(MENAFN- PR Newswire)

HANGZHOU, China, Nov. 14, 2024 /PRNewswire/ -- NetEase, Inc. (NASDAQ: NTES and HKEX: 9999, "NetEase" or the "Company"), a leading internet and game services provider, today announced its unaudited financial results for the third quarter ended September 30, 2024.

Third Quarter 202 4
Financial Highlights

• Net revenues were RMB26.2 billion (US$3.7 billion), a decrease of 3.9% compared with the same quarter of 2023.
  • Games and related value-added services net revenues were RMB20.9 billion (US$3.0 billion), a decrease of 4.2% compared with the same quarter of 2023.
  • Youdao net revenues were RMB1.6
    billion (US$224.1
    million), an increase of 2.2% compared with the same quarter of 2023.
  • NetEase
    Cloud Music net revenues were RMB2.0 billion (US$284.9
    million), an increase of 1.3% compared with the same quarter of 2023.
  • Innovative businesses and others net revenues were RMB1.8 billion (US$252.8 million), a decrease of 10.3% compared with the same quarter of 2023.
• Gross profit was RMB16.5 billion (US$2.3 billion), a decrease of 2.9% compared with the same quarter of 2023.
• Total operating expenses were RMB9.3 billion (US$1.3 billion), a decrease of 0.8% compared with the same quarter of 2023.
• Net income attributable to the Company's shareholders was RMB6.5 billion (US$931.7 million). Non-GAAP net income attributable to the Company's shareholders was RMB7.5 billion (US$1.1 billion).[1]
  
• Basic net income per share was US$0.29 (US$1.46 per ADS). Non-GAAP basic net income per share was US$0.33 (US$1.67 per ADS).[1]

[1] As used in this announcement, non-GAAP net income attributable to the Company's shareholders and non-GAAP basic and diluted net income per share and per ADS are defined to exclude share-based compensation expenses. See the unaudited reconciliation of GAAP and non-GAAP results at the end of this announcement.

Third Quarter 202 4
and Recent Operational Highlights

• Launched popular new titles and expanded established games in new regions, strengthening
  NetEase's competitive edge across more markets in diversified genres.
  • Naraka: Bladepoint mobile game gained significant popularity since its launch in July, reaching No. 4 on the iOS grossing chart with its September seasonal update, effectively catering to growing player demand for action-based PvP games.
  • Racing Master
    topped the App Store and Google Play free-to-play charts in Japan following its launch in August.
  • World of
    Warcraft
    and Hearthstone's return to China reignited historic level of player community enthusiasm. Following their relaunch, World of Warcraft saw a 50% increase in daily active players as compared to levels before the shutdown, while Hearthstone achieved over 150% growth.
• Generated continued popularity of hit games
  Identity V
  and Naraka: Bladepoint, showcasing NetEase's long-term operation capabilities for online games.
• Strengthened diversified portfolio, announcing more exciting titles in the making, including
  Destiny: Rising
  and MARVEL
  Mystic Mayhem, and new games, such as Marvel Rivals
  and
  Where Winds Meet, set for launch in December.
• Youdao significantly improved its
  profitability in the third quarter, achieving its first-ever third-quarter operating profit and a record-high quarterly operating profit, compared with a loss in the same period last year.
• NetEase Cloud Music continued to drive quality development across its music-centric ecosystem, further expanding its subscriber base and sustaining healthy revenue growth momentum in its online music services.

"To further diversify our game portfolio across genres and expand globally, we launched a variety of new games to captivate players worldwide and achieved breakthrough milestones," said Mr. William Ding, Chief Executive Officer and Director of NetEase. "Throughout our development journey over the past two decades, players have remained at the core of our creations and operations, ensuring the long-lasting popularity of our games. As we expand, we will continue to prioritize player demand and propel innovation, bringing more exciting NetEase gaming experiences to players domestically and around the world.

"NetEase Cloud Music and Youdao are both positioned for steady growth alongside our games. Across the NetEase family, we focus on creating unique, engaging and impactful experiences for our community that fuel our ongoing success," Mr. Ding concluded.

Third Quarter 202 4
Financial Results

Net Revenues

Net
revenues for the third quarter of 2024
were RMB26.2 billion (US$3.7
billion), compared with RMB25.5
billion and RMB27.3
billion for the preceding quarter and the same quarter of 2023, respectively.

