NetEase's Q1 2023 Financial Report: Revenue of 25 billion yuan, AI Assisting in 90% Efficiency Improvement in Digital Content Production

On May 25th, NetEase released its first quarter financial report for 2023. According to the financial report, NetEase maintained steady growth in its first quarter performance, with a net income of 25 billion yuan and a net profit of 7

On May 25th, NetEase released its first quarter financial report for 2023. According to the financial report, NetEase maintained steady growth in its first quarter performance, with a net income of 25 billion yuan and a net profit of 7.6 billion yuan attributable to shareholders of the company under non GAAP, exceeding market expectations.

This quarter, NetEase continued to invest in self-developed key technologies such as AI big models, with a research and development investment of 3.7 billion yuan in Q1, accounting for 15% of revenue. At the same time, NetEase has utilized self-developed technologies such as AI to achieve 90% efficiency improvement in key aspects of digital content production. Through AI tools and a new model of content co creation, it has fully stimulated the creative ability of young groups, formed an ecosystem of high-quality content creation, and driven sustainable business development.

In the first quarter, NetEase focused on creating and innovating high-quality products, with a net revenue of 20.1 billion yuan from games and related value-added services, achieving double growth compared to the same period last month. NetEase Cloud Music continued to develop healthily, and achieved Q1 net income of 2 billion yuan and gross profit margin of 22.4%, up from 12.2% in the same period last year, through continuous innovation of business cooperation models, including cooperation with China Mobile Video RBT, upgrading Dolby Atmos experience, and covering more IoT terminals. NetEase Youdao has a net income of 1.2 billion yuan, and features such as "AI Speaking Teacher" developed based on the self-developed large model "Ziyue" are rapidly iterating. It will be the first to implement AIGC technology in domestic education scenarios.

NetEase's innovation and other business net revenue is 1.9 billion yuan. NetEase Media recently launched the pan entertainment experience space "NetEase NETALAND" to provide brand new metaverse marketing solutions. NetEase strictly selects to deepen its supply chain model, establish multiple independent production lines for pet, household cleaning, and other categories, and create multiple joint research and development laboratories to further improve product quality, production capacity, and research and development capabilities, and accelerate physical manufacturing upgrades. Among them, the independent production line for pet food has a daily output of 60 tons, helping strictly select the multi-channel sales ranking of cat food.

NetEase CEO Ding Lei stated that looking forward to 2023, NetEase will continue to focus on key technology research and development and content innovation, create more high-quality content products globally, and promote the innovative development of the digital industry.

AI assists in 90% efficiency improvement in digital content production, and self-developed technology accelerates its application in education and entertainment fields

In the first quarter, NetEase invested 3.7 billion yuan in research and development, a year-on-year increase of 10%, and continued to promote the integration of AI technology into digital content production, achieving quality and efficiency improvement.

At present, NetEase's self-developed AI technology has been applied to the entire process of game industrialization, and AI technology has improved the work efficiency of key links by up to 90%. NetEase Interactive Entertainment AILAB has developed dozens of AI efficiency enhancement tools, covering various aspects such as AI voice generation, AI original picture generation, AI video capture, and AI model generation. With the help of the self-developed AI facial model generation tool "iPhoto2Avatar", 2D original design and 3D facial models can be industrialized and quickly generated; With the help of the self-developed AI video motion capture tool "AIxPose", the character movements in the video can be extracted with one click and transferred to virtual characters, greatly improving the efficiency of the traditional production process.

Since the beginning of this year, NetEase has made phased progress in AI applications in various fields such as education and entertainment. NetEase's "AI Spoken Language Teacher", who possesses reasoning, language, and emotional abilities, will provide immersive oral practice for students of different oral proficiency, which is more in line with real-life chat scenarios.

In the field of entertainment, the AI painting platform "Danqingyue", jointly developed by NetEase Fuxi and Leihuo Art Center, adopts the fully Chinese ecological multimodal models "Yuzhi" and "Danqing", with a leading technological level in the industry; Another big model trained by Fuxi, "Yuyan," topped the CLUE classification list for the authoritative assessment of Chinese language comprehension in the first quarter, surpassing human level in multiple tasks for the first time. Danqingyue has independent intellectual property rights, supports native Chinese input and style customization, and can generate art content such as characters, scenes, and icons. It will serve various fields of art creation such as game development, product design, and animation derivative creation.

