NetEase Fails To Renew Licensing Deal With Activision; Clocks $3.4B Revenue In Q3

NetEase, Inc NTES reported third-quarter FY22 revenue growth of 10.1% year-on-year to $3.4 billion, missing the consensus of $3.48 billion.
Segments and margins: Games and related value-added services revenues grew 9.1% Y/Y to $2.6 billion. The corresponding gross margin expanded by 370 bps to 65%.
Youdao, Inc's DAO revenue rose 1.1% Y/Y to $197.2 million, and the corresponding gross margin contracted by 240 bps to 54.2%.
Cloud Music's revenues were $331.4 million, up 22.5% Y/Y, and its gross margin expanded 1,200 bps to 14.2%.
Innovative businesses and other revenue rose 13.6% Y/Y to $276.7 million, and the gross margin contracted 170 bps to 25.5%.
Non-GAAP net income from continuing operations per ADS of $1.59 beat the consensus of $1.06.
NetEase held $13.3 billion in cash and equivalents and generated $1.1 billion in operating cash flow.
Dividend: The board approved a dividend of $0.4350 per ADS for Q3 versus $0.3600 in Q2.
NetEase's agreement for licensing games with Activision Blizzard, Inc ATVI will expire in January 2023 and will not be renewed. The expiration of such licenses will have no material impact on NetEase's financial results.
Price Action: NTES shares closed lower by 0.38% at $71.33 on Wednesday.

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