Net revenues from games and related value-added services were RMB20.9 billion (US$3.0
billion) for the third quarter of 2024, compared with RMB20.1
billion and RMB21.8
billion for the preceding quarter and the same quarter of 2023, respectively. Net revenues from the operation of online games accounted for approximately 96.8% of the segment's net revenues for the third quarter of 2024, compared with 96.1% and
93.7%
for the preceding
quarter and the same quarter of 2023, respectively. Net revenues from mobile games accounted for approximately 70.8% of net revenues from the operation of online games for the third quarter of 2024, compared with 76.4% and 77.6%
for
the preceding
quarter and the same quarter of 2023, respectively.

Net revenues from Youdao were RMB1.6
billion (US$224.1
million) for the third quarter of 2024, compared with RMB1.3
billion and RMB1.5
billion for the preceding quarter and the same quarter of 2023, respectively.

Net revenues from NetEase Cloud Music were RMB2.0 billion (US$284.9 million) for the third quarter of 2024, compared with
RMB2.0 billion each for the preceding quarter and the same quarter of 2023.

Net revenues from innovative businesses and others were RMB1.8
billion (US$252.8
million) for the third quarter of 2024, compared with RMB2.1 billion and RMB2.0
billion for the preceding quarter and the same quarter of 2023, respectively.

Gross Profit

Gross profit for the third quarter of 2024 was RMB16.5
billion (US$2.3
billion), compared with RMB16.0
billion and RMB17.0
billion for the preceding quarter and the same quarter of 2023, respectively.

The quarter-over-quarter increase in games and related value-added services' gross profit was primarily due to higher net revenues from PC games. The year-over-year decrease was primarily due to decreased net revenues from mobile games.

The quarter-over-quarter increase in Youdao's gross profit was primarily due to higher net revenues from sales of smart devices
and learning services.
The year-over-year decrease was primarily due to decreased net revenues from its
learning services.

The year-over-year
increase in NetEase Cloud Music's
gross profit was primarily due to increased net revenues from sales of membership subscriptions and continued improvement in cost control measures.

The quarter-over-quarter decrease in innovative businesses and others'
gross profit was primarily due to decreased e-commerce gross profit from Yanxuan. The year-over-year increase was primarily due to increased gross profit from several businesses included within the segment.

Gross Profit Margin

Gross profit margin for games and related value-added services for the third quarter of 2024 was 68.8%, compared with 70.0% and
69.0% for the preceding quarter and the same
quarter of 2023, respectively.
The quarter-over-quarter and year-over-year decreases were mainly attributable to changes in product mix.

Gross profit margin for Youdao for the third quarter of 2024 was 50.2%, compared with 48.2% and 55.9% for the preceding quarter and the same
quarter of 2023, respectively.
The quarter-over-quarter and year-over-year fluctuations were mainly due to the factors enumerated above.

Gross profit margin for NetEase Cloud Music for the third quarter of 2024 was 32.8%, compared with 32.1% and 27.2% for the preceding quarter and the same quarter of 2023, respectively. The quarter-over-quarter and year-over-year increases were mainly due to increased net revenues from sales of membership subscriptions and continued improvement in cost control measures.

Gross profit margin for innovative businesses and others for the third quarter of 2024 was
37.8%, compared with
34.0% and 27.3% for the preceding quarter and the same
quarter of 2023, respectively.
The quarter-over-quarter and year-over-year increases were mainly due to increased gross profit margins from several businesses included within the segment.

Operating Expenses

Total operating expenses for the third quarter of 2024 were RMB9.3 billion (US$1.3 billion), compared with RMB9.0 billion and RMB9.4 billion for the preceding quarter and the same quarter of 2023, respectively. The quarter-over-quarter increase was mainly due to increased marketing expenditures related to games and related value-added services.

Other Income/(Expenses)

Other income/(expenses) consisted of investment income, interest income, exchange (losses)/gains and others. The quarter-over-quarter and year-over-year
decreases
were mainly due to
higher net exchange losses in the third quarter of 2024.

Income Tax

The Company recorded a net income tax charge of RMB1.3 billion (US$183.8 million) for the third quarter of 2024, compared with
RMB1.3 billion each for the preceding quarter and the same quarter of 2023. The effective tax rate for the third quarter of 2024 was 16.1%, compared with 16.0% and 14.2% for the preceding quarter and the same quarter of 2023, respectively. The effective tax rate represents certain estimates by the Company as to the tax obligations and benefits applicable to it in each quarter.

