Old but still fresh: NetEase reports 46% profit increase and 800 million users for its cloud music service

It has weathered an ever-changing macroeconomic environment for 22 years.

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NetEase, one of China’s oldest internet companies, booked RMB 18.8 billion (USD 2.7 billion) in net revenues in the second quarter of this year, up 15% year-on-year. Its net income reached RMB 3.07 billion (USD 447.4 million), up by 46% year-on-year. NetEase has become one of China’s internet dinosaurs who have managed to stay relevant through the decades.

NetEase was set up in 1997 and became famous first as a free email service provider. Today, its net income almost equals the entire revenue of another major player of China’s early internet era, Sohu. The latter’s revenue in the second quarter amounted to USD 475 million. Sohu was once one of the largest online information portals along with NetEase and Sina, but it has been making losses for years.  Its early investments in Sogou, which is now China’s second-largest search engine and in Changyou, a gaming company, help Sohu sustain.

Sina, which has yet to release its second quarter financials, booked RMB 3.28 billion (USD 475.1 million) in first-quarter revenue, up 8% year-on-year. That is also minimal compared with NetEase’s Q2 revenue.

NetEase, although lagging behind in revenue compared to the younger giants Alibaba, Tencent and Baidu, has maintained its growth by exploring various sectors including gaming, e-commerce, education and online music.

And these are proving to pay off. In the second quarter, NetEase gained RMB 11.4 billion (USD 1.67 billion) from online game services, up by 13.6% year-on-year and collected RMB 5.2 billion (USD 764 million) from e-commerce which it initiated within its email services in 2012, up by 20.2% year-on-year.

NetEase collected RMB 1.5 billion (USD 219.5 million) from its innovative business, including cloud music, CC live broadcasting and Youdao Online Education. Profit margin for this segment reached 1.4%, compared to gross loss margin of 13.1% for the preceding quarter.

Its management revealed to analysts during the earnings call that the number for its cloud music users have reached 800 million. That is a big jump from the 600 million NetEase disclosed in November last year.