On February 29th, NetEase released its financial reports for the fourth quarter and full year of 2023. NetEase focuses on its main business and continues to increase its technological self-development efforts. Its annual R&D investment reaches a record high of 16.5 billion yuan, leading the industry with 16% R&D intensity. At present, key self-developed technologies such as NetEase's generative AI have fully penetrated core business workflows such as gaming, music, and education, significantly improving digital productivity, assisting in breaking through multiple content vertical tracks, and injecting fresh activity energy into long-term development.
According to the financial report, NetEase's performance in 2023 was stable, with a total revenue of 103.5 billion yuan; Under non GAAP, the net profit attributable to the company's shareholders from continuing operations was 32.6 billion yuan. NetEase's Q4 revenue was 27.1 billion yuan; Under non GAAP, the net profit attributable to the company's shareholders from continuing operations was 7.4 billion yuan.
Over the past year, NetEase's various businesses have implemented a focused strategy and steadily developed in their respective tracks. NetEase Games achieved a milestone category breakthrough, with annual revenue of 81.6 billion yuan and Q4 revenue of 20.9 billion yuan. NetEase Cloud Music further strengthened its membership commercialization, with an annual revenue of 7.9 billion yuan, achieving annual profit for the first time; Q4 revenue was 2 billion yuan, with a gross profit margin increase to 30.3%. NetEase Youdao has released the "Confucius" Education Model 2.0, which has achieved better than expected results in education and advertising, driving annual revenue of 5.4 billion yuan and Q4 revenue of 1.5 billion yuan.
The annual revenue of innovation and other businesses was 8.6 billion yuan, and the Q4 revenue was 2.8 billion yuan. Thanks to NetEase's strict selection and the increase in advertising service gross profit margin, the innovation sector's quarterly gross profit margin increased to 34.4% compared to the previous quarter. NetEase's strict selection focuses on "treasure of domestic products", firmly ranking at the top of the pet and family cleaning tracks, with Pro member revenue increasing by 57% year-on-year. NetEase Media strengthens differentiated content creation and launches the NetEase cultural and tourism brand; NetEase News has consistently ranked first in per capita daily usage time for information clients, with an annual increase of 64% in high-quality UGC content compared to the same period last year.
NetEase CEO Ding Lei stated that the company's performance has grown healthily in 2023, with many business sectors developing well. NetEase will continue to provide innovative and high-quality products and services, continuously output high-quality content, enhance user experience, accelerate cross industry digital and real innovation integration, and promote industry progress through practical applications.
Our self-developed masterpiece has broken records in a row, achieving breakthroughs in five major game tracks and winning first place
Starting from 2023, NetEase has relied on AI self-developed technology, gameplay, and content innovation to create multiple category milestones, winning the first place in the five major game tracks of leisure parties, MMO, racing, basketball, and Yi women, and accumulating new momentum for long-term development.
NetEase continues to consolidate its advantages in leisure parties, MMO, and other fields, and expand the national influence of its self-developed products. During the Spring Festival of the the Year of the Loong, the national original amusement park game "Egg Boy Party" was joined by three "Spring Festival Galas", including the "CCTV 2024 Online Spring Festival Gala". With the advantages of more than 40 million active users, 500 million registered users and 100 million maps, it firmly ranked first in the party game, and led NetEase to achieve a breakthrough in the game's big DAU track. The series of mobile games "Against Water and Cold" marks a new milestone in the MMO field, attracting over 100 million active users; The mobile game "Against the Cold Water" continues to adhere to the industry's first MMO "per capita small payment" business model, with a single season sales of over 100 million pieces of 6 yuan fashion.
NetEase Games has achieved historic breakthroughs with multiple self-developed new products topping multiple vertical tracks. "Peak Speed" relies on high-quality racing content and has performed well in the Hong Kong, Macao, and Taiwan markets in China. It topped the iOS best-selling and download charts in its first week of launch in Taiwan. The All Star Streetball Party continues to break through the sports track, becoming the first basketball mobile game to reach the top of the iOS best-selling chart. NetEase's unlimited romance mobile game "Beyond the World", with its high-quality content and immersive love experience, has become the biggest dark horse at the beginning of 2024, winning the top of the iOS free list and igniting the female player circle.
In addition, multiple self-developed works by NetEase have obtained license plates, which are highly anticipated by the industry and players. In February, the mobile game "Eternal Sorrow" was approved. At present, the game has achieved end game level graphics quality under low power consumption on mobile devices and will be tested for the first time on April 1st. After switching to a free game in July last year, the global player count of "Eternal Sorrow" doubled to over 40 million in just three months. The opening world masterpiece of Jin Yong's martial arts, "The Legend of the Condor Heroes," has been scheduled for release on March 28th. The content spans 150 years of Jin Yong's martial arts world and pioneered the top-level server architecture of "World One Server," with over ten million reservations.
A record high R&D investment of 16.5 billion yuan, with AI penetrating the business to create dual commercial and social value
NetEase adheres to self research on key technologies such as AI and accelerates the application of technology to achieve business breakthroughs. NetEase will increase its research and development efforts quarter by quarter in 2023, with an annual R&D investment of 16.5 billion yuan, reaching a new high in history. Self developed technologies such as AI big models have fully penetrated and empowered core businesses, rapidly landing in fields such as digital content and industrial manufacturing, creating dual commercial and social value.