Net Income and Non-GAAP Net Income

Net income attributable to the Company's shareholders totaled RMB6.5 billion (US$931.7 million) for the third quarter of 2024, compared with RMB6.8 billion and RMB7.8 billion for the preceding quarter and the same quarter of 2023, respectively.

NetEase reported basic net income of US$0.29 per share (US$1.46 per ADS) for the third quarter of 2024, compared with US$0.30 per share (US$1.50 per ADS) and US$0.35 per share (US$1.74 per ADS) for the preceding quarter and the same quarter of 2023, respectively.

Non-GAAP net income attributable to the Company's shareholders totaled RMB7.5 billion (US$1.1 billion) for the third quarter of 2024, compared with RMB7.8 billion and RMB8.6 billion for the preceding quarter and the same quarter of 2023, respectively.

NetEase reported non-GAAP basic net income of US$0.33 per share (US$1.67 per ADS) for the third quarter of 2024, compared with US$0.35 per share (US$1.73 per ADS) and US$0.38 per share (US$1.92 per ADS) for the preceding quarter and the same quarter of 2023, respectively.

Other Financial Information

As of September 30, 2024, the Company's net cash (total cash and cash equivalents, current and non-current time deposits and restricted cash, as well as short-term investments balance, minus short-term and long-term loans) totaled RMB120.0 billion (US$17.1 billion), compared with RMB110.9 billion as of December 31, 2023. Net cash provided by operating activities was RMB10.6 billion (US$1.5 billion) for the third quarter of 2024, compared with RMB6.5 billion and RMB9.8 billion for the preceding quarter and the same quarter of 2023, respectively.

Quarterly
Dividend

The board of directors approved a dividend of US$0.0870
per share (US$0.4350
per ADS)
for the third quarter of 2024 to holders of ordinary shares and holders of ADSs as of the close of business on November 29, 2024, Beijing/Hong Kong Time and New York Time, respectively, payable in U.S. dollars. For holders of ordinary shares, in order to qualify for the dividend, all valid documents for the transfer of shares accompanied by the relevant share certificates must be lodged for registration with the Company's Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong no later than 4:30 p.m. on November 29, 2024 (Beijing/ Hong Kong Time). The payment date is expected to be December 10, 2024 for holders of ordinary shares and on or around December 13, 2024 for holders of ADSs.

NetEase paid a dividend of US$0.0870
per share (US$0.4350 per ADS) for the second quarter of 2024 in September 2024.

Under the Company's current dividend policy, the determination to make dividend distributions and the amount of such distribution in any particular quarter will be made at the discretion of its board of directors and will be based upon the Company's operations and earnings, cash flow, financial condition and other relevant factors.

Share Repurchase Program

On November 17, 2022, the Company announced that its board of directors had
approved a share repurchase program of up to US$5.0 billion of the Company's ADSs and ordinary shares in open market transactions. This share repurchase program commenced on January 10, 2023 and will be in effect for a period not to exceed 36 months from such date. As of September 30, 2024, approximately 18.2 million ADSs had been repurchased under this program for a total cost of US$1.6 billion.

The extent to which NetEase repurchases its ADSs and its ordinary shares depends upon a variety of factors, including market conditions. These programs may be suspended or discontinued at any time.

** The United States dollar (US$) amounts disclosed in this announcement are presented solely for the convenience of the reader. The percentages stated are calculated based on RMB.

Conference Call

NetEase's management team will host a teleconference call with a simultaneous webcast at 7:00 a.m. New
York Time on Thursday, November 14, 2024 (Beijing/Hong Kong Time: 8:00 p.m., Thursday, November 14, 2024). NetEase's management will be on the call to discuss the quarterly results and answer questions.

Interested parties may participate in the conference call by dialing 1-914-202-3258
and providing conference ID: 10042941,
15 minutes prior to the initiation of the call. A replay of the call will be available by dialing 1-855-883-1031 and entering PIN: 10042941. The replay will be available through November 21, 2024.

This call will be webcast live and the replay will be available for 12 months. Both will be available on NetEase's Investor Relations website at .

About NetEase, Inc.

NetEase, Inc. (NASDAQ: NTES and HKEX: 9999, "NetEase") is
a leading internet and game services provider centered around premium content. With extensive offerings across its expanding gaming ecosystem, the Company develops and operates some of the
most popular and longest running mobile and PC games available in China and globally.

