Netease Aktie

Good day, and welcome to the NetEase First Quarter 2026 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brandi Piacente. Please go ahead.

Thank you, operator. Please note that today's discussion will contain forward-looking statements relating to the future performance of the company and are intended to qualify for the safe harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion.

A general discussion of the risk factors that could affect NetEase business and financial results is included in certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20-F and in announcements and filings on the Hong Kong Stock Exchange's website.

The company does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will also discuss certain non-GAAP financial measures, which should not be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP.

For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the first quarter 2026 earnings news release issued earlier today.

As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com.

Joining us today on the call from NetEase's senior management are Mr. William Ding, Chief Executive Officer; Mr. Hu Zhipeng, Executive Vice President; Ms. Aileen Bin Mo, Vice President of Finance; and Mr. Bill Pang, Vice President of Corporate Development.

I will now turn the call over to Bill, who will read the prepared remarks on William's behalf. Bill, please go ahead.

Thank you, Brandy, and welcome, everyone, to today's call. Before we begin, I would like to remind everyone that all percentages are based on RMB. 2026 is off to a solid start, with total revenue reaching RMB 30.6 billion in the first quarter, driven by continued momentum in our games business. Our games and related value-add services generated net revenues of RMB 25.7 billion, reflecting our strength in long-term game operations and growing global appeal.

Our performance of this quarter was underpinned by continued strength of our game portfolio, both internationally and domestically. Overseas, our titles demonstrated growing cross-market fuel across genres and platforms. at home, our established franchises sustain strong player activity through consistent content delivery and live service innovation.

Together, these results reflect the breadth and revelance of what we have been built across genres, platforms and the player communities worldwide.

Now let me walk through some of the highlights. Since its overseas launch in last November, Where Winds Meet has become a global phenomenon, resonating across cultures and maintaining momentum well beyond the initial launch window. In March, we launched its first major expansion, use, bringing players to a better environment with distinctive settings and uniquely designed in-game enemies.

More recently, the game introduced a version 1.6, featuring a new region, intra alongside a novel wind-based exploration system that further enhance merchant and player freedom in the open world experience. The update was well received by players. Preparing the game to #2 on STEAM's global top seller chart. Strong momentum across both overseas and domestic market, backed by sustained player engagement translated into another record in quarterly revenue, a result that reflects the compounding value of high-quality content and reinforces our confidence in this type of long-term potential.

Our rivals continue to expand its reach among global hero shooter audiences, supported by a steady cadence of seasonal updates and high-quality content. On April 10, the game introduced a new SIM cosmetic content, including made of fit for [ Deadpool ] and Jeff land chart, which generated strong community engagement driving it to #2 on team's top center chart in the U.S.

In addition to the content update, Marvel expanded its PV experience with a blood in Season 7. featuring new hospitals and refresh mechanics as players engage in intensified against the lode umpires. It also introduced its past to doom say event. -- year-long road map, featuring new molds and in-game events inspired by the Infinity [indiscernible]. This initiative is deepening player engagement while creating natural links to broader Marvel story talent, leading into the release of Marvel Studios Avenger do stay in December.

Together, these efforts reinforce Marvel's position as a dynamic evolving place with strong cross-media resonance. In March, Liat launched a crossover with the iconic Tokyo Go franchise, integrating its SIMs into the in-game world and allowing players to engage with its universe. The collaboration sparked strong responses on social media and generated high player engagement supported by the IT switch and well-designed event execution outreach #3 on Japan's LS top crossing charge.

In the same genre, BlackStripe celebrated the second anniversary office global mobile launch in March, achieving a record high daily active users, demonstrating the enduring strength of its player community. Alongside international expansion, our domestic performance remains solid.

We sustained strong engagement and revenue in the first quarter across estate titles supported by ongoing content updates and gameplay innovation. Multiple titles reached highs in player base and activity, demonstrating the enduring appeal of our extreme franchises. Chinese was majorly online, our flagship continues to evolve through new mechanics and content that keeps our players engaged. In the first quarter, the unlimited server rolled out a series of updates that enrich gameplay and PVP events, including the family system, which allows players to build in-game social balls, cultivate compact companions and experience a refreshed progression art.

The features were well received by the community and the unlimited server continues to serve as an effective entry point for both returning and new players. Brought in the active user base while retaining the loyalty of long-standing fans. [ Piccart ] users reached a new high of $3.9 million. and the Tipo recorded its highest ever quarterly revenue, underscoring its continued vitality.

[ Sweden Mogo ] also maintained strong momentum, which is specialized server continuing to refine progression systems and steadily expanding active player base. The game's 11th anniversary events in March was a particular highlight, driving daily active users to its highest level since 2017.

In April, more updates to the in-game economic system continued to strengthen the long-term health and balance of the game's overall ecosystem. [indiscernible], a long-running MMO franchise with over 18 years of operations delivered a record commercial performance in the first quarter, supported by a small community and stable life operations cadence.

The game continues to evolve through player cocreation with ongoing content updates, sustaining engagement, while more new features are being explored to enhance personalization and deepen player connections. GoldStar immobile, one of Mary's most enduring MMORPG franchises, recently celebrated its test anniversary, a milestone reflecting the strength of our long-term life service capabilities.

Since its 2016 launch, the title has attracted over 200 million registered users, which is longevity both on the consistent content update, evolving gameplay experiences and a deeply loyal community. As a pioneer of film and television crossovers in gaming, Go Store immobile once again partnered with heat TV drama, Love O2O and and actors with test anniversary realizing players with beloved characters and classic experiences from the series, reaffirming the title's momentum as it enters into a second decade.

Take Parking continues to hold its position as China's leading party game destination. Screen festival events have become a meaningful annual tradition. Bringing players together with friends and family through seem content on IP Island, reinforcing the game's identity as a sheer social space.

Building on the festive atmosphere, in February, the introduction of Serrablo IPs, including my Litecoin, drove strong community participation and push the game to the top of China's LS closing charge. Identity maintained steady engagement and momentum throughout the first quarter, with enriched gameplay systems that reinforced its unique position in the ACmetric-bet arena genre.

During the spring festival event, it added more depth by introducing new characters and same content alongside limited time gameplay experiences within the caustic when we formate. In March is a anniversary for new variations to the classic will be for more with the sizes of survivors and hunters, shipped during matches based on player actions.

It also added more dynamics to the fast-paced IBA mode with new car-based mechanics that influence real-time battle progression. As an integral part of its broader continent operation strategy e-sports remains a core pillar of the game's long-term engagement.

Coop [indiscernible] begins premier global tournament reached its climax with global finals held in Shanghai earlier this month. It led teams from regions across the globe delivered highly competitive matches that ignited community excitement. It loaders, our fixture SLG title, continues to push the genres foundry with updates like the Pes addition that streamline time consumer actions and rebalance better pacing, enhancing the overall strategic experience.

Beyond this addition, the game continued to enrich its seasonal update with fresh landscape designs, [indiscernible] smarter portraits and crossovers with popular IPs, all of which were well received by the players over the past months.

These updates resonated strongly with the community, drove a meaningful improvement in daily active users and continue to strengthen the game's foundation for long-term operations. The NARAKA: BLADEPOINT franchise continued to refine its male-focused combat experience through new hero, new maps and updated better mechanics that keep the fast pace game play fresh.

A tube crossover event with Overwatch in China helped expand the game switch, connecting to distinct clear communities. Sword of Justice maintained a vibrant player community to reach content and a likely open world that continues to evolve.

The title continues to enrich player interaction and creative gameplay experiences introducing features such as tax item generation and in-game narrative creation. These innovations not only deepen the player engagement but also fostered a thriving ecosystem of user-generated content. -- strengthening player connections. Innovation is a driving force for the content creation in our existing portfolio as well as our games under development. new titles in our pipeline remain on track.

We see our radome and Enanta making steady progress towards launch. Both titles are designed with a clear intent to deliver all new player experiences and explore gameplay directions that have the potential to shape future trends. Feedback from C of relevant latest round of testing was positive. And we're in the final stages of preparation ahead of launch.

As for Blizzard titles, their popularity was reinforced through diversified live service operations and localized content in the first quarter. World [indiscernible] Cup launched its midnight expansion in China on March 3 alongside the global release, bringing players back to the Albin Kingdom. With the continued deepening of our localized operations in China, we have implemented extensive optimizations and a dedicated life of events tailored to the China market.

This efforts have successfully sustained a high level of player retention and engagement, leading to a solid year-on-year commercial performance in the first quarter. In April, Diablo IV launched its lot of trade expansion, simultaneously across China and global markets.

Meanwhile, Diablo II resected a title with a 20-year legacy reignite its player base with a new DRC. This update drove a strong increase in monthly active users in the first quarter, further reflecting its enduring appeal.

In February, or watch and MarkerBot collaborated on 2 crossover events featuring character integration and CMskins. Combined with the spring festival seemed content, the event generated strong cost community engagement and elevated player activity.

With strong user engagement in Q1, the active users grew with key bids while showing improved stability. Through strong partnerships and sustained engagement across our growing portfolio, we are well positioned packing into the rest of the year, with continued investment in innovation an unwavering commitment to quality and deep rooted operational expertise. We aim to create unique and unforgettable gaming experiences for players in China and around the world.

Turning to our other businesses. We would not further advance its AI native strategy in the first quarter by driving continued situation on its confuses large language model and more deeply embedded AI throughout its ecosystem. The Learning Services segment made steady progress. supported by strong growth in yield outline and AI equivalent subscription offerings.

UNO also enriched its AI agent metric, adding 2 new AI native applications lobster AI and open source personal AI desktop system and Dokanative knowledge base designed for complex information senses. Online marketing services benefited from increased demand for performance-based advertising as AI-driven tools enhance the targeting and streamlined cotton production.

While the Smart Devices segment maintained its physical discipline, prioritizing execute profitability over volume. Yanxuan celebrated its tenth anniversary this year. marking a decade of dedication to high-quality products. As part of this effort, we continue to build out our pet category. Strengthening capabilities across R&D, supply chain, quality control and membership operations.

Yanxuan maintained consistent execution across key categories in the first quarter with path home sand and home goods continuing to introduce new products and securing leading positions in their segment across e-commerce platforms. Additionally, sustainable development remains a core focus for NetEase. We believe long-term success of a company is in line with the value increase for users, for communities and employees.

Earlier today, we published our seventh annual ESG report, onlining our latest progress across sustainability, governance and social impact. As our business continues to grow and evolve, we stand steadfast along our employees who share our values and the dedication to continuous innovation and passion in service of our users.

We provide resources and opportunities for them to develop strive and keep innovating. By focusing on these kind of initiatives, we have once again been included in the World's Best Employer list published by Forbes marking 9 consecutive years for our company.

We're also mindful of social impact of our technology and strive to integrate corporate social responsibilities into product innovation and business practices, expanding the accessibility and inclusiveness of technology.

On the environmental side, while our online business by nature has relatively low carbon footprint, we nonetheless actively explore ways to make our operation even greener and cleaner. For example, we have improved energy efficiencies across our data centers and compasses, helping reduce greenhouse gas emission by 12% year-over-year.

On the governance side, we continue to improve our board and management oversight on material issues. External recognition continues to reflect this progress. MSCI upgraded us to a AAA ranking, positioning us as a leader among our 200 companies in the global media and entertainment industry.

Whilst the analytic maintained our low risk rating with improved profile, placing us among the top companies in our industry.

In closing, across our operations and our development pipeline, we are seeing results from our long-held commitment to creativity, innovation and the evolving technologies that PowerEdge. We see this momentum building as established titles continue to see record new titles advanced towards launch with clear ambition. And our international footprint continues to grow.

Working through all of it is our ongoing effort to build an environment where our developers are free to push creative boundaries and deliver experiences that are relevant with players, communities around the world.

We believe we are still in the early stages of what this can deliver for our players, our communities and shareholders alike. That concludes William's comments.

And I will turn the call over to Aileen for more detailed discussion of our financial results. Thank you.

[Interpreted]

we encourage you to resume our press release issued earlier today for further details. As a reminder, all amounts are in RMB unless otherwise stated.

Hello -- thank you, Bill. I will now provide a brief review of our 2026 first quarter results. Given the limited time on today's call, I will present some obliviate financial highlights. We encourage you to list to our press release issued earlier today for further details. As a reminder, all amounts are in RMB unless otherwise stated. Our total net revenue for the first quarter were RMB 3.6 billion or USD 4.4 billion, representing a 6% increase year-over-year.

Total net revenue from our games and related viral acid services were RMB 25.7 billion. up 7% year-over-year. Specifically, net revenues from online games were RMB 25.1 billion. up 18% quarter-over-quarter and 7% year-over-year. The quarter-over-quarter and year-over-year increase in online game net revenues were attributable to higher net revenue from sales developed games such as sentence virtual general franchise and wellness.

Yordon's net revenue increased 4% year-over-year to RMB 1.3 billion. primarily driven by increased net revenue from Jonas on marketing services. Its net revenue was down 14% quarter-over-quarter due to a decreased net revenue from Jonas learning services and the smart devices.

NetEase cloud muted net revenue were RMB 2 billion, representing a 7% year-over-year decrease and remaining broadly stable quarter-over-quarter. Net revenue from innovated business and others were RMB 1.5 billion, decreasing 5% year-over-year and 24% quarter-over-quarter. The quarter-over-quarter decrease was mainly driven by declines across e-commerce and the advertising services.

