NetEase NTES, a prominent provider of gaming and Internet services with an emphasis on high-quality content, has gained 6.6% in a month, outpacing the Internet - Software and Services industry’s return of 5.9%.
Over the same time frame, it has also outpaced its industry peers, including Red Violet RDVT, Criteo CRTO and Globant GLOB. Shares of RDVT have gained 1.9% in a month, while shares of CRTO and GLOB dropped 3.9% and 4.1%, respectively.
Strong momentum in its online gaming services and remarkable revenue growth in the third quarter are responsible for this outperformance. The robust operational performances of PC, mobile and online games are demonstrated by the quarter-over-quarter increase in consolidated revenues.
In the third quarter earnings release of 2024, net revenues from the operation of online games made up roughly 96.8% of the segment's net revenues, up from 96.1% in the second quarter and 93.7% in the year-ago quarter. About 70.8% of net revenues from online game operations came from mobile games in the third quarter of 2024, compared to 76.4% and 77.6% in the same quarter of 2023 and the quarter before, respectively.
Portfolio Expansion Enhances NTES' Prospects
NetEase is committed to delivering outstanding content through innovative solutions across its diverse family of businesses. The company’s dedication to continuous improvement ensures that it stays ahead and meets the ever-changing needs of the community.
In the Gaming division, NetEase’s popular titles are not just gaining traction, they are thriving, while newer releases are effectively broadening the player community. Notably, PC games have experienced impressive growth, with net revenues soaring by approximately 29% year over year and 30% quarter over quarter. These results showcase NTES’ dominance in long-term game operations and unwavering commitment to driving game longevity.
NetEase’s legacy franchises, Fantasy Westward Journey and Westward Journey Online, remain popular. In the third quarter, it introduced a new chapter in Fantasy Westward Journey Mobile, featuring the structured Kingdom.
NetEase, Inc. Price and Consensus
NetEase, Inc. price-consensus-chart | NetEase, Inc. Quote
NARAKA: BLADEPOINT recently celebrated its third anniversary, highlighting its role as a leader in action-driven PvP gaming. With the introduction of new heroes, maps and mechanics, the anniversary updates have reenergized the player community and driven concurrent player numbers to new heights.
Justice Mobile is another notable addition to NTES' gaming portfolio. As a groundbreaking title that redefines traditional MMOs and boasts a massive user base, Justice Mobile is at the forefront of innovation. Leveraging the success of AI-driven NPCs that captivated players with their lifelike interactions, NTES empowers players with tools to create their own AI companies, allowing them to boldly explore the expansive Wuxia world and igniting unparalleled enthusiasm among the community.
In the third quarterearnings call NTES stated that the celebration of Racing Master's first anniversary marked thrilling annual updates with the introduction of legendary car models, including the Lamborghini Reventón and an additional iconic vehicle. These updates deliver players an even more dedicated and responsive driving experience.
Noteworthy to mention, NetEase is aggressively expanding the international footprint of its games alongside Racing Master. Justice Mobile is set to launch in the Hong Kong, Macau and Taiwan markets this November, and Dunk City Dynasty is on track for a global release. In addition to these strategic expansions, NTES is intensifying its game pipeline with plans to unveil several highly anticipated titles in the coming months.
AI Strength to Bolster NetEase’s Growth
NetEase has decisively maintained robust growth trajectory in AI-driven subscription services, significantly bolstered by its advanced AI power tool, which has dramatically enhanced functionality and user appeal. For Youdao Dictionary, NTES launched simultaneous interpretation powered by its cutting-edge large language model, Ziyue. This impressive feature garnered over 4 million users in its debut quarter, achieving outstanding accuracy and fluency that sets a new standard in the industry.
Hi Echo is rapidly gaining popularity and securing its place as one of the top domestic apps in China. A leading AI application ranking chart clearly shows Hi Echo’s impressive user numbers and exceptional retention rates.
Moreover, Youdao Literature has introduced AI-powered writing enhancement tools to assist students in improving their writing skills, leading to higher user engagement.
Conclusion: What Should Investors Do?
NetEase has been making significant strides in technological innovations, showcasing its commitment to staying at the forefront of the industry. As the company continues to invest in new technologies and build valuable relationships, it positions itself favorably for future opportunities and evolving consumer demands.
NetEase currently flaunts a Zacks Rank #1 (Strong Buy), implying that investors should accumulate the stock. You can see the complete list of today’s Zacks #1 Rank stocks here.
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