Powered by one of the largest in-house game R&D teams focused on mobile, PC and console, NetEase creates superior gaming experiences, inspires players, and passionately delivers value for its thriving community worldwide. By infusing play with culture, and education with technology, NetEase transforms gaming into a meaningful vehicle to build a more entertaining and enlightened world.

Beyond games, NetEase service offerings include its majority-controlled subsidiaries Youdao (NYSE: DAO ), an intelligent learning company with industry-leading technology, and NetEase Cloud Music
(HKEX: 9899), a well-known online music platform featuring a vibrant content community, as well as Yanxuan, NetEase's private label consumer lifestyle brand.

For more information, please visit: .

Forward Looking Statements

This announcement contains statements of a forward-looking nature. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar expressions. In addition, statements that are not historical facts, including statements about NetEase's strategies and business plans, its expectations regarding the growth of its business and its revenue and the quotations from management in this announcement are or contain forward-looking statements. NetEase may also make forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"), in announcements made on the website of The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange"), in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks related to: the risk that the online games market will not continue to grow or that NetEase will not be able to maintain its position in that market in China or globally; risks associated with NetEase's business and operating strategies and its ability to implement such strategies; NetEase's ability to develop and manage its operations and business; competition for, among other things, capital, technology and skilled personnel;
potential changes in government regulation that could adversely affect the industry and geographical markets in which NetEase operates; the risk that NetEase may not be able to continuously develop new and creative online services or that NetEase will not be able to set, or follow in a timely manner, trends in the market; risks
related to economic uncertainty and capital market disruption; risks related to the expansion of NetEase's businesses and operations internationally;
risks associated with cybersecurity threats or incidents; and the risk that fluctuations in the value of the Renminbi with respect to other currencies could adversely affect NetEase's business and financial results. Further information regarding these and other risks is included in NetEase's filings with the SEC and announcements on the website of the Hong Kong Stock Exchange. NetEase does not undertake any obligation to update this forward-looking information, except as required under applicable law.

Non-GAAP Financial Measures

NetEase considers and uses non-GAAP financial measures, such as non-GAAP net income attributable to the Company's shareholders and non-GAAP basic and diluted net income per ADS and per share, as supplemental metrics in reviewing and assessing its operating performance and formulating its business plan. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

NetEase defines non-GAAP net income attributable to the Company's shareholders as net income attributable to the Company's shareholders excluding share-based compensation expenses. Non-GAAP net income attributable to the Company's shareholders enables NetEase's management to assess its operating results without considering the impact of share-based compensation expenses. NetEase believes that this non-GAAP financial measure provide useful information to investors in understanding and evaluating the Company's current operating performance and prospects in the same manner as management does, if they so choose. NetEase also believes that the use of this non-GAAP financial measure facilitates investors' assessment of its operating performance.

Non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. Non-GAAP financial measures have limitations as analytical tools. One of the key limitations of using non-GAAP net income attributable to the Company's shareholders is that it does not reflect all items of expense/ income that affect our operations. Share-based compensation expenses have been and may continue to be incurred in NetEase's business and are not reflected in the presentation of non-GAAP net income attributable to the Company's shareholders. In addition, the non-GAAP financial measures NetEase uses may differ from the non-GAAP measures used by other companies, including peer companies, and therefore their comparability may be limited.

NetEase compensates for these limitations by reconciling non-GAAP net income attributable to the Company's shareholders to the nearest U.S. GAAP performance measure, all of which should be considered when evaluating the Company's performance. See the unaudited reconciliation of GAAP and non-GAAP results at the end of this announcement. NetEase encourages you to review its financial information in its entirety and not rely on a single financial measure.

Contact for Media and Investors:
Email: [email protected]
Tel: (+86) 571-8985-3378

