HANGZHOU,China,Feb. 20,2025 -- NetEase,Inc. (NASDAQ: NTES and HKEX: 9999,"NetEase" or the "Company"),a leading internet and game services provider,today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31,2024.

Fourth Quarter2024Financial Highlights

Net revenues were RMB26.7 billion (US$3.7 billion),a decrease of 1.4% compared with the same quarter of 2023.

Games and related value-added services net revenues were RMB21.2 billion (US$2.9 billion),an increase of 1.5% compared with the same quarter of 2023.

Youdao net revenues were RMB1.3billion (US$183.6million),a decrease of 9.5% compared with the same quarter of 2023.

NetEaseCloud Music net revenues were RMB1.9billion (US$257.6million),a decrease of 5.3% compared with the same quarter of 2023.

Innovative businesses and others net revenues were RMB2.3 billion (US$313.1 million),a decrease of 17.0% compared with the same quarter of 2023.

Gross profit was RMB16.3 billion (US$2.2 billion),a decrease of 3.3% compared with the same quarter of 2023.

Total operating expenses were RMB8.5 billion (US$1.2 billion),a decrease of 15.1% compared with the same quarter of 2023.

Net income attributable to the Company's shareholders was RMB8.8 billion (US$1.2 billion). Non-GAAP net income attributable to the Company's shareholders was RMB9.7 billion (US$1.3 billion).[1]

Basic net income per share was US$0.38 (US$1.89 per ADS). Non-GAAP basic net income per share was US$0.42 (US$2.09 per ADS).[1]

[1] As used in this announcement,non-GAAP net income attributable to the Company's shareholders and non-GAAP basic and diluted net income per share and per ADS are defined to exclude share-based compensation expenses. See the unaudited reconciliation of GAAP and non-GAAP results at the end of this announcement.

Fourth Quarter 2024and Early2025 Operational Highlights

Introduced more new blockbuster games around the globe,reinforcingNetEase's leadership across diverse genres and growing global momentum.

Marvel Rivalstopped Steam's global top sellers chart shortly after its launch on December 6,amassing over 10 million registered users within 72 hours and over 40 million to date. Its Season 1 update in January 2025 sparked another surge,claiming the No. 1 spots on Steam's top sellers and most-played charts worldwide.

Where Winds Meetsurpassed 3 million downloads in China within four days of its PC launch and topped the iOS download chart for approximately two weeks following its mobile launch. A successful release of the game's mobile version drove total players across PC and mobile to over 15 million within twoweeks.

Justicemobile gametopped the iOS download chartsin Hong Kong,Macau and Taiwan and reached No. 1 positionon the iOS top grossing chart in Taiwan in January 2025.

Blizzard titlesWorld of Warcraftand Hearthstone continued to generate strong enthusiasm from the Chinese gaming community,while the return of Overwatch 2on February 19,2025 further fueled players' passion.

Established titles maintained their popularity,such as Westward Journey Online 2,Fantasy Westward Journey Onlineand mobile game,Infinite Borders,Onmyoji,Identity V,Naraka: Bladepoint and Justice franchise,demonstrating NetEase's prowess in long-term game operations.

New game lineup for global markets,includingFragpunk,Destiny: Risingand MARVEL Mystic Mayhem,positioned to further diversify game portfolio.

Youdao continued to focus on technology-driven innovation and profitability enhancement,achieving a 10.3% year-over-year increase in operating profit during the fourth quarter and recording first-ever annual operating profit in 2024.

NetEase Cloud Music continued to drive quality development across its music-centric ecosystem,remaining committed to nurturing its unique community and enriching its distinctive content offering. It also further improved music-oriented monetization supported by enlarging subscription-based memberships.

"We boldly pushed the boundaries of innovation once again in 2024,delivering groundbreaking gaming experiences that captivated players worldwide," said Mr. William Ding,Chief Executive Officer and Director of NetEase. "Our new hit titles not only redefined gameplay but also set new industry benchmarks,while our legacy franchises gained fresh momentum through striking enhancements in design,storytelling and immersive content. As our diverse game portfolio expands across more genres and engages an ever-growing global audience,we remain dedicated to fostering creativity and collaborating with top talent and strategic partners to shape the next wave of gaming trends.

"Beyond gaming,Youdao and NetEase Cloud Music maintained healthy development in 2024,led by our focus on meticulously crafted content and exceptional user experiences. Our enduring pursuit of innovation,global expansion and game diversification is fueling lasting value creation across the industries we serve and for our partners and shareholders alike," Mr. Ding concluded.

Fourth Quarter 2024Financial Results

Net Revenues

Netrevenues for the fourth quarter of 2024were RMB26.7 billion (US$3.7billion),compared with RMB26.2billion and RMB27.1billion for the preceding quarter and the same quarter of 2023,respectively.

