NetEase Q4 Earnings: Revenue Miss, Gaming and Cost Controls Drive Margins, Boosts Dividend

Zinger Key Points

NetEase misses Q4 revenue estimates, with gaming growth offset by declines in cloud music and learning services.
NetEase raises dividend despite revenue drop, as gaming segment posts modest 1.5% growth amid margin pressures.
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On Thursday, NetEase, Inc NTES reported a fiscal fourth-quarter revenue decline of 1.4% year-on-year to $3.66 billion (26.7 billion Chinese yuan), missing the analyst consensus estimate of $3.74 billion.

The Chinese gaming player's adjusted EPADS of $2.07 beat the analyst consensus estimate of $1.77. The stock fell after the report.

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Segments and margins: Games and related value-added services revenues rose 1.5% year over year to $2.9 billion. The corresponding gross margin decreased by 280 bps to 67.5%, mainly attributable to higher revenue contributions from licensed games, which have comparatively lower gross profit margins.

Youdao, Inc.'s DAO revenue declined by 9.5% year over year to $183.6 million, and the corresponding gross margin declined by 210 bps to 47.8%, primarily due to decreased net revenues from its learning services.

Cloud Music's revenues were $257.6 million, down 5.3% year over year, and its gross margin expanded by 160 bps to 31.9%, mainly due to increased net revenues from sales of membership subscriptions and continued improvement in cost control measures.

Innovative businesses and other revenue declined 17.0% year over year to $313.1 million, and the gross margin increased by 340 bps to 37.8%, mainly due to increased gross profit margins from Yanxuan.

As of December 31, 2024, NetEase held $18.0 billion in cash and equivalents and generated $1.78 billion in operating cash flow.

Dividend: The board of directors approved a dividend of $1.22025 per ADS for the fourth quarter of 2024 versus $0.4350 per ADS for the third quarter.

NetEase confirmed the laying off of the U.S.-based developers working on Marvel Rivals, the Verge cites the company. However, the development of Rivals would continue with a core group of developers based in China.

Price Action: NTES stock is down 5.91% at $98.01 at the last check on Thursday.

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