# NetEase (NTES)

Sector: Video games & internet

| Field | Value |
|---|---|
| Price | $127.11 |
| Fair value (Analysts) | $200.00 |
| Discount to fair value | 36.4% |
| Fair value uncertainty (Analysts) | High |
| Economic moat (Analysts) | Narrow |
| LSEG analyst rating (1 strong buy to 5 strong sell) | 1.8 |
| Data as of | 2026-10-16 |
| Next earnings | 2026-11-19 (estimate) |

## In short

Chinese game rules, US-China tension and doubts about new hits keep a China discount on NetEase, so the gap will probably not close fully even with strong cash and growing games.

## Themes and gap

- Themes: China and geopolitics (china-geopolitics), Regulation and courts (regulation-legal)
- Gap type: Will probably not close (structural)
- Why: Most of the gap comes from Chinese game regulation and US-China tension, which NetEase cannot control and which have no end date.

## About

NetEase is a Chinese internet company, and most of its revenue comes from online games. It develops and runs PC and mobile games such as the Fantasy Westward Journey franchise, Identity V, Eggy Party, Where Winds Meet and Marvel Rivals, and it earns money mainly from in-game purchases. Games and related services had RMB25.0 billion of the RMB30.1 billion of net revenue in Q2 2026. NetEase also owns stakes in Youdao, an online learning company, and NetEase Cloud Music, a music streaming service, and it runs Yanxuan, an e-commerce brand. It sells more games outside China, but China is still its main market. The ADSs trade on Nasdaq, and each ADS is five ordinary shares; the shares also trade in Hong Kong, where NetEase became a dual-primary listed company on June 30, 2026.

## Thesis

The market prices NetEase with a China discount and doubts about how long its games can grow. Chinese regulators approve new games and can limit play time and spending, and tension between the United States and China adds a risk to US-listed Chinese companies. Investors also fear that NetEase depends on old franchises and on a small number of new hits, while research and development costs rise. In Q2 2026, games revenue rose 9.7%, but it fell from Q1 2026, and net income fell to RMB7.0 billion from RMB8.6 billion a year earlier because of investment losses and a higher tax rate. NetEase has net cash of RMB167.5 billion, a dividend and a US$5.0 billion buyback program, but the market gives little value to this cash. For the gap to narrow, games revenue must keep growing, new titles such as Sea of Remnants, Ananta and Blood Message must succeed, and international revenue from games such as Where Winds Meet and Marvel Rivals must grow. The Q3 2026 report in about late November 2026 and the launch dates of Ananta and Blood Message give the next evidence. Because the China discount depends on regulation and politics, which NetEase cannot control, the gap will probably not close fully.

## Checkpoints

- Nov 19, 2026 (estimate): Q3 2026 results: games growth and new titles. Status: Pending. Watch: Games revenue growth near 10% year over year with a good start for Sea of Remnants passes; a fall in games revenue or more investment losses fail.
- Mar 2027 (estimate): Q4 2026 results and new game launches. Status: Pending. Watch: Growth in international games revenue and firm launch dates for Ananta and Blood Message pass; delays or weak new titles fail.

## Balance sheet

- Cash: CN¥180.1B
- Debt: CN¥12.6B
- Net cash: CN¥167.5B
- Debt due within 12 months: CN¥12.6B

NetEase has a large net cash position. Cash here is the total of cash and cash equivalents, current and non-current time deposits, restricted cash and short-term investments at June 30, 2026, RMB180.1 billion. Debt is its short-term loans, RMB12.6 billion, which are due within 12 months; it had no long-term loans. The company states net cash of RMB167.5 billion (US$24.7 billion) at June 30, 2026, up from RMB163.5 billion at December 31, 2025. Operating cash flow was RMB10.0 billion in Q2 2026. NetEase pays a quarterly dividend, US$0.480 per ADS for Q2 2026, and its buyback program of up to US$5.0 billion runs until January 9, 2029; it had used US$2.3 billion by June 30, 2026. It also holds long-term investments of RMB21.3 billion, which are not in cash here.

As of 2026-06-30.

Sources:

- https://www.sec.gov/Archives/edgar/data/1110646/000110465926098940/tm2623482d1_ex99-1.htm
- https://www.sec.gov/Archives/edgar/data/1110646/000110465926064764/tm2615053d1_ex99-1.htm

## Recent events

- 2026-10-08: NetEase Cloud Music announced a strategic partnership with gamma. to bring music from artists such as Mariah Carey, Usher and Snoop Dogg to its platform in China.
- 2026-08-20: NetEase reported Q2 2026 results. Net revenue rose 7.9% to RMB30.1 billion, and games revenue rose 9.7% to RMB25.0 billion. Gross profit rose 17.5%, but net income attributable to shareholders fell to RMB7.0 billion from RMB8.6 billion because of investment losses, impairments and a 25.5% tax rate. NetEase declared a dividend of US$0.480 per ADS and bought back US$324.1 million of ADSs in the first half of 2026. NetEase said that Sea of Remnants launched in China in July 2026.
- 2026-06-30: NetEase became a dual-primary listed company on the Hong Kong Stock Exchange. The Exchange had found that 55% or more of the trading in its shares took place in Hong Kong in 2025.
- 2026-05-21: NetEase reported Q1 2026 results. Net revenue rose 6.1% to RMB30.6 billion, games revenue rose 6.9% to RMB25.7 billion, and net income attributable to shareholders was RMB10.7 billion. It declared a dividend of US$0.720 per ADS.

## Risks

- High: Chinese regulators approve new games and set rules on play time, spending and content. New rules or slower approvals can cut revenue from games in China.
- High: Tension between the United States and China can affect US-listed Chinese companies, for example through audit or delisting rules, and can lower the value of the ADSs.
- Medium: Games revenue depends on a few large franchises and new hits. If new titles such as Ananta and Blood Message do not succeed, growth can slow while research and development costs rise.
- Medium: NetEase holds large equity investments. Falls in their fair value and impairments cut net income in Q2 2026.
- Low: NetEase reports in renminbi and pays dividends in US dollars. Exchange rates change the US dollar value of its earnings and cash.

## Links

- Page: https://picks.kamadorueda.com/company/NTES/
- History of changes: https://picks.kamadorueda.com/company/NTES/history/
- JSON with full history: https://picks.kamadorueda.com/data/company/NTES.json

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