$1.2bn games business lifts NetEase revenues up by more than a third

Chinese publisher reports revenues of $1.9 billion, profits of $839.9m for third quarter

By James Batchelor.Published Thursday 16th November 2017, 9:38am GMT

NetEase has enjoyed a quarter of year-on-year growth, with online and mobile games the primary driver behind its success.

The firm has released its financial results for the three months ended September 30th, 2017, posting net revenues of 12.5bn yuan ($1.9bn) - an increase of 35.5% when compared to the same period last year.

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However, while these revenues may be an improvement on 2016, they show a continued decline since the start of the year. Revenues for Q1 came in at 13.6bn yuan ($2.05bn), which dropped slightly to 13.4bn yuan ($2.02bn) in Q2.

During an earnings call, transcribed by Seeking Alpha, CFO Charles Yang said the publisher is still trying to grow its business outside China but overseas revenue for this quarter only accounted for 2.4% of the total.

The vast majority of all revenues came from online and mobile games, which accounted for 8.1bn yuan ($1.2bn). This is up 23.5% year-on-year but, similar to NetEase's overall revenues, shows decline since the start of the year. For Q1, games generated revenues of 10.7bn yuan ($1.6bn), which dipped in Q2 to 9.4bn yuan ($1.4bn).

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As you might expect from a company predominantly operating in the Chinese market, most of its games revenues come from mobile titles - 68% in fact, although this is down slightly from 72% and 73% in the two previous quarters.

The Chinese publisher's other businesses, advertising services and email/ecommerce, generated revenues of 631.4m yuan ($94.9m) and 3.7bn yuan ($561.3m) respectively. Both also showed year-on-year increases, with email/ecommerce up 79.5% compared to 2016 and, unlike games, consistent growth since the start of the financial year.

As a result, gross profit rose 11.5% year-on-year to 5.9bn yuan ($893.9m).

NetEase is one of the biggest games publishers in China, rivalling Tencent. In addition to its popular domestic titles, it also notable for being Blizzard's partner in the region, bringing the likes of Overwatch, World of Warcraft, Hearthstone, StarCraft II and Diablo III to the region.

A key release during its third quarter was the free-to-play Chinese version of Minecraft, which had close to 30m new users by the end of October. In the earnings call, Yang said the company is not ready to disclose any other metrics, but has "full confidence" that the game will be able to monetise well in the long run.

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