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What changed in NetEase, Inc.'s 20-F — 2023 vs 2024

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Paragraph-level year-over-year comparison of NetEase, Inc.'s 2023 and 2024 20-F annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+786 added−900 removedSource: 20-F (2025-04-15) vs 20-F (2024-04-25)

Top changes in NetEase, Inc.'s 2024 20-F

786 paragraphs added · 900 removed · 631 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

260 edited+88 added−100 removed601 unchanged
Biggest changeWith respect to the cross-border transfer of personal information outside the territory of PRC, PIPL requires that unless otherwise provided in the related international treaties or agreements concluded or acceded to by PRC, the handler of personal information must meet one of the following conditions: (i) pass the security assessment organized by CAC (on August 31, 2022, the CAC issued the Guidelines for Declaring Data Cross-border Security Assessment (First Edition), which became effective on September 1, 2022, to further clarify the scope of application, declaration methods and processes of data cross-border security assessment); (ii) have been certified by a specialized agency for protection of personal information in accordance with the provisions of the CAC (on November 4, 2022, the CAC promulgated the Announcement on the Implementation of Certification for Personal Information Protection to substantiate the details of such certification); (iii) enter into a contract with the overseas recipient under the standard contract formulated by CAC (on February 24, 2023, the CAC promulgated the Measures for Standard Contracts for Cross-border Transfers of Personal Information, or the Measures, together with a template of such standard contract as an annex to the Measures, which took effect on June 1, 2023, to specify the circumstances to conclude such standard contract and a template of such standard contract); or (iv) meet other conditions prescribed by laws, administrative regulations or the CAC.
Biggest changeWith respect to the cross-border transfer of personal information outside the territory of PRC, PIPL requires that unless otherwise provided in the related international treaties or agreements concluded or acceded to by PRC, the handler of personal information must meet one of the following conditions: (i) pass the security assessment organized by CAC; (ii) have been certified by a specialized agency for protection of personal information in accordance with the provisions of the CAC; (iii) enter into a contract with the overseas recipient under the standard contract formulated by CAC; or (iv) meet other conditions prescribed by laws, administrative regulations or the CAC.
We receive relatively lower profits from the operation of online games that we license from third-party developers, and we are subject to certain financial obligations in connection with such licenses. Our revenue sharing arrangements for games that we license from third-party developers provide us with relatively less profit than games that we develop in-house.
We receive relatively lower profits from the operation of online games that we license from third-party developers and are subject to certain financial obligations in connection with such licenses. Our revenue sharing arrangements for games that we license from third-party developers provide us with relatively less profit than games that we develop in-house.
Over the years, Youdao has developed a number of core technologies to support its comprehensive suite of products and services. Youdao also relies on technologies to build and maintain its information technology infrastructure. The intelligent learning industry is subject to rapid technological changes and innovations and is affected by unpredictable product lifecycles and user preferences.
Over the years, Youdao has developed a number of core technologies to support its comprehensive suite of products and services. Youdao also relies on technologies to build and maintain its information technology infrastructure. The intelligent learning industry is subject to rapid technological changes and innovations and affected by unpredictable product lifecycles and user preferences.
Our ability to generate and maintain significant advertising revenue will depend on a number of factors, many of which are beyond our control, including: ● macroeconomic conditions; ● operations and financial conditions of our advertisers and the general level of advertiser spending; ● the development of a large base of users possessing demographic characteristics attractive to advertisers; ● competition with other major and emerging online advertising platforms; 25 Table of Contents ● the development of software that blocks internet advertisements before they appear on a user’s screen; ● downward pressure on online advertising prices; and ● the effectiveness of our advertising delivery and tracking system.
Our ability to generate and maintain significant advertising revenue will depend on a number of factors, many of which are beyond our control, including: ● macroeconomic conditions; ● operations and financial conditions of our advertisers and the general level of advertiser spending; ● the development of a large base of users possessing demographic characteristics attractive to advertisers; 25 Table of Contents ● competition with other major and emerging online advertising platforms; ● the development of software that blocks internet advertisements before they appear on a user’s screen; ● downward pressure on online advertising prices; and ● the effectiveness of our advertising delivery and tracking system.
We mainly compete to: ● attract, engage and retain users based on the design, quality, popularity and efficacy of our content offerings, the overall user experience of our products and services, as well as the effectiveness of our marketing activities; ● attract and retain motivated and capable talent, including engineers, game designers, product developers and creative professionals to build compelling content, tools and functions; and 26 Table of Contents ● win collaboration relationships with game studios and content owners based on our level of expertise in systematically developing original games, delivering a compelling user experience through operational know-how and customizing our established game titles for rapid expansion into overseas markets.
We mainly compete to: ● attract, engage and retain users based on the design, quality, popularity and efficacy of our content offerings, the overall user experience of our products and services, as well as the effectiveness of our marketing activities; 26 Table of Contents ● attract and retain motivated and capable talent, including engineers, game designers, product developers and creative professionals to build compelling content, tools and functions; and ● win collaboration relationships with game studios and content owners based on our level of expertise in systematically developing original games, delivering a compelling user experience through operational know-how and customizing our established game titles for rapid expansion into overseas markets.
In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021.
In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021.
These transactions involve significant challenges and risks, including: ● difficulties in, and significant and unanticipated additional costs and expenses resulting from, integrating into our business the personnel, operations, products, services, technology, internal controls and financial reporting of the businesses we acquire; ● disruptions to our ongoing business and distractions to our management and employees when engaging in or negotiating these transactions, or when integrating the new business we acquire with our existing business, both of which will increase our expenses; ● departure of skilled professionals and experienced management teams of the acquired businesses, in particular senior game designers and programmers; ● lack of influence over the controlling partners or shareholders or the misalignment of interests between us and our partners or other shareholders, for those investments in which we may not obtain management and operational control; ● complex regulatory requirements, restrictions and/or scrutiny on our investments and acquisitions in foreign jurisdictions, including those related to national security, anti-monopoly and competition laws, export controls, etc.; ● actual or alleged misconduct, unscrupulous business practices or non-compliance by us and/or any company we acquire or invest in or by its affiliates or current or former employees, whether before, during or after our acquisition or investments; ● difficulties in and costs associated with identifying and selecting appropriate targets and strategic partners; ● loss of potential opportunities to enter into strategic transactions with competitors of our investee companies and strategic partners; ● difficulties in conducting sufficient and effective due diligence on potential targets to identify hidden liabilities, incidences of non-compliance, operating losses, or costs and expenses, which may adversely affect us following our acquisitions or investments or other strategic transactions; ● losses arising from disposal of investments or split-up of businesses; and ● actual or potential impairment charges or write-offs of investments in equity method investees or intangible assets (including intellectual property we acquire), and goodwill recorded in connection with invested businesses, in the event that a decline in fair value below the carrying value of our equity method investments is other-than-temporary, or the carrying amount of a reporting unit to which goodwill is allocated exceeds its fair value.
These transactions involve significant challenges and risks, including: ● difficulties in, and significant and unanticipated additional costs and expenses resulting from, integrating into our business the personnel, operations, products, services, technology, internal controls and financial reporting of the businesses we acquire; ● disruptions to our ongoing business and distractions to our management and employees when engaging in or negotiating these transactions, or when integrating the new business we acquire with our existing business, both of which will increase our expenses; ● departure of skilled professionals and experienced management teams of the acquired businesses, in particular senior game designers and programmers; ● lack of influence over the controlling partners or shareholders or the misalignment of interests between us and our partners or other shareholders, for those investments in which we may not obtain management and operational control; 37 Table of Contents ● complex regulatory requirements, restrictions and/or scrutiny on our investments and acquisitions in foreign jurisdictions, including those related to national security, anti-monopoly and competition laws, export controls, etc.; ● actual or alleged misconduct, unscrupulous business practices or non-compliance by us and/or any company we acquire or invest in or by its affiliates or current or former employees, whether before, during or after our acquisition or investments; ● difficulties in and costs associated with identifying and selecting appropriate targets and strategic partners; ● loss of potential opportunities to enter into strategic transactions with competitors of our investee companies and strategic partners; ● difficulties in conducting sufficient and effective due diligence on potential targets to identify hidden liabilities, incidences of non-compliance, operating losses, or costs and expenses, which may adversely affect us following our acquisitions or investments or other strategic transactions; ● losses arising from disposal of investments or split-up of businesses; and ● actual or potential impairment charges or write-offs of investments in equity method investees or intangible assets (including intellectual property we acquire), and goodwill recorded in connection with invested businesses, in the event that a decline in fair value below the carrying value of our equity method investments is other-than-temporary, or the carrying amount of a reporting unit to which goodwill is allocated exceeds its fair value.
If we fail to address any of these challenges, especially if we fail to offer high-quality music content and superior user experience to meet user preferences and demands, Cloud Music may not be successful in increasing the number of paying users and cultivating users’ willingness to pay for music content and social entertainment services, which could have a material adverse impact on Cloud Music’s business, and negatively impact our consolidated results of operations.
If we fail to address any of these challenges, especially if we fail to offer high-quality music content and superior user experience to meet user preferences and demands, NetEase Cloud Music may not be successful in increasing the number of paying users and cultivating users’ willingness to pay for music content and social entertainment services, which could have a material adverse impact on NetEase Cloud Music’s business, and negatively impact our consolidated results of operations.
“Information on the Company—Business Overview—Government Regulations—Regulations on Internet Live Streaming Services.” Cloud Music and its subsidiaries have submitted an application to register with the registration management system, which is currently under review, and we cannot assure you that such registration will be approved or that Cloud Music will no longer be required to hold an AVSP if and when such registration is completed.
“Information on the Company—Business Overview—Government Regulations—Regulations on Internet Live Streaming Services.” NetEase Cloud Music and its subsidiaries have submitted an application to register with the registration management system, which is currently under review, and we cannot assure you that such registration will be approved or that NetEase Cloud Music will no longer be required to hold an AVSP if and when such registration is completed.
Failure to maintain or regain compliance may materially and adversely affect our business, financial condition and results of operations, including being subject to liabilities, penalties, impediments in development of such business models and disruptions to its operations. 23 Table of Contents Our controlling interest in Youdao and/or Cloud Music may be diluted if Youdao and/or Cloud Music raise additional capital with the issuance and sale of additional equity in the future.
Failure to maintain or regain compliance may materially and adversely affect our business, financial condition and results of operations, including being subject to liabilities, penalties, impediments in development of such business models and disruptions to its operations. 23 Table of Contents Our controlling interest in Youdao and/or NetEase Cloud Music may be diluted if Youdao and/or NetEase Cloud Music raise additional capital with the issuance and sale of additional equity in the future.
If we fail to retain and enhance our business relationships with these business partners, or if these business partners choose to terminate or change the terms of our cooperation arrangements for strategic, financial or other reasons, we may suffer content loss, service interruptions or reduced revenues, which may have a material and adverse effect on Cloud Music’s business and may adversely affect our consolidated results of operations.
If we fail to retain and enhance our business relationships with these business partners, or if these business partners choose to terminate or change the terms of our cooperation arrangements for strategic, financial or other reasons, we may suffer content loss, service interruptions or reduced revenues, which may have a material and adverse effect on NetEase Cloud Music’s business and may adversely affect our consolidated results of operations.
For example, in general our segments, namely Youdao, Cloud Music and innovative businesses and others, have had lower gross profit margins compared to our games and related value-added services segment. These individual gross margins in turn can be impacted in any given period by factors such as competition, the implementation of new regulatory requirements and other factors.
For example, in general our segments, namely Youdao, NetEase Cloud Music and innovative businesses and others, have had lower gross profit margins compared to our games and related value-added services segment. These individual gross margins in turn can be impacted in any given period by factors such as competition, the implementation of new regulatory requirements and other factors.
In addition, Cloud Music and its subsidiaries are required to obtain various government approvals, licenses and permits or make various registrations and filings to provide internet information services, internet culture services, internet publication services, online audio-visual products and other related value-added telecommunications services, including the requirement to hold an AVSP or complete the registration in the national network audio-visual platform information registration management system.
In addition, NetEase Cloud Music and its subsidiaries are required to obtain various government approvals, licenses and permits or make various registrations and filings to provide internet information services, internet culture services, internet publication services, online audio-visual products and other related value-added telecommunications services, including the requirement to hold an AVSP or complete the registration in the national network audio-visual platform information registration management system.
We have devoted, and will continue to devote substantial efforts to monetizing our user base in Cloud Music’s music streaming business. If we fail to effectively execute such monetization strategies, Cloud Music’s business may be materially and adversely affected which may adversely affect our consolidated results of operations.
We have devoted, and will continue to devote substantial efforts to monetizing our user base in NetEase Cloud Music’s music streaming business. If we fail to effectively execute such monetization strategies, NetEase Cloud Music’s business may be materially and adversely affected which may adversely affect our consolidated results of operations.
In the future, should Youdao and/or Cloud Music require additional liquidity and capital resources to fund their business and operations, Youdao and/or Cloud Music may need to obtain additional financing, including issuing and selling additional equity or equity-linked securities, or issuing additional equity awards to incentivize their employees, which would dilute our interests in Youdao and/or Cloud Music.
In the future, should Youdao and/or NetEase Cloud Music require additional liquidity and capital resources to fund their business and operations, Youdao and/or NetEase Cloud Music may need to obtain additional financing, including issuing and selling additional equity or equity-linked securities, or issuing additional equity awards to incentivize their employees, which would dilute our interests in Youdao and/or NetEase Cloud Music.
Cloud Music monetizes its music streaming platform primarily through the sales of membership subscriptions for online music services and sales of virtual items for social entertainment services. At a strategic level, we plan to continue to optimize our existing monetization strategies and explore new monetization opportunities.
NetEase Cloud Music monetizes its music streaming platform primarily through the sales of membership subscriptions for online music services and sales of virtual items for social entertainment services. At a strategic level, we plan to continue to optimize our existing monetization strategies and explore new monetization opportunities.
If we fail to anticipate user preferences to provide online music streaming content catering to user demands, or maintain the attractiveness of our services to users and business partners, Cloud Music’s business may be materially and adversely affected, which may adversely affect our consolidated results of operations.
If we fail to anticipate user preferences to provide online music streaming content catering to user demands, or maintain the attractiveness of our services to users and business partners, NetEase Cloud Music’s business may be materially and adversely affected, which may adversely affect our consolidated results of operations.
We depend on third-party licenses for a significant portion of our music content, and any adverse changes to, or loss of, our relationships with these music content providers may materially and adversely affect Cloud Music’s business, which may adversely affect our consolidated results of operations.
We depend on third-party licenses for a significant portion of our music content, and any adverse changes to, or loss of, our relationships with these music content providers may materially and adversely affect NetEase Cloud Music’s business, which may adversely affect our consolidated results of operations.
Any difficulties or delays in receiving approval from the relevant government authorities for our new games or new expansion packs for, or material changes to, our existing games could adversely affect such games’ popularity and profitability. All games we release in China require government approvals.
Any difficulties in receiving approval from the relevant government authorities for our new games or new expansion packs for, or material changes to, our existing games could adversely affect such games’ popularity and profitability. All games we release in China require government approvals.
The expansion of our online games to markets outside of China will involve a variety of risks, including: ● difficulties in anticipating the preferences of game players in markets outside of China; ● challenges in formulating effective local sales and marketing strategies targeting users from various jurisdictions and cultures; ● challenges in identifying appropriate local business partners, including local game operators, and establishing and maintaining good working relationships with them; ● changes in a specific country’s or region’s political or economic conditions; ● unexpected changes in regulatory requirements, taxes or trade laws; ● difficulties in adapting and/or developing games which effectively address cultural differences and consumer preferences and are compliant with the local legal and regulatory environment; ● difficulties in managing a business in international markets with diverse cultures, languages, customs, legal systems, alternative dispute systems and regulatory systems; ● more stringent regulations relating to data security and the unauthorized use of, or access to, commercial and personal information; ● currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we choose to do so in the future; ● laws and business practices favoring local competitors or general preferences for local vendors; ● limited or insufficient intellectual property protection; and ● adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
The expansion of our online games to markets outside of China will involve a variety of risks, including: ● difficulties in anticipating the preferences of game players in markets outside of China; ● challenges in formulating effective local sales and marketing strategies targeting users from various jurisdictions and cultures; ● challenges in identifying appropriate local business partners, including local game operators, and establishing and maintaining good working relationships with them; ● changes in a specific country’s or region’s political or economic conditions; ● unexpected changes in regulatory requirements, taxes or trade laws; ● difficulties in adapting and/or developing games which effectively address cultural differences and consumer preferences and are compliant with the local legal and regulatory environment; ● difficulties in managing a business in international markets with diverse cultures, languages, customs, legal systems, alternative dispute systems and regulatory systems; ● more stringent regulations relating to data security and the unauthorized use of, or access to, commercial and personal information; 14 Table of Contents ● currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we choose to do so in the future; ● laws and business practices favoring local competitors or general preferences for local vendors; ● limited or insufficient intellectual property protection; and ● adverse tax burdens and foreign exchange regulations that could make it difficult to repatriate earnings and cash.
Youdao follows internal guidelines to make necessary registrations and filings, except as would not have a material adverse effect on our business, and will use its commercially reasonable efforts to obtain, maintain and renew necessary licenses and permits on a timely basis.
Youdao follows internal guidelines to make necessary registrations and filings, except as would not have a material adverse effect on its business, and will use its commercially reasonable efforts to obtain, maintain and renew necessary licenses and permits on a timely basis.
For example, our online music business and services, which we conduct through our majority-controlled subsidiary Cloud Music, must comply with laws, regulations, policies and guidelines promulgated by PRC government authorities related to music streaming, live streaming and online entertainment industries.
For example, our online music business and services, which we conduct through our majority-controlled subsidiary NetEase Cloud Music, must comply with laws, regulations, policies and guidelines promulgated by PRC government authorities related to music streaming, live streaming and online entertainment industries.
As Youdao and/or Cloud Music will continue to invest heavily in improving technologies, expanding their marketing efforts, hiring qualified personnel and offering additional products, services and content, Youdao and/or Cloud Music may not generate sufficient revenue to offset such expenses.
As Youdao and/or NetEase Cloud Music will continue to invest heavily in improving technologies, expanding their marketing efforts, hiring qualified personnel and offering additional products, services and content, Youdao and/or NetEase Cloud Music may not generate sufficient revenue to offset such expenses.
Our music streaming business is operated by our majority-controlled subsidiary Cloud Music, and we have devoted substantial efforts to monetizing its user base by increasing the number of paying users and cultivating users’ willingness to pay for music.
Our music streaming business is operated by our majority-controlled subsidiary NetEase Cloud Music, and we have devoted substantial efforts to monetizing its user base by increasing the number of paying users and cultivating users’ willingness to pay for music.
These laws and regulations are relatively new, and therefore there are substantial uncertainties with respect to their interpretation and implementation. We may need to adjust our business operations and systems to comply with these laws and regulations regarding network security, data security and personal information from time to time.
These laws and regulations are relatively new, and therefore there are uncertainties with respect to their interpretation and implementation. We may need to adjust our business operations and systems to comply with these laws and regulations regarding network security, data security and personal information from time to time.
PRC tax authorities may also require us to amend our contractual arrangements with the VIEs and their respective shareholders in a manner that would materially and adversely affect the ability of our subsidiaries to pay dividends and other distributions to us.
PRC tax authorities may also require us to amend our contractual arrangements with the VIEs and their respective shareholders in a manner that would adversely affect the ability of our subsidiaries to pay dividends and other distributions to us.
Youdao, our majority-controlled subsidiary listed on the New York Stock Exchange, and/or Cloud Music, our majority-controlled subsidiary listed on the Hong Kong Stock Exchange, may need additional capital in the future to fund their continued operations and support their business growth.
Youdao, our majority-controlled subsidiary listed on the New York Stock Exchange, and/or NetEase Cloud Music, our majority-controlled subsidiary listed on the Hong Kong Stock Exchange, may need additional capital in the future to fund their continued operations and support their business growth.
Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy.
Since PRC administrative and court authorities have discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy.
The expansion of our online game business and potentially other businesses outside of China will also expose us to risks and challenges inherent in operating businesses globally, including: ● challenges in replicating or adapting our corporate policies and procedures to operating environments different from that of China, including technology and logistics infrastructure; ● challenges in maintaining efficient and consolidated internal systems, including IT infrastructure, and customizing and integrating these systems with the other parts of our business; ● lack of acceptance of our product and service offerings, and challenges of adapting our offerings to appeal to local tastes; ● failure to understand cultural differences, local consumer behavior and preferences and local business practices; ● protectionist or national security policies that restrict our ability to: ● invest in or acquire companies; ● develop, import or export certain technologies; ● utilize technologies that are deemed by local governmental to pose a threat to their national security; or ● obtain or maintain the necessary licenses and authorizations to operate our businesses; ● the need for increased resources to manage regulatory compliance across our international businesses; 38 Table of Contents ● failure to attract and retain capable talent with international perspectives who can effectively manage and operate local businesses; ● compliance with local laws and regulations, including those relating to online games, e-commerce, digital services and platforms, such as the DSA and Digital Markets Act which have been adopted by the European Commission, privacy and data security, such as the GDPR, and consumer and labor protection laws, which will increase our compliance costs across different legal systems; ● heightened restrictions and barriers on the transfer of data between different jurisdictions; ● availability, reliability and security of international and cross-border payment systems and logistics infrastructure; ● exchange rate fluctuations; and ● political instability and general economic or political conditions in particular countries or regions, including territorial or trade disputes, war and terrorism.
The expansion of our online game business and potentially other businesses outside of China will also expose us to risks and challenges inherent in operating businesses globally, including: 38 Table of Contents ● challenges in replicating or adapting our corporate policies and procedures to operating environments different from that of China, including technology and logistics infrastructure; ● challenges in maintaining efficient and consolidated internal systems, including IT infrastructure, and customizing and integrating these systems with the other parts of our business; ● lack of acceptance of our product and service offerings, and challenges of adapting our offerings to appeal to local tastes; ● failure to understand cultural differences, local consumer behavior and preferences and local business practices; ● protectionist or national security policies that restrict our ability to: ● invest in or acquire companies; ● develop, import or export certain technologies; ● utilize technologies that are deemed by local governmental to pose a threat to their national security; or ● obtain or maintain the necessary licenses and authorizations to operate our businesses; ● the need for increased resources to manage regulatory compliance across our international businesses; ● failure to attract and retain capable talent with international perspectives who can effectively manage and operate local businesses; ● compliance with local and international laws and regulations, including those relating to online games, e-commerce, digital services and platforms, such as the DSA and Digital Markets Act, privacy and data security, such as the GDPR and CCPA, and consumer and labor protection laws, which will increase our compliance costs across different legal systems; ● heightened restrictions and barriers on the transfer of data between different jurisdictions; ● availability, reliability and security of international and cross-border payment systems and logistics infrastructure; ● exchange rate fluctuations; and ● political instability and general economic or political conditions in particular countries or regions, including territorial or trade disputes, war and terrorism.
Our music streaming business partners include music labels, advertisers, talent agencies and others. We help our advertisers reach and engage with their target users through the services and solutions we offer through Cloud Music.
Our music streaming business partners include music labels, advertisers, talent agencies and others. We help our advertisers reach and engage with their target users through the services and solutions we offer through NetEase Cloud Music .
Both the continual accessibility of the NetEase websites and other online and mobile platforms and the performance and reliability of our technical infrastructure are critical to our reputation and the ability of the NetEase websites and other online and mobile platforms to attract and retain users and advertisers.
Finally, both the continual accessibility of the NetEase websites and other online and mobile platforms and the performance and reliability of our technical infrastructure are critical to our reputation and the ability of the NetEase websites and other online and mobile platforms to attract and retain users and advertisers.
In addition, we have been further advised by our PRC counsel that there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations.
In addition, we have been further advised by our PRC counsel that there are uncertainties regarding the interpretation and application of current or future PRC laws and regulations.
“Information on the Company—Business Overview—Government Regulations—Regulations on Internet Live Streaming Services.” 13 Table of Contents Regulatory authorities in China have been heightening their oversight of live streaming businesses. Pursuant to applicable PRC laws and regulations, users who have not registered with their real names or who are minors are prohibited from engaging in virtual gifting.
“Information on the Company—Business Overview—Government Regulations—Regulations on Internet Live Streaming Services.” 20 Table of Contents Regulatory authorities in China have been heightening their oversight of live streaming businesses. Pursuant to applicable PRC laws and regulations, users who have not registered with their real names or who are minors are prohibited from engaging in virtual gifting.
Non-compliance with any of such requirements could result in penalties, fines or significant legal liability, including, as noted above, penalties calculated as a percentage of global revenue under the GDPR or the DSA. 34 Table of Contents Cybersecurity and the threat environment remain a dynamic and ever-changing landscape with new threats and increasingly sophisticated attacks continually emerging.
Non-compliance with any of such requirements could result in penalties, fines or significant legal liability, including, as noted above, penalties calculated as a percentage of global revenue under the GDPR or the DSA. 33 Table of Contents Cybersecurity and the threat environment remain a dynamic and ever-changing landscape with new threats and increasingly sophisticated attacks continually emerging.
However, if these efforts fail to achieve our anticipated results, we may not be able to increase or even maintain Cloud Music’s revenue growth.
However, if these efforts fail to achieve our anticipated results, we may not be able to increase or even maintain NetEase Cloud Music’s revenue growth.
Consequently, the trading performance of our shares and/or ADSs may be adversely and materially affected, regardless of our actual operation performance. 62 Table of Contents In addition to market and industry factors, the price and trading volume for our shares and/or ADSs may be highly volatile for factors specific to our operation, including the following: ● variations in our results of operations that are not in line with market or research analyst expectations or changes in financial estimates by securities research analysts; ● announcements of studies and reports relating to the quality of our product and service offerings or those of our competitors; ● changes in the economic performance or market valuations of other market players in our industries; ● announcements made by us or our competitors of new features or functionalities or other product and service offerings, investments, acquisitions, strategic relationships, joint ventures or capital commitments; ● press and other reports, whether or not true, about our business, including negative reports published by short sellers, regardless of their veracity or materiality to us; ● litigation and regulatory allegations or proceedings that involve us and our directors; ● additions to or departures of our management; ● political or market instability or disruptions, and actual or perceived social unrest in the markets where we operate; ● fluctuations of exchange rates among the Renminbi, the Hong Kong dollar and the U.S. dollar; ● sales or perceived potential sales or other dispositions of existing or additional ADSs or other equity or equity-linked securities; ● any actual or alleged illegal acts of our senior management or other key employees; ● any share repurchase program; and ● regulatory developments affecting us or our industry, customers, licensors and other suppliers.
In addition to market and industry factors, the price and trading volume for our shares and/or ADSs may be highly volatile for factors specific to our operation, including the following: ● variations in our results of operations that are not in line with market or research analyst expectations or changes in financial estimates by securities research analysts; ● announcements of studies and reports relating to the quality of our product and service offerings or those of our competitors; ● changes in the economic performance or market valuations of other market players in our industries; ● announcements made by us or our competitors of new features or functionalities or other product and service offerings, investments, acquisitions, strategic relationships, joint ventures or capital commitments; ● press and other reports, whether or not true, about our business, including negative reports published by short sellers, regardless of their veracity or materiality to us; 60 Table of Contents ● litigation and regulatory allegations or proceedings that involve us and our directors; ● additions to or departures of our management; ● political or market instability or disruptions, and actual or perceived social unrest in the markets where we operate; ● fluctuations of exchange rates among the Renminbi, the Hong Kong dollar and the U.S. dollar; ● sales or perceived potential sales or other dispositions of existing or additional ADSs or other equity or equity-linked securities; ● any actual or alleged illegal acts of our senior management or other key employees; ● any share repurchase program; and ● regulatory developments affecting us or our industry, customers, licensors and other suppliers.
We cannot assure you that we can obtain these governmental registrations or approvals on a timely basis, if at all. Any future restrictions imposed by SAFE or tightened foreign exchange control by SAFE as a matter of practice may adversely affect our ability to utilize our revenues effectively and pay dividends to our shareholders.
We cannot assure you that we can obtain these governmental registrations or approvals on a timely basis, if at all. Any future restrictions imposed by SAFE or tightened foreign exchange regulation by SAFE as a matter of practice may adversely affect our ability to utilize our revenues effectively and pay dividends to our shareholders.
“Operating and Financial Review and Prospects—Critical Accounting Estimates—Impairment of long-term investments.” 37 Table of Contents These and other risks could lead to negative publicity, increased regulatory scrutiny, litigation, government inquiries, investigations, actions or penalties against us and the companies we invest in or acquire on the ground of non-compliance with regulatory requirements and may force us to incur significant additional expenses and allocate significant management and human resources to rectify or improve these companies’ corporate governance standards, disclosure controls and procedures or internal controls and systems.
“Operating and Financial Review and Prospects—Critical Accounting Estimates—Impairment of long-term investments.” These and other risks could lead to negative publicity, increased regulatory scrutiny, litigation, government inquiries, investigations, actions or penalties against us and the companies we invest in or acquire on the ground of non-compliance with regulatory requirements and may force us to incur significant additional expenses and allocate significant management and human resources to rectify or improve these companies’ corporate governance standards, disclosure controls and procedures or internal controls and systems.
Based on the value of our assets, including goodwill, and the composition of our income and assets, we do not believe that we were a PFIC for the taxable year ended December 31, 2023. We have not obtained any opinion of counsel or any rulings from the U.S. Internal Revenue Service, or the IRS, regarding our status as a PFIC.
Based on the value of our assets, including goodwill, and the composition of our income and assets, we do not believe that we were a PFIC for the taxable year ended December 31, 2024. We have not obtained any opinion of counsel or any rulings from the U.S. Internal Revenue Service, or the IRS, regarding our status as a PFIC.
The significant changes in Youdao’s business strategies and offerings have not only rendered its historical results no longer indicative of its future performance, but they may also have some or all of the following unintended effects: ● some users, customers and business partners may not receive the changes in Youdao’s business strategies and offerings in a positive manner, and relationships with these parties may be jeopardized; ● Youdao’s new products and services may not be accepted by its users as we expect; ● Youdao’s new products and services may not attract users and customers or generate the revenue required to succeed; ● the underlying assumptions and estimates about Youdao’s new businesses and the new markets that it attempts to enter into may prove incorrect, which may cause Youdao’s actual results of operations to fall short of our expectations; ● to the extent Youdao enters into new businesses, its previous operating history may be of limited use for investors to evaluate Youdao’s future performance and prospects; ● the development of new products and services could be costly and time-consuming and requires us to make significant investments in research and product development, develop new technologies, and increase sales and marketing efforts, all of which may not be successful; ● expenses will be incurred in the implementation of the new business strategies, which could be substantial; and ● the changes in organizational structure that will be required to support the changes in Youdao’s business strategies and offerings may lead to dissatisfaction among employees which could make it more difficult for Youdao to retain key employees.
The significant changes in Youdao’s business strategies and offerings have not only rendered its historical results prior to such disposal no longer indicative of its future performance, but they may also have some or all of the following unintended effects: ● some users, customers and business partners may not receive the changes in Youdao’s business strategies and offerings in a positive manner, and relationships with these parties may be jeopardized; ● Youdao’s new products and services may not be accepted by its users as we expect; ● Youdao’s new products and services may not attract users and customers or generate the revenue required to succeed; ● the underlying assumptions and estimates about Youdao’s new businesses and the new markets that it attempts to enter into may prove incorrect, which may cause Youdao’s actual results of operations to fall short of our expectations; ● to the extent Youdao enters into new businesses, its previous operating history may be of limited use for investors to evaluate Youdao’s future performance and prospects; ● the development of new products and services could be costly and time-consuming and requires us to make significant investments in research and product development, develop new technologies, and increase sales and marketing efforts, all of which may not be successful; ● expenses will be incurred in the implementation of the new business strategies, which could be substantial; and 22 Table of Contents ● the changes in organizational structure that will be required to support the changes in Youdao’s business strategies and offerings may lead to dissatisfaction among employees which could make it more difficult for Youdao to retain key employees.
Preparing for and complying with the plethora of changing requirements and navigating the overlap or inconsistencies in regulatory approaches will necessitate changes in our operational approach or service deployment in each jurisdiction which will likely impact our efficiency, ability to scale and/or market uptake and may cause us to incur substantial costs.