Our gross profit margin increased year-over-year to 69.4% from 54.1% in the prior year period. Looking at our first quarter margin for before details. Gross profit margin was 74.8% for our game and related value-added services, compared with 68.8% in the same period of last year.

The improvement was primarily driven by lower revenue sharing costs related to the platform. Our gross profit margin for Youdao was 44.7%, compared with 47.3% in the same period of last year. The decrease was mainly due to the decline in Smart Devices gross margin.

Gross profit margin for NetEase cloud matics were 37.1% compared with 36.7% in the same period of last year, remaining generally stable year-over-year. For our innovative business and others, gross profit margin was 42%, compared with 38.8% in the first quarter of 2025.

The improvement was primarily driven by margin expansion in certain innovative business within the segment. Total operating expenses for the first quarter were RMB 8.6 billion, representing 28% of our net revenue. Taking a closer look at our cost composition. Our selling and marketing expenses accounted for 11.2% of total net revenues in the fourth quarter, compared with 9.4% in the same period last year, primarily due to the increased marketing expenses related to same and the related VAS.

Our G&A expenses were accounted for 2.1% of the total net revenue in the first quarter compared with the 3.3% in the same period last year. Our R&D expense remained stable at 14.7% of total net revenue in the first quarter compared with 15.2% in the same period last year, reflecting our consistent investment in innovation and content development.

The effective tax rate was 18.9% for the first quarter. As a reminder, the effective tax rate is presented on an accrual basis and the tax credit vary across each of our entities at different time periods, depending on at policies and our operations.

Our non-GAAP net income attributable to the shareholder third quarter totaled RMB 11.3 billion, or 1.6 billion, broadly stable year-over-year. Non-GAAP basic earnings per ADS for the quarter was U.S. or USD 0.51 per share. Additionally, our cash position remains strong as of March 31, 2026.

Our net cash position was RMB 167.2 billion compared with RMB 153.5 billion at the end of 2025. In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved a dividend of USD 0.44 per share or USD 720 per ADS for the first quarter.

Lastly, under our current USD 5 billion share repurchase program, we had repurchased of [ USD 23.2 ] million as of March 31, 2026 for a total cost of opportunity USD 3.1 billion.

Thank you for your attention. We would now like to open the call to your questions.

[Operator Instructions]. Your first question comes from Lincoln Kong with Goldman Sachs.

[Interpreted]

Congrats on the very solid first quarter results. I have 2 questions related to the new games pipeline. First of all is on the Cement -- could management share us a more detailed update in terms of the latest progress of the game, especially along with -- how is the product -- the monetization design, game plate and user feedback has been changed over the past few months. And what is the latest rollout schedule for global and across platforms.

My second question is about Ananta. So I wonder what's our competitive strategy in this sort of open world type of general. Specifically, we have seen a few of our peers has recently released some new titles, a bit similar to Ananta along with there going to be a potential heavyweight blockbuster like GTA before the year-end. -- how this company will ensure Ananta game can successfully break through the competition and capture incremental user growth?

[Foreign Language].

[Interpreted].

Okay. I will translate the answer to the first question first. So thank you for your question regarding elements. Following the technical test in February in the past month is we received valuable feedback from players. And our team is now actively preparing for the upcoming down breaker test. -- in this next round will showcase a bigger picture of the in-game wall and richer gameplay details as we work towards our targeted Q3 launch window. In terms of monetization, we're designing it as a natural extension of the overall game plan with characters at the heart of the experience and cosmetics customization at the core of our monetization design, keeping the experience reached but without too much further. Please stay tuned for more details in our upcoming test and the future announcement.

[Foreign Language].

[Interpreted].

Okay. Let me translate this answer. First of all, thank you for your question. We addressed your question from several angles. First, regarding the competitive landscape, we do not shy away from competition, but our focus is more on differentiation. Yes, open world category is crowded in 2026, and players have more choices than ever. But from another angle, it also means that the genre has a high seating and strong user demand.

Competition in our industry is not a zero-sum game. Great products expand the overall market rather than just fighting our fixed market share. Secondly, what makes Ananta different? Ananta is built around an urban open world concept, which is fundamentally different from traditional open world RPGs or animal sell action games. Whether you look at the IP building generic structure or gameplay design.

We are not following existing formulas what we are building as an open wall setting more than city, driven by immersive daily living experiences. The competitive edge here is not about NetEase or flashy combat. It's about where the players can truly feel like they are living in the world. shopping, for example, shopping, social interactions, exploration running businesses.

These activities with their strong sense of Urban Life are where our differentiation really lies. Right now, the team is focused on refining the game's content quality. We believe players always have strong appetite for innovative and polished experiences. What decides what the product succeeds is not the long window of how many competitors are out there. It is whether or not the experience is distinctive enough and good enough to the players. We'd rather take the time to get it right than ship something on average in a rush.

Lastly, but importantly, we do not think Ananta is a traditional animal style game. Our goal is to achieve a genre breakthrough within the urban open wall space, reaching players who are interested in the idea of 3D leaving in the virtual city. This means that our direction, our narrative ton, our gameplay design, are all being shaped to appeal to a broader audience, rather than putting ourselves in the fixed box.

In summary, distinctive urban open world positioning, a relentless pursuant for content quality and broad unconstrained vision for who this game is for. That's how Enanta stands out. The competition is real, but we are confident in the direction that we have chosen. Next question please.

Your next question comes from Xueqing Zhang with CICC.

[Interpreted]

My question about globalization. What management feel the progress in global expansion. In particular, how do you assess the overseas growth potential of well wins meat as well as the opportunities for the MMO Gara in international markets.

[Foreign Language].

[Interpreted].

Okay. Let me translate this answer. We win Smith has demonstrated very strong and sustained momentum in this global expansion. Within 6 months of launch, it has held very high scores like 78% positive rating on steam. And as repetitively ranked among top 2 often global top seller chart when we have major updates, including West markets that have traditionally been difficult for Chinese Wishagame to penetrate. This has set a new benchmark for this genre overseas.

This clearly shows that overseas players not only appreciate the game's high immersive [indiscernible], but also highly receptive to the free-to-play, high-quality and no pay-to-way model. Once again, it reinforces that the unique experiences delivered by Weine is something that resonates globally.

Going forward, we'll continue to unlock the games overseas potential oversee growth potential with -- by enhancing cross-device compatibilities, strengthening global publishing capabilities, expanding on to more platform and deepening localization effort. More updates on this will be shares. In short, we'll continue to invest resources into where wins made making it another flagship title in our global portfolio with the goal of achieving long-term sustainable success worldwide.

Your next question comes from Ritchie Sun with HSBC.

[Interpreted].

Congrats on a very good set of results. I want to ask about FWJ PC. The PC version has launched a limited server close to 1 year now. Can management share the latest update on this game? And how do you plan to further sustain or even expand the successful sort of response from this game going forward?

[Foreign Language].

[Interpreted].

Yes. [indiscernible] has hit another record of Picanco user at $3.9 million in Q1, which clearly shows that the unlimited server has successfully expanded the player base. Beyond the strong performance of the unlimited server the time-based classic server has also been growing steadily.

With the development team's years of experience in long-term life operations, the oral game ecosystem is in good shape with all key metrics trending in the right direction. We remain committed to the long-term operation strategy and keep exploiting the opportunities along the way. Thank you.

And that concludes the question-and-answer session. I would like to turn the conference back over to Brandi Piacente for any closing additional comments.

Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly to have a wonderful day. Thank you.

Good day, and welcome to the NetEase Fourth Quarter and Full Year 2025 Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Brandi Piacente. Please go ahead.

Thank you, operator. Please note that today's discussion will contain forward-looking relating to the future performance of the company and are intended to qualify for the safe harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect NetEase's business and financial results is included in certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20-F and in announcements and filings on the Hong Kong Stock Exchange's website. The company does not undertake any obligation to update this forward-looking information, except as required by law.

During today's call, management will also discuss certain non-GAAP financial measures, which should not be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the fourth quarter and full year 2025 earnings news release issued earlier today.

As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com. Joining us on the call today from NetEase's senior management are Mr. William Ding, Chief Executive Officer; Mr. Hu Zhipeng, Executive Vice President, and Mr. Bill Pang, Vice President of Corporate Development.

And I will now turn the call over to Bill, who will read the prepared remarks on William's behalf.

Thank you, Brandi, and thank you, everyone, for participating in today's call. Before we begin, I would like to remind everyone that all percentages are based on RMB.

In 2025, our total annual net revenues reached RMB 112.6 billion, with RMB 92.1 billion from games and value-add services. These metrics represent another milestone for our company, reflecting 23 consecutive years of online games operation revenue growth since we started the business [ a quarter of century ] ago. In our 25 years in the gaming business, our pursuit has always been trying to provide extraordinary player experiences, and we have never stopped investing in continuous exploration of creativity and pushing technical boundaries.

In our early years, our proprietary 2D game engine made Fantasy Westward Journey online the benchmark of its time. While we moved to mobile in the early of 2010, our flagship in-house engines enabled us to deliver low latency, high-performance experiences of smaller pocket-size screens. This new capability was instrumental in unleashing the full potential of iconic titles such as Knives Out and Diablo Immortal on mobile devices. Today, as we continue refining these engines to support AAA quality cross-platform experiences, they have laid the indispensable foundation and the success of our recent global [indiscernible] like Where Winds Meet.

In conjunction with the evolution of our in-house proprietary game engines, we also built our full stack 2 chains that empowers our team to innovate at scale, growing our DNA as an Internet company. We continually scale new technologies that can improve the game development process. We started emerging technological trends, determining if they can be harnessed to enhance our game development and develop proprietary solutions to incorporate these solutions -- to incorporate the most impactful ones into our production pipeline. This long-standing practice has enabled us to integrate company's new technologies, substantially boosting productivity over the years.

Back in 2017, we saw that artificial intelligence would have transformative impact in our industry. Because AI research is closer to [indiscernible] size than traditional technology, we set up 2 dedicated research labs: NetEase Fuxi Lab and NetEase Game AI Lab to study AI and explore its real-time real-world applications in gaming. These teams had made exceptional strides over the years in both research and practice, winning dozens of AI algorithm competitions, publishing hundreds of papers and secure hundreds of patents. We're now far beyond the experimental phase, and the combination of this work is the full integration of our AI technology into the game development process, with AI playing an important role across our portfolio.

AIGC has accelerated quickly in recent years. We have been monitoring the progress closely and making substantial effort to embed it into our production pipeline. Importantly, we don't see AI as a replacement for human activity. We see it as a force multiplier, one that can bring paradigm shift to the game development process when used responsibly. It can elevate creative work and introduce real change in how games are built. As a new technology with core attributes that are fundamentally different from traditional technologies such as its probabilistic nature, AI represents unique challenges. Figuring out how to harness it, how to fit it into a sophisticated game software engineering process and how to turn probabilistic AI output into reliable, high-quality components as far from [indiscernible].

There are very few precedents in the industry of game making. Fortunately, with our many years of game-making experiences, we have deep expertise in building production [indiscernible], along with data and asset library spanning hundreds of games. Most importantly, we have over 10,000 top-tier developers, which put us in a strong position to approach these challenges programmatically. Over the past 3 years, our engineers have worked closely with our designers to explore how to unleash the power of AI, while building [indiscernible]. At the same time, we focus on how tos, how to use AI to take our tedious repetitive noncreative task without getting in the way of human creativity. After many iterations, we believe we have established robust human oversight and feedback will be in place, and AI has become a highly effective part of our game development process.

Today, we are pleased to report that we have comprehensively integrated AI across our internal workflows, encompassing design, programming, arch and QA. This integration is not limited to a few BD teams. It is broadly accessible to developers at NetEase, driving meaningful efficiency across the board.

In programming, our self-developed tool, code maker, has evolved from a single AI-powered code completion tool to providing agent network services. Our internal data shows qualitatively shift in developed habits. We have moved from using AI to complete a line of software code, to leveraging AI to solve a complete development path.

In art and animation, AI is easily accelerating the early-stage exploration process with our in-house tools, dream maker and [indiscernible], turning creative ideas into deliverable outputs in minutes. Our AI animation technologies, including multi-camera motion capture, facial motion capture and generative AI-driven animation tools, have significantly reduced the production cost and time required for character movement and expression animation workflows, while substantially expanding our animation asset libraries and in empowering artists to deliver richer and more expressive virtual characters and walls.

Furthermore, in quality assurance, we utilize AI to model more than 1 million diverse player behaviors to ensure stability in increasingly complex game world. This augment traditional time-consuming [ menu ] testing with data-driven validation, providing us with greater mathematically confidence in-game balance and stability before public launch.

On efficiency, the ultimate goal is gameplay innovation. We have allotted massive new interactive experiences for our players that were previously out of reach, and we still remain at relatively early stage in exploring all the possibilities.

Our exploration of AI-driven attractive characters began early with Sword of Justice, which pioneered one of the industry's earliest commercial implementation of intelligent MPC systems powered by large language models in live game environment. This laid important technological groundwork for expanding AI-driven character ecosystem.

In Where Winds Meet, we have deployed over 10,000 AI-powered MPCs that engage players with natural language, realistic voices and potential for unexpected story outcomes, creating a level of vivid interaction that was previously impossible.

