#1NetEase 2Q22 Investor Presentation Investor Relations Aug 18, 2022 網易 NETEASE#2SAFE HARBOR STATEMENT This announcement contains statements of a forward-looking nature. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "will," "expects,” “anticipates,” “future,” "intends," "plans,” “believes,” “estimates” and similar statements. In addition, statements that are not historical facts, including statements about NetEase's strategies and business plans, its expectations regarding the growth of its business and its revenue and the quotations from management in this announcement are or contain forward-looking statements. NetEase may also make forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"), in announcements made on the website of The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange"), in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks related to: the risk that the online game market will not continue to grow or that NetEase will not be able to maintain its position in that market in China or globally; the risk that COVID-19 or other health risks in China or globally could adversely affect the Company's operations or financial results; risks associated with NetEase's business and operating strategies and its ability to implement such strategies; NetEase's ability to develop and manage its operations and business; competition for, among other things, capital, technology and skilled personnel; potential changes in government regulation that could adversely affect the industry and geographical markets in which NetEase operates, including, among others, initiatives to enhance supervision of companies listed on an overseas stock exchange and tighten scrutiny over data privacy and data security, as well as the risk that NetEase's ADSs could be barred from trading in the United States as a result of the Holding Foreign Companies Accountable Act and the rules promulgated thereunder; the risk that NetEase may not be able to continuously develop new and creative online services or that NetEase will not be able to set, or follow in a timely manner, trends in the market; competition in NetEase's existing and potential markets; and the risk that fluctuations in the value of the Renminbi with respect to other currencies could adversely affect NetEase's business and financial results. Further information regarding these and other risks is included in NetEase's filings with the SEC and announcements on the website of the Hong Kong Stock Exchange. NetEase does not undertake any obligation to update this forward-looking information, except as required under the applicable law. 網易 NETEASE#3NetEase, Inc. Founded in 1997, NetEase, Inc. is a leading China-based internet technology company that develops and operates some of China's most popular and longest running mobile and PC games. Powered by industry-leading in-house R&D capabilities in China and globally, NetEase creates superior gaming experiences, inspires players and passionately delivers value for its thriving community worldwide. By infusing play with culture and education with technology, NetEase transforms gaming into a meaningful vehicle to build a more entertaining and enlightened world. Beyond games, NetEase service offerings include its majority-controlled subsidiaries Youdao (NYSE: DAO), China's leading technology-focused intelligent learning company, and Cloud Music (HKEX: 9899), China's leading online music content community, as well as Yanxuan, NetEase's private label consumer lifestyle brand. NetEase's ESG initiatives are among the best in the global media and entertainment industry, earning it a distinction as one of the S&P Global Industry Movers and an "A" rating from MSCI. For more information, please visit: http://ir.netease.com/. 網易 NETEASE#4MARKET SNAPSHOT In USD Note: 1 2 3 $60.2 billion 3.3 billion $1.21 Market Cap 1 (8/17/22) Shares Outstanding, Diluted (2022) Basic net income per ADS (GAAP) (2Q22) $790 million $13.1 billion A Net income attributable to the Company's shareholders (GAAP) Cash position 2 (6/30/22) 3 MSCI ESG Rating (2Q22) $3.5 billion Net revenues (2Q22) Market Cap is calculated using the closing price on NASDAQ; Our market cap is HK$473.9 billion ($ 60.4 billion) based on the closing price on the Hong Kong Stock Exchange Cash position refers to total cash and cash equivalents, current and non-current time deposits and restricted cash, as well as short-term investments balance, minus the outstanding balance of short-term and long-term loans The result is based on the latest update in November 2021 網易 NETEASE#5GAMES AND RELATED VALUE-ADDED SERVICES USD million Online Games Related VAS 93% (2022) Definition of this segment has been changed to include related value-added services, such as NetEase CC Live streaming service, game-related merchandise and others CC直播 C C 16 3. COM Games and Related Value-added Services Net Revenues and Gross Margin Note: 1 Gross Margin Online Games Related VAS 63.2% 62.2% 2,355 2Q21 64.9% 2,783 2,708 1Q22 2Q22 34% PC & console games ~ 66%: mobile games 網易 NETEASE US$1.00 = RMB6.6981 on June 30, 2022. Same exchange rate is applied to all years for illustrative purpose#6ONLINE GAMES PC & CONSOLE GAMES Flagship Self-Developed Titles MOBILE GAMES Self-Developed Mobile Games 巍] 天下 逆水寒 倩。 