Shares of NetEase surged despite reporting a 19% decline in net profit for the second quarter compared to the previous year, primarily due to investment and foreign exchange losses.
As of 3:20 p.m. in Hong Kong, the stock gained 3.8%, reaching HKD 200.80 (approximately USD 25.60) per share. In contrast, its New York-listed shares closed down 5.9% at USD 119.81 yesterday.
For the three-month period ending June 30, the company’s net profit was CNY 7 billion (about USD 1 billion), down from CNY 10.7 billion (around USD 1.6 billion) in the first quarter. Revenue increased by 7.9% year over year, totaling CNY 30.1 billion.
The company reported nearly CNY 3 billion (USD 446.2 million) in investment losses and close to CNY 440 million (USD 65.4 million) in foreign exchange losses. These expenses significantly impacted profits and contrasted with the gains from these segments a year earlier.
Investment losses largely resulted from unrealized mark-to-market declines in equity holdings, such as its stake in PDD Holdings. During the second quarter, holdings in Alibaba Group and PDD declined over 20%, leading to substantial portfolio losses, according to a research firm. Excluding these losses, the core operating profit for the quarter actually increased by 33% compared to the same period last year.
Gross profit rose 18% to CNY 21.2 billion, surpassing market expectations of CNY 19.8 billion. Revenue from gaming services grew 9.7%, reaching CNY 25 billion, maintaining its status as the company’s most profitable segment. Meanwhile, income from NetEase Cloud Music remained steady at CNY 2 billion.
In other areas, the company emphasized the expanding importance of artificial intelligence. Their AI-driven learning platform, Youdao, saw learning services revenue jump 21% to CNY 800 million. Additionally, online education revenue increased by 3.5%, totaling CNY 1.5 billion.