Net revenues from games and related value-added services were RMB21.2 billion (US$2.9billion) for the fourth quarter of 2024,compared with RMB20.9billion each for the preceding quarter and the same quarter of 2023. Net revenues from the operation of online games accounted for approximately 96.7% of the segment's net revenues for the fourth quarter of 2024,compared with 96.8% and93.4%for the precedingquarter and the same quarter of 2023,respectively. Net revenues from mobile games accounted for approximately 65.3% of net revenues from the operation of online games for the fourth quarter of 2024,compared with 70.8% and 76.7%forthe precedingquarter and the same quarter of 2023,respectively. The change in revenue mix was mainly due to the increased net revenues from PC games,including certain licensed titles.

Net revenues from Youdao were RMB1.3billion (US$183.6million) for the fourth quarter of 2024,compared with RMB1.6billion and RMB1.5billion for the preceding quarter and the same quarter of 2023,respectively.

Net revenues from NetEase Cloud Music were RMB1.9 billion (US$257.6million) for the fourth quarter of 2024,compared withRMB2.0 billion each for the preceding quarter and the same quarter of 2023.

Net revenues from innovative businesses and others were RMB2.3billion (US$313.1million) for the fourth quarter of 2024,compared with RMB1.8 billion and RMB2.8billion for the preceding quarter and the same quarter of 2023,respectively.

Gross Profit

Gross profit for the fourth quarter of 2024 was RMB16.3 billion (US$2.2 billion),compared with RMB16.5 billion and RMB16.8 billion for the preceding quarter and the same quarter of 2023,respectively.

The quarter-over-quarterand year-over-year decreasesin games and related value-added services' gross profit were primarily due to decreased net revenues from certain mobile games,partially offset by increased net revenues from PC games,including certainlicensed titles.

The quarter-over-quarterand year-over-year decreases in Youdao's gross profit were primarily due to decreased net revenues from itslearning services.

The quarter-over-quarter decrease in NetEase Cloud Music'sgross profit was primarily due to decreased net revenues from social entertainment services.

The quarter-over-quarter increase in innovative businesses and others'gross profit was primarily due to increased gross profit from Yanxuan and advertising services. The year-over-year decrease was primarily due to decreased gross profit from several businesses within the segment including advertising services.

Gross Profit Margin

Gross profit margin for games and related value-added services for the fourth quarter of 2024 was 66.7%,compared with 68.8% and69.5% for the preceding quarter and the samequarter of 2023,respectively.The quarter-over-quarter and year-over-year decreases were mainly attributable to higher revenue contribution from licensed games which have comparatively lower gross profit margins.

Gross profit margin for Youdao for the fourth quarter of 2024 was 47.8%,compared with 50.2% and 49.9% for the preceding quarter and the samequarter of 2023,respectively.The quarter-over-quarter and year-over-year decreases were mainly due to decreased revenue contribution from its learning services.

Gross profit margin for NetEase Cloud Music for the fourth quarter of 2024 was 31.9%,compared with 32.8% and 30.3% for the preceding quarter and the same quarter of 2023,respectively. Theyear-over-year increasewas mainly due to increased net revenues from sales of membership subscriptions and continued improvement in cost control measures.

Gross profit margin for innovative businesses and others for the fourth quarter of 2024 was 37.8%,compared with 37.8% and 34.4% for the preceding quarter and the same quarter of 2023,respectively. The year-over-year increase was mainly due to increased gross profit margins from Yanxuan.

Operating Expenses

Total operating expenses for the fourth quarter of 2024 were RMB8.5billion (US$1.2billion),compared with RMB9.3billion and RMB10.0billion for the preceding quarter and the samequarter of 2023,respectively. The quarter-over-quarter and year-over-year decreases were mainly due to decreased marketing expendituresrelated to games and related value-added services.

Other Income/(Expenses)

Other income/(expenses) consisted of investment (losses)/income,interest income,exchange gains/(losses) and others. The quarter-over-quarter and year-over-year increasesweremainly due tonet exchange gains in the fourth quarter of 2024 compared with net exchange losses recorded in the preceding quarter and the same quarter of 2023.

Income Tax

The Company recorded a net income tax charge of RMB1.4 billion (US$189.7 million) for the fourth quarter of 2024,compared withRMB1.3 billion and RMB1.1 billion for the preceding quarter and the same quarter of 2023,respectively. The effective tax rate for the fourth quarter of 2024 was 13.4%,compared with 16.1% and 13.8% for the preceding quarter and the same quarter of 2023,respectively. The effective tax rate represents certain estimates by the Company as to the tax obligations and benefits applicable to it in each quarter.

Net Income and Non-GAAP Net Income

Net income attributable to the Company's shareholders totaled RMB8.8 billion (US$1.2 billion) for the fourth quarter of 2024,compared with RMB6.5 billion and RMB6.6 billion for the preceding quarter and the same quarter of 2023,respectively.

