Chinese video games maker NetEase (NTES) returned to profit in the fourth quarter even as revenues slipped, in a sign that its new titles such as the hugely popular Marvel Rivals are starting to generate momentum.
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Net profit climbed 33% in its Fiscal fourth quarter to 8.8 billion yuan, $1.20 billion, NetEase said Thursday, well ahead of the 7.70 billion yuan expected by analysts. However, revenues declined 1.4% to 26.7 billion yuan ($3.7 billion), albeit this was also better than analysts’ expectations.
Gaming Titles Fuel Profit Growth for NTES
The Marvel Rivals maker said top line growth was weighed down by its education unit Youdao, where revenues were down 9.5% to 1.3 billion yuan ($183.6 million), while net revenues from its cloud music business also took the shine off top-line figures as they declined 5.3% year-on-year to 1.9 billion yuan, or $257.6 million.
The company launched Marvels Rivals in December, and it has gained over 40 million users to date, the company said. This and the launch of Where Minds Meet drove games and related services revenues up 1.5% to 21.2 billion yuan, or $2.9 billion.
Where Winds Meet surpassed three million downloads in China within four days of its PC launch and topped the Apple (AAPL) iOS download chart for approximately two weeks following its mobile launch. The release of the game’s mobile version drove total players across PC and mobile to over 15 million within two weeks, NTES said today. The company also noted the resumption of popular Blizzard titles as boosting performance.
“Our new hit titles not only redefined gameplay but also set new industry benchmarks, while our legacy franchises gained fresh momentum through striking enhancements in design, storytelling and immersive content,” said CEO William Ding.
Despite its success, NetEase has been laying off Marvels Rivals developers, cutting its design team based in Seattle.
Shares of NetEase in Hong Kong (HK:9999) fell on Thursday.
Is NTES Stock a Buy, Sell, or Hold?
On Wall Street, the analysts’ consensus rating for NetEase is Strong Buy based on five Buy ratings over the last three months. The average NTES price target of $117.40, represents around 12% upside for NTES stock, though this is subject to change following the earnings update.
