NetEase (NASDAQ:NTES) stock dropped after it reported fiscal second-quarter results on Thursday.

The company’s quarterly revenue increased 9.4% year-on-year to $3.89 billion (27.89 billion Chinese yuan), topping the analyst consensus estimate of $3.86 billion.

The Chinese gaming player’s adjusted EPADS of $2.07 beat the analyst consensus estimate of $1.85.

Also Read: China’s NetEase Stock Pops On Q1 Performance Fueled By Gaming Growth, Strong Cash Flow

Games and related value-added services revenues rose 13.7% to $3.18 billion. The corresponding gross margin increased by 178 bps to 64.7% attributable to higher net revenues from Identity V, its newly launched games, Where Winds Meet and Marvel Rivals, and certain licensed games.

Youdao (NYSE:DAO) revenue rose by 7.2% to $197.88 million, and the corresponding gross margin declined by 519 bps to 43.0%, primarily due to a decrease in net revenues from its smart devices.

NetEase Cloud Music’s revenues were $274.8 million, down 3.5%, and its gross margin expanded by 396 bps to 36.1% driven by higher net revenues from its online music services.

Innovative businesses and other revenue declined 17.8% to $237.2 million due to decreased net revenues from Yanxuan, advertising services, and the gross margin increased by 832 bps to 42.3%.

As of June 30, 2025, NetEase held $19.8 billion in cash and equivalents and generated $1.52 billion in operating cash flow.

The board of directors approved a dividend of 57 cents per ADS for the second quarter of 2025, versus 67.5 cents per ADS for the first quarter.

NetEase stock gained over 51% year-to-date as its online gaming business remains resistant to macro and geopolitical headwinds.

Price Action: NetEase stock is trading lower by 4.17% to $129.28 at last check Thursday.

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