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NetEase (NTES)
NASDAQ:NTES

NetEase (NTES) AI Stock Analysis

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NT

NetEase

(NASDAQ:NTES)

Rating:85Outperform
Price Target:
$152.00
▲(18.13%Upside)
NetEase's robust financial performance and positive technical indicators are the primary drivers of its high stock score. The company's strategic focus on innovation in gaming, alongside strong earnings and global expansion, further bolster its outlook. Valuation is reasonable, and while there are challenges in some segments, the overall sentiment remains positive.
Positive Factors
Financial Performance
Operating profit increased by 37% YoY, mainly due to disciplined operational expense control.
Product Launch
Marvel Rivals will launch a new hero, Ultron, which is expected to become a new grossings driver due to the character's popularity in the Marvel series.
Revenue Growth
Games business regains momentum with reaccelerating and better-than-expected revenue growth.
Negative Factors
Mobile Games Performance
Mobile game was -6%QoQ/-11%YoY to Rmb13.4bn, 15% below MSe.
Revenue Decline
NetEase's Cloud music revenue declined by 8% YoY, mainly due to the decline in social entertainment revenue.
Revenue Shortfall
Revenue fell short of consensus expectations mainly due to weaker performance in mobile games.

NetEase (NTES) vs. SPDR S&P 500 ETF (SPY)

NetEase Business Overview & Revenue Model

Company DescriptionNetEase, Inc. engages in online games, music streaming, online intelligent learning services, and internet content services businesses in China and internationally. The company operates through Games and Related Value-Added Services; Youdao; Cloud Music; and Innovative Businesses and Others segments. It develops and operates PC and mobile games, as well as offers games licensed from other game developers. The company's products and services include Youdao Dictionary, an online knowledge tool; Youdao Translation, a tool specifically designed to support translation needs of business and leisure travelers; U-Dictionary, an online dictionary and translation app; Youdao Kids' Dictionary, a smart and fun tool; smart devices, such as Youdao Dictionary Pen, Youdao Smart Learning Pad, and Youdao Listening Pod; online courses; interactive learning apps; and education digitalization solutions, such as Youdao Smart Learning Terminal, a device that automates paper-based homework processing; Youdao Smart Cloud, a cloud-based platform that allows third-party app developers, smart device brands, and manufacturers to the company's OCR capabilities; and Youdao Sports, a sports-centric educational system. Its products and services include NetEase Cloud Music, a music streaming platform; Yanxuan, an e-commerce platform, which sells private label products; www.163.com portal and related mobile app, Wangyi Xinwen, which deliver information such as news, sports events, technology, fashion trends, and online entertainment; NetEase Mail, an email service; NetEase CC Live streaming, a live streaming platform with a focus on game broadcasting; and NetEase Pay, a payment platform. The company was formerly known as NetEase.com, Inc. and changed its name to NetEase, Inc. in March 2012. NetEase, Inc. was founded in 1997 and is headquartered in Hangzhou, the People's Republic of China.
How the Company Makes MoneyNetEase primarily generates revenue through its online gaming sector, which accounts for the majority of its earnings. The company develops, operates, and licenses a wide array of games, including MMORPGs, mobile games, and casual games, catering to diverse consumer preferences. In addition to self-developed titles, NetEase also collaborates with global gaming leaders like Blizzard Entertainment to distribute and operate popular franchises in China. Another significant revenue stream comes from its e-commerce platforms, such as NetEase Yanxuan, which leverages a direct-to-consumer model to sell a variety of lifestyle products. Advertising services and other value-added services, such as premium email and music streaming subscriptions, also contribute to NetEase's revenue. The company's diverse business model and strategic partnerships are key factors in its financial performance.

NetEase Key Performance Indicators (KPIs)

Any
Any
Gross Margin by Segment
Gross Margin by Segment
Reveals the efficiency of each segment in generating profit relative to costs, helping investors assess competitive strength and pricing power within specific markets.
Chart InsightsNetEase's gaming segment shows robust gross margin growth, reflecting its strategic focus on innovation and successful game launches like Marvel Rivals and FragPunk. Despite challenges, such as declining revenues in Youdao and Cloud Music, the gaming sector's strong performance and global expansion efforts are driving overall profitability. The earnings call highlights the company's commitment to maintaining momentum in gaming, while addressing revenue declines in other segments through strategic improvements and sustainability initiatives.
Data provided by:Main Street Data

