This article is from the WeChat public account "Tech Business" (ID: InnoBusiness), author: Tech Business, published with permission. 93% of this revenue in the current fiscal year came from online game operating revenue. Among them, mobile game net revenue accounted for 67% of online game operating revenue, which was lower than the proportion in the same period of fiscal 2021 (70%). NetEase said that the relative decline in the proportion of mobile game revenue is due to the relatively high proportion of computer games such as Fantasy Westward Journey and Naraka: Bladepoint.
Tech Business News Recently, Internet and online game service provider NetEase announced its financial results for fiscal year 2022 and fourth quarter (ended December 31, 2022).
According to the financial report, NetEase's revenue in fiscal 2022 was 96.5 billion yuan, compared with 87.6 billion yuan in fiscal 2021, showing a 10% increase in revenue. The company's revenue in fiscal 2021 increased by 19% compared to the fiscal 2020 period.
In the latest quarter of this fiscal year (fiscal year 2022 Q4), NetEase's revenue was 25.4 billion yuan, compared with 24.4 billion yuan in fiscal 2021, reflecting a revenue increase of 4%. Revenue growth in the latest quarter was slower than full-year growth.
NetEase's revenue comes from four business segments, including games and related value-added services, Youdao, cloud music, innovation business and others.
NetEase's game and related value-added services revenue was RMB74.6 billion in the current fiscal year, an increase of 10% over the previous fiscal year. According to the financial report, 93% of this revenue in this fiscal year came from online game operating income. Among them, mobile game net revenue accounted for 67% of online game operating revenue, which was lower than the proportion in the same period of fiscal 2021 (70%). NetEase said that the relative decline in the proportion of mobile game revenue is due to the relatively high proportion of computer games such as Fantasy Westward Journey and Naraka: Bladepoint.
Youdao contributed revenue of 5 billion yuan in the fiscal year, compared with 5.4 billion yuan in the same period of the previous fiscal year, reflecting a decrease of 7% in revenue. Cloud Music's revenue in fiscal 2022 was nearly 9 billion yuan, a year-on-year increase of 29%. Innovation business and other FY2022 revenue was $7.9 billion, up 7% from $7.4 billion in the previous fiscal year.
In terms of revenue proportion, 77% of NetEase's revenue in fiscal 2022 came from games and related value-added services, which was the same as in fiscal 2021. Youdao's revenue share was 5%, which was slightly lower than the 6% share in fiscal 2021. Cloud music accounted for 9% of revenue, up slightly from 8% in the same period last fiscal year. Innovation and other revenue accounted for 8%, unchanged from FY2021.
NetEase's cost of revenue for the fiscal year was 43.7 billion yuan, compared with 40.6 billion yuan in fiscal 2021, an increase of 8%. The company's gross profit in fiscal 2022 was 52.8 billion yuan, an increase of 12% from 47 billion yuan in the previous fiscal year.
Among them, the gross profit of games and related value-added services in the current fiscal year was 46.8 billion yuan, an increase of 12% over the previous fiscal year. The earnings report said the increase was driven by higher net revenue from online game operations (including PC games such as Fantasy Westward Journey Online and Naraka: Bladepoint, as well as new launches such as certain mobile games and existing popular games such as Infinite Lagrange)
Youdao's gross profit was RMB2.6 billion, down 11% year-on-year. Cloud Music gross profit was RMB1.3 billion, a significant year-on-year increase. Gross profit in the Innovation business and other fiscal years decreased slightly.
In terms of gross margin, the gross margin of the company's games and related value-added services was 63% for the current fiscal year, slightly higher than the gross margin of 62% in the same period of the previous fiscal year. Youdao gross margin was 52%, slightly lower than the 54% performance in the same period last fiscal year. Cloud Music's gross margin was 14% for the current fiscal year, significantly higher than the 2% performance in the same period of the previous fiscal year. Gross margin for the Innovation and Other fiscal year was 27%, down from 28% in the prior fiscal year.
NetEase's total operating expenses for the fiscal year were 33.1 billion yuan, compared with 30.6 billion yuan in the same period of the previous fiscal year, an increase of 8% for the current fiscal year.
Among them, sales and marketing expenses for the fiscal year were 13.4 billion yuan, a year-on-year increase of 10%. General and administrative expenses were $4.7 billion, compared to $4.3 billion in the previous fiscal year, and also increased by 10% for the current fiscal year. R&D expenses were RMB15 billion, a year-on-year increase of 7%.
According to the financial report, NetEase performed a net profit of 19.8 billion yuan in fiscal 2022, compared with 17 billion yuan in the previous fiscal year, showing a 17% increase in net profit.
As of the fiscal year, NetEase's net cash flow from operating activities was 27.7 billion yuan, which increased by 11% year-on-year. Cash flow from investing activities was $7.4 billion, representing a 4% increase in cash outflow for the fiscal year. Cash flow from financing activities decreased by 19% to $10.2 billion, compared to $12.6 billion in the same period last fiscal year.
NetEase's cash, cash equivalents and restricted cash increased net by $10.2 billion in the fiscal year, compared to a net increase of $5.2 billion in the same period last fiscal year. At the end of the fiscal year, the company's cash, cash equivalents and restricted cash were $27.6 billion, compared to $17.4 billion in the previous fiscal year, and cash assets increased 59% for the current fiscal year.
In the financial report, the company's CEO Ding Lei said: "The company achieved steady growth in 2022. This is mainly due to the continued popularity of the company's leading games and the expansion of the range of products and services: In 2022, the company focuses on flagship games and new games, attracting more players through diverse and growing gaming content. Eggy Party, for example, represents the company's major breakthrough in casual gaming. The new additions further expand and diversify our user base, enhancing our robust portfolio of games... The company's other business lines, including Youdao and Cloud Music, are also on track..."
Regarding NetEase, the company offers online services centered on content creation. Currently, the company develops and operates a number of well-known mobile and desktop games. In addition to games, NetEase's service products include its holding subsidiary Youdao (intelligent learning company), NetEase Cloud Music (online music content community), and NetEase's own brand consumer lifestyle brand Yanxuan.
As of this writing, the company's shares are down 11% over the past year and are now worth $54.4 billion.