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NetEase Q2 financials show steady gains driven by mobile success

Identity V, Knives Out support 21.7% YOY increase in company net revenue

NetEase has reported its earnings for Q2 ending June 30, 2018, showing solid increases in both revenue and profit driven in part by a strong quarter for the company's mobile games in Japan and China.

The company posted a net revenue of 16.3 billion yuan ($2.5 billion), up 21.7% year-over-year, and a gross profit of 7.2 billion yuan ($1.1 billion), up 7.5% YOY.

Online games made up 10.1 billion yuan ($1.5 billion) of the company's net revenue, a 6.7% increase YOY for the segment. Mobile games accounted for approximately 74.7% of the segment's revenue, up slightly both year-over-year and quarter-over-quarter. NetEase attributes these increases to increased revenue contribution from its in-house mobile games such as Chu Liu Xiang, Knives Out, and Identity V.

Identity V in particular was a strong contender in Q2, ranking #1 on Google Play and iOS download charts for Japan in early July shortly after its launch. The company also launched Shadowverse and QwQ to diversify its portfolio further away from MMOs. NetEase PC game, Justice, launched right at the end of the quarter, leaving its impact on financials better-reflected in Q3.

The company also celebrated Knives Out ranking #1 in June's top grossing iOS chart for Japan during Q2, and saw Minecraft's Chinese release reach 100 million registered users.

NetEase also made multiple investments during the quarter in companies such as Bungie, Improbable, and JumpShip.

"We are pleased with the solid growth we achieved across all of our business segments, including online games, e-commerce and advertising services, and the strong improvement to our bottom line," said CEO and director William Ding. "Our PC-client and mobile games continue to serve as dual growth engines. At the end of June, we launched the highly anticipated PC-client game Justice. Featuring exciting new state-of-the-art technology and graphics, Justice has become one of the most acclaimed PC games launched in China in recent years.

"On the mobile game side, our diversification strategy to expand our games portfolio beyond the MMORPG genre is proving effective. During the second quarter, we launched a number of highly successful games in non-MMORPG categories, including Shadowverse, Identity V and QwQ, each of which climbed to the top of the charts in China. With a number of new titles suitable for a global audience, we have quickly gained traction in overseas markets, led by games such as Knives Out and Identity V."

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