Science and Technology Innovation Board Daily, November 17 (Reporter Zhu Ling) NetEase released its financial report for the third quarter of 2023 yesterday. Data shows that NetEase's net revenue in the third quarter was 27.3 billion yuan, a year-on-year increase of 11.6%. The net profit was 7.8369 billion yuan, compared to 8.2428 billion yuan and 6.6994 billion yuan in the previous quarter and the same period last year, respectively. The net profit under non GAAP was 8.645.2 billion yuan, compared to 9.0175 billion yuan and 7.4696 billion yuan in the previous quarter and the same period last year, respectively.
From a business perspective, in terms of gaming, driven by new products such as the "Cold Water" mobile game, the net revenue of NetEase's gaming sector in the third quarter reached 21.8 billion yuan, an increase of 16.5% year-on-year. For the gaming business, NetEase stated that various new games are being developed and multiple new products will be released in 2024.
Regarding the progress of games such as "Shooting Sculpture" and "Task Zero", NetEase executives responded in a conference call, "Every product launched by NetEase to the market is carefully polished and believes that the quality is guaranteed before providing services to users. We are still carefully preparing for the final launch of games such as" Shooting Sculpture "and" Task Zero ", and will be launched no later than the second quarter of next year
Thanks to AI technology landing products such as the Confucius Education Model, NetEase Youdao has rapidly developed multiple businesses, with a single quarter net income of 1.5 billion yuan reaching a new high and a gross profit margin of 55.9%, reaching a new high in the past two years.
NetEase Cloud Music Q3 has a net income of 2 billion yuan, a year-on-year decrease of 16.3%. The financial report states that it will continue to strengthen the monetization ability of its membership business centered on music content, and the gross profit margin will further increase to 27.2%.
NetEase's Q3 net revenue from innovation and other businesses was 2 billion yuan, a slight increase year-on-year. Among them, NetEase Media innovates content production through digital technology, and the proportion of Q3 video consumption on NetEase News clients has increased to 74.8%.
Starting from the second quarter of this year, NetEase Group has been comprehensively promoting the implementation and application of AI big models in various businesses. From the perspective of investment, the cumulative R&D investment in the first three quarters has exceeded the 10 billion mark, exceeding 12 billion yuan. In the third quarter alone, NetEase invested 4.3 billion yuan in research and development.
From the current results, the effectiveness of these investments has begun to show. In its financial report, NetEase stated that its AI self-developed large model has been applied in batches in core business and physical scenarios.
Among them, NetEase Youdao has accelerated the implementation of the "Ziyue" education big model application. As one of the first vertical big models in the education field to be registered, it has supported the development of six native applications, including the world's first virtual human oral private education Hi Echo.
The AI application is reflected in the financial data of Youdao Business. According to the financial report, the sales of digital content services exceeded 400 million yuan, the gross profit margin reached a historic high, the Q3 membership fees of Youdao Dictionary and Youdao Translation increased by over 160% year-on-year, and the net revenue of online marketing services increased by 113.5% year-on-year. This year's Double 11, Youdao's intelligent hardware has performed outstandingly, with dictionary pens consistently ranking first in sales on JD and Tmall for four consecutive years.
NetEase is currently accelerating the implementation of AI self-developed technology in cultural and entertainment scenes. The financial report mentioned that the new model of AI collaborative content creation has been basically implemented in multiple products of NetEase.
In the gaming industry, as the world's first large-scale implementation of AI gameplay in the open world, the mobile game "Cold Against the Current" pioneered AI custom voice and other gameplay methods, with "AI teammates" playing with more than one billion times. The Egg Party also updates multiple AI features on the basis of the original UGC content creation ecosystem, which can help players change colors on a one click map, generate video actions, and more.
Recently, the first vertical model application in the email service field, "NetEase Email Intelligent Assistant," has been registered and will provide intelligent functions such as AI proxy email writing, email summary, and polishing. NetEase Smart Enterprise has launched a large model in the customer service field called "Shanghe", which can more accurately understand and process complex tasks and information.
It is also worth noting that in this financial report, NetEase also disclosed that the company's Chief Financial Officer Yang Zhaoxuan has submitted his resignation to the board of directors due to personal reasons and will no longer hold this position starting from November 30, 2023, exploring other career developments.
However, until June 30, 2024, Yang Zhaoxuan will continue to serve as an advisor to NetEase Group to ensure a smooth transition in the company's search for a successor.
Yang Zhaoxuan has played an important leadership role in multiple major capital market transactions at NetEase. He has been serving as the Chief Financial Officer of NetEase since June 2017, completing important capital projects such as the listing of NetEase on the New York Stock Exchange in 2019, the secondary listing of NetEase in Hong Kong in 2020, and the listing of NetEase Cloud Music on the Hong Kong Stock Exchange in 2021 during his tenure.
Before joining NetEase, Yang Zhaoxuan served as an executive director in the China Technology, Media, and Communications and Investment Banking departments of JPMorgan Chase, and served in Hong Kong for nearly ten years. In addition, Yang Zhaoxuan currently serves as an independent non-executive director of Jitu Express.
As of the close of Hong Kong stocks today, NetEase fell 2.39% to close at HKD 175.7 per share.