On May 23, NetEase released its first-quarter financial report for 2024. The report revealed that NetEase's Q1 revenue reached 26.9 billion RMB, with a net profit of 8.5 billion RMB attributable to the company's shareholders (Non-GAAP). With a research and development investment intensity exceeding 15% for seven consecutive quarters, NetEase leads the industry in innovation, setting sail with a steady performance in the first quarter.
In Q1, NetEase focused on innovative breakthroughs in core business around high-quality content and AI applications. Revenue from games and related value-added services reached 21.5 billion RMB, with income from long-term operating products such as "Fantasy Westward Journey" mobile game and "Identity V" hitting record highs. Self-developed new products accelerated their global distribution across all platforms, forming a strong content foundation with a variety of products. AI large models deeply integrated into industries such as gaming, education, music, and industrial sectors, with industrial robots equipped with large model technology landing in scenes like Nanjing Port and Asia's largest prefabricated beam mixing station, exploring the new productivity role of self-developed technology in physical industries.
NetEase Cloud Music strengthened support for original content, self-produced music, and copyright acquisitions, continuously enhancing its content influence. NetEase Youdao focused on the development of three high-potential AI-driven businesses, generating 1.4 billion RMB in revenue with significantly improved profits. The innovation segment generated 2 billion RMB in revenue, with NetEase Media accelerating AI service integration with multimedia and UGC creation. The proportion of UGC content on the NetEase News app increased by 30.5% year-on-year. NetEase Yanxuan iterated products with AI technology, helping popular items like ergonomic chairs maintain a leading position in multi-channel sales, while categories like pets and home cleaning maintained double-digit growth. NetEase Mail provided free access to NetEase VIP Launch Mail for Tsinghua Alumni Association and more than 10 partner universities, supporting high-quality employment opportunities for students.
NetEase CEO William Ding stated that in 2024, NetEase will continue to strengthen its research and development capabilities, focus on product and content refinement, explore markets through innovation and category expansion, and collaborate with global talents and partners to create value together.
Long-term operating boutique income hits record high, accelerating new product global distribution across all platforms
NetEase is speeding up the creation of high-quality games and music, activating China's local original creative forces and solidifying a foundation of diverse and high-quality content.
In the first quarter, boutique long-term operations saw an increase in new additions, with various products forming a solid foundation together. Many flagship works remained popular, with "Fantasy Westward Journey" mobile game achieving record Q1 revenue; popular games like "Justice" mobile game and "Egg Party" continued to top the bestseller list. As the 6th anniversary of "Identity V" approached, its popularity and revenue in Q1, as well as May's DAU, reached new highs. "The Land of Rebirth" achieved near three-year revenue highs on its 9th anniversary. Breakthroughs continued in niche markets such as otome games, basketball, and racing, with the new game "Beyond the World" topping the iOS download chart in January and ranking third on the bestseller list in March and May; "All-Star Streetball Party" and "Peak Speed" entered the markets of China, Hong Kong, and Taiwan, becoming champions on various download and bestseller lists.
In the second half of the year, NetEase will accelerate the global distribution of self-developed new products, helping world-class boutique IPs penetrate the Chinese market. At the NetEase Games 520 Conference, over ten new products were released, with the Chinese open-world masterpiece "Sixteen Sounds of Yan Yun" scheduled for the first public beta test on July 26. The mobile game "Eternal Abyss" quickly gained popularity and positive reviews, with over 10 million new reservations in the first two weeks of testing, and over 25 million total reservations across the network after testing. "Seven Days World" entered the top ten of the global Steam wishlist due to its excellent quality. In April, NetEase upgraded its collaboration with Microsoft Games and updated its distribution agreement with Blizzard Entertainment, with the first returning game from Blizzard expected to launch this summer, sparking high anticipation.
NetEase Cloud Music continues to invest in high-quality content, achieving breakthrough success through three main paths: original support, self-produced music, and copyright acquisitions. NetEase musician Qiu De has been nominated for the Golden Melody Awards three times, winning six nominations, with all nominated works produced and distributed by NetEase Cloud Music. In 2018, Qiu De rose to fame through projects like the "Stone Plan" under NetEase's musician support program, gradually growing into a recognized force in the Chinese music scene. Platform-produced songs like "5:20AM" and "Apu's Longing" went viral across the internet, sparking a new trend in dialect-based rap. Korean music giants like JYP and Kakao are gradually returning with their copyrights, with popular artists like IU, TWICE, and Stray Kids once again shining with their hit songs, further enriching the global music copyright cooperation ecosystem with companies like Universal, Sony, Warner, SM, YG, and CUBE.
