Shares of NetDragon (00777) advanced more than 4% in early trading, last up 3.25% at HK$8.095 with turnover reaching HK$22.64 million.

Recent developments show the company unveiled Muyu AI at the 2026 Global Smart Education Conference. The platform has begun testing, with the mobile version simultaneously launched for trial in overseas markets.

Where the momentum comes from

CITIC Securities highlights that Muyu AI operates as a multi-scenario AI application ecosystem built on an AI Agent foundation, offering specialized tools across video creation, teacher lesson preparation, and programming, introducing a fresh AI application model for work, study, creation, and design. The brokerage believes NetDragon's transition toward an AI-native enterprise has achieved key milestones, expressing optimism about the company's long-term prospects amid the AI wave.

Cost curve transformation drivers

CITIC Construction Investment points to company disclosures showing AI staff contribution reached 35%–40% of total workforce output in 1H26. NetDragon has deployed 269 AI-powered positions with dynamic capacity expansion, compressing development costs for a single lightweight/native game from tens of millions of yuan to roughly 2 million yuan.

The group has streamlined its workforce to 2,557 employees, a net reduction of 504 people compared to end-2025, representing a 16.47% workforce decline within six months. Management noted during the earnings call that AI's impact on productivity and expenses concentrates during 2025–2026, with optimization gains tapering from 2027 onward. Future benefits will increasingly manifest as enhanced game output alongside modest cost increases, reflecting operational leverage effects.