NetEase Stock Dips After Q4 Print: What's Going On?

NetEase, Inc NTES reported fourth-quarter fiscal 2023 revenue growth of 7.0% year-on-year to $3.82 billion, missing the consensus of $3.94 billion.

The Chinese gaming player’s adjusted EPADS of $1.60 missed the consensus of $1.71. The stock price slid after the results.

Segments and margins: Games and related value-added services revenues grew 9.6% Y/Y to $2.9 billion. The corresponding gross margin increased by 1,040 bps to 69.5%, attributable to a higher proportion of net revenues from NetEase’s self-developed games.

Also Read: Tencent And NetEase Surge After Chinese Regulator Pulls Draft Gaming Rules From Website

Youdao, Inc DAO revenue climbed by 1.8% Y/Y to $208.5 million, and the corresponding gross margin declined by 340 bps to 49.9% due to decreased revenue contribution from its learning services and reduced gross profit margin from its smart devices.

Cloud Music’s revenues were $279.7 million, down by 16.4% Y/Y, and its gross margin expanded by 1,250 bps to 30.3%.

Innovative businesses and other revenue grew by 12.9% Y/Y to $387.7 million, and the gross margin increased by 290 bps to 34.4% due to improved gross profit margin from Yanxuan and advertising services.

NetEase held $15.6 billion in cash and equivalents as of December 31, 2023, and generated $1.7 billion in operating cash flow.

Dividend: The board approved a dividend of $1.07985 per ADS for the fourth-quarter versus $0.4950 per ADS for the third-quarter.

The company acknowledged strengthening its anti-addiction system and continuing to steer the gaming ecosystem toward a healthier trajectory.

VanEck Video Gaming And ESports ETF ESPO has close to 6% exposure to NetEase and has gained close to 10% year-to-date.

Price Action: NTES shares traded lower by 1.27% at $110.85 premarket on the last check Thursday.