NetEase Q3 profit dips 39% but beats estimates

China’s internet and online game services provider NetEase Inc. (NTES) reported a 39% dip in earnings for the third quarter due to higher operating expenses. However, revenues climbed 35% helped by each of its primary business lines. The results exceeded analysts’ expectations. Following this, the shares turned positive on Thursday’s early trade.

Net income attributable to the company’s shareholders plunged 39% to $232.43 million and earnings per American Depository Share dropped 37% to $1.80. Non-GAAP earnings per ADS fell 26% to $2.55.

However, net revenue jumped 35.1% to $2.5 billion. The top line benefited from the 27.6% growth in the online game services revenue, a 67.2% surge in e-commerce revenue, a 2% rise in advertising services revenue, and a 31.5% jump in e-mail and other revenue.

NetEase said it is one of the very few companies that has consistently created distinct new game IP for both PC-client and mobile platforms. Over the last few months, the company rolled out several more hit games including Justice, Ancient Nocturne and Night Falls: Survival. Additionally, NetEase has taken a more global view of its online games business.

The top-performing advertising verticals in the third quarter of 2018 were automobile, real estate, and internet services sectors.

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Total operating expenses inched up 60.1% year-over-year due to increased staff-related costs, a rise in research and development expenses, as well as higher investments and marketing expenditures.

In addition, the board of directors has approved a dividend of $0.45 per ADS for the third quarter of 2018, which is expected to be paid on December 7, 2018, to shareholders of record on November 30, 2018.

The company also announced that its board of directors had approved a new share repurchase program of up to $1 billion of its outstanding ADSs for a period not to exceed 12 months beginning on November 16, 2018.

Shares of NetEase is trading up over 7% on Thursday at mid-afternoon. The stock has fallen over 31% in the year so far and over 21% in the past year.

Listen to publicly listed companies’ earnings conference calls along with the edited closed caption text.