Most importantly, these AI-powered MPCs are not static [ cross-gamers ]. They reflects the shadow of real human existence. Some may be struggling with poverty and resorting to [indiscernible] in village. If a player has the patience to follow them, they could discover sub stories like the hardship of adult life.

These MPCs may not always be brilliant or lucky, but they're living their lives within their own reality, living our own [ world ]. This level of detail creates an [ award ] that was not just a sandbox but a leading society. This is the essence of the open world we're building. Places where every iteration, every interaction feels authentic, unpredictable and deeply immersive. This not only provides players with more depth and in-game experiences, but it also help to address the challenge that players consuming content much faster than developers have created.

We were also seeing AI act as a powerful personalized copilot and ecosystem multiplier. In Naraka: Bladepoint mobile game, the voice AI teammate system represents a major inflection point. AI doesn't just follow, it cooperates. With co-pilot teammates, AI provides customized interactive assistance to help players to learn the [ global ] game, making the complex high skill-based game play more accessible to much broader audience and significantly increase new comer retention.

Meanwhile, the [indiscernible] mode in the Sword of Justice empowers players to direct their own short videos with simple [ AI ] workflows, attracting millions of players who have created tens of millions of [ UGC ] works. Meanwhile, integrating these tools into Eggy Party tool chain had empowered 15 million creators to transform a single game into a self-evolving platform driven by collective creativity of its players.

Beyond enhancing our existing portfolio, we're also exploring new frontiers in AI-native game play. Moving beyond fixed preset logic, we're trying to utilize AI as a core engine to dynamically construct the in-game world and tailor real-time elements like missions, plans and other content to individual players' unique behaviors, unlocking infinite potential through deep customization. Underpinning this work is our experiment in AI-native production pipelines that leverage integrated tool chains to streamline workflow and significantly accelerate our innovation cycle.

2025 has been a year in which our long-term vision for AI has reached a critical point. We're no longer just talking about the potential of AI, we're seeing the results in the form of enhanced productivity, deeper player engagement and expanded creative boundaries. We're on the threshold of a paradigm shift, and we believe we are well positioned to serve as epicenter of industry-defining innovations. We have built a very solid technological foundation, the proprietary engine, the full stack tool chains, which already internalized artificial intelligence capabilities, including AIGC capabilities. And we have seen early results from AI-powered gameplay.

What we have achieved in the first 25 years of our game business was unimaginable when we started. We're at the dawn of a new time in our industry where productivity can be much more enhanced and creativity can be much more amplified. As we look ahead, we believe AI will fundamentally empower our creators to transcend the traditional development limits and reshape how interactive entertainment is created and experienced in the years to come. We think this is going to be the best time of industry.

With that, I would like to walk through several recent operational highlights, starting with our global expansion achievement.

Where Winds Meet has gained strong global traction through a staged cross-platform launch, surpassing 80 million cumulative players and marking the meaningful milestone in our global expansion. Rooted in Eastern aesthetic and Wuxian story-telling, the game demonstrates how authentic cultural content can resonate with players worldwide. Following it's global launch, they ranked #2 on Steam's Global Top Seller Chart, on PlayStation's November Players Choice Award and top [indiscernible] across more than [ 60 ] regions. Ongoing live service updates resulted in sustained strong engagement globally and domestically, with the title delivering its highest monthly revenue and daily active user on record in China in December, reinforcing its long-term momentum.

Meanwhile, Sword of Justice successfully expanded internationally in November, introducing its next-generation MMO experience to more audience, topping download chart in multiple key Asian regions. This title is another example that illustrates how AI-integrated production pipeline now directly elevated gameplay in large-scale online worlds, delivering richer responsiveness, deeper interactivity and more immersive player experiences globally. Domestically, player engagement remains strong, supported by innovative live events and culturally-branded content that continues to deepen community resonance.

Marvel Rivals, our superhero team-based PvP shooter continues to build strong global momentum. The title earned broad industry recognition, including being named one of Time's Best Video games of 2025, winning the Grand Award at PlayStation Partner World 2025 and ranking in [indiscernible] tier of best of 2025. Continued seasonal update on new character releases has sustained strong player engagement with season 6 featuring Deadpool, propelling the game to #2 globally and #1 in multiple markets, including the United States and Canada. The rapid expanding international player community is further reinforcing the long-term durability of this growing franchise.

Looking ahead, we continue to strengthen our pipeline to support the next wave of global growth. [ Sea of Remnants ] began technical testing across China and selected global market earlier this month, featuring a distinctive art style and richly-imagined open world. This ambitious original title aims to deliver a deeply immersive exploration experience with extensive player freedom, where every naval journey fuels unique.

Development is also progressing steady on Ananta, our highly anticipated urban open world title. Building our available insight from previous testing, the team is diligently refining core systems and content to meet high expectations from our global community.

Shifting to our domestic portfolio. Our long-standing franchises continue to demonstrate strong vitality supported by continuous content innovation and deeply engaged player communities. These titles remain a testament of our ability to operate a large-scale live service ecosystem over decades. Now in this 23rd year of operation, Fantasy Westward Journey online delivered record high annual revenue in 2025, driven by historical peak revenue in the fourth quarter. As ecosystem continues to evolve through innovative content design to meet diverse player needs while preserving the classic mechanics cherished by long-term fans. [indiscernible] server. With a streamlined accessible game play has been particularly effective at reenacting player [ enthusiasm ]. Fantasy Westward Journey mobile also maintained strong momentum, delivering record high annual revenue in 2025. Diversified server models and ongoing content initiatives reinforce its leadership position within the MMO category.

Beyond these legacy franchises, several established titles continue to deliver stable engagement and underscore the breadth of our diversified portfolio. Identity V strengthening its global e-sports ecosystem through a major competitive event and ongoing content updates. Eggy Party maintains strong player engagement, supported by expanding gameplay modes and continued investment in this fast-growing UGC ecosystem. Infinite Borders continue to drive long-term retention through innovative gameplay updates and specialized server models that deepen strategic complexity. Naraka: Bladepoint is expanding its global community and e-sports presence, highlighted by the successfully hosting the [indiscernible] championship and active content road map updates designed to sustain long-term player engagement.

Beyond the games we developed in-house, we also continue to expand our ecosystem through structured partnerships. These titles have driven sustained engagement for the past year, achieving a record high revenue in China and reaffirming our long-term commitment to the market.

The launch of World of Warcraft's China exclusive Titan Reforged server on November 14 sparked strong excitement among domestic players and interest from international influencers. [indiscernible] [ 2 ] once again saw a [indiscernible] support from Chinese players and set a new record in daily active users in China. Through close collaboration with our partners and shared commitment to putting player first, we remain focused on delivering high-quality experiences while strengthening our long-term global gaming ecosystem.

We're also committed to delivering exceptional user experiences across our other business lines. Youdao continued to advance its AI native strategy in 2025, driving healthy business development and achieving its first ever net cash inflow from operating activities. This learning services segment delivered robust growth through ongoing iterations of its tutoring features, while online marketing services are trying to improve advertisement effectiveness and streamlines advertising production.

Smart Devices segment was supported by ongoing popularity of Youdao tutoring pad products. NetEase Cloud Music continue to advance the high-quality development of its ecosystem. Platform enriched its differentiated music catalog through both corporate collaborations and our in-house music production, while introducing new features and experience upgrades that enhanced music discovery and listening.

In 2025, the platform delivered steady year-over-year growth in both its active user base and overall engagement. The engine continued to strengthen its positioning as a private label brand known for premium quality product across its key categories, supported by an expanded product lineup and enhancement to key products.

In closing, the results and operational milestones we have discussed highlighted a clear trajectory. That is not merely adapting to the AI era, we are advancing it through industrial application of technologies we have been building for years. Our large-scale integration of AI is a natural extension of our long-standing strategy and leadership in technological innovation. By embedding AI into the core of our production pipelines and product design, from the leading breathing world of our games to intelligent productivity tools of Youdao and personalized discovery algorithm of NetEase Cloud Music, we are exploring and shaping what's possible to future user experiences across [indiscernible] scenarios.

Looking ahead, we remain focused on advancing technology and creative innovation to drive sustained growth. We view AI not as a replacement, but a powerful amplifier of human engineering, enabling us to deliver to our users worldwide what was previously out of reach. By staying at the epicenter of this technical paradigm shift, we're uniquely positioned to unlock unprecedented long-term value for our users, creators and all of our stakeholders.

That concludes William's comments. I will now provide a brief review of our 2025 annual results with a focus on the fourth quarter. Given the limited time on today's call, I'll be presenting some financial highlights in a streamlined manner. We encourage you to read through our press release issued earlier today for further details. As a reminder, all amounts are in RMB, unless otherwise stated.

Our total net revenue for 2025 were RMB 112.6 billion or USD 16.1 billion, representing a 7% increase year-on-year. For the fourth quarter, total revenues were RMB 27.5 billion or USD 3.9 billion. In 2025, net revenues from games and related value-add services reached RMB 92.1 billion, up 10% from 2024. In the fourth quarter, net revenues grew 3% year-over-year to RMB 22 billion. Specifically, net revenues from online games were RMB 89.6 billion for the full year, up 11% from 2024. In the fourth quarter, online game net revenues increased 4% year-over-year to RMB 21.3 billion.

The quarter-over-quarter decrease in online games net revenue reflected the fact that the prior quarter benefited more -- benefited from the seasonal trends of more events during the summer holidays. The year-over-year growth in the fourth quarter was attributable to higher net revenues from self-development games, such as Fantasy Westward Journey online and the newly-launched games like Where Winds Meet and Marvel Rivals.

Youdao's net revenues from 2025 increased approximately 5% year-over-year to RMB 5.9 billion. In the fourth quarter, net revenues rose 17% year-over-year to RMB 1.6 billion and were broadly stable quarter-over-quarter. The year-over-year increase in the fourth quarter was due to increased net revenues from Youdao's online marketing services and learning services.

NetEase Cloud Music net revenue decreased 2% year-on-year to RMB 7.8 billion for the full year. In the fourth quarter, net revenues were RMB 2 billion, representing a 5% year-over-year increase and remaining broadly stable quarter-over-quarter. The year-over-year growth in the fourth quarter was driven by continued healthy growth in membership subscriptions. Revenue from social entertainment services and others, however, remained lower compared with the same period of last year.

Net revenues from innovative businesses and others totaled RMB 6.8 billion for the full year. In the fourth quarter, net revenues of RMB 2 billion, representing a 10% decrease year-over-year, while increasing 42% quarter-over-quarter. The year-over-year decrease reflected an increase in certain intersegment transaction eliminations. The quarter-over-quarter increase was led by increased net revenues from [ Yangshan ] advertising services and several other businesses included within that segment. For the year, our total gross profit margin was 64.3%. In the fourth quarter our gross profit margin increased year-over-year to 64.2% from 60.8% in the year before.

Looking ahead at the fourth quarter margins in more detail. Gross profit margin was RMB 70.5 billion for our games and related VS compared with 66.7% in the same period of last year. The improvement reflects changes in product mix, including a lower proportion of net revenues from licensed game, which generally have lower margins than our self-developed titles. Our gross profit margin for Youdao was 45.1% compared with 47.8% in the same period of last year. The decrease was primarily driven by a higher net revenue contribution from online marketing services, which has lower gross profit margin.

Gross profit margin for NetEase Cloud Music was 34.7% in the fourth quarter versus 31.9% in the same period a year ago, primarily driven by steady growth in its core online music business. For innovative business and others, gross profit margin was 39.6% compared with 37.8% in the fourth quarter of 2024. The improvement was primarily driven by margin expansion in certain innovative business within the segment, along with the impact of certain intersegment elimination. Our total operating expenses for the fourth quarter were RMB 9.4 billion or 34% of our net revenues.

Taking a closer look at our cost composition. Our selling and marketing expenses accounted for 14.1% of the total net revenue in the fourth quarter. For the full year 2025, the ratio was 13%, remaining broadly in line with prior year. Our R&D expenses remained stable at 16.1% of total net revenues in the fourth quarter. For the full year 2025, the ratio was 15.7%, broadly in line with 2024, reflecting our continued and consistent investment into content creation and product development.

The effective tax rate was 14.8% for the full year and [ 16.4% ] for the fourth quarter. As a reminder, the effective tax rate is presented on an accrual basis and the tax credit vary across each of our entities in different time periods, depending after policies and our operations.

Our non-GAAP net income attributable to shareholders for the fourth quarter totaled RMB 7.1 billion or USD 1 billion, down 27% year-over-year. Non-GAAP basic earnings per ADS for the quarter was USD 1.58 or USD 0.32 per share. For the full year, non-GAAP net income attributable to shareholders was up 11% to RMB 37.3 billion or USD 5.3 billion, which is USD 8.38 per ADS or $1.68 per share.

Additionally, our cash position remains strong. As of year-end, our net cash position was about RMB 163.5 billion compared with RMB 131.5 billion at the end of 2024. In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved the dividend of [ $0.232 ] per share or USD 1.16 per ADS. Lastly, our current USD 5 billion share repurchase program, we had repurchased approximately 22.1 million ADS as the end of December 31, 2025, for a total cost of approximately USD 2 billion.

Thank you for your attention. We would now like to open the call to your questions. Operator, please?

[Operator Instructions] Your first question comes from Jialong Shi with Nomura.

[Foreign Language] I will translate my question.

