Netease Shares Spike After Earnings Report


NetEase shares were up 7%, after it crushed analysts estimates in Q4, and finished 2012 strong, all due to positive growth in its online games business and advertising services

In 2012, the company saw 12.1% growth in revenues, totaling RMB8.4 billion (US$1.3 billion). Driving that growth was an 11.2% increase in online games, and a 6.9% increase in advertising revenues, each totaling RMB7.3 billion (US$1.2 billion), and RMB850.2 million (US$136.5 million), respectively. Altogether, that helped Netease rake in RMB3.6 billion (US$583.9 million), or $4.44 per diluted share. Meanwhile, analysts only expected $4.23 per share.

In Q4, revenues were RMB2.3 billion (US$373.5 million), up 9.4% year to year. Games contributed RMB2.0 billion (US$317.4 million), up 11.1%, while advertising shot up 6.8%, to RMB259.5 million (US$41.7 million). Net income was up $161.9 million, amounting to $1.23 per diluted share, while analysts estimated $1.04.

Regarding increases in gaming, Chief Executive Officer and Director of NetEase William Ding said:

The growing popularity of our self-developed games and the newly launched expansion pack for Blizzard Entertainment's World of Warcraft® contributed to our 13.6% quarter-over-quarter increase in online game revenues, supported by the launch of new games Kung Fu Master, Soul of the Fighter and Heroes of Tang Dynasty II.

Advertising through Netease's online portal (similar to Yahoo) was helped by increased email usage. As of December 31, 2012, the company had approximately 530 million registered email users.

Ding finished by saying:

In 2013, we will work to achieve growth across our businesses with enhancements to our games and services that underscore our commitment to driving content, community, communication and commerce in China's growing online market.

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