Good day, and welcome to the NetEase Third Quarter 2025 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brandi Piacente. Please go ahead.

Thank you, operator. Please note that today's discussion will contain forward-looking statements relating to the future performance of the company and are intended to qualify for the safe harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect NetEase's business and financial results is included in certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20-F and in announcements and filings on the Hong Kong Stock Exchange's website. The company does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the third quarter 2025 earnings release issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com. Joining us today on the call from NetEase's senior management are Mr. William Ding, Chief Executive Officer; Mr. Zhipeng Hu, Executive Vice President; and Mr. Bill Pang, Vice President of Corporate Development. I will now turn the call over to Bill, who will read the prepared remarks on William's behalf.

Thank you, Brandi, and welcome, everyone, to today's call. Before we begin, I would like to remind everyone that all percentages are based on RMB. The third quarter marked continued momentum and strong execution across our NetEase family. By uniting creativity with exceptional operations, we created more meaningful connections with players, driven by our diverse portfolio of games that expanded our global reach and reignited our player enthusiasm for our key franchises. Total revenues increased 8% year-over-year, reaching RMB 28.4 billion in the third quarter, and revenues from our games and related VAS grew 12% in the third quarter compared with the same period last year. Innovative creativity and long-term operation remain the defining force behind NetEase's ongoing player engagement and global expansion, whether for new launches or established titles. Our teams are dedicated to delivering unexpected gaming experiences and responsive live services that are winning over players worldwide. This strategic creative approach continued to gain traction overseas, amplifying the influence and excitement of multiple games in the third quarter, including our new releases. Destiny: Rising, our new free-to-play mobile sci-fi RPG shooter quickly topped iOS download chart in the United States and other major Western markets following its global launch on August 28. The game has received widespread acclaim, securing leading positions on iOS download chart across nearly 100 markets worldwide, featuring Destiny's iconic powerful game gunplay across diverse mode setting new time line. The game has earned positive feedback from long-time fans, while gaining traction within the broader shooter game community. The excitement continued in China, where Destiny: Rising debuted on October 16 and immediately topped our downloading chart, drawing in players nationwide to experience the streaming shooting action at their fingertips. Marvel Rivals continues to captivate superhero shooter fan base around the world. Kicking off its fourth…

[Operator Instructions] Your first question comes from Xueqing Zhang with CICC.

[Foreign Language] [Interpreted] Congratulations on the third quarter. My question about Fantasy Westward Journey. Given that FWJ PC has consistently set new record for online player count since this summer, we would appreciate that the company is sharing its operational structure for this evergreen title. And we have several follow-up questions on it. Firstly, what's the core driving factors behind the unlimited player server. And secondly, what's the user profile? What's the ratio of retaining players to new players. And lastly, is this model replicable across other flagship titles?

[Foreign Language]

[Interpreted] Okay. I'll do the translation. The longevity of Fantasy Westward Journey online PC is based on highly stable economic system and unique enriched gaming experiences which are very rare in most other games. Our team has been dedicated to providing sustainable fun experience, stable ecosystem and innovative content. This commitment has been recognized and appreciated by the players as well as we can see from the market. In the unlimited server, we have removed the upfront time-based payment, streamlined the gameplay and systems, offered a lighter gameplay format, while preserving the core designs that has evolved in our classic server over time. Compared with the comprehensive and diverse game experience on the content, unlimited server offers enjoyable experiences in the simple -- more simple direct manner with a smooth learning curve, unlimited server has attracted both many former players back to the game as well as new players. This user demographic of unlimited server actually also benefited the classic server by introducing additional new and returning players. Fantasy Westward Journey online as a legacy game has been operated for 22 years. We remain committed to the innovation and diversified experience to meet -- continues to meet the demand from our community. Looking ahead, we will continue to focus on long-term development, providing our broad player community with various choices in one game.

Your next question comes from Thomas Chong with Jefferies.

[Interpreted] Can management comment about the gaming trend in China as well as overseas. On the other hand, can management also talk about the overseas expansion strategy?

