Chinese leading internet and game services provider NetEase announced its unaudited financial results for the second quarter ended June 30, 2023.
The financial report shows that the net revenues were RMB24.0 billion ($3.3 billion), an increase of 3.7% compared with the second quarter of 2022. Games and related value-added services net revenues were RMB18.8 billion ($2.6 billion), an increase of 3.6% compared with the second quarter of 2022. Gross profit was RMB14.4 billion ($2.0 billion), an increase of 11.1% compared with the second quarter of 2022, while total operating expenses were RMB8.3 billion ($1.1 billion), an increase of 4.0% compared with the second quarter of 2022.
Net revenues from the operation of online games accounted for approximately 91.7% of the segment’s net revenues for the second quarter of 2023, compared with 92.7% and 92.8% for the preceding quarter and the second quarter of 2022, respectively. Net revenues from mobile games accounted for approximately 73.6% of net revenues from the operation of online games for the second quarter of 2023, compared with 72.3% and 66.1% for the preceding quarter and the second quarter of 2022, respectively.
William Ding, Chief Executive Officer and Director of NetEase said, “Our steady second quarter results reflect our dedication to producing exceptional content across our businesses, which generated total net revenues of RMB24.0 billion, up nearly 4% year-over-year,” and continued, “We believe that each addition to our game portfolio validates our exceptional R&D capabilities and the broad influence our ingenuity has in the marketplace, including expanding the casual game market and altering the face of traditional MMOs.”
The quarter-over-quarter decrease in games and related value-added services’ gross profit was primarily due to decreased net revenues from the operation of online games as a result of seasonality. The year-over-year increase was primarily due to increased net revenues from the operation of online games such as Eggy Party, as well as decreased royalty fees due to the termination of certain licensed games.
The gross profit margin for games and related value-added services for the second quarter of 2023 was 67.4%, compared with 66.7% and 64.9% for the preceding quarter and the second quarter of 2022, respectively. The quarter-over-quarter and year-over-year increases were primarily attributable to changes in the revenue mix of NetEase’s self-developed, co-developed and licensed games.
Total operating expenses for the second quarter of 2023 were RMB8,312.8 million ($1,146.4 million), compared with RMB7,676.5 million and RMB7,995.2 million for the preceding quarter and the second quarter of 2022, respectively. The quarter-over-quarter increase was mainly due to increased marketing and research and development expenditures related to games and related value-added services. The year-over-year increase was mainly due to higher staff-related costs.
Other income/ (expenses) consisted of investment (loss)/ income, interest income, exchange gains/ (losses), and others. The quarter-over-quarter increase was mainly due to net unrealized exchange gains arising from the Company’s U.S. dollar-denominated bank deposits and loan balances as the exchange rate of the U.S. dollar against the RMB fluctuated in the second quarter of 2023. The year-over-year increase was mainly due to higher investment income from fair value changes of equity investments with readily determinable fair value, as well as higher net unrealized exchange gains.
The full report can be downloaded at NetEase’s official website.
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