NetEase Games accelerates the application of AI gameplay, leading the innovation and transformation of digital content experience. As the first mainstream game to apply AI gameplay on a large scale, the mobile game "Against the River and Cold" is based on the underlying Fuxi AI model and pioneered the virtual newspaper system "Da Song Toutiao". AI automatically generates over 300 million illustrated news stories based on player interests, continuing to explore the scenario based implementation of AI transformation game experience. Egg Party continues to upgrade its UGC creation tool equipped with AI algorithms, introducing new features such as "Egg Code" and "Universal Generator", significantly reducing the threshold for map creation and increasing the creation limit. It also enhances the educational and entertainment attributes of the park, helping the total number of maps for park players to exceed 100 million, and the maximum number of times a single map can be played exceeds 120 million.
NetEase has accelerated the implementation of AI in fields such as education services and music assisted creation, achieving phased results. NetEase Youdao has released the "Confucius" Education Big Model 2.0, launching multiple native applications of the big model, including the virtual human oral coach Hi Echo 2.0 and the AI tutoring teacher Xiao P. Supported by AI technology, Youdao's online marketing services have seen a year-on-year increase of over 50% for five consecutive quarters, with Q4 revenue reaching a record high of 97% year-on-year. NetEase Cloud Music deepens the application of AI technology in the entire process of music production, consumption, and recommendation. The one-stop AI music creation tool developed by its AI Music Laboratory appeared on the CCTV News New Year special program "Taking New Steps", generating song demos in 10 seconds based on three keywords. It was praised by on-site experts as "super auxiliary" and will promote industry development through innovation.
NetEase's technology application is not limited to content scenarios, but also landing in physical industries such as serving industrial manufacturing and national exhibitions. The NetEase Fuxi Intelligent Loader Platform, developed based on the NetEase Industrial Big Model, was selected as an excellent case of the 2023 Industrial Metaverse by the Industrial Culture Development Center of the Ministry of Industry and Information Technology at the end of last year. In the first half of this year, NetEase Fuxi will also launch an engineering machinery remote control platform based on 3D digital twin technology, which will create a safer and more efficient working environment based on the needs of physical scenes such as mines, ports, and mixing plants. Based on digital twins, real-time video transmission and other technologies, NetEase Smart Enterprise has built a highly authentic cloud venue for the Global Digital Trade Expo, serving 367 enterprises to participate in the exhibition online through the cloud platform of the Digital Trade Fair.
Under the new wave of global technology, NetEase is accelerating the open source of core technologies and promoting industry collaboration and creation. In the past year, NetEase has developed dozens of self-developed resources in the fields of big models, low code, cloud native, and big data, including the open-source voice synthesis engine "Yimaosheng", knowledge base question answering engine "QAnything", and NetEase Cloud Music low code engine "Tango", promoting the sharing and progress of cutting-edge technologies. NetEase Fuxi and the Chinese Computer Society have established the "CCF NetEase Thunderfire Joint Fund", attracting research teams from nearly 100 universities such as Tsinghua University, Peking University, and Zhejiang University to participate in the first batch, committed to promoting China's scientific research collision and industrial application in cutting-edge technology fields such as artificial intelligence.
The first batch of products in the entire industry to launch the "underage model", with inclusive resources to fulfill social responsibilities
NetEase adheres to a long-term sustainable development strategy and fulfills its social responsibility through technology implementation, resource accessibility, and other means. In 2023, NetEase will focus on the intersection of corporate development and social needs, and actively play the social responsibility of technology companies in areas such as protecting minors, blocking new types of online fraud, and donating major disaster materials.
NetEase Games took the lead in responding to the new policy requirements and became one of the first industry manufacturers to add a "minor mode" to their entire product line. NetEase Games actively responded to the "Regulations on the Protection of Minors Network" implemented on January 1st, and all products are connected to the "Minors Mode" on the basis of the anti addiction system. 63 products have been deployed. In addition, NetEase has launched a special winter vacation protection program for minors for the fourth consecutive year. The "minors mode", which includes protection functions such as one click ban on playing, ban charging, and content blocking, has been used more than 3 million times. More than 10000 gray and black games involving adult account transactions have been taken down from third-party platforms, and 3.8 million abnormal real name registered accounts have been processed in the game.
NetEase actively leverages the synergistic effect of technology in the field of anti fraud, and cooperates to crack down on new types of online fraud targeting player groups. In 2023, NetEase launched five anti fraud functions, including detection, early warning, blocking, reporting, and intelligent outbound calling, based on the industry's first AI underage protection patrol system. It also collaborated with authoritative anti fraud organizations to launch public welfare science popularization, covering over 20 million people on a monthly basis. At the same time, NetEase Games assisted police in cracking down on the fraud industry chain in multiple regions, seized more than 10000 illegal online accounts, banned 5394 live streaming rooms, short videos, and chat groups outside of games, and resolutely cut off the online mafia that reached out to players.
Faced with sudden major natural disasters, NetEase actively mobilized group resources and joined forces to urgently assist the disaster stricken areas. In 2023, NetEase, together with the Red Cross, will donate a total of 18 million yuan in cash and various relief materials to rainstorm and flood stricken areas such as Zhuozhou in Hebei Province and earthquake stricken areas in Gansu Province, to ensure that the materials can really provide timely help and solve the local urgent needs.
In 2024, NetEase will continue to focus on social development needs, face future cutting-edge technological trends, promote faster implementation of AI self-developed achievements in the digital industry, and create products and services with global competitiveness.