Basic net income was US$0.38 per share (US$1.89 per ADS) for the fourth quarter of 2024,compared with US$0.28 per share (US$1.40 per ADS) each for the preceding quarter and the same quarter of 2023,respectively.

Non-GAAP net income attributable to the Company's shareholders totaled RMB9.7 billion (US$1.3 billion) for the fourth quarter of 2024,compared with RMB7.5 billion and RMB7.4 billion for the preceding quarter and the same quarter of 2023,respectively.

Non-GAAP basic net income was US$0.42 per share (US$2.09 per ADS) for the fourth quarter of 2024,compared with US$0.32 per share (US$1.61 per ADS) and US$0.32 per share (US$1.57 per ADS) for the preceding quarter and the same quarter of 2023,respectively.

Fiscal Year 2024Financial Results

Net Revenues

Net revenues for fiscal year 2024 were RMB105.3 billion (US$14.4billion),compared with RMB103.5 billion for fiscal year 2023.

Net revenues from games and related value-added services were RMB83.6 billion (US$11.5billion) for fiscal year 2024,compared with RMB81.6 billion for fiscal year 2023. Net revenues from the operation of online games accounted for approximately 96.2% of the segment's total net revenues for fiscal year 2024,compared with 92.9% for fiscal year 2023. Net revenues from mobile games accounted for approximately 72.7% of net revenues from the operation of online games for fiscal year 2024,compared with 75.2% for fiscal year 2023. The change in revenue mixwas mainly due to higher net revenues generated by PC games such as Naraka: Bladepointand licensed titles.

Net revenues from Youdao were RMB5.6billion (US$770.7million) for fiscal year 2024,compared with RMB5.4 billion for fiscal year 2023.

Net revenues from NetEase Cloud Music were RMB8.0billion (US$1.1 billion) for fiscal year 2024,compared with RMB7.9 billion for fiscal year 2023.

Net revenues from innovative businesses and others were RMB8.1billion (US$1.1 billion) for fiscal year 2024,compared with RMB8.6 billion for fiscal year 2023.

Gross Profit

Gross profit for fiscal year 2024 was RMB65.8billion (US$9.0 billion),compared with RMB63.1billion for fiscal year 2023.

The year-over-year increase in games and related value-added services'gross profit was primarily due to increased net revenues from the operation of online games,such as Identity Vand Naraka: Bladepoint PC and mobile games.

The slight year-over-year decrease in Youdao's gross profit was mainly due to decreased revenue contribution from its learning services,which was partially offset by increased revenue contribution from its online marketing services.

The year-over-year increase in NetEase Cloud Music's gross profit was primarily attributable to increased net revenues from sales of membership subscriptions and continued improvement in cost control measures.

The year-over-year increase in innovative businesses and others'gross profit wasprimarily due to increased gross profits from Yanxuan and several other businesses included within the segment.

Operating Expenses

Total operating expenses for fiscal year 2024were RMB36.2 billion (US$5.0billion),compared with RMB35.4billion for fiscal year 2023. The year-over-year increase was primarily due to higher research and development investments for games and related value-added services.

Other Income/(Expenses)

The year-over-year decrease was mainly due tohigher impairment provisions related to certain investments,which was partially offset by higher interest income resultingfrom the Company's increased net cash position.

Income Taxes

The Company recorded a net income tax charge of RMB5.5 billion (US$748.2 million) for fiscal year 2024,compared with RMB4.7 billion for fiscal year 2023. The effective tax rate was 15.3%for fiscal year 2024,compared with 13.8%for fiscal year 2023.

Net Income and Non-GAAP Net Income

Net income attributable to the Company's shareholders for fiscal year 2024 totaled RMB29.7billion (US$4.1 billion),compared with RMB29.4billion for fiscal year 2023.

Basic net income was US$1.27 per share (US$6.36 per ADS) for fiscal year 2024,compared with US$1.25 per share (US$6.26 per ADS) for fiscal year 2023.

Non-GAAP net incomeattributable to the Company's shareholdersfor fiscal year 2024totaled RMB33.5billion (US$4.6 billion),compared with RMB32.6 billionfor fiscal year 2023.

Non-GAAP basic net income was US$1.43 per share (US$7.17 per ADS) for fiscal year 2024,compared with US$1.39per share (US$6.94per ADS) for fiscal year 2023.

Other Financial Information

As of December 31,2024,the Company's net cash (total cash and cash equivalents,current and non-current time deposits and restricted cash,as well as short-term investments balance,minus short-term and long-term loans) totaledRMB131.5billion (US$18.0billion),compared with RMB110.9 billion as of December 31,2023. Net cash provided by operating activities was RMB39.7billion (US$5.4 billion) for fiscal year2024,compared with RMB35.3 billion for fiscal year 2023.