Preparing for and complying with the plethora of changing requirements and navigating the overlap or inconsistencies in legal requirements and regulatory approaches will continue to necessitate changes in our operational approach or service deployment in each jurisdiction which will likely impact our efficiency, ability to scale and/or market uptake and may cause us to incur substantial costs.
We consider our time deposits with maturities of less than 12 months as “cash items” for purposes of Rule 3a-1 under the Investment Company Act, which we believe is the correct treatment of such assets, and, as such, we satisfy Rule 3a-1’s 45% asset test described above as of December 31, 2023.
We consider our time deposits with maturities of less than 12 months as “cash items” for purposes of Rule 3a-1 under the Investment Company Act, which we believe is the correct treatment of such assets, and, as such, we satisfy Rule 3a-1’s 45% asset test described above as of December 31, 2024.
If we are unsuccessful at developing and introducing new online games that are appealing to players with acceptable pricing and terms, our business, financial condition and results of operations will be negatively impacted because we would not be able to compete effectively and our ability to generate revenues would suffer.
If we are unsuccessful in developing and introducing new online games that are appealing to players with acceptable pricing and terms, our business, financial condition and results of operations will be negatively impacted because we would not be able to compete effectively and our ability to generate revenues would suffer.
This includes threats from diverse threat actors, such as state-sponsored organizations, opportunistic hackers and hacktivists, who are becoming increasingly sophisticated in using techniques and tools that circumvent security controls, evade detection and remove forensic evidence.
This includes threats from diverse threat actors, such as state-sponsored organizations, opportunistic hackers and hacktivists, who are becoming increasingly sophisticated in using techniques and tools—including AI—that circumvent security controls, evade detection and remove forensic evidence.
We are not subject to certain provisions of the Hong Kong Listing Rules pursuant to Rule 19C.11, including, among others, rules on notifiable transactions, connected transactions, share option schemes, content of financial statements as well as certain other continuing obligations.
We are not subject to certain provisions of the Hong Kong Listing Rules pursuant to Rule 19C.11, including, among other things, rules on notifiable transactions, connected transactions, share option schemes, content of financial statements as well as certain other continuing obligations.
Violation of the Minors Protection Law could result in rectification, confiscation of illegal gains and penalties. In 2019, the GAPP restricted play of online gamers under 18 years old to 90 minutes on weekdays and three hours on weekends.
Violations of the Minors Protection Law could result in rectification, confiscation of illegal gains and penalties. In 2019, the GAPP restricted play of online gamers under 18 years old to 90 minutes on weekdays and three hours on weekends.
If we are a PFIC in any year with respect to a U.S. investor, the U.S. investor will generally be required to file an annual information return on IRS Form 8621 (or other then applicable IRS Form or statement) regarding distributions received on our ADSs or ordinary shares, and certain U.S. investors will be required to file an annual information return (also on IRS Form 8621 or other then applicable IRS Form or statement) relating to their ownership of our ADSs or ordinary shares.
If we are a PFIC in any year with respect to a U.S. investor, the U.S. investor will generally be required to file an annual information return on IRS Form 8621 (or other then applicable IRS Form or statement) regarding distributions received on our ADSs or ordinary shares and any gain realized on the disposition of our ADSs or ordinary shares, and certain U.S. investors will be required to file an annual information return (also on IRS Form 8621 or other then applicable IRS Form or statement) relating to their ownership of our ADSs or ordinary shares.
In January 2023, Japan and the Netherlands, countries that are homes to some of the world’s most advanced semiconductor equipment manufacturers, also announced that they have agreed to restrict exports of advanced chip-manufacturing equipment to China. The U.S.
In January 2023, Japan and the Netherlands, countries that are homes to some of the world’s most advanced semiconductor equipment manufacturers, also announced that they have agreed to restrict exports of advanced chip-manufacturing equipment to China.
Under these rules and regulations, content service providers are prohibited from posting or displaying over the mobile or internet content that, among others, violates PRC laws and regulations, impairs the national security of China, is obscene, superstitious, defamatory, or may be deemed by relevant government authorities as “socially destabilizing” or leaking “state secrets” of China.
Under these rules and regulations, content service providers are prohibited from posting or displaying over the mobile or internet content that, among other things, violates PRC laws and regulations, impairs the national security of China, is obscene, superstitious, defamatory, or may be deemed by relevant government authorities as “socially destabilizing” or leaking “state secrets” of China.
As a result, shareholders who exchange shares into ADSs, and vice versa, may not achieve the level of economic return the shareholders may anticipate. 64 Table of Contents As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq rules.
As a result, shareholders who exchange shares into ADSs, and vice versa, may not achieve the level of economic return the shareholders may anticipate. As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq rules.
The CPRA also led to the establishment of the California Privacy Protection Agency, or CPPA, a first-of-its-kind government agency with a broad mandate, including the ability to enforce the CPRA, impose fines and create new regulations.
The CCPA also led to the establishment of the California Privacy Protection Agency, or CPPA, a first-of-its-kind government agency with a broad mandate, including the ability to enforce the CCPA, impose fines and create new regulations.
Theses fluctuations had a significant effect on our profit and our cash dividend. Restrictions on currency exchange may limit our ability to utilize our revenues effectively. Most of our revenues and operating expenses are denominated in Renminbi.
Theses fluctuations had a significant effect on our profit and our cash dividend. Regulation on currency exchange may limit our ability to utilize our revenues effectively. Most of our revenues and operating expenses are denominated in Renminbi.
As the implementing rules of these regulations have not been issued, we do not know how or when we will be expected to comply, or how our business will be affected by the application of these regulations. We face uncertainties with respect to the interpretation and implementation of the anti-monopoly related laws in the field of internet platforms.
As the implementing rules of these regulations have not been issued, we do not know how or when we will be expected to comply, or how our business will be affected by the application of these regulations. 52 Table of Contents We face uncertainties with respect to the interpretation and implementation of the anti-monopoly related laws in the field of internet platforms.
Our independent registered public accounting firm has also, in its audit report, concluded that our internal control over financial reporting was effective in all material aspects as of December 31, 2023.
Our independent registered public accounting firm has also, in its audit report, concluded that our internal control over financial reporting was effective in all material aspects as of December 31, 2024.
If Cloud Music fails to cater to the needs and preferences of Cloud Music’s users and control our costs in doing so or fail to deliver compelling user experience, Cloud Music may suffer from reduced user traffic, and Cloud Music’s business may be materially and adversely affected, which may adversely affect our consolidated results of operations. 24 Table of Contents Maintaining and enhancing the “NetEase Cloud Music” brand is critical to expanding Cloud Music’s base of users, advertisers, content contributors and other partners.
If NetEase Cloud Music fails to cater to the needs and preferences of NetEase Cloud Music’s users and control our costs in doing so or fail to deliver compelling user experience, NetEase Cloud Music may suffer from reduced user traffic, and NetEase Cloud Music’s business may be materially and adversely affected, which may adversely affect our consolidated results of operations. 24 Table of Contents Maintaining and enhancing the “ NetEase Cloud Music ” brand is critical to expanding NetEase Cloud Music’s base of users, advertisers, content contributors and other partners.
The effect of this discretionary proxy is that, if holders of ADSs fail to give voting instructions to the depositary, they cannot prevent our shares underlying their ADSs from being voted, except under the circumstances described above. This may make it more difficult for shareholders to influence our management.
The effect of this discretionary proxy is that, if holders of ADSs fail to give voting instructions to the depositary, they cannot prevent our shares underlying their ADSs from being voted, except under the circumstances described above. This may make it more difficult for shareholders to influence our management. Holders of our shares are not subject to this discretionary proxy.
“Additional Information—Taxation—Material United States Federal Income Taxation Considerations.” 69 Table of Contents If a United States person is treated as owning at least 10% of our ADSs or ordinary shares, such holder may be subject to adverse U.S. federal income tax consequences. If a U.S. Holder (as defined in Item 10.E.
“Additional Information—Taxation—Material United States Federal Income Taxation Considerations.” If a United States person is treated as owning at least 10% of our ADSs or ordinary shares, such holder may be subject to adverse U.S. federal income tax consequences. If a U.S. Holder (as defined in Item 10.E.
These include existing regulations such as the European Union General Data Protection Regulation, or EU GDPR, UK GDPR (which is the EU GDPR as saved into the United Kingdom law by virtue of the European Union (Withdrawal) Act 2018 GDPR (as may be amended from time to time)) (together with the EU GDPR, referred to as GDPR), state and federal privacy laws in the United States, including the California Consumer Privacy Act of 2018, or CCPA, as amended by the California Privacy Rights Act of 2020, or CPRA, as well as federal and provincial privacy laws in Canada.
These include existing regulations such as the European Union General Data Protection Regulation, or EU GDPR, UK GDPR (which is the EU GDPR as saved into the United Kingdom law by virtue of the European Union (Withdrawal) Act 2018 GDPR (as may be amended from time to time)) (together with the EU GDPR, referred to as GDPR), state and federal privacy laws in the United States, including the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020, together the “CCPA”, and similar state laws, as well as federal and provincial privacy laws in Canada.
In addition, we have been granted a number of waivers and/or exemptions from strict compliance with, among others, the Hong Kong Listing Rules and the SFO. We have also been granted a ruling from the Securities and Futures Commission of Hong Kong, as a result of which the Takeovers Codes do not apply to us.
In addition, we have been granted a number of waivers and/or exemptions from strict compliance with, among other things, the Hong Kong Listing Rules and the SFO. We have also been granted a ruling from the Securities and Futures Commission of Hong Kong, as a result of which the Takeovers Codes do not apply to us.
“Operating and Financial Review and Prospects—Operating Results—Income Taxes.” Although we will attempt to obtain or maintain similar preferential tax statuses for our subsidiaries in the future, we cannot assure you that we will obtain or maintain any particular preferential tax status, and typically the relevant government agencies do not confirm that we have obtained or maintained a particular tax status until late in a given tax year or the following tax year.
“Operating and Financial Review and Prospects—Operating Results—Income Taxes.” 55 Table of Contents Although we will attempt to obtain or maintain similar preferential tax statuses for our subsidiaries in the future, we cannot assure you that we will obtain or maintain any particular preferential tax status, and typically the relevant government agencies do not confirm that we have obtained or maintained a particular tax status until late in a given tax year or the following tax year.
The PRC government has recently published new policies that affect various industries, including industries in which we operate, and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could adversely affect our business, financial condition and results of operations.
The PRC government has published new policies that affect various industries in recent years, including industries in which we operate, and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could adversely affect our business, financial condition and results of operations.
We may be required to make significant expenditures or modify our business practices to comply with existing or future laws and regulations, which may increase our costs and materially limit our ability to operate our business. 55 Table of Contents Regulatory restrictions on financial transactions may adversely affect the operation and profitability of our business.
We may be required to make significant expenditures or modify our business practices to comply with existing or future laws and regulations, which may increase our costs and materially limit our ability to operate our business. Regulatory restrictions on financial transactions may adversely affect the operation and profitability of our business.
If we or such PRC participants fail to comply with these regulations, we or such PRC participants may be subject to fines and other legal or administrative sanctions. 60 Table of Contents The Chinese government has strengthened the regulation of investments made by Chinese residents in offshore companies and reinvestments in China made by these offshore companies.
If we or such PRC participants fail to comply with these regulations, we or such PRC participants may be subject to fines and other legal or administrative sanctions. The Chinese government has strengthened the regulation of investments made by Chinese residents in offshore companies and reinvestments in China made by these offshore companies.
Exchange Act); ● have a compensation committee or a nominating or corporate governance committee consisting entirely of independent directors; ● have regularly scheduled executive sessions for non-management directors; or ● have executive sessions of solely independent directors each year. We have relied on and intend to continue to rely on some of these exemptions.
Exchange Act); ● have a compensation committee or a nominating or corporate governance committee consisting entirely of independent directors; ● have regularly scheduled executive sessions for non-management directors; or ● have executive sessions of solely independent directors each year. 62 Table of Contents We have relied on and intend to continue to rely on some of these exemptions.
The PFIC determination is highly fact-intensive and made at the end of each taxable year. We hold and will continue to hold a substantial amount of cash and cash equivalents.
The PFIC determination is highly fact-intensive and made at the end of each taxable year. We hold and may continue to hold a substantial amount of cash and cash equivalents.
If Hong Kong stamp duty is determined by the competent authority to apply to the trading of those ADSs or deposits of shares in or withdrawal of shares from those ADS facilities, the trading price and the value of your investment in our ADSs and/or shares may be affected. ​ 70 Table of Contents
If Hong Kong stamp duty is determined by the competent authority to apply to the trading of those ADSs or deposits of shares in or withdrawal of shares from those ADS facilities, the trading price and the value of your investment in our ADSs and/or shares may be affected. ​
Finally, failure to avoid being deemed an investment company under the Investment Company Act could also make us unable to comply with our reporting obligations as a public company in the United States and lead to our being delisted from Nasdaq Stock Market LLC, which would have a material adverse effect on the liquidity and value of our ADSs and ordinary shares. 42 Table of Contents RISKS RELATED TO OUR CORPORATE STRUCTURE There are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations, and rules relating to the agreements that establish the VIE structure for our operations in China, including potential future actions by the PRC government, which could affect the enforceability of our contractual arrangements with the VIEs and, consequently, significantly affect the financial condition and results of operations of NetEase.
Finally, failure to avoid being deemed an investment company under the Investment Company Act could also make us unable to comply with our reporting obligations as a public company in the United States and lead to our being delisted from Nasdaq Stock Market LLC, which would have a material adverse effect on the liquidity and value of our ADSs and ordinary shares. 42 Table of Contents RISKS RELATED TO OUR CORPORATE STRUCTURE There are uncertainties regarding the interpretation and application of current and future PRC laws, regulations, and rules relating to the agreements that establish the VIE structure for our operations in China, including potential future regulatory actions pursuant to the laws and regulations in force at that time, which could affect the enforceability of our contractual arrangements with the VIEs and, consequently, significantly affect the financial condition and results of operations of NetEase.
The diversion of our management’s attention and any difficulties encountered with respect to the alliances or in the process of integration could have an adverse effect on our ability to manage our business. Termination of our material intellectual property licenses could have a material adverse effect on our business.
The diversion of our management’s attention and any difficulties encountered with respect to the alliances or in the process of integration could have an adverse effect on our ability to manage our business. 18 Table of Contents Termination of our material intellectual property licenses could have a material adverse effect on our business.
The occurrence of any of the foregoing could have a material and adverse effect on our business, financial condition and results of operations. 19 Table of Contents Illegal game servers and acts of cheating by players of online games could harm our business and reputation and materially and adversely affect our results of operations.
The occurrence of any of the foregoing could have a material and adverse effect on our business, financial condition and results of operations. Illegal game servers and acts of cheating by players of online games could harm our business and reputation and materially and adversely affect our results of operations.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting and concluded that our internal control over financial reporting was effective as of December 31, 2023.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting and concluded that our internal control over financial reporting was effective as of December 31, 2024.
A number of our China mainland subsidiaries, such as Boguan, NetEase Hangzhou and certain other subsidiaries, enjoyed preferential tax rates of 15% for 2021, 2022 and 2023 by being recognized as an HNTE. See Item 5.A.
A number of our China mainland subsidiaries, such as Boguan, NetEase Hangzhou and certain other subsidiaries, enjoyed preferential tax rates of 15.0% for 2022, 2023 and 2024 by being recognized as an HNTE. See Item 5.A.
It remains unclear whether a formal version will be adopted in the future and whether the adopted formal version (if any) will have any further material changes, and it is uncertain how the measures will be enacted, interpreted or implemented and how they will affect us. 12 Table of Contents On October 16, 2023, the State Council promulgated the Regulation on the Protection of Minors in Cyberspace, which became effective on January 1, 2024.
It remains unclear whether a formal version will be adopted in the future and whether the adopted formal version (if any) will have any further material changes, and it is uncertain how the measures would be enacted, interpreted or implemented and how they will affect us. 12 Table of Contents On October 16, 2023, the State Council promulgated the Regulation on the Protection of Minors in Cyberspace, which took effect on January 1, 2024.
Several mobile and PC games we offer are licensed from third-party developers, which accounted for 9.5%, 9.5% and 4.6% of our total net revenues in 2021, 2022 and 2023, respectively.
Several mobile and PC games we offer are licensed from third-party developers, which accounted for 9.5%, 4.6% and 7.4% of our total net revenues in 2022, 2023 and 2024, respectively.
These games include World of Warcraft ® , Hearthstone ® and other titles in the Warcraft ® , Overwatch ® , Diablo ® , and StarCraft ® universes . The termination of any such licenses could adversely affect our business, financial conditions and results of operations.
These games include World of Warcraft ® , Hearthstone ® and other titles in the Warcraft ® , Overwatch ® , Diablo ® , and StarCraft ® universes. 17 Table of Contents The termination of any such licenses could adversely affect our business, financial conditions and results of operations.
It is not, however, possible to predict how the international regulatory environment concerning trade sanctions may develop. As a company incorporated in the Cayman Islands, a British Overseas Territory, we are required to comply with sanctions implemented in the Cayman Islands, which generally reflect the United Kingdom sanctions.
It is not, however, possible to predict how the international regulatory environment concerning trade sanctions may develop. 28 Table of Contents As a company incorporated in the Cayman Islands, a British Overseas Territory, we are required to comply with sanctions implemented in the Cayman Islands, which generally reflect the United Kingdom sanctions.
Further, failure to comply with the various SAFE registration requirements described above can result in liability under Chinese law for foreign exchange evasion. These regulations may have a significant impact on our present and future structuring and investment.
Further, failure to comply with the various SAFE registration requirements described above can result in liability under Chinese law for foreign exchange evasion. 58 Table of Contents These regulations may have a significant impact on our present and future structuring and investment.
On December 22, 2023, the NPPA publicly solicited opinions on the Draft Administrative Measures for Online Games, which provide for rules on the distribution, trading and trading enterprises of online game coins, as well as rules on the distribution and trading of virtual items for online games, including, among other things, (i) trading of online game coins shall be conducted via real-name digital RMB wallets, (ii) an enterprise shall not provide both the distribution of online game coins and the trading service for online game coins simultaneously, and (iii) online game publishers and operators shall not exchange the virtual props of online games acquired by users into legal tender.
On December 22, 2023, the NPPA publicly solicited opinions on the Draft Administrative Measures for Online Games, which provide for rules on the distribution, trading and trading enterprises of online game coins, as well as rules on the distribution and trading of virtual items for online games, including, among other things, (i) trading of online game coins shall be conducted via real-name digital RMB wallets, and (ii) online game publishers and operators shall not exchange the virtual props of online games acquired by users into legal tender.
The voting rights of holders of ADSs are limited by the terms of the Deposit Agreement. Holders of ADSs may exercise their voting rights with respect to the underlying shares represented by their ADSs only in accordance with the provisions of the deposit agreement which governs our ADS programs.
Holders of ADSs may exercise their voting rights with respect to the underlying shares represented by their ADSs only in accordance with the provisions of the deposit agreement which governs our ADS programs.
As the Confidentiality and Archives Administration Provisions are relatively new, there are substantial uncertainties with respect to their interpretation and implementation. 68 Table of Contents If we are classified as a passive foreign investment company, or a PFIC, for United States federal income tax purposes, such classification could result in adverse U.S. federal income tax consequences to U.S. investors.
As the Confidentiality and Archives Administration Provisions are relatively new, there are uncertainties with respect to their interpretation and implementation. If we are classified as a passive foreign investment company, or a PFIC, for United States federal income tax purposes, such classification could result in adverse U.S. federal income tax consequences to U.S. investors.
Youdao, our majority-controlled subsidiary, relies on our financial support. Since its formation, Youdao has received various financial support from the NetEase group, among others, currently including RMB878.0 million outstanding interest-bearing short-term loans as of December 31, 2023 and a US$300.0 million revolving loan facility.
Youdao, our majority-controlled subsidiary, relies on our financial support. Since its formation, Youdao has received various financial support from the NetEase group, among other things, currently including RMB878.0 million outstanding interest-bearing short-term loans as of December 31, 2024 and a US$300.0 million revolving loan facility.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

178 edited+47 added−131 removed284 unchanged
Biggest changeRegulations on Information Security and Censorship Regulations governing information security and censorship include: ● The Law of the PRC on the Preservation of State Secrets (1988, revised in 2010 and 2024) and its Implementation Rules (2014); ● The Counter-espionage Law of the PRC (2014, revised in 2023); ● The Rules of the PRC for Protecting the Security of Computer Information Systems (1994, revised in 2011); ● The Administrative Measures for Protection of the Security of International Internetworking of Computer Information Networks (1997, revised in 2011); ● Provisions for the Administration of Keeping Secrets in the International Internetworking of Computer Information Systems (1999); ● The Notice issued by the Ministry of Public Security of the PRC Regarding Issues Relating to the Implementation of the Administrative Measure for the Security Protection of International Connections to Computer Information Networks (2000); ● The Decision of the Standing Committee of the National People’s Congress Regarding the Safeguarding of Internet Security (2000, revised in 2009); ● The Provisions on the Technical Measures for the Protection of the Security of the Internet (2005); ● The Administrative Regulations for the Classified Protection of Information Security (2007); 96 Table of Contents ● The Decision of the Standing Committee of the National People’s Congress on Strengthening Network Information Protection (2012); ● Provisions on Protection of Personal Information of Telecommunication and Internet Users (2013); ● Internet User Account Name Management Regulations (2015); ● Cybersecurity Law of the PRC (2016); ● Detailed Rules for the Implementation of the Counter-espionage Law of the PRC (2017); ● Provisions on the Cyber Protection of Children’s Personal Information, or the Children’s Provisions (2019); ● Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning the Application of Law in the Handling of Criminal Cases Involving Illegal Use of Information Networks and Assistance in Criminal Activities Committed through Information Networks, or the “Fa Shi No. 15” (2019); ● Information Security Technology —Personal Information Security Specification (2020 edition); ● Guiding Opinions on Implementing the Multi-Level Protection System for Cybersecurity and the Security Protection System for Critical Information Infrastructure (2020); ● PRC Civil Code (2020); ● Rules on the Scope of Necessary Personal Information for Common Types of Mobile Internet Applications (2021); ● Cybersecurity Review Measures (2021); ● PRC Data Security Law (2021); ● Regulations for the Security Protection of Critical Information Infrastructure (2021); ● Personal Information Protection Law (2021); ● Anti-Telecom and Online Fraud Law of the PRC (2022); ● Measures for the Security Assessment of Data Cross-border Transfer (2022); ● Guidelines for Declaring Data Cross-border Security Assessment (First Edition) (2022); ● Announcement on the Implementation of Certification for Personal Information Protection (2022); ● Measures for Data Security Administration in the Industry and Information Technology Field (Trial Implementation) (2022); ● Administrative Provisions for In-depth Integration as an Internet Information Service (2022); ● Measures for Standard Contracts for Cross-border Transfers of Personal Information (2023); ● Interim Measures for the Administration of Generative Artificial Intelligence Services (2023); ● Measures for Ethical Review of Science and Technology (for Trial Implementation) (2023); and ● Provisions on Promoting and Regulating Cross-border Data Flows (2024). 97 Table of Contents Under various Laws, ICP operators and internet publishers are prohibited from posting or displaying any content that: ● opposes the fundamental principles set out in China’s Constitution; ● compromises state security, divulges state secrets, subverts state power or damages national unity; ● harms the dignity or interests of the state; ● incites ethnic hatred or racial discrimination or damages inter-ethnic unity; ● sabotages China’s religious policy or propagates heretical teachings or feudal superstitions; ● disseminates rumors, disturbs social order or disrupts social stability; ● propagates obscenity, pornography, gambling, violence, murder or fear or incites the commission of crimes; ● insults or slanders a third party or infringes upon the lawful rights and interests of a third party; or ● includes other content prohibited by laws or administrative regulations.
Biggest changeRegulations on Information Security and Censorship Under various Laws, ICP operators and internet publishers are prohibited from posting or displaying any content that: ● opposes the fundamental principles set out in China’s Constitution; ● compromises state security, divulges state secrets, subverts state power or damages national unity; ● harms the dignity or interests of the state; ● incites ethnic hatred or racial discrimination or damages inter-ethnic unity; ● sabotages China’s religious policy or propagates heretical teachings or feudal superstitions; ● disseminates rumors, disturbs social order or disrupts social stability; ● propagates obscenity, pornography, gambling, violence, murder or fear or incites the commission of crimes; ● insults or slanders a third party or infringes upon the lawful rights and interests of a third party; or ● includes other content prohibited by laws or administrative regulations.
Smart Devices . We develop and offer smart devices, including Youdao Dictionary Pen, Youdao Listening Pod and Youdao Smart Learning Pad , to make learning more productive and efficient for our users.
We develop and offer smart devices, including Youdao Dictionary Pen, Youdao Listening Pod and Youdao Smart Learning Pad , to make learning more productive and efficient for our users.
Online Music Platform – Cloud Music Cloud Music’s Products and Services We founded Cloud Music in 2013 and launched the iconic cornerstone product, NetEase Cloud Music , in the same year. Cloud Music experienced rapid growth since its founding and completed its public listing on the Hong Kong Stock Exchange in December 2021.
Online Music Platform – NetEase Cloud Music NetEase Cloud Music’s Products and Services We founded NetEase Cloud Music in 2013 and launched the iconic cornerstone product, NetEase Cloud Music , in the same year. NetEase Cloud Music experienced rapid growth since its founding and completed its public listing on the Hong Kong Stock Exchange in December 2021.
As of the date of the filing of this annual report, the Draft Administrative Measures for Online Games have not been formally adopted.
As of the date of the filing of this annual report, the Draft Administrative Measures for Online Games have not been formally adopted.
The Generative Artificial Intelligence Services Measures provide, among other things, that the provider of generative artificial intelligence services of text, image, audio or video to the general public shall, (i) assume the responsibilities as the producers of the network information contents in accordance with the law and fulfill its obligation of network information security, (ii) if personal information is involved, assume its responsibility as a personal information handler in accordance with the law and fulfill its obligation of protecting personal information, and (iii) in case of providing generative artificial intelligence services with attribute of public opinions or capable of social mobilization, conduct security assessments in accordance with the relevant regulations and complete certain filings in accordance with the Administrative Provisions on Internet Information Service Algorithm Recommendation.
The Generative Artificial Intelligence Services Measures provide, among other things, that the provider of generative AI services of text, image, audio or video to the general public shall, (i) assume the responsibilities as the producers of the network information contents in accordance with the law and fulfill its obligation of network information security, (ii) if personal information is involved, assume its responsibility as a personal information handler in accordance with the law and fulfill its obligation of protecting personal information, and (iii) in case of providing generative AI services with attribute of public opinions or capable of social mobilization, conduct security assessments in accordance with the relevant regulations and complete certain filings in accordance with the Administrative Provisions on Internet Information Service Algorithm Recommendation.
Data protection is a priority at NetEase. We have also obtained ISO 27001 and ISO 27701:2019 certifications and filing certificates of the multi-level protection scheme, or MLPS, in China for some of our entities and products. Our network security measures include use of firewalls, network segmentation, network access controls and intrusion prevention systems.
Data protection is a priority at NetEase. We have also obtained ISO 27001 and ISO 27701:2019 certifications and filing certificates of the multi-level protection scheme, or MLPS, in China for some of our entities and products. Our network technical security measures include use of firewalls, network segmentation, network access controls and intrusion prevention systems.
On September 19, 2019, the MOE, jointly with certain other PRC government authorities, issued the Guidance Opinions on Promoting the Healthy Development of Online Education, which provides, among other things, that: (i) social forces are encouraged to establish online education institutions, develop online education resources, and provide high quality education services; and (ii) an online education negative list shall be promulgated and industries not included in the negative list are open for all types of entities to enter into. 106 Table of Contents On June 10, 2020, the General Office of MOE and the General Office of SAMR promulgated the Notice on Issuing the Form of Service Contract for After-school Training Provided to Primary and Secondary School Students, which requires the local competent regulatory authorities to guide the relevant parties to use the form of service contract for after-school training activities provided to primary and secondary school students.
On September 19, 2019, the MOE, jointly with certain other PRC government authorities, issued the Guidance Opinions on Promoting the Healthy Development of Online Education, which provides, among other things, that: (i) social forces are encouraged to establish online education institutions, develop online education resources, and provide high quality education services; and (ii) an online education negative list shall be promulgated and industries not included in the negative list are open for all types of entities to enter into. 98 Table of Contents On June 10, 2020, the General Office of MOE and the General Office of SAMR promulgated the Notice on Issuing the Form of Service Contract for After-school Training Provided to Primary and Secondary School Students, which requires the local competent regulatory authorities to guide the relevant parties to use the form of service contract for after-school training activities provided to primary and secondary school students.
The controlling shareholders and actual controllers of such domestic companies that organize or instruct the aforementioned violations would be fined up to RMB10 million and directly liable persons-in-charge and other directly liable persons would be each fined up to RMB5 million. 117 Table of Contents In order to support domestic companies’ overseas securities offering and listing pursuant to PRC laws and regulations, as a supplement to the Filing Rules, on February 24, 2023, CSRC and other three PRC regulatory authorities jointly issued the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the Confidentiality and Archives Administration Provisions, which took effect on March 31, 2023 with the Filing Rules, according to which, a domestic company that seeks overseas offering and listing, and the securities companies and securities service providers that undertake relevant businesses shall strictly abide by applicable PRC laws and regulations and perform relevant confidentiality and archives administration obligations.
The controlling shareholders and actual controllers of such domestic companies that organize or instruct the aforementioned violations would be fined up to RMB10 million and directly liable persons-in-charge and other directly liable persons would be each fined up to RMB5 million. 107 Table of Contents In order to support domestic companies’ overseas securities offering and listing pursuant to PRC laws and regulations, as a supplement to the Filing Rules, on February 24, 2023, CSRC and other three PRC regulatory authorities jointly issued the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the Confidentiality and Archives Administration Provisions, which took effect on March 31, 2023 with the Filing Rules, according to which, a domestic company that seeks overseas offering and listing, and the securities companies and securities service providers that undertake relevant businesses shall strictly abide by applicable PRC laws and regulations and perform relevant confidentiality and archives administration obligations.
“Key Information—Risk Factors—Risks Related to Doing Business in China—The approval, filing or other requirements of the CSRC, CAC or other PRC government authorities may be required under PRC law in connection with our issuance of securities overseas or maintenance of the listing status of our ADSs or ordinary shares, and the PRC government’s oversight and discretion over our business operations could result in a material adverse change in our operations and the value of our ADSs or ordinary shares.” 90 Table of Contents GOVERNMENT REGULATIONS Regulations on Foreign Investment On March 15, 2019, the National People’s Congress promulgated the 2019 PRC Foreign Investment Law, which became effective on January 1, 2020, and replaced the Wholly Foreign-owned Enterprises Law, the Sino-foreign Equity Joint Ventures Law, and the Sino-foreign Cooperative Joint Ventures Law.
“Key Information—Risk Factors—Risks Related to Doing Business in China—The approval, filing or other requirements of the CSRC, CAC or other PRC government authorities may be required under PRC law in connection with our issuance of securities overseas or maintenance of the listing status of our ADSs or ordinary shares, and the PRC government’s oversight and discretion over our business operations could result in a material adverse change in our operations and the value of our ADSs or ordinary shares.” 86 Table of Contents GOVERNMENT REGULATIONS Regulations on Foreign Investment On March 15, 2019, the National People’s Congress promulgated the 2019 PRC Foreign Investment Law, which became effective on January 1, 2020, and replaced the Wholly Foreign-owned Enterprises Law, the Sino-foreign Equity Joint Ventures Law, and the Sino-foreign Cooperative Joint Ventures Law.
The CCPA and CPRA confer an extensive suite of rights on California residents (including employees and business-to-business contacts), including the right to transparency (e.g. the right to request detailed information about how personal information is collected, used, and shared), the right of access to, correction of and/or deletion of their personal information, and a right to opt out of the sale or sharing of their personal information.
The CCPA confer an extensive suite of rights on California residents (including employees and business-to-business contacts), including the right to transparency (e.g. the right to request detailed information about how Personal Information is collected, used, and shared), the right of access to, correction of and/or deletion of their Personal Information, and a right to opt out of the sale or sharing of their Personal Information.