NETEASE, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
	December 31,		September 30,		September 30,
	2023		2024		2024
	RMB		RMB		USD (Note 1)
Assets
Current assets:
Cash and cash equivalents	21,428,902		20,184,013		2,876,199
Time deposits	100,856,034		91,195,431		12,995,245
Restricted cash	2,777,206		2,994,096		426,655
Accounts receivable, net	6,422,417		6,173,077		879,656
Inventories	695,374		613,685		87,449
Prepayments and other current assets, net	6,076,595		6,811,171		970,584
Short-term investments	4,436,057		12,607,188		1,796,510
Total current assets	142,692,585		140,578,661		20,032,298
Non-current assets:
Property, equipment and software, net	8,075,044		8,200,464		1,168,557
Land use rights, net	4,075,143		4,204,865		599,188
Deferred tax assets	1,560,088		1,173,270		167,190
Time deposits	1,050,000		4,025,000		573,558
Restricted cash	550		5,277		752
Other long-term assets	28,471,568		26,708,737		3,805,965
Total non-current assets	43,232,393		44,317,613		6,315,210
Total assets	185,924,978		184,896,274		26,347,508
Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity
Current liabilities:
Accounts payable	881,016		755,372		107,640
Salary and welfare payables	4,857,206		2,941,618		419,177
Taxes payable	2,571,534		2,606,842		371,472
Short-term loans	19,240,163		10,594,342		1,509,682
Contract liabilities	13,362,166		15,543,023		2,214,863
Accrued liabilities and other payables	12,930,399		13,270,811		1,891,075
Total current liabilities	53,842,484		45,712,008		6,513,909
Non-current liabilities:
Deferred tax liabilities	2,299,303		1,828,869		260,612
Long-term loans	427,997		427,997		60,989
Other long-term liabilities	1,271,113		1,199,075		170,867
Total non-current liabilities	3,998,413		3,455,941		492,468
Total liabilities	57,840,897		49,167,949		7,006,377
Redeemable noncontrolling interests	115,759		122,494		17,455
NetEase, Inc.'s shareholders' equity	124,285,776		132,150,155		18,831,246
Noncontrolling interests	3,682,546		3,455,676		492,430
Total equity	127,968,322		135,605,831		19,323,676
Total liabilities, redeemable noncontrolling interests and shareholders' equity	185,924,978		184,896,274		26,347,508
The accompanying notes are an integral part of this announcement.

NETEASE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data or per ADS data)
		Three Months Ended		Nine Months Ended
		September 30,		June 30,		September 30,		September 30,		September 30,		September 30,		September 30,
		2023		2024		2024		2024		2023		2024		2024
		RMB		RMB		RMB		USD (Note 1)		RMB		RMB		USD (Note 1)
Net revenues		27,270,406		25,485,805		26,209,879		3,734,878		76,327,994		78,547,425		11,192,919
Cost of revenues		(10,304,106)		(9,443,587)		(9,733,274)		(1,386,980)		(30,089,735)		(29,012,682)		(4,134,274)
Gross profit		16,966,300		16,042,218		16,476,605		2,347,898		46,238,259		49,534,743		7,058,645
Operating expenses:
Selling and marketing expenses		(3,567,153)		(3,501,737)		(3,805,071)		(542,218)		(9,743,904)		(11,329,012)		(1,614,371)
General and administrative expenses		(1,494,186)		(1,091,441)		(1,100,328)		(156,795)		(3,648,011)		(3,388,244)		(482,821)
Research and development expenses		(4,347,052)		(4,455,717)		(4,424,469)		(630,482)		(12,005,691)		(13,054,944)		(1,860,315)
Total operating expenses		(9,408,391)		(9,048,895)		(9,329,868)		(1,329,495)		(25,397,606)		(27,772,200)		(3,957,507)
Operating profit		7,557,909		6,993,323		7,146,737		1,018,403		20,840,653		21,762,543		3,101,138
Other income/(expenses):
Investment income, net		556,603		103,674		578,398		82,421		1,315,662		861,363		122,743
Interest income, net		1,147,227		1,186,219		1,282,766		182,793		2,858,835		3,746,582		533,884
Exchange (losses)/gains, net		(400,483)		(239,375)		(1,055,518)		(150,410)		677,905		(1,279,882)		(182,382)
Other, net		240,024		85,694		43,600		6,213		618,883		323,182		46,053
Income before tax		9,101,280		8,129,535		7,995,983		1,139,420		26,311,938		25,413,788		3,621,436
Income tax		(1,290,398)		(1,300,939)		(1,289,545)		(183,759)		(3,631,047)		(4,076,394)		(580,881)
Net income		7,810,882		6,828,596		6,706,438		955,661		22,680,891		21,337,394		3,040,555
Accretion of redeemable noncontrolling interests		(895)		(960)		(962)		(137)		(2,623)		(2,880)		(410)
Net loss/(income) attributable to noncontrolling interests and redeemable noncontrolling interests		26,901		(68,887)		(167,041)		(23,803)		156,021		(403,384)		(57,482)
Net income attributable to the Company's shareholders		7,836,888		6,758,749		6,538,435		931,721		22,834,289		20,931,130		2,982,663
Net income per share *
Basic		2.44		2.10		2.04		0.29		7.10		6.52		0.93
Diluted		2.41		2.08		2.03		0.29		7.02		6.46		0.92
Net income per ADS *
Basic		12.19		10.50		10.22		1.46		35.48		32.61		4.65
Diluted		12.06		10.42		10.14		1.44		35.11		32.30		4.60
Weighted average number of ordinary shares used in calculating net income per share *
Basic		3,213,834		3,217,699		3,198,646		3,198,646		3,217,873		3,209,298		3,209,298
Diluted		3,249,649		3,243,056		3,224,110		3,224,110		3,251,666		3,238,834		3,238,834
* Each ADS represents five ordinary shares.
The accompanying notes are an integral part of this announcement.