QuarterlyDividend

The board of directors approved a dividend of US$0.24405 per share (US$1.22025 per ADS) for the fourth quarter of 2024 to holders of ordinary shares and holders of ADSs as of the close of business on March 6,2025,Beijing/Hong Kong Time and New York Time,respectively,payable in U.S. dollars. For holders of ordinary shares,in order to qualify for the dividend,all valid documents for the transfer of shares accompanied by the relevant share certificates must be lodged for registration with the Company's Hong Kong branch share registrar,Computershare Hong Kong Investor Services Limited,at Shops 1712-1716,17th Floor,Hopewell Centre,183 Queen's Road East,Wanchai,Hong Kong,no later than 4:30 p.m. on March 6,2025 (Beijing/Hong Kong Time). The payment date is expected to be March 17,for holders of ordinary shares and on or around March 20,for holders of ADSs.

NetEase paid a dividend of US$0.0870per share (US$0.4350 per ADS) for the third quarter of 2024 in December 2024.

Under the Company's current dividend policy,the determination to make dividend distributions and the amount of such distribution in any particular quarter will be made at the discretion of its board of directors and will be based upon the Company's operations and earnings,cash flow,financial condition and other relevant factors.

Share Repurchase Program

On November 17,2022,the Company announced that its board of directors hadapproved a share repurchase program of up to US$5.0 billion of the Company's ADSs and ordinary shares in open market transactions. This share repurchase program commenced on January 10,2023 and will be in effect for a period not to exceed 36 months from such date. As of December 31,approximately21.2 million ADSs had been repurchased under this program for a total cost of US$1.9 billion.

The extent to which NetEase repurchases its ADSs and its ordinary shares depends upon a variety of factors,including market conditions. These programs may be suspended or discontinued at any time.

** The United States dollar (US$) amounts disclosed in this announcement are presented solely for the convenience of the reader. The percentages stated are calculated based on RMB.

Conference Call

NetEase's management team will host a teleconference call with a simultaneous webcast at 7:00 a.m. NewYork Time on Thursday,February 20,2025 (Beijing/Hong Kong Time: 8:00 p.m.,Thursday,2025). NetEase's management will be on the call to discuss the quarterly results and answer questions.

Interested parties may participate in the conference call by dialing 1-914-202-3258and providing conference ID: 10044895,15 minutes prior to the initiation of the call. A replay of the call will be available by dialing 1-855-883-1031 and entering PIN: 10044895. The replay will be available through February 27,2025.

This call will be webcast live and the replay will be available for 12 months. Both will be available on NetEase's Investor Relations website at http://ir.netease.com/.

About NetEase,Inc.

NetEase,"NetEase") isa leading internet and game services provider centered around premium content. With extensive offerings across its expanding gaming ecosystem,the Company develops and operates some of themost popular and longest running mobile and PC games available in China and globally.

Powered by one of the largest in-house game R&D teams focused on mobile,PC and console,NetEase creates superior gaming experiences,inspires players,and passionately delivers value for its thriving community worldwide. By infusing play with culture,and education with technology,NetEase transforms gaming into a meaningful vehicle to build a more entertaining and enlightened world.

Beyond games,NetEase service offerings include its majority-controlled subsidiaries Youdao (NYSE: DAO),an intelligent learning company with industry-leading technology,and NetEase Cloud Music(HKEX: 9899),a well-known online music platform featuring a vibrant content community,as well as Yanxuan,NetEase's private label consumer lifestyle brand.

For more information,please visit: http://ir.netease.com/.

Forward Looking Statements

This announcement contains statements of a forward-looking nature. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar expressions. In addition,statements that are not historical facts,including statements about NetEase's strategies and business plans,its expectations regarding the growth of its business and its revenue and the quotations from management in this announcement are or contain forward-looking statements. NetEase may also make forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"),in announcements made on the website of The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange"),in press releases and other written materials and in oral statements made by its officers,directors or employees to third parties. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated,including risks related to: the risk that the online games market will not continue to grow or that NetEase will not be able to maintain its position in that market in China or globally; risks associated with NetEase's business and operating strategies and its ability to implement such strategies; NetEase's ability to develop and manage its operations and business; competition for,among other things,capital,technology and skilled personnel;potential changes in regulation environment in the markets where NetEase operates; the risk that NetEase may not be able to continuously develop new and creative online services or that NetEase will not be able to set,or follow in a timely manner,trends in the market; risks related to evolving economic cycles and geopolitical events; risks related to the expansion of NetEase's businesses and operations internationally;risks associated with cybersecurity threats or incidents; and fluctuations in foreign currency exchange rates that could adversely affect NetEase's business and financial results. Further information regarding these and other risks is included in NetEase's filings with the SEC and announcements on the website of the Hong Kong Stock Exchange. NetEase does not undertake any obligation to update this forward-looking information,except as required under applicable law.