On April 14, 2022, the SAMR issued the Provisions on Clearly Marking Prices and Prohibiting Price Fraud to regulate the clear marking of prices (referring to such activities of business operators as publicly marking prices and other information in accordance with the law in the process of selling or purchasing goods or providing services), prevent and stop price fraud (referring to such activities of business operators as luring consumers or other business operators into trading with them by false or misleading pricing means), which became effective on July 1, 2022. 109 Table of Contents On January 6, 2017, SAIC issued the Interim Measures for Return of Online Purchases within seven Days without Reason, or the Online Return Measures, which was amended on October 23, 2020 and became effective on the same date.
On April 14, 2022, the SAMR issued the Provisions on Clearly Marking Prices and Prohibiting Price Fraud to regulate the clear marking of prices (referring to such activities of business operators as publicly marking prices and other information in accordance with the law in the process of selling or purchasing goods or providing services), prevent and stop price fraud (referring to such activities of business operators as luring consumers or other business operators into trading with them by false or misleading pricing means), which became effective on July 1, 2022. 101 Table of Contents On January 6, 2017, SAIC issued the Interim Measures for Return of Online Purchases within seven Days without Reason, or the Online Return Measures, which was amended on October 23, 2020 and became effective on the same date.
On September 18, 2021, the MOE further published on its official website that the General Office of MOE, together with five other government authorities, issued a circular requiring all online after-school tutoring institutions that have filed with the local education administration authorities providing tutoring services on academic subjects to obtain the private school operating permit by the end of 2021, and all online after-school tutoring institutions shall, before obtain such permit, suspend enrollment of students and charging fees. 107 Table of Contents On October 21, 2021, the MOE jointly with certain other PRC government authorities, promulgated the Notice on Strengthening the Supervision of After-School Tutoring Institutions Pre-collection of Fees, which requires the pre-collection of fees by academic AST institutions and non-academic AST institutions be supervised.
On September 18, 2021, the MOE further published on its official website that the General Office of MOE, together with five other government authorities, issued a circular requiring all online after-school tutoring institutions that have filed with the local education administration authorities providing tutoring services on academic subjects to obtain the private school operating permit by the end of 2021, and all online after-school tutoring institutions shall, before obtain such permit, suspend enrollment of students and charging fees. 99 Table of Contents On October 21, 2021, the MOE jointly with certain other PRC government authorities, promulgated the Notice on Strengthening the Supervision of After-School Tutoring Institutions Pre-collection of Fees, which requires the pre-collection of fees by academic AST institutions and non-academic AST institutions be supervised.
If we or any of the VIEs is found to be in violation of any existing or future PRC laws or regulations or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures.
If we or any of the VIEs is found to be in violation of any existing or future PRC laws or regulations or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have discretion to take action in dealing with such violations or failures.
Online game operators may only provide online game services to primary and middle school students on every Friday, Saturday, Sunday or PRC statutory holiday for one hour per day from 8:00 p.m. to 9:00 p.m. 103 Table of Contents On September 28, 2009, GAPP, the National Copyright Administration and the National Office of Combating Pornography and Illegal Publications jointly published the Notice Regarding the Consistent Implementation of the “Regulation on Three Provisions” of the State Council and the Relevant Interpretations of the State Commission Office for Public Sector Reform and the Further Strengthening of the Administration of Examination and Approval of Online Games and the Examination and Approval of Imported Online Games, or Circular 13.
Online game operators may only provide online game services to primary and middle school students on every Friday, Saturday, Sunday or PRC statutory holiday for one hour per day from 8:00 p.m. to 9:00 p.m. 95 Table of Contents On September 28, 2009, GAPP, the National Copyright Administration and the National Office of Combating Pornography and Illegal Publications jointly published the Notice Regarding the Consistent Implementation of the “Regulation on Three Provisions” of the State Council and the Relevant Interpretations of the State Commission Office for Public Sector Reform and the Further Strengthening of the Administration of Examination and Approval of Online Games and the Examination and Approval of Imported Online Games, or Circular 13.
On February 29, 2024, the National Technical Committee 260 on Cybersecurity of Standardization Administration of China promulgated the Basic Security Requirements for Generative Artificial Intelligence Service as a supporting document for the Generative Artificial Intelligence Services Measures to provide specific guidelines and assessment requirements for security of generative artificial intelligence services.
On February 29, 2024, the National Technical Committee 260 on Cybersecurity of Standardization Administration of China promulgated the Basic Security Requirements for Generative Artificial Intelligence Service as a supporting document for the Generative Artificial Intelligence Services Measures to provide specific guidelines and assessment requirements for security of generative AI services.
Furthermore, the data processor shall conduct a self-assessment on the risk of data cross-border transfer prior to applying for the foregoing security assessment, under which the data processor shall focus on certain factors including, among others, the legitimacy, fairness and necessity of the purpose, scope and method of data cross-border transfer and the data processing of overseas recipients, the risks that the cross-border data transfer may bring to national security, public interests and the legitimate rights and interests of individuals or organizations as well as whether the cross-border data transfer related contracts or the other legally binding documents to be entered with overseas recipients have fully included the data security protection responsibilities and obligations.
Furthermore, the data processor shall conduct a self-assessment on the risk of data cross-border transfer prior to applying for the foregoing security assessment, under which the data processor shall focus on certain factors including, among other things, the legitimacy, fairness and necessity of the purpose, scope and method of data cross-border transfer and the data processing of overseas recipients, the risks that the cross-border data transfer may bring to national security, public interests and the legitimate rights and interests of individuals or organizations as well as whether the cross-border data transfer related contracts or the other legally binding documents to be entered with overseas recipients have fully included the data security protection responsibilities and obligations.
To be specific, a domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, (i) any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities and file with competent secrecy administrative department; (ii) any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.
Specifically, a domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, (i) any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities and file with competent secrecy administrative department; and (ii) any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.
The revised version, among others, (i) makes changes to the merger review process by enabling SAMR to review non-threshold transactions and introducing the stop-clock system, (ii) changes the rules on monopoly agreements for resale price maintenance, introducing a “safe harbor” for vertical monopoly agreement, and (iii) increases fines imposed on different parties, e.g., amending the fine for illegal concentration of business operators from “a fine of up to RMB500,000” to “a fine of no more than ten percent of its prior year’s sales revenue if the concentration of the business operators has or may have an effect of eliminating or restricting competitions; or a fine of up to RMB5 million if the concentration of business operators does not have an effect of eliminating or restricting competitions.” On March 10, 2023, the SAMR issued the Provisions on the Prohibitions of Monopoly Agreements, the Provisions on the Prohibitions of Acts of Abuse of Dominant Market Positions and the Provisions on Review of Concentration of Undertakings, all of which took effect on April 15, 2023.
The revised version, among other things, (i) makes changes to the merger review process by enabling SAMR to review non-threshold transactions and introducing the stop-clock system, (ii) changes the rules on monopoly agreements for resale price maintenance, introducing a “safe harbor” for vertical monopoly agreement, and (iii) increases fines imposed on different parties, e.g., amending the fine for illegal concentration of business operators from “a fine of up to RMB500,000” to “a fine of no more than ten percent of its prior year’s sales revenue if the concentration of the business operators has or may have an effect of eliminating or restricting competitions; or a fine of up to RMB5 million if the concentration of business operators does not have an effect of eliminating or restricting competitions.” On March 10, 2023, the SAMR issued the Provisions on the Prohibitions of Monopoly Agreements, the Provisions on the Prohibitions of Acts of Abuse of Dominant Market Positions and the Provisions on Review of Concentration of Undertakings, all of which took effect on April 15, 2023.
“Information on the Company—Business Overview—Our Organizational Structure.” There remain substantial uncertainties with respect to the interpretation and application of existing or future PRC laws and regulations on foreign investment. See Item 3.D.
“Information on the Company—Business Overview—Our Organizational Structure.” There remain uncertainties with respect to the interpretation and application of existing or future PRC laws and regulations on foreign investment. See Item 3.D.
The Opinions on Educational Apps also requires, among others, that: (i) before filing, the Educational App’s provider obtain the ICP license or complete the ICP filing and obtain the certificate and the grade evaluation report for graded protection of cybersecurity; (ii) Educational Apps whose main users are under the age of 18 must limit the use time, specify the range of suitable ages, and have strictly monitored content; (iii) before an Educational App is introduced as a mandatory app to students, the Educational App must be approved by the applicable school through its collective decision-making process and be filed with the competent education authority; and (iv) Educational Apps adopted by education authorities and schools as their uniformly used teaching or management tools shall not charge the students or parents any fee, and not offer any commercial advertisements or games.
The Opinions on Educational Apps also requires, among other things, that: (i) before filing, the Educational App’s provider obtain the ICP license or complete the ICP filing and obtain the certificate and the grade evaluation report for graded protection of cybersecurity; (ii) Educational Apps whose main users are under the age of 18 must limit the use time, specify the range of suitable ages, and have strictly monitored content; (iii) before an Educational App is introduced as a mandatory app to students, the Educational App must be approved by the applicable school through its collective decision-making process and be filed with the competent education authority; and (iv) Educational Apps adopted by education authorities and schools as their uniformly used teaching or management tools shall not charge the students or parents any fee, and not offer any commercial advertisements or games.
The illegal income (if any) shall be confiscated after the refund of the fees charged; if the situation is serious, the institution shall be ordered to stop recruiting trainees and the license shall be revoked. 108 Table of Contents Regulations on E-commerce The E-Commerce Law of the PRC, which was promulgated on August 31, 2018 and became effective on January 1, 2019, set out detailed obligations for operators of e-commerce businesses and e-commerce platforms and guidelines in terms of contract performance and dispute resolutions in relation to e-commerce.
The illegal income (if any) shall be confiscated after the refund of the fees charged; if the situation is serious, the institution shall be ordered to stop recruiting trainees and the license shall be revoked. 100 Table of Contents Regulations on E-commerce The E-Commerce Law of the PRC, which was promulgated on August 31, 2018 and became effective on January 1, 2019, set out detailed obligations for operators of e-commerce businesses and e-commerce platforms and guidelines in terms of contract performance and dispute resolutions in relation to e-commerce.
In addition, e-commerce platform operators shall: (i) report information such as identity and tax information of third-party vendors to relevant authorities; (ii) make platform service agreement or web-links thereto prominently displayed and accessible on its homepage; (iii) be jointly liable in the event that the platform operator fails to take necessary measures when it has or should have the knowledge that any vendor using its platform has infringed consumers’ rights; and (iv) be jointly liable for any damage or threat to a customer’s personal health and wellbeing caused by the products sold on its platform if a platform operator fails to examine the qualifications of its vendor using its platform or fails to protect its customers’ safety in respect of goods or services that may affect a customer’s health.
In addition, e-commerce platform operators shall: (i) report information such as identity and tax information of third-party vendors to relevant authorities; (ii) make platform service agreement or web-links thereto prominently displayed and accessible on its homepage; (iii) be jointly liable in the event that the platform operator fails to take necessary measures when it has or should have the knowledge that any vendor using its platform has infringed consumers’ rights; and (iv) be jointly liable for any damage or threat to a customer’s personal health and well-being caused by the products sold on its platform if a platform operator fails to examine the qualifications of its vendor using its platform or fails to protect its customers’ safety in respect of goods or services that may affect a customer’s health.
The MOE, jointly with certain other PRC government authorities, issued the Opinions on Guiding and Regulating the Orderly and Healthy Development of Educational Mobile Apps on August 10, 2019, or the Opinions on Educational Apps, which requires, among others, mobile apps that provide services for school teaching and management, student learning and student life, or home-school interactions, with school faculty, students or parents as the main users, and with education or learning as the main application scenarios, or the Educational Apps, be filed with competent provincial regulatory authorities for education.
The MOE, jointly with certain other PRC government authorities, issued the Opinions on Guiding and Regulating the Orderly and Healthy Development of Educational Mobile Apps on August 10, 2019, or the Opinions on Educational Apps, which requires, among other things, mobile apps that provide services for school teaching and management, student learning and student life, or home-school interactions, with school faculty, students or parents as the main users, and with education or learning as the main application scenarios, or the Educational Apps, be filed with competent provincial regulatory authorities for education.
On August 30, 2018, the MOE, SAMR and certain other government authorities issued the Implementation Scheme for Comprehensive Prevention and Control of Myopia in Children and Youth which requires, among others, that the schools shall (i) shall use electronic products based on the principle of necessity, shall not rely on electronic products for teaching and homework assignment and shall rather assign paper-based homework in principle, and the teaching time using electronic products shall account for, in principle, not more than 30% of the total teaching time, and (ii) shall strictly implement the learning and development guidelines for children aged 3-6, pay attention to the value of life and play for these children and shall not teach them primary-school-level lessons. 105 Table of Contents On November 20, 2018, the General Office of the MOE, the General Office of the SAMR and the General Office of the Ministry of Emergency Management of the PRC jointly issued the Notice on Improving the Specific Governance and Rectification Mechanisms of After-school Education Institutions, or Circular 10, which provides that provincial education departments shall be responsible for the filing of training institutions that use internet technology to provide online training for primary and middle school students.
On August 30, 2018, the MOE, SAMR and certain other government authorities issued the Implementation Scheme for Comprehensive Prevention and Control of Myopia in Children and Youth which requires, among other things, that the schools shall (i) shall use electronic products based on the principle of necessity, shall not rely on electronic products for teaching and homework assignment and shall rather assign paper-based homework in principle, and the teaching time using electronic products shall account for, in principle, not more than 30% of the total teaching time, and (ii) shall strictly implement the learning and development guidelines for children aged 3-6, pay attention to the value of life and play for these children and shall not teach them primary-school-level lessons. 97 Table of Contents On November 20, 2018, the General Office of the MOE, the General Office of the SAMR and the General Office of the Ministry of Emergency Management of the PRC jointly issued the Notice on Improving the Specific Governance and Rectification Mechanisms of After-school Education Institutions, or Circular 10, which provides that provincial education departments shall be responsible for the filing of training institutions that use internet technology to provide online training for primary and middle school students.
Moreover, Youdao owns the intellectual property relating to in-house developed content used on its platform and the registrations of the core trademarks “Youdao.” Cloud Music owns the intellectual properties relating to NetEase Cloud Music and the registrations of the core trademarks “Cloud Music.” We also own the intellectual property (other than the content) relating to the NetEase websites and other online and mobile platforms, and the technology that enables online community, personalization, online games, news sharing, instant messaging, video streaming, e-commerce and other services on those platforms.
Moreover, Youdao owns the intellectual property relating to in-house developed content used on its platform and the registrations of the core trademarks “Youdao.” NetEase Cloud Music owns the intellectual properties relating to NetEase Cloud Music and the registrations of the core trademarks “NetEase Cloud Music.” We also own the intellectual property (other than the content) relating to the NetEase websites and other online and mobile platforms, and the technology that enables online community, personalization, online games, news sharing, instant messaging, video streaming, e-commerce and other services on those platforms.
Over the years, Cloud Music has built a large-scale, robust and rapidly growing business to provide community-centric online music services and social entertainment services to users.
Over the years, NetEase Cloud Music has built a large-scale, robust and rapidly growing business to provide community-centric online music services and social entertainment services to users.
At the U.S. federal level, legislative proposals such as the executive order issued by President Biden (February 28, 2024) on “Preventing Access to Americans’ Bulk Sensitive Personal Data and United States Government-Related Data by Countries of Concern,” or the Executive Order, pose additional complexity for us and could adversely impact our business. The Executive Order directs the U.S.
At the U.S. federal level, legislative proposals such as the executive order issued by President Biden (February 28, 2024) on “Preventing Access to Americans’ Bulk Sensitive Personal Data and United States Government-Related Data by Countries of Concern,” or the Executive Order, pose additional complexity for us and could adversely impact our business. The Executive Order directed the U.S.
The CPRA also introduces clear requirements for businesses to adopt appropriate security measures. In terms of enforcement, the CPRA established a “first-of-its-kind” enforcement agency, the California Privacy Protection Agency, or CPPA, with a broad mandate which includes the ability to take enforcement action, issue new rules and raise awareness among businesses and consumers about their rights and obligations.
The CCPA also introduces clear requirements for businesses to adopt appropriate security measures. In terms of enforcement, the CCPA established a “first-of-its-kind” enforcement agency, the California Privacy Protection Agency, or CPPA, with a broad mandate which includes the ability to take enforcement action, issue new rules and raise awareness among businesses and consumers about their rights and obligations.
Cloud Music generates the majority of the revenue from its music platform through the sales of membership subscriptions for its online music services and sales of virtual items for its social entertainment services.
NetEase Cloud Music generates the majority of the revenue from its music platform through the sales of membership subscriptions for its online music services and sales of virtual items for its social entertainment services.
(3) Beijing NetEase Youdao Computer System Co., Ltd. is 71.1% owned by William Lei Ding and 28.9% owned by the chief executive officer of Youdao, Inc. ​ 73 Table of Contents OUR SERVICES We have a successful online game business, developing and operating a rich portfolio of highly popular titles.
(3) Beijing NetEase Youdao Computer System Co., Ltd. is 71.1% owned by William Lei Ding and 28.9% owned by the chief executive officer of Youdao, Inc. ​ 70 Table of Contents OUR SERVICES We have a successful online game business, developing and operating a rich portfolio of highly popular titles.
To date, the majority of our most popular mobile games are in-house developed games. We have launched the mobile versions of our in-house developed flagship MMORPGs, including the Fantasy Westward Journey and Westward Journey Online mobile games. We distribute our mobile games through partnerships with major Android- and iOS-based application stores in China, as well as our proprietary platforms.
To date, the majority of our most popular mobile games are in-house developed games. We have launched the mobile versions of our in-house developed flagship titles, including the Fantasy Westward Journey and Westward Journey Online mobile games. We distribute our mobile games through partnerships with major Android- and iOS-based application stores in China, as well as our proprietary platforms.
The Regulation on the Protection of Minors in Cyberspace stipulates that online live streaming service providers shall, among others, (i) establish a dynamic verification mechanism for the real identity information of online live streaming uploaders and shall not provide online live streaming uploading services for minor users who do not conform to the legal provisions, (ii) set the mode for minors, and manage the period, duration, function and content of use, and (iii) reasonably restrict minors’ network service expenditure according to their age groups.
The Regulation on the Protection of Minors in Cyberspace stipulates that online live streaming service providers shall, among other things, (i) establish a dynamic verification mechanism for the real identity information of online live streaming uploaders and shall not provide online live streaming uploading services for minor users who do not conform to the legal provisions, (ii) set the mode for minors, and manage the period, duration, function and content of use, and (iii) reasonably restrict minors’ network service expenditure according to their age groups.
On December 28, 2015, the PBOC issued the Administrative Measures for Internet Payment Services of Non-bank Payment Institutions, which became effective on July 1, 2016, and requires that non-bank payment institutions implement the real-name verification system for payment accounts and take effective measures to verify the personal information of clients.
Regulations on Payment and Finance Services On December 28, 2015, the PBOC issued the Administrative Measures for Internet Payment Services of Non-bank Payment Institutions, which became effective on July 1, 2016, and requires that non-bank payment institutions implement the real-name verification system for payment accounts and take effective measures to verify the personal information of clients.
With Youdao Listening Pod , users can study natural pronunciation by listening and reading over 7,000 recording clips of training content, interact and communicate live with AI-powered chat bots and practice on mock questions to score their English listening and speaking capabilities.
With Youdao Listening Pod , users can study natural pronunciation by listening and reading over 30,000 recording clips of training content, interact and communicate live with AI-powered chat bots and practice on mock questions to score their English listening and speaking capabilities.
Westward Journey Online II and Fantasy Westward Journey were upgraded to New Westward Journey Online II and Fantasy Westward Journey Online in 2013. Both game series remain popular with gamers today as a result of continued content updating and innovation in play modes over the past two decades.
Westward Journey Online II and Fantasy Westward Journey were upgraded to Westward Journey Online 2 and Fantasy Westward Journey Online in 2013. Both game series remain popular with gamers today as a result of continued content updating and innovation in play modes over the past two decades.
Processing of and access to user data is also subject to strict assessment and approval procedures in order to safeguard against unauthorized access and processing. 87 Table of Contents To reduce the risk of data loss, we conduct periodic data backup and data recovery tests and back-up management procedures.
Processing of and access to user data is also subject to strict assessment and approval procedures in order to safeguard against unauthorized access and processing. 83 Table of Contents To reduce the risk of data loss, we conduct periodic data backup and data recovery tests and back-up management procedures.
On March 3, 2022, the MOE jointly with SAMR and NDRC promulgated the Notice on Regulating Non-Academic After-school Training Institutions, which provide that, among others, (i) non-academic after-school tutoring institutions shall have the corresponding qualifications and their staffs shall have the corresponding certificates for their profession; (ii) non-academic after-school tutoring institutions shall ensure that training contents and training methods are suitable for the students’ age, mental and physical characteristics and cognitive level.
On March 3, 2022, the MOE jointly with SAMR and NDRC promulgated the Notice on Regulating Non-Academic After-school Training Institutions, which provide that, among other things, (i) non-academic after-school tutoring institutions shall have the corresponding qualifications and their staffs shall have the corresponding certificates for their profession; (ii) non-academic after-school tutoring institutions shall ensure that training contents and training methods are suitable for the students’ age, mental and physical characteristics and cognitive level.
On December 9, 2023, the State Council promulgated the Regulation on Supervision and Administration of Non-bank Payment Institutions, which will become effective on May 1, 2024, to provide principal rules for regulating activities of non-bank payment institutions, including, among other things, implementing access management by specifying certain access requirements of the non-bank payment institutions, and reinforcing management systems with respect to payment accounts, reserve funds and payment instructions.
On December 9, 2023, the State Council promulgated the Regulation on Supervision and Administration of Non-bank Payment Institutions, which became effective on May 1, 2024, to provide principal rules for regulating activities of non-bank payment institutions, including, among other things, implementing access management by specifying certain access requirements of the non-bank payment institutions, and reinforcing management systems with respect to payment accounts, reserve funds and payment instructions.
Yanxuan offers products in a wide range of categories, including home life, clothing, shoes, bags, gourmet food, drinks, pet food and supplies, personal care and cleaning products, among others. Yanxuan pursues the brand concept of “thoughtfully curated products for mindful moments,” which is an extension of NetEase’s overall “user-first” attitude towards its services and products.
Yanxuan offers products in a wide range of categories, including home life, clothing, shoes, bags, gourmet food, drinks, pet food and supplies, personal care and cleaning products, among other things. Yanxuan pursues the brand concept of “thoughtfully curated products for mindful moments,” which is an extension of NetEase’s overall “user-first” attitude towards its services and products.
Furthermore, users of face recognition technology who use face recognition technology in public places, or store face information of more than 10,000 people, should file with the competent Internet information department within 30 working days. On October 16, 2023, the State Council promulgated the Regulation on the Protection of Minors in Cyberspace, which became effective on January 1, 2024.
Furthermore, users of face recognition technology who use face recognition technology in public places, or store face information of more than 10,000 people, should file with the competent Internet information department within 30 working days. 90 Table of Contents On October 16, 2023, the State Council promulgated the Regulation on the Protection of Minors in Cyberspace, which became effective on January 1, 2024.
Youdao has historically offered a major portion of its services through its Academic AST Business, but it disposed of such business in 2021 in order to comply with applicable PRC regulatory requirements adopted by the PRC government.
Youdao historically offered a major portion of its learning services through its Academic AST Business, but it disposed of such business in 2021 in order to comply with applicable PRC regulatory requirements adopted by the PRC government.
By the end of 2023, the One Screen program had provided support in the form of donations and teaching resources to over 300 schools across nine provinces and regions in China, benefiting nearly 200,000 teachers and students.
By the end of 2024, the One Screen program had provided support in the form of donations and teaching resources to over 300 schools across nine provinces and regions in China, benefiting nearly 200,000 teachers and students.
Other revenue sources primarily include movie soundtrack production and ticketing services for offline music events. 82 Table of Contents Technological-driven Music Experience Cloud Music needs to ensure that it can deliver a satisfying music experience consistently at scale by continuously innovating and improving its platform and investing in R&D.
Other revenue sources primarily include movie soundtrack production and ticketing services for offline music events. 78 Table of Contents Technological-driven Music Experience NetEase Cloud Music needs to ensure that it can deliver a satisfying music experience consistently at scale by continuously innovating and improving its platform and investing in R&D.
The handbooks are tailored to the legal requirements of the relevant jurisdictions, but all contain rules and guidelines regarding, among others, business ethics and compliance, anti-harassment, fraud prevention, anti-bribery and anti-corruption, conflicts of interest, and channels to report concerns. We provide employees with regular training as well as resources to explain the rules and guidelines in the employee handbooks.
The handbooks are tailored to the legal requirements of the relevant jurisdictions, but all contain rules and guidelines regarding, among other things, business ethics and compliance, anti-harassment, fraud prevention, anti-bribery and anti-corruption, conflicts of interest, and channels to report concerns. We provide employees with regular training as well as resources to explain the rules and guidelines in the employee handbooks.
“Key Information—Risk Factors—Risks Related to Our Business And Industry—Risks Related to Our Games and Related Value-added Services—Any difficulties or delays in receiving approval from the relevant government authorities for our new games or new expansion packs for, or material changes to, our existing games could adversely affect such games’ popularity and profitability,” Such licenses and permits include, among others, Value-added Telecommunications Business Operating License, Online Publishing Service License, Internet Audiovisual Program Services License, Internet Cultural Business License, and Commercial Performance License.
“Key Information—Risk Factors—Risks Related to Our Business And Industry—Risks Related to Our Games and Related Value-added Services—Any difficulties in receiving approval from the relevant government authorities for our new games or new expansion packs for, or material changes to, our existing games could adversely affect such games’ popularity and profitability,” Such licenses and permits include, among other things, Value-added Telecommunications Business Operating License, Online Publishing Service License, Internet Audiovisual Program Services License, Internet Cultural Business License, and Commercial Performance License.
Having built a virtuous cycle among our talent, established development pipeline and dynamic culture of innovation and craftsmanship, our strong R&D capabilities continue to enable high-quality production and expansion of successful games. 78 Table of Contents Key Game Technologies Our game R&D is centered around using technologies to deliver a superior and differentiated user experience.
Having built a virtuous cycle among our talent, established development pipeline and dynamic culture of innovation and craftsmanship, our strong R&D capabilities continue to enable high-quality production and expansion of successful games. Key Game Technologies Our game R&D is centered around using technologies to deliver a superior and differentiated user experience.
The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us, at http://www.sec.gov. Our corporate website can be accessed at http://ir.netease.com. The information on our website is not part of this annual report. 71 Table of Contents B.
The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us, at http://www.sec.gov. Our corporate website can be accessed at http://ir.netease.com. The information on our website is not part of this annual report. B.
In 2023, using remote, collaborative online classroom technology, the One Screen program helped students in many remote areas to achieve breakthroughs in terms of academic performance at the National College Entrance Examination.
In 2024, using remote, collaborative online classroom technology, the One Screen program helped students in many remote areas to achieve breakthroughs in terms of academic performance at the National College Entrance Examination.
In 2023, we did not make any material insurance claims in relation to our business. 89 Table of Contents PERMISSIONS REQUIRED FROM THE PRC AUTHORITIES FOR OUR OPERATIONS AND OFFERINGS We believe our China mainland subsidiaries and the VIEs have obtained the requisite licenses and permits from the PRC government authorities that are necessary for their material business operations in China, except for our Online Publishing Service License which we are in the process of renewing as disclosed in Item 3.D.
In 2024, we did not make any material insurance claims in relation to our business. 85 Table of Contents PERMISSIONS REQUIRED FROM THE PRC AUTHORITIES FOR OUR OPERATIONS AND OFFERINGS We believe our China mainland subsidiaries and the VIEs have obtained the requisite licenses and permits from the PRC government authorities that are necessary for their material business operations in China, except for our Online Publishing Service License which we are in the process of renewing as disclosed in Item 3.D.
On March 22, 2024, the CAC promulgated the Provisions on Promoting and Regulating Cross-border Data Flows (together with the Security Assessment of Data Cross-border Transfer, the “Data Cross-border Transfer Provisions”), which further clarify the implementation rules of existing systems to facilitate the cross-border flow of data, including, among others, relaxing the conditions for the cross-border transfer of data and narrowing the scope of security assessment on the cross-border transfer of data.
On March 22, 2024, the CAC promulgated the Provisions on Promoting and Regulating Cross-border Data Flows (together with the Security Assessment of Data Cross-border Transfer, the “Data Cross-border Transfer Provisions”), which further clarify the implementation rules of existing systems to facilitate the cross-border flow of data, including, among other things, relaxing the conditions for the cross-border transfer of data and narrowing the scope of security assessment on the cross-border transfer of data.
“Key Information—Risk Factors—Risks Related to Doing Business in China—We may not be able to adequately protect our intellectual property and may be exposed to infringement claims by third parties.” COMPETITION Our competition primarily comes from global online game developers and operators, such as Tencent, established online and offline education service and/or product providers in China, as well as leading digital content and entertainment providers.
“Key Information—Risk Factors—Risks Related to Doing Business in China—We may not be able to adequately protect our intellectual property and may be exposed to infringement claims by third parties.” 81 Table of Contents COMPETITION Our competition primarily comes from global online game developers and operators, such as Tencent, established online and offline education service and/or product providers in China, as well as leading digital content and entertainment providers.
In order to further regulate online transaction activities, on March 15, 2021, SAMR issued the Online Trading Supervision and Management Measures, or the Online Trading Supervision Measures, which became effective on May 1, 2021 and replace the Online Trading Measures.
In order to regulate online transaction activities, on March 15, 2021, SAMR issued the Online Trading Supervision and Management Measures, or the Online Trading Supervision Measures, which became effective on May 1, 2021.
Our key capabilities include: ● Advanced technologies focusing on user experience : We have developed advanced technologies such as natural language processing, automatic speech recognition (ASR) and text-to-speech (TTS) technologies that enable us to deliver an enjoyable and effective user experience. ● Machine learning-powered applications, such as content recommendation and customization : We have developed and adapt machine learning and related technologies in content recommendation and customization, which enables us to achieve greater user engagement and stickiness.
Our key capabilities include: ● Advanced technologies focusing on user experience : We have developed advanced technologies such as natural language processing, automatic speech recognition (ASR) and text-to-speech (TTS) technologies that enable us to deliver an enjoyable and effective user experience. 79 Table of Contents ● Machine learning-powered applications, such as content recommendation and customization : We have developed and adapt machine learning and related technologies in content recommendation and customization, which enables us to achieve greater user engagement and stickiness.
Games and Blizzard, respectively. PC games We launched our first PC based MMORPG, Westward Journey Online , in December 2001. Subsequently, we launched Westward Journey Online II in August 2002 and our second original PC based MMORPG, Fantasy Westward Journey , in January 2004.
PC games We launched our first PC based MMORPG, Westward Journey Online , in December 2001. Subsequently, we launched Westward Journey Online II in August 2002 and our second original PC based MMORPG, Fantasy Westward Journey , in January 2004.
We license content from various freelance providers and other content providers. 85 Table of Contents While we actively take steps to protect our proprietary rights, such steps may not be adequate to prevent the infringement or misappropriation of our intellectual property. See Item 3.D.
We license content from various freelance providers and other content providers. While we actively take steps to protect our proprietary rights, such steps may not be adequate to prevent the infringement or misappropriation of our intellectual property. See Item 3.D.
We have established multiple studios of game developers to research and develop new games and expansion packs. 77 Table of Contents Our Franchises We continue to build upon existing successful games to offer multi-dimensional content by leveraging our in-house developed franchises and intellectual property.
We have established multiple studios of game developers to research and develop new games and expansion packs. Our Franchises We continue to build upon existing successful games to offer multi-dimensional content by leveraging our in-house developed franchises and intellectual property.
Failure to comply with the requirements of the PIPL may result in various legal liabilities including confiscation of unlawful income, a warning, a fine of up to RMB50 million or 5% of annual revenue, and suspension of related business activities, among others.
Failure to comply with the requirements of the PIPL may result in various legal liabilities including confiscation of unlawful income, a warning, a fine of up to RMB50 million or 5% of annual revenue, and suspension of related business activities, among other things.
As we expand our operations internationally, we have become subject to privacy and data protection laws of other jurisdictions. In Europe, the GDPR has applied directly in all European Union member states since May 25, 2018.