[Interpreted] Management has touched upon this AI topic in your opening remarks. I would like to explore a bit deeper into the impact of AI on the online gaming industry. We noticed Google's recent project Genie, which some media claims is some [ DeepSeek ] moment. Some people believe AI tools like Google [indiscernible] for game development and therefore, accelerate the entry of new game developers. Any material impact of AI on the competitive landscape for the industry?

My follow-up question is we saw many Chinese internet companies that have decided to ramp up investments in both AI foundation models and computing power. I just wonder where NetEase primarily focused its AI investments?

[Foreign Language]

Okay. Okay. Thank you, William. I will help on the translation.

[Interpreted] Yes. So first, you asked about the Genie, this -- regarding the potential impact of AI on the competitive landscape to our industry, First of all, we believe the market has largely misinterpreted Genie's impact on the gaming industry.

Talking about lower barriers, we can look at what happened in our industry, for example, the handheld -- from the handheld cameras to smartphones. The barrier of video shooting has been continually lowered. However, the threshold for producing Hollywood level of movie has continued to rise. AI does lower the barriers of entry of game development. However, it is also significantly raised the success threshold for top-tier games.

Surely, the widespread adoption of AI tools will help the exposure of creative content. However, the core barrier for commercial blockbuster hit has translated from pure production into integration capabilities. Specifically, how to seamlessly integrate AI technology with complex numeric system, long-term economies of games and engaging social ecosystems. This requires extensive design expertise and operational experiences, which create a deep mode that new commerce can hardly cross.

In the [indiscernible] of AI, production cost is falling, but soft skills has become more scarce and more valuable than ever, including the judgment -- the sense of judgment or high-level gameplay designs, insights into players' demand and refined aesthetic taste.

On the other hand, we believe that greater value of the world model is to inspire brand-new type of entertainment that differ from traditional games. Currently, world models are still far away from practical application. Today's games are built on certainty, predefine rule script events and logics. However, one model are probabilistic, where every [indiscernible] is based on difference. The advantage is that they provide extremely high degree of freedom for creativity, while the disadvantage is their high uncertainty and difficult to control, making them unsuitable for traditional games. Furthermore, they currently face issues like severe latencies and high cost. Of course, we see the rapid iteration and evolution of these models, and it is just the beginning. We believe that it will be a real opportunity for accent teams. NetEase will also actively embrace these cutting-edge technologies to explore brand-new interactive experiences.

Regarding the focus on investment, we don't blindly pursue general large language models. Instead, we aim at building AI expertise who understand the game best and achieve highly efficient AI applications through comprehensive and deep integration. In vertical areas, high-quality private data is more important than computing power, with application scenarios more important than parameter scales.

In terms of differentiated competitive advantages, data and proprietary vertical model is very important. Vertical models trained our years of gaming data can improve our internal industrialization efficiency more accurately than general ones. Focus on -- and we also focus on user experiences and the commercialization. We focus on how AI translates into player experience. Currently, AI-native gameplay intelligent such as [indiscernible] NPCs and also UGC tools implemented in several titles have effectively improved user retention, proving our capability to translate technology into commercial value.

And we also have a group of versatile talent who are highly scarce in our industry. They are not only proficient in algorithm and graphic engines, but also, they have a deep understanding of game design. This cross-discipline capabilities is the key to ensure AI technology [indiscernible] [ 2D ] lens and generate funds. We believe that the explosion of AI technology will accelerate the industry's integration process of the so-called survival of the fittest process. We'll continue to maintain high intensity investment vertical models, our AI-native game play and talent nurturing process, leveraging AI technology to further expand our advantages in high-quality game development and long-term operations.

Your next question comes from Alicia Yap with Citigroup.

[Foreign Language]

[Interpreted] My question is related to Where Winds Meet. The game's recently been a gain of very positive feedback among the overseas user. Could management share the retention rate of this overseas user? And also, what are the key factors contributing to the game's strong performance in [indiscernible]? And then furthermore, what unique gameplay mechanics or the content has particularly resonated with and attracted the international players?

[Foreign Language]

Thanks, William, I will do the transaction.

[Interpreted] Where Winds Meet. The overseas version launched on November 15. And after its global launch, it quickly gained overwhelming popularity and positive review rates across multiple markets. With continuous operation, it topped various global chart for multiple times, and it demonstrated outstanding performance in various operational metrics, including retention rate.

Where Winds Meet has received widespread acclaim from global players for its immersive, high-quality Wuxia open-world experience. And with this low pressure, high freedom gameplay experience raised by separate -- by separating single player and multiplayer modes. And its operational focus of free-to-play, high-frequency update and custom-based [indiscernible]. At the same time, the cross-platform availability accommodates modern players' diverse habit and meet the various needs from different type of players.

Where Winds Meet features Chinese Wuxia scene, build a vivid and high freedom [indiscernible] from multiple experience dimensions, including narrative comeback exploration. The combination of eastern Wuxia-style martial art [indiscernible] skill system and open world experiences deliver fresh, deeply immersive experience for players.

The combination of single player and multiplayer modes ensure that both those who enjoy immerse [indiscernible] exploration and players who enjoy social cooperation can find content they love at the same time. The continuous upgrade -- update of new maps, new dungeons and competitive game play, along with constantly expanding views and casual game play, it caters to a wide range of player preference, including single-player multiplayer combat and casual experiences.

Your next question comes from Alex Liu with Bank of America.

[Foreign Language]

[Interpreted] Given the recent success of FWJ PC unlimited server, can the management discuss whether this business model will be replicated across other legacy titles? And if that's the case, how should we think about the pace of rolling out of that game play?

[Foreign Language]

Thank you, William. I will do the translation.

[Interpreted] In quick summary, [indiscernible] was turning online, the [indiscernible] server has done some things. First is restore the most classic gameplay experience while providing a differentiated gameplay experience at the same time. The second is restructure the economy system or keeping the most important free trading. The third one is to comprehensively optimize the gaming process, specifically for the [indiscernible] servers. And the classic experience lowers the entry barrier for players and differentiated experience that allow the overall player base to expand.

The feasibility of this approach has been validated in this [indiscernible] server. Our product team always maintain close interaction with the player community and listen to players' voice. We believe we'll continue to introduce updates across more titles, provide richer and smoother fresh experiences while restoring the [indiscernible].

Your next question comes from Yang Liu with Morgan Stanley.

[Foreign Language] Let me translate my question.

[Interpreted] My question is about Sea of Remnants, this new game. Could management update us in terms of the current development status and the feedback in the recent testing? And what is -- what will be the commercialization method? And what is the expected timing to launch the game, whether it's possible to launch that in summer this year, and whether it will be a cross-platform global launch?

[Foreign Language]

[Interpreted] Yes. Currently, the development is fully on track, and our plan is to launch that officially in Q3. In the current round of technical test started on February 5, we are pleased to see active participation from players. Our second promotional video for [ warm-up ] quickly amassed more than 10 million views on Bilibili.

Based on the initial feedback, we are glad to see positive feedback regarding product quality and reputations from various parties. We're still observing and collecting player feedback. And we'll carry out targeted improvement on optimizations to further enhance the gaming experience and prepare for the official launch later this year. Thank you.

Your next question comes from Ritchie Sun with HSBC.

[Foreign Language]

[Interpreted]. First of all, [indiscernible] in January. So how is the testing feedback? And how far away in terms of number of months before the launch? And do we have any plans to launch it in the different market as well as different [indiscernible]? Secondly, regarding our plans to launch auto test titles, and we -- because there are [ 2 ] auto chess titles under testing -- helping game license given that there has been some very top competitor in this genre. So what is the rationale and strategic thinking behind of entering this market. And how does NetEase product would -- how would NetEase products differentiate against the experienced competitor?

[Foreign Language]

[Interpreted] Yes. The data and feedback from the closed test in January both met our expectations, first of all. The retention rate and player feedback on the content both proved that the current product direction is sufficiently innovative and attractive.

Currently, our product is still undergoing continuous refinement, aiming to deliver a higher degree of completion and richer content once it meets the market and launched as scheduled. We're targeting a simultaneous global launch across all platforms, including PC, mobile and console. Thank you.

And William will answer the next -- the auto chess question.

[Foreign Language]

[Interpreted] Yes. So yes, the auto chess category is a matured category. And we are doing a elevation and differentiation within this proven category. We select the Chinese demon and ghost culture, making it unique in this genre. It inherently contains strong narrative tension and aesthetic potential. We aim to build a high-quality auto chess game that belongs to the domestic players and also building on the traditional classic of our historically proven high-quality development capabilities. Thank you.

Your next question comes from Yang Bai with CICC.

[Foreign Language] I will translate by myself.

[Interpreted] The company has made remarkable progress include game globalization in recent years with early successes such as Naraka and Marvel Rivals, followed by titles like Where Winds Meet. I would like to ask the management, in terms of overseas expansion strategies, can we say that the company has developed a replicable path to success? Regarding game longer expansion, how does company plan its product pipeline for high-potential markets such as U.S. and Europe? About talent, what is company's global team structure and future talent strategy?

[Foreign Language]

[Interpreted] Yes, sure. Our developed market expansion started from 18 -- from 2018, starting from [indiscernible] success in Japan. And now -- as you mentioned, we have Naraka and we have Marvel Rivals and Where Winds Meet. All of them are very successful in Western market. And we have to say this the success is not easily got. We spent a lot of effort to make that happen. That reflects NetEase as the company with the most R&D capabilities. We have started to grasp a sense of the core success element in overseas markets in Japan and Western market. And we believe we'll be able to produce more titles to be successful in this market in the future.

And also regarding the question on talent, we believe China possess the world's deepest talent pool in game development. And we are fully committed to cultivating top-tier creative minds to deliver premium games that resonate on a global scale. Thank you.

The next question comes from Lincoln Kong with Goldman Sachs.

[Foreign Language]

[Interpreted] So the first question is about Marvel Rivals. So now that it has been live for a year, how is the team evaluating its future life cycle? So what strategy are in place to sustain its momentum and continued product innovation here?

My second question is a follow-up on AI. Basically, the AI application in the gaming industry is primarily focused on R&D assistance and MPC interaction at the moment. So as the capability continue to evolve, how does management view the potential for AI gameplay design, content generation and long-term live service? So do we see any opportunity for AI driven as a core game play to become the next major growth engine for the industry? So is planning any products where all those AI as a core-driven gameplay is in place? And additionally, how should we think about those personalized or service-oriented monetization model based on AI?

[Foreign Language]

[Interpreted] Yes. So first, we answered the Marvel Rivals question. First of all, Marvel Rivals remain stable after one year of its launch, and our team continues to deliver innovative content and game play.

Our recently -- the recently launched Season 6 with Deadpool will be first [ triple ] role hero has been widely welcomed by players. We believe that only excellent content with innovative experiences cause same player engagement. Therefore, while maintaining our regular updates, we will continue to explore innovative experiences driven by new heroes, new gameplay modes and social infections. So that's the question for Marvel Rivals.

And regarding the question on AI, AI has been comprehensively integrated into our production workflow, becoming an indispensable asset in -- that significantly enhance our programming and QA. The -- regarding AI's potential to deliver transformative player experiences, we are certain of this impact. It will happen. We believe NetEase is a pioneer in this field and is one of the company's most well positioned to explore this opportunity and we will aggressively -- to explore this opportunity. We have built a robust pipeline of R&D reserves for this next generation of AI-driven gameplay. Thank you.

And that concludes the question-and-answer session. I would like to turn the conference back over to Brandi Piacente for any additional or closing statements.

Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly. Have a great day. And for those listening from China, we wish you a happy New Year. Thank you, everyone. Goodbye.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good day, and welcome to the NetEase Third Quarter 2025 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brandi Piacente. Please go ahead.

Thank you, operator. Please note that today's discussion will contain forward-looking statements relating to the future performance of the company and are intended to qualify for the safe harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future provenance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion.

A general discussion of the risk factors that could affect NetEase's business and financial results is included in certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20-F and in announcements and filings on the Hong Kong Stock Exchange's website. The company does not undertake any obligation to update this forward-looking information, except as required by law.

During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the third quarter 2025 earnings release issued earlier today.

As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase's corporate website at ir.netease.com.

Joining us today on the call from NetEase's senior management are Mr. William Ding, Chief Executive Officer; Mr. [indiscernible] Hu, Executive Vice President; and Mr. Bill Pang, Vice President of Corporate Development.

I will now turn the call over to Bill, who will read the prepared remarks on William's behalf.

Thank you, Brandi and welcome, everyone, to today's call. Before we begin, I would like to remind everyone that all percentages are based on RMB. The third quarter marked continued momentum and strong execution across our NetEase family. By uniting creativity with exceptional operations, we created more meaningful connections with players driven by our direct portfolio of games that expanded our global reach and reignited our player enthusiasm for heat franchises. Total revenues increased 8% year-over-year reaching RMB 28.4 billion in the third quarter, and revenues from our games and related VS grew 12% in the third quarter compared with the same period last year. Innovative creativity and long-term operations remain a defining force behind NetEase's ongoing clear engagement and global expansion, whether for new launches, we're [indiscernible] titles. Our teams are dedicated to delivering unexpected gaming experiences and responsive live services that are winning over players worldwide.

