NETEASE CLOUD MUSIC INC

NetEase shares fell more than 5% in U.S. premarket trading Thursday after the Chinese gaming and media company reported second-quarter earnings well below analyst expectations, while revenue topped estimates. The company reported second-quarter earnings per share of RMB12.02, missing the analyst estimate of RMB15.54. Revenue rose 7.9% year-over-year to RMB30.11 billion, ahead of the RMB29.48 billion consensus estimate. Games and related value-added services, NetEase's core business, generated net revenue of RMB25.0 billion, up 9.7% year-over-year. Youdao net revenue rose 3.5% to RMB1.5 billion, while NetEase Cloud Music net revenue was relatively stable at RMB2.0 billion and revenue from innovative businesses and other operations fell 3.5% to RMB1.6 billion. Total operating expenses rose to RMB9.1 billion, up from RMB8.6 billion in the prior quarter and RMB9.0 billion a year earlier, with the company attributing the sequential increase to higher marketing, staff-related and research and development spending.

NetEase Cloud Music reported first-half 2026 revenue of RMB4.0 billion, up 3.4% from RMB3.8 billion a year earlier, while net profit fell to RMB809.2 million from RMB1,882.1 million. The profit decline was primarily due to a deferred tax credit of RMB849.4 million recognized in the first half of 2025 that did not recur. Adjusted net profit was RMB859.7 million, down from RMB1,946.4 million, and adjusted operating profit was RMB796.7 million versus RMB905.4 million. Gross margin improved to 37.2% from 36.4%, and the company said its daily active user to monthly active user ratio remained above 30%.