As we expand our operations internationally, we have become subject to privacy and data protection laws of other jurisdictions. 93 Table of Contents In Europe, the GDPR has applied directly in all European Union member states since May 25, 2018.
Internal Control Risk Management We have designed and adopted strict internal procedures to ensure the compliance of our business operations with the relevant rules and regulations.
Internal Control Risk Management We have designed and adopted internal procedures to help ensure the compliance of our business operations with the relevant rules and regulations.
Protection of minors in the field of Internet live streaming will be further strengthened under the newly promulgated laws and regulations. On October 16, 2023, the State Council promulgated the Regulation on the Protection of Minors in Cyberspace, which became effective on January 1, 2024.
Protection of minors in the field of Internet live streaming will be further strengthened under the newly promulgated laws and regulations. 103 Table of Contents On October 16, 2023, the State Council promulgated the Regulation on the Protection of Minors in Cyberspace, which became effective on January 1, 2024.
Empowered by advanced core proprietary technologies, we deliver engaging content and services that are highly individualized and personalized across our businesses. 83 Table of Contents Machine Learning and Other Advanced Technologies Our machine learning and other advanced technologies enable us to effectively process data generated from across our services and products, optimize recommendations, personalize offerings and predict user behavior.
Empowered by advanced core proprietary technologies, we deliver engaging content and services that are highly individualized and personalized across our businesses. Machine Learning and Other Advanced Technologies Our machine learning and other advanced technologies enable us to effectively process data generated from across our services and products, optimize recommendations, personalize offerings and predict user behavior.
To diversify its revenue streams, Cloud Music has also been actively developing other monetization channels, such as the provisioning of advertising services, sales of digital albums and songs, copyright sublicensing and music-inspired services.
To diversify its revenue streams, NetEase Cloud Music has also been actively developing other monetization channels, such as the provision of advertising services, sales of digital albums and songs, copyright sublicensing and music-inspired services.
In order to protect our interests as shareholders and control the potential risks associated with our investments, we generally request our investee companies to grant us customary investor protective rights. Our finance department monitors the deal performance on a regular basis.
In order to protect our interests as shareholders and control the potential risks associated with our investments, we generally request our investee companies to grant us customary investor protective rights. 84 Table of Contents Our finance department monitors the deal performance on a regular basis.
We continue to establish and deepen collaboration with other leading international game studios, including entering into a joint development agreement with Codemasters, a leading United Kingdom game studio focusing on racing games. In conjunction with Codemasters, we launched Racing Master , a real-time simulation racing game that has gained widespread acclaim in Hong Kong, Macau, Taiwan and the PRC.
We continue to establish and deepen collaboration with other leading international game studios, including entering into a joint development agreement with Codemasters, a leading United Kingdom game studio focusing on racing games. In conjunction with Codemasters, we launched Racing Master , a real-time simulation racing game that has gained widespread acclaim in Hong Kong, Macau, Taiwan, China mainland and Japan.
Since the measures were recently promulgated, there exists uncertainties with respect to their interpretation and implementation. 100 Table of Contents On August 17, 2021, the State Council promulgated the Regulations on Critical Information Infrastructure Protection, or the CII Regulations, which came into effect on 1 September 2021.
Since the measures were recently promulgated, there exists uncertainties with respect to their interpretation and implementation. On August 17, 2021, the State Council promulgated the Regulations on Critical Information Infrastructure Protection, or the CII Regulations, which came into effect on 1 September 2021.
The CPRA provides for co-enforcement authority for violations between the CPPA and the California Attorney General, as well as a private right of action for certain data breaches that could increase data breach litigation and liability, in light of the potential for statutory damages.
The CPRA provides for co-enforcement authority for violations between the CCPA and the California Attorney General, as well as a private right of action for certain data breaches that has increased data breach litigation and could increase liability, in light of the potential for statutory damages.
Pursuant to the Copyright Law and its implementation rules, creators of protected works enjoy personal and property rights, including, among others, the right of disseminating the works through information networks. 116 Table of Contents Domain name Domain names are protected under the Administrative Measures on the Internet Domain Names promulgated by the MIIT on August 24, 2017.
Pursuant to the Copyright Law and its implementation rules, creators of protected works enjoy personal and property rights, including, among other things, the right of disseminating the works through information networks. 106 Table of Contents Domain name Domain names are protected under the Administrative Measures on the Internet Domain Names promulgated by the MIIT on August 24, 2017.
In addition, as of December 31, 2023, we have leased office, warehouse, store facilities and others with an aggregate of approximately 0.4 million square meters of space at properties mainly in Shanghai, Guangdong province and Zhejiang province.
In addition, as of December 31, 2024, we have leased office, warehouse, store facilities and others with an aggregate of approximately 0.4 million square meters of space at properties mainly in Zhejiang and Guangdong provinces.
“Operating and Financial Review and Prospects—Operating Results.” Games and Related Value-added Services Our Games Our game products and services are comprised of in-house developed mobile and PC games (including certain games co-developed with our collaboration partners) as well as games licensed from renowned global developers.
“Operating and Financial Review and Prospects—Operating Results.” Games and Related Value-added Services Our Games Our game products and services are comprised of in-house developed mobile and PC games as well as games licensed from renowned global developers.
In August 2023, we launched Youdao Listening Pod Pro , which features improved hardware functionality, such as an enhanced CPU and microphones. Our Youdao Listing Pod Pro customizes English listening content to cater to learners’ specific needs at various stages, leveraging our AI dialogue functions powered by Ziyue LLM for optimal support. ● Youdao Smart Learning Pad.
In August 2023, we launched Youdao Listening Pod Pro , which features improved hardware functionality, such as an enhanced CPU and microphones. Our Youdao Listing Pod Pro customizes English listening content to cater to learners’ specific needs at various stages, leveraging our AI dialogue functions powered by Confucius LLM.
We launched Ziyue , our own large language model (LLM), in 2023, which is China’s first LLM specifically designed for the education sector. Powered by Ziyue , we also launched Hi Echo , an AI-driven virtual English-speaking tutor, and Mr. P AI Tutor , a conversation-based tutorial function designed for real-time and multi-modality tutoring across major subjects for students.
We launched Confucius , our own large language model (LLM), in 2023, which is China’s first LLM specifically designed for the education sector. Powered by Confucius , we also launched Hi Echo , an AI-driven virtual English-speaking tutor, and Mr. P AI Tutor , a conversation-based tool designed with real-time and multi-modality learning features across major subjects for students.
We are one of the largest mobile game providers globally in terms of game revenue, offering over 100 mobile games of various genres as of December 31, 2023, including in-house developed and licensed MMORPGs, casual games, CCGs, battle arena games and SLGs, as well as other types of games.
We are one of the largest mobile game providers globally in terms of game revenue, offering around 100 mobile games of various genres as of December 31, 2024, including in-house developed and licensed MMORPGs, casual games, shooting games, racing simulations, CCGs, battle arena games and SLGs, as well as other types of games.
In addition, Youdao also employs mobile marketing, such as brand advertisements and marketing campaigns on app stores, leading mobile news apps and social networking platforms, as well as through optimization techniques designed to improve its ranking in popular search engines’ results.
In addition, Youdao also employs mobile marketing, such as brand advertisements and marketing campaigns on app stores, leading mobile news apps and social networking platforms, as well as through optimization techniques designed to improve its ranking in popular search engines’ results. Youdao also engages in offline marketing and branding to supplement its overall sales and marketing strategies.
The registration should be updated in time when the relevant contents change. 95 Table of Contents On July 21, 2023, the MIIT promulgated the Notice of the Ministry of Industry and Information Technology on the Record-filing of Mobile Internet Application (hereinafter referred to as App), which requires that holders of mobile Internet Apps engaged in Internet information services within the Mainland of PRC must fulfill the filing formalities in accordance with the Anti-Telecom and Online Fraud Law of the PRC and the Measures for the Administration of Internet Information Services and such holders shall not engage in the App Internet information service without completion of such filing.
On July 21, 2023, the MIIT promulgated the Notice of the Ministry of Industry and Information Technology on the Record-filing of Mobile Internet Application (hereinafter referred to as App), which requires that holders of mobile Internet Apps engaged in Internet information services within the Mainland of PRC must fulfill the filing formalities in accordance with the Anti-Telecom and Online Fraud Law of the PRC and the Measures for the Administration of Internet Information Services and such holders shall not engage in the App Internet information service without completion of such filing.
We own and occupy several office buildings and R&D centers in Hangzhou and Guangzhou, China with a total floor area of approximately 0.3 million and 0.2 million square meters, respectively, where our online game and innovative businesses and other services developers, as well as their related sales, marketing, technology, management and administrative functions are located.
We own and occupy several office buildings and R&D centers in Shanghai, Hangzhou and Guangzhou, China with an aggregate total floor area of approximately 1.1 million square meters, where our online game and innovative businesses and other services developers, as well as their related sales, marketing, technology, management and administrative functions are located.
We offer a variety of in-game virtual items that players can purchase, including avatars, skills, privileges and other in-game consumables, features and functionalities. ​ 74 Table of Contents The table below sets forth certain of our major in-house developed mobile games: Game Genre Date of Initial Launch Mobile Version of Fantasy Westward Journey II ​ Turn-based MMORPG ​ July 2013 Fantasy Westward Journey mobile game ​ Turn-based MMORPG ​ March 2015 Westward Journey Online mobile game ​ Turn-based MMORPG ​ September 2015 Infinite Borders (previously known as Invincible) ​ SLG ​ October 2015 The mobile version of Ghost ​ Real-time MMORPG ​ May 2016 Onmyoji ​ CCG & RPG ​ September 2016 Knives Out ​ Battle Arena ​ November 2017 Identity V ​ Battle Arena ​ April 2018 LifeAfter ​ Cooperative Survival RPG ​ November 2018 Fantasy Westward Journey H5 ​ MMORPG ​ June 2020 Harry Potter: Magic Awakened* ​ CCGRPG ​ September 2021 Eggy Party ​ Casual Party Mobile Game ​ May 2022 Diablo® Immortal™* ​ MMO Action-RPG ​ June 2022 Racing Master ​ Racing Simulation ​ June 2023 Justice mobile game ​ MMORPG ​ June 2023 Dunk City Dynasty ​ Basketball ​ August 2023 * Harry Potter: Magic Awakened and Diablo ® Immortal™ were co-developed with Warner Bros.
We offer a variety of in-game virtual items that players can purchase, including avatars, skills, privileges and other in-game consumables, features and functionalities. ​ 71 Table of Contents The table below sets forth certain of our major in-house developed mobile games: Game Genre Date of Initial Launch Mobile Version of Fantasy Westward Journey II ​ Turn-based MMORPG ​ July 2013 Fantasy Westward Journey mobile game ​ Turn-based MMORPG ​ March 2015 Westward Journey Online mobile game ​ Turn-based MMORPG ​ September 2015 Infinite Borders ​ SLG ​ October 2015 The mobile version of Ghost ​ Real-time MMORPG ​ May 2016 Onmyoji ​ CCG & RPG ​ September 2016 Knives Out ​ Battle Arena ​ November 2017 Identity V ​ Battle Arena ​ April 2018 LifeAfter ​ Cooperative Survival RPG ​ November 2018 Fantasy Westward Journey H5 ​ MMORPG ​ June 2020 Eggy Party ​ Casual Party Mobile Game ​ May 2022 Diablo® Immortal™* ​ MMO Action-RPG ​ June 2022 Racing Master* ​ Racing Simulation ​ June 2023 Justice mobile game ​ MMORPG ​ June 2023 Dunk City Dynasty ​ Basketball ​ August 2023 Naraka: Bladepoint mobile game ​ Action Battle Royale ​ July 2024 * Diablo ® Immortal™ and Racing Master were co-developed with Blizzard and Codemasters, respectively.
Game R&D and Technologies Our consistent and significant investment in innovative game R&D is a key contributor to the success of our online game business and has been widely recognized in the games industry.
Game R&D and Technologies Our consistent and significant investment in innovative game R&D is a key contributor to the success of our online game business and has been widely recognized in the games industry. 74 Table of Contents Our Proprietary Game R&D Capabilities Proprietary R&D is the key focus of our game business.
On 14 June 2022, the CAC issued a revised version of the Administrative Provisions on Mobile Internet Application Information Services, or the APP Provisions, which basically reflects the regulatory development since 2016 and further emphasizes that mobile internet app providers shall comply with the relevant provisions on the scope of necessary personal information when engaging in personal information processing activities.
On 14 June 2022, the CAC issued a revised version of the Administrative Provisions on Mobile Internet Application Information Services, or the APP Provisions, which emphasizes that mobile internet app providers shall comply with the relevant provisions on the scope of necessary personal information when engaging in personal information processing activities.
An online performance business operator shall assume the primary responsibility for the business operations of online performance carried out thereby. 111 Table of Contents According to the Guiding Opinions on Strengthening the Standardized Management of Online Live Streaming issued by CAC and several other governmental authorities on February 9, 2021, live streaming platforms that carry out business-oriented online performance activities must hold the internet cultural business license and carry out ICP filing; live streaming platforms that carry out network audio-visual program services must hold the AVSP (or complete the registration in the national network audio-visual platform information registration management system) and carry out ICP filing; live streaming platforms that carry internet news information service must hold internet news information service license.
According to the Guiding Opinions on Strengthening the Standardized Management of Online Live Streaming issued by CAC and several other governmental authorities on February 9, 2021, live streaming platforms that carry out business-oriented online performance activities must hold the internet cultural business license and carry out ICP filing; live streaming platforms that carry out network audio-visual program services must hold the AVSP (or complete the registration in the national network audio-visual platform information registration management system) and carry out ICP filing; live streaming platforms that carry internet news information service must hold internet news information service license.
Our key business milestones are summarized below: ​ ​ ● Founding of our business 1997 ​ ​ ● Launch of free web-based e-mail services, and business model shifted from software development to internet technology with the launch of our NetEase website (“ www.163.com ”) 1998 ​ ​ ● Launches of advertisement services, online platforms, online shopping malls, and other internet services in China 1999 ​ ​ ● Listing on Nasdaq on June 30 2000 ​ ​ ● Introduction of fee-based premium services and online entertainment services, including online games, wireless value-added services and other subscription-type services 2001 ​ ​ ● Launch of our first PC-client MMORPG game, Westward Journey Online , our widely popular in-house developed game series 2001 ​ ​ ● Launch of our Fantasy Westward Journey series, our second widely popular original game series 2004 ​ ​ ● Founding of Youdao, an intelligent learning company that now offers learning content, applications and solutions, as well as online marketing services 2006 ​ ​ ● Launch of NetEase Cloud Music, our music streaming platform 2013 ​ ​ ● Launch of our first mobile game, the mobile version of Fantasy Westward Journey II 2013 ​ ​ ● Launch of Yanxuan, our e-commerce business 2016 ​ ​ ● Listing of Youdao on the New York Stock Exchange on October 26 2019 ​ ​ ● Listing on the Hong Kong Stock Exchange on June 11 2020 ​ ​ ● Listing of Cloud Music on the Hong Kong Stock Exchange on December 2 2021 ​ Our principal capital expenditures for 2023 and 2022 consisted mainly of expenditures related to our new office buildings in Shanghai and Hangzhou in China and the acquisition of new servers in connection with the operation of our business for a total of approximately RMB2.3 billion and RMB2.1 billion, respectively.
Our key business milestones are summarized below: ​ ​ ● Founding of our business 1997 ​ ​ ● Launch of free web-based e-mail services, and business model shifted from software development to internet technology with the launch of our NetEase website (“ www.163.com ”) 1998 ​ ​ ● Launches of advertisement services, online platforms, online shopping malls, and other internet services in China 1999 ​ ​ ● Listing on Nasdaq on June 30 2000 ​ ​ ● Introduction of fee-based premium services and online entertainment services, including online games, wireless value-added services and other subscription-type services 2001 ​ ​ ● Launch of our first PC-client MMORPG game, Westward Journey Online , our widely popular in-house developed game series 2001 ​ ​ ● Launch of our Fantasy Westward Journey series, our second widely popular original game series 2004 ​ ​ ● Founding of Youdao, our intelligent learning and advertising solutions provider 2006 ​ ​ ● Launch of NetEase Cloud Music , our music streaming platform 2013 ​ ​ ● Launch of our first mobile game, the mobile version of Fantasy Westward Journey II 2013 ​ ​ ● Launch of Yanxuan, our e-commerce business 2016 ​ ​ ● Listing of Youdao on the New York Stock Exchange on October 26 2019 ​ ​ ● Listing on the Hong Kong Stock Exchange on June 11 2020 ​ ​ ● Listing of NetEase Cloud Music on the Hong Kong Stock Exchange on December 2 2021 ​ Our principal capital expenditures for 2024, 2023 and 2022 consisted mainly of expenditures related to our new office buildings in Shanghai and Hangzhou in China and the acquisition of new servers in connection with the operation of our business for a total of approximately RMB1.3 billion, RMB2.3 billion and RMB2.1 billion, respectively. 68 Table of Contents As of December 31, 2024, we had capital expenditure commitments of RMB632.3 million (US$86.6 million) for 2025 and thereafter, which primarily consist of commitments made in connection with the construction of new office buildings in Shanghai, Hangzhou and other cities.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeGAAP (the “Primary Beneficiaries of VIEs”), our other subsidiaries that are not the Primary Beneficiaries of VIEs (the “Other Subsidiaries”), and the VIEs and their subsidiaries that we consolidate for the periods presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2022 ​ ​ ​ Primary VIEs and ​ ​ ​ ​ NetEase, ​ Other ​ Beneficiaries of ​ their ​ Eliminating ​ Consolidated ​ ​ Inc. ​ Subsidiaries ​ VIEs ​ subsidiaries ​ adjustments ​ totals ​ ​ (RMB in thousands) Assets Cash and cash equivalents 98,865 4,771,179 17,715,676 2,303,280 — 24,889,000 Time deposits — 60,115,896 27,405,623 400,000 — 87,921,519 Restricted cash — 15,584 28,570 2,655,171 — 2,699,325 Accounts receivable, net — 1,165,043 295,557 3,542,272 — 5,002,872 Inventories — 768,099 157,965 67,572 — 993,636 Prepayments and other current assets, net 328,766 2,109,849 1,142,559 1,867,110 — 5,448,284 Short-term investments — 138,218 7,410,471 73,984 — 7,622,673 Amounts due from group companies (1) 25,813,779 6,707,302 7,723,645 9,917,091 (50,161,817) — Property, equipment and software, net 24 578,404 5,685,236 78,666 — 6,342,330 Land use right, net — 54,120 4,067,647 — — 4,121,767 Operating lease right-of-use assets, net 170 268,483 564,671 54,653 — 887,977 Deferred tax assets — 660 1,324,534 155,595 — 1,480,789 Investments in subsidiaries (2) 88,979,671 26,887,522 25,513 — (115,892,706) — Contractual interests in the VIEs and VIEs’ subsidiaries (2) ​ — ​ — ​ 762,591 ​ — ​ (762,591) ​ — Long-term investments 393,580 ​ 17,074,981 190,425 885,372 — 18,544,358 Other long-term assets 64,411 4,727,973 1,849,103 164,968 — 6,806,455 Total assets 115,679,266 125,383,313 76,349,786 22,165,734 (166,817,114) 172,760,985 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities, redeemable noncontrolling interests and shareholders’ equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts payable 17 570,520 133,887 802,717 — 1,507,141 Salary and welfare payables 1,303 384,980 4,191,180 155,478 — 4,732,941 Taxes payable 10,107 124,198 2,637,439 41,352 — 2,813,096 Short-term loans 4,472,768 14,369,014 5,033,500 422 — 23,875,704 Contract liabilities-current — 844,487 209,302 11,465,101 — 12,518,890 Accrued liabilities and other payables 25,017 1,884,156 5,403,800 3,809,049 — 11,122,022 Operating lease liabilities 173 281,378 595,161 54,981 — 931,693 Amounts due to group companies (1) 2,956,264 12,595,746 30,672,023 3,937,784 (50,161,817) — Deferred tax liabilities — 1,811,525 314,595 — — 2,126,120 Long-term loans 3,482,300 — 172,664 — — 3,654,964 Other long-term payable — 268,361 73,200 263,373 — 604,934 Total liabilities 10,947,949 33,134,365 49,436,751 20,530,257 (50,161,817) 63,887,505 Redeemable noncontrolling interests — 71,869 — 64,571 — 136,440 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ’ Shareholders’ equity (2) 104,731,317 ​ 92,177,079 ​ 26,913,035 ​ 1,570,906 ​ (120,661,020) ​ 104,731,317 Noncontrolling interests — — — — 4,005,723 4,005,723 Total equity 104,731,317 92,177,079 26,913,035 1,570,906 (116,655,297) 108,737,040 Total liabilities, redeemable noncontrolling interests and shareholders’ equity 115,679,266 125,383,313 76,349,786 22,165,734 (166,817,114) 172,760,985 ​ ​ 141 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2023 ​ ​ ​ ​ ​ ​ Primary ​ VIEs and ​ ​ ​ ​ ​ NetEase, Other Beneficiaries their Eliminating Consolidated ​ ​ Inc. ​ Subsidiaries ​ of VIEs ​ subsidiaries ​ adjustments ​ totals ​ ​ (RMB in thousands) Assets Cash and cash equivalents 224,824 13,269,440 6,132,382 1,802,256 — 21,428,902 Time deposits — 63,445,277 38,040,757 420,000 — 101,906,034 Restricted cash — 20,075 56,098 2,701,583 — 2,777,756 Accounts receivable, net — 1,421,964 337,122 4,663,331 — 6,422,417 Inventories — 586,212 72,254 36,908 — 695,374 Prepayments and other current assets, net 262,937 2,933,583 1,114,866 1,765,209 — 6,076,595 Short-term investments — 39,620 4,322,533 73,904 — 4,436,057 Amounts due from group companies (1) 48,884,976 32,562,994 18,972,738 9,192,463 (109,613,171) — Property, equipment and software, net 829 709,387 7,312,616 52,212 — 8,075,044 Land use right, net — 64,264 4,010,879 — — 4,075,143 Operating lease right-of-use assets, net 3,996 280,906 410,687 53,686 — 749,275 Deferred tax assets — 15,158 1,396,083 148,847 — 1,560,088 Investments in subsidiaries (2) 103,785,841 28,944,158 (410,515) — (132,319,484) — Contractual interests in the VIEs and VIEs’ subsidiaries (2) ​ — ​ — ​ 1,619,075 ​ — ​ (1,619,075) ​ — Long-term investments 393,580 19,211,745 965,058 1,212,804 — 21,783,187 Other long-term assets 42,303 4,471,840 1,221,219 203,744 — 5,939,106 Total assets 153,599,286 167,976,623 85,573,852 22,326,947 (243,551,730) 185,924,978 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities, redeemable noncontrolling interests and shareholders’ equity ​ ​ ​ ​ ​ ​ Accounts payable 32 536,021 79,826 265,137 — 881,016 Salary and welfare payables 1,678 669,323 4,071,411 114,794 — 4,857,206 Taxes payable 10,278 35,066 2,383,421 142,769 — 2,571,534 Short-term loans 920,751 8,669,455 9,633,862 16,095 — 19,240,163 Contract liabilities-current — 732,809 227,931 12,401,426 — 13,362,166 Accrued liabilities and other payables 9,008 2,071,530 6,900,483 3,689,885 — 12,670,906 Operating lease liabilities 3,536 316,747 442,348 52,691 — 815,322 Amounts due to group companies (1) 28,368,227 45,955,508 32,466,685 2,822,751 (109,613,171) — Deferred tax liabilities — 1,951,981 347,322 — — 2,299,303 Long-term loans — — 427,997 — — 427,997 Other long-term payable — 101,713 58,923 554,648 — 715,284 Total liabilities 29,313,510 61,040,153 57,040,209 20,060,196 (109,613,171) 57,840,897 Redeemable noncontrolling interests — 77,798 — 37,961 — 115,759 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shareholders’ equity (2) 124,285,776 106,858,672 28,533,643 2,228,790 (137,621,105) 124,285,776 Noncontrolling interests — — — — 3,682,546 3,682,546 Total equity 124,285,776 106,858,672 28,533,643 2,228,790 (133,938,559) 127,968,322 Total liabilities, redeemable noncontrolling interests and shareholders’ equity 153,599,286 167,976,623 85,573,852 22,326,947 (243,551,730) 185,924,978 ​ 142 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2021 ​ ​ ​ ​ ​ ​ Primary ​ VIEs and ​ ​ ​ ​ ​ NetEase, Other Beneficiaries of their Eliminating Consolidated ​ ​ Inc. ​ Subsidiaries ​ VIEs ​ subsidiaries ​ adjustments ​ totals ​ ​ (RMB in thousands) Net revenues Third-party revenues — ​ 11,231,687 ​ 1,967,818 ​ 74,406,521 ​ — ​ 87,606,026 Intra-Group revenues related to technical consulting and related service (3) — ​ 893,686 ​ 55,928,796 ​ — ​ (56,822,482) ​ — Other intra-Group revenues (4) — ​ 1,481,060 ​ 1,898,873 ​ 808,648 ​ (4,188,581) ​ — Total net revenues — ​ 13,606,433 ​ 59,795,487 ​ 75,215,169 ​ (61,011,063) ​ 87,606,026 Cost of revenues and operating expenses ​ ​ ​ ​ ​ Third-party cost of revenue and operating expenses (144,741) ​ (12,099,429) ​ (41,293,111) ​ (17,651,675) ​ — ​ (71,188,956) Intra-Group cost of revenues and operating expenses related to technical consulting and related services (3) — ​ — ​ — ​ (56,822,482) ​ 56,822,482 ​ — Other intra-Group cost of revenues and operating expenses (4) — ​ (1,837,295) ​ (2,182,436) ​ (168,850) ​ 4,188,581 ​ — Total cost of revenues and operating expenses (144,741) ​ (13,936,724) ​ (43,475,547) ​ (74,643,007) ​ 61,011,063 ​ (71,188,956) Operating (losses)/profit (144,741) ​ (330,291) ​ 16,319,940 ​ 572,162 ​ — ​ 16,417,070 Share of income/(losses) from subsidiaries and VIEs (2) 16,275,271 ​ 16,114,107 ​ (52,063) ​ — ​ (32,337,315) ​ — Other income, net 735,648 ​ 1,729,248 ​ 1,898,499 ​ 323,994 ​ — ​ 4,687,389 Income before tax 16,866,178 ​ 17,513,064 ​ 18,166,376 ​ 896,156 ​ (32,337,315) ​ 21,104,459 Income tax (9,336) ​ (1,533,115) ​ (2,313,961) ​ (271,857) ​ — ​ (4,128,269) Net income from continuing operations 16,856,842 ​ 15,979,949 ​ 15,852,415 ​ 624,299 ​ (32,337,315) ​ 16,976,190 Less: Accretion of redeemable noncontrolling interests — ​ (536,981) ​ — ​ — ​ — ​ (536,981) Net loss attributable to noncontrolling interests (2) — ​ — ​ — ​ 27,777 ​ 389,856 ​ 417,633 Net income attributable to the Company’s shareholders 16,856,842 ​ 15,442,968 ​ 15,852,415 ​ 652,076 ​ (31,947,459) ​ 16,856,842 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2022 ​ ​ ​ ​ ​ ​ Primary ​ VIEs and ​ ​ ​ ​ NetEase, Other Beneficiaries of their Eliminating Consolidated ​ ​ Inc. ​ Subsidiaries ​ VIEs ​ subsidiaries ​ adjustments ​ totals ​ ​ (RMB in thousands) Net revenues ​ ​ ​ ​ ​ ​ Third-party revenues ​ — ​ 12,788,652 ​ 1,157,713 ​ 82,549,444 ​ — ​ 96,495,809 Intra-Group revenues related to technical consulting and related service (3) ​ — ​ 692,337 ​ 64,085,249 ​ — ​ (64,777,586) ​ — Other intra-Group revenues (4) ​ — ​ 913,644 ​ 1,876,699 ​ 817,962 ​ (3,608,305) ​ — Total net revenues ​ — ​ 14,394,633 ​ 67,119,661 ​ 83,367,406 ​ (68,385,891) ​ 96,495,809 Cost of revenues and operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Third-party cost of revenue and operating expenses ​ (62,115) ​ (13,477,853) ​ (44,968,961) ​ (18,358,287) ​ — ​ (76,867,216) Intra-Group cost of revenues and operating expenses related to technical consulting and related services (3) ​ — ​ — ​ — ​ (64,777,586) ​ 64,777,586 ​ — Other intra-Group cost of revenues and operating expenses (4) ​ — ​ (1,822,670) ​ (1,667,214) ​ (185,608) ​ 3,675,492 ​ — Total cost of revenues and operating expenses ​ (62,115) ​ (15,300,523) ​ (46,636,175) ​ (83,321,481) ​ 68,453,078 ​ (76,867,216) Operating (losses)/profit ​ (62,115) ​ (905,890) ​ 20,483,486 ​ 45,925 ​ 67,187 ​ 19,628,593 Share of income/(losses) from subsidiaries and VIEs (2) ​ 24,489,042 ​ 20,442,796 ​ (151,361) ​ — ​ (44,780,477) ​ — Other (expenses)/income, net ​ (4,156,514) ​ 6,458,954 ​ 2,334,424 ​ (15,193) ​ — ​ 4,621,671 Income before tax ​ 20,270,413 ​ 25,995,860 ​ 22,666,549 ​ 30,732 ​ (44,713,290) ​ 24,250,264 Income tax ​ — ​ (2,437,898) ​ (2,481,879) ​ (112,061) ​ — ​ (5,031,838) Net income from continuing operations ​ 20,270,413 ​ 23,557,962 ​ 20,184,670 ​ (81,329) ​ (44,713,290) ​ 19,218,426 Less: Accretion of redeemable noncontrolling interests ​ — ​ (2,978) ​ — ​ — ​ — ​ (2,978) Net loss attributable to noncontrolling interests (2) ​ — ​ — ​ — ​ 14,020 ​ 483,268 ​ 497,288 Net income from continuing operations attributable to the Company’s shareholders ​ 20,270,413 ​ 23,554,984 ​ 20,184,670 ​ (67,309) ​ (44,230,022) ​ 19,712,736 Net income from discontinued operations, net of tax ​ — ​ 624,864 ​ — ​ — ​ — ​ 624,864 Net income attributable to the Company’s shareholders ​ 20,270,413 ​ 24,179,848 ​ 20,184,670 ​ (67,309) ​ (44,230,022) ​ 20,337,600 ​ ​ 143 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2023 ​ ​ ​ Primary VIEs and ​ ​ ​ ​ NetEase, ​ Other ​ Beneficiaries of ​ their ​ Eliminating ​ Consolidated ​ ​ Inc. ​ Subsidiaries ​ VIEs ​ subsidiaries ​ adjustments ​ totals ​ ​ (RMB in thousands) Net revenues ​ ​ ​ ​ ​ ​ Third-party revenues ​ — ​ 12,193,244 ​ 1,220,371 ​ 90,054,544 ​ — ​ 103,468,159 Intra-Group revenues related to technical consulting and related service (3) ​ — ​ 386,828 ​ 72,605,740 ​ — ​ (72,992,568) ​ — Other intra-Group revenues (4) ​ — ​ 873,787 ​ 1,440,970 ​ 734,857 ​ (3,049,614) ​ — Total net revenues ​ — ​ 13,453,859 ​ 75,267,081 ​ 90,789,401 ​ (76,042,182) ​ 103,468,159 Cost of revenues and operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Third-party cost of revenue and operating expenses ​ (26,012) ​ (14,240,361) ​ (44,024,077) ​ (17,468,565) ​ — ​ (75,759,015) Intra-Group cost of revenues and operating expenses related to technical consulting and related services (3) ​ — ​ — ​ — ​ (72,992,568) ​ 72,992,568 ​ — Other intra-Group cost of revenues and operating expenses (4) ​ — ​ (1,454,070) ​ (1,571,998) ​ (23,546) ​ 3,049,614 ​ — Total cost of revenues and operating expenses ​ (26,012) ​ (15,694,431) ​ (45,596,075) ​ (90,484,679) ​ 76,042,182 ​ (75,759,015) Operating (losses)/profit ​ (26,012) ​ (2,240,572) ​ 29,671,006 ​ 304,722 ​ — ​ 27,709,144 Share of income/ (losses) from subsidiaries and VIEs (2) ​ 29,849,939 ​ 30,023,775 ​ (88,094) ​ — ​ (59,785,620) ​ — Other (expenses)/ income, net ​ (345,851) ​ 3,929,431 ​ 2,537,239 ​ 226,964 ​ — ​ 6,347,783 Income before tax ​ 29,478,076 ​ 31,712,634 ​ 32,120,151 ​ 531,686 ​ (59,785,620) ​ 34,056,927 Income tax ​ — ​ (1,928,340) ​ (2,568,035) ​ (203,329) ​ — ​ (4,699,704) Net income from continuing operations ​ 29,478,076 ​ 29,784,294 ​ 29,552,116 ​ 328,357 ​ (59,785,620) ​ 29,357,223 Less: Accretion of redeemable noncontrolling interests ​ — ​ (3,589) ​ — ​ — ​ — ​ (3,589) Net (income)/loss attributable to noncontrolling interests (2) ​ — ​ — ​ — ​ (3,759) ​ 66,677 ​ 62,918 Net income attributable to the Company’s shareholders ​ 29,478,076 ​ 29,780,705 ​ 29,552,116 ​ 324,598 ​ (59,718,943) ​ 29,416,552 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2021 ​ ​ ​ ​ ​ ​ Primary ​ VIEs and ​ ​ ​ ​ ​ NetEase, Other Beneficiaries of their Eliminating Consolidated ​ ​ Inc. ​ Subsidiaries ​ VIEs ​ subsidiaries ​ adjustments ​ totals ​ ​ (RMB in thousands) Cash flows from operating activities: Net cash (used in)/provided by transactions with third-parties (117,844) ​ 221,977 ​ (36,449,437) ​ 61,272,031 ​ — ​ 24,926,727 Net cash provided by/ (used in) transactions with intra-Group companies related to technical consulting and related service — ​ 1,070,594 ​ 58,368,958 ​ (59,439,552) ​ — ​ — Dividends received from subsidiaries and VIEs (5) 731,250 ​ 6,510,526 ​ — ​ — ​ (7,241,776) ​ — Net cash (used in)/ provided by other transactions with intra-Group companies (381) ​ 87,037 ​ 196,965 ​ (283,621) ​ — ​ — Net cash provided by operating activities 613,025 ​ 7,890,134 ​ 22,116,486 ​ 1,548,858 ​ (7,241,776) ​ 24,926,727 Cash flows from investing activities: Net cash provided by/ (used in) transactions with third-parties 127,015 ​ 4,315,478 ​ (11,481,357) ​ (39,430) ​ — ​ (7,078,294) Loans made to intra-Group companies (6) (5,549,688) ​ (21,611,930) ​ (783,842) ​ — ​ 27,945,460 ​ — Loans repaid by intra-Group companies (6) 8,730,730 ​ 6,749,175 ​ 272,944 ​ — ​ (15,752,849) ​ — Other investing activities with intra-Group companies (7) (1,307,026) ​ (604,322) ​ (4,600) ​ — ​ 1,915,948 ​ — Net cash provided by/ (used in) investing activities 2,001,031 ​ (11,151,599) ​ (11,996,855) ​ (39,430) ​ 14,108,559 ​ (7,078,294) Cash flows from financing activities: Net cash (used in)/provided by transactions with third-parties (15,854,237) ​ 3,246,955 ​ 700,000 ​ (678,287) ​ — ​ (12,585,569) Cash dividend paid to intra-Group companies (5) — ​ — ​ (6,510,526) ​ (731,250) ​ 7,241,776 ​ — Loans received from intra-Group companies (6) 19,965,792 ​ 6,137,790 ​ 1,646,137 ​ 195,741 ​ (27,945,460) ​ — Loans repaid to intra-Group companies (6) (6,749,175) ​ (8,916,374) ​ — ​ (87,300) ​ 15,752,849 ​ — Other financing activities with intra-Group companies (7) — ​ 1,311,504 ​ 604,444 ​ — ​ (1,915,948) ​ — Net cash (used in)/ provided by financing activities (2,637,620) ​ 1,779,875 ​ (3,559,945) ​ (1,301,096) ​ (6,866,783) ​ (12,585,569) ​ ​ 144 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2022 ​ ​ ​ ​ ​ ​ Primary ​ VIEs and ​ Eliminating ​ ​ ​ NetEase, Other Beneficiaries of their ​ Consolidated ​ ​ Inc. ​ Subsidiaries ​ VIEs ​ subsidiaries ​ adjustments ​ totals ​ ​ (RMB in thousands) Cash flows from operating activities: Net cash (used in)/provided by transactions with third-parties (255,519) ​ 707,587 ​ (40,202,699) ​ 67,459,864 ​ — ​ 27,709,233 Net cash provided by/ (used in) transactions with intra-Group companies related to technical consulting and related service — ​ 820,545 ​ 66,150,273 ​ (66,970,818) ​ — ​ — Dividends received from subsidiaries and VIEs (5) — ​ 29,094,971 ​ — ​ — ​ (29,094,971) ​ — Net cash provided by/ (used in) other transactions with intra-Group companies 2,893 ​ (3,478,205) ​ 3,175,860 ​ 299,452 ​ — ​ — Net cash (used in)/ provided by operating activities (252,626) ​ 27,144,898 ​ 29,123,434 ​ 788,498 ​ (29,094,971) ​ 27,709,233 Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net cash (used in)/provided by transactions with third-parties (223) ​ (10,434,166) ​ 3,136,494 ​ (71,832) ​ — ​ (7,369,727) Loans made to intra-Group companies (6) (6,013,061) ​ (33,737,997) ​ (1,356,487) ​ — ​ 41,107,545 ​ — Loans repaid by intra-Group companies (6) 2,501,060 ​ 8,292,517 ​ 668,856 ​ — ​ (11,462,433) ​ — Other investing activities with intra-Group companies (7) — ​ (1,912) ​ (31,000) ​ — ​ 32,912 ​ — Net cash (used in)/ provided by investing activities (3,512,224) ​ (35,881,558) ​ 2,417,863 ​ (71,832) ​ 29,678,024 ​ (7,369,727) Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net cash (used in)/provided by transactions with third-parties (21,326,822) ​ 6,636,050 ​ 4,505,614 ​ (52,541) ​ — ​ (10,237,699) Cash dividend paid to intra-Group companies (5) — ​ — ​ (29,094,971) ​ — ​ 29,094,971 ​ — Loans received from intra-Group companies (6) 33,461,057 ​ 7,168,199 ​ 276,940 ​ 201,349 ​ (41,107,545) ​ — Loans repaid to intra-Group companies (6) (8,292,517) ​ (2,862,847) ​ (272) ​ (306,797) ​ 11,462,433 ​ — Other financing activities with intra-Group companies (7) — ​ 31,000 ​ 1,912 ​ — ​ (32,912) ​ — Net cash provided by/(used in) financing activities 3,841,718 ​ 10,972,402 ​ (24,310,777) ​ (157,989) ​ (583,053) ​ (10,237,699) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2023 ​ ​ ​ ​ ​ ​ Primary ​ VIEs and ​ ​ ​ ​ ​ NetEase, Other Beneficiaries of their Eliminating Consolidated ​ ​ Inc. ​ Subsidiaries ​ VIEs ​ subsidiaries ​ adjustments ​ totals ​ ​ (RMB in thousands) Cash flows from operating activities: Net cash (used in)/provided by transactions with third-parties (354,694) ​ 475,946 ​ (37,115,437) ​ 72,325,460 ​ — ​ 35,331,275 Net cash provided by/ (used in) transactions with intra-Group companies related to technical consulting and related service — ​ 411,369 ​ 72,887,298 ​ (73,298,667) ​ — ​ — Dividends received from subsidiaries and VIEs (5) — ​ 26,455,948 ​ — ​ — ​ (26,455,948) ​ — Net cash provided by/ (used in) other transactions with intra-Group companies 476 ​ (502,444) ​ (137,577) ​ 639,545 ​ — ​ — Net cash (used in)/ provided by operating activities (354,218) ​ 26,840,819 ​ 35,634,284 ​ (333,662) ​ (26,455,948) ​ 35,331,275 Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net cash used in transactions with third-parties (589) ​ (3,584,348) ​ (13,375,849) ​ (82,645) ​ — ​ (17,043,431) Loans made to intra-Group companies (6) (5,100,814) ​ (32,331,958) ​ (13,748,357) ​ — ​ 51,181,129 ​ — Loans repaid by intra-Group companies (6) 246,020 ​ 7,004,819 ​ 1,200,611 ​ — ​ (8,451,450) ​ — Other investing activities with intra-Group companies (7) — ​ (347,375) ​ (17,100) ​ — ​ 364,475 ​ — Net cash (used in)/ provided by investing activities (4,855,383) ​ (29,258,862) ​ (25,940,695) ​ (82,645) ​ 43,094,154 ​ (17,043,431) Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net cash (used in)/provided by transactions with third-parties (19,980,650) ​ (6,357,771) ​ 4,855,694 ​ 15,673 ​ — ​ (21,467,054) Cash dividend paid to intra-Group companies (5) — ​ — ​ (26,455,948) ​ — ​ 26,455,948 ​ — Loans received from intra-Group companies (6) 32,327,958 ​ 18,639,436 ​ 4,000 ​ 209,735 ​ (51,181,129) ​ — Loans repaid to intra-Group companies (6) (7,004,819) ​ (1,184,057) ​ — ​ (262,574) ​ 8,451,450 ​ — Other financing activities with intra-Group companies (7) — ​ 17,100 ​ 347,375 ​ — ​ (364,475) ​ — Net cash provided by/(used in) financing activities 5,342,489 ​ 11,114,708 ​ (21,248,879) ​ (37,166) ​ (16,638,206) ​ (21,467,054) Note: (1) It represents the elimination of intercompany balances among NetEase, Inc., other subsidiaries, primary beneficiary of VIEs, and VIEs and their subsidiaries.
Biggest changeGAAP (the “Primary Beneficiaries of VIEs”), our other subsidiaries that are not the Primary Beneficiaries of VIEs (the “Other Subsidiaries”), and the VIEs and their subsidiaries that we consolidate for the periods presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2023 ​ ​ ​ ​ ​ ​ Primary ​ VIEs and ​ ​ ​ ​ ​ NetEase, Other Beneficiaries their Eliminating Consolidated ​ ​ Inc. ​ Subsidiaries ​ of VIEs ​ subsidiaries ​ adjustments ​ totals ​ ​ (RMB in thousands) Assets Cash and cash equivalents 224,824 13,269,440 6,132,382 1,802,256 — 21,428,902 Time deposits — 63,445,277 38,040,757 420,000 — 101,906,034 Restricted cash — 20,075 56,098 2,701,583 — 2,777,756 Accounts receivable, net — 1,421,964 337,122 4,663,331 — 6,422,417 Inventories — 586,212 72,254 36,908 — 695,374 Prepayments and other current assets, net 262,937 2,933,583 1,114,866 1,765,209 — 6,076,595 Short-term investments — 39,620 4,322,533 73,904 — 4,436,057 Amounts due from group companies (1) 48,884,976 32,562,994 18,972,738 9,192,463 (109,613,171) — Property, equipment and software, net 829 709,387 7,312,616 52,212 — 8,075,044 Land use right, net — 64,264 4,010,879 — — 4,075,143 Operating lease right-of-use assets, net 3,996 280,906 410,687 53,686 — 749,275 Deferred tax assets — 15,158 1,396,083 148,847 — 1,560,088 Investments in subsidiaries (2) 103,785,841 28,944,158 (410,515) — (132,319,484) — Contractual interests in the VIEs and VIEs’ subsidiaries (2) ​ — ​ — ​ 1,619,075 ​ — ​ (1,619,075) ​ — Long-term investments 393,580 19,211,745 965,058 1,212,804 — 21,783,187 Other long-term assets 42,303 4,471,840 1,221,219 203,744 — 5,939,106 Total assets 153,599,286 167,976,623 85,573,852 22,326,947 (243,551,730) 185,924,978 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities, redeemable noncontrolling interests and shareholders’ equity ​ ​ ​ ​ ​ ​ Accounts payable 32 536,021 79,826 265,137 — 881,016 Salary and welfare payables 1,678 669,323 4,071,411 114,794 — 4,857,206 Taxes payable 10,278 35,066 2,383,421 142,769 — 2,571,534 Short-term loans 920,751 8,669,455 9,633,862 16,095 — 19,240,163 Contract liabilities-current — 732,809 227,931 12,401,426 — 13,362,166 Accrued liabilities and other payables 9,008 2,071,530 6,900,483 3,689,885 — 12,670,906 Operating lease liabilities 3,536 316,747 442,348 52,691 — 815,322 Amounts due to group companies (1) 28,368,227 45,955,508 32,466,685 2,822,751 (109,613,171) — Deferred tax liabilities — 1,951,981 347,322 — — 2,299,303 Long-term loans — — 427,997 — — 427,997 Other long-term liabilities — 101,713 58,923 554,648 — 715,284 Total liabilities 29,313,510 61,040,153 57,040,209 20,060,196 (109,613,171) 57,840,897 Redeemable noncontrolling interests — 77,798 — 37,961 — 115,759 Total equity 124,285,776 106,858,672 28,533,643 2,228,790 (133,938,559) 127,968,322 Total liabilities, redeemable noncontrolling interests and shareholders’ equity 153,599,286 167,976,623 85,573,852 22,326,947 (243,551,730) 185,924,978 ​ 131 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2024 ​ ​ ​ Primary VIEs and ​ ​ ​ ​ NetEase, ​ Other ​ Beneficiaries of ​ their ​ Eliminating ​ Consolidated ​ ​ Inc. ​ Subsidiaries ​ VIEs ​ subsidiaries ​ adjustments ​ totals ​ ​ (RMB in thousands) Assets Cash and cash equivalents 68,315 22,226,946 28,074,849 1,013,200 — 51,383,310 Time deposits — 67,221,715 11,174,640 70,000 — 78,466,355 Restricted cash — 22,636 40,326 3,028,651 — 3,091,613 Accounts receivable, net — 1,765,642 285,361 3,618,024 — 5,669,027 Inventories — 494,666 49,547 27,335 — 571,548 Prepayments and other current assets, net 65,235 3,341,726 663,724 2,346,183 — 6,416,868 Short-term investments — 123,191 10,219,436 413,516 — 10,756,143 Amounts due from group companies (1) 47,134,874 24,332,449 17,541,728 11,716,452 (100,725,503) — Property, equipment and software, net 765 806,010 7,703,421 9,905 — 8,520,101 Land use right, net — 61,354 4,111,111 — — 4,172,465 Operating lease right-of-use assets, net 2,541 232,315 271,200 35,015 — 541,071 Deferred tax assets — 12,763 1,085,481 15,191 — 1,113,435 Investments in subsidiaries (2) 110,875,457 27,503,090 (691,849) — (137,686,698) — Contractual interests in the VIEs and VIEs’ subsidiaries (2) ​ — ​ — ​ 1,810,627 ​ — ​ (1,810,627) ​ — Long-term investments 393,580 ​ 17,737,532 955,281 1,119,963 — 20,206,356 Other long-term assets 30,137 3,938,040 773,016 342,065 — 5,083,258 Total assets 158,570,904 169,820,075 84,067,899 23,755,500 (240,222,828) 195,991,550 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities, redeemable noncontrolling interests and shareholders’ equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts payable 1,540 457,395 209,709 51,905 — 720,549 Salary and welfare payables 1,897 638,774 3,948,479 93,859 — 4,683,009 Taxes payable 10,389 422,409 2,186,974 139,413 — 2,759,185 Short-term loans — 7,899,918 3,905,133 — — 11,805,051 Contract liabilities-current — 1,319,742 276,933 13,702,547 — 15,299,222 Accrued liabilities and other payables 32,143 2,716,831 6,924,271 4,555,787 — 14,229,032 Operating lease liabilities 2,317 256,038 292,603 33,251 — 584,209 Amounts due to group companies (1) 19,837,012 39,620,317 38,609,798 2,658,376 (100,725,503) — Deferred tax liabilities — 1,756,535 416,582 — — 2,173,117 Long-term loans — — 427,997 — — 427,997 Other long-term liabilities — 109,239 58,179 648,623 — 816,041 Total liabilities 19,885,298 55,197,198 57,256,658 21,883,761 (100,725,503) 53,497,412 Redeemable noncontrolling interests — 84,272 — — — 84,272 Total equity 138,685,606 114,538,605 26,811,241 1,871,739 (139,497,325) 142,409,866 Total liabilities, redeemable noncontrolling interests and shareholders’ equity 158,570,904 169,820,075 84,067,899 23,755,500 (240,222,828) 195,991,550 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2022 ​ ​ ​ ​ ​ ​ Primary ​ VIEs and ​ ​ ​ ​ ​ NetEase, Other Beneficiaries of their Eliminating Consolidated ​ ​ Inc. ​ Subsidiaries ​ VIEs ​ subsidiaries ​ adjustments ​ totals ​ ​ (RMB in thousands) Net revenues Third-party revenues — ​ 12,788,652 ​ 1,157,713 ​ 82,549,444 ​ — ​ 96,495,809 Intra-Group revenues related to technical consulting and related service (3) — ​ 692,337 ​ 64,085,249 ​ — ​ (64,777,586) ​ — Other intra-Group revenues (4) — ​ 913,644 ​ 1,876,699 ​ 817,962 ​ (3,608,305) ​ — Total net revenues — ​ 14,394,633 ​ 67,119,661 ​ 83,367,406 ​ (68,385,891) ​ 96,495,809 Cost of revenues and operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Third-party cost of revenues and operating expenses (62,115) ​ (13,477,853) ​ (44,968,961) ​ (18,358,287) ​ — ​ (76,867,216) Intra-Group cost of revenues and operating expenses related to technical consulting and related services (3) — ​ — ​ — ​ (64,777,586) ​ 64,777,586 ​ — Other intra-Group cost of revenues and operating expenses (4) — ​ (1,822,670) ​ (1,667,214) ​ (185,608) ​ 3,675,492 ​ — Total cost of revenues and operating expenses (62,115) ​ (15,300,523) ​ (46,636,175) ​ (83,321,481) ​ 68,453,078 ​ (76,867,216) Operating (losses)/profit (62,115) ​ (905,890) ​ 20,483,486 ​ 45,925 ​ 67,187 ​ 19,628,593 Share of income/(losses) from subsidiaries and VIEs (2) 24,489,042 ​ 20,442,796 ​ (151,361) ​ — ​ (44,780,477) ​ — Other (expenses)/income, net (4,156,514) ​ 6,458,954 ​ 2,334,424 ​ (15,193) ​ — ​ 4,621,671 Income before tax 20,270,413 ​ 25,995,860 ​ 22,666,549 ​ 30,732 ​ (44,713,290) ​ 24,250,264 Income tax — ​ (2,437,898) ​ (2,481,879) ​ (112,061) ​ — ​ (5,031,838) Net income from continuing operations 20,270,413 ​ 23,557,962 ​ 20,184,670 ​ (81,329) ​ (44,713,290) ​ 19,218,426 ​ ​ 132 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2023 ​ ​ ​ ​ ​ ​ Primary ​ VIEs and ​ ​ ​ ​ NetEase, Other Beneficiaries of their Eliminating Consolidated ​ ​ Inc. ​ Subsidiaries ​ VIEs ​ subsidiaries ​ adjustments ​ totals ​ ​ (RMB in thousands) Net revenues ​ ​ ​ ​ ​ ​ Third-party revenues ​ — ​ 12,193,244 ​ 1,220,371 ​ 90,054,544 ​ — ​ 103,468,159 Intra-Group revenues related to technical consulting and related service (3) ​ — ​ 386,828 ​ 72,605,740 ​ — ​ (72,992,568) ​ — Other intra-Group revenues (4) ​ — ​ 873,787 ​ 1,440,970 ​ 734,857 ​ (3,049,614) ​ — Total net revenues ​ — ​ 13,453,859 ​ 75,267,081 ​ 90,789,401 ​ (76,042,182) ​ 103,468,159 Cost of revenues and operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Third-party cost of revenues and operating expenses ​ (26,012) ​ (14,240,361) ​ (44,024,077) ​ (17,468,565) ​ — ​ (75,759,015) Intra-Group cost of revenues and operating expenses related to technical consulting and related services (3) ​ — ​ — ​ — ​ (72,992,568) ​ 72,992,568 ​ — Other intra-Group cost of revenues and operating expenses (4) ​ — ​ (1,454,070) ​ (1,571,998) ​ (23,546) ​ 3,049,614 ​ — Total cost of revenues and operating expenses ​ (26,012) ​ (15,694,431) ​ (45,596,075) ​ (90,484,679) ​ 76,042,182 ​ (75,759,015) Operating (losses)/profit ​ (26,012) ​ (2,240,572) ​ 29,671,006 ​ 304,722 ​ — ​ 27,709,144 Share of income/ (losses) from subsidiaries and VIEs (2) ​ 29,849,939 ​ 30,023,775 ​ (88,094) ​ — ​ (59,785,620) ​ — Other (expenses)/ income, net ​ (345,851) ​ 3,929,431 ​ 2,537,239 ​ 226,964 ​ — ​ 6,347,783 Income before tax ​ 29,478,076 ​ 31,712,634 ​ 32,120,151 ​ 531,686 ​ (59,785,620) ​ 34,056,927 Income tax ​ — ​ (1,928,340) ​ (2,568,035) ​ (203,329) ​ — ​ (4,699,704) Net income from continuing operations ​ 29,478,076 ​ 29,784,294 ​ 29,552,116 ​ 328,357 ​ (59,785,620) ​ 29,357,223 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2024 ​ ​ ​ Primary VIEs and ​ ​ ​ ​ NetEase, ​ Other ​ Beneficiaries of ​ their ​ Eliminating ​ Consolidated ​ ​ Inc. ​ Subsidiaries ​ VIEs ​ subsidiaries ​ adjustments ​ totals ​ ​ (RMB in thousands) Net revenues ​ ​ ​ ​ ​ ​ Third-party revenues ​ — ​ 13,062,383 ​ 1,360,569 ​ 90,872,284 ​ — ​ 105,295,236 Intra-Group revenues related to technical consulting and related service (3) ​ — ​ 359,211 ​ 72,339,430 ​ — ​ (72,698,641) ​ — Other intra-Group revenues (4) ​ — ​ 1,416,369 ​ 1,525,153 ​ 938,100 ​ (3,879,622) ​ — Total net revenues ​ — ​ 14,837,963 ​ 75,225,152 ​ 91,810,384 ​ (76,578,263) ​ 105,295,236 Cost of revenues and operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Third-party cost of revenues and operating expenses ​ (38,022) ​ (14,872,314) ​ (42,256,868) ​ (18,544,042) ​ — ​ (75,711,246) Intra-Group cost of revenues and operating expenses related to technical consulting and related services (3) ​ — ​ — ​ — ​ (72,698,641) ​ 72,698,641 ​ — Other intra-Group cost of revenues and operating expenses (4) ​ — ​ (1,453,656) ​ (2,270,346) ​ (155,620) ​ 3,879,622 ​ — Total cost of revenues and operating expenses ​ (38,022) ​ (16,325,970) ​ (44,527,214) ​ (91,398,303) ​ 76,578,263 ​ (75,711,246) Operating (losses)/profit ​ (38,022) ​ (1,488,007) ​ 30,697,938 ​ 412,081 ​ — ​ 29,583,990 Share of income/ (losses) from subsidiaries and VIEs (2) ​ 30,071,305 ​ 29,362,928 ​ 55,384 ​ — ​ (59,489,618) ​ — Other (expenses)/ income, net ​ (335,674) ​ 4,658,054 ​ 1,852,504 ​ (41,119) ​ — ​ 6,133,765 Income before tax ​ 29,697,609 ​ 32,532,975 ​ 32,605,826 ​ 370,962 ​ (59,489,618) ​ 35,717,755 Income tax ​ — ​ (1,895,096) ​ (3,372,468) ​ (193,844) ​ — ​ (5,461,408) Net income from continuing operations ​ 29,697,609 ​ 30,637,879 ​ 29,233,358 ​ 177,118 ​ (59,489,618) ​ 30,256,347 ​ ​ 133 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2022 ​ ​ ​ ​ ​ ​ Primary ​ VIEs and ​ ​ ​ ​ ​ NetEase, Other Beneficiaries of their Eliminating Consolidated ​ ​ Inc. ​ Subsidiaries ​ VIEs ​ subsidiaries ​ adjustments ​ totals ​ ​ (RMB in thousands) Cash flows from operating activities: ​ ​ Net cash (used in)/provided by transactions with third-parties (255,519) ​ 707,587 ​ (40,202,699) ​ 67,459,864 ​ — ​ 27,709,233 Net cash provided by/(used in) transactions with intra-Group companies related to technical consulting and related service — ​ 820,545 ​ 66,150,273 ​ (66,970,818) ​ — ​ — Dividends received from subsidiaries and VIEs (5) — ​ 29,094,971 ​ — ​ — ​ (29,094,971) ​ — Net cash provided by/(used in) other transactions with intra-Group companies 2,893 ​ (3,478,205) ​ 3,175,860 ​ 299,452 ​ — ​ — Net cash (used in)/provided by operating activities (252,626) ​ 27,144,898 ​ 29,123,434 ​ 788,498 ​ (29,094,971) ​ 27,709,233 Cash flows from investing activities: ​ ​ ​ ​ ​ Net cash (used in)/provided by transactions with third-parties (223) ​ (10,434,166) ​ 3,136,494 ​ (71,832) ​ — ​ (7,369,727) Loans made to intra-Group companies (6) (6,013,061) ​ (33,737,997) ​ (1,356,487) ​ — ​ 41,107,545 ​ — Loans repaid by intra-Group companies (6) 2,501,060 ​ 8,292,517 ​ 668,856 ​ — ​ (11,462,433) ​ — Other investing activities with intra-Group companies (7) — ​ (1,912) ​ (31,000) ​ — ​ 32,912 ​ — Net cash (used in)/provided by investing activities (3,512,224) ​ (35,881,558) ​ 2,417,863 ​ (71,832) ​ 29,678,024 ​ (7,369,727) Cash flows from financing activities: ​ ​ ​ ​ ​ Net cash (used in)/provided by transactions with third-parties (21,326,822) ​ 6,636,050 ​ 4,505,614 ​ (52,541) ​ — ​ (10,237,699) Cash dividend paid to intra-Group companies (5) — ​ — ​ (29,094,971) ​ — ​ 29,094,971 ​ — Loans received from intra-Group companies (6) 33,461,057 ​ 7,168,199 ​ 276,940 ​ 201,349 ​ (41,107,545) ​ — Loans repaid to intra-Group companies (6) (8,292,517) ​ (2,862,847) ​ (272) ​ (306,797) ​ 11,462,433 ​ — Other financing activities with intra-Group companies (7) — ​ 31,000 ​ 1,912 ​ — ​ (32,912) ​ — Net cash provided by/(used in) financing activities 3,841,718 ​ 10,972,402 ​ (24,310,777) ​ (157,989) ​ (583,053) ​ (10,237,699) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2023 ​ ​ ​ ​ ​ ​ Primary ​ VIEs and ​ ​ ​ ​ ​ NetEase, Other Beneficiaries of their Eliminating Consolidated ​ ​ Inc. ​ Subsidiaries ​ VIEs ​ subsidiaries ​ adjustments ​ totals ​ ​ (RMB in thousands) Cash flows from operating activities: ​ ​ Net cash (used in)/provided by transactions with third-parties (354,694) ​ 475,946 ​ (37,115,437) ​ 72,325,460 ​ — ​ 35,331,275 Net cash provided by/(used in) transactions with intra-Group companies related to technical consulting and related service — ​ 411,369 ​ 72,887,298 ​ (73,298,667) ​ — ​ — Dividends received from subsidiaries and VIEs (5) — ​ 26,455,948 ​ — ​ — ​ (26,455,948) ​ — Net cash provided by/(used in) other transactions with intra-Group companies 476 ​ (502,444) ​ (137,577) ​ 639,545 ​ — ​ — Net cash (used in)/provided by operating activities (354,218) ​ 26,840,819 ​ 35,634,284 ​ (333,662) ​ (26,455,948) ​ 35,331,275 Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net cash used in transactions with third-parties (589) ​ (3,584,348) ​ (13,375,849) ​ (82,645) ​ — ​ (17,043,431) Loans made to intra-Group companies (6) (5,100,814) ​ (32,331,958) ​ (13,748,357) ​ — ​ 51,181,129 ​ — Loans repaid by intra-Group companies (6) 246,020 ​ 7,004,819 ​ 1,200,611 ​ — ​ (8,451,450) ​ — Other investing activities with intra-Group companies (7) — ​ (347,375) ​ (17,100) ​ — ​ 364,475 ​ — Net cash used in investing activities (4,855,383) ​ (29,258,862) ​ (25,940,695) ​ (82,645) ​ 43,094,154 ​ (17,043,431) Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net cash (used in)/provided by transactions with third-parties (19,980,650) ​ (6,357,771) ​ 4,855,694 ​ 15,673 ​ — ​ (21,467,054) Cash dividend paid to intra-Group companies (5) — ​ — ​ (26,455,948) ​ — ​ 26,455,948 ​ — Loans received from intra-Group companies (6) 32,327,958 ​ 18,639,436 ​ 4,000 ​ 209,735 ​ (51,181,129) ​ — Loans repaid to intra-Group companies (6) (7,004,819) ​ (1,184,057) ​ — ​ (262,574) ​ 8,451,450 ​ — Other financing activities with intra-Group companies (7) — ​ 17,100 ​ 347,375 ​ — ​ (364,475) ​ — Net cash provided by/(used in) financing activities 5,342,489 ​ 11,114,708 ​ (21,248,879) ​ (37,166) ​ (16,638,206) ​ (21,467,054) ​ 134 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2024 ​ ​ ​ ​ ​ ​ Primary ​ VIEs and ​ ​ ​ ​ ​ NetEase, Other Beneficiaries of their Eliminating Consolidated ​ ​ Inc. ​ Subsidiaries ​ VIEs ​ subsidiaries ​ adjustments ​ totals ​ ​ (RMB in thousands) Cash flows from operating activities: ​ ​ ​ Net cash (used in)/provided by transactions with third-parties (20,988) ​ 2,140,247 ​ (37,271,070) ​ 74,828,624 ​ — ​ 39,676,813 Net cash provided by/(used in) transactions with intra-Group companies related to technical consulting and related service — ​ 259,015 ​ 73,526,878 ​ (73,785,893) ​ — ​ — Dividends received from subsidiaries and VIEs (5) — ​ 30,766,934 ​ — ​ — ​ (30,766,934) ​ — Net cash provided by/(used in) other transactions with intra-Group companies 228,056 ​ (117,507) ​ (65,495) ​ (45,054) ​ — ​ — Net cash provided by operating activities 207,068 ​ 33,048,689 ​ 36,190,313 ​ 997,677 ​ (30,766,934) ​ 39,676,813 Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net cash (used in)/provided by transactions with third-parties (292) ​ (1,633,126) ​ 19,784,580 ​ (234,760) ​ — ​ 17,916,402 Loans made to intra-Group companies (6) (6,437,272) ​ (34,610,921) ​ (14,876,404) ​ (1,438,000) ​ 57,362,597 ​ — Loans repaid by intra-Group companies (6) 3,634,436 ​ 11,781,140 ​ 16,200,334 ​ — ​ (31,615,910) ​ — Other investing activities with intra-Group companies (7) (356) ​ — ​ (22,250) ​ — ​ 22,606 ​ — Net cash (used in)/provided by investing activities (2,803,484) ​ (24,462,907) ​ 21,086,260 ​ (1,672,760) ​ 25,769,293 ​ 17,916,402 Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net cash used in transactions with third-parties (20,630,929) ​ (919,224) ​ (5,769,454) ​ (16,095) ​ — ​ (27,335,702) Cash dividend paid to intra-Group companies (5) — ​ — ​ (30,766,934) ​ — ​ 30,766,934 ​ — Loans received from intra-Group companies (6) 34,610,921 ​ 20,436,682 ​ 1,438,000 ​ 876,994 ​ (57,362,597) ​ — Loans repaid to intra-Group companies (6) (11,529,250) ​ (19,187,330) ​ (251,889) ​ (647,441) ​ 31,615,910 ​ — Other financing activities with intra-Group companies (7) — ​ 22,606 ​ — ​ — ​ (22,606) ​ — Net cash provided by/(used in) financing activities 2,450,742 ​ 352,734 ​ (35,350,277) ​ 213,458 ​ 4,997,641 ​ (27,335,702) Note: (1) It represents the elimination of intercompany balances among NetEase, Inc., other subsidiaries, primary beneficiary of VIEs, and VIEs and their subsidiaries.