[Foreign Language]

[Foreign Language] [Interpreted] Okay. I will do the translation. During our business operations process of doing business in overseas market, we have accumulated successful experiences, which is powered by the strong development capability we have in-house here. For example, in Japan, we have Knives Out as identified been very popular in national network games. And last December, we released Marvel Rivals globally, super successful. And just November 15 this month, we released Where Winds Meet in global markets. And all this product achieved a very good level of success overseas, and we hear a lot of positive feedback from the community as well. In the -- what we see is that in the overseas market, NetEase as one of the most prominent game developing powerhouses in our industry. And we are the only company that bring the purely truly Chinese authentic online games to global market. For example, Where Winds Meet, it's a very Chinese [Technical Difficulty] and we're the only big successful companies that bring this level of authentic experience to the online gamers globally and received very positive feedback. Looking ahead, we believe we have the capability to bring more and more success cases to overseas markets and provide gamers from the globe with more and more high-quality content and services. We have confidence in that.

[Foreign Language]

[Interpreted] Yes, there are some further comments from William. One is that actually also in this month, we also rolled out our Sword of Justice into the global market. And of course, 3 years ago, we rolled out Naraka: Bladepoint PC on global market. And as you heard, we showed our games to public for both ANANTA and Sea of Remnants. The market has very big expectations. We showed ANANTA game show this year, and it's been named one of the most promising upcoming games by the Japan Games Award 2025 Future division. NetEase, we are based in China, and we are also carving our territory in the global market. That is what we have been doing. We have some successes, and it's -- we're going to keep doing.

Next question comes from Ritchie Sun with HSBC.

[Foreign Language] [Interpreted] Regarding Identity V, we have seen the volatility in grossing and DAU in recent months. Can management discuss the reasons behind it and the strategy to improve the performance? Secondly, World of Warcraft and Hearthstone have returned to China for 1 year already and about to face tough comps. Can management discuss the performance metrics now versus 1 year ago and plans to drive sustainable growth in the future? And the Diablo IV is also coming back soon. Can management discuss the monetization potential considering the more intense competition in the ARPG genre?

[Foreign Language]

[Interpreted] Okay. I will translate this part first. Indeed, it's true that there has been some influence from competing products during the summer holidays, particularly among general users in lower-tier cities. However, we also have noticed that the impact has eased since the start of back-to-school time. And in fact, talking about September, Identity V actually has reached historical high starting from the new semester compared to the same period in previous years. While Q4 historically has never been the peak season for Identity V, the team is focusing on preparing new content and marketing campaigns for the Chinese New Year cycle. During this period, we observed the demand -- the diversified demands on diversified gameplays from community. So we have been preparing more comprehensive and large-scale side game modes while on the other hand, we're also working on the next chapters of the game.

[Foreign Language]

[Interpreted] Thank you, Yes. As we approach the end of current expansion of World of Warcraft, it is indeed expected to see decline in performance compared to this launch period. Meanwhile, Hearthstone has steady maintained its cadence of expansion updates over the past years. With different operation strategy from the past, the performance of both games actually maintained higher than status than when the operation closed previously. Moving forward, we'll continue to deepen our collaboration to sustain our unique competitive offerings in the China market. And one specific example I want to give here is the Titan Reforged Server for Warcraft. That indeed was initiated by -- together by our Chinese team and the U.S. team. Together, we set the target and designed together and developed specific for this demand and the result is very good. So that is one example to see by working closer together, we can achieve better result compared to the past. Talking about Diablo, Diablo IV has its own unique quality, and we have brand-new business plans in place for it. We believe it will secure its deserved market share and commercial performance in the ARPG segment after launch. In addition, StarCraft II has achieved record high user engagement since its launch, infusing vitality into the RGS genre.

Your next question comes from Alicia Yap with Citigroup.

[Foreign Language] [Interpreted] So just wanted to follow up. I think management earlier mentioned ANANTA was recently showcased at the Tokyo Game Show and has a pretty good feedback. So just wanted to know more details about the user feedback. And then how should we think about the market positioning and also the differentiation of this game? And then it also seems that the game included a pretty decent rich content and also the innovative gameplay. So any comments on that? And then are there any updates regarding the next testing timing and also the official launch timing in 2026 that you can share?

[Foreign Language]

[Interpreted] We showcased the latest update and playtesting of ANANTA at the Tokyo game show, which attracted significant attention on social media across the world, winning one of the most promising upcoming titles by the Japan Game Award 2025 Future Division. We believe with a blend of colorful quality content, innovative monetization strategy as well as our focus on long-term operations we anticipate the game will secure a new position within the industry ecosystem. We're currently planning to further enhance our development process, the development process is on track now, and we'll proceed with testing and launches as scheduled. And when time comes, we have further updates to share.

Your next question comes from Jialong Shi with Nomura.

