Chinese Videogame Giant NetEase’s Profit Falls on Weaker Gaming Revenue

Dow Jones11-14

Chinese videogame giant NetEase posted lower net profit and revenue in the third quarter amid gaming-segment weakness and a high base last year.

U.S.-listed shares of NetEase gained 3.6% in premarket trading.

Net profit dropped 17% to 6.54 billion yuan, equivalent to $905.3 million, NetEase said Thursday, missing the 7.45 billion yuan estimate from a FactSet poll of analysts. That marked its second consecutive quarter of net profit decline as its main gaming segment faced some headwinds.

The Hangzhou-based company’s revenue fell 3.9% to 26.21 billion yuan, slightly lower than analysts’ expectations, as sales from games and value-added services declined 4.2% from a year earlier.

NetEase competes with Tencent, the world’s largest gaming company by revenue. Tencent on Wednesday posted better-than-expected quarterly results, thanks to its gaming strength as both evergreen and recent titles booked robust sales.

In a sign of the companies’ diverging fortunes, NetEase’s Hong Kong-listed shares have fallen almost 15% this year, while Tencent’s have risen nearly 40%. By comparison, the benchmark Hang Seng Index is up 14%.

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