NetEase reports strong first-quarter profit growth as it jostles with miHoYo for No.2 spot in China’s recovering games market

NetEase reported a 53.7 per cent surge in first quarter profit amid a recent market recovery, as the country’s long-time No.2 Chinese video games company continues to fend off increased competition from Genshin Impact developer miHoYo in the world’s largest video gaming market.

The Hangzhou-based company on Thursday reported net profit of 6.8 billion yuan (US$983.6 million) for the three months to end-March, beating the US$716.6 million consensus estimate of analysts surveyed by Bloomberg. That marked a significant turnaround from the previous quarter, when net profit dropped 30.6 per cent year on year.

Total revenue increased 6.3 per cent to 25 billion yuan during the quarter, better than the analysts’ estimates of US$3.5 billion. The uplift came as the world’s video gaming market continues to battle back from a long winter of intense regulatory scrutiny, and as Beijing keeps a steady pace of new game licence approvals this year.

However, NetEase is facing intense competition for the No.2 spot in China behind Tencent Holdings from Shanghai-based miHoYo, which continues to disrupt the market.

Last November, privately-owned miHoYo saw its monthly mobile gaming revenue overtake NetEase’s sales, making it the second most-grossing mobile games publisher in China for the first time in over a year, according to market data firm Sensor Tower.

Although NetEase regained the position in January and March, miHoYo got the second spot again last month, as the company released its latest blockbuster Honkai: Star Rail.