Non-GAAP Financial Measures

NetEase considers and uses non-GAAP financial measures,such as non-GAAP net income attributable to the Company's shareholders and non-GAAP basic and diluted net income per ADS and per share,as supplemental metrics in reviewing and assessing its operating performance and formulating its business plan. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

NetEase defines non-GAAP net income attributable to the Company's shareholders as net income attributable to the Company's shareholders excluding share-based compensation expenses. Non-GAAP net income attributable to the Company's shareholders enables NetEase's management to assess its operating results without considering the impact of share-based compensation expenses. NetEase believes that this non-GAAP financial measure providesuseful information to investors in understanding and evaluating the Company's current operating performance and prospects in the same manner as management does,if they so choose. NetEase also believes that the use of this non-GAAP financial measure facilitates investors' assessment of its operating performance.

Non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. Non-GAAP financial measures have limitations as analytical tools. One of the key limitations of using non-GAAP net income attributable to the Company's shareholders is that it does not reflect all items of expense/ income that affect our operations. Share-based compensation expenses have been and may continue to be incurred in NetEase's business and are not reflected in the presentation of non-GAAP net income attributable to the Company's shareholders. In addition,the non-GAAP financial measures NetEase uses may differ from the non-GAAP measures used by other companies,including peer companies,and therefore their comparability may be limited.

NetEase compensates for these limitations by reconciling non-GAAP net income attributable to the Company's shareholders to the nearest U.S. GAAP performance measure,all of which should be considered when evaluating the Company's performance. See the unaudited reconciliation of GAAP and non-GAAP results at the end of this announcement. NetEase encourages you to review its financial information in its entirety and not rely on a single financial measure.

Contact for Media and Investors:

Email: ir@service.netease.com

Tel: (+86) 571-8985-3378

NETEASE,INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

December 31,

December 31,

2023

2024

2024

RMB

RMB

USD (Note 1)

Assets

Current assets:

Cash and cash equivalents

21,428,902

51,383,310

7,039,485

Time deposits

100,856,034

75,441,355

10,335,423

Restricted cash

2,777,206

3,086,405

422,836

Accounts receivable,net

6,422,417

5,669,027

776,654

Inventories

695,374

571,548

78,302

Prepayments and other current assets,076,595

6,416,868

879,107

Short-term investments

4,436,057

10,756,143

1,473,586

Total current assets

142,692,585

153,324,656

21,005,393

Non-current assets:

Property,equipment and software,net

8,075,044

8,520,101

1,167,249

Land use rights,net

4,143

4,172,465

571,625

Deferred tax assets

1,560,088

1,113,435

152,540

Time deposits

1,050,000

3,025,000

414,423

Restricted cash

550

5,208

713

Other long-term assets

28,471,568

25,830,685

3,538,789

Total non-current assets

43,232,393

42,666,894

5,845,339

Total assets

185,924,978

195,991,550

26,850,732

Liabilities,Redeemable Noncontrolling Interests

and Shareholders' Equity

Current liabilities:

Accounts payable

881,016

720,549

98,715

Salary and welfare payables

4,857,206

4,683,009

641,570

Taxes payable

2,571,534

2,759,185

378,007

Short-term loans

19,240,163

11,805,051

1,617,285

Contract liabilities

13,362,166

15,299,222

2,095,985

Accrued liabilities and other payables

12,930,399

14,400,641

1,972,879

Total current liabilities

53,842,484

49,667,657

6,804,441

Non-current liabilities:

Deferred tax liabilities

2,303

2,173,117

297,716

Long-term loans

427,997

427,997

58,635

Other long-term liabilities

1,271,113

1,228,641

168,323

Total non-current liabilities

3,998,413

3,829,755

524,674

Total liabilities

57,840,897

53,497,412

7,329,115

Redeemable noncontrolling interests

115,759

84,272

11,545

NetEase,Inc.'s shareholders' equity

124,285,776

138,685,606

18,999,850

Noncontrolling interests

3,682,546

3,724,260

510,222

Total equity

127,968,322

142,409,866

19,510,072

Total liabilities,redeemable noncontrolling

interests and shareholders' equity

185,732

The accompanying notes are an integral part of this announcement.