[Foreign Language] [Interpreted] We noticed from media, it seems to us the number of new games in your pipeline every year is smaller than in the past few years. If our observation is correct, just wonder what is your current strategy towards launching new games into the market. And if NetEase does not launch as many new games each year, what will be the growth driver for your online gaming business?

[Foreign Language]

[Interpreted] Okay. I will do the translation. The whole company will be very focused on our success products. And among the already success product, we'll keep refining and keep focusing. We don't want to distract too much focus to charter many, many new products, which we don't have super confidence. For new projects, we will look at product more prudently and more focused, making sure that whatever new product we're building, it has confidence power in the content market. We actually don't see this to contradict with another. We believe being focused is one of the core competence a company needs to have. That's our view.

Our next question comes from Felix Liu with UBS.

[Foreign Language] [Interpreted] My question is on the recent news of organizational changes in your game department. Will these changes impact the near-term operations of the related games? And how does management think about the current organizational structure under the context of your game strategy? And should we expect more changes to come?

[Foreign Language]

[Interpreted] Okay, I will do the translation. Regarding the recent adjustment and changes, it's part of the company's normal personnel turnover process and has been carried out without impacting daily operations of our game. That's rest assured. The adjustment is aiming to make the operation more focused and efficient, allowing us to concentrate -- keep concentrating on creating enduring high-quality product. For example, for existing evergreen titles, we asked our teams to stay focused continuously refining and optimizing the games. For new titles that show evergreen potentials, we'll allocate sufficient resources to develop them into Evergreen long-lasting successful games. However, for teams that are not keeping pace with the market trends or user demand, we also must trim decisively to make sure a healthy development of our core initiatives. NetEase has been especially for 28 years, and our commitment to creating high-quality products has remained unchanged. We'll allocate more resources to evergreen titles and provide more opportunities to teams who are creative and willing to innovate.

Your next question comes from Lincoln Kong with Goldman Sachs.

[Foreign Language] [Interpreted] So my first question is about AI. So we have actually seen some of the games like Eggy Party or Justice Mobile has already integrated with AI applications. So going forward, for our existing portfolio and the new games, how should we think about AI can bring additional opportunities to our gamers? And the second question is in terms of the future new games. Given that the company now focus more on quality of those new games, so how should we think about the potential important game genre going forward? Specifically like for the shooting game genre globally, I think we have seen a rapid growth. So how would NetEase sort of differentiate ourselves in this shooting genre?

[Foreign Language]

[Interpreted] Okay. I'll do translation. First of all, regarding the question on AI, we have been using AI in development and AI is very important in game development and operation, and we have accumulated tons of hands-on in this area. And compared -- especially compared to many of our peer companies from overseas, we have more hands-on experience in this area. We have deployed massive resources in the research of AI and how to use AI in the process of game development, innovation and operation. Actually, the user experience is the best answer to guide us on how we should deploy technologies. But we don't think we have time here today for the detailed specific user experience explanations. Regarding your next question on the future direction of product, as we explained, we'll focus on the concentrating resources on building really high-quality flagship products, the product that we have conviction on the success. We won't do aggressively blindly open many projects. That's not our direction. We'll be focused on -- we'll do focused targeted approach to the new project. And in the future coming years, we believe NetEase compared to most -- many other companies in our industry globally, we are one of the companies that has clear vision on the future in future products, and we will make ground breakthroughs.

Your next question comes from Yang Liu with Morgan Stanley.

[Foreign Language] [Interpreted] Let me translate my question. My question is about the Sea of Remnants this new game. Could the management share about the R&D development and expected launch timing? And what will be the commercial strategy for this title? And is there any direct peers or competitor for this game? And what NetEase can do to differentiate?

[Foreign Language]

[Interpreted] I will do the translation. First of all, the Sea of Remnants is a very important product to us. We focus on that very much. The team has very rich development and operational experience in the company. And the game is built on our self-developed game engine will support both PC, mobile and console as well. On the detailed gameplay and content, we believe we have a clear decisions on how to do that. We believe it's going to be a fresh experience in the market. It's going to be a multi-character cultivation kind of type, but not the traditional way. The sailing experience on the ocean as well as the rich combination between characters and classes, we believe it will bring a fresh unexperienced ocean experience to the gamers.

And that concludes the question-and-answer session. I would like to turn the conference back over to Brandi Piacente for any additional or closing remarks.

Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly. Have a great day. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]