NetEase Cloud Music reported mixed first-half 2026 results, showing topline expansion but a sharp contraction in earnings.

Revenue rose 3.4% year-on-year to RMB3.96 billion, driven mainly by a 5.3% increase in subscription income to RMB2.60 billion. Online-music services contributed RMB3.07 billion, while social-entertainment and other businesses added RMB0.89 billion, up 3.7%.

Gross profit improved 5.9% to RMB1.47 billion and gross margin widened to 37.2% from 36.4%, reflecting favorable content-cost discipline. However, operating profit fell 11.6% to RMB0.75 billion, pressured by an 81% surge in selling and marketing expenses to RMB0.30 billion as the platform stepped up user-acquisition and branding efforts.

Bottom-line performance weakened markedly. Profit for the period dropped 57.0% to RMB0.81 billion, largely because last year’s base included a RMB0.85 billion deferred-tax credit that did not recur. Adjusted net profit, which strips out share-based compensation, declined 55.8% to RMB0.86 billion.

Key operating indicators highlighted solid engagement. The daily-active-user ratio to monthly active users remained above 30%, and average daily listening time continued to rise. Membership retention improved on expanded privileges, while content expansion included renewed licensing with major labels such as Universal and Warner, new K-Pop and Chinese catalogues, and original music initiatives.

The balance sheet stayed liquid, with RMB2.41 billion in cash and cash equivalents and RMB9.44 billion in bank deposits at 30 June 2026. Net cash from operating activities was RMB0.46 billion. During the half, the company spent HK$967.04 million to repurchase 7.30 million shares, which were subsequently cancelled. No interim dividend was declared.

Management reaffirmed priorities of broadening differentiated content, enhancing AI-driven recommendations, deepening community features, and pursuing cost discipline to bolster long-term profitability.