CICC has released a research report estimating that NetEase (09999) will record a 4% year-on-year increase in revenue to RMB 29.5 billion in the third quarter of 2026, with non-GAAP operating profit rising 32% year-on-year to RMB 11.7 billion and non-GAAP net profit attributable to shareholders up 9% year-on-year to RMB 10.4 billion, compared with the consensus estimate of RMB 10.5 billion.
Taking into account the valuation premium attached to the company's 2027 new title Ananta, CICC maintains its target prices of US$171 for the US-listed shares and HK$265 for the Hong Kong-listed shares, implying upside of 39% and 36%, respectively.
The main points of the CICC report are as follows.
Revenue expected to grow steadily year-on-year in Q3 2026, with solid fundamentals for flagship products
The bank expects revenue to maintain steady year-on-year growth in the third quarter of 2026, supported by the resilient fundamentals of flagship products. In terms of product performance during the quarter, the bank estimates that: 1) Fantasy Westward Journey Mobile remained relatively stable, while deferred revenue from the Fantasy Westward Journey PC free-to-play server continued to contribute to the third quarter; 2) Eggy Party saw relatively strong gross billings momentum, which the bank attributes mainly to the boost from its fourth anniversary celebrations held from June 26 to July 24 in three successive waves, combined with summer holiday benefits; 3) several other flagship titles such as Justice Mobile and Onmyoji also contributed incremental gross billings.
Operating profit expected to remain strong
The bank estimates that the gross margin will rise 5 percentage points year-on-year in the third quarter of 2026 and remain broadly stable quarter-on-quarter, and believes it will likely stay at a relatively high level on the back of factors including the game revenue mix and lower channel costs. On operating expenses, the bank expects the management expense ratio to partly extend the trend seen in the second quarter and possibly decline somewhat year-on-year, thereby boosting operating profit. At the same time, the bank expects investment income in the third quarter to post a positive gain on a quarter-on-quarter basis.
Rich game pipeline for 2027, with Ananta launching in early 2027 and multiple innovative titles in niche segments in the pipeline
Ananta has been scheduled for a global launch on January 15, 2027, with global pre-registrations exceeding 25 million. As a major new urban open-world title, the bank believes it could become an important source of revenue growth for the company in 2027. In niche segments, the Chinese supernatural extraction shooter Guiying Cangfeng and the Western fantasy extraction shooter Under the Mist both completed their first tests in August 2026; the extreme sports competitive shooter Extreme Battlefield, which received its first preview in October 2026 and already holds a license, and the wuxia-style SLG Codename: Strategic Wulin continue the company's differentiated innovation approach; and reserve projects such as the AAA single-player title Return to Tang are also progressing in an orderly manner. The bank believes the company's 2027 game product pipeline is rich, with Ananta leading a tier of innovation across multiple categories, and suggests investors pay attention to investment opportunities around the new title cycle.
Risk factors include an economic downturn, tighter regulation, poor game performance, intensifying competition, and foreign exchange and investment losses.
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