NETEASE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
	Three Months Ended		Nine Months Ended
	September 30,		June 30,		September 30,		September 30,		September 30,		September 30,		September 30,
	2023		2024		2024		2024		2023		2024		2024
	RMB		RMB		RMB		USD (Note 1)		RMB		RMB		USD (Note 1)
Cash flows from operating activities:
Net income	7,810,882		6,828,596		6,706,438		955,661		22,680,891		21,337,394		3,040,555
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	651,856		631,957		520,567		74,180		2,395,488		1,720,447		245,162
Fair value changes of equity security, other investments and financial instruments	(382,132)		(7,887)		(824,608)		(117,506)		(686,887)		(1,200,753)		(171,106)
Impairment losses on investments	280,641		210,741		529,668		75,477		328,511		868,826		123,807
Fair value changes of short-term investments	(72,875)		(128,295)		(100,071)		(14,260)		(307,675)		(289,176)		(41,207)
Share-based compensation cost	819,548		1,079,056		978,139		139,384		2,429,823		2,951,495		420,584
Allowance for expected credit losses	22,386		9,281		36,022		5,133		51,646		56,903		8,109
Losses/(gains) on disposal of property, equipment and software	2,649		(326)		(2,920)		(416)		2,291		(1,114)		(159)
Unrealized exchange losses/(gains)	362,213		(209,311)		1,050,644		149,715		(718,121)		823,824		117,394
Gains on disposal of long-term investments, business and subsidiaries	(3,197)		(141,114)		(118,046)		(16,821)		(25,347)		(272,647)		(38,852)
Deferred income taxes	(305,703)		(1,280,076)		711,639		101,408		(62,417)		(83,383)		(11,882)
Share of results on equity method investees	(160,042)		39,200		(28,466)		(4,057)		(385,142)		175,005		24,938
Changes in operating assets and liabilities:
Accounts receivable	(1,177,732)		1,410,478		146,758		20,913		(1,523,463)		198,525		28,289
Inventories	84,970		29,552		(39,285)		(5,598)		271,710		81,645		11,634
Prepayments and other assets	(573,631)		530,856		(1,234,390)		(175,899)		(455,037)		(377,394)		(53,778)
Accounts payable	150,868		(126,862)		6,316		900		(577,862)		(127,547)		(18,175)
Salary and welfare payables	(588,217)		879,058		(670,750)		(95,581)		(2,055,848)		(1,970,300)		(280,766)
Taxes payable	515,087		(1,462,700)		224,015		31,922		255,911		33,137		4,722
Contract liabilities	1,560,628		(1,270,324)		1,928,060		274,746		2,009,423		2,231,822		318,032
Accrued liabilities and other payables	845,721		(490,048)		755,882		107,712		(104,899)		507,904		72,376
Net cash provided by operating activities	9,843,920		6,531,832		10,575,612		1,507,013		23,522,996		26,664,613		3,799,677
Cash flows from investing activities:
Purchase of property, equipment and software	(643,144)		(168,880)		(379,520)		(54,081)		(1,816,627)		(963,418)		(137,286)
Proceeds from sale of property, equipment and software	3,101		660		1,072		153		9,897		5,238		746
Purchase of intangible assets, content and licensed copyrights	(742,523)		(399,533)		(222,247)		(31,670)		(1,852,526)		(810,601)		(115,510)
Net changes of short-term investments with terms of three months or less	(1,993,921)		(8,194,289)		1,585,395		225,917		(1,087,059)		(4,207,245)		(599,528)
Purchase of short-term investments with terms over three months	-		-		(3,675,000)		(523,683)		-		(3,675,000)		(523,683)
Proceeds from maturities of short-term investments with terms over three months	376,950		-		-		-		481,219		-		-
Investment in long-term investments and acquisition of subsidiaries	(417,448)		(193,450)		(226,086)		(32,217)		(1,916,724)		(901,340)		(128,440)
Proceeds from disposal of long-term investments, businesses, subsidiaries and other financial instruments	20,898		840,649		1,541,338		219,639		78,709		2,467,443		351,608
Placement/rollover of matured time deposits	(30,831,994)		(61,775,606)		(36,766,094)		(5,239,127)		(78,026,928)		(133,100,536)		(18,966,675)
Proceeds from maturities of time deposits	33,893,436		55,211,839		37,546,192		5,350,289		78,144,576		138,806,413		19,779,756
Change in other long-term assets	(181,263)		(172,543)		(125,911)		(17,942)		(333,293)		(333,079)		(47,463)
Net cash used in investing activities	(515,908)		(14,851,153)		(720,861)		(102,722)		(6,318,756)		(2,712,125)		(386,475)
Cash flows from financing activities:
Net changes from loans with terms of three months or less	(7,501,788)		(2,085,053)		(4,778,301)		(680,902)		(19,834,683)		(7,263,080)		(1,034,981)
Proceeds of loans with terms over three months	7,607,060		1,069,020		5,395,810		768,897		11,058,160		13,463,080		1,918,473
Payment of loans with terms over three months	(4,250,550)		(10,681,827)		(3,100,520)		(441,821)		(7,524,472)		(14,739,347)		(2,100,340)
Net amounts received/(paid) related to capital contribution from or repurchase of noncontrolling interests shareholders	11,573		50,572		(8,394)		(1,196)		58,150		84,392		12,026
Cash paid for repurchase of NetEase's ADSs/purchase of subsidiaries' ADSs and shares	(296,495)		(2,007,030)		(3,994,212)		(569,171)		(4,608,462)		(7,235,022)		(1,030,982)
Dividends paid to NetEase's shareholders	(2,423,355)		(2,264,799)		(1,972,928)		(281,140)		(5,755,011)		(9,182,743)		(1,308,530)
Net cash used in financing activities	(6,853,555)		(15,919,117)		(8,458,545)		(1,205,333)		(26,606,318)		(24,872,720)		(3,544,334)
Effect of exchange rate changes on cash, cash equivalents and restricted cash held in foreign currencies	4,197		8,234		(68,136)		(9,710)		(28,181)		(103,040)		(14,683)
Net increase/(decrease) in cash, cash equivalents and restricted cash 2,478,654		(24,230,204)		1,328,070		189,248		(9,430,259)		(1,023,272)		(145,815)
Cash, cash equivalents and restricted cash, at the beginning of the period	15,679,412		46,085,520		21,855,316		3,114,358		27,588,325		24,206,658		3,449,421
Cash, cash equivalents and restricted cash, at end of the period	18,158,066		21,855,316		23,183,386		3,303,606		18,158,066		23,183,386		3,303,606
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net	1,165,196		2,848,493		554,867		79,068		3,864,820		4,586,071		653,510
Cash paid for interest expenses	105,665		152,943		165,881		23,638		708,025		465,279		66,302
The accompanying notes are an integral part of this announcement.

