NetEase notches solid gains on strong second-quarter earnings

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NetEase (Photo/VCG)

China's internet technology giant NetEase saw big gains in its Nasdaq-listed stock throughout Thursday trading, after the company reported robust corporate earnings for the second quarter (Q2) on late Wednesday night.

Shares of NetEase surged 10.26 percent to close at 238.02 U.S. dollars. As of the closing bell, the company was valued at more than 31 billion dollars in market capitalization.

The rally made NetEase the best performer among the top 10 stocks by weight in the S&P U.S. Listed China 50 index on Thursday, all of which extended gains with 58.com ranking the second by rising 3.92 percent.

For Q2, NetEase reported marked growth in its core business, including a diverse portfolio of online games, e-commerce and innovative business and others, such as Youdao online education service and cloud music service.

Its total revenue jumped 15.3 percent year over year to more than 2.7 billion dollars. The quarterly earnings per American Deposit Share also surged 46.6 percent year over year to over 3.4 dollars.

Among the company's four backbone sources of income, three posted double-digit growth year over year in Q2 revenues. While the advertising services' quarterly revenue declined 8.3 percent year over year, but upswung 32.6 percent quarter over quarter.

More specifically, its "cornerstone business" of online games has expanded rapidly both at home and abroad, with a raft of new games launched and the company's global presence strengthened.

"Despite a seasonally slower period in the second quarter, the steady performance of our game portfolio marked the fifth consecutive quarter that we have exceeded CNY 10 billion (around 1.4 billion dollars) in online game revenues," said Yang Zhaoxuan, CFO of NetEase during a conference call on Wednesday night.

For instance, the company's mobile game Knives Out topped the iOS grossing chart several times in May and June in Japan, and another game, Identity V, reached Japan's top three iOS grossing chart for the first time in July.

Apart from introducing new games into Japan and the United States, NetEase reached strategic collaborations with world-renowned entertainment companies, including Marvel Entertainment and The Pokemon Company.

"We are pleased with the progress we have made to introduce our games to international audiences and fortify our relationships with other industry leaders in the video games and entertainment markets," said William Ding, CEO and director of NetEase in the quarterly report.

"We will continue exploring overseas market opportunities and growing our games business on a global scale," Ding added.

In the second quarter, overseas games revenue accounted for more than 10 percent of the total games net revenue, according to Yang.

The company has also striven to enlarge its footprint in the broader North America games markets, particularly Canada.

It has launched a new video games studio in Montreal, with plans of hiring local and international resources to broaden its research and development capabilities in North America.

"Having the right products is a key to global expansion, and we will continue to invest in game content that will resonate with global players," Yang said.

 

Email: lansuying@nbd.com.cn