新倩女幽魂 SSID ONLINE ST 无日的 拉相部日 Licensed Mobile Games From Overseas Developers Flagship Licensed Titles KONAMI WORLD OF WARCRAFT 包 MINECRAFT 我的世界 魔兽世界 星味金霸 DIABLO ©Football 争霸文理拉斯 Launching Mobile Games in Overseas Markets 炉石传说 风暴少英雄 HEROES OF THE STORM 守望先锋 5v5 无日的 拉相朗日 Naraka: Bladepoint: 10 million copies sold worldwide within less than one year, and launched its Xbox version in June • DiabloⓇ Immortal TM: made its debut in the global market and topped iOS download charts in multiple regions • Fantasy Westward Journey series continue to grow after nearly two decades of operation • Identity V and Infinite Lagrange continued their popularity with highly captivating content updates and creative marketing • Pipeline: Naraka: Bladepoint mobile, Justice mobile and Ghost World Chronicle, as well as Harry Potter: Magic Awakened in international markets 網易 NETEASE#7YOUDAO 1 USD million Note: 1 2 Youdao Net Revenues and Gross Margin Gross Margin Net Revenues 53.1% 52.3% 42.8% 193 179 2Q21 1Q22 143 2Q222 Achieved positive operating cash flow of RMB104 million, despite the challenges faced during the COVID resurgence and business transition • • Total net revenues for Youdao were RMB956 million in the second quarter Released diversified new products to cover a broader range of learning scenarios, such as Youdao Smart Learning Pad, which has been sold out shortly after the distribution of the initial batch • Continued to diversify the STEAM course offering in which it achieved sustainable growth, with gross billings expanding by more than nine-fold year-over-year. Some of the fastest growing courses include Youdao Chess (F) and Youdao Go(有道纵横) US$1.00 RMB 6.6981 on June 30, 2022. Same exchange rate is applied to all years for illustrative purpose The year-over-year decline of Youdao's net revenues was primarily due to the conclusion of Youdao's after-school tutoring services for academic subjects under China's compulsory education system 網易 NETEASE#8CLOUD MUSIC 1 USD million Note: 1 Cloud Music Net Revenues and Gross Margin 4.1% 253 2Q21 12.2% Gross Margin Net Revenues 327 309 1Q22 13.0% 2Q22 US$1.00 RMB6.6981 on June 30, 2022. Same exchange rate is applied to all years for illustrative purpose • • Maintained strong growth in the second quarter despite macro-headwinds, with total revenues improving by 29% year-over-year to RMB2.2 billion Reached 182 million MAUS for our online music services, with the DAU/MAU ratio staying well above 30% Increased membership paying ratio to 21% Home to more than 500,000 registered independent artists, with 2.4 million music tracks created by them Enhanced our products and community features to bring premium experience to music lovers, including High Resolution Audio feature (and a social networking App called MUS Added multiple licensing agreements with major overseas and domestic music labels, such as SM Entertainment, TF Entertainment and YG Entertainment 網易 NETEASE#9INNOVATIVE BUSINESSES AND OTHERS 1 USD million Note: 1 Innovative Businesses and Others Net Revenues and Gross Margin 27.3% 21.7% 263 246 2Q21 1Q22 严选 Gross Margin Net Revenues 25.8% NetEase Yanxuan Leading private label consumer lifestyle brand in China Successively launched a variety of popular products in the second quarter, such as handmade vinegar and ergonomic chairs 279 SAS Internet Media NEWS 2Q22 US$1.00 RMB6.6981 on June 30, 2022. Same exchange rate is applied to all years for illustrative purpose E-mail Services www.163.com is one of China's most visited Internet portals, with strong user diversity, reach and stickiness Mobile News App is one of the most popular news apps in China • China's leading e-mail service provider since 1997 Nearly 500 million annual active users as of June 30, 2022 網易 NETEASE#10FINANCIAL HIGHLIGHTS 1 USD billion Note: 1 2 Net Revenues 8.8 11.0 13.1 FY2019 FY2020 2.6 FY2019 3.5 FY2021 Q2 2022 Operating Cash Flow 3.7 3.7 FY2020 FY2021 1.0 Q2 2022 US$ Net Income Attributable to Shareholders (GAAP) 3.2 1.8 2.5 I. 0.8 FY2019 FY2020 FY2021 Q2 2022 Value Returned to Shareholders FY2019 FY2020 FY2021 Q2 2022 Dividend per ADS (declared) $1.378 $0.784 $1.170 $0.360 Total Dividends (declared) 2 $1,334 m $515 m $777 m $236 m Share Buyback (mn) $0.2 m $1,625 m $1,974 m $330 m US$1.00 RMB6.6981 on June 30, 2022. Same exchange rate is applied to all years for illustrative purpose Total Dividends (declared) equals to Dividend per ADS (declared) multiplied by each quarter's corresponding Weighted average number of ADS outstanding, basic 網易 NETEASE#11ESG PERFORMANCE MSCI Ratings DJSI (Dow Jones Sustainability Index) Ratings Sustainalytics Ratings A 39 14.9 BBB BBB 18.0 BB 19 18.4 Environment 2.3 B Social 0.1 18 Governance 0.4 Governance Environment Social 23 23 25.9 ▲ 18 2018. 6 2019.6 2019. 11 2020. 12 2021. 11 2019 2020 2021 2018 2019 2020 2021 30% 19% 10% ■NTES 2021 DJSI Score DJSI Industry Average 16% 16% 47 39 37 9% 0% 23 21 CCC B BB BBB A AA AAA 18 17 13 CCC B BB BBB A AA AAA Industry Rank 45/993 Barely No Risk Low Risk Middle Risk High Risk Very High Risk Total Governance Environment Social 0-10 10-20 20-30 30-40 40+#12BALANCE SHEET SUMMARY in millions ASSETS Current assets: Cash and cash equivalents 2021 2022 Dec 31, RMB June 30, RMB (Unaudited) June 30, USD (Unaudited) 14,498 16,462 2,458 Time deposits 70,755 84,917 12,678 Other current assets 27,867 26,630 3,975 Total current assets 113,120 128,009 19,111 Property, equipment and software, net 5,434 6,022 899 Other non-current assets 35,090 34,149 5,099 Total assets 153,644 168,180 25,109 LIABILITIES, REDEEMABLE NONCONTROLING INTERESTS & SHAREHOLDERS' EQUITY Current liabilities: Contract liabilities 12,133 12,317 1,839 Other current liabilities 38,368 45,128 6,737 Total current liabilities 50,501 57,445 8,576 Total liabilities 54,220 63,273 9,446 Redeemable noncontrolling interests 145 143 Total shareholders' equity 99,279 104,764 21 15,642 Total liabilities, redeemable noncontrolling 153,644 168,180 25,109 interests and shareholders' equity 網易 NETEASE#13INCOME STATEMENT SUMMARY 2Q21 1Q22 2Q22 2Q22 QoQ YoY in millions except per ADS data & percentage data RMB RMB RMB USD Change Change (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