NETEASE,INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands,except per share data or per ADS data)

Three Months Ended

Year Ended

December 31,

September 30,

2023

2024

2024

2024

2023

2024

2024

RMB

RMB

RMB

USD (Note 1)

RMB

RMB

USD (Note 1)

Net revenues

27,140,165

26,209,879

26,747,811

3,664,435

103,468,159

105,295,236

14,425,388

Cost of revenues

(10,315,030)

(9,733,274)

(10,475,470)

(1,435,134)

(40,404,765)

(39,488,152)

(5,855)

Gross profit

16,825,135

16,476,605

16,272,341

2,229,301

63,063,394

65,807,084

9,015,533

Operating expenses:

Selling and marketing expenses

(4,225,556)

(3,071)

(2,818,645)

(386,153)

(13,969,460)

(14,147,657)

(1,938,221)

General and administrative expenses

(1,251,869)

(1,100,328)

(1,162,381)

(159,246)

(4,899,880)

(4,550,625)

(623,433)

Research and development expenses

(4,479,219)

(4,424,469)

(4,469,868)

(612,369)

(16,484,910)

(17,524,812)

(2,889)

Total operating expenses

(9,956,644)

(9,868)

(8,450,894)

(1,157,768)

(35,354,250)

(36,223,094)

(4,962,543)

Operating profit

6,868,491

7,146,737

7,821,447

1,071,533

27,709,144

29,583,990

4,052,990

Other income/(expenses):

Investment (losses)/income,net

(8,940)

578,398

(506,077)

(69,332)

1,306,722

355,286

48,674

Interest income,net

1,261,583

1,282,766

1,174,333

160,883

4,120,418

4,920,915

674,163

Exchange (losses)/gains,net

(810,904)

(1,055,518)

1,535,312

210,337

(132,999)

255,430

34,994

Other,net

434,759

43,600

278,952

38,216

1,053,642

602,134

82,492

Income before tax

7,744,989

7,995,983

10,303,967

1,411,637

34,056,927

35,717,755

4,893,313

Income tax

(1,068,289,545)

(1,385,014)

(189,746)

(4,699,704)

(5,461,408)

(748,210)

Net income

6,676,332

6,706,438

8,918,953

1,221,891

29,357,223

30,256,347

4,145,103

Accretion of redeemable noncontrolling

interests

(966)

(962)

(1,039)

(142)

(3,589)

(3,919)

(537)

Net (income)/loss attributable to noncontrolling

interests and redeemable noncontrolling

interests

(93,103)

(167,041)

(151,435)

(20,747)

62,918

(554,819)

(76,010)

Net income attributable to the

Company's shareholders

6,582,263

6,435

8,766,479

1,201,002

29,552

29,697,609

4,556

Net income per share *

Basic

2.05

2.04

2.76

0.38

9.15

9.28

1.27

Diluted

2.02

2.03

2.73

0.37

9.05

9.19

1.26

Net income per ADS *

Basic

10.25

10.22

13.81

1.89

45.73

46.40

6.36

Diluted

10.12

10.14

13.67

1.87

45.23

45.95

6.29

Weighted average number of ordinary

shares used in calculating net income

per share *

Basic

3,212,328

3,198,646

3,113

3,216,475

3,200,453

3,453

Diluted

3,253,166

3,224,110

3,206,100

3,252,029

3,230,602

3,602

* Each ADS represents five ordinary shares.

The accompanying notes are an integral part of this announcement.

NETEASE,INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months Ended

Year Ended

December 31,

2023

2024

2024

2024

2023

2024

2024

RMB

RMB

RMB

USD (Note 1)

RMB

RMB

USD (Note 1)

Cash flows from operating activities:

Net income

6,103

Adjustments to reconcile net income to net cash provided

by operating activities:

Depreciation and amortization

659,772

520,567

697,447

95,550

3,260

2,417,894

331,250

Fair value changes of equity security,other investments

and financial instruments

151,571

(824,608)

358,852

49,163

(535,316)

(841,901)

(115,340)

Impairment losses on investments

140,648

529,668

422,801

57,924

469,159

1,291,627

176,952

Fair value changes of short-term investments

(106,532)

(100,071)

(241,431)

(33,076)

(414,207)

(530,607)

(72,693)

Share-based compensation cost

812,987

978,139

931,444

127,608

3,242,810

3,882,939

531,960

Allowance for expected credit losses

9,500

36,022

12,031

1,648

61,146

68,934

9,444

Losses/(gains) on disposal of property,equipment and software

3,385

(2,920)

(3,644)

(499)

5,676

(4,758)

(652)

Unrealized exchange losses/(gains)

838,056

1,644

(1,542,986)

(211,388)

119,935

(719,162)

(98,525)

(Gains)/losses on disposal of long-term investments,

business and subsidiaries

(38,437)

(118,046)

232

32

(63,784)

(272,415)

(37,321)

Deferred income taxes

193,854

711,639

404,109

55,363

131,437

320,726

43,939

Share of results on equity method investees and revaluation

results from previously held equity interest

(88,805)

(28,466)

(19,437)

(2,663)

(473,947)

155,568

21,313

Changes in operating assets and liabilities:

Accounts receivable

53,089

146,758

517,850

70,945

(1,470,374)

