htsc's report pointed out that netease (09999.HK) third-quarter revenue fell by 3.9% year-on-year to 26.2 billion RMB, below the market's consensus of 1.3%. Adjusted net profit declined by 13.3% year-on-year, below the consensus of 4.7%, mainly due to the expansion of exchange rate losses. Standalone gaming and deferred revenue exceeded expectations by 21% and 14% respectively, mainly due to the return of the "Warcraft" game and the continued growth in revenue from the standalone game "Endless of Tiamat".

The bank believes that the return of Blizzard games, the upcoming launch of "Swallow Clouds" and "Code: Infinite" will contribute significantly to the increase in revenue. Therefore, the forecast for netease's gaming revenue from 2024 to 2026 is adjusted upwards by 0.6%, 0.9%, and 0.7%, corresponding to growth rates of 6.7%, 8%, and 9.1%. Furthermore, due to youdao's decline in gross margin and the slowing improvement in cloud music gross margin, the forecast for adjusted net profit is lowered by 2.6%, 6.5%, and 11.8%. The bank maintains its "buy" rating on netease, with the target price raised from HK$97 to HK$118.15.