NetEase Q2 Earnings Disappoint, Core Games Business Falls Short

NetEase's core games business failed to shine in Q2, with revenue missing expectations and shares down 6.5% in premarket trading. The Chinese internet and gaming company reported lower-than-expected growth for its key games unit.

Chinese internet and gaming giant NetEase (HK:9999) (NASDAQ:NTES) reported mixed results for the second quarter of 2025, with its core games business failing to meet revenue expectations. The company's shares dropped by more than 6.5% in premarket trading on Thursday, August 14, following the release of its earnings report [1].

NetEase reported second-quarter earnings of RMB14.81 per share, missing the consensus estimate of RMB14.92. Revenue was RMB27.9 billion, up 9.4% year-over-year, but this figure fell short of the RMB28.54 billion consensus. The 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 [2].

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. The innovative businesses and other segments, which include the Yanxuan e-commerce platform, saw a 17.8% decrease in net revenues to RMB1.7 billion (US$237.2 million) [2].

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% [2].

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://finance.yahoo.com/news/netease-misses-q2-top-bottom-091321947.html
[2] https://www.ainvest.com/news/netease-adrs-drop-1-10-2q-earnings-estimates-2508/