projected to grow from RMB 105.3 billion in FY24 to RMB 110.7 billion in FY25, representing a year-on-year growth of 7.5%. Adjusted net profit is expected to increase from RMB 33.5 billion in FY24 to RMB 36.0 billion in FY25, reflecting a growth rate of 7.5% [4][21]. - The operating profit margin is expected to improve, with a forecast of 30.4% for FY25, up from 29.1% in FY24, driven by effective control of sales and marketing expenses [3][11]. Segment Valuation - The report employs a Sum-of-the-Parts (SOTP) valuation method, estimating the online gaming business at $11.05 billion, accounting for 88% of the total valuation. Other segments include Youdao at $1 million, Cloud Music at $380 million, and innovation and other businesses at $1.8 million, with net cash valued at $8.5 million [14][15].

Investment Rating - The report maintains a "BUY" rating for NetEase, with a target price of US$125.50, indicating a potential upside of 20.5% from the current price of US$104.17 [3][12]. Core Insights - NetEase's 4Q24 performance showed total revenue of RMB26.7 billion, down 1.4% YoY, but operating profit increased by 13.9% YoY to RMB7.8 billion, exceeding consensus estimates due to effective control of selling and marketing expenses [1][2]. - For FY25E, new game titles such as Marvel Rivals and Where Winds Meet are expected to drive revenue growth, despite a slight reduction in total revenue forecasts for FY25-26E by 2-3% [1][9]. - The company is focusing on prudent operational expense control, which is anticipated to support operating profit margin (OPM) improvement in FY25E [1][8]. Financial Summary - FY24 total revenue was RMB105.3 billion, with a gross margin of 62.5% and adjusted net profit of RMB33.5 billion, reflecting a YoY growth of 2.8% [2][19]. - Revenue projections for FY25E are set at RMB110.7 billion, with adjusted net profit expected to reach RMB36.0 billion, indicating a 7.5% growth [9][19]. - The company reported a significant improvement in OPM, which rose by 3.9 percentage points YoY to 29.2% in 4Q24 [1][8]. Business Segments - The online gaming segment remains the primary revenue driver, contributing 88% to the total valuation, with a projected valuation of US$110.5 billion based on a 15x EV/EBIT multiple [12][13]. - Non-gaming businesses, including Youdao and Cloud Music, are focusing on quality growth, although revenues in these segments have seen declines [1][8]. - The innovative businesses segment is valued at US$1.8 billion, reflecting a cautious approach to customer acquisition and prioritizing higher ROI engagements [12][13]. Market Position - NetEase's market capitalization stands at approximately US$66.7 billion, with a strong share performance over the past months, showing a 19% increase over the last three months [3][5]. - The company has a solid shareholder return strategy, having returned RMB20.0 billion to shareholders through dividends and share buybacks in FY24 [1][8].