This strategic creative approach continues to gain traction overseas, amplifying the influence and excitement of multiple games in the third quarter, including our new releases. That's the rising. Our new free-to-play mobile side [indiscernible], quickly [indiscernible] in the United States and other major Western markets for the [indiscernible] launch on August 28. The game has received widespread or claim, securing leading positions on a ton lot across nearly 100 markets worldwide. Future investments iconic powerful game comply across dives setting new time line. The game has earned positive feedback from longtime fans, while gaining traction within the broader cuter game community. The excitement continued in China. We're destining debut on October 16 and immediately top our tolling chart [indiscernible] players nationwide to experience a straining shooting action at their fingertips.

[indiscernible] rivals continue to captivate [indiscernible] fan base around the world, kicking off its fourth season on September 12. The game introduced a wealth of refreshing new content, features, special events and TMOS. Following the update, we reached #3 on Steam's global top seller chart. The new map, [indiscernible], transport players to the Asian East, while the debut of Angela and eagerly anticipate vanguard spurred excitement across the player community. Additionally, inspired by Marvel Animation [indiscernible] Zombies, a limited time [indiscernible] zombie mode was released, featuring challenging bosses, [indiscernible] in time for [indiscernible] Beyond the game, more rivals Ignite celebrated its grand finals at [indiscernible] held in collaboration with EESL [indiscernible] lease players from around the world showcased their exceptional skills and strategies, driving massive engagement in both on-site and online and reflecting more arrivals growing appeal.

As we continue to enrich our global portfolio through diverse partnerships, our original titles are also gaining increasing momentum for a while delivering a distinctive survival open water experience to players globally, once human launched engaging updates in the third quarter, Igonizing its growing global community on October 30, the game introduced a major new scenario centered on the capture and customization of deviations alongside a significant refresh of the PVP experience that provides more intense combat options. The highly anticipated collaboration event with a global [indiscernible] also went live on the same bank, bringing popular powers to a dedicated in-game islands, which further evigrated the player community.

We recently shared some of our upcoming international expansion plans at worldwide gaming events like [indiscernible] 2025, generating even more excitement in the community with engaging player interactions. We exhibited [indiscernible] 2025, showcasing our creative ambition in cultural story talent and next-generation savor building. In [indiscernible] innovative game play that combines [indiscernible]. Each newly unbilled district not only engages our existing fans but also attract new players, driving continued growth in both revenue and monthly active user to new highs in the third quarter. On November 14, we brought [indiscernible] wall featuring dynamic come back to the global market on both PC and Playstation 5. Within just 2 days, we achieved a peak of 190,000 concurrent players, secured the #5 spot among the most played games and #4 position for top seller globally Austria.

Additionally, they became 1 of the top 10 best seller across the United States, Germany, France and several other regions on PlayStation. This underscores the widespread appeal of our captivating [indiscernible] universe to an even broader audience. To further enhance community engagement, the mobile version has commenced preregistration and is there to launch soon. Our highly anticipated title, Atlanta, also garnered significant attention at the Tokyo Game Show. Players show enthusiasm for in-depth game trailers and engaging hands-on play testing. They will draw in by the game's emanate action design, high fidelity visuals and more than urban store talent. Study in dynamic and immersive environment. Enanta lands high-energy action with open world freedom, offering players an experience that goes well beyond conventional gameplay. We are pleased to see monthly excitement and anticipation among this title, including recognition from the Japan Game Award 2025 Future division, where it was named as one of the most promising upcoming games.

Our groundbreaking MMO sort of festive won global across mobile and PC platform on November 7, talking the OS download chart in multiple regions. The international release included AI-powered MPCs and intelligent face creation system. We showcased this at the top game show in September highlighting how emerging technologies are reshaping gameplay experiences. Sort of Justice also continued to engage domestic players in the third quarter, which is ever evolving gameplay and rich content. With the global version now live, sort of Justice is greening its immersive world and cutting-edge AI enhancements to broader international audience. On top of the new releases we are brought to the international stage, our established games are also gaining speed in multiple regions worldwide.

Our real estate [indiscernible] game, raising master has continued to gain popularity overseas through localized content, making it highly resonate with players in Japan since they launched their last year. Player engagement spike in August during its adversary celebration with carefully designed in-game content, booting the games performance in Japan. Exciting esports events, like the Racing Master 2025 Legend Car finals held in Bangkok in August. We brought passionate readers and fans from across Asia together, United ResinMaster's distinctive global community. As firm delivers in live operations, we stay closely attuned to players involved expectations across every title and our domestic games continue to deliver strong performances. Each game update present new opportunities to entertain, engage and grow our communities. This approach continues to resonate with players, driving steady growth across our domestic portfolio for both new titles and games that has been around for that case.

[indiscernible] journey online. One of our longest running flagship titles at 22 years and counting amplifies our dedication to sustain high-quality operations. The game is built around an inclusive ecosystem that allows players of all types to find enjoyment. We continue to inject fresh vitality through new features and mechanics. In July, we launched our innovative unlimited server, which offers coffee gameplay under a popular modern model that eliminates the entry barrier of upfront time-based payments. This generated substantial enthusiasm from long-time fans and new commerce alone significantly booking player engagement. As a result, it has achieved 4 successive record peaking concurrent player count since the third quarter, reaching a height of $3.58 million in early November. [indiscernible] continues to evolve as we regularly introduce new features at players love.

To meet [indiscernible], we launched our new casual server, which is designed for fun and streamlined flight. It offers [indiscernible] Journey mobile signature gameplay in lighter format between simple progression, low threshold and intuitive controls with a surge of new and return players, monthly active users reached a 2-year high in September. Another [indiscernible] continues to engage its community with deep [indiscernible] updates. In October, we concluded closed beta testing for [indiscernible] to Classic. This version recreates the game's iconic style and slower pace game plan, allowing players to experience its extinctive Chinese culture extent. Meanwhile, the existing [indiscernible] clients will undergo a complete upgrade with player progression similarly shared with [indiscernible], the brand-new cross-platform client powered by [indiscernible], our flagship in-house engine.

The upgrade will both enhance grape quality and expand access for players across PC and mobile platforms, allowing them to experience the [indiscernible] universe everywhere. Identify stand base maintained a high engagement level in the third quarter, supported by our steady cadence of seasonal updates and partnerships. New caters released along with each [indiscernible] update including Hunter of [indiscernible] and the survival of [indiscernible] in the quarter infused new energy into Identity V's distinctive world, reinforcing Identity as a top destination for asymmetric gameplay fans. In addition, the games collaboration with the pilots Museum Classic on September 25, added Majestic Group tops or for [indiscernible] to identify manner, adding a new layer of [indiscernible] also experienced robust growth with the third anniversary celebration in July, sparking renewed enthusiasm across the per community. Daily active users exceeded 30 million and average play time hit record high, driving historical engagement level, 2 new game play belts quickly followed in September.

Spooky Treasury Squad presents an intense detection experience, and [indiscernible] introduces a casual and source farming simulator. Both were highly placed attractive way upon returning users due to the National Day holiday. Meanwhile, we continue to evolve Eggy Party's AI-powered [indiscernible] design faster, easier and more enjoyable. We believe that together, these innovations are keeping IT party fresh and this community inspired. Thanks to this ongoing effort, we saw ADP's performance recovered to historical peak level in both daily active users and average play time which we expect will pave the way for smooth development in the coming years. Another example of our player first philosophy and commitment to innovative ad quality content is on EOG, one of China's earliest and most iconic animated style games. On September 10, we launched its nice adversary celebration featuring reached new content and gameplay updates shaped by player feedback.

The highlight was the new character, [indiscernible] whose beautifully crafted CG [indiscernible] gain widespread attention on social media from both long-time fans and broader enemy community. It was broadly halted for innovative use of [indiscernible] and 2D animation tech to create an [indiscernible] visual effect with strong community support [indiscernible] quickly entered China's top 10 grossing chart, demonstrating the vitality of this [indiscernible] and the strength of our long-term operations. Our commitment to engaging players and continuous innovation is social evident in market point. In the third quarter, we rolled out new heroes and exciting collaborations such as Armor Hero in September and the time limited return of Mir in October. [indiscernible] eSports present is also growing.

The 2025 [indiscernible] autumn season marked its first professional league since being selected for the 2026 [indiscernible] games, culminating extruding finals in October. Now in its fourth year, MVPLhas become the cornerstone of Naritas esports ecosystem and China's top professional for the title driving increasing social media engagement across major platforms. We continue to expand our domestic portfolio with new lighthearted experiences that appeal to a wider range of audience. [indiscernible], our MMO featuring medical heartwarming creatures inspired by Chinese fairytales has built a dedicated fan base since its launch in August. Design will support the interface for EZ100 play. The game combines the joy of capturing and nurturing creators with strategic term-based compact and building homeland for them to thrive in backed by our players and supported by world-class partners and global teams.

We're building enduring collaborations that keep expanding what's possible in gaming [indiscernible] continue to elevate the gaming experience for Chinese players. World-class rolled out updates across both classic and modern servers during the third quarter. sustaining strong engagement among long-time fans and newcomers alike. To further enhance localized experience, the game just launched a highly anticipated China exclusive [indiscernible] reported server this week. [indiscernible] of classic expansion with more than gameplay elements. The new server fulfills players long awaited expectations and has reignited excitement across the world class community. Oral Watch 2 has also recently introduced a new Chinese Hero, [indiscernible] further deepened the game's diverse roster of characters. Meanwhile, Hardstone celebrated its 11th anniversary amounting over 100 million registered players in China. A series of special anniversary events drove enthusiastic participation from both loyal fans and new commerce to the game. The [indiscernible] franchise also continue to capture attention. [indiscernible] resurrected the legendary remaster of the installment that helped define the franchise returned to China on August 27.

Newest season released in October, push the games daily active player base to record high. In parallel, Diablo related blockbuster bringing the serious Signature Dark assertive to a new high, will launch in China on December 12. Furthermore, the genres defining real-time strategy game, [indiscernible] also returned on October 28 trigger excitement among fans. Minecraft China Edition, the localized version of the globally popular Sandbox game reached 1.5 million current players on August 17, an impressive milestone in this year of operation committed to nurturing SCGC ecosystem. The game continues to enhance creation tools and expand exposure for community creators, now supporting over 300,000 creators by delivering enriched locally tailored experiences Minecraft China edition has fostered a highly engaged and loyal player community.

Now about titles. Other globally renowned franchises in our portfolio also continue to strive in China engaging vast creative community and expanding local ecosystems. Along with our expanding global presence and evolving development capabilities, our domestic community continues to thrive. Regardless of geographies [indiscernible] we'll continue to put player first and work closely with our partners to deliver memorable high-quality experiences across our [indiscernible] franchises and existing new titles [indiscernible]

Turn to Youdao. Youdao continued to solidly execute its AI native strategy in the third quarter with healthy development of both its education and advertising businesses. For learning services, [indiscernible] grew gross billing by 40% year-over-year in the third quarter, notably a partner with the [indiscernible] science center of the [indiscernible] University driving technical support to a platform, which is designed to identify and support mathematically gifted students. The platform is currently being positive in top-tier schools with a national rollout plan following further refinements. Youdao's online marketing services achieved robust growth in the third quarter. As we advance the use of AI across multiple advertising processes, we further enhance our expertise in programmatic advertising and influencer marketing campaigns elevating the efficiency and effectiveness of advertising. For smart devices, we continue to enrich our offerings with technology upgrades.

In the third quarter, we launched a new 2 [indiscernible], which features a series of intelligence capabilities such as precise scanning for long-form and multi-graphic problems to help students learn more effectively. Turning to Yanxuan. The business continued to perform well across major e-commerce platforms, led by steady development in its core categories such as petfood, HomeSense and home growth preceding technology-driven innovations, Yanxuan's product launches have consistently stood up in the market. This new cat food product use a refund production process making it smoother and easier for path to digest, burning it widespread place for addressing common digestive issues. Across the NetEase family of businesses, we continue to build on our foundation of creativity, quality and disciplined execution. Looking ahead, we are focused on advancing our development capabilities and global reach, scaling our original [indiscernible] into lasting franchises and elevating every experience we deliver guided by innovation and the trust of our communities. We're shaping the future defined by meaningful both and enduring impact.

That concludes William's comments. I will now provide a brief review of our 2025 3rd quarter financial results. Given the limited time on today's call, I will be presenting abbreviated financial highlights. We encourage you to [indiscernible] our press release issued earlier today for further details. As a reminder, all lines are [indiscernible] otherwise stated. Total net revenue for the third quarter were RMB 28.4 billion or USD 4 billion, representing an 8% increase year-over-year. Total net revenue from our games and related BS were RMB 23.3 billion, up 12% year-over-year. Specifically, net revenues from all games RMB 22.8 billion, up 3% quarter-over-quarter and 13% year-over-year. The quarter-over-quarter increase in online games net revenue was due to higher net revenues from self-development games such as finance Westward online and [indiscernible] of Justice as well as certain license games.

The year-over-year increase was attributable to higher net revenue from self-developed games, such as [indiscernible] and newly launched [indiscernible] as well as certain licensed games. [indiscernible] net revenue reached RMB 1.6 billion, representing increased quarter-over-quarter, driven by growth in smart devices and online marketing services. Year-over-year, revenue rose by 4% attributed to a higher contribution from online marketing services. NetEase core music net revenue RMB 2 billion, stable quarter-over-quarter but down 2% year-over-year. Notably, revenue from membership subscriptions continued to show healthy growth both sequentially and year-over-year. Revenues from social entertainment services and others though still lower compared with the same period last year, stabilized quarter-over-quarter. Net revenues for innovative businesses and others were RMB 1.4 billion, 15% quarter-over-quarter and 19% year-over-year.

