Citigroup released a research report stating that Netease (09999.HK) (NTES.US) will announce its second-quarter earnings in mid-August. Including the impact of the adjustment of the Dream of the Three Kingdoms computer game trading system, the revenue forecast for the second quarter was lowered by 3.2% to RMB 25.9 billion, a year-on-year increase of 7.8%. The non-GAAP net profit forecast was lowered by 0.9% to RMB 7.35 billion, which is lower than the market's generally expected revenue and net profit of RMB 26.2 billion and RMB 7.93 billion, respectively.

Citigroup predicts that Netease's game revenue in the second quarter will increase by 8% year-on-year to RMB 20.3 billion. The impact of the Dream of the Three Kingdom's computer version will be partially offset by the growth of the mobile gaming business. The bank pointed out that Netease will launch several heavyweight games this year, including Yan Yun Sixteen Sounds and Tianqi Action, which is expected to support overall game revenue growth. It is believed that the negative impact of the Dream of the Three Kingdoms computer version will drag down PC game revenue in the second to fourth quarters of this year, with respective declines of 9%, 8%, and 7%. It will not return to normal until the first quarter of 2025.

Correspondingly, Citigroup lowered Netease's revenue expectations for 2024 to 2026 by 3.9%, 5.7%, and 4.3%, and non-GAAP net profit expectations by 2.3%, 3.5%, and 1.4%, with a target price of $116 for the US stock market and a "buy" rating.