【行业研究报告】网易-Strong 1Q25 results on solid games business and disciplined opex control

16May2025
CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdate
NetEase(NTESUS)
Strong1Q25resultsonsolidgamesbusiness
anddisciplinedopexcontrol
NetEaseannounced1Q25results:totalrevenuegrewby7%YoYto
RMB28.8bn,largelyinlinewithconsensusestimate.Operatingprofitincreased
by37%YoYtoRMB10.4bn,25%aheadofconsensusestimate,mainlydueto
thedisciplinedopexcontrol(-14%YoY).Gamesbusinessregainsmomentum,
withreacceleratingandbetter-than-expectedrevenuegrowthin1Q25(+12%
YoY),andthestronggrowthofcontractliabilitiesin1Q25(+19%/16%YoY/QoQ)
shouldsupportthegrowthofgamesrevenueinthecomingquarters,inourview.
Inviewofthesolidbusinessperformanceofgames,weraiseFY25-27Erevenue
forecastby2-6%.WeliftourSOTP-derivedtargetpricetoUS$136.5(previous:
US$125.5).MaintainBUY.
Gamesrevenuegrowthreaccelerates.Games&relatedVASrevenue
wasupby12%YoYtoRMB24.0bnin1Q25(4Q24:+2%YoY)and4%
wasupby12%YoYtoRMB24.0bnin1Q25(4Q24:+2%YoY)and4%
aheadofconsensusestimate,primarilydrivenby:1)incremental
contributionfromnewtitleslikeWhereWindsMeetandMarvelRivals;2)
growthinrevenuefromlegacygameslikeIdentityV.WhereWindsMeet
surpassed30mnregisteredplayersasofMar2025;MarvelRivalstopped
Steam'sglobaltopsellerchartafteritsSeason2updateinApr2025;Once
HumanmobiletoppediOSdownloadchartsinover160regionsafterits
launchinApr2025.Contractliabilitiesdeliveredstronggrowthof19%/16%
YoY/QoQasofMar2025,whichshouldsupporttherevenuegrowthof
gamesinthecomingquarters,inourview.Lookingahead,severalhighly-
anticipatedtitlesarelinedupforgloballaunch,includingMARVELMystic
Mayhem,Destiny:RisingandAnanta.
Non-gamingbusinessesimproveefficiency.NetEase’sCloudmusic
revenuedeclinedby8%YoYtoRMB1.86bnin1Q25,mainlyduetothe
declineinsocialentertainmentrevenue;butmusicGPMroseby4.8ppts
QoQto36.7%in1Q25thankstotheeffectivecostcontrol.Youdao’s
revenuewasdownby7%YoYtoRMB1.30bnin1Q25,asthemore
disciplinedcustomeracquisitionapproachledtodecreasedrevenuefrom
learningservices.Innovativebusinessesandothersrevenuedecreasedby
18%YoYtoRMB1.62bnin1Q25,mainlyattributabletodecreasedrevenue
fromYanxuanandadvertisingbusinesses.
Effectiveopexcontrolboostsprofitability.OverallOPMroseby7.8ppts
YoYand7.0pptsQoQto36.2%in1Q25,mainlyondisciplinedopexcontrol
andGPMexpansion.S&M/G&Aexpensesweredownby33%/20%YoYin
1Q25,equivalentto9.4%/3.3%oftotalrevenue(1Q24:15.0%/4.5%).We
expectNetEasewillcontinuetomaintaindisciplinedopexinadditiontoGPM
expansioninFY25E,whichshouldsupportOPMtoimprovebyc.5.5ppts
YoYinFY25E,basedonourestimate.Theenhancedprofitabilitywilloffer
roomforinvestmentinfutureopportunitiessuchasnewgamegenresand
overseasmarket,inourview.NetEasecurrentlytradesat14xFY25Enon-
GAAPPE,whichisonparwith2-yearhistoricalaverage.