The unique content of "AIGC+UGC" co creates an ecosystem, driving long-term business development

Based on the actual needs of the industry and users, NetEase continues to innovate and expand the incremental space of the digital content industry. At this year's NetEase Game 520 press conference, the first self-developed and popular mobile game to create a unique UGC content ecosystem model, "Egg Boy Party," and the first AI driven intelligent NPC with new experiences, "Cold Against the Current," sparked industry attention to the "AIGC+UGC" creative model stimulating national creativity and expanding the value of the gaming industry.

Based on NetEase's self-developed engine, Egg Party has innovatively created a UGC map editing tool, while gradually incentivizing players to co create game content, helping Egg Party maintain strong growth in the first quarter and reach the top of China's iOS download list, with over 30 million active players per day. At present, "Egg Party" has attracted millions of players to participate in map co creation, adding over 100000 new maps per day, forming a high stickiness and strong social content ecological barrier. The Egg Party was developed based on the world's top 3D engine NeoX. NetEase owns 100% independent and proprietary rights to this engine, and has successfully developed several popular products such as "The Fifth Personality", "Yin Yang Teacher", and "Leading the Land by the Shore".

It is worth mentioning that "Egg Party" also utilizes the UGC map editor to inspire players to create educational maps with rich themes such as public welfare, environmental protection, cultural heritage, and aerospace science popularization. The Egg Boy Party also recently held various online and offline public welfare activities in conjunction with the China Green Foundation and PADI Love the Sea Special Fund, giving full play to the social value of the game.

Another self-developed mobile game, "Against the Cold Water," takes the lead in exploring multiple cutting-edge AIGC technologies to create an open digital world. Based on NetEase's Fuxi AI big model technology, the intelligent NPCs in the mobile game "Cold Water" will have their own personality, emotions, and memory, and can actively socialize with players and other intelligent NPCs, forming a self iterative and updated network of relationships in the open world, bringing players a new experience. The mobile game 'Cold Against the Water' will be fully platform tested on June 30th, and is expected to set a new industry benchmark in the MMORPG gaming field.

Strict crackdown on game piracy and innovative measures to weave a "protective net" for minors

As one of the earliest enterprises in China to establish a protection system for minors, NetEase continues to explore new models and experiences for safeguarding the healthy growth of minors from three dimensions: technology interception, social governance, and network literacy.

In terms of technology, popular game products under NetEase have all been integrated with AI and facial recognition technology. The user identity of suspected minors determined through AI will be verified again by the facial recognition verification system, ensuring the safety of minors' internet access from the source. In terms of network literacy, NetEase Games established the "NetEase Game Social Responsibility Promotion Center" in 2022, committed to promoting cooperation between games and academic, technological, educational, charitable and other fields, promoting cultural inheritance, disciplinary construction, and safeguarding the growth of young people.

During this year's winter vacation, NetEase launched a special action to continuously crack down on illegal activities related to minors renting and selling game accounts. At the same time, NetEase has also upgraded its "NetEase Parent Care Platform" to assist parents in preventing gaming addiction from the root cause. Parents can use this platform to scan and bind their underage children's game accounts, and check and supervise their children's gaming information at any time. In 2023, NetEase will continue to upgrade and improve its protection system for minors, safeguarding their healthy internet access.

Promote high-quality employment, cultivate new technological talents, and incubate 1300 enterprises through digital inclusion

NetEase is committed to promoting high-quality employment, rural revitalization, and other important social issues through the inclusion of digital resources and technological innovation, and playing a corporate role and practicing social responsibility.

NetEase is exploring lowering the threshold for technological learning and cultivating urgently needed new technological talents for society. NetEase Sufan recently launched the CodeWave intelligent development platform, which is based on intelligent large models and full stack low code, helping to significantly reduce development barriers; And we plan to create 100000 job opportunities with over 10000 partners and develop 1 million low code developers within the next 5 years.

In order to promote rural revitalization and common prosperity, NetEase has also innovated and created the "digital culture+industry revitalization" county entrepreneurship and innovation support project, which has cultivated more than 40000 industrial talents in 25 counties, incubated more than 1300 new economic enterprises, and driven 3 million new tourists.

In 2023, NetEase will continue to accumulate key technological capabilities, accelerate the exploration of a new digital content production model combining "AIGC+UGC", promote the long-term development of various businesses, and create more economic and social value.