The gaming sector has recently been buoyed by several positive developments. ChinaJoy, the world's largest digital entertainment expo, is scheduled to take place from July 31 to August 3, showcasing games, the metaverse, VR/AR, esports, and AI interactive devices.
Additionally, the second China International Game Developers Conference will be held from July 28 to 30, during which the "China Game Going Global Guide" will be released in four country-specific editions: the United States, Germany, Saudi Arabia, and Indonesia. Furthermore, the National Press and Publication Administration has approved 197 online games for July 2026, including 193 domestic titles and 4 imported titles. Key products include NetEase's "Fantasy Westward Journey: Renewal," Lingyoufang's "Shadow Blade Zero," Huya's "Island of Phantom Beasts," Xinghui Entertainment's "Guard the Dome," Boke Technology's "Monsters, Where Are You Running?", Shulong Technology's "Aion: The Classic," and XD Inc.'s "Ragnarok: Guardian of Eternal Love 2."
Since the start of the year, the administration has issued a total of 1,147 game licenses, comprising 1,110 domestic and 37 imported games, maintaining a steady monthly release schedule.
Reasons for Optimism on Mid-Term Stability
CITIC Securities believes that the stable pace of game license issuance indicates a normalized supply environment. From a product structure perspective, mobile games continue to dominate, while the share of casual puzzle games has increased. New formats such as PC-client, cross-platform, and VR games are also being explored. With the product pipelines of both major developers and smaller companies progressing steadily, combined with the long-term operation of classic IPs, the gaming industry's mid-term outlook is expected to remain robust.
Citigroup released a report noting that the latest batch of 197 game licenses, the largest single-batch approval in the past five years, exceeds the average levels of the first half of 2026 and 2025. The bank believes the timing of the approvals, just ahead of the summer peak season and the ChinaJoy expo, demonstrates continued regulatory support for the healthy development of the online gaming industry. This approval batch benefits game developers by further solidifying a healthy supply pipeline. Citigroup has confidence that market leaders like TENCENT (00700) and NTES-S (09999) can leverage their strong product lineups and industrial R&D capabilities to drive sustainable, stable growth.
Strong First-Half Performance and AI Integration
In the first half of this year, many gaming companies released positive earnings forecasts. With the accelerated implementation of generative AI, the technology has become a crucial tool for improving R&D efficiency and optimizing operational processes in the gaming industry, with its value for cost reduction and efficiency enhancement expected to further manifest in 2026.
On July 14, Yozoo Games (游族网络) released its first-half 2026 performance forecast, expecting net profit of 200 million to 300 million yuan, a year-on-year increase of 298.76% to 498.14%. The announcement attributed the growth not only to stable revenue from core products but also to the application of AI across the entire game development and operations chain. The company stated it has established an AI empowerment system covering all business processes, significantly improving efficiency in R&D and distribution. "In R&D, AI has achieved 70% automated generation of game test cases, greatly shortening the testing cycle. In distribution, AI has increased the production efficiency of marketing materials by 3 to 5 times."
On July 7, Giant Network (巨人网络) released its first-half 2026 performance forecast, expecting net profit of 2 billion to 2.2 billion yuan, a year-on-year increase of 157.38% to 183.12%. This is mainly due to the continued high revenue contribution from "Supernatural Action Team," which set new historical highs for both daily and monthly revenue during the Spring Festival. Entering the second quarter, the game has maintained stability, with activities like "Touch Gold Festival" enriching the product content. Its overseas version, Tomb Busters, launched in Japan, South Korea, and the US on May 27, reaching No. 3 on the iOS free game chart in Japan and No. 7 in South Korea on its first day.
Several other gaming companies also achieved stable profit growth driven by their core products. Kingnet Network Co.,Ltd. (002517.SZ) stated that multiple games like "Blazing Awakening," "Chinese Paladin: A New Beginning," and "Three Kingdoms: Hearts United," along with its user platform business, performed well. The company expects net profit of 1.3 billion to 1.56 billion yuan for the first half of the year, a year-on-year increase of 36.84% to 64.20%.