The sequential decline was mainly driven by Yanxuan due to its high base during the 618 e-commerce festival. The year-over-year decrease reflected an increase in certain intersegment transaction elimination and to a lesser extent, decreased net revenue from Yanxuan and certain other businesses. Gross profit for the third quarter of 2025 was RMB 18.2 billion, up 10% year-over-year, primarily driven by increased net revenue from [indiscernible]. This quarter, our total gross profit margin was 64.1%, looking at our third quarter margin in [indiscernible]. Gross profit margin was 69.3% from [indiscernible] related BS compared with 68.8% in the same period of last year. The improvement was mainly driven by a higher mix of PC games in China, which typically have higher margins. Our gross profit margin for [indiscernible] was 42.2% compared with 50.2% in the same period last year.

The decrease was mainly due to the decline in gross profit margin of online marketing services. Gross profit margin for NetEase Cloud Music was 35.4% in the third quarter versus 32.8% in the same period a year ago. The margin improvement was primarily driven by steady growth in our core online music business with lower contributions from social entertainment and other lower-margin services or innovative business and others, gross profit margin was 43.0% compared with 37.8% in the third quarter of 2024. Despite the impact of intersegment elimination mentioned earlier, the improvement was mainly driven by better margins at Yanxuan and higher revenue contribution from certain innovative business with relatively stronger margins. The total operating expenses for the third quarter was RMB 10 billion or 36% of our net revenues, taking a closer look at our cost composition.

Our sales and marketing -- our selling and marketing expenses as a percentage of total net revenue, or 15.7% compared with 14.5% for the same period last year. primarily due to increased marketing expenditures related to online games. Our R&D expenses maintained stable at 16% of total net revenues in the third quarter compared with 16.9% for the same period last year reflect our consistent investment in content creation and product development. The effective tax rate was 13% for the third quarter. As a reminder, effective tax rate is presented on an accrual basis. in accordance with at policies and our operations. Our non-GAAP net income attributable to shareholders for the third quarter totaled RMB 9.5 billion or USD 1.3 billion, up 27% year-over-year. Non-GAAP basic earnings per ADS for the quarter was USD 2.9 or USD 0.42 per share.

Additionally, our cash position remains robust, with net cash of approximately RMB 153.2 billion as of September 30, 2025, compared with RMB 142.1 billion at the end of last quarter. In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved a dividend of USD [ 0.114 ] per share or USD 0.57 per ADS. The company announced today that its previously approved share repurchase program of up to USD 5 billion for the company's ADS and all shares in open market or other transactions will be extended for an additional 36 months until January 9, 2029. As of September 30, 2025, approximately 22.1 million ADS has been repurchased under this program for a total cost of approximately USD 2 billion.

Thank you for your attention. We would now like to open the call to your questions. Operator, please.

[Operator Instructions] Your first question comes from Xueqing Zhang with CICC.

[Interpreted] congratulations on the third quarter. My question about [indiscernible] journey. Given that WPC has consistently set [indiscernible] for online player count since this summer. We would appreciate that the company is sharing its operational structure for this Aerogreen title. And we have several follow-up questions on it. Firstly, what's the core driving factors behind the unlimited per server. And secondly, what's the user profile with the ratio of retaining players to new players. And lastly, is this model reflexible across other flagship types.

[Interpreted] Okay. I'll do the translation. The longevity of finance posture online PC is based on highly stable economic system and unique enriched gaming experiences which are very rare in most other games. Our team has been dedicated to providing sustainable fund experience. stable ecosystem and innovative content. This commitment has been recognized and issued by the players as well as we can see from the market. In the unlimited server, we have removed the upfront time-based payment, streamlined the gameplay and systems offer a lighter gameplay format, while preserving the core designs that has evolved in our classic server over time.

Compared with the comprehensive and diverse game experience on the content, unlimited server offers enjoyable experiences in the simple -- more simple direct manner with a smooth learning curve, unlimited survey has attractive both many former players back to the game as well as new players. This user demographic of unlimited server actually also benefited the classic server by introducing additional new and returning players. Finance was turn online as a legacy game has been operated for 22 years. We remain committed to the innovation and diversified experience to meet continues to meet the demand from our community. Looking ahead, we will continue to focus on long-term development, providing our broad player community with various choices in one game.

Your next question comes from Thomas Chong with Jefferies.

[Interpreted] [indiscernible] the demand trend in China as well as overseas. On the other hand, can management also talk about the overseas expansion strategy?

[Interpreted] Okay. I will do the translation. During our business operation process of doing business in overseas market, we have accumulated successful experiences which is powered by the strong development capability we have in house here. For example, in Japan, we have next out identify very popular national network games. And last December, we released more rivals globally super successful. And just November 15, this month, we released were wins met in global market. And all this product achieved a very good level of success overseas, and we hear a lot of positive feedback from the committee as well. In the -- what we see is that in the overseas market, NetEase as one of the most prominent game development powerhouses in our industry. And we are the only company that brings the purely truly Chinese authentic online games to global market, for example, where we -- it's a very Chinese we're on big successful companies that bring this level of authentic experience to the online gamers globally and receive very positive feedback.

Looking ahead, we believe we have the capability to bring more and more success cases to oversea markets and provide gamers from the globe with more and more high-quality custom and services. We have confidence in that.

[Foreign Language]

Yes, there are some further comments from William. One is that actually still also in this month, we also roll out our sort of justice into global market. And of course, 3 years ago, we rolled out [indiscernible] on global market. And as you heard that the -- we showed our games to public for both [indiscernible], the market has very big expectations. We showed Total Game Show this year, and it's been named one of the most promising upcoming games by the Japan games award 205 future division. That is we are both based in China, and we are also carving our territory in the global market. That is what we have been doing. We have some successes, and it's -- we're going to keep doing.

Next question comes from Ritchie Sun with HSBC.

[Interpreted] Regarding Identity V, we have seen the volatility in grossing and DAU in recent months. Can management discuss the reasons behind it and the strategy to improve the performance. Secondly, where [indiscernible] have returned to China for 1 year already and about to face tough comps. Can management discuss the performance metrics now versus 1 year ago and plans to drive sustainable growth in the future? And [indiscernible] is also coming back soon. Can management discuss the monetization potential considering the more intense competition in the ARPG genre?

[Interpreted] Okay. I will translate this part first. Indeed, it's true that there has been some from competing products during the summer holidays particularly among general users in lower-tier cities. However, we also have noticed that the impact has eased since the start of back-to-school. And in fact, talking about September, Identity V has reached historical high starting from the new semester compared to the same period in previous years. While Q4 historically has never been the peak season for Identity V. Team is focusing on preparing new content and marketing campaign for the Chinese New Year cycle. During this period, we offered their demand diversified demands on diversified gameplays from community. So we have been preparing more comprehensive and large field [indiscernible] well, on the other hand [indiscernible] , we're also working on the next [indiscernible]

[Foreign Language]

Yes. As we approach the end of current expansion of a World of Warcraft is indeed expected to see decline in performance compared to this last period. Meanwhile, Hearthstone has a steady maintains cadence of expansion pace updates over the past years. with different operation strategy from the past, the performance of both games actually maintained higher than status than when was when the operation closed previously. Moving forward, we'll continue to deepen our collaboration to sustain our unique competitive offerings in the China market. And one specific example we want to give here is the Titan reforge server of World of Warcraft that indeed was initiated by together by our Chinese team and U.S. team together.

We set the target and design together developed specific for this demand. And the result is very good. So that is one example to see by working closer together, we can achieve better results compared to the past. Talking about the [indiscernible] has its own unique quality and we have brand new business plans in place. We believe it was sure deserve market share and commercial performance in the ARPG segment after launch. In addition, [indiscernible] has achieved record high user engagement since its launch infusing vitality into the RTS genre.

Your next question comes from Alicia Yap with Citigroup.

[Interpreted] So just wanted to follow up. I think management earlier mentioned [indiscernible] was recently showcased at the total gain show and had a pretty good feedback. Just wanted to know more details about the user feedback. And then how should we think about the market positioning and also the differentiation of this game? And then it also seems that being included present rich content and also the innovative game play. So any comments on that? And then are there any updates regarding the next testing timing and also the official launch timing in 2026 that you can share? .

[Interpreted] We showcased the latest update on play testing of [indiscernible] show which attracted significant attention on social media across the world, winning one of the most promising upcoming titles by the Japan [indiscernible] 5 future division. We believe with a blend of quality content, innovative monetization strategy as well as our focus on long-term operations we anticipate the game will secure a new position within the industry ecosystem. We're currently planning to further enhance our development process the dividend process is on track now, and we'll proceed with testing and launches as scheduled. And on time comes, we have further updates this year.

Your next question comes from Jialong Shi with Nomura.

[Interpreted] We noticed from media, it seems to us the number of new games in your pipeline every year. is smaller than in the past few years. If our observation is correct, I just wonder what is your current strategy towards launching new rooms into the market? And if that is -- does not launch as many new games each year, what will be the growth driver for your online gaming business?

[Interpreted] Okay. I will do the translation. The whole company will be very focused on our success products. And among the already success product will keep refining and keep focusing. We don't want to distract too much focus on to charter many, many new products, which we don't have super confidence. For new product, we'll look at new products more prudently and more focus, making sure that whatever new product we're building, is confidence power in the cost market. We actually don't see this to [indiscernible]. We believe being focused as one of the core confidence a company need to have. That's our view.

Our next question comes from Felix Liu with UBS.

[Interpreted] My question is on the recent news of organizational changes in your game department. Will these changes impact the near-term operations of the related games and how does management think about the current organizational structure under the context of your game strategy? And should we expect more changes to come?

[Interpreted] Okay. I will do the translation. Regarding the recent adjustment and changes, it's a part of the company's normal personnel turnover process. And that's been carried out without impacting [indiscernible] game. That's rest assured. The adjustment is aiming to make the operation more focused and efficient, allowing us to concentrate keep concentrating on creating enduring high-quality products. For example, for existing evergreen titles, we ask our teams to stay focused continuously refining and optimizing the games. For new titles that show evergreen potentials, we'll allocate sufficient resources to develop them into evergreen long-lasting successful games. However, for teams that are not keeping place with the market trends for user demand we also must trim decisively to make sure healthy development of our core initiatives. NetEase has been especially for 28 years, and our commitment to creating high-quality products has remained unchanged. We'll allocate more resources to Evergreen titles and provide more opportunities to teams who are creative and willing to innovate.

Your next question comes from Lincoln Kong with Goldman Sachs.

[Interpreted] So my first question is about AI. So we have actually seen some of the games like apart or Justice Mobile has already integrated with applications. So going forward, for our existing portfolio and the new games, how should we think about AI can bring additional opportunities to our game risk? And the second question is in terms of the future new games given that the company now focus more on quality of those new games, so how should we think about the potential important game genre going forward, specifically like for the shooting game general globally, I think we have seen a rapid growth so how would [indiscernible] to serve differentiate ourselves in this shooting genre?

[Interpreted] Okay. I'll do translation. First of all, regarding the question on we have been using AI and development and AI is very important in game development and operation, and we have accumulated tons of [indiscernible] in this area. And compared -- especially compared to many of our peer companies from overseas, we have more anti experience in this area. We have deployed massive resources in the research of AI and how to use AI in the process game development, innovation and operation. Actually, the user experience is the best answer to guide us on how we should deploy technologies. But we don't think we have time here today for a detailed specific user experience explanation. Regarding your next question on the future direction of product. As we explained we'll focus on the concentrating resources on building really high-quality flagship products, the product that we have conviction on this success.

We want to aggressively blindly open many products. That's not our action will be focused -- we'll do focused targeted approach to do new projects. And in the future coming years, we believe that is compared to most many other companies in our industry globally. We're one of the companies that has clear vision on the future individuals, future products, and we will make grand breakthroughs.

Your next question comes from Yang Liu with Morgan Stanley.

[Interpreted] Let me translate my question. My question is about the C of remnant this new game. Could the management share about the R&D development and expected launch timing? And what will be the commercial strategy for this title? And is there any direct peers or competitor for this game? And what native can do to differentiate?

[Interpreted] I will do the translation. First of all, the relevance is a very important product to us. We focus on that very much. The team has very rich development and operational experience in the company. And the game is built out our self-developed game engine will support both PC, mobile and [indiscernible] as well. On the detailed gameplay and content, we believe we have a clear decisions on how to do that. We believe it's going to be a fresh experience in the market. It's going to be a multicharacter cultivation kind of type, but not the traditional new way. The sailing experience on the ocean as well as the rich combination between characters and classes we believe, will bring a fresh unexperienced ocean experience to the gamers.

And that concludes the question-and-answer session. I would like to turn the conference back over to Brandi Piacente for any additional or closing remarks.

Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly. Have a great day. Thank you.

Good day, and welcome to the NetEase Second Quarter 2025 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brandi Piacente. Please go ahead.

Thank you, operator. Please note that today's discussion will contain forward-looking statements relating to the future performance of the company and are intended to qualify for the safe harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect NetEase business and financial results is included in certain filings of the company with the Securities and Exchange Commission including its annual report on Form 20-F and in announcements and filings on the Hong Kong Stock Exchange's website. The company does not undertake any obligation to update this forward-looking information, except as required by law.