NETEASE, INC.
UNAUDITED SEGMENT INFORMATION
(in thousands, except percentages)
		Three Months Ended		Nine Months Ended
		September 30,		June 30,		September 30,		September 30,		September 30,		September 30,		September 30,
		2023		2024		2024		2024		2023		2024		2024
		RMB		RMB		RMB		USD (Note 1)		RMB		RMB		USD (Note 1)
Net revenues:
Games and related value-added services		21,779,851		20,055,819		20,864,036		2,973,102		60,644,094		62,380,233		8,889,113
Youdao		1,538,783		1,321,721		1,572,541		224,085		3,908,687		4,286,121		610,767
NetEase Cloud Music		1,973,064		2,040,952		1,999,163		284,878		5,881,444		6,069,656		864,919
Innovative businesses and others		1,978,708		2,067,313		1,774,139		252,813		5,893,769		5,811,415		828,120
Total net revenues		27,270,406		25,485,805		26,209,879		3,734,878		76,327,994		78,547,425		11,192,919
Cost of revenues:
Games and related value-added services		(6,749,507)		(6,008,604)		(6,503,146)		(926,691)		(19,555,391)		(19,067,061)		(2,717,034)
Youdao		(679,147)		(684,942)		(783,085)		(111,588)		(1,880,026)		(2,178,383)		(310,417)
NetEase Cloud Music		(1,436,552)		(1,385,756)		(1,343,921)		(191,507)		(4,379,785)		(3,988,683)		(568,383)
Innovative businesses and others		(1,438,900)		(1,364,285)		(1,103,122)		(157,194)		(4,274,533)		(3,778,555)		(538,440)
Total cost of revenues		(10,304,106)		(9,443,587)		(9,733,274)		(1,386,980)		(30,089,735)		(29,012,682)		(4,134,274)
Gross profit:
Games and related value-added services		15,030,344		14,047,215		14,360,890		2,046,411		41,088,703		43,313,172		6,172,079
Youdao		859,636		636,779		789,456		112,497		2,028,661		2,107,738		300,350
NetEase Cloud Music		536,512		655,196		655,242		93,371		1,501,659		2,080,973		296,536
Innovative businesses and others		539,808		703,028		671,017		95,619		1,619,236		2,032,860		289,680
Total gross profit		16,966,300		16,042,218		16,476,605		2,347,898		46,238,259		49,534,743		7,058,645
Gross profit margin:
Games and related value-added services		69.0 %		70.0 %		68.8 %		68.8 %		67.8 %		69.4 %		69.4 %
Youdao		55.9 %		48.2 %		50.2 %		50.2 %		51.9 %		49.2 %		49.2 %
NetEase Cloud Music		27.2 %		32.1 %		32.8 %		32.8 %		25.5 %		34.3 %		34.3 %
Innovative businesses and others		27.3 %		34.0 %		37.8 %		37.8 %		27.5 %		35.0 %		35.0 %
The accompanying notes are an integral part of this announcement.