716,375

98,143

Inventories

25,054

(39,285)

42,135

5,772

296,764

123,780

16,958

Prepayments and other assets

542,593

(1,234,390)

(432,196)

(59,211)

87,556

(809,590)

(110,913)

Accounts payable

18,443

6,316

218,689

29,960

(559,419)

91,142

12,486

Salary and welfare payables

1,992,931

(670,750)

1,382

241,034

(62,917)

(210,918)

(28,896)

Taxes payable

(500,172)

224,015

154,651

21,187

(244,261)

187,788

25,727

Contract liabilities

(847,562)

1,928,060

(209,626)

(28,719)

1,161,861

2,022,196

277,041

Accrued liabilities and other payables

1,572

755,882

1,944

140,166,673

1,530,848

209,725

Net cash provided by operating activities

11,808,279

10,575,612

13,012,200

1,782,664

35,331,275

39,813

5,701

Cash flows from investing activities:

Purchase of property,equipment and software

(484,927)

(379,520)

(311,982)

(42,741)

(2,301,554)

(1,275,400)

(174,729)

Proceeds from sale of property,equipment and software

405

1,072

9,295

1,273

10,302

14,533

1,991

Purchase of intangible assets,content and licensed copyrights

(121,797)

(222,247)

(120,387)

(16,493)

(1,974,323)

(930,988)

(127,545)

Net changes of short-term investments with terms of three

months or less

(690,628)

1,585,395

3,798,989

520,460

(1,687)

(408,256)

(55,931)

Purchase of short-term investments with terms over three

months

-

(3,675,000)

(4,000)

(624,717)

-

(8,235,000)

(1,128,190)

Proceeds from maturities of short-term investments with terms

over three months

4,897,291

-

2,853,778

390,966

5,378,510

2,966

Investment in long-term investments and acquisition of

subsidiaries

(914,962)

(226,086)

(201,686)

(27,631)

(2,831,686)

(1,103,026)

(151,114)

Proceeds from disposal of long-term investments,businesses,

subsidiaries and other financial instruments

73,855

1,541,338

355,142

48,654

152,564

2,822,585

386,692

Placement/rollover of matured time deposits

(46,670)

(36,094)

(21,691,769)

(2,971,760)

(124,693,598)

(154,792,305)

(21,459)

Proceeds from maturities of time deposits

33,273,393

37,546,192

40,570,700

5,558,163

111,969

179,377,113

24,574,564

Change in other long-term assets

(90,635)

(125,911)

(73,553)

(10,077)

(423,928)

(406,632)

(55,708)

Net cash (used in)/provided by investing activities

(10,675)

(720,861)

20,628,527

2,826,097

(17,043,431)

17,916,402

2,454,537

Cash flows from financing activities:

Net changes from loans with terms of three months or less

6,179,979

(4,778,301)

606,092

83,034

(13,654,704)

(6,656,988)

(912,004)

Proceeds of loans with terms over three months

2,511,000

5,395,810

457,000

62,609

13,569,160

13,080

1,907,043

Payment of loans with terms over three months

(695,000)

(3,520)

-

-

(8,219,472)

(14,739,347)

(2,019,282)

Net amounts received/(paid) related to capital contribution from

or repurchase of noncontrolling interests shareholders

28,009

(8,394)

51,614

7,071

86,159

136,006

18,633

Cash paid for repurchase of NetEase's ADSs/purchase of

subsidiaries' ADSs and shares

(625,832)

(3,994,212)

(1,595,093)

(218,527)

(5,294)

(8,115)

(1,721)

Dividends paid to NetEase's shareholders

(2,258,892)

(1,928)

(1,982,595)

(271,614)

(8,013,903)

(11,165,338)

(1,529,645)

Net cash provided/(used in) by financing activities

5,139,264

(8,458,545)

(2,462,982)

(337,427)

(21,467,054)

(27,702)

(3,976)

Effect of exchange rate changes on cash,cash equivalents and

restricted cash held in foreign currencies

(174,276)

(68,136)

113,792

15,589

(202,457)

10,752

1,473

Net increase/(decrease) in cash,cash equivalents and restricted cash

6,048,592

1,328,070

31,537

4,286,923

(3,381,667)

30,268,265

4,735

Cash,cash equivalents and restricted cash,at the beginning

of the period

18,158,066

21,855,316

23,183,386

3,176,111

27,588,325

24,658

3,316,299

Cash,at end of the period

24,658

23,386

54,474,923

7,463,034

24,658

54,034

Supplemental disclosures of cash flow information:

Cash paid for income taxes,net

1,030,932

554,867

603,514

82,681

4,895,752

5,189,585

710,970

Cash paid for interest expenses

71,847

165,881

24,343

3,335

779,872

489,622

67,078

The accompanying notes are an integral part of this announcement.

NETEASE,INC.

