By Sherry Qin and Jiahui Huang

NetEase's profit and revenue rose in the second quarter but missed market expectations as the videogame giant faced intensifying competition in China's gaming industry amid a slowing economy.

The Chinese company behind hit games such as "Marvel Rivals" said Thursday that its second-quarter net profit climbed 27% to 8.60 billion yuan, equivalent to $1.20 billion. That was lower than the 9.135 billion yuan consensus estimate in a FactSet poll.

Adjusted net profit, a closely watched metric that excludes share-based compensation expenses, increased 22% from a year earlier to 9.53 billion yuan.

Revenue at the Hangzhou-based company grew by a weaker-than-expected 9.4% to 27.89 billion yuan.

Sales from games and value-added services rose to 22.8 billion yuan, driven by higher revenues from "Identity V," new launches "Where Winds Meet" and "Marvel Rivals," as well as certain licensed games.

"In the second quarter, we grew our player community with thrilling new content that reinforces our position as a creator of high-impact, genre-defining games," Chief Executive William Ding said.

NetEase launched the new superhero team-based tactical role-playing game "Marvel Mystic Mayhem" and brought back Blizzard's "Diablo III" to China during the quarter.

Shares in Hong Kong-listed NetEase have risen 50% this year, outperforming the benchmark Hang Seng Index's gains. Analysts have pointed to the stock's appeal during periods of market volatility, as its online gaming business isn't exposed to macro weakness or geopolitical headwinds.

NetEase's results come a day after its bigger Chinese rival, Tencent, posted a solid set of earnings. China's gaming regulatory environment has continued to improve, with a steady number of games getting approved each month after a multiyear crackdown. Last month, China's videogame regulator approved 134 games, including Blizzard's "Diablo IV" for NetEase.

Analysts have said that the company's strength in high-quality game development, diversified genres and growing game portfolio will likely support sustainable growth.

NetEase has 60 games in the pipeline, according to Citi estimates, with more than one-third already approved for domestic launch.

The company's American depositary receipts fell 6.75% in premarket trading on Thursday following the release of second-quarter results.

Write to Sherry Qin at sherry.qin@wsj.com and Jiahui Huang at jiahui.huang@wsj.com

(END) Dow Jones Newswires

August 14, 2025 05:28 ET (09:28 GMT)

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