NetEaseNTES

Key highlights

• Gaming margins expanding: Gross margins for the games and value-added services division rose to 74.8% from 68.8% a year ago. This improvement in the core business was driven by lower platform revenue-sharing costs and strong performance from self-developed titles like Fantasy Westward Journey.
• Cloud Music profit grows: The music division earned RMB734.2 million in gross profit, a 7.6% increase from the RMB682.6 million it earned in the same period last year. This marks continued steady progress for the segment, which now accounts for about 6.5% of the company's total sales.
• Shareholder returns continue: Management approved a dividend of $0.720 per ADS for the first quarter and has now spent $2.1 billion of its $5.0 billion share repurchase plan. These buybacks have already retired approximately 23.2 million shares, which helps increase the value for remaining owners over time.
• Cash pile strengthens: Net cash reached RMB167.5 billion, or about $24.3 billion, which is an increase from the RMB163.5 billion held at the end of 2025. This large cash reserve gives the company flexibility to fund its global expansion and its pipeline of new game launches like Marvel Rivals.
• Global expansion outlook: The company expects to continue its international growth through key upcoming titles like Where Winds Meet and Marvel Rivals. Management is specifically targeting 20% of gaming revenue from outside China by 2027 to diversify away from its domestic market.

Our take: A very strong quarter that was much cleaner than the headline suggests. The big jump in gaming margins to 74.8% is the standout win here, showing that the company's own games are more profitable than ever. This performance reinforces the long-term case for the business as a dominant content creator.