Sales Tax Pursuant to the Provisional Regulation of the PRC on Value Added Tax, or VAT, and its implementation rules, or Provisional VAT Regulation, our China mainland subsidiaries and the VIEs are generally subject to VAT at a rate of 6% for revenues earned from rendering services.
Sales Tax Pursuant to the Provisional Regulation of the PRC on Value Added Tax, or VAT, and its implementation rules, our China mainland subsidiaries and the VIEs are generally subject to VAT at a rate of 6% for revenues earned from rendering services.
In 2023, costs relating to games and related value-added services, Youdao, Cloud Music and innovative businesses and others represented 64.2%, 6.5%, 14.3% and 15.0% of total cost of revenues, respectively, as compared with 63.5%, 5.6%, 17.6% and 13.3% of the total cost of revenues, respectively, in 2022.
In 2023, costs relating to games and related value-added services, Youdao, NetEase Cloud Music and innovative businesses and others represented 64.2%, 6.5%, 14.3% and 15.0% of total cost of revenues, respectively, as compared with 63.5%, 5.6%, 17.6% and 13.3% of the total cost of revenues, respectively, in 2022.
Net revenues from games and related value-added services, Youdao, Cloud Music and innovative businesses and others constituted 78.8%, 5.2%, 7.6% and 8.4%, respectively, of our total net revenues in 2023, compared with 77.3%, 5.2%, 9.3% and 8.2%, respectively, in 2022.
Net revenues from games and related value-added services, Youdao, NetEase Cloud Music and innovative businesses and others constituted 78.8%, 5.2%, 7.6% and 8.4%, respectively, of our total net revenues in 2023, compared with 77.3%, 5.2%, 9.3% and 8.2%, respectively, in 2022.
The average playing period of paying player is subjected to period assessment. Considering the events or circumstances may change that indicate the change of the estimate, we assessed the average playing period of paying player on a quarterly basis. We make a qualitative and quantitative assessment to determine the average playing period of paying players for each game.
The average playing period of paying players is subjected to period assessment. Considering the events or circumstances may change that indicate the change of the estimate, we assessed the average playing period of paying players on a quarterly basis. We make a qualitative and quantitative assessment to determine the average playing period of paying players for each game.
The gross profit margin for Youdao remained relatively stable in 2023 compared to 2022. The improvement in gross profit margin in 2023 for Cloud Music was mainly due to increased net revenues from sales of membership subscriptions and continued improvement in cost control measures.
The gross profit margin for Youdao remained relatively stable in 2023 compared to 2022. The improvement in gross profit margin in 2023 for NetEase Cloud Music was mainly due to increased net revenues from sales of membership subscriptions and continued improvement in cost control measures.
These measures led to a decrease in net revenues from Cloud Music’s social entertainment services, which was partially offset by increased revenues from online music services as a result of the growth in sales of membership subscriptions.
These measures led to a decrease in net revenues from NetEase Cloud Music’s social entertainment services, which was partially offset by increased revenues from online music services as a result of the growth in sales of membership subscriptions.
Trend Information Other than as described elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material adverse effect on our revenue, income from continuing operations, profitability, liquidity or capital resources, or that would cause our reported financial information not necessarily to be indicative of future operation results or financial condition. 146 Table of Contents E.
Trend Information Other than as described elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material adverse effect on our revenue, income from continuing operations, profitability, liquidity or capital resources, or that would cause our reported financial information not necessarily to be indicative of future operation results or financial condition. 136 Table of Contents E.
We have successfully developed industry-leading proprietary game, big data and other technologies and integrate these technologies into our products and services, and we will continue to significantly invest in developing and upgrading our technology with a focus on optimizing our products and services and delivering a superior and differentiated user experience. 120 Table of Contents Our ability to manage our costs and expenses effectively across all business segments Our results of operations are affected by our ability to effectively control our costs and expenses across all of our business segments.
We have successfully developed industry-leading proprietary game, big data and other technologies and integrate these technologies into our products and services, and we will continue to significantly invest in developing and upgrading our technology with a focus on optimizing our products and services and delivering a superior and differentiated user experience. 110 Table of Contents Our ability to manage our costs and expenses effectively across all business segments Our results of operations are affected by our ability to effectively control our costs and expenses across all of our business segments.
General and Administrative Expenses General and administrative expenses consist primarily of staff-related costs for our general administrative and management staff, office rental, legal, professional and consultancy fees, expected credit loss and depreciation charges. Research and Development Expenses Research and development expenses consist primarily of staff-related costs for our professionals and technology expenses.
General and Administrative Expenses General and administrative expenses consist primarily of staff-related costs for our general administrative and management staff, office rental, legal, professional and consultancy fees, expected credit loss and depreciation charges. Research and Development Expenses Research and development expenses consist primarily of staff-related costs for our professionals and outsourcing technology expenses.
“Key Information—Risk Factors—Risks Related to Our Corporate Structure—Our corporate structure may restrict our ability to receive dividends from, and transfer funds to, our China mainland subsidiaries and VIEs, which could restrict our ability to act in response to changing market conditions and reallocate funds internally in a timely manner.” and “Key Information—Risk Factors—Risks Related to Doing Business in China—Restrictions on currency exchange may limit our ability to utilize our revenues effectively.” and Item 10.D.
“Key Information—Risk Factors—Risks Related to Our Corporate Structure—Our corporate structure may restrict our ability to receive dividends from, and transfer funds to, our China mainland subsidiaries and VIEs, which could restrict our ability to act in response to changing market conditions and reallocate funds internally in a timely manner.” and “Key Information—Risk Factors—Risks Related to Doing Business in China—Regulation on currency exchange may limit our ability to utilize our revenues effectively.” and Item 10.D.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Please see the Notes to the Consolidated Financial Statements—Note 2(bb) “Recently issued accounting pronouncements not yet adopted.” 125 Table of Contents RESULTS OF OPERATIONS The following table sets forth a summary of our audited consolidated statements of operations for the periods indicated both in Renminbi and as a percentage of total revenues.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Please see the Notes to the Consolidated Financial Statements—Note 2(bb) “Recently issued accounting pronouncements not yet adopted.” 115 Table of Contents RESULTS OF OPERATIONS The following table sets forth a summary of our audited consolidated statements of operations for the periods indicated both in Renminbi and as a percentage of total revenues.
Cost of Revenues Our cost of revenues decreased by 7.6% to RMB40.4 billion (US$5.7 billion) in 2023 from RMB43.7 billion in 2022. The year-over-year decrease was mainly due to a decrease in royalty fees and revenue sharing costs with game developers, talent agencies of live streaming performers and other third parties.
Cost of Revenues Our cost of revenues decreased by 7.6% to RMB40.4 billion in 2023 from RMB43.7 billion in 2022. The year-over-year decrease was mainly due to a decrease in royalty fees and revenue sharing costs with game developers, talent agencies of live streaming performers and other third parties.
Our product development efforts and strategies consist of incorporating new technologies from third parties as well as continuing to develop our own proprietary technology.
Our product development efforts and strategies consist of incorporating new technologies from third parties as well as continuing to develop our own proprietary technologies.
We repatriated a portion of these earnings and paid related withholding income tax in 2021, 2022 and 2023. In addition, the payment of dividends by entities established in the PRC is subject to limitations. Regulations in the PRC currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in the PRC.
We repatriated a portion of these earnings and paid related withholding income tax in 2022, 2023 and 2024. In addition, the payment of dividends by entities established in the PRC is subject to limitations. Regulations in the PRC currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in the PRC.
Our management believes that there is only a remote possibility that this scenario would happen. 140 Table of Contents Condensed Consolidating Schedule The following tables present the condensed consolidating schedule of financial information for NetEase, Inc., its wholly owned subsidiaries that are the primary beneficiaries of the VIEs under U.S.
Our management believes that there is only a remote possibility that this scenario would happen. 130 Table of Contents Condensed Consolidating Schedule The following tables present the condensed consolidating schedule of financial information for NetEase, Inc., its wholly owned subsidiaries that are the primary beneficiaries of the VIEs under U.S.
These assumptions include, but not limited to types of games and characteristics of targeted players. 147 Table of Contents In connection with our periodic reviews of the estimate, the assumptions are evaluated accordingly considering historical players’ churn rates, similarities between new games and existing games and management judgment.
These assumptions include, but not limited to types of games and characteristics of targeted players. 137 Table of Contents In connection with our periodic reviews of the estimate, the assumptions are evaluated accordingly considering historical players’ churn rates, similarities between new games and existing games and management judgment.
For the years 2021, 2022 and 2023, the first HK$2 million of profits earned by one of our subsidiaries incorporated in Hong Kong is taxed at a rate of 8.25%, while the remaining profits will continue to be taxed at the 16.5% tax rate.
For the years 2022, 2023 and 2024, the first HK$2 million of profits earned by one of our subsidiaries incorporated in Hong Kong is taxed at a rate of 8.25%, while the remaining profits will continue to be taxed at the 16.5% tax rate.
Nature of Estimates Required – Impairment assessment of equity method investments and long-term equity investments without readily determinable fair values. We regularly evaluate the impairment of the investments in equity method investments and privately-held companies without readily determinable fair value periodically or when events or circumstances indicate that the carrying amount may not be recoverable.
Nature of Estimates Required – Impairment assessment of long-term equity investments without readily determinable fair values. We regularly evaluate the impairment of the investments in privately-held companies without readily determinable fair value periodically or when events or circumstances indicate that the carrying amount may not be recoverable.
Net revenues from our in-house developed games (including certain games co-developed with our collaboration partners) increased by 18.7% to RMB71.0 billion (US$10.0 billion) in 2023 from RMB59.8 billion in 2022 as a result of the expansion of our portfolio of mobile games and increased popularity in 2023.
Net revenues from our in-house developed games (including certain games co-developed with our collaboration partners) increased by 18.7% to RMB71.0 billion in 2023 from RMB59.8 billion in 2022 as a result of the expansion of our portfolio of mobile games and increased popularity in 2023.
Innovative Businesses and Others Net revenues from the innovative businesses and others segment increased by 9.1% to RMB8.6 billion (US$1.2 billion) in 2023 from RMB7.9 billion in 2022. This increase mainly resulted from an increase in revenue contribution by our Yanxuan e-commerce business and certain other innovative businesses in this segment.
Innovative Businesses and Others Net revenues from the innovative businesses and others segment increased by 9.1% to RMB8.6 billion in 2023 from RMB7.9 billion in 2022. This increase mainly resulted from an increase in revenue contribution by our Yanxuan e-commerce business and certain other innovative businesses in this segment.
Net cash used in investing activities was RMB7.4 billion for the year ended December 31, 2022, which was mainly attributable to (i) placement/rollover of matured time deposits of RMB99.0 billion, (ii) purchase of short-term investments of RMB6.0 billion, (iii) investment in other equity investments and acquisition of subsidiaries of RMB4.4 billion, (iv) purchase of property, equipment and software of RMB2.1 billion, (v) investment in equity investees of RMB705.9 million, and (vi) purchase of intangible assets, content and licensed copyrights of RMB543.2 million, which were partially offset by (i) proceeds from maturity of time deposits of RMB92.2 billion, (ii) proceeds from maturity of short-term investments of RMB10.2 billion, (iii) proceeds from disposals of investment in equity investees, business and subsidiaries of RMB2.4 billion, and (iv) net change in short-term investments with terms of three months or less of RMB776.4 million.
Net cash used in investing activities was RMB7.4 billion for the year ended December 31, 2022, which was mainly attributable to (i) placement/rollover of matured time deposits of RMB99.0 billion, (ii) purchase of short-term investments with terms over three months of RMB6.0 billion, (iii) investment in other equity investments and acquisition of subsidiaries of RMB4.4 billion, (iv) purchase of property, equipment and software of RMB2.1 billion, (v) investment in equity method investees of RMB705.9 million, and (vi) purchase of intangible assets, content and licensed copyrights of RMB543.2 million, which were partially offset by (i) proceeds from maturities of time deposits of RMB92.2 billion, (ii) proceeds from maturities of short-term investments with terms over three months of RMB10.2 billion, (iii) proceeds from disposals of long-term investments and business of RMB2.4 billion, and (iv) net change of short-term investments with terms of three months or less of RMB776.4 million.
Games and Related Value-added Services Net revenues from games and related value-added services increased by 9.4% to RMB81.6 billion (US$11.5 billion) in 2023 from RMB74.6 billion in 2022. The increase was principally attributable to the strong performance of certain of our mobile games including newly launched titles such as Justice mobile game and hit titles such as Eggy Party .
Games and Related Value-added Services Net revenues from games and related value-added services increased by 9.4% to RMB81.6 billion in 2023 from RMB74.6 billion in 2022. The increase was principally attributable to the strong performance of certain of our mobile games including newly launched titles such as Justice mobile game and hit titles such as Eggy Party .
Youdao Our cost of revenues of Youdao consists primarily of revenue sharing costs paid to Youdao’s course instructors, teaching assistants and course development personnel, staff-related costs, costs of course materials, costs relating to the sales of smart devices and traffic acquisition costs.
Youdao Our cost of revenues of Youdao consists primarily of revenue sharing costs paid to Youdao’s course instructors and teaching assistants, staff-related costs, costs of course materials, costs relating to the sales of smart devices and traffic acquisition costs.
Net revenues from licensed games decreased by 48.2% to RMB4.7 billion (US$668.6 million) in 2023 from RMB9.2 billion in 2022, which was mainly attributable to the termination of certain licensed titles. Net revenues generated from licensed games represented 4.6% of our total net revenues in 2023, compared to 9.5% in 2022.
Net revenues from licensed games decreased by 48.2% to RMB4.7 billion in 2023 from RMB9.2 billion in 2022, which was mainly attributable to the termination of certain licensed titles. Net revenues generated from licensed games represented 4.6% of our total net revenues in 2023, compared to 9.5% in 2022.
Operating Expenses Total operating expenses increased by 6.7% to RMB35.4 billion (US$5.0 billion) in 2023 from RMB33.1 billion in 2022 as a result of higher R&D investments and marketing expenditures mainly for games and related value-added services.
Operating Expenses Total operating expenses increased by 6.7% to RMB35.4 billion in 2023 from RMB33.1 billion in 2022 as a result of higher R&D investments and marketing expenditures mainly for games and related value-added services.
We also incurred net foreign exchange losses of RMB133.0 million (US$18.7 million) in 2023, compared to net foreign exchange gains of RMB1.6 billion in 2022, primarily due to the fluctuation between the U.S. dollar against the RMB over the years.
We also incurred net foreign exchange losses of RMB133.0 million in 2023, compared to net foreign exchange gains of RMB1.6 billion in 2022, primarily due to the fluctuation between the U.S. dollar against the RMB over the years.
Investment income was RMB1.3 billion (US$184.0 million) in 2023 compared to investment income of RMB54.0 million in 2022, consisting primarily of (i) a gain from fair value change related to equity investments with readily determinable fair value of RMB535.3 million (US$75.4 million) in 2023 compared to a loss of RMB3.4 billion in 2022, (ii) a net investment gain in equity method investees of RMB473.9 million (US$66.8 million) in 2023 compared to RMB1.3 billion in 2022, (iii) investment income related to short-term investments of RMB414.2 million (US$58.3 million) in 2023 compared to RMB342.6 million in 2022, and (iv) a gain on disposal of certain long-term investments of RMB63.8 million in 2023 compared to RMB1.8 billion in 2022, which was offset in part by impairment provisions related to certain investments of RMB274.2 million (US$38.6 million) compared to RMB282.8 million in 2022.
Investment income was RMB1.3 billion in 2023 compared to investment income of RMB54.0 million in 2022, consisting primarily of (i) a gain from fair value change related to equity investments with readily determinable fair value of RMB535.3 million in 2023 compared to a loss of RMB3.4 billion in 2022, (ii) a net investment gain in equity method investees of RMB473.9 million in 2023 compared to RMB1.3 billion in 2022, (iii) investment income related to short-term investments of RMB414.2 million in 2023 compared to RMB342.6 million in 2022, and (iv) a gain on disposal of certain long-term investments of RMB63.8 million in 2023 compared to RMB1.8 billion in 2022, which was offset in part by impairment provisions related to certain investments of RMB274.2 million compared to RMB282.8 million in 2022.
Our mobile game portfolio now consists of over 100 diverse games, and we expect to continue introducing new mobile games each year for the foreseeable future, which we believe will contribute to future growth in net revenues from this segment. We generate revenues from our PC games mainly through sales of prepaid points.
Our mobile game portfolio now consists of approximately 100 diverse games, and we expect to continue introducing new mobile games each year for the foreseeable future, which we believe will contribute to future growth in net revenues from this segment. We generate revenues from our PC games mainly through sales of prepaid points and sales of in-game virtual items.
China The PRC Enterprise Income Tax Law subjects foreign invested enterprises and domestic companies to EIT at a uniform rate of 25%, and preferential tax treatments may be granted to foreign invested enterprises or domestic companies which conduct businesses in certain encouraged sectors and to entities otherwise classified as HNTEs.
China The PRC Enterprise Income Tax Law subjects foreign invested enterprises and domestic companies to EIT at a uniform rate of 25%, and preferential tax treatments may be granted to foreign invested enterprises or domestic companies which conduct businesses in certain encouraged sectors and to entities otherwise classified as “Software Enterprises”, “Key Software Enterprises” and/or HNTEs.
The following are key assumptions we use in making the average playing period of paying player for each game: ● Players’ churn rates.
The following are key assumptions we use in making the average playing period of paying players for each game: ● Players’ churn rates.
The increase in net revenues of this segment also resulted from an increase in revenue contribution by game related value-added services such as game development services provided to third-parties. Youdao Net revenues from our Youdao segment increased by 7.5% to RMB5.4 billion (US$759.1 million) in 2023 from RMB5.0 billion in 2022.
The increase in net revenues of this segment also resulted from an increase in revenue contribution by game related value-added services such as game development services provided to third-parties. Youdao Net revenues from our Youdao segment increased by 7.5% to RMB5.4 billion in 2023 from RMB5.0 billion in 2022.
Gross Profit Our gross profit increased by 19.5% to RMB63.1 billion (US$8.9 billion) in 2023 from RMB52.8 billion in 2022. 128 Table of Contents The following table sets forth the consolidated gross profits and gross profit margins of our business activities for the periods indicated as derived from our audited financial statements.
Gross Profit Our gross profit increased by 19.5% to RMB63.1 billion in 2023 from RMB52.8 billion in 2022. 122 Table of Contents The following table sets forth the consolidated gross profits and gross profit margins of our business activities for the periods indicated as derived from our audited financial statements.
(5) It represents the elimination of the dividends payment at the consolidation level. 145 Table of Contents (6) It represents the elimination of intra-Group loans related cash activities among NetEase, Inc., other subsidiaries, primary beneficiary of VIEs, and VIEs and their subsidiaries.
(5) It represents the elimination of the dividends payment at the consolidation level. (6) It represents the elimination of intra-Group loans related cash activities among NetEase, Inc., other subsidiaries, primary beneficiary of VIEs, and VIEs and their subsidiaries.
No customer individually accounted for greater than 10% of our total revenues for the years ended December 31, 2021, 2022 and 2023. 121 Table of Contents Games and Related Value-added Services We generate our mobile game revenues primarily from the sale of in-game virtual items, including avatars, skills, privileges or other in-game consumables, features or functionalities, within the games.
No customer individually accounted for greater than 10% of our total revenues for the years ended December 31, 2022, 2023 and 2024. 111 Table of Contents Games and Related Value-added Services We generate our mobile game revenues primarily from the sale of in-game virtual items, including avatars, skills, privileges or other in-game consumables, features or functionalities.
General and administrative expenses increased by 4.3% to RMB4.9 billion (US$690.1 million) in 2023 from RMB4.7 billion in 2022, primarily due to the settlement of certain litigation as well as an impairment provision made for fixed assets and land use rights.
General and administrative expenses increased by 4.3% to RMB4.9 billion in 2023 from RMB4.7 billion in 2022, primarily due to the settlement of certain litigation as well as an impairment provision made for fixed assets and land use rights.
If the assessment indicates that there’s impairment indicator, we estimate the investment’s fair value in accordance with the principles of ASC 820. We measure the fair value of the investees considering the severity and duration of the impairment indicator and the existence of any positive or mitigating factors or based on income approach or market approach.
If the assessment indicates that there is an impairment indicator, we estimate the investment’s fair value in accordance with the principles of ASC 820. We measure the fair value of the investees considering the severity and duration of the impairment indicator and the existence of any positive or mitigating factors or based on income approach or market approach.
The gross profit margins in 2022 and 2023 were calculated by dividing our gross profits over our net revenues for the corresponding type of services. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2022 ​ 2023 ​ 2023 ​ ​ RMB RMB US$ ​ ​ (in thousands) Gross profit: ​ Games and related value-added services 46,782,052 55,626,584 7,834,840 ​ Youdao 2,582,444 2,767,462 389,789 ​ Cloud Music 1,293,118 2,102,670 296,155 ​ Innovative businesses and others 2,108,512 2,566,678 361,509 ​ Total gross profit 52,766,126 63,063,394 8,882,293 ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit margin: ​ ​ ​ Games and related value-added services 62.7 % 68.2 % 68.2 % Youdao 51.5 % 51.4 % 51.4 % Cloud Music 14.4 % 26.7 % 26.7 % Innovative businesses and others 26.6 % 29.7 % 29.7 % Total gross profit margin 54.7 % 60.9 % 60.9 % ​ The increase in gross profit margin in 2023 for games and related value-added services was primarily attributable to increased contribution from our in-house developed games, which have a relatively higher gross profit margin, as well as changes in the revenue contribution from different platforms.
The gross profit margins in 2022 and 2023 were calculated by dividing our gross profits over our net revenues for the corresponding type of services. ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2022 2023 ​ ​ RMB ​ RMB ​ ​ (in thousands) Gross profit: ​ ​ ​ ​ ​ Games and related value-added services 46,782,052 ​ 55,626,584 ​ Youdao 2,582,444 ​ 2,767,462 ​ NetEase Cloud Music 1,293,118 ​ 2,102,670 ​ Innovative businesses and others 2,108,512 ​ 2,566,678 ​ Total gross profit 52,766,126 ​ 63,063,394 ​ ​ ​ ​ ​ ​ ​ Gross profit margin: ​ ​ ​ ​ Games and related value-added services 62.7 % 68.2 % Youdao 51.5 % 51.4 % NetEase Cloud Music 14.4 % 26.7 % Innovative businesses and others 26.6 % 29.7 % Total gross profit margin 54.7 % 60.9 % ​ The increase in gross profit margin in 2023 for games and related value-added services was primarily attributable to increased contribution from our in-house developed games, which have a relatively higher gross profit margin, as well as changes in the revenue contribution from different platforms.
Youdao Cost of revenues from Youdao increased by 7.9% to RMB2.6 billion (US$369.3 million) in 2023 from RMB2.4 billion in 2022, which was primarily attributable to an increase in revenues shared to third parties’ internet properties related to increased revenue from online marketing services.
Youdao Cost of revenues from Youdao increased by 7.9% to RMB2.6 billion in 2023 from RMB2.4 billion in 2022, which was primarily attributable to an increase in revenues shared to third parties’ internet properties related to increased revenue from online marketing services.
Research and development expenses increased by 9.6% to RMB16.5 billion (US$2.3 billion) in 2023 from RMB15.0 billion in 2022, primarily due to increased staff-related costs and outsourcing game development expenses. 129 Table of Contents Other Income/(Expenses) The following table sets forth our other income/(expenses) for the periods indicated as derived from our audited financial statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2022 ​ 2023 ​ 2023 ​ ​ RMB RMB US$ ​ ​ (in thousands) ​ ​ ​ ​ ​ ​ ​ Investment income, net 53,976 1,306,722 184,048 Interest income, net 2,149,673 4,120,418 580,349 Exchange gains/(losses), net 1,571,207 (132,999) (18,733) Other, net 846,815 1,053,642 148,402 ​ Other income/(expenses) mainly consisted of investment income related to short-term investments, interest income, government incentives, net foreign exchange gains/(losses), impairment provisions related to certain equity investments, net investment gain in equity method investees and fair value change related to our equity investments with readily determinable fair value.
Research and development expenses increased by 9.6% to RMB16.5 billion in 2023 from RMB15.0 billion in 2022, primarily due to increased staff-related costs and outsourcing game development expenses. 123 Table of Contents Other Income/(Expenses) The following table sets forth our other income/(expenses) for the periods indicated as derived from our audited financial statements. ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2022 2023 ​ ​ RMB ​ RMB ​ ​ (in thousands) ​ ​ ​ ​ ​ Investment income, net 53,976 ​ 1,306,722 Interest income, net 2,149,673 ​ 4,120,418 Exchange gains/(losses), net 1,571,207 ​ (132,999) Other, net 846,815 ​ 1,053,642 ​ Other income/(expenses) mainly consisted of investment income related to short-term investments, interest income, government incentives, net foreign exchange gains/(losses), impairment provisions related to certain equity investments, net investment gain in equity method investees and fair value change related to our equity investments with readily determinable fair value.
Leveraging on our user insights and execution expertise, we have also incubated and developed in-house a pipeline of successful businesses, including our intelligent learning platform, Youdao, online music platform, NetEase Cloud Music, and other innovative businesses, ranging from e-commerce to advertising services, e-mail, payment platform and other services.
Leveraging on our user insights and execution expertise, we have also incubated and developed in-house a pipeline of thriving businesses, including our intelligent learning and advertising solutions provider, Youdao, online music platform, NetEase Cloud Music, and other innovative businesses, ranging from e-commerce to advertising services, e-mail and other services.
We incur revenue sharing costs, including fees shared with third-party platform providers, game developers and other third parties related to mobile games, course instructors related to Youdao’s services, music labels and other copyright and content partners related to Cloud Music’s services and others in connection with our other innovative businesses, which may increase in absolute amounts as we continue to scale up our operations across our business segments.
We incur revenue sharing costs, including fees shared with third-party platform providers, game developers, owners of intellectual property licensed to us and other third parties related to mobile games, course instructors related to Youdao’s services, music labels and other copyright and content partners related to NetEase Cloud Music’s services and others in connection with our other innovative businesses, which may increase in absolute amounts as we continue to scale up our operations across our business segments.
The difference between our net income of RMB19.8 billion and the net cash provided by operating activities was primarily due to (i) the deduction of net income from discontinued operations of RMB624.9 million; (ii) the adjustment of non-cash items, mainly including adding back share-based compensation cost of RMB3.2 billion, fair value change of equity security investments of RMB3.1 billion, depreciation and amortization charges of RMB2.9 billion, and deferred income taxes of RMB489.7 million, partially offset by gains on disposal of long-term investments, business and subsidiaries of RMB1.8 billion, unrealized exchange gains of RMB1.6 billion, share of results on equity method investees and revaluation results from previously held equity interest of RMB1.3 billion, and fair value changes of short-term investments of RMB342.6 million, and (iii) the increase in cash resulting from the changes in operating assets and liabilities, mainly including an increase in payables of RMB2.8 billion, including content costs, bonus and professional and technical charges and an increase in contract liabilities of RMB385.4 million, as well as a decrease in accounts receivable, prepayments and other current assets of RMB1.3 billion, partially offset by a decrease of tax payables of RMB917.6 million. 135 Table of Contents Net cash provided by operating activities was RMB24.9 billion for the year ended December 31, 2021.
The difference between our net income of RMB19.8 billion and the net cash provided by operating activities was primarily due to (i) the deduction of net income from discontinued operations of RMB624.9 million; (ii) the adjustment of non-cash items, mainly including adding back share-based compensation cost of RMB3.2 billion, fair value change of equity security investments of RMB3.1 billion, depreciation and amortization charges of RMB2.9 billion, and deferred income taxes of RMB489.7 million, partially offset by gains on disposal of long-term investments, business and subsidiaries of RMB1.8 billion, unrealized exchange gains of RMB1.6 billion, share of results on equity method investees of RMB1.3 billion, and fair value changes of short-term investments of RMB342.6 million, and (iii) the increase in cash resulting from the changes in operating assets and liabilities, mainly including an increase in payables of RMB2.8 billion, including content costs, bonus and professional and technical charges and an increase in contract liabilities of RMB385.4 million, as well as a decrease in accounts receivable, prepayments and other current assets of RMB1.3 billion, partially offset by a decrease of tax payables of RMB917.6 million.
The increase was mainly due to increased revenue contribution from its online marketing services and learning services. 127 Table of Contents Cloud Music Net revenues from our Cloud Music segment decreased by 12.5% to RMB7.9 billion (US$1.1 billion) in 2023 from RMB9.0 billion in 2022.
The increase was mainly due to increased revenue contribution from its online marketing services and learning services. 121 Table of Contents NetEase Cloud Music Net revenues from our NetEase Cloud Music segment decreased by 12.5% to RMB7.9 billion in 2023 from RMB9.0 billion in 2022.
Boguan, NetEase Hangzhou and certain of our other China mainland subsidiaries were qualified as HNTEs and enjoyed a preferential tax rate of 15% for 2021, 2022 and 2023. The foregoing preferential income tax rates, however, are subject to periodic review and renewal by PRC authorities.
Boguan, NetEase Hangzhou and certain of our other China mainland subsidiaries were qualified as HNTEs and enjoyed a preferential tax rate of 15% for 2022, 2023 and 2024. The foregoing preferential income tax rate, however, is subject to periodic review and renewal by PRC authorities.
Cloud Music Cost of revenues from Cloud Music decreased by 25.1% to RMB5.8 billion (US$811.9 million) in 2023 from RMB7.7 billion in 2022, which was primarily attributable to a decrease in revenue sharing costs in line with the decline of its revenue from social entertainment services.
NetEase Cloud Music Cost of revenues from NetEase Cloud Music decreased by 25.1% to RMB5.8 billion in 2023 from RMB7.7 billion in 2022, which was primarily attributable to a decrease in revenue sharing costs in line with the decline of its revenue from social entertainment services.
The following table sets forth our operating expenses for the periods indicated as derived from our audited financial statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2022 ​ 2023 ​ 2023 ​ ​ RMB RMB US$ ​ ​ (in thousands) ​ ​ ​ ​ ​ ​ ​ Selling and marketing expenses (13,402,721) (13,969,460) (1,967,557) General and administrative expenses (4,695,798) (4,899,880) (690,134) Research and development expenses (15,039,014) (16,484,910) (2,321,851) Total operating expenses (33,137,533) (35,354,250) (4,979,542) ​ Selling and marketing expenses increased by 4.2% to RMB14.0 billion (US$2.0 billion) in 2023 from RMB13.4 billion in 2022, primarily due to increased marketing spending for games and related value-added services.
The following table sets forth our operating expenses for the periods indicated as derived from our audited financial statements. ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2022 ​ 2023 ​ RMB RMB ​ ​ (in thousands) ​ ​ ​ ​ ​ Selling and marketing expenses (13,402,721) ​ (13,969,460) General and administrative expenses (4,695,798) ​ (4,899,880) Research and development expenses (15,039,014) ​ (16,484,910) Total operating expenses (33,137,533) ​ (35,354,250) ​ Selling and marketing expenses increased by 4.2% to RMB14.0 billion in 2023 from RMB13.4 billion in 2022, primarily due to increased marketing spending for games and related value-added services.
Financing Activities Net cash used in financing activities was RMB21.5 billion (US$3.0 billion) for the year ended December 31, 2023, which was mainly attributable to (i) net payment of short-term and long-term loans of RMB8.3 billion (US$1.2 billion), (ii) dividends paid to our shareholders with RMB8.0 billion (US$1.1 billion), and (iii) repurchase of NetEase’s ADSs and purchase of subsidiaries’ ADSs and shares totaling of RMB5.2 billion (US$737.2 million).
Net cash used in financing activities was RMB21.5 billion for the year ended December 31, 2023, which was mainly attributable to (i) net payment of short-term and long-term loans of RMB8.3 billion, (ii) dividends paid to shareholders of RMB8.0 billion, and (iii) repurchase of NetEase’s ADSs and purchase of subsidiaries’ ADSs and shares of RMB5.2 billion.