During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the 2025 Second Quarter Earnings News Release issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com.

Joining us today on the call from NetEase senior management are Mr. William Ding, Chief Executive Officer; and Mr. Bill Peng, Vice President of Corporate Development. I will now turn the call over to Bill, who will read the prepared remarks on William's behalf. Bill?

Thank you, Brandy, and thank you, everyone, for participating in today's call. Before we begin, I would like to remind everyone that all percentages are based on RMB. During the second quarter, we advanced each of our businesses through the development of high-quality and innovative offerings. Total revenues increased 9% year-over-year driven by our diverse portfolio of games. We saw strong player engagement in our established franchises and released new titles that expanded our reach across genres and geographies.

Building on our first quarter year-on-year growth momentum, revenue from our games and related VAS rose 14% in the second quarter compared to the same period last year. As we expand our expertise across more genres, we now offer a diverse range of gaming experiences to players around the world, which we believe lays a solid foundation for our global expansion. In the second quarter, we launched several new global titles, while also extending the reach of our well-known domestic franchises.

Looking first at our newest releases. Our Super Hero Team-Based Technical RPG Marvel Mystic Mayhem on June 25. Game quickly garnered attraction group of players eager to collect iconic superheroes and super billions to battle the nightmare dimension. Its player base quickly surpassed 1 million with the game talking the U.S. dollar chart in multiple regions and ranking #2 in the U.S.

To further the community's excitement we plan to introduce more playable characters and expand the storyline approximately every 6 weeks.

The global release of our tactical shooter game, Fragpunk on Xbox and PlayStation quickly gained traction after its April 29 debut. In May, it reached #2 spot on PlayStations North America free-to-play download chart. Originally launched on PC in March. Fragpunk has been winning our players with this groundbreaking shard card system. Now with the signature blend of strategy and high-octane shooting experience available console. It continues to build momentum.

Our commitment to growing the existing hit has also brought fresh energy to games already resonated with players. Once Human commemorated is annual version 2.0, [indiscernible] with a major content update and a series of exciting announcements. Players were introduced to End the Screen, a new nightmare CMPV scenario that takes them through multiple layers of dreamscapes, offering a fresh take on the apocalyptic world. A new class system was also unveiled featuring three classes, Chef, Gunner and Beast master as the first page, each bringing unique abilities to support diverse play files. This 2.0 update gained massive popularity, propelling the game to #4 on Steam's global top eldercare.

We also rolled out a new PVP spinoff of Once Human on July 30 called Gray Zone, which amplifies the throw of the game's survival open world experience. With unrestricted combat, allowing attacks anytime anywhere. This innovation targets on broader PVP audience through more intense and liberated battles. In June, we began testing a new customer server allowing private servers and customizable seasonal settings that encourage creativity and diversity, giving players even more autonomy.

For Marvel Rivals, we launched Season 3 on July 11, introducing Phoenix as a new playbook here alongside a slate of exciting events and team maps. [ Setting Clinton ] were now stocking spreads. Players join forces and unleash unique skills to save the world. With fast-paced open compact and the fan favorite Phoenix during the rooster, the game quickly climbed to #1 on team's top setter chart in the U.S. and subsequently reached #2 globally following their summer party events.

Beyond in-game update, we are also deepening community engagement through more off-line events in San Diego Comicon. And exclusive behind the same look at the hero creation process, generated tremendous excitement among fans. In May, we also kicked off our Marvel Rivals Ignite e-sports tournaments. With mid-season Finals successfully cut at our Guangzhou Campus recently. Partially players from around the world have come to compete, and we look forward to crowning the first champion with our finals at the end of the year.

With our domestic IP, we continue to extend our player communities and prepare for global expansion. Players of our [indiscernible] open world RPG, Where Winds Meet, continue to be impressed by our steady stream of high-quality content. In the second quarter, we launched a new [ SCSI ] update, featuring the exhaustive dessert landscape of [ Tufan ]. The story line centered on the unyielding spirit of both general and [indiscernible] citizens during the period of unrest resonated deeply with players. By restoring Asian fresco in game, in collaboration with [ Sun ] Art academic. We brought emotional storage live with stunning visual effect. Further fueling player enthusiasm. By the end of July, [ ADAS ] amassed over 40 million total players, while the release of the summer version for [indiscernible] propelled to #5 on China's top grossing chart.

Furthermore, we are thrilled to have successfully concluded the latest round of overseas testing on PC and Playstation 5 at the end of July, placing us firmly on track for its global launch. Sword of Justice, previously known as Justice Mobile marked its second anniversary with the surge in players. We launched a massive update introducing new gameplay features, expanded areas and a wide selection of new cost teams, propelling the title to #3 on China's LS top crossing chart. Global preregistration opened in May and we look forward to bringing this ground-breaking MMORPG experience to more players worldwide.

Dunk City Dynastic also make global players on May 22, and where it reached #1 our LSO target in multiple regions and #2 in the U.S.

As we enhance the global appeal of our games, our established franchises continue to keep players highly engaged, highlighting the strength of our operations and content updates that stand the test of time.

In May, Fantasy Westward Journey online, driving strong interest from player community, which is How to Train your Dragon collaboration, bringing the movies iconic cost teams and dragging mount into the game. The momentum continued with the launch of the innovative unlimited server in July. More notably, this evergreen title reached a new all-time high peak in concurrent players in August, surpassing 2.93 million, an impressive milestone after 22 years of operation.

Our long-term commitment to innovation and maintaining a healthy in-game ecosystem continues to pay off. Similarly, Fantasy Westward Journey Mobile launched a new faction, [indiscernible] which generated strong participation and introduced a vertical screen mode to expand accessibility across play scenarios. Delivering fresh content and elevating player experiences remains central to the game's enduring success. Its revenue posted another record high in the second quarter. The Westward Journey franchise struck at emotional core with players by launching a series of activities seen around below romantic legend [ Bisera ], featuring [ slim ] game plan, costumes and crossovers with the [indiscernible] all tied to the 2025 year of spend. Westward Journey Online 2 continue to build excitement through its annual PVP finals and content updates. While Westward Journey Mobile saw strong participation from both loyal and returning players through the launch of a new server.

Knives out continues to showcase our long-term operational capabilities, maintaining its status as a household game in Japan through dedicated content updates and culturally resonant collaborations. This quarter's crossover with Jujutsu Kaizen, the hit Japanese manga that captivate global audiences, was met with strong player enthusiasm and propelled again to #3 on Japan's LS top grossing chart.

Identity V once again, broke its quarterly revenue record in the second quarter, supported by an enthusiastic fan base. On July 3, identify teamed up with paper bright a popular Chinese horror mystery puzzle game to introduce a chilling wedding sim world featuring immersive labs and new costumes. The crossover drove the game to #7 on China's top grossing chart. Momentum continued in August when the crossover with Frieren: Beyond Journeys End generated significant enthusiasm and propelled it to #4 on China's LS top crossing chart. For Eggy Party anniversary on June 27, we introduced effective in-game updates that transformed Eggy Island with candies, cakes and toys, adding new maps and equipment to deepen strategic game point. Wave of anniversary activities, along with the highly anticipated crossover with [ Sungdong ] ship a strong player excitement and lifted Eggy Party to #5 on China's iOS top grossing chart on July 11.

The [ Nata ] [indiscernible] point franchise also hit another milestone. Its PC game entered its fourth year with brand-new extraction mode and iconic IP crossovers, including Bruce Lee and degenerated drawing [ Zango ]. The mobile game also introduced enhancements to extraction-based survival feature with dynamic weather and new mechanics. The update, [indiscernible] the player base and push the title to #6 on China's iOS top losing care.

After a year of close collaboration, Blizzard titles continue to calculate players in China. On July 15, World of Warcraft and its community celebrated the game's 20th anniversary of operation in China and waiting plans to launch a China exclusive Titan reforged server in November. This announcement reignited enthusiasm among local players and attracted significant attention from broader global community.

Meanwhile, Heartstone launched its latest expansion, the last city of Angora on July 9, featuring a brand-new path system. This new adventure invites players to embark on the quest set for the last city with 145 [indiscernible] card and a new keyword kindred to empower their decks. Shortly after the update. The game climbed to #5 on China's iOS top casting charge.

In April, Overwatch launched its new stadium mode, which has been very popular with players. And in June, they introduced its 17th season featuring a series of updates to power after game experiences. At [indiscernible] World 2025, its collaboration with Porsche sparked more fun excitement, featuring a special in-game skin of the iconic Porsche model.

We are also thrilled to announce that Diablo II resurrected will be returning to China on August 27, with plans for launch of Diablo IV underway. This will enhance the classic franchise for a dedicated fan base.

Innovation remains at the core of how we build and operate games. We bring the same creative ambition and operational rigor to every new titles and the development. Several exciting new games are in the pipeline, each powered by creative game play, bow designs and cutting-edge technology. These titles reflect our commitment to pushing the boundaries of gaming experiences and will position us to expand our player community and further fuel our long-term growth.

Sea of Remnants, our upcoming cross-platform Ocean Adventure RPG received encouraging feedback from its first testing at the end of June. The game invites players into an exciting open water exploration where they uncover the choice behind the 4,000 identity through exhilarating label compacts and term-based battles. Players recruit a crew of allies, build ships and interact with characters adding strategic debts as players shape the faith of the surrounding world based on each decision they make. Currently, we are actively refining the game for its release in 2026.

In June, we are excited to unveil plans for Blood Message, our first AAA single player title. This cinematic story-driven action adventure will be available on PC and consoles, inviting players to step into the heart of [indiscernible] uprising as the nameless messenger and his young son. With immersive third-person gameplay and powered by cutting-edge technology. Blood Message is designed to deliver an epic blockbuster experience for players worldwide.

Planet Party Time, our cross-platform game branding social simulation and party game play has undergone a series of tests to further refine experiences ahead of its official launch. Players can express their creativity on cosmic journey where they can design, build and cultivate their own planets, while enjoying over 120 exciting mini games with friends.

Destiny Rising, a new free-to-play mobile sideline RPG shooter that delivers players to a new alternative time line of Destiny universe will launched on August 28 and across mobile devices. In addition, we plan to launch several licensed titles in China. Most recently, on July we launched Supervise an innovative competitive multiplayer game on PC that provides a unique blend of mobile, battle royale and hero shooter elements.

And we expect Wild Gate, a PVP multi-player shooter game that plans tactical ship-to-ship combat with fast-paced first-person action to meet players in China later this year.

The development for Anata, our highly anticipated urban in open wall title is also well underway. Across our portfolio, we remain focused on building lasting success through continuous innovation and high-quality operations that keeps our games relevant and exciting for players. From evergreen franchises that keep breaking records to build new titles shaping the next generation of game plan. We are committed to delivering distinctive experiences that players love. As we continue raising the bar of the engagement and creativity, we are paving the way for long-term growth domestically and worldwide.

Turning to our other businesses. In Q2, Youdao executed its AI native strategy effectively across both its learning and advertising businesses, delivering its first second quarter operating profit. For Learning Services, Youdao [indiscernible] continue to drive product innovation with our proprietary LLM, Confucius, while we continue to iterate our AI applications. such as Mr. Si AI Tutor gaining increasing user traction.

The online marketing services, our newly launched AI advertising placement optimizer an end-to-end AI agent solution covering demand analysts, strategy formation, data analytics and iteration optimization. Achieving capabilities that previously relied on human expertise. Leveraging our LLM, Confucius, we now offer comprehensive AI-empowered advertisement services. spending creative ad production, placements and post-campaign analysis.

NetEase Cloud Music remain committed to driving quality development across its core music ecosystem. To build on our unique content offerings. We continue to expand our catalog of corrected content while strengthening our origin music library. During the second quarter, we expanded collaborations with Korean music labels and renowned Chinese Artist, while generating strong traction with several in-house tracks such as [indiscernible].

We also continue to innovate our product features and optimize our music-centric community to deliver even better music experiences for our users. For example, our innovative music plan feature, magic live player, which is designed to recreate the immerse field of live concert enhanced with less cape orientation support received a widespread acclaim from music lovers. We're constantly advancing our music-centric monetization and further expanded our subscriber base, resulting in healthy growth in subscription-based membership revenues.

Turning to Yanxuan. We continue to maintain our leading position in key categories. For example, Yanxuan Home Sounds, such as bathroom frequency and car refreshers, has been widely recognized by consumers, secure a solid market position with leading sales. Other iconic products such as cat food also maintained a stable market position.

Across our NetEase family of businesses, we are focused on innovation and refining our product and content to deliver long-term value for users and stakeholders. Looking ahead, we will continue to push the boundaries of player experiences, scaling original IP to build lasting franchises and growing alongside with collaborative global partners to reinforce our position as a creator of high-impact gone defining game.

That concludes William's comments. I will now provide a brief review of our 2025 second quarter financial results. Given the limited time on today's call, I will be presenting abbreviated financial highlights. We encourage you to read through our press release issued earlier today for further details.

As a reminder, all amounts are in RMB, unless otherwise stated. Total net revenue for the second quarter were RMB 27.9 billion or USD 3.9 billion, representing a 9.4% increase year-over-year. Total net revenue from our games and related [indiscernible] were RMB 22.8 billion, up 14% year-over-year. Specifically, Net revenues from online games were RMB 22.1 billion, a quarter-over-quarter decrease of 6% and a year-over-year increase of 15%. The sequential decline was primarily attributable to decreased revenue following the Chinese New Year push, while the year-over-year growth was mainly driven by increased revenue contribution from newly launched titles such as well wind med and more rivals as well as established games like Identity V.