Financial Data and Key Metrics Changes - Total net revenue for 2024 reached RMB 105.3 billion, representing a 2% increase year-over-year [52] - For Q4 2024, total revenue was RMB 26.7 billion, with net revenue from games and related services at RMB 21.2 billion, up 2% year-over-year [52] - Gross profit margin for the full year was 62.5%, while Q4 margin slightly decreased to 60.8% [56][57] Business Line Data and Key Metrics Changes - Net revenue from online games was RMB 80.4 billion for 2024, up 6% from 2023, with Q4 revenue at RMB 20.5 billion, up 5% year-over-year [52] - Youdao's net revenue for 2024 was RMB 5.6 billion, up 4% year-over-year, but declined 9.5% in Q4 due to a focus on long-term growth [54] - NetEase Cloud Music's revenue was RMB 8 billion for the full year, with a 5% decrease in Q4 [55] Market Data and Key Metrics Changes - PC client games achieved 17% year-over-year growth, with a 57% increase in Q4, driven by titles like NARAKA: BLADEPOINT [53] - Mobile games accounted for approximately 65% of total net revenue from online games in Q4 [53] Company Strategy and Development Direction - The company is focused on innovation and expanding its game portfolio, with plans to launch several new titles in 2025 and beyond [50][31] - There is a commitment to enhancing the gaming experience through continuous updates and player feedback [68][75] - The strategy includes leveraging AI to improve R&D efficiency and user engagement [98] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the gaming market's capacity to accommodate multiple successful titles, such as Marvel Rivals and Overwatch [85] - The company aims to revitalize existing franchises and maintain player engagement through new content and community interaction [90] Other Important Information - The effective tax rate was 15.3% for the full year, with a strong cash position of RMB 131.5 billion at year-end [63][61] - The Board of Directors approved a dividend of US$0.2424 per share for Q4 [64] Q&A Session Summary Question: Insights on data test achievements and competition in the shooter game market - Management reported positive feedback from large-scale testing and expressed confidence in their unique game design [67][69] Question: Monetization strategy for Where Winds Meet - The monetization strategy will focus on cosmetics and new content to enhance player experience, with plans for an overseas launch in 2025 [75][76] Question: Growth strategy for Marvel Rivals - The company plans to invest in eSports and cross-promotions with other media to expand the user base [80] Question: Expectations for Overwatch and balancing with Marvel Rivals - Expectations for Overwatch are to revitalize the product and reach new highs, with both games expected to coexist successfully in the market [85] Question: User growth trends for World of Warcraft and Hearthstone - Both titles are performing well post-launch, with plans for new content to maintain player engagement [90] Question: Future expansion strategy in overseas markets - The company is committed to supporting overseas studios to create content that meets local demands [97] Question: Impact of AI on game development - AI is expected to significantly enhance R&D efficiency and user engagement in gaming [98]

NetEase 4Q24 Investor Presentation Investor Relations February 20, 2024 SAFE HARBOR STATEMENT 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 histo ...

Core Viewpoint - NetEase Cloud Music Inc. reported a modest revenue growth of 1.1% for fiscal year 2024, driven by a significant increase in online music services and subscription memberships, while also focusing on enhancing user engagement and community building [1][7][11]. Financial Performance - Revenue for 2024 reached RMB 7,950.1 million, up from RMB 7,867.0 million in 2023, marking a 1.1% increase [2][7]. - Gross profit increased by 27.5% to RMB 2,681.5 million from RMB 2,102.7 million in 2023, with gross margin improving to 33.7% from 26.7% [2][11]. - Net profit surged by 113.2% to RMB 1,565.4 million compared to RMB 734.2 million in 2023, while adjusted net profit reached RMB 1,700.1 million, more than doubling from RMB 818.5 million in 2023 [2][11]. Business Overview - The company focused on strengthening its core music business and enhancing user engagement through expanded content offerings, personalized recommendations, and innovative features [5][10]. - Monthly active users (MAUs) increased, with a DAU/MAU ratio maintained above 30%, indicating strong user engagement [6][8]. Revenue Breakdown - Revenue from online music services grew by 23.1% to RMB 5,400.1 million, driven by increased subscription memberships, which rose to RMB 4,500.0 million from RMB 3,600.0 million in 2023 [7][10]. - Revenue from social entertainment services declined to RMB 2,600.0 million from RMB 3,500.0 million in 2023, reflecting a strategic shift towards the core music business [7][11]. Community and Content Development - The company expanded its music content library, focusing on popular genres among younger audiences and enhancing partnerships with major music labels [9][12]. - The platform celebrated the 10th anniversary of its independent musician platform, supporting over 773,500 registered independent artists [16][18]. Future Initiatives - The company plans to enhance its content ecosystem, strengthen partnerships with copyright holders, and improve user engagement through innovative features and community-building initiatives [12][14]. - Continued focus on optimizing profitability through disciplined operations and cost management is a key strategic priority [14][11].