By Sherry Qin

NetEase is scheduled to report third-quarter results on Thursday. Here is what you need to know:

NET PROFIT: The Chinese videogame giant is expected to post a 5.0% drop in net profit to 7.45 billion yuan, equivalent to $1.03 billion, according to the consensus estimate of 13 analysts in a FactSet poll. That would mark its second consecutive quarter of lower profit as its gaming segment faced headwinds.

ADJUSTED NET PROFIT: Excluding share-based compensation expenses, adjusted net profit is expected at 7.95 billion yuan, according to FactSet, down from 8.645 billion yuan a year earlier.

REVENUE FORECAST: Revenue likely fell 2.6% to 26.55 billion yuan, with its online games segment expected to post a 5.8% decline. NetEase's PC games revenue was likely resilient, but its mobile games performance could be soft due to the lackluster performance of the recent new title "Naraka: Bladepoint Mobile" and a high base a year ago following the strong debut of blockbuster title "Justice Mobile," Nomura analysts said in a recent note.

NetEase's Hong Kong-listed shares edged 0.9% higher in the third quarter. The stock slumped 10% in a single day after it reported a profit miss and computer-game sector softness in the second quarter, prompting some analysts to call the share-price move an overreaction. They have said that NetEase's overall gaming performance remains intact, with rich titles in the pipeline. Its shares got a boost in late September as Chinese equities rose broadly on Beijing's aggressive policy push.

WHAT TO WATCH:

--NetEase is slated to launch two new titles in the fourth quarter, "Where Winds Meet" and "Marvel Rivals," which Nomura thinks will strengthen its game portfolio, particularly its PC gaming business. Meanwhile, the PC version of "Fantasy Westward Journey" will likely become less of a drag on its revenue next year after the in-game adjustments carried out in the first half of this year, Nomura said.

--The company's PC games may overtake mobile games as the key growth driver in the near term, supported by the robust results from Blizzard's "World of Warcraft," HSBC analysts said in a note. However, higher contributions from the lower-margin Blizzard games may weigh on NetEase's bottom line, they said. Still, HSBC commends NetEase's game-development capability and efforts to diversify into titles with higher daily active users.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

November 12, 2024 06:40 ET (11:40 GMT)

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