G-Bits Network Technology(Xiamen)Co.,Ltd. (603444.SH) expects net profit of 1.01 billion to 1.1 billion yuan for the first half, a year-on-year increase of 57% to 71%. The company attributed the growth to games like "Scepter Legend (Mainland Version)" and "Fellow Digs for Treasure" entering their full operational cycle in the first half of 2026, alongside profit contributions from new products like "Scepter Legend (Hong Kong, Macau, Taiwan Version)" and "Nine Shepherds."
Guotai Haitong believes that the approval of 193 domestic and 4 imported game licenses in July sets a new high for single-month approvals. Companies like NetEase, Kingnet Network, and XD Inc. all had games approved, continuously replenishing the product pipelines of leading companies. The institution views the normalized and high-volume license issuance as direct evidence of the current relaxed game regulatory environment, with a clear policy attitude encouraging content innovation and global expansion. Noting a recent phased correction in the gaming sector, the institution believes it is primarily driven by valuation fluctuations, with the industry's fundamentals remaining solid. Based on disclosed first-half 2026 performance forecasts, major companies like Century Huatong, Giant Network, Kingnet Network, and G-Bits generally achieved growth rates exceeding 50%, with mature, long-term product operations releasing earnings and providing stable cash flow. Companies like G-Bits are rewarding investors with high dividend payout ratios, demonstrating their investment value.
Related Stock Profiles
TENCENT (00700): On July 22, Tencent announced the full launch of its first AI creative agent, Miora (Tencent Design Wonderland). Miora, built on an architecture similar to WorkBuddy, is designed for the creative field. Tencent describes Miora as an AI creative agent with memory, the ability to understand needs, and the capability to coordinate multi-agent collaboration. Users only need to propose a goal, and Miora will decompose the task and delegate work such as image, video, 3D, and UI creation to corresponding experts, outputting diverse results with a consistent style. Application scenarios include brand proposals, social media creative, promotional videos, game UI, ad materials, e-commerce materials, and 3D modeling.
ARCHOSAUR GAMES (09990): Recently, Archosaur Games released the first official PV for its new IP-based game, "Lord of the Mysteries: The Fool." Leveraging the massive and highly loyal fanbase of the "Lord of the Mysteries" novel, the game's pre-registration popularity has soared. The debut PV not only garnered significant recognition from fans but also received approval from the original novel's author, Cuttlefish That Loves Diving. The project holds dual official authorizations from both the novel and the animation, making the development process more complex and subject to higher scrutiny from both copyright holders. Archosaur Games is leveraging its mature adaptation experience and R&D capabilities to navigate these strict standards while maintaining creative freedom.
FRIENDTIMES (06820): Friendtimes announced that the group expects to record a profit of approximately 68 million to 74 million yuan for the first half of 2026, a year-on-year increase of about 67% to 82%. The expected profit increase is mainly due to an increase in fair value gains and investment income from financial assets measured at fair value through profit or loss.
NTES-S (09999): Guosheng Securities suggests that the new product cycle from the second half of 2026 to early 2027 could boost performance. Key products include "The Sea of Forgotten Memories" and "Project: Mugen." "The Sea of Forgotten Memories" is an oceanic adventure open-world RPG with a puppet-like, grotesque art style that has global potential, with an estimated annual revenue potential of 3 billion yuan. "Project: Mugen" is an urban open-world ARPG with numerous potential gameplay elements, potentially becoming the next flagship hit, with an estimated annual revenue potential of 6-8 billion yuan. If revenue expectations are met, this could boost NetEase's revenue base by approximately 5-10%.
NETDRAGON (00777): On March 26, NetDragon announced its full-year 2025 financial results, with total revenue of 4.48 billion yuan. Revenue from gaming and application services was 3.28 billion yuan, while Mynd.ai business revenue was 1.20 billion yuan. The company's gross margin improved by 5.1 percentage points year-on-year to 70.3%. Driven by the "Mashang AI" strategy, the company has made positive progress in its two core tracks of education and gaming, as well as in various AI+ strategic investment areas, significantly improving operational efficiency. Full-year operating expenses decreased by 22.2% year-on-year, and second-half operating profit increased by 47.7% year-on-year. The benefits of cost optimization are expected to be fully released in 2026.