NetEase (NTES.US) 3Q16 RESULTS: REVENUE MISSES ON SLIGHTLY WEAKER MOBILE GAME REVENUE, EPS BEATS

Executive Summary

• NetEase, a leading online game service provider in China, reported 3Q16 revenues of ¥9.21 billion (US$1.38 billion), up 38% year over year and 5% below the consensus estimate. Non-GAAP diluted EPS was ¥22.82 (US$3.42), ahead of the US$3.20 consensus estimate and up 7% year over year.
• Online game service revenues totaled ¥6.57 billion (US$0.99 billion) for 3Q16, an increase of 0% year over year. Advertising services and email, e-commerce and others revenue grew 23.8% and 107.2% to US$0.56 billion and US$2.08 billion, respectively.
• Margins were squeezed year over year in both the online game services and advertising services segments. The margin for the e-mail, e-commerce and other business jumped year over year, as the e-commerce business was in a development phase last year.