NetEase reported second-quarter 2026 revenue of RMB30.1 billion ($4.44 billion), up 7.9% year-over-year and beating estimates, but earnings per ADR missed consensus at $1.77 due to higher R&D spending and investment losses. Gaming revenue rose 9.7% to RMB25 billion with gross margin expanding to 76.13% from 70.22%, driven by strong performances from Fantasy Westward Journey, Where Winds Meet, Sword of Justice, Eggy Party and Blizzard titles. Youdao revenue increased 3.5% to RMB1.5 billion with AI enhancements including the Confucius 4 model and translation improvements, while Cloud Music stayed flat at RMB2 billion. Innovative businesses declined 3.5% to RMB1.7 billion. The company ended the quarter with RMB167.5 billion in net cash and generated $1.5 billion in operating cash flow. Shares fell more than 3% in pre-market trading.