NTES schedules to report 4Q25 results on 11 Feb, 2026 before U.S. markets open. We forecast a relatively weak 4Q25 with +6% YoY pure online game revenue and RMB8.4bn adj. net profit, 5% and 9% miss consensus respectively. We expect Co. to continue its game development and operation executions to improve resource utilisation efficiency with consistent innovative global vision. We deem its 2026 financials will accelerate from 2H26 due to new pipelines’ incremental with relatively stable existing evergreen franchises. Along with highly likely 4Q25 special dividend and potential inclusion in HK Stock Connect in 2027, maintain BUY with new TP of US$160.0/HK$250.0.
Key Factors for Rating
Eye on highly expected new games. We deem Co. continues to improve resource utilisation and allocation efficiency by streamlining their new game development, existing game operations, studio/ projects adjustments and channel optimisations. While we expect relatively stable game forecasts in 1H26 driven by evergreen key franchises but lack of new game contributions, we deem new pipelines across genres, terminals and geographies (Planet Party Time, Sea of Remnants, Ananta, etc.) will gradually contribute to meaningful incremental since 2H26. Therefore, we nudge down our FY2026-27E online game forecasts by 3% impacted by 1-3% cut of PC game and 3% cut of mobile game forecasts respectively. Along with 2% increase of total opex assumptions due to Co.’s dedicated investments on game developments and operations, we cut our FY2025-27E adj. EPADS by 2-7%.
4Q25 preview: weak quarter. We model total revenue will deliver 3% YoY to RMB27.7bn, 4% miss consensus. We forecast pure online game revenue will deliver 6% YoY to RMB21.8bn, 5% miss consensus. PC game revenue will grow at 9% YoY to RMB7.8bn, primarily contributed by FWJ PC, Marvel Rivals in overseas and WWM PC globally. Mobile game revenue will display 4% YoY at RMB14.0bn primarily driven by solid FWJ and WWM, partially offsetting by justice mobile, identity V and Hearthstone. We forecast cash revenue to deliver 1% YoY to RMB20.3bn. Forecasted adj. net profit will drop by -14% YoY to RMB8.4bn, missing streets’ expectation by 9%, primarily impacted by +11% YoY total opex assumption mainly due to S&M expenses.
Key Risks for Rating
Downside risks: i) weak pipelines; ii) weak macro and online discretionary spending recovery; iii) game regulations; iv) competition; v) destructive investments; vi) dampened partnerships; and vii) ADR delisting.
Valuation
Maintain BUY and cut our TP to US$160.0/ HK$250.0 on: i) US$140.0 on 16.0x FY2026E adj. EPADS of US$8.8; 2) US$5.0 from stake in Youdao and Cloud Music; and 3) US$15.0 from net cash.