Youdao's net revenue were RMB 1.4 billion, up 7% year-over-year and 9% quarter-over-quarter. This growth was primarily driven by the enhanced utilization of AI technology to boost our learning services and online marketing services.

NetEase Cloud Music net revenue were only $2 billion, up 6% from previous quarter, while declining 4% from the same period last year. Notably, revenues from online music services maintained healthy development, both quarter-over-quarter and year-over-year. Net revenue from innovative businesses and others were RMB 1.7 billion, up 5% from previous quarter, while declined 18% year-over-year. The quarter-over-quarter growth was primarily driven by Yanxuan while the year-over-year decline was mainly due to decreased net revenue from Yanxuan advertising services and certain other businesses in this segment.

Gross profit for the second quarter of 2025 was RMB 18.1 billion, up 13% year-over-year. This was primarily driven by increased net revenue from online games, as previously mentioned. This quarter, our total gross profit margin was 64.7%, looking at our second quarter margin in more detail. Gross profit margin was 70.2% of our games and related [indiscernible] compared with 70% in the same period last year at 68.8% in the last quarter. The quarter-over-quarter improvement was mainly from the higher proportion of net revenues from our self-developed game, which carry higher margin and license gain. Our gross profit margin for Youdao was 43% compared with 48.2% in the same period last year. The decrease was mainly due to the increased revenue contribution from online marketing services with relatively lower gross profit margin. Gross profit margin for NetEase Cloud Music was 36.1% in the second quarter versus 32.1% in the same period a year ago. The margin improvement primarily resulted from strong monetization of our core online music business and ongoing cost of optimization.

For our innovative business and others, gross profit margin was 42.3% compared with 34% in the second quarter of 2024. Total operating expenses for the second quarter were RMB 9 billion or 32% of our net revenues.

Taking a closer look at our cost composition. Our selling and marketing expenses as a percentage of total net revenue was 12.8% compared with 13.7% for the same period last year. mainly due to increased revenue contribution from Games and [ BS ] over the past year.

Our R&D expenses as a percentage of total net revenue remained stable year-over-year at 15.6% in the second quarter. compared with 15.2% for the last quarter. We remain committed to invest into content creation and product development. The effective tax rate was 14.7% for the second quarter.

As a reminder, the effective tax rate is presented on an accrual basis, depending on appeal policies and our operations. Our non-GAAP net income attributable to shareholders for the second quarter totaled RMB 9.5 billion or USD 1.3 billion, up 22% year-over-year. Non-GAAP basic earnings per ADS for the quarter was USD 2.8 or USD 0.42 per share. Additionally, our cash position remains robust. With net cash of approximately RMB 142.1 billion as of June 30, 2025, compared with RMB 137 billion at the end of last quarter. In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved a dividend of USD 11.4 per share or USD 0.57 per ADS.

Lastly, under our current USD 5 billion share repurchase program, which started in mid-January of 2023. We had repurchased approximately 22.1 million ADS as of [indiscernible] 2025, for a total cost of approximately USD 2 billion. Thank you for your attention. We would now like to open the call to your questions.

[Operator Instructions] Your first question comes from Yang Liu with Morgan Stanley.

[Foreign Language] Let me translate my questions my first question is regarding the war wings meat in terms of the monetization in management view. Is it as early success? Or is it meeting expectations? Or it's already fully ramped up? And my second question is regarding 1 human. What drives the grossing rebound for this title? Does this have the good potential to become evergreen game? And what is user revenue split in China and overseas.

[Foreign Language]

Thank you for the answer, and I will do the translation. So first question is regarding Where Winds Meet. Where Winds Meet has delivered a solid performance as we have explained and exceeded our initial expectation before launch in both in terms of active players and monetization. And more notably, the long term -- we believe the long-term performance has been quite stable, demonstrating the promising potential for the sustainable success. We win me uniquely adopt a business model that combines high-quality content and cosmetic only monetization strategy.

With a well-planned cadence for releasing high-quality content, along with the cosmetic only approach that does not impact the character cultivation process Where Winds Meet -- we believe Where Winds Meet has potential for healthy and lasting monetization cycle. And we are very confident in the future of the game. And in terms of the future continuous development for the content for this game, we'll make continuous, if not bigger investments in the future.

And the second question is regarding Once Human. Behind the balance of performance of Once Human, we actually -- we launched a welcomed significant updates, which we call the annual 2.0 version in early July. The new scenario, and the spring and the new class system has been well both well received by players. The 2.0 version game massive popularity. That's why the game was pushed on to #4 position on Steam's global top seller charge following the amount of the update. Additionally, we also rolled out a new PVP spin-off called Gray Zone by the end of July -- on July 30, offering players what we call that rule-free combat experience that enhance the intensity of the game's PVP gameplays.

Look back, the success of the new scenario demonstrate that the seasonal scenario mode has great potential, and we will continue to launch new scenarios to meet players' seasonal demand. In the meanwhile, we have also introduced a private server called customer survey in China products serve, which allow players to customize their own setting. We're looking forward with ongoing updates of the scenario experiences and the health ecosystem built around the customer service, the product has potential for long-term sustainability. Regarding your question on the user distribution between China and international. The user distribution is about 50-50 between China and the rest of the world. And revenue distribution is about 2% to 3% compared with China versus rest of all. Hope that answers your question.

Your next question comes from Alicia Yap with Citigroup.

[Foreign Language]

[Interpreted] Can management share -- so additional color on the overall lease games performance on the sequential basis. Do you think you have targeted or the potential of new games? Or do you think they are still untapped user for Blizzard title? Will the future growth of Blizzard titles mainly to be driven by content update and promotional activities on the monetization upside? Or is it will also come from the new user growth those face therapy.

[Foreign Language]

[Interpreted] Thank you for your question. First of all, please products are extremely high-quality work, high-quality games. As we explained in this call and previous calls, after a year of returning the product operation in China market via various mechanics with the online and offline rich market activities. The game metrics has surplus level positive level previous prior to the shutting down of the server. And thanks for our dedication of the local operation for both online and off-line.

As we continue to deepen our collaboration with Blizzard developing team, our mutual trust and the coordination is increasing. Looking to the future. As long as we implement more improvements that align with the local tastes and habits local Chinese players. We believe there is a good opportunity that we can attract even more new players as well as engaging those who haven't returned yet. Long story short, we believe there's big potential for business games in China market.

Your next question comes from Yang Bai with CICC.

[Foreign Language]

[Interpreted] Thank you management. The company has a number of shooting games set to launch in the second half of 2025, including PC and mobile games as well as self-developed and licensed products. which is your perspective on the overall competitive landscape of your parent shooting game sector

[Foreign Language]

Yes. Thank you for your question. Yes, the shooting game genre is a very big genres. And also a very big real marketplace as well. And the players have very high expectation on the quality of games. For example, you have to have very high quality or production and we have to have gameplay innovation. It's a high bar to entry. For NetEase, we will keep investing to this genre. And we believe in the future, we can continue to come up with competitive market in this big genre.

Your next question comes from Richie Sun with HSBC.

[Foreign Language]

[Interpreted] Thank you, management. So first of all, regarding Marvel Rivals after the launch of Season 3, we see the steam revenue ranking rebounded, but then drop to below top 10 afterwards. So how would you evaluate the effectiveness of the new strategy so far? Have we already seen the peak? And what are the new gameplay skins or characters in the backlog that we should watch out for to drive the game to regain this momentum?

And secondly, regarding Sea of Remnants, can management share the feedback of the first testing in June? And what would be the monetization model? And how would you evaluate the addressable market and longevity of this genre of the games?

[Foreign Language]

Okay. So first, regarding your question on Marvel Rivals. Marvel Rivals recently launched Season 3 and the mid-season finals of Morris Ignite also concluded. We have observed upward and stabilized trend on both DAU and revenue, which make us believe that the new seasonal content update and strategy are effective. Looking forward, we'll continue to introduce more new gameplay mechanics new heroes, new popular costumes based on our new cadence of seasonal update.

For your questions regarding Sea of Remnants. Sea of Remnants Is a very important product to us, and we have high confidence that will make this top-tier successful game and the game will be launched next year. So regarding the detail of this game, please stay tuned. Thank you.

Your next question comes from Felix Liu with UBS.

[Foreign Language]

[Interpreted] I have two questions. Number one is on your evergreen titles. We noticed recovery in quite a few of your evergreen titles such Eggy Party and Fantasy Westward Journey online to management share more color on the status of the mentioned two titles. Any reasons for their recent recovery? And in the long run, how does management think about resourcing on existing titles and IPs versus developing new games from farm app?

My second question is on another game in your pipeline, which is Anita. What is the R&D status of Anata? When do you expect this game to launch? And how should we think about the competition landscape for Anata considering there are a few new games from your competitors that also fall into this genre.

[Foreign Language]

Okay. So yes, let me translate the answers in different parts. So first, regarding your question, the first part, [indiscernible] answered about the Westward Journey PC version. So after a year of continuous experience optimization, various metrics of Fantasy Westward Journey online has observed recovery and stable improvement. And also, as we mentioned, the newly launched unlimited server has been well received by players. And we're super excited to announce that the number of peak and concurrent users set a new record on early August at the 2.93 million PC number. And we have been running this game for so many years, and we are confident that with continuous innovation Fantasies Westward Journey PC will be continuing growing in the future in the future that we can foresee.

And the next question is regarding Eggy Party. Eggy Party, as you know, is one of this kind UGC -- EGC platform kind of game. And after 3 years of exploration, we have mastered the methodology of operating this type of game. And in the future, we're going to keep investing to the game, keep encouraging high-quality EGC content to prosper the ecosystem. And also, we're going to keep investing to the marketing to keep promoting the game to make it household game for everyone in China and have everyone in China understand that is the associated game with this whole family party game kind of concept. That's for the Eggy Party.

And for your question regarding Anata. Anata is now well underway in the mass production stage. And with ongoing efforts to strengthen the core experience and prepare for the long-term content pipeline as well. in the face of competitors, we are more focused on whether we are able to create superior gaming quality that differentiate us from existing market offerings. And also, we -- looking forward, we anticipate that new content and progress will be reviewed around too Game show time late September. Please stay tuned for product news. Thank you.

Your next question comes from Iran Amanda Zheng with Bank of America.

[Foreign Language]

[Interpreted] Can management share your marketing and operational strategies for your own game and also new games? What are your key focuses? And if any changes that you would like to highlight this year? And what kind of results are you seeing? What is your expectation for the sales and marketing expenses?

[Foreign Language]

Yes. So we have been doing this business for 20-something years. For new games, all games, how to operate, how to market, we have developed a mature methodology and standard operating procedures. We know how to invest into marketing and when to invest in the marketing. And of course, this -- now we're embracing new master like the social media like the power of AI, everything. So we believe we know went to spend were to spend precisely and were not to spend as well. So in the future, you will see our marketing is going to be more precise and more effective in the future.

Your next question comes from Lincoln Kong with Goldman Sachs.

[Foreign Language]

[Interpreted] I have two questions. The first one is on AI. So in recent months, the rapid development of AI Mark 3 model has been quite notable. So has company seen any acceleration in an empowered through AI. So what are the existing bottlenecks that still remain? And what are our plans to -- for AI adopting our existing games? And when can we expect some truly AI-native games? My second question is on the overseas market. Company actually recent games has been globally published by ourselves. So what are the important directions or game genres, we are focused for future overseas expansion?

[Foreign Language]

Yes. So regarding your first question about AI, there's a joke saying that every the life span of every big model is only 3 months. Basically, every new model comes out every couple of months. We have been invested a lot of resources to embrace AI to leverage AI in our development, in our operations, how to embrace AI in our two chains, everything.

So looking to the future. AI is going to play a more and more important role. And we are looking into the future that some there might be games designed by AI could be fun game, that's the future we're looking forward to. And regarding your next question for the overseas publishing, yes, this is a critically important capability of us to be able to publish an globally in different geos.

The global market is kind of geo-based in North America, in South America, in Japan, every market is an attribute. We have learned through a bunch of global game operation from more rivals, Once Human and also in West market and identified and LifeSouth in Japan market, we have learned a tremendous amount of firsthand hands-on experience as well. from operation. And looking forward, in the next couple of years, you will see our global operation -- global operation will keep growing, fueled by our more important new games. And we do believe growing globally is going to be a very important task for us. Thank you for your question. And operator, let's go with one last question, please.

Your last question comes from Jialong Shi with Nomura.

[Foreign Language]

[Interpreted] So I just have one question. Can management share the performance of mobile mistake in overseas markets so far. In addition, are there any updates on the expected launch time for the domestic version what are the company's expectation or specific targets for this game going forward?

[Foreign Language]

Okay. So as you know, Marvel Mystic Mayhem was officially launched over in overseas market on June 26, with this unique style in innovative game design. The game has received multiple features from Google and App Store and also editor interview as well. And the update was fantastic for release at the end of July has been well received by players as well. In the meantime, we do face some long-term growth challenges for the game, and we're in the process of taking that how should we grow the game and keep it again in the long run.

And that concludes the question-and-answer session. I would like to hand the conference back to Brandi Piacente for any additional or closing remarks.

Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly, and have a great day and good evening.