NETEASE, INC.

NOTES TO UNAUDITED FINANCIAL INFORMATION

Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00 = RMB7.0176 on the last trading day of September 2024 (September 30, 2024)
as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on September 30, 2024, or at any other certain date.

Note 2: Share-based compensation cost reported in the Company's unaudited condensed consolidated statements of comprehensive income is set out as follows in RMB and USD (in thousands):

	Three Months Ended		Nine Months Ended
	September 30,		June 30,		September 30,		September 30,		September 30,		September 30,		September 30,
	2023		2024		2024		2024		2023		2024		2024
	RMB		RMB		RMB		USD (Note 1)		RMB		RMB		USD (Note 1)
Share-based compensation cost included in:
Cost of revenues	210,533		319,949		306,283		43,645		607,048		881,167		125,565
Operating expenses
Selling and marketing expenses	33,804		42,865		36,365		5,182		97,226		97,099		13,836
General and administrative expenses	280,581		286,350		247,440		35,260		856,188		823,426		117,337
Research and development expenses	294,630		429,892		388,051		55,297		869,361		1,149,803		163,846
The accompanying notes are an integral part of this announcement.

Note 3: The financial information prepared and presented in this announcement might be different from those published and to be published by NetEase's listed subsidiary to meet the disclosure requirements under different accounting standards requirements.

Note 4: The unaudited reconciliation of GAAP and non-GAAP results is set out as follows in RMB and USD (in thousands, except per share data or per ADS data):

		Three Months Ended		Nine Months Ended
		September 30,		June 30,		September 30,		September 30,		September 30,		September 30,		September 30,
		2023		2024		2024		2024		2023		2024		2024
		RMB		RMB		RMB		USD (Note 1)		RMB		RMB		USD (Note 1)
Net income attributable to the Company's shareholders		7,836,888		6,758,749		6,538,435		931,721		22,834,289		20,931,130		2,982,663
Add: Share-based compensation		808,276		1,059,939		960,706		136,900		2,394,559		2,897,543		412,897
Non-GAAP net income attributable to the Company's shareholders		8,645,164		7,818,688		7,499,141		1,068,621		25,228,848		23,828,673		3,395,560
Non-GAAP net income per share *
Basic		2.69		2.43		2.34		0.33		7.84		7.42		1.06
Diluted		2.66		2.41		2.33		0.33		7.76		7.35		1.05
Non-GAAP net income per ADS *
Basic		13.45		12.15		11.72		1.67		39.20		37.12		5.29
Diluted		13.30		12.05		11.63		1.66		38.79		36.77		5.24
* Each ADS represents five ordinary shares.
The accompanying notes are an integral part of this announcement.

SOURCE NetEase, Inc.

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