For the years ended December 31, 2021, 2022 and 2023, we recorded share-based compensation cost of approximately RMB3.0 billion, RMB3.2 billion and RMB3.2 billion (US$456.7 million), respectively, for awards granted under the 2009 RSU Plan and 2019 Share Plan, as well as the other share incentive plans discussed as below.
For the years ended December 31, 2022, 2023 and 2024, we recorded share-based compensation cost of approximately RMB3.2 billion, RMB3.2 billion and RMB3.9 billion (US$532.0 million), respectively, for awards granted under the 2009 RSU Plan and 2019 Share Plan, as well as the other share incentive plans discussed as below.
As of December 31, 2023, there were RMB21.0 million in unrecognized share-based compensation expenses related to such share options for which the service conditions were met and are expected to be recognized when the vesting conditions are achieved.
As of December 31, 2024, there were unrecognized share-based compensation expenses of RMB18.0 million related to such share options for which the service conditions were met and are expected to be recognized when the vesting conditions are achieved.
“Information on the Company—Business Overview—Our Organizational Structure.” As of December 31, 2023, the total assets of all the consolidated VIEs were RMB22.3 billion (US$3.1 billion), mainly comprising cash and cash equivalents, restricted cash, accounts receivable, net, prepayments and other current assets, amounts due from group companies, short-term investments, long-term investments and other long-term assets, net.
“Information on the Company—Business Overview—Our Organizational Structure.” As of December 31, 2024, the total assets of all the consolidated VIEs were RMB23.8 billion (US$3.3 billion), mainly comprising cash and cash equivalents, restricted cash, accounts receivable, net, prepayments and other current assets, net, amounts due from group companies and long-term investments.
Innovative Businesses and Others Cost of revenues from our innovative businesses and others increased by 4.5% to RMB6.1 billion (US$856.3 million) in 2023 from RMB5.8 billion in 2022.
Innovative Businesses and Others Cost of revenues from our innovative businesses and others increased by 4.5% to RMB6.1 billion in 2023 from RMB5.8 billion in 2022.
As of December 31, 2023, US$3.1 billion of such credit facilities had not been utilized. 134 Table of Contents We believe that our current levels of cash and cash equivalents, cash flows from operations and short-term investments will be sufficient to meet our anticipated cash needs for at least the next 12 months.
As of December 31, 2024, US$4.6 billion of such credit facilities had not been utilized. 124 Table of Contents We believe that our current levels of cash and cash equivalents, cash flows from operations and short-term investments will be sufficient to meet our anticipated cash needs for at least the next 12 months.
In 2021, 2022 and 2023, we accrued RMB1.1 billion, RMB2.1 billion and RMB1.5 billion (US$214.7 million) withholding tax liabilities, respectively, mainly associated with dividends expected to be distributed from our China mainland subsidiaries to companies in our corporate group outside of China for general corporate purposes.
In 2022, 2023 and 2024, we accrued RMB2.1 billion, RMB1.5 billion and RMB1.6 billion (US$215.9 million) withholding tax liabilities, respectively, mainly associated with dividends expected to be distributed from our China mainland subsidiaries to companies in our corporate group outside of China for general corporate purposes.
Interest income increased to RMB4.1 billion (US$580.3 million) in 2023 from RMB2.1 billion in 2022, among which, we incurred interest expenses of RMB884.1 million (US$124.5 million) in 2023 related to our short-term and long-term loans.
Interest income increased to RMB4.1 billion in 2023 from RMB2.1 billion in 2022, among which, we incurred interest expenses of RMB884.1 million in 2023 related to our short-term and long-term loans.
As a result of these and other restrictions under PRC laws and regulations, our China mainland subsidiaries and the VIEs are restricted in their ability to transfer a portion of their net assets to us either in the form of dividends, loans or advances, which restricted portion amounted to approximately RMB13.8 billion, or 11% of our total consolidated net assets, as of December 31, 2023.
As a result of these and other restrictions under PRC laws and regulations, our China mainland subsidiaries and the VIEs are restricted in their ability to transfer a portion of their net assets to us either in the form of dividends, loans or advances, which restricted portion amounted to approximately RMB14.2 billion, or 10% of our total consolidated net assets, as of December 31, 2024.
Investing Activities Net cash used in investing activities was RMB17.0 billion (US$2.4 billion) for the year ended December 31, 2023, which was mainly attributable to (i) placement/rollover of matured time deposits of RMB124.7 billion (US$17.6 billion), (ii) investment in other equity investments and acquisition of subsidiaries of RMB2.4 billion (US$336.2 million), (iii) purchase of property, equipment and software of RMB2.3 billion (US$324.2 million), (iv) purchase of intangible assets, content and licensed copyrights of RMB2.0 billion (US$278.1 million), and (v) net change in short-term investments with terms of three months or less of RMB1.8 billion (US$250.4 million), which were partially offset by (i) proceeds from maturity of time deposits of RMB111.4 billion (US$15.7 billion), and (ii) proceeds from maturity of short-term investments of RMB5.4 billion (US$757.5 million).
Net cash used in investing activities was RMB17.0 billion for the year ended December 31, 2023, which was mainly attributable to (i) placement/rollover of matured time deposits of RMB124.7 billion, (ii) investment in other equity investments and acquisition of subsidiaries of RMB2.4 billion, (iii) purchase of property, equipment and software of RMB2.3 billion, (iv) purchase of intangible assets, content and licensed copyrights of RMB2.0 billion, and (v) net change of short-term investments with terms of three months or less of RMB1.8 billion, which were partially offset by (i) proceeds from maturities of time deposits of RMB111.4 billion, and (ii) proceeds from maturities of short-term investments with terms over three months of RMB5.4 billion.
We generated net revenues of RMB87.6 billion, RMB96.5 billion and RMB103.5 billion (US$14.6 billion) in 2021, 2022 and 2023, respectively. Our net income attributable to the company’s shareholders was RMB16.9 billion, RMB20.3 billion and RMB29.4 billion (US$4.1 billion) in 2021, 2022 and 2023, respectively. OUR CORPORATE STRUCTURE Our company was incorporated in the Cayman Islands.
We generated net revenues of RMB96.5 billion, RMB103.5 billion and RMB105.3 billion (US$14.4 billion) in 2022, 2023 and 2024, respectively. Our net income attributable to the company’s shareholders was RMB20.3 billion, RMB29.4 billion and RMB29.7 billion (US$4.1 billion) in 2022, 2023 and 2024, respectively. OUR CORPORATE STRUCTURE Our company was incorporated in the Cayman Islands.
Customers can use the points to play our PC games, either to pay for playing time or to purchase virtual items within the games, and use our other fee-based services.
Customers can purchase prepaid points and use the points to play our PC games, either to pay for playing time or to purchase virtual items within the games, and use our other fee-based services. Customers can also purchase the in-game virtual items directly and use them.
For the years ended December 31, 2021, 2022 and 2023, we recorded share-based compensation costs of RMB528.2 million, RMB327.9 million and RMB289.0 million, respectively under these plans.
For the years ended December 31, 2022, 2023 and 2024, we recorded share-based compensation costs of RMB327.9 million, RMB289.0 million and RMB266.4 million, respectively, under these plans.
Investors NetEase, Inc.’s ability to pay dividends, if any, to its shareholders and ADS holders and to service any debt it may incur will depend upon dividends paid by our China mainland subsidiaries. See “—Management of Capital Resources” above.
Investors NetEase, Inc.’s ability to pay dividends, if any, to its shareholders and ADS holders and to service any debt it may incur will depend upon dividends paid by our China mainland subsidiaries.
Upon the VIEs reaching a cumulative level of profitability, because our China mainland subsidiaries own certain trademarks and copyrights, the agreements will be updated to reflect charges for such trademarks and copyrights usage on the basis that they will qualify for tax neutral treatment. 139 Table of Contents (3) Certain of our subsidiaries and the VIEs qualify for a 15% preferential income tax rate in China.
Upon the VIEs reaching a cumulative level of profitability, because our China mainland subsidiaries own certain trademarks and copyrights, the agreements will be updated to reflect charges for such trademarks and copyrights usage on the basis that they will qualify for tax neutral treatment.
Furthermore, if certain procedural requirements are satisfied, the payment of current account items, including profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE or its local branches.
See “—Management of Capital Resources” above. 135 Table of Contents Furthermore, if certain procedural requirements are satisfied, the payment of current account items, including profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE or its local branches.
The difference between our net income of RMB29.4 billion (US$4.1 billion) and the net cash provided by operating activities was primarily due to (i) the adjustment of non-cash items, mainly including adding back share-based compensation cost of RMB3.2 billion (US$456.7 million), depreciation and amortization charges of RMB3.1 billion (US$430.3 million), and impairment losses on investments and other long-term assets of RMB469.2 million (US$66.1 million), partially offset by gains on fair value change of equity security investments of RMB535.3 million (US$75.4 million), share of results on equity method investees and revaluation results from previously held equity interest of RMB473.9 million (US$66.8 million), fair value changes of short-term investments of RMB414.2 million (US$58.3 million), and (ii) an increase in cash resulting from the changes in operating assets and liabilities, mainly including an increase in contract liabilities of RMB1.2 billion (US$163.6 million) and an increase in payables of RMB544.3 million (US$76.7 million), including content costs, bonus and professional and technical charges, partially offset by a decrease in accounts receivable of RMB1.5 billion (US$207.1 million).
The difference between our net income of RMB29.4 billion and the net cash provided by operating activities was primarily due to (i) the adjustment of non-cash items, mainly including adding back share-based compensation cost of RMB3.2 billion, depreciation and amortization charges of RMB3.1 billion, and impairment losses on investments and other long-term assets of RMB469.2 million, partially offset by gains on fair value change of equity security investments of RMB535.3 million, share of results on equity method investees and revaluation results from previously held equity interest of RMB473.9 million, fair value changes of short-term investments of RMB414.2 million, and (ii) an increase in cash resulting from the changes in operating assets and liabilities, mainly including an increase in contract liabilities of RMB1.2 billion and an increase in payables of RMB544.3 million, including content costs, bonus and professional and technical charges, partially offset by an increase in accounts receivable of RMB1.5 billion. 125 Table of Contents Net cash provided by operating activities was RMB27.7 billion for the year ended December 31, 2022.
The following table sets forth the net revenues and cost of revenues by segment for the period presented as derived from our audited financial statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2022 ​ 2023 ​ 2023 ​ RMB RMB US$ ​ ​ (in thousands) Net revenues: ​ ​ ​ ​ ​ ​ Games and related value-added services 74,566,471 81,565,449 11,488,253 Youdao 5,013,182 5,389,208 759,054 Cloud Music 8,992,221 7,866,992 1,108,043 Innovative businesses and others 7,923,935 8,646,510 1,217,835 Total net revenues 96,495,809 103,468,159 14,573,185 Cost of revenues: ​ ​ ​ Games and related value-added services (27,784,419) (25,938,865) (3,653,413) Youdao (2,430,738) (2,621,746) (369,265) Cloud Music (7,699,103) (5,764,322) (811,888) Innovative businesses and others (5,815,423) (6,079,832) (856,326) Total cost of revenues (43,729,683) (40,404,765) (5,690,892) ​ Net Revenues Total net revenues increased by 7.2% to RMB103.5 billion (US$14.6 billion) in 2023 from RMB96.5 billion in 2022.
The following table sets forth the net revenues and cost of revenues by segment for the period presented as derived from our audited financial statements. ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2022 ​ 2023 ​ ​ RMB ​ RMB ​ ​ (in thousands) Net revenues: Games and related value-added services 74,566,471 81,565,449 Youdao 5,013,182 5,389,208 NetEase Cloud Music 8,992,221 7,866,992 Innovative businesses and others 7,923,935 8,646,510 Total net revenues 96,495,809 103,468,159 Cost of revenues: Games and related value-added services (27,784,419) (25,938,865) Youdao (2,430,738) (2,621,746) NetEase Cloud Music (7,699,103) (5,764,322) Innovative businesses and others (5,815,423) (6,079,832) Total cost of revenues (43,729,683) (40,404,765) ​ Net Revenues Total net revenues increased by 7.2% to RMB103.5 billion in 2023 from RMB96.5 billion in 2022.
As of December 31, 2023, these subsidiaries and VIEs had RMB123.1 billion (US$17.3 billion) in cash and cash equivalents, demand deposits and short-term and long-term time deposits. Our cash and cash equivalents, demand deposits and time deposits held outside of China are mainly denominated in U.S. dollars.
As of December 31, 2024, these subsidiaries and VIEs had RMB129.8 billion (US$17.8 billion) in cash and cash equivalents and short-term and long-term time deposits. Our cash and cash equivalents and time deposits held outside of China are mainly denominated in U.S. dollars.
As of December 31, 2023, total unrecognized compensation cost related to unvested awards granted under the 2009 RSU Plan and 2019 Share Plan, adjusted for estimated forfeitures, was RMB2.6 billion (US$365.3 million), which is expected to be recognized through the remaining vesting period of each grant.
As of December 31, 2024, total unrecognized compensation cost related to unvested awards granted under the 2019 Share Plan, adjusted for estimated forfeitures, was RMB2.9 billion (US$402.1 million), which is expected to be recognized through the remaining vesting period of each grant.
Other, net increased to RMB846.8 million in 2022 from RMB710.4 million in 2021, mainly related to government incentives received and recognized in 2022 and 2021. Income Tax Income tax increased to RMB5.0 billion in 2022 from RMB4.1 billion in 2021. Our effective tax rate in 2022 was 20.7% compared with 19.6% in 2021. B.
Other, net increased to RMB1.1 billion in 2023 from RMB846.8 million in 2022, which were mainly related to government incentives received and recognized in 2023 and 2022. Income Tax Income tax decreased to RMB4.7 billion in 2023 from RMB5.0 billion in 2022. Our effective tax rate in 2023 was 13.8% compared with 20.7% in 2022. B.
For the years 2021, 2022 and 2023, we spent RMB14.1 billion, RMB15.0 billion and RMB16.5 billion (US$2.3 billion), respectively, on R&D activities. D.
For the years 2022, 2023 and 2024, we spent RMB15.0 billion, RMB16.5 billion and RMB17.5 billion (US$2.4 billion), respectively, on R&D activities. D.
Games and Related Value-added Services Cost of revenues from our games and related value-added services decreased by 6.6% to RMB25.9 billion (US$3.7 billion) in 2023 from RMB27.8 billion in 2022. The decrease in cost of revenues in 2023 was primarily due to a decrease in royalty fees related to certain licensed games.
Games and Related Value-added Services Cost of revenues from our games and related value-added services decreased by 6.6% to RMB25.9 billion in 2023 from RMB27.8 billion in 2022. The decrease in cost of revenues in 2023 was primarily due to a decrease in royalty fees and revenue sharing costs with game developers.
Our e-commerce business revenues are relatively lower during the Chinese New Year holiday season in the first quarter of each year, while sales in the fourth quarter are higher than each of the preceding three quarters due to a variety of promotional activities conducted by retail and e-commerce businesses in China. 122 Table of Contents Cost of Revenues The following table sets forth our cost of revenues by segment for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2021 2022 2023 2023 ​ ​ RMB ​ RMB ​ RMB ​ US$ ​ ​ (in thousands) Cost of revenues: ​ ​ ​ ​ ​ ​ ​ ​ Games and related value-added services ​ (26,007,412) ​ (27,784,419) ​ (25,938,865) ​ (3,653,413) Youdao (2,448,146) (2,430,738) (2,621,746) (369,265) Cloud Music ​ (6,854,948) ​ (7,699,103) ​ (5,764,322) ​ (811,888) Innovative businesses and others (5,324,719) ​ (5,815,423) ​ (6,079,832) (856,326) Total cost of revenues (40,635,225) (43,729,683) (40,404,765) (5,690,892) ​ Games and Related Value-added Services Cost of revenues for our games and related value-added services consists primarily of revenue sharing costs paid to platforms, game developers, content providers and performers, staff-related costs, royalties related to licensed games, server and bandwidth service fees and other direct costs of providing these services.
Our e-commerce business revenues are relatively lower during the Chinese New Year holiday season in the first quarter of each year, while sales in the fourth quarter are higher than each of the preceding three quarters due to a variety of promotional activities conducted by retail and e-commerce businesses in China. 112 Table of Contents Cost of Revenues The following table sets forth our cost of revenues by segment for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2022 2023 2024 2024 ​ ​ RMB ​ RMB ​ RMB ​ US$ ​ ​ (in thousands) Cost of revenues: ​ ​ ​ ​ ​ ​ ​ ​ Games and related value-added services ​ (27,784,419) ​ (25,938,865) ​ (26,142,623) ​ (3,581,525) Youdao (2,430,738) ​ (2,621,746) ​ (2,877,428) ​ (394,206) NetEase Cloud Music ​ (7,699,103) ​ (5,764,322) ​ (5,268,634) ​ (721,800) Innovative businesses and others (5,815,423) ​ (6,079,832) ​ (5,199,467) ​ (712,324) Total cost of revenues (43,729,683) ​ (40,404,765) ​ (39,488,152) ​ (5,409,855) ​ Games and Related Value-added Services Cost of revenues for our games and related value-added services consists primarily of revenue sharing costs paid to platforms, game developers, content providers and performers, staff-related costs, royalties related to licensed games, server and bandwidth service fees and other direct costs of providing these services.
Cloud Music Our cost of revenues of Cloud Music consists primarily of content licensing fees paid to music labels, independent artists and other copy right partners, revenue sharing fees paid to live streaming performers and their agencies, advertising service-related costs, music and entertainment event related costs, staff-related costs and professional fees.
NetEase Cloud Music Our cost of revenues of NetEase Cloud Music consists primarily of content licensing fees paid to music labels, independent artists and other copyright partners, revenue sharing fees related to social entertainment services, advertising service-related costs, music and entertainment event related costs, staff-related costs and professional fees.
Our Youdao platform tends to experience strong sales of its smart devices during the period leading up to commencement of school terms in September and in connection with various e-commerce promotions in November and December.
Our Youdao platform tends to experience strong sales of its smart devices during the period leading up to commencement of school terms in September.
Net revenues from games and related value-added services, Youdao, Cloud Music and innovative businesses and others constituted 77.3%, 5.2%, 9.3% and 8.2%, respectively, of our total net revenues in 2022, compared with 77.4%, 6.1%, 8.0% and 8.5%, respectively, in 2021.
Net revenues from games and related value-added services, Youdao, NetEase Cloud Music and innovative businesses and others constituted 79.4%, 5.3%, 7.6% and 7.7%, respectively, of our total net revenues in 2024, compared with 78.8%, 5.2%, 7.6% and 8.4%, respectively, in 2023.
For long-term equity investments without readily determinable fair values, we record an impairment in the consolidated statements of operations and comprehensive income to the extent the carrying amount exceeds the fair value.
For long-term equity investments without readily determinable fair values, we record an impairment in the consolidated statements of operations and comprehensive income to the extent the carrying amount exceeds the fair value. ​ Changes in assumptions or estimates can materially affect the fair value measurement of the investment and, therefore, can affect the test results.
Cloud Music Cloud Music’s revenue is primarily generated from (i) online music services through the sales of membership subscriptions in various content and service packages and (ii) social entertainment services and others mainly through the sale of virtual items. Innovative Businesses and Others We derive our innovative businesses and others revenues primarily from e-commerce, advertising services and other value-added services.
NetEase Cloud Music NetEase Cloud Music’s revenue is primarily generated from (i) online music services through the sales of membership subscriptions in various content and service packages and (ii) social entertainment services and others mainly through the sale of virtual items.
Net cash provided by operating activities was RMB27.7 billion for the year ended December 31, 2022.
Net cash provided by operating activities was RMB35.3 billion for the year ended December 31, 2023.
Our royalties and expenditures for licensed content commitments primarily relate to the costs of acquiring the rights to certain content by our online game business and online music business. Other commitments primarily consist of expenditures related to marketing and administration activities.
Our capital commitments are primarily the commitments made in connection with the construction of new office buildings. Our royalties and expenditures for licensed content commitments primarily relate to the costs of acquiring the rights to certain content by our online game and online music businesses. Other commitments primarily consist of expenditures related to marketing and administration activities.
As of December 31, 2023, the total liabilities of the consolidated VIEs were RMB20.1 billion (US$2.8 billion), mainly comprising accounts payable, contract liabilities, amounts due to group companies and accrued liabilities and other payables. 119 Table of Contents We believe that our present operations are structured to comply with the relevant Chinese laws.
As of December 31, 2024, the total liabilities of the consolidated VIEs were RMB21.9 billion (US$3.0 billion), mainly comprising contract liabilities, amounts due to group companies and accrued liabilities and other payables. 109 Table of Contents We believe that our present operations are structured to comply with the relevant PRC laws and regulations.
“Additional Information—Exchange Controls.” 137 Table of Contents CAPITAL EXPENDITURES Our capital requirements relate primarily to financing: ● our working capital requirements, such as servers and bandwidth service fees, inventory purchase costs, content and copyrights purchase costs, staff costs, selling and marketing expenses and R&D costs; and ● costs incurred for the construction of our new office buildings in Guangzhou, Hangzhou and Shanghai in China, and acquisition of new servers and other facilities.
“Additional Information—Exchange Controls.” CAPITAL EXPENDITURES Our capital requirements relate primarily to financing: ● our working capital requirements, such as servers and bandwidth service fees, inventory purchase costs, content and copyrights purchase costs, staff costs, selling and marketing expenses and R&D costs; and ● costs incurred for the construction of our new office buildings and acquisition of new servers and other facilities. 127 Table of Contents MATERIAL CASH REQUIREMENTS Our material cash requirements as of December 31, 2024 primarily include our operating lease commitments, server and bandwidth service fee commitments, capital commitments, royalties and expenditure for licensed content commitments and other commitments.

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Biggest changeWe believe that we have a generally good working relationship with our employees, and we have not experienced any significant labor disputes. The following table sets forth information regarding our staff as of December 31, 2023.
Biggest changeD. Employees As of December 31, 2022, 2023 and 2024, we had 31,119, 29,128 and 26,028 full-time employees, respectively. A substantial majority of our employees are based in China. We believe that we have a generally good working relationship with our employees, and we have not experienced any significant labor disputes.
The awards under the 2015 Youdao Plan, the Cloud Music Plans and such other plans expire in four to seven years from the date of grant and either vest or have a vesting commencement date upon certain conditions being met.
The awards under the 2015 Youdao Plan, the NetEase Cloud Music Plans and such other plans expire in four to seven years from the date of grant and either vest or have a vesting commencement date upon certain conditions being met.
Cloud Music, our subsidiary, adopted its 2016 Share Incentive Plan, or the 2016 Cloud Music Plan, in May 2016, under which 15,000,000 ordinary shares of Cloud Music are reserved for issuance.
NetEase Cloud Music, our subsidiary, adopted its 2016 Share Incentive Plan, or the 2016 NetEase Cloud Music Plan, in May 2016, under which 15,000,000 ordinary shares of NetEase Cloud Music are reserved for issuance.
Tang is a U.S. certified public accountant and a fellow of the Hong Kong Institute of Certified Public Accountants. 150 Table of Contents Joseph Tze Kay Tong , also known as Joseph Tong , has served as a director of our company since March 2003. From January 2003 to November 2021, Mr.
Tang is a U.S. certified public accountant and a fellow of the Hong Kong Institute of Certified Public Accountants. 140 Table of Contents Joseph Tze Kay Tong , also known as Joseph Tong , has served as a director of our company since March 2003. From January 2003 to November 2021, Mr.
Boltz, Jr. ​ 54 ​ General Counsel Sarah Ying Li ​ 42 ​ Head of Financial Reporting (1) Alice Cheng, Grace Tang and Joseph Tong are members of the audit, compensation, nominating and environmental, social and governance (ESG) committee.
Boltz, Jr. ​ 55 ​ General Counsel Sarah Ying Li ​ 42 ​ Head of Financial Reporting (1) Alice Cheng, Grace Tang and Joseph Tong are members of the audit, compensation, nominating and environmental, social and governance (ESG) committee.
In April 2023, Youdao adopted a 2023 Share Incentive Plan, or the 2023 Youdao Plan, under which 5,668,625 shares of Youdao are reserved for issuance. As of March 31, 2024, no options or restricted share units were outstanding under the 2023 Youdao Plan.
In April 2023, Youdao adopted a 2023 Share Incentive Plan, or the 2023 Youdao Plan, under which 5,668,625 shares of Youdao are reserved for issuance. As of March 31, 2025, no options or restricted share units were outstanding under the 2023 Youdao Plan.
Since September 2022, Ms. Tang has been teaching accounting and auditing courses to foreign students at Beijing Foreign Studies University as a professor. In addition, Ms. Tang serves as an independent director of Textainer Group Holdings Ltd. (NYSE: TGH), Brii Biosciences Ltd. (HKEX: 2137), Elkem ASA (OSLO: ELK), ECARX Holdings Inc. (Nasdaq: ECX) and Pirelli & C.S.p.A. (PIRC.MI). Ms.
Since September 2022, Ms. Tang has been teaching accounting and auditing courses to foreign students at Beijing Foreign Studies University as a professor. In addition, Ms. Tang serves as an independent director of Brii Biosciences Ltd. (HKEX: 2137), Elkem ASA (OSLO: ELK), ECARX Holdings Inc. (Nasdaq: ECX) and Pirelli & C.S.p.A. (PIRC.MI). Ms.
The principal business address of Shining Globe International Limited is c/o NetEase, Inc., NetEase Building, No. 599 Wangshang Road, Binjiang District, Hangzhou, People’s Republic of China 310052. 157 Table of Contents (2) The address of our current executive officers and directors are c/o NetEase Building, No. 599 Wangshang Road, Binjiang District, Hangzhou, People’s Republic of China 310052.
The principal business address of Shining Globe International Limited is c/o NetEase, Inc., NetEase Building, No. 599 Wangshang Road, Binjiang District, Hangzhou, People’s Republic of China 310052. (2) The address of our current executive officers and directors are c/o NetEase Building, No. 599 Wangshang Road, Binjiang District, Hangzhou, People’s Republic of China 310052.
Boltz has more than 24 years of experience practicing law in Asia, with a particular focus on capital markets, M&A, joint ventures and public company compliance for technology companies, including the NetEase group since its listing on Nasdaq in 2000. Mr. Boltz is qualified to practice law in Pennsylvania and New Jersey and a non-practicing solicitor in Hong Kong.
Boltz has 25 years of experience practicing law in Asia, with a particular focus on capital markets, M&A, joint ventures and public company compliance for technology companies, including the NetEase group since its listing on Nasdaq in 2000. Mr. Boltz is qualified to practice law in Pennsylvania and New Jersey and a practicing solicitor in Hong Kong.
The shareholders listed below do not have different voting rights. ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Shares ​ ​ Beneficially Owned ​ Number Percentage 5% Shareholder ​ ​ ​ ​ ​ Shining Globe International Limited/William Lei Ding (1) 1,450,300,000 ​ 45.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Shares ​ ​ ​ Beneficially Owned ​ ​ Number Percentage ​ Executive Officers and Directors (2) ​ ​ ​ ​ ​ William Lei Ding (1) 1,450,300,000 45.0 % Alice Cheng * * ​ Grace Tang ​ * ​ * ​ Joseph Tong * * ​ Michael Leung * * ​ Yingfeng Ding * * ​ Paul W.
The shareholders listed below do not have different voting rights. ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Shares ​ ​ Beneficially Owned ​ Number Percentage 5% Shareholder ​ ​ ​ ​ ​ Shining Globe International Limited/William Lei Ding (1) 1,450,300,000 ​ 45.8 % ​ 146 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ Number of Shares ​ ​ ​ Beneficially Owned ​ ​ Number Percentage ​ Executive Officers and Directors (2) ​ ​ ​ ​ ​ William Lei Ding (1) 1,450,300,000 45.8 % Alice Cheng * * ​ Grace Tang ​ * ​ * ​ Joseph Tong * * ​ Michael Leung * * ​ Yingfeng Ding * * ​ Paul W.
Our major shareholders do not have different voting rights than any of our other shareholders. ​ F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation None. ​
Our major shareholders do not have different voting rights than any of our other shareholders. ​ F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation None. ​ 147 Table of Contents
“Directors, Senior Management and Employees—Directors and Senior Management.” We have no specific policy with respect to director attendance at our annual general meetings of shareholders, and no director attended the annual general meeting of shareholders held on June 15, 2023.
“Directors, Senior Management and Employees—Directors and Senior Management.” We have no specific policy with respect to director attendance at our annual general meetings of shareholders, and no director attended the annual general meeting of shareholders held on June 26, 2024.
Share Ownership The table in this section sets forth certain information known to us with respect to the beneficial ownership as of March 31, 2024 (unless otherwise indicated) by: ● all persons who are beneficial owners of 5% or more of our ordinary shares, ● each of our directors, ● each of our current executive officers, and ● all current directors and executive officers as a group.
Share Ownership The table in this section sets forth certain information known to us with respect to the beneficial ownership as of February 28, 2025 (unless otherwise indicated) by: ● all persons who are beneficial owners of 5% or more of our ordinary shares, ● each of our directors, ● each of our current executive officers, and ● all current directors and executive officers as a group.
(3) Shares owned by all of our current directors and executive officers as a group includes shares beneficially owned by William Lei Ding. As of March 31, 2024, based on public filings with the SEC, there are no major shareholders holding 5% or more of our ordinary shares or ADSs representing ordinary shares, except as described above.
(3) Shares owned by all of our current directors and executive officers as a group includes shares beneficially owned by William Lei Ding. As of February 28, 2025, based on public filings with the SEC, there are no major shareholders holding 5% or more of our ordinary shares or ADSs representing ordinary shares, except as described above.
Our company has received an annual confirmation on his/her “independence” from each of the non-executive directors, addressing the factors set out in Rule 3.13 of the Hong Kong Listing Rules, and our board continues to consider all of them to be “independent.” We do not have service contracts with any of our directors which provide for benefits upon termination. 155 Table of Contents Our board has four committees, the audit committee, the compensation committee, the nominating committee and the ESG committee.
Our company has received an annual confirmation on his/her “independence” from each of the non-executive directors, addressing the factors set out in Rule 3.13 of the Hong Kong Listing Rules, and our board continues to consider all of them to be “independent.” We do not have service contracts with any of our directors which provide for benefits upon termination.
Each employee signs a confidentiality agreement in respect of our intellectual property rights. 156 Table of Contents E.
Each employee signs a confidentiality agreement in respect of our intellectual property rights. E.
The 2019 Share Plan provides that in the event of certain corporate transactions, including specified types of mergers and acquisition transactions, the administrator may (a) accelerate the vesting, in whole or in part, of any award; (b) purchase any award for an amount of cash or ordinary shares of our company equal to the value that could have been attained upon the exercise of the award or the realization of the plan participant’s rights had the award been currently fully vested; or (c) provide for the assumption, conversion or replacement of any award by the successor corporation, or a parent or subsidiary of the successor corporation, with other rights or property selected by the plan administrator in its sole discretion, or the assumption or substitution of the award by the successor or surviving corporation, or a parent or subsidiary of the surviving or successor corporation, with appropriate adjustments as to the number and kind of shares and prices as the plan administrator deems, in its sole discretion, reasonable, equitable and appropriate. 153 Table of Contents Eligibility Awards can be issued to participants in the Share Plans, which include employees, directors or consultants of us, our subsidiaries, the VIEs and certain other related entities.
The 2019 Share Plan provides that in the event of certain corporate transactions, including specified types of mergers and acquisition transactions, the administrator may (a) accelerate the vesting, in whole or in part, of any award; (b) purchase any award for an amount of cash or ordinary shares of our company equal to the value that could have been attained upon the exercise of the award or the realization of the plan participant’s rights had the award been currently fully vested; or (c) provide for the assumption, conversion or replacement of any award by the successor corporation, or a parent or subsidiary of the successor corporation, with other rights or property selected by the plan administrator in its sole discretion, or the assumption or substitution of the award by the successor or surviving corporation, or a parent or subsidiary of the surviving or successor corporation, with appropriate adjustments as to the number and kind of shares and prices as the plan administrator deems, in its sole discretion, reasonable, equitable and appropriate.
