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Chinese tech company NetEase (NASDAQ: NTES) saw its shares rise almost 10% on Thursday after it announced its second quarter revenues.
Online games drive NetEase revenues
In the period ending June 30, 2019, net revenues for the company were $2,734.0 million, representing 15.3% increase year-over-year. Roughly $1,665.5 million was from its online game services component, which continues to be the company’s main revenue driver, which grew 13.6% year-over-year.
Total operating expenses decreased 5.5% year-over-year to $675.8 million. In addition to video games, NetEase draws revenues from its e-commerce, advertising, and other businesses.
Highlights from the second quarter include launching the games BuildTopia, Love is Justice, Sky, and an updated version of Tom & Jerry in China.
The company also reported international success with mobile games reaching the top grossing charts in Japan. Additionally, it acquired a minority stake in Behaviour Interactive, opened a new development studio in Montreal, and announced strategic collaborations with IP owners such as Marvel Entertainment and The Pokémon Company in the second quarter.
NetEase also recently announced a partnership with developer Creative Assembly in early August to bring its Total War franchise to China. The strategy game series, published in other countries by Sega, includes 13 titles with Total War: Three Kingdoms being the most recent installment. Three Kingdoms takes place in China during the Han dynasty and sold over 1 million copies during its first week.
NetEase invests in Shanghai esports stadium
NetEase has made strong moves in recent weeks, taking aim at its chief rival Tencent in the video game and esports space.
The company plans to invest over ¥5 billion ($725 million) into building an esports park in Shanghai’s western Qingpu District. Planning and construction for the facility’s first stage has already begun, with several more facilities being planned. The park will also host what NetEase claims to be China’s first large professional esports stadium.
NetEase currently owns the Shanghai Dragons esports team, which competes in the Overwatch League. Each Overwatch League team owner will host two events in 2020, giving NetEase opportunities to show off its park and engage with esports fans.
The Shanghai government revealed in June that it wanted the city to become an esports capital within three-to-five years. As part of this plan, the city government has encouraged companies to invest in constructing esports stadiums that will host high profile tournaments. Next to the US, China has one of the biggest audiences for video game and esports entertainment.
Online gaming will likely continue to drive NetEase’s revenues in the coming quarters, bolstered by recent and future acquisitions.
Although NetEase stock has been volatile over the past year, caused by the ongoing trade war between the US and China and a slowing domestic economy,
NetEase stock has been volatile in the last year due to the US-China trade war and a slowing domestic economy. However, its recent moves could set the company up for a breakout.