NetEase Earnings Call Summary

Earnings Call Date:May 15, 2025
(Q1-2025)
|
% Change Since: 20.78%|
Next Earnings Date:Aug 14, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong revenue growth in gaming and positive momentum for new and existing titles. However, it also acknowledged challenges in revenue for Youdao, NetEase Cloud Music, and innovative businesses. The positive aspects, particularly in gaming and ESG achievements, outweigh the lowlights.
Q1-2025 Updates
Positive Updates
Strong Start to 2025
NetEase began 2025 with strong momentum, reporting a total net revenue increase of 7% year-over-year, driven by innovative content and exceptional operations.
Gaming Revenue Growth
Total revenue from gaming and value-added services rose by 12% year-over-year to RMB24.0 billion, with new titles and flagship games achieving record highs.
Successful Game Launches
Marvel Rivals and FragPunk both saw strong initial success, with Marvel Rivals reclaiming #1 on Steam's global top seller chart and FragPunk achieving over 110,000 peak concurrent players within three days of its PC launch.
Identity V and Naraka: Bladepoint Achievements
Identity V reached a new quarterly high in player base, surpassing 400 million globally, while Naraka: Bladepoint saw record revenue, and both games were named as official Esports events for the 2026 Asian Games.
Youdao Record High Operating Profit
Youdao achieved record high first quarter operating profit, driven by a focus on technology-driven innovation and long-term sustainability.
ESG and Sustainability Recognition
NetEase achieved a 16% reduction in greenhouse gas emissions compared to the previous year, and received upgraded ESG ratings from MSCI to AA, among other recognitions.
Negative Updates
Decline in Youdao and NetEase Cloud Music Revenue
Youdao's net revenues declined by 7% year-over-year, and NetEase Cloud Music net revenues decreased by 8% from the same period last year, attributed to strategic structural improvements and decreased revenue from social entertainment services.
Challenges in Innovative Businesses
Net revenue for innovative businesses and others decreased by 17% year-over-year, largely due to decreased net revenue from Yanxuan, advertising services, and other segments.
Company Guidance
During the first quarter of 2025 earnings call, NetEase reported a 7% year-over-year increase in total net revenue, reaching RMB28.8 billion. Revenue from gaming and value-added services rose by 12% to RMB24.0 billion. Notably, Marvel Rivals and FragPunk contributed to this growth, with Marvel Rivals reclaiming its #1 position on Steam's global top seller chart and FragPunk achieving over 110,000 peak concurrent players shortly after launch. The company emphasized its commitment to innovation and global expansion, with new titles like Once Human quickly gaining traction across platforms. NetEase's non-GAAP net income grew by 32% year-over-year to RMB11.2 billion, demonstrating strong operational capabilities and strategic foresight in expanding its global gaming footprint.

NetEase Financial Statement Overview

Summary
NetEase demonstrates excellent financial health with strong profitability, efficient operations, and robust cash flow management. Its low leverage profile and consistent growth across key financial metrics underscore its financial strength.
Income Statement
92
Very Positive
NetEase shows strong growth and profitability in its TTM period, with a Gross Profit Margin of 62.7% and a Net Profit Margin of 30.2%. Revenue growth is stable, with a healthy increase of 1.9% from the previous year. The EBIT Margin is robust at 30.2%, and the EBITDA Margin is strong at 32.4%, indicating efficient operations and cost management.
Balance Sheet
88
Very Positive
The company maintains a strong financial position with a low Debt-to-Equity Ratio of 0.07, indicating minimal reliance on debt financing. The Return on Equity stands at an impressive 22.5%, showcasing effective use of equity capital. The Equity Ratio is solid at 71.6%, reflecting a strong asset position relative to liabilities.
Cash Flow
90
Very Positive
NetEase exhibits a strong cash flow position with a Free Cash Flow Growth Rate of 6.7% for the TTM period. The Operating Cash Flow to Net Income Ratio is 1.3, demonstrating effective conversion of net income to cash. The Free Cash Flow to Net Income Ratio is also high at 1.2, indicating strong cash generation relative to net income.
Breakdown
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
107.27B105.30B103.47B96.50B87.61B73.67B
Gross Profit
67.27B65.81B63.06B52.77B46.97B38.98B
EBIT
32.40B29.58B27.71B19.63B16.42B14.54B
EBITDA
34.73B32.00B30.76B22.49B19.69B18.00B
Net Income Common Stockholders
32.36B29.70B29.42B20.34B16.86B12.06B
Balance SheetCash, Cash Equivalents and Short-Term Investments
140.11B137.58B126.72B117.46B97.53B93.47B
Total Assets
200.86B195.99B185.92B172.76B153.64B141.87B
Total Debt
9.82B12.82B20.48B27.53B20.63B19.50B
Net Debt
-31.92B-38.57B-945.42M2.64B6.13B10.39B
Total Liabilities
52.99B53.50B57.84B63.89B54.37B58.88B
Stockholders Equity
143.83B138.69B124.29B104.73B95.33B82.13B
Cash FlowFree Cash Flow
39.99B37.47B31.06B25.07B21.82B21.60B
Operating Cash Flow
42.23B39.68B35.33B27.71B24.93B24.89B
Investing Cash Flow
-7.78B17.92B-17.04B-7.37B-7.08B-29.19B
Financing Cash Flow
-35.13B-27.34B-21.47B-10.24B-12.59B9.91B

NetEase Technical Analysis

Technical Analysis Sentiment
Positive
Last Price128.67
Price Trends
50DMA
113.45
Positive
100DMA
107.20
Positive
200DMA
96.43
Positive
Market Momentum
MACD
4.84
Positive
RSI
61.39
Neutral
STOCH
54.29
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NTES, the sentiment is Positive. The current price of 128.67 is above the 20-day moving average (MA) of 126.38, above the 50-day MA of 113.45, and above the 200-day MA of 96.43, indicating a bullish trend. The MACD of 4.84 indicates Positive momentum. The RSI at 61.39 is Neutral, neither overbought nor oversold. The STOCH value of 54.29 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for NTES.

NetEase Risk Analysis

NetEase disclosed 94 risk factors in its most recent earnings report. NetEase reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

NetEase Peers Comparison

Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
85
Outperform
$81.45B18.6123.93%2.10%1.26%6.84%
72
Outperform
$69.63B-460.30%30.24%27.61%
71
Outperform
$8.34B-4.29%21.11%87.93%
EAEA
70
Outperform
$37.87B35.5616.13%0.50%-0.81%-9.28%
63
Neutral
$1.71B12.17-220.61%8.76%1.64%-32.31%
61
Neutral
$14.57B5.94-3.83%7.78%2.79%-33.24%
57
Neutral
$42.14B-114.76%5.31%-15.57%
* Communication Services Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
NTES
NetEase
128.67
41.40
47.44%
EA
Electronic Arts
151.00
12.66
9.15%
TTWO
Take-Two
238.50
80.28
50.74%
BILI
Bilibili
20.25
2.11
11.63%
PLTK
Playtika Holding
4.56
-3.23
-41.46%
RBLX
Roblox
102.65
66.49
183.88%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.