NetEase (NTES) Q2 Earnings August 20: The Profit Line Isn't About Games

TL;DR

• NetEase reports Q2 2026 on Thursday, August 20, before the US open. The release goes out at or around 6:00pm Beijing time, which is 6:00am ET, and the call is at 8:00am ET.
• The Street wants about RMB 10.2 billion of non-GAAP net income. Nomura's July 27 note models RMB 9.4 billion, roughly 8% light, and attributes the shortfall to mark-to-market losses on NetEase's Alibaba and Pinduoduo stakes.
• Growth has halved. Games and related value-added services grew 13.7% in the year-ago quarter and 6.9% in the most recent one. Tencent's domestic games line reaccelerated to 17% when it reported on August 12.
• Margin has been carrying the earnings. Games gross margin ran 74.8% last quarter against 70.2% in Q2 2025, and group gross profit grew 14.8% on 6.1% revenue growth.
• The reacceleration catalyst moved to 2027. JPMorgan pushed Ananta from 2H 2026 to 1H 2027 in a June 29 note and trimmed its 2026 earnings forecast by 3%. NTES closed Thursday at $122.65, 23% below its 52-week high, on 15.8x trailing earnings.

When Does NetEase Report Earnings?

Thursday, August 20, before the US open. NetEase said in its August 6 filing that it will publish results at or around 6:00pm Beijing and Hong Kong time on the HKEX website, with the earnings call at 8:00am ET.

That timing has a wrinkle if you trade the ADR. Hong Kong shuts at 4:00pm local, two hours before the release, so 9999.HK does not price the quarter until Friday morning. The Nasdaq line trades it first, in Thursday's premarket, with no offshore tape to read off. It is the reverse of the Tencent setup on August 12, where Hong Kong had already closed on stale information and the ADR spent the whole US session catching up.

The rest of the week, including Baidu on August 18 and the US retail block, sits in the earnings calendar.

The Board

Cheap multiple, decelerating games line, and a profit number with two other companies inside it.

Two Stocks NetEase Doesn't Operate Are Inside the Profit Number

Nomura published a Q2 preview on July 27 modelling revenue of RMB 29.3 billion, up about 5%, and non-GAAP net income of RMB 9.4 billion against a Street figure near RMB 10.2 billion. The reason it gives is not the games business. It is investment losses on NetEase's holdings in Alibaba and Pinduoduo. The bank kept a Buy rating and a $155 twelve-month target on the ADR.

This matters because of how NetEase defines non-GAAP. The adjustment strips out share-based compensation and very little else, so a writedown on an equity stake lands in the headline profit line with the same weight as an operating miss. Anyone reading Thursday's EPS as a verdict on Fantasy Westward Journey is reading a number that includes marks on two e-commerce holdings.

Working the consensus into per-ADS terms: RMB 10.2 billion, at roughly the 6.96 rate implied by NetEase's own Q1 conversions, is about $2.30 per ADS, against $2.09 delivered in Q2 2025. Nomura's RMB 9.4 billion comes out near $2.12, which would be roughly flat year on year. A separately sourced per-ADS consensus of $2.33 sits close enough to the RMB figure that I am content using both.

One figure in circulation does not belong to this print. The $2.19 consensus quoted on several sites was the estimate for the May 21 Q1 report, which NetEase cleared at $2.53 diluted.

Games Grew 6.9%. Tencent's Grew 17%.

Put the two quarters side by side and the deceleration is plain. Games and related value-added services grew 13.7% in Q2 2025, to RMB 22.8 billion. In Q1 2026, the most recent reported quarter, the same line grew 6.9%, to RMB 25.7 billion. Group revenue growth went from 9.4% to 6.1% over the same span.

Tencent reported Q2 on August 12 and its domestic games revenue reaccelerated to 17%, up from 6% in Q1. I am comparing NetEase's March quarter with Tencent's June quarter, so read that as a direction rather than a scoreboard. It still frames the question for Thursday: one of China's two large publishers found a second gear this year, and the other has not shown one.

Approvals are not the constraint. The NPPA issued licences for 193 domestic and 4 imported titles on July 23, its sixth batch of 2026, with NetEase among the recipients.

Margin Did the Work

The earnings growth has come off the cost line. NetEase disclosed games gross profit of RMB 16.0 billion on RMB 22.8 billion of games revenue in Q2 2025, which works out at a 70.2% margin. Last quarter it reported games gross margin of 74.8% directly. Group gross profit rose 14.8% on 6.1% revenue growth, taking the overall margin from about 64.1% to 69.3%.

Four and a half points of gross margin on a business this size is worth more than a couple of points of revenue growth, and it explains why profit held up while the top line slowed. It is also finite. Expansion of that size does not repeat indefinitely, and when it stops, the growth rate is all that is left to look at.

Ananta Moved to 2027

The title meant to reaccelerate this is Ananta, the urban open-world RPG that spent development as Project Mugen. JPMorgan moved its expected launch from the second half of 2026 to the first half of 2027 in a June 29 note, cut its 2026 earnings forecast by 3%, and kept an Overweight. That is the bank's own model. NetEase has never published a launch date, and Sea of Remnants has separately slid from Q2 to Q3 2026.

So August 20 covers a quarter with no major new release in it, and the call commentary is where the 2027 question gets answered or dodged.

The market has already marked the doubt. NTES closed Thursday at $122.65, down 1.18% on the session, 23% below its $159.55 52-week high, on 15.8x trailing earnings and a $78.2 billion market capitalisation. For a business earning RMB 10-11 billion a quarter with a 70%-plus gross margin games segment, that is a cheap multiple attached to a real doubt.

The Options Angle

No live NTES chain was reachable this morning, so no strike or premium goes in the log. What is worth saying is specific to this name: NetEase barely moves on earnings. The stock fell 0.2% the session after a Q1 beat in May, and 2.12% in the premarket after the Q4 2025 miss in February.

That cuts against buying a straddle here, which makes this one of the few names where the house reflex about expensive premium is probably right. The July calibration work on this site found realised moves running far above implied across a dozen US names; NTES has been the opposite case, printing and shrugging for three quarters. The risk to the pass is a hard Ananta date on the call, which is the one disclosure that could produce a genuine gap.

Trade log

#	Stance	Structure	Strikes and expiry	Cost or credit	Spot at writing	Implied move	Breakeven
1	Pass	Long straddle	At the money, Aug 21 weekly	No live chain sourced	$122.65, Aug 13 close, 4:00pm ET	Not sourced	Scored a loss if NTES moves more than 3% on August 20

The One-Line Read

Cheap for a reason that keeps sliding: the games line has halved its growth, Ananta went to 2027, and Thursday's profit partly reflects what Alibaba and Pinduoduo did in the quarter.