Categories Earnings, Technology

NetEase (NTES) Q3 earnings surge, exceed forecast

China-based internet technology firm NetEase (NASDAQ: NTES) reported a sharp increase in its third-quarter earnings, which also topped expectations.

Net income from continuing operations, excluding special items, surged to RMB 4.7 billion ($661.2 million) or $5.08 per ADS from RMB 2.71 billion or $2.94 per ADS last year. The bottom-line also exceeded the market’s prediction. On an unadjusted basis, profit from continuing operations was RMB 12.89 billion, sharply higher than RMB 2.06 billion reported in the year-ago quarter.

The results benefited from a 3% decline in total operating expenses, mainly due to lower marketing expenditures related to online games.

The earnings growth reflects an 11% annual increase in net revenues to RMB 14.64 billion ($2.05 billion). Online game service revenues advanced 12% annually, while revenues of the Youdao division nearly doubled. Innovative business revenues were up 4.5%.

Gaming push

Continuing its efforts to expand the gaming business, NetEase introduced new titles in China during the September-quarter, including Cyber Hunter, Xuan Yuan Sword: Dragon Upon the Cloud and Bloom & Blade. It also launched Blizzard Entertainment’s World of Warcraft Classic in the local market.

“Our main areas of investment are online games, online education, music and private label e-commerce. With the completion of Youdao’s IPO, we will continue to invest in knowledge tools, online courses and smart devices to empower even more efficient learning in China. Online games remain the cornerstone of our business with steady growth from our existing titles and exciting new titles in China and globally,” said CEO William Ding.

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Youdao IPO

Last month, Youdao went public and started trading in the New York Stock Exchange under the symbol DAO. During the third quarter, NetEase sold its e-commerce platform Kaola to Alibaba Group (BABA).

Related: NetEase Q3 2019 Earnings Conference Call Transcript

Baidu (BIDU), which competes with NetEase in certain areas of the business, reported a loss of $1.76 per ADS for the third quarter, despite an increase in revenues to $3.9 billion. The bottom-line was hurt by one-time items.

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