Alice Cheng, Grace Tang and Joseph Tong are currently the members of each of these committees. Grace Tang is the chairperson of the audit committee, the compensation committee and the nominating committee. Alice Cheng is the chairperson of the ESG committee. The board of directors has determined that Mr.
Our board has four committees, the audit committee, the compensation committee, the nominating committee and the ESG committee. Alice Cheng, Grace Tang and Joseph Tong are currently the members of each of these committees. Grace Tang is the chairperson of the audit committee, the compensation committee and the nominating committee. Alice Cheng is the chairperson of the ESG committee.
Additionally, Cloud Music adopted the 2022 Restricted Share Unit Plan, or the 2022 Cloud Music Plan (together with the 2016 Cloud Music Plan, the “Cloud Music Plans”) in August 2022 (and amended it in June 2023), pursuant to which it may issue up to 10,462,280 new shares.
Additionally, NetEase Cloud Music adopted the 2022 Restricted Share Unit Plan, or the 2022 NetEase Cloud Music Plan (together with the 2016 NetEase Cloud Music Plan, the “NetEase Cloud Music Plans”) in August 2022 (and as amended from time to time), pursuant to which it may issue up to 10,462,280 new shares.
Boltz, Jr. * * ​ Sarah Li * * ​ All current directors and executive officers as a group (eight persons) (3) 1,468,297,542 45.6 % * Less than 1%. (1) Shining Globe International Limited is the record owner of 1,450,300,000 ordinary shares, consisting of 1,406,000,000 ordinary shares and 8,860,000 ADSs.
Boltz, Jr. * * ​ Sarah Li * * ​ All current directors and executive officers as a group (eight persons) (3) 1,472,083,436 46.4 % * Less than 1%. (1) Shining Globe International Limited is the record owner of 1,450,300,000 ordinary shares, consisting of 1,406,000,000 ordinary shares and 8,860,000 ADSs.
Directors and Senior Management The names of our directors and executive officers, their ages as of March 31, 2024 and the principal positions with NetEase held by them are as follows: ​ Name Age Position William Lei Ding ​ 52 ​ Director and Chief Executive Officer Alice Yu-Fen Cheng (1) ​ 62 ​ Independent Director Grace Hui Tang (1) ​ 64 ​ Independent Director Joseph Tze Kay Tong (1) ​ 61 ​ Independent Director Michael Man Kit Leung ​ 70 ​ Independent Director Yingfeng Ding ​ 52 ​ Executive Vice President Paul W.
Directors and Senior Management The names of our directors and executive officers, their ages as of the date of the filing of this annual report and the principal positions with NetEase held by them are as follows: ​ Name Age Position William Lei Ding ​ 53 ​ Director and Chief Executive Officer Alice Yu-Fen Cheng (1) ​ 63 ​ Independent Director Grace Hui Tang (1) ​ 65 ​ Independent Director Joseph Tze Kay Tong (1) ​ 62 ​ Independent Director Michael Man Kit Leung ​ 71 ​ Independent Director Yingfeng Ding ​ 53 ​ Executive Vice President Paul W.
As of March 31, 2024, 3,252,550 restricted share units had been granted under the 2022 Cloud Music Plan. In addition, certain of our other subsidiaries have adopted their own equity incentive plans, which allow the relevant subsidiaries to grant options or other awards to certain of our employees.
As of March 31, 2025, 4,260,547 restricted share units had been granted under the 2022 NetEase Cloud Music Plan. 144 Table of Contents In addition, certain of our other subsidiaries have adopted their own equity incentive plans, which allow the relevant subsidiaries to grant options or other awards to certain of our employees.
After any such transfer, the original recipient shall continue to remain subject to the withholding tax requirements described below. 154 Table of Contents Payment of Taxes No ordinary shares shall be delivered under the Share Plans to any participant or other person until such participant or other person has made arrangements acceptable to us regarding payment of Chinese, Cayman Islands, U.S. and any other federal, state, provincial, local or other taxes required by law.
Payment of Taxes No ordinary shares shall be delivered under the Share Plans to any participant or other person until such participant or other person has made arrangements acceptable to us regarding payment of Chinese, Cayman Islands, U.S. and any other federal, state, provincial, local or other taxes required by law.
As of March 31, 2024, there were four ordinary shareholders of record with an address in the United States.
As of February 28, 2025, there were four ordinary shareholders of record with an address in the United States.
Conditions of Awards Our board, either acting directly or through our compensation committee or one or more of our officers, is authorized to determine the provisions, terms and conditions of each award, including, without limitation, the award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, settlement of the award, payment contingencies and satisfaction of any performance criteria established by our board.
The 2019 Share Plan provides that the maximum exercisable term of share option awards is ten years from the date of a grant. 143 Table of Contents Conditions of Awards Our board, either acting directly or through our compensation committee or one or more of our officers, is authorized to determine the provisions, terms and conditions of each award, including, without limitation, the award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, settlement of the award, payment contingencies and satisfaction of any performance criteria established by our board.
Joseph Tong is an “audit committee financial expert” as defined by Item 16A. “Audit Committee Financial Expert” of Form 20-F.
The board of directors has determined that Mr. Joseph Tong is an “audit committee financial expert” as defined by Item 16A. “Audit Committee Financial Expert” of Form 20-F.
As of March 31, 2024, options to purchase a total of 3,691,150 ordinary shares were outstanding under the 2016 Cloud Music Plan, and 3,064,550 of such options had vested and become exercisable; and restricted share units representing an aggregate of 674,936 shares were outstanding and remain unsettled under the 2016 Cloud Music Plan, which may be satisfied by new or existing shares of Cloud Music.
As of March 31, 2025, options to purchase a total of 1,258,490 ordinary shares were outstanding under the 2016 NetEase Cloud Music Plan, and 1,038,665 of such options had vested and become exercisable; and restricted share units representing an aggregate of 182,997 shares were outstanding and remain unsettled under the 2016 NetEase Cloud Music Plan, which may be satisfied by new or existing shares of NetEase Cloud Music.
The audit, compensation, nominating and ESG committees are composed solely of non-employee directors, as such term is defined in Rule 16b-3 under the Exchange Act and the board of directors has determined that all such members are “independent” as that term is defined in NASDAQ Marketplace Rule 5605(a)(2).
The audit, compensation, nominating and ESG committees are composed solely of non-employee directors, as such term is defined in Rule 16b-3 under the Exchange Act and the board of directors has determined that all such members are “independent” as that term is defined in NASDAQ Marketplace Rule 5605(a)(2). 145 Table of Contents Compensation Committee Interlocks No interlocking relationships have existed between our board of directors or compensation committee and the board of directors or compensation committee of any other company.
Our R&D staff consisted of 51% of our total employees as of December 31, 2023. ​ ​ ​ ​ Games and related value-added services ​ 16,817 Youdao ​ 4,364 Cloud Music ​ 1,359 Innovative businesses and others 6,588 Total 29,128 ​ All employees of our company, subsidiaries and the VIEs are employed under employment contracts which specify, among other things, the employee’s responsibilities, remuneration and grounds for termination of employment.
Our R&D staff consisted of 49.0% of our total employees as of December 31, 2024. ​ ​ ​ ​ Games and related value-added services ​ 16,041 Youdao ​ 3,750 NetEase Cloud Music ​ 1,331 Innovative businesses and others ​ 4,906 Total ​ 26,028 ​ All employees of our company, subsidiaries and the VIEs are employed under employment contracts which specify, among other things, the employee’s responsibilities, remuneration and grounds for termination of employment.
The Bank of New York Mellon, depositary of our ADS program, held 498,561,420 outstanding ordinary shares as of that date, which accounted for 15.5% of our total issued and outstanding ordinary shares (excluding 107,096,010 ordinary shares being the total of ordinary shares issued and held by The Bank of New York Mellon, which were reserved for future delivery upon vesting of share awards granted under our Share Plans, and the ordinary shares underlying our treasury ADSs).
The Bank of New York Mellon, depositary of our ADS program, held 518,172,325 outstanding ordinary shares as of that date, which accounted for 16.4% of our total issued and outstanding ordinary shares (excluding 53,573,160 ordinary shares issued to and held by The Bank of New York Mellon, which were the ordinary shares underlying our treasury ADSs and were reserved for future delivery upon vesting of share awards granted under our Share Plans).
As of March 31, 2024, options to purchase a total of 3,680,851 ordinary shares were outstanding under the 2015 Youdao Plan, and 2,900,111 of such options had vested and become exercisable. Additionally, as of March 31, 2024, restricted share units representing an aggregate of 525,824 shares were outstanding under the 2015 Youdao Plan.
As of March 31, 2025, options to purchase a total of 2,694,185 ordinary shares were outstanding under the 2015 Youdao Plan, and 2,371,225 of such options had vested and become exercisable. Additionally, as of March 31, 2025, restricted share units representing an aggregate of 605,288 shares were outstanding under the 2015 Youdao Plan.
These agreements include: (i) a covenant that prohibits the executive officer from engaging in any activities that compete with our business during and for twelve (12) months after their employment with us, (ii) a requirement that executive officers assign all rights in company-related inventions to us and to keep our proprietary information confidential, and (iii) provisions for severance payments in the event the employment of the executive officer is terminated. 152 Table of Contents Share Incentive Plans General We have two share incentive plans, which we refer to collectively in this annual report as our “Share Plans.” Our board approved the 2009 RSU Plan in November 2009.
These agreements include: (i) a covenant that prohibits the executive officer from engaging in any activities that compete with our business during and for twelve (12) months after their employment with us, (ii) a requirement that executive officers assign all rights in company-related inventions to us and to keep our proprietary information confidential, and (iii) provisions for severance payments in the event the employment of the executive officer is terminated.
As of March 31, 2024, 3,222,468,571 of our ordinary shares were outstanding (excluding 107,096,010 ordinary shares being the total of ordinary shares issued to and held by The Bank of New York Mellon, the depositary of our ADS program, which are reserved for future delivery upon vesting of share awards granted under our Share Plans, and the ordinary shares underlying our treasury ADSs).
As of February 28, 2025, 3,165,991,421 of our ordinary shares were outstanding (excluding 53,573,160 ordinary shares issued to and held by The Bank of New York Mellon, the depositary of our ADS program, which were the ordinary shares underlying our treasury ADSs and were reserved for future delivery upon vesting of share awards granted under our Share Plans).
Relationships Among Directors or Executive Officers; Right to Nominate Directors There are no family relationships among any of the directors or executive officers of our company.
Relationships Among Directors or Executive Officers; Right to Nominate Directors There are no family relationships among any of the directors or executive officers of our company. None of our directors were nominated pursuant to a contractual or other right. 141 Table of Contents B.
The vested portion of an option will expire if not exercised prior to the expiration date of the award as set forth in the award agreement. The 2019 Share Plan provides that the maximum exercisable term of share option awards is ten years from the date of a grant.
The vested portion of an option will expire if not exercised prior to the expiration date of the award as set forth in the award agreement.
Plan Administration Our board has designated our compensation committee to administer the Share Plans, and it may designate one or more of our officers to exercise its authority thereunder from time to time.
Plan Administration Our board has designated our compensation committee to administer the Share Plans, and it may designate one or more of our officers to exercise its authority thereunder from time to time. 142 Table of Contents Securities Subject to the Share Plans The maximum aggregate number of our ordinary shares which were issuable pursuant to all awards under the 2009 RSU Plan was 323,694,050 ordinary shares.
In 2023, we also granted restricted share unit awards under our 2019 Share Plan to our chief financial officer (who subsequently resigned from such position in 2023), which, if vested, represented less than 1% of our total outstanding ordinary shares as of December 31, 2023.
Compensation Executive Officer and Director Compensation In 2024, we paid our executive officers and directors aggregate cash compensation of RMB466.1 million (US$63.8 million). In 2024, we also granted restricted share unit awards under our 2019 Share Plan to our executive officers, which, if vested, represented less than 1% of our total outstanding ordinary shares as of December 31, 2024.
Securities Subject to the Share Plans The maximum aggregate number of our ordinary shares which are issuable pursuant to all awards under the 2009 RSU Plan is 323,694,050 ordinary shares. The maximum aggregate number of our ordinary shares which may be issued pursuant to all awards under the 2019 Share Plan is 322,458,300 ordinary shares.
The maximum aggregate number of our ordinary shares which may be issued pursuant to all awards under the 2019 Share Plan is 322,458,300 ordinary shares. Such ordinary shares may, in whole or in part, be authorized but unissued shares or shares that will have been or may be reacquired by us.
The Share Plans permit the designation of beneficiaries by holders of awards in the event of the participant’s death.
The Share Plans permit the designation of beneficiaries by holders of awards in the event of the participant’s death. After any such transfer, the original recipient shall continue to remain subject to the withholding tax requirements described below.
Removed
None of our directors were nominated pursuant to a contractual or other right. 151 Table of Contents Board Diversity ​ ​ ​ Board Diversity Matrix (As of March 31, 2024) Country of Principal Executive Offices China ​ ​ ​ Foreign Private Issuer Yes ​ ​ ​ Disclosure Prohibited under Home Country Law No ​ ​ ​ Total Number of Directors 5 ​ ​ ​ ​ Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity Directors 2 3 - - Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction - LGBTQ+ - Did Not Disclose Demographic Background - ​ B.
Added
Share Incentive Plans General We have two share incentive plans, which we refer to collectively in this annual report as our “Share Plans.” Our board approved the 2009 RSU Plan in November 2009.
Removed
Compensation Executive Officer and Director Compensation In 2023, we paid our then current executive officers and directors aggregate cash compensation of RMB49.2 million (US$6.9 million).
Added
Eligibility Awards can be issued to participants in the Share Plans, which include employees, directors or consultants of us, our subsidiaries, the VIEs and certain other related entities.
Removed
Such ordinary shares may, in whole or in part, be authorized but unissued shares or shares that will have been or may be reacquired by us.
Added
The following table sets forth information regarding our staff as of December 31, 2024.
Removed
Compensation Committee Interlocks No interlocking relationships have existed between our board of directors or compensation committee and the board of directors or compensation committee of any other company. D. Employees As of December 31, 2021, 2022 and 2023, we had 32,064, 31,119 and 29,128 full-time employees, respectively. A substantial majority of our employees are based in China.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

27 edited+2 added−5 removed93 unchanged
Biggest changeThis agreement was effective from July 1, 2015 and will continue to be effective unless it is terminated by written notice of Youdao Information or, in case of a material breach of the agreement, it is terminated by written notice of the non-breaching party. 163 Table of Contents Agreements relating to Hangzhou Yuedu Dong Zhang, one of our former employees, previously owned 1% of the equity interest in Hangzhou Yuedu and in November 2023, such 1% interest was transferred to Wei Li, who is a current employee of Cloud Music.
Biggest changeThis agreement was effective from January 1, 2010 and will continue to be effective unless it is terminated by written notice of NetEase Hangzhou or, in case of a material breach of the agreement, it is terminated by written notice of the non-breaching party.
Hu’s rights and obligations under the operating agreement, equity pledge agreement, exclusive purchase option agreement and shareholder voting rights trust agreement described below. ● Loan Agreements and Equity Pledge Agreements between NetEase Hangzhou and each of the ultimate shareholders of Hangzhou Leihuo .
Hu’s rights and obligations under the loan agreement, operating agreement, equity pledge agreement, exclusive purchase option agreement and shareholder voting rights trust agreement described below. ● Loan Agreements and Equity Pledge Agreements between NetEase Hangzhou and each of the ultimate shareholders of Hangzhou Leihuo .
Under the operating agreement entered into by Hangzhou Yuedu, William Lei Ding and Wei Li and Hangzhou NetEase Cloud Music dated November 2, 2023, Hangzhou NetEase Cloud Music agreed to be the guarantor of Hangzhou Yuedu in, and provide full guarantees for the performance of, the contracts, agreements or transactions entered into between Hangzhou Yuedu and any third-party in connection with Hangzhou Yuedu’s businesses and operations.
Under the operating agreement entered into by Hangzhou Yuedu, William Lei Ding, Wei Li and Hangzhou NetEase Cloud Music dated November 2, 2023, Hangzhou NetEase Cloud Music agreed to be the guarantor of Hangzhou Yuedu in, and provide full guarantees for the performance of, the contracts, agreements or transactions entered into between Hangzhou Yuedu and any third-party in connection with Hangzhou Yuedu’s businesses and operations.
On August 5, 2021, we entered into a framework agreement with Cloud Music to govern key aspects of the intragroup transactions between Cloud Music and us, or the Cloud Music Framework Agreement, including (a) from us to Cloud Music (i) intellectual property licensing services where we grant Cloud Music a royalty-free license to non-exclusively use certain intellectual property, including software copyrights, domain names, trademarks and logos relating or registered by us, in perpetuity, (ii) advertising agency services, (iii) bandwidth, server custody and rack services, (iv) information technology services, (v) shared services and (vi) product procurement, and (b) from Cloud Music to us, advertising services and others.
On August 5, 2021, we entered into a framework agreement with NetEase Cloud Music to govern key aspects of the intragroup transactions between NetEase Cloud Music and us, or the NetEase Cloud Music Framework Agreement, including (a) from us to NetEase Cloud Music (i) intellectual property licensing services where we grant NetEase Cloud Music a royalty-free license to non-exclusively use certain intellectual property, including software copyrights, domain names, trademarks and logos relating or registered by us, in perpetuity, (ii) advertising agency services, (iii) bandwidth, server custody and rack services, (iv) information technology services, (v) shared services and (vi) product procurement, and (b) from NetEase Cloud Music to us, advertising services and others.
If the transfer price for the equity interest in Hangzhou Yuedu is higher than the principal of the loan under the relevant Loan Agreement, any surplus would be considered interest for the loan. Subsidiary Guarantees We have entered into several guarantee agreements in the aggregate amount of US$2.3 billion in respect of certain credit facilities taken by our subsidiaries.
If the transfer price for the equity interest in Hangzhou Yuedu is higher than the principal of the loan under the relevant Loan Agreement, any surplus would be considered interest for the loan. Subsidiary Guarantees We have entered into several guarantee agreements in the aggregate amount of US$2.7 billion in respect of certain credit facilities taken by our subsidiaries.
These include a master transaction agreement, a transitional services agreement, a non-competition agreement, a cooperation framework agreement, an intellectual property license agreement and multiple loan agreements, each of which are summarized below. 165 Table of Contents Master Transaction Agreement We have entered into a master transaction agreement with Youdao to govern certain key aspects of our relationship with Youdao, including the allocation of liabilities.
These include a master transaction agreement, a transitional services agreement, a non-competition agreement, a cooperation framework agreement, an intellectual property license agreement and multiple loan agreements, each of which are summarized below. 154 Table of Contents Master Transaction Agreement We have entered into a master transaction agreement with Youdao to govern certain key aspects of our relationship with Youdao, including the allocation of liabilities.
In addition, under the Exclusive Purchase Option Agreements, William Lei Ding and Wei Li may not transfer or permit the encumbrance of or allow any guarantee or security to be created on any of its equity interest in Hangzhou Yuedu without Hangzhou NetEase Cloud Music’s prior written consent. 164 Table of Contents ● Equity Pledge Agreements .
In addition, under the Exclusive Purchase Option Agreements, William Lei Ding and Wei Li may not transfer or permit the encumbrance of or allow any guarantee or security to be created on any of its equity interest in Hangzhou Yuedu without Hangzhou NetEase Cloud Music’s prior written consent. 153 Table of Contents ● Equity Pledge Agreements .
Agreements with Cloud Music Cloud Music, which became listed on the Hong Kong Stock Exchange in December 2021, is currently our majority-controlled subsidiary.
Agreements with NetEase Cloud Music NetEase Cloud Music, which became listed on the Hong Kong Stock Exchange in December 2021, is currently our majority-controlled subsidiary.
Each Exclusive Purchase Option Agreement shall remain in effect until all of the equity interests in or assets of Youdao Computer have been acquired by Youdao Information or its designee or until Youdao Information unilaterally terminates the agreement by written notice. ● Shareholder Voting Rights Trust Agreements between Youdao Information and each of William Lei Ding and Feng Zhou.
Each Exclusive Purchase Option Agreement shall remain in effect until all of the equity interests in or assets of Youdao Computer have been acquired by Youdao Information or its designee or until Youdao Information unilaterally terminates the agreement by written notice. 151 Table of Contents ● Shareholder Voting Rights Trust Agreements between Youdao Information and each of William Lei Ding and Feng Zhou.
Ltd., or “NetEase Beijing,” granted Guangzhou NetEase the right to use NetEase Beijing’s web page layout in China for a royalty of RMB10,000 per year. NetEase Beijing may waive this fee at any time. 158 Table of Contents ● Trademark License Agreement between NetEase Beijing and Guangzhou NetEase.
Ltd., or “NetEase Beijing,” granted Guangzhou NetEase the right to use NetEase Beijing’s web page layout in China for a royalty of RMB10,000 per year. NetEase Beijing may waive this fee at any time. ● Trademark License Agreement between NetEase Beijing and Guangzhou NetEase.
Each Shareholder Voting Rights Trust Agreement shall remain effective for as long as William Lei Ding or Feng Zhou, as applicable, remains a shareholder of Youdao Computer unless Youdao Information unilaterally terminates the agreement by written notice . 162 Table of Contents ● Operating Agreements among Youdao Computer, Youdao Information and each of William Lei Ding and Feng Zhou .
Each Shareholder Voting Rights Trust Agreement shall remain effective for as long as William Lei Ding or Feng Zhou, as applicable, remains a shareholder of Youdao Computer unless Youdao Information unilaterally terminates the agreement by written notice . ● Operating Agreements among Youdao Computer, Youdao Information and each of William Lei Ding and Feng Zhou .
As of December 31, 2023, US$1.1 billion of such credit facilities had not been utilized. Agreements with Youdao Youdao, which became listed on the New York Stock Exchange in October 2019, is currently our majority-controlled subsidiary.
As of December 31, 2024, US$1.5 billion of such credit facilities had not been utilized. Agreements with Youdao Youdao, which became listed on the New York Stock Exchange in October 2019, is currently our majority-controlled subsidiary.
Guangzhou NetEase may waive this fee at any time. The term of the foregoing agreement is automatically renewable for successive one year term. ● Trademark Transfer Agreement between Guangzhou NetEase and NetEase Beijing . Under this agreement, Guangzhou NetEase transferred its registered trademarks to NetEase Beijing. ● Supplemental Agreement between NetEase Beijing and Guangzhou NetEase.
Guangzhou NetEase may waive this fee at any time. 148 Table of Contents The term of the foregoing agreement is automatically renewable for successive one year term. ● Trademark Transfer Agreement between Guangzhou NetEase and NetEase Beijing . Under this agreement, Guangzhou NetEase transferred its registered trademarks to NetEase Beijing. ● Supplemental Agreement between NetEase Beijing and Guangzhou NetEase.
The Equity Pledge Agreements will remain binding until the pledgor discharges all his obligations under the above-mentioned agreements. 160 Table of Contents ● Exclusive Purchase Option Agreements among NetEase Hangzhou, Hangzhou Leihuo and each of the ultimate shareholders of Hangzhou Leihuo .
The Equity Pledge Agreements will remain binding until the pledgor discharges all his obligations under the above-mentioned agreements. ● Exclusive Purchase Option Agreements among NetEase Hangzhou, Hangzhou Leihuo and each of the ultimate shareholders of Hangzhou Leihuo .
The term of this agreement is 20 years from December 1, 2015 and can be extended with the written consent of NetEase Hangzhou. ● Cooperation Agreement between NetEase Hangzhou and Hangzhou Leihuo.
The term of this agreement is 20 years from December 1, 2015 and can be extended with the written consent of NetEase Hangzhou. 150 Table of Contents ● Cooperation Agreement between NetEase Hangzhou and Hangzhou Leihuo.
Hui agrees he shall not transfer, pledge or encumber his 1.0% equity interest without the prior written consent of NetEase Beijing. During the term of this agreement, NetEase Beijing is entitled to all dividends and other distributions made by Guangzhou NetEase. The Equity Pledge Agreement will remain binding until Mr. Hui discharges all his obligations under the above-mentioned agreements.
Hui agrees he shall not transfer, pledge or encumber his 1.0% equity interest without the prior written consent of NetEase Beijing. During the term of this agreement, NetEase Beijing is entitled to all dividends and other distributions made by Guangzhou NetEase. The Equity Pledge Agreement will remain binding until Mr.
Agreements relating to Guangzhou NetEase As of the date of the filing of this annual report, William Lei Ding, our Chief Executive Officer, and Xiaojun Hui, our vice president of game development, own 99.0% and 1.0% of the equity interest in Guangzhou NetEase, respectively. ● Copyright License Agreement between NetEase Beijing and Guangzhou NetEase. NetEase Information Technology (Beijing) Co.
Agreements relating to Guangzhou NetEase As of the date of the filing of this annual report, William Lei Ding, our Chief Executive Officer, and Xiaojun Hui, one of our employees, own 99.0% and 1.0% of the equity interest in Guangzhou NetEase, respectively. ● Copyright License Agreement between NetEase Beijing and Guangzhou NetEase. NetEase Information Technology (Beijing) Co.
On November 28, 2023, we entered into a new framework agreement, which superseded the original Cloud Music Framework Agreement, pursuant to which the intragroup transactions between Cloud Music and us set forth in the Cloud Music Framework Agreement were renewed for a term of three years (other than the intellectual property license which, as noted above, was granted in perpetuity), commencing from January 1, 2024. 167 Table of Contents C.
On November 28, 2023, we entered into a new framework agreement, which superseded the original NetEase Cloud Music Framework Agreement, pursuant to which the intragroup transactions between NetEase Cloud Music and us set forth in the NetEase Cloud Music Framework Agreement (save for the aforementioned advertising agency services provided by us) were renewed for a term of three years (other than the intellectual property license which, as noted above, was granted in perpetuity), commencing from January 1, 2024.
NetEase Beijing agrees to pay the operating costs of Guangzhou NetEase. 159 Table of Contents ● Letter of Agreement.
NetEase Beijing agrees to pay the operating costs of Guangzhou NetEase. ● Letter of Agreement.
As of December 31, 2023, the total principal amount of interest-bearing short-term loans outstanding to Youdao was RMB878.0 million (US$123.7 million). As of March 31, 2024, the total principal amount of interest-bearing long-term loans outstanding to Youdao was US$124.2 million (equivalent to RMB881.1 million), which was drawn down from the above-mentioned revolving loan facility.
As of December 31, 2024, the total principal amount of interest-bearing short-term loan outstanding to Youdao was RMB878.0 million (US$120.3 million). As of March 31, 2025, the total principal amount of interest-bearing long-term loans outstanding to Youdao was US$128.1 million (equivalent to RMB926.7 million), which was drawn down from the above-mentioned revolving loan facility.
The non-competition agreement also provides for a mutual non-solicitation obligation that neither Youdao nor we may, during the Non-competition Period, hire, or solicit for hire, any active employees of or individuals providing consulting services to the other party, or any former employees of or individuals providing consulting services to the other party within six months of the termination of their employment or consulting services, without the other party’s consent, except for solicitation activities through generalized non-targeted advertisement not directed to such employees or individuals that do not result in a hiring within the Non-competition Period.
If the party receiving the notice elects not to or otherwise fails to take up the opportunity within 30 days, the notifying party may proceed to take up such business or investment opportunity. 155 Table of Contents The non-competition agreement also provides for a mutual non-solicitation obligation that neither Youdao nor we may, during the Non-competition Period, hire, or solicit for hire, any active employees of or individuals providing consulting services to the other party, or any former employees of or individuals providing consulting services to the other party within six months of the termination of their employment or consulting services, without the other party’s consent, except for solicitation activities through generalized non-targeted advertisement not directed to such employees or individuals that do not result in a hiring within the Non-competition Period.
Agreements relating to Hangzhou Leihuo As of the date of the filing of this annual report, the ultimate shareholders of Hangzhou Leihuo are Zhipeng Hu and Long Cheng, two of our employees, who each hold a 50.0% equity interest. Mr.
Hui discharges all his obligations under the above-mentioned agreements. 149 Table of Contents Agreements relating to Hangzhou Leihuo As of the date of the filing of this annual report, the ultimate shareholders of Hangzhou Leihuo are Zhipeng Hu and Long Cheng, two of our employees, who each hold a 50.0% equity interest. Mr.
Transitional Services Agreement Under the transitional services agreement, we have agreed that, during the service period as described below, we will provide Youdao with various corporate support and services such as legal support, human resources support, financial reporting, internal control and internal audit support, technology and operational support, and administrative support.
Transitional Services Agreement Under the transitional services agreement, we agreed to provide Youdao with various corporate support and services such as legal support, human resources support, financial reporting, internal control and internal audit support, technology and operational support, and administrative support.
The non-competition agreement provides that if there is any ambiguity in the scope of business subject to the foregoing non-compete restrictions, our interpretation shall prevail. 166 Table of Contents In addition, we and Youdao have each undertaken to each other that during the Non-competition Period, should a party have a business or investment opportunity relating to the other party’s businesses covered by the foregoing non-compete restrictions, it shall notify the other party of such opportunity in writing.
In addition, we and Youdao have each undertaken to each other that during the Non-competition Period, should a party have a business or investment opportunity relating to the other party’s businesses covered by the foregoing non-compete restrictions, it shall notify the other party of such opportunity in writing.
Interests of Experts and Counsel Not applicable. ​
C. Interests of Experts and Counsel Not applicable. ​ 156 Table of Contents
This agreement was effective from January 1, 2010 and will continue to be effective unless it is terminated by written notice of NetEase Hangzhou or, in case of a material breach of the agreement, it is terminated by written notice of the non-breaching party. 161 Table of Contents Agreements relating to Youdao Computer As of the date of the filing of this annual report, Feng Zhou, the chief executive officer of Youdao, owns 28.9% of the equity interest in Youdao Computer, and William Lei Ding owns 71.1% of the equity interest in Youdao Computer. ● Loan Agreements between Youdao Information and each of William Lei Ding and Feng Zhou .
This agreement was effective from July 1, 2015 and will continue to be effective unless it is terminated by written notice of Youdao Information or, in case of a material breach of the agreement, it is terminated by written notice of the non-breaching party. 152 Table of Contents Agreements relating to Hangzhou Yuedu As of the date of the filing of this annual report, William Lei Ding, our Chief Executive Officer, and Wei Li, an employee of NetEase Cloud Music, own 99.0% and 1.0% of the equity interest in Hangzhou Yuedu, respectively. ● Cooperation Agreement .
As of the date of the filing of this annual report, William Lei Ding, our Chief Executive Officer, and Wei Li own 99.0% and 1.0% of the equity interest in Hangzhou Yuedu, respectively. ● Cooperation Agreement .
Agreements relating to Youdao Computer As of the date of the filing of this annual report, Feng Zhou, the chief executive officer of Youdao, owns 28.9% of the equity interest in Youdao Computer, and William Lei Ding owns 71.1% of the equity interest in Youdao Computer. ● Loan Agreements between Youdao Information and each of William Lei Ding and Feng Zhou .
Removed
At the time of such transfer, all the VIE agreements that Dong Zhang previously entered with Hangzhou NetEase Cloud Music and/or Hangzhou Yuedu were terminated, and Wei Li entered into substantially identical VIE agreements with Hangzhou NetEase Cloud Music and/or Hangzhou Yuedu.
Added
The transitional services agreement expired in accordance with its terms in October 2024, although we continue to provide such services to Youdao pursuant to arms’ length arrangements.
Removed
The price to be paid for the services provided under the transitional services agreement is calculated by multiplying the sum of the actual “direct costs” and “indirect costs” of providing such services by 100% plus a reasonable mark-up rate as determined by us.
Added
The non-competition agreement provides that if there is any ambiguity in the scope of business subject to the foregoing non-compete restrictions, our interpretation shall prevail.
Removed
Direct costs include labor-related compensation and travel expenses, materials and supplies consumed in and agency fees arising from performing the services. Indirect costs include office occupancy, information technology support and other overhead costs of the departments incurring the direct costs of providing the services.
Removed
The service period under the transitional services agreement commenced upon the completion of Youdao’s initial public offering and will end on the earliest of (i) the fifth anniversary of the completion of Youdao’s initial public offering, (ii) one year after the Control Ending Date, (iii) the date the transitional services agreement is terminated by Youdao or us, whichever is earlier.
Removed
If the party receiving the notice elects not to or otherwise fails to take up the opportunity within 30 days, the notifying party may proceed to take up such business or investment opportunity.

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