UNAUDITED SEGMENT INFORMATION

(in thousands,except percentages)

Three Months Ended

Year Ended

December 31,

2023

2024

2024

2024

2023

2024

2024

RMB

RMB

RMB

USD (Note 1)

RMB

RMB

USD (Note 1)

Net revenues:

Games and related value-added services

20,921,355

20,864,036

21,410

2,910,198

81,565,449

83,622,643

11,456,254

Youdao

1,480,521

1,572,541

1,339,798

183,552

5,389,208

5,625,919

770,748

NetEase Cloud Music

1,985,548

1,163

1,880,490

257,626

7,866,992

7,950,146

1,089,166

Innovative businesses and others

2,752,741

1,774,139

2,113

313,059

8,646,510

8,096,528

1,109,220

Total net revenues

27,388

Cost of revenues:

Games and related value-added services

(6,474)

(6,503,146)

(7,562)

(969,348)

(25,865)

(26,142,623)

(3,581,525)

Youdao

(741,720)

(783,085)

(699,045)

(95,621,746)

(2,877,428)

(394,206)

NetEase Cloud Music

(1,384,537)

(1,343,921)

(1,279,951)

(175,353)

(5,764,322)

(5,634)

(721,800)

Innovative businesses and others

(1,299)

(1,122)

(1,420,912)

(194,664)

(6,079,832)

(5,199,467)

(712,324)

Total cost of revenues

(10,855)

Gross profit:

Games and related value-added services

14,537,881

14,360,890

14,848

1,940,850

55,626,584

57,020

7,874,729

Youdao

738,801

789,456

640,753

87,783

2,767,462

2,748,491

376,542

NetEase Cloud Music

601,011

655,242

600,539

82,273

2,102,670

2,681,512

367,366

Innovative businesses and others

947,442

671,017

864,201

118,395

2,566,678

2,061

396,896

Total gross profit

16,533

Gross profit margin:

Games and related value-added services

69.5%

68.8%

66.7%

66.7%

68.2%

68.7%

68.7%

Youdao

49.9%

50.2%

47.8%

47.8%

51.4%

48.9%

48.9%

NetEase Cloud Music

30.3%

32.8%

31.9%

31.9%

26.7%

33.7%

33.7%

Innovative businesses and others

34.4%

37.8%

37.8%

37.8%

29.7%

35.8%

35.8%

The accompanying notes are an integral part of this announcement.

NETEASE,INC.

NOTES TO UNAUDITED FINANCIAL INFORMATION

Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00 = RMB7.2993 on the last trading day of December 2024 (December 31,2024)as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been,or could be,converted into US$ at that rate on December 31,or at any other certain date.

Note 2: Share-based compensation cost reported in the Company's unaudited condensed consolidated statements of comprehensive income is set out as follows in RMB and USD (in thousands):

Three Months Ended

Year Ended

December 31,

2023

2024

2024

2024

2023

2024

2024

RMB

RMB

RMB

USD (Note 1)

RMB

RMB

USD (Note 1)

Share-based compensation cost included in:

Cost of revenues

216,717

306,283

304,687

41,742

823,765

1,185,854

162,461

Operating expenses

Selling and marketing expenses

35,575

36,365

7,435

1,019

132,801

104,534

14,321

General and administrative expenses

262,830

247,440

246,424

33,760

1,119,018

1,069,850

146,569

Research and development expenses

297,865

388,051

372,898

51,087

1,226

1,522,701

208,609

The accompanying notes are an integral part of this announcement.

Note 3: The financial information prepared and presented in this announcement might be different from those published and to be published byNetEase's listed subsidiary to meet the disclosure requirements under different accounting standards requirements.

Note 4: The unaudited reconciliation of GAAP and non-GAAP results is set out as follows in RMB and USD (in thousands,except per share data or per ADS data):

Three Months Ended

Year Ended

December 31,

2023

2024

2024

2024

2023

2024

2024

RMB

RMB

RMB

USD (Note 1)

RMB

RMB

USD (Note 1)

Net income attributable to the Company's shareholders

6,556

Add: Share-based compensation

797,194

960,706

915,489

125,421

3,191,753

3,813,032

522,383

Non-GAAP net income attributable to the Company's shareholders

7,379,457

7,499,141

9,968

1,326,423

32,608,305

33,641

4,590,939

Non-GAAP net income per share *

Basic

2.30

2.34

3.05

0.42

10.14

10.47

1.43

Diluted

2.27

2.33

3.02

0.41

10.03

10.37

1.42

Non-GAAP net income per ADS *

Basic

11.49

11.72

15.25

2.09

50.69

52.35

7.17

Diluted

11.34

11.63

15.09

2.07

50.14

51.85

7.10

* Each ADS represents five ordinary shares.

The accompanying notes are an integral part of this announcement.