1Q26结果：利润大幅超过预期，盈利空间扩大；2H26E游戏流水稳健。

margin expansion; solid gamepipeline in 2H26E 1Q26results: strongprofit beat on marginexpansion; solid game pipeline in 2H26E TargetPriceUS$155.00(Previous TPUS$161.50)Up/Downside35.6%Current PriceUS$114.34 NetEaseannounced 1Q26 financialresults: total revenuewas upby6% YoY toRMB30.6bn, 4%/2%ahead of Bloomberg consensus/ourestimatedue to thesolid performance of established game titles; non-GAAP net income was flattishYoY at RMB11.3bn,beating consensus/ourestimateby 13%/4%thanks to thebetter-than-expected GPM expansion (+5.3ppt YoY) and prudent opex control. Looking ahead, several highly-anticipated game titles likeSea of RemnantsandANANTAare lined up for launch in 2H26/FY27,which we expect to driveacceleration of games revenue growth from 2H26E onwards. In view of thestrong margin expansion, we raise our FY26-28E earningsforecastby3-4%; China Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk 1Q26 games revenueabove expectation.Games & related VAS revenueincreased by 7% YoY toRMB25.7bn in1Q26, 4% ahead of consensusestimate. Contractliabilities also maintained a solid growth of 23%/6%YoY/QoQ as of Mar 2026. Despitealack of new titles in 1H26, evergreen Ye TAO, CFA(852) 3850 5226franktao@cmbi.com.hk Shuyin GUO(852) 3916 3716guoshuyin@cmbi.com.hkStock Data titlesmaintained strong performance in 1Q26: 1)Where Winds Meetachieved record-high quarterly revenue and ranked the 2nd on Steam global top-selling chart following its overseas launch of version 1.6; 2)Fantasy Westward JourneyOnline’speak concurrent users reached a newhigh of 3.9mn and also achieved record-highquarterlyrevenue thanks tothe introduction of unlimited server; 3)IdentityVsustained steady userengagement throughcontinuousupgrade of its gameplay systems. Looking ShareholdingStructure Steady Music and Youdao businesses.NetEase Cloud music revenuegrewby7% YoY to RMB1.98bn in1Q26,mainly driven by the growth ofonlinemusic revenue.Youdao revenue increased by 4%YoY toRMB1.35bn in 1Q26,primarily fuelled by the solid growth of online Strong margin expansion onfavourablemix shift and opex control. Overall/games GPM expanded by 5.3/6.0ppt YoY to 69.4/74.8% in 1Q26,thanks to channel cost optimization and revenue mix shift to higher-marginPC games. The company’s prudent expense control led to 33% decline inG&A expenses in 1Q26, and thus overall OPM was up by 5.2ppt YoY to Source: FactSet We use sum-of-the-parts (SOTP)valuation methodology to value NetEase’s four mainbusiness segments. Our SOTP-derived target price is US$155.0, comprising: 1) US$137.2for the online game business (88.5% of total valuation),based on15x 2026EEV/EBIT,which isat a premium tothe industry average(14x) reflecting NetEase’s strong 2) US$0.6for Youdao (0.4% of total valuation), based on0.7x 2026E EV/revenue, on parwith the industry average; 3) US$2.2(1.4% of total valuation) for theNetEaseCloud Music business, based on1.9x2026E EV/revenue,on par with the industry average; 4) US$1.2(0.8% of total valuation) for the innovative businesses and others, based on0.8x2026EEV/revenue, on par with the industry average; 5) US$13.9for net cash. Disclosures& Disclaimers Analyst Certification The research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuerthat the analyst coveredin this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and FuturesCommission) (1) have dealt in or traded in the stock(s)covered in this research report within 30 calendar days prior to the date of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3)serve as an officer ofany of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report. CMBIGM Ratings BUY: Stock with potential return of over 15% over next 12 monthsHOLD:Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852) 3900 0800CMB InternationalGlobal MarketsLimited (“CMBIGM”) is a wholly owned subsidiaryof CMB International Capital Corporation Limited (a wholly owned Important Disclosures There are risks involved in transacting in any securities. The information contained in this report may not be suitable forthe purposes of all investors.CMBIG