What’s new: Chinese video game giant NetEase reported better-than-expected third-quarter profit and revenue Thursday, continuing to benefit from a surge in demand for in-home entertainment amid the Covid-19 pandemic.
Net revenue surged 27.5% year-on-year to 18.7 billion yuan ($2.7 billion) in the quarter ended in September, beating analysts’ estimates of 18.2 billion yuan.
Net income from continuing operations decreased to 3 billion yuan due to a net exchange loss of 1.6 billion yuan, compared with 4.1 billion yuan a year ago, which included a net gain on foreign exchange rates.
Net revenue from online game services was 13.9 billion yuan, an increase of 20.2% from a year ago, reflecting the resilience of the company’s two most popular titles, Fantasy Westward Journey Online and New Westward Journey Online II.
Revenue from NetEase’s education unit Youdao rose 159% to 896 million. New York-listed Youdao provides a free online translation tool and dictionary, and its revenue mainly comes from online advertising and instruction courses.
The background: Youdao contributes less than 5% of NetEase’s total revenue, but the unit’s gross profit margin jumped to 45.9% in the third quarter from 25.8% a year ago.
On a conference call discussing the results, NetEase founder and Chief Executive Officer William Ding said Youdao increased the number of teaching assistants in the summer by more than 600 to 3,400.
China’s online education market is white hot, estimated to grow 12% to $61.5 billion this year with a major boost from the coronavirus pandemic. To compete for students, online education platforms are engaged in a fierce price war. In the summer, Youdao and rivals offered a package including five sessions and 10 class hours for as a low as 9 yuan.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com).
Related: CGI: China’s Online Education Industry Locked in a War of Attrition
