NetEase Q1 Earnings Call Highlights
Key Points
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- NetEase posted stronger Q1 2026 results, with total net revenue up 6% year over year to RMB 30.6 billion and games revenue rising 7%. Gross margin also improved sharply to 69.4%, while non-GAAP net income held steady at RMB 11.3 billion.
- Games remained the main growth engine, led by titles such as Where Winds Meet, Marvel Rivals, and the Fantasy Westward Journey franchise. Management highlighted record engagement and sales rankings across both domestic and overseas markets, including strong Steam performance for Where Winds Meet and Marvel Rivals.
- NetEase emphasized a robust pipeline and shareholder returns, saying new games Sea of Elements and Ananta are progressing, while the company ended the quarter with RMB 167.5 billion in net cash. It also approved a quarterly dividend and continued buybacks under its $5 billion repurchase program.
NetEase (NASDAQ:NTES) reported higher first-quarter revenue for 2026, driven by continued growth in its games business and stronger gross margins, while management highlighted momentum across major titles including Where Winds Meet, Marvel Rivals and the Fantasy Westward Journey franchise.
Total net revenue rose 6% year over year to RMB 30.6 billion, or $4.4 billion, Vice President of Finance Aileen Mo said on the company’s earnings call. Games and related value-added services generated RMB 25.7 billion in revenue, up 7% from a year earlier. Online game revenue totaled RMB 25.1 billion, increasing 18% quarter over quarter and 7% year over year, which Mo attributed to higher revenue from self-developed games including the Fantasy Westward Journey franchise and Where Winds Meet.
Games Portfolio Drives First-Quarter Performance
Bill Pang, vice president of corporate development, speaking from prepared remarks on behalf of Chief Executive Officer William Ding, said 2026 was “off to a solid start,” with the quarter supported by both domestic and international game performance. Pang said NetEase’s established franchises sustained strong player activity in China, while overseas titles showed growing cross-market appeal.
Where Winds Meet, which launched overseas in November, was described by Pang as a “global phenomenon.” He said the title’s March expansion, Hexi, and a later version 1.6 update featuring the Qingchuan region helped sustain engagement. Pang said the update pushed the game to No. 2 on Steam’s global top seller chart and contributed to another quarterly revenue record for the title.
Management also pointed to continued momentum for Marvel Rivals. Pang said seasonal updates, new themed cosmetic content and the expansion of player-versus-environment features helped deepen engagement. He said an April content update that included outfits for Deadpool and Jeff the Landshark generated strong community engagement and drove the game to No. 2 on Steam’s U.S. top seller chart.
Other titles cited on the call included Knives Out, which reached No. 3 on Japan’s iOS top-grossing chart following a Tokyo Ghoul crossover, and Blood Strike, which recorded record-high daily active users during the second anniversary of its global mobile launch.
Domestic Franchises Remain a Focus
In China, Pang said NetEase sustained engagement and revenue across established titles through content updates and gameplay innovation. The Fantasy Westward Journey franchise was a particular focus during the call. In response to an analyst question, management said Fantasy Westward Journey Online reached a new peak concurrent user record of 3.9 million in the first quarter, reflecting the impact of its unlimited server and continued growth in its time-based classic server.
Pang also highlighted long-running titles including Tianxia, which delivered a record commercial performance in the quarter, and Ghost Story Mobile, which recently marked its 10th anniversary and has attracted more than 200 million registered users since launch. Eggy Party topped China’s iOS grossing chart in February after Spring Festival events and collaborations with intellectual property including My Little Pony, Pang said.
Other titles discussed included Identity V, Infinite Borders, Naraka: Bladepoint and Sword of Justice. Pang said esports remains a core part of Identity V’s engagement strategy and noted that the Call of Duty: Mobile World Championship global finals were held in Shanghai earlier this month.
Pipeline Updates: Sea of Elements and Ananta
Management said new games in development remain on track, including Sea of Elements and Ananta. During the question-and-answer session, management said the team behind Sea of Elements had received valuable player feedback from a recent technical test and was preparing for an upcoming “Dawnbreaker” test. The company said it is working toward a targeted third-quarter launch window.
On monetization, management said Sea of Elements would be designed around characters and cosmetic customization, with the goal of keeping the experience “rich but without too much burden.”
For Ananta, management said the game is being positioned as an urban open-world title rather than a traditional open-world role-playing game or anime-style action game. The company said its differentiation will center on letting players feel as if they are living in a modern virtual city, with activities such as shopping, social interaction, exploration and running businesses. Management said it would prioritize content quality over rushing to meet a specific launch window.
Margins Improve as Net Income Holds Steady
NetEase’s overall gross profit margin increased to 69.4% from 64.1% a year earlier. The gross profit margin for games and related value-added services rose to 74.8% from 68.8%, which Mo said was primarily due to lower platform-related revenue-sharing costs.
Youdao revenue increased 4% year over year to RMB 1.3 billion, driven by online marketing services, though it declined 14% sequentially due to lower revenue from learning services and smart devices. NetEase Cloud Music revenue was RMB 2 billion, up 7% year over year and broadly stable sequentially. Revenue from innovative businesses and others fell 5% year over year to RMB 1.5 billion.
Total operating expenses were RMB 8.6 billion, equal to 28% of net revenue. Selling and marketing expenses rose to 11.2% of revenue from 9.4% a year earlier, primarily due to increased marketing expenses related to games and related value-added services. Research and development expenses were 14.7% of revenue, compared with 15.2% a year earlier.
Non-GAAP net income attributable to shareholders was RMB 11.3 billion, or $1.6 billion, which Mo said was broadly stable year over year. Non-GAAP basic earnings per ADS were $2.56, or $0.51 per share.
Cash Position and Capital Returns
Mo said NetEase ended the quarter with a net cash position of RMB 167.5 billion as of March 31, 2026, up from RMB 153.5 billion at the end of 2025. The board approved a first-quarter dividend of $0.144 per share, according to Mo.
Under the company’s current $5 billion share repurchase program, NetEase had repurchased approximately 23.2 million ADS as of March 31 for a total cost of about $3.1 billion, Mo said.
Management also highlighted progress in overseas expansion. In response to a question from CICC, management said Where Winds Meet had maintained a 78% positive rating on Steam and repeatedly ranked among the top two on Steam’s global top seller chart during major updates. The company said it plans to continue expanding the game’s global potential through cross-device compatibility, stronger global publishing, additional platforms and deeper localization.
About NetEase (NASDAQ:NTES)
NetEase, Inc (NASDAQ: NTES) is a Chinese technology company headquartered in Hangzhou that develops and operates Internet services and products. Founded in 1997 by William Ding (Ding Lei), the company has grown from an early web portal and e-mail provider into a diversified online services group. William Ding has served as the company's founder and long-time leader, guiding its expansion into games, digital content and consumer services.
The company's primary business is interactive entertainment: NetEase Games designs, develops and publishes PC and mobile games for domestic and international audiences, offering a mix of self-developed franchises and titles published under licensing and strategic partnerships.
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