NetEase, Inc. Q3 FY2024 earnings call

• Game Releases and Updates: Where Winds Meet PC slated for end-December launch, mobile slightly later. Marvel Rivals set for global release on December 6. FragPunk closed beta testing in October had over 1 million applicants. Project MUGEN to start regional offline technical test soon.
• Expansion Plans: Justice Mobile to hit Hong Kong, Macau, and Taiwan in November. Dunk City Dynasty preparing for global release.
• Product Innovations: Youdao Dictionary launched simultaneous interpretation powered by Ziyue. X7 Pro, the latest digital dictionary, introduced offline large language model translation. NARAKA: BLADEPOINT Mobile adapted to diversified mobile gamer needs.
• Blizzard Partnership: Relaunch of Blizzard games in China saw strong player engagement, e.g., World of Warcraft active players up 50% vs pre-shutdown, Hearthstone growth over 150%.

Gaming: Total online games net revenue reached around RMB20 billion. PC games saw robust growth with net revenue up ~29% YOY and 30% QOQ. Titles like Fantasy Westward Journey, Identity V, NARAKA: BLADEPOINT, Justice Mobile, and Racing Master had various performance highlights. For example, Identity V reached record high revenues for the third consecutive quarter. NARAKA: BLADEPOINT Mobile launched domestically in July and performed well. Justice Mobile celebrated its first anniversary and continued innovation. Racing Master had a successful first anniversary update and expanded to Japan.

Youdao: Net revenue was RMB1.6 billion, a 2% YOY increase. Driven by online marketing services growth and smart device/s learning services revenue. The Youdao intelligent learning system expanded video coverage, and Youdao Dictionary launched simultaneous interpretation. Hi Echo gained popularity. Smart devices segment saw solid growth with X7 Pro launch.

NetEase Cloud Music: Net revenue was RMB2 billion, +1% YOY. Broaden subscriber base, expanded music offerings, reinforced partnerships with music labels, and amplified in-house music. Monetization capabilities enhanced with AI tools and membership privileges.

Yanxuan: Saw GMV growth in key categories. Pet products and household cleaning items had double-digit YOY growth. Established a dedicated factory in the fast food sector.

• Where Winds Meet PC to launch end-December, mobile slightly later.
• Marvel Rivals global release on December 6.
• FragPunk first testing phase in China in December.
• Project MUGEN to start regional offline technical test soon.
• Justice Mobile to hit Hong Kong, Macau, and Taiwan in November.
• Continued share buyback with repurchased shares amounting to $543 million in Q3, 98% increase from previous quarter. Under $5 billion share repurchase program, ~18 million ADS repurchased as of September 30, 2024, at total cost of ~$1.6 billion.

• Risks related to market conditions, competition, and factors beyond the company's control that could cause actual results to differ from forward-looking statements. For example, risks associated with the successful launch and performance of new games, and the ability to maintain and grow market share.

Q: What's the latest launch schedule for Where Winds Meet? How to integrate single player vs multiplayer and monetization?

A: Where Winds Meet PC is slated to launch by the end of December, mobile slightly later. Core game play is for high-quality open world exploration and social experiences. Hoping players start with single-player content and smoothly transition to multiplayer. Monetization focuses on tier-based cosmetic offerings and lighter models to avoid complicated cultivation and monetization.

Q: How are Justice Mobile and Eggy Party performing operationally? Can we expect to extend their life cycles?

A: Justice Mobile had good player stickiness post-first anniversary. Will keep enriching content and explore innovative commercialization. Eggy Party has high DAU and is a unique offering. Facing short-term challenges but will focus on long-term content operation to provide commercialization opportunities.

Q: Current situation with overseas first-party studios and globalization plan?

A: Have overseas first-party studios and domestic studios making games for global release. Once Human performed well. Marvel Rivals and FragPunk to be released globally. Confident domestic studios can produce more global suitable content.

Q: How does Marvel Rivals compare to other PVP shooting titles? When will it ramp up?

A: Marvel Rivals is a new generation superhero-based team-based competitive shooting game with unique experiences. Steam positive review rate close to 95%. Confident in optimizing before launch and providing unique experience globally upon December 6 release.

Q: What's different about Naraka: Bladepoint Mobile vs PC?

A: Accumulated 50 million new users in four months. PC and mobile gamers have different needs. Mobile gamers have more diversified demands. Provide differentiated content for both versions.

Q: Performance of Naraka: Bladepoint Mobile since launch? Upcoming content plans?

A: Launched in July, met expectations with 50 million new users. Mobile and PC gamers have different needs, so provide differentiated content. Upcoming content will cater to diversified mobile gamer demands.