By Sherry Qin


Chinese videogame giant NetEase recorded a drop in fourth-quarter profit, crimped by a high base and a slowdown in revenue growth, though it signaled improving production efficiency with the help of artificial intelligence.

The company behind the popular game "Fantasy Westward Journey" on Wednesday said net profit fell 29% from a year earlier to 6.24 billion yuan, equivalent to $902.9 million. Analysts were looking for a decline to 8.26 billion yuan, according to a FactSet consensus. Adjusted net profit, a closely watched metric that excludes share-based compensation expenses, dropped 27%.

The game maker's revenue rose 3% to 27.55 billion yuan, roughly in line with market expectations, though growth slowed further from 8.2% in the third quarter and 9.4% in the second quarter.

Revenue from games climbed 3.9% to 21.30 billion yuan in the latest quarter. The company attributed the increase to higher net revenues from self-developed games, such as "Fantasy Westward Journey Online," as well as from newly launched games "Where Winds Meet" and "Marvel Rivals."

The market had expected an earnings decline for the final quarter of 2025, given the previous year's high base. However, higher operating expenses and investment losses also buffeted the bottom line.

While the Hangzhou-based company's results were weaker than expected, this doesn't suggest any change in its resilience and the longevity of its game portfolio performance, Citi analysts said in a note.

NetEase, China's second-largest game maker behind Tencent, has leveraged its game innovation to create hit titles that have gained traction beyond the home market. For instance, its self-developed title "Where Winds Meet" has had great success overseas, surpassing 80 million cumulative players.

Investors have rewarded the company for its diverse and expanding game portfolio, sending shares 55% higher last year.

The game maker boasts a strong 2026 pipeline, including high-profile flagship titles "Ananta" and "Sea of Remnants."

According to CGS International estimates, NetEase's share of the Chinese gaming market could grow to 26% by 2028 from 14% in 2020, driven by the global success of its self-developed games.

The company has also embraced AI, applying it throughout its game development and gameplay.

The technology "is already driving meaningful improvement in production efficiency and unlocking new interactive experiences for our players that were previously out of reach," Chief Executive William Ding said.


Write to Sherry Qin at sherry.qin@wsj.com


(END) Dow Jones Newswires

02-11-26 0650ET