NetEase-S (09999) recently released its Q4 and full-year 2025 financial results, serving as a stabilizing force in the capital market due to its solid business layout, strong product pipeline, and robust financial performance. Research reports from CICC, Huatai Securities, and J.P. Morgan have all assigned positive ratings, highlighting multiple core strengths that underscore the company's resilience. The reports indicate that current valuations are at historically low levels, presenting a notable investment opportunity.

The global success of "Where Winds Meet" ("燕云十六声") demonstrates the effectiveness of NetEase's long-term evergreen strategy. Huatai Securities noted in its report that the game maintains NetEase's consistent high standards in product quality and ongoing operations, showing a capacity for continuous renewal and potential to become a major revenue driver. As a key part of NetEase's globalization strategy, "Where Winds Meet" has surpassed 80 million cumulative global users. On its first day of overseas mobile launch, it topped the iOS free chart in over 60 regions. According to Sensor Tower data, overseas revenue in January 2026 already accounted for 17% of domestic revenue, with this share continuously rising.

The game's performance in China is equally strong. The Q4 release of the "Unseen Mountain" version and the first anniversary update set new records for daily active users and revenue, significantly exceeding expectations and securing the top spot on the iOS bestseller chart. Recent Spring Festival activities again outperformed forecasts, setting new highs for user engagement and revenue compared to similar past events. Huatai Securities projects that "Where Winds Meet" could generate overseas revenue of 2.5 to 3 billion yuan in 2026, positioning it as a new engine for NetEase's international income.

Beyond the impressive performance of its overseas titles, NetEase's long-established evergreen games continue to deliver. "Fantasy Westward Journey Online," after 23 years of operation, achieved a new annual revenue high. The PC game "World of Tiansha" saw its concurrent user numbers reach a near-decade peak. "Eggy Party" set a new record for average user online time. These mature products show no signs of fatigue, instead continuing to release incremental value through long-term operations. Driven by this dual strategy of evergreen titles and globalization, NetEase's games business has returned to double-digit growth. Financial reports show that in 2025, NetEase's online game services and related value-added services revenue reached 92.1 billion yuan, with online games net revenue at 89.6 billion yuan, an 11% year-on-year increase.

The pipeline for major new games is becoming clearer, indicating substantial growth potential for 2026. Market concerns often center on a lack of new hits, but NetEase's product portfolio demonstrates strong, sustained output and a capability for creating high-quality titles. All three research reports consistently highlighted key progress in upcoming games: "Forgotten Sea" ("遗忘之海"), one of NetEase's most anticipated new titles for 2026, recently began testing and received positive market feedback. Management stated during the earnings call that the game is expected to launch in Q3 2026. Huatai Securities estimates its revenue potential in the first 12 months could reach 2.5 to 5 billion yuan. Its unique combination of "sailing + Roguelike + turn-based" gameplay and high-quality art is considered by Huatai to be a "pioneering genre," showcasing strong differentiated competitiveness.

"Infinity" ("无限大") is progressing steadily, with closed beta feedback meeting expectations. A J.P. Morgan report views "Infinity" as having the potential to become one of NetEase's highest-grossing games ever. Furthermore, the Chinese-style AAA single-player game "Return to Tang" ("归唐") and the newly licensed Chinese-themed auto-battler "Yao Yao Chess" ("妖妖棋") form a diverse, high-quality product matrix, effectively securing NetEase's growth trajectory for 2026 and beyond.

Regarding recent market concerns that AI, such as Google's Genie3, could disrupt game development models, reports from J.P. Morgan and Huatai Securities provided rational analysis. J.P. Morgan cited management's view that while AI increases the supply of creative content, it actually deepens the moat for top-tier game companies. Deeply integrating AI-generated content with gameplay, economic systems, and social ecosystems requires decades of R&D and operational experience. Huatai also emphasized that core skills like game design, numerical balancing, and long-term operation—crafts—cannot be easily replaced by AI. In fact, NetEase is transforming AI into a core capability to enhance development efficiency and innovate gameplay.

According to Huatai's report, NetEase has deployed approximately 10,000 AI R&D personnel. AI is already applied in programming assistance, art asset generation, automated testing, and smart NPC interactions, accelerating development cycles while reducing content costs. This allows teams to focus more on core creativity and experience refinement, thereby strengthening its leading position. J.P. Morgan's report stated that NetEase is poised to be a key global developer capable of competing in the AI-driven gaming era, reiterating it as a top pick in the Chinese digital entertainment sector over a 6-12 month horizon.

Additionally, a notable point is the strong growth in NetEase's deferred revenue. A CICC report pointed out that NetEase's Q4 2025 deferred revenue increased by a net 10.4 billion yuan quarter-over-quarter, significantly exceeding market expectations. Huatai Securities data further showed that Q4 deferred revenue stood at 20.5 billion yuan, surpassing market expectations (17 billion yuan) by 21%. Moreover, the combined figure for "game revenue + deferred revenue" actually grew 5% year-on-year, outperforming the growth rate of revenue alone. A Bernstein report also noted that deferred revenue will gradually be recognized as income, maintaining an "Outperform" rating.

On valuation, J.P. Morgan indicated that NetEase currently trades at around 13 times earnings, a discount of approximately 25% to its five-year average. With projected game revenue CAGR of about 11% and operating profit CAGR of about 17% for 2026-2027, the current valuation presents significant attractiveness. The target prices set by CICC and Huatai imply an upside potential of 36% to 51%.

Short-term market volatility may amplify sentiment, but it does not change the fundamentals. NetEase has "stored" current performance in deferred revenue, providing a strong guarantee for near-term growth. Its clear new product pipeline outlines a promising medium-term blueprint, while the deep application of AI fortifies its competitive moat. For investors, NetEase in 2026 is likely to be a case of recovery, with performance expected to be realized quarter by quarter.