NetEase Inc

NASDAQ:NTES

Q3-2025 Earnings Call

[Operator]

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.

[Brandi Piacente]

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.

[Bill Pang, executive]

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]

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

[Xueqing Zhang, analyst]

[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.

[Unknown Executive]

[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.

[Operator]

Your next question comes from Thomas Chong with Jefferies.

[Thomas Chong, analyst]

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

[Unknown Executive]

[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.

[Thomas Chong, analyst]

[Foreign Language]

[Unknown Executive]

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.

[Operator]

Next question comes from Ritchie Sun with HSBC.

[Ritchie Sun, analyst]

[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?

[Unknown Executive]

[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]

[Ritchie Sun, analyst]

[Foreign Language]

[Unknown Executive]

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.

[Operator]

Your next question comes from Alicia Yap with Citigroup.

[Alicis a Yap, analyst]

[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? .

[Unknown Executive]

[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.

[Operator]

Your next question comes from Jialong Shi with Nomura.

[Jialong Shi, analyst]

[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?

[Unknown Executive]

[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.

[Operator]

Our next question comes from Felix Liu with UBS.

[Felix Liu, analyst]

[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?

[Unknown Executive]

[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.

[Operator]

Your next question comes from Lincoln Kong with Goldman Sachs.

[Lincoln Kong, analyst]

[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?

[Unknown Executive]

[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.

[Operator]

Your next question comes from Yang Liu with Morgan Stanley.

[Yang Liu, analyst]

[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?

[Unknown Executive]

[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.

[Operator]

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.

[Brandi Piacente]

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.