NetEase ADRs drop 1.10% after 2Q earnings miss estimates

NetEase ADRs drop 1.10% after 2Q earnings miss estimates

NetEase, Inc. (NTES) reported its second-quarter (Q2) 2025 earnings on Thursday, August 14, after the market close. The company's non-GAAP earnings per share (EPS) came in at $2.09, missing the consensus estimate of $2.10 by $0.01. Revenue for the quarter totaled $3.9 billion, falling short of the consensus estimate of $3.98 billion by $80 million [3].

The earnings miss can be attributed to several factors. NetEase's gaming segment, which includes titles like Marvel Rivals and FragPunk, saw a 13.7% increase in net revenues to RMB22.8 billion (US$3.2 billion), but this growth was slower than the 15.2% year-over-year increase seen in the first quarter. Meanwhile, Youdao's learning services segment saw a 7.2% increase in net revenues to RMB1.4 billion (US$197.9 million), but this was also below the 8.3% year-over-year increase reported in the first quarter [3].

NetEase Cloud Music, a significant contributor to the company's revenue, saw a 3.5% decrease in net revenues to RMB2.0 billion (US$274.8 million) compared to the same quarter last year. This decline is likely due to ongoing challenges in the social entertainment services market. The innovative businesses and others segment, which includes the Yanxuan e-commerce platform, saw a 17.8% decrease in net revenues to RMB1.7 billion (US$237.2 million) [3].

Despite the earnings miss, NetEase has shown strong growth in its core gaming portfolio and strategic global expansion initiatives. The company's stock price dropped by 1.10% following the earnings announcement, reflecting the market's disappointment with the results. However, historical data suggests that NTES has demonstrated resilience after earnings misses: over the past three years, the stock has posted positive returns in 66.67% of cases within 3 days, 10 days, and 30 days of missing earnings expectations, with a maximum 30-day return of 9.59% [^].

In comparison, over the last two years, NetEase has beaten EPS estimates 50% of the time and revenue estimates 38% of the time. However, in the last three months, EPS estimates have seen 6 upward revisions and 1 downward revision, while revenue estimates have seen 8 upward revisions and 2 downward revisions [1].

NetEase's Q2 earnings report highlights the company's continued strength in the gaming sector but also underscores the challenges it faces in other segments. The market's reaction to the earnings report suggests that investors are closely monitoring NetEase's performance in these areas.



References:
[1] https://seekingalpha.com/news/4484802-netease-q2-2025-earnings-preview
[2] https://www.theglobeandmail.com/investing/markets/stocks/AS-N/pressreleases/34084053/ntes-set-to-report-q2-earnings-what-s-in-store-for-the-stock/
[3] https://seekingalpha.com/news/4485151-netease-non-gaap-eps-of-209-misses-by-001-revenue-of-39b-misses-by-80m