China's NetEase Stock Pops On Q1 Performance Fueled By Gaming Growth, Strong Cash Flow

NetEase, Inc. NTES reported fiscal first-quarter results on Thursday. The company’s quarterly revenue increased 7.4% year-on-year to $3.97 billion (28.8 billion Chinese yuan), topping the analyst consensus estimate of $3.87 billion.

The Chinese gaming player’s adjusted EPADS of $2.41 beat the analyst consensus estimate of $2.01.

Segments and margins: Games and related value-added services revenues rose 12.1% to $3.3 billion. The corresponding gross margin decreased by 62 bps to 68.8%, mainly attributable to higher revenue contributions from licensed games, which have comparatively lower gross profit margins.

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

Youdao, Inc.’s DAO revenue declined by 6.7% to $178.9 million, and the corresponding gross margin declined by 165 bps to 47.3%, primarily due to a decrease in net revenues from its learning services.

NetEase Cloud Music’s revenues were $256.1 million, down 8.4%, and its gross margin declined by 123 bps to 36.7%, primarily due to decreased net revenues from its social entertainment services.

Innovative businesses and other revenue declined 17.6% to $223.8 million due to decreased net revenues from Yanxuan, advertising services, and the gross margin increased by 534 bps to 38.8%.

As of March 31, 2025, NetEase held $18.9 billion in cash and equivalents and generated $1.7 billion in operating cash flow.

Dividend: The board of directors approved a dividend of $0.6750 per ADS for the first quarter of 2025 versus $1.22025 per ADS for the fourth quarter.

Price Action: NetEase stock is up 8.39% at $116.10, and Youdao stock is up 12.0% at $9.72 premarket at the last check on Thursday.

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