4Q25结果：尽管收入未达预期，但合同负债增长强劲

growth despite revenue miss 4Q25 results: strong contract liabilities growth Target PriceUS$161.50(Previous TPUS$164.00)Up/Downside30.7%Current PriceUS$123.52 NetEasereported 4Q25 results:total revenue increased by 3%YoY toRMB27.5bn, 4%below Bloomberg consensus estimate due to slower-than-expected games revenue growthand theprolongedrevenuerecognitionperiod.Operatingincome grew by 6% YoY to RMB8.3bn,6% below consensusestimate.That said, weremainconstructiveon FY26E revenuegrowthoutlook, given that 1) contract liabilities were up by 34% YoY in 4Q25; 2) several highlyanticipatedgames are lined up for launch in FY26,includingSea of Remnants.We slightly lower our FY26-27E total revenue forecastsby 1-2% in view of the China Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk Strong growth of contract liabilities.Games & related VAS revenuegrewby 3% YoY toRMB22.0bn in4Q25. Contractliabilitieswere up by 34% YoYto RMB20.5bn as of Dec 2025,showing healthy game business and user Ye TAO, CFA(852)3850 5226franktao@cmbi.com.hkStock Data engagementtrend.By titles:1)Where Winds Meet surpassed 80mncumulative players after its global launch; 2)Fantasy Westward Journey franchiseand Blizzard titles achieved record-high annual revenue in FY25;3) legacy titles likeIdentity VandEggy Partyallmaintainedstrong user engagementthanks to innovative content and events. In terms of thepipeline, several highlyanticipatedgames are lined up for launch in FY26E: Sea of Remnants(3Q26E), YaoYaoQi (2026E),ANANTA(TBA), andBlood Message(TBA).In terms of AI, managementbelievesthat the World Modellike Genie 3 will not pose direct threatsto the company, butmayenhance Shareholding Structure William Lei DingSource:Company data Music and Youdao businesses achievedsteady growth.NetEaseCloudmusic revenueincreased by 5%YoY to RMB2.0bn in 4Q25,mainlyattributableto the solid growthof online musicrevenue.Youdao revenuegrewby17% YoY to RMB1.6bn in4Q25, mainly driven by the solid growth Expanding margin and steady shareholder return.Overall GPM rose by3.4pptsYoY to 64.2% in 4Q25, primarily due torevenue mix shift to higher-margin self-developed games.OPM expanded by 1.0ppt YoY to 30.2% in4Q25.Thecompanymaintaineddecent shareholder returnof RMB14.5bnin 2025, equivalent to c.3% of the market cap. As the company’s tradingvolumein HK exceeded 55% of total trading volume in HK & US markets in Source: FactSet We use sum-of-the-parts (SOTP) valuation methodology to value NetEase’s four mainbusiness segments. Our SOTP-derived target price is US$161.5, comprising: 1) US$142.1for the online game business (88.0% of total valuation), based on17x 2026EEV/EBIT which ison par withthe industry average. 2) US$0.7for Youdao (0.4% of total valuation), based on0.9x 2026E EV/revenue, on parwith the industry average; 3) US$3.4(2.1% of total valuation) for theNetEaseCloud Music business, based on3.0x2026E EV/revenue,on par with the industry average; 4) US$1.5(0.9% of total valuation) for the innovative businesses and others, based on1.0x2026EEV/revenue, on par with the industry average; 5) US$13.8for net cash. Disclosures& Disclaimers Analyst Certification The research analyst who is primary responsible for thecontent of this research report, in whole or in part, certifies that with respect to the securities or issuerthat the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securitiesor issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (asdefined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listedcompanies covered in this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12monthsNOT RATED: Stock is not rated byCMBIGM OUTPERFORM:Industry expected to outperform the relevant broad market benchmark over next 12 monthsMARKET-PERFORM:Industry expected to perform in-line with the relevantbroad market benchmark over next 12 monthsUNDERPERFORM:Industry expected to underperform the relevant broad market benchmark over next 12 months Address: 45/F, Champion Tower, 3 Garden Road,Hong Kong, Tel: (852) 3900 0888 Fax: (852) 3900 0800CMB InternationalGlobal Ma