For seven consecutive quarters, NetEase has maintained a research and development investment intensity exceeding 15%, enabling AI large models to enhance efficiency and quality in the entertainment, education, music, and industrial sectors.
NetEase has sustained high-intensity research and development investment, driving technological empowerment across industries. As of Q1, the company has maintained a research and development investment intensity exceeding 15% for seven consecutive quarters. AI large models have been deeply integrated into the gaming, education, music, and industrial sectors, unleashing the productivity of cutting-edge technologies.
NetEase continues to explore new pathways for content production through the deep integration of AI and gaming. Their self-developed AI tools support scene modeling, motion capture animation, and other time-consuming aspects of traditional game development, benefiting over a hundred game products. Leveraging NetEase's Fuxi multimodal AI large model, the mobile game "Justice" has pioneered the "crew mode" gameplay on top of various AI game features such as intelligent NPCs, AI character customization, AI poetry, and AI virtual newspaper systems. Players can now easily complete AI casting, scene selection, and filming within the game, generating cinematic masterpieces with just a few keystrokes.
In the fields of education, advertising, and music creation assistance, AI commercialization and scenario-based applications have made new progress. With the driving force of AI technologies such as the first large-scale education model "Ziyue" in China, NetEase Youdao's three major high-growth potential businesses have developed rapidly. The gross profit margin of digital content services has exceeded 70% for three consecutive quarters, with a year-on-year increase of 126% in online marketing net revenue and a 140% increase in AI subscription service sales. NetEase's all-in-one AI music creation tool, NetEase Tianyin, has recently opened its doors to all NetEase Cloud Music users, providing AI-assisted functions for the entire music creation process including lyrics, composition, arrangement, vocals, and mixing, helping music enthusiasts engage in music creation with low barriers to entry.
NetEase is also promoting the application of AI and other technological services in industrial construction and urban traffic management, innovatively providing digital upgrade solutions. Based on the transformation of the NetEase Fuxi Industrial Large Model, loader robots have been deployed in scenarios such as Nanjing Port and Asia's largest prefabricated beam mixing plant, expected to help reduce safety risks by 50% and save 75% of construction costs at construction sites. NetEase's self-developed real-time audio and video technology, integrated into remote law enforcement platforms in multiple regions across the country, supports law enforcement agencies in efficiently handling traffic accidents remotely, leading to a 213% increase in law enforcement efficiency.
Creating a high-standard and tightly woven protection net for minors, integrating education with entertainment to build a green and healthy online environment.
NetEase firmly chooses a sustainable, high-quality path for long-term development, committed to creating a green and healthy online environment and contributing practical experience to the healthy development of the industry.
Through the dual upgrade of AI technology and channel measures, NetEase collaborates with all parties to explore solutions to industry challenges such as "minors using fake identities in games" to higher standards. Innovatively leveraging the educational value of games as interactive media, integrating education with entertainment to cultivate an interest in programming. Recently, in the registration process for "Egg Party," mandatory facial recognition authentication is required for accounts providing real-name information of individuals aged 70 and above. AI facial recognition patrol density has been upgraded for all users, with rational recharge reminders set up, and daily/weekly consumption limits added across all channels. For some Android channels without access to facial recognition for payments, users will receive dual protection of daily and weekly recharge limits. Additionally, "Egg Party" has independently developed and launched the programming education app "Learn Programming with Egg," using a new model of "game + education" filled with fun through zero-threshold, visual interactive programming teaching like "Egg Code" to nurture programming thinking and creative abilities.
NetEase places great importance on the ESG concept and its implementation, once again recognized by leading global rating agencies. In late April, NetEase released its 2023 ESG report. With innovative achievements in sustainable operations, low-carbon energy, and the ongoing development of a diverse, inclusive, and fair corporate culture over the past year, NetEase has been selected for the Bloomberg 2023 Gender Equality Index. NetEase also maintains its ESG "A" rating from the internationally renowned ESG rating agency MSCI and a "low risk" ESG rating from Morningstar Sustainalytics.
In 2024, NetEase will continue to focus on high-quality self-developed products, accelerate the digital technology services for traditional industries, and expand the global influence of Chinese original content through a high-quality, diverse, and innovative product matrix.
