NetEase, Inc. (NASDAQ:NTES) traded lower in premarket action on Thursday after the company delivered quarterly earnings that exceeded expectations but reported revenue that missed analyst estimates.
For the third quarter ending September 30, the Chinese gaming and internet group generated RMB28.4 billion ($4.0 billion) in revenue, up 8.2% year over year but below the RMB29.01 billion consensus. Shares dropped around 3% following the announcement.
Adjusted earnings came in at RMB14.73 per share ($2.09 per ADS), narrowly beating expectations of RMB14.65. NetEase’s core gaming unit — responsible for most of its revenue — expanded 11.8% year over year to RMB23.3 billion ($3.3 billion).
CEO William Ding said the company continued to execute well, noting “We delivered another quarter of solid execution, underscoring our healthy growth in China and rising global appeal,” and added, “Over the years, we have honed our innovation capabilities and proven them title after title by delivering exceptional gaming experiences.”
The company’s long-standing hit Fantasy Westward Journey Online remained a standout performer. The title achieved four consecutive record peaks in concurrent users during the quarter, topping out at 3.58 million players. NetEase also bolstered its international portfolio with launches such as Destiny: Rising, which reached the top of the iOS download charts in several regions.
Youdao, NetEase’s education technology arm, posted 3.6% year-over-year revenue growth to RMB1.6 billion ($228.8 million). In contrast, NetEase Cloud Music revenue edged down 1.8% to RMB2.0 billion ($275.9 million).
Gross profit improved 10.3% from a year earlier to RMB18.2 billion ($2.6 billion), while operating expenses rose 8.9% to RMB10.2 billion ($1.4 billion), largely driven by higher marketing costs for game launches.
The board declared a quarterly dividend of $0.57 per ADS, payable in December.