NetEase Q2 In-Line, But Deferred Revenue Surges At Fastest Pace Since 2021

NetEase Inc (NASDAQ:NTES) reported its second-quarter results broadly in-line with expectations, according to Goldman Sachs.

The NetEase Analyst: Analyst Lincoln Kong reiterated a Buy rating and price target of $144.

The NetEase Thesis: The company reported its quarterly revenues and non-GAAP net profit in-line with consensus estimates, Kong said in the note.

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NetEase's revenues and non-GAAP net profits grew 9% and 22% year-on-year, respectively, he added.

The company achieved record high gross margin of 65.8%, with disciplined R&D offsetting higher S&M (sales and marketing) costs, the analyst stated.

Deferred revenue, excluding Youdao, grew 28% year-on-year. This represents the fastest pace of year-on-year growth since the fourth quarter of 2021, he commented.

This suggests "an improving trend across evergreen/legacy titles as Marvel Rivals likely having a small contribution," while year-on-year game revenue growth is expected to "remain solid" in the third quarter, Kong further wrote.

NTES Price Action: Shares of NetEase had declined by 2.75% to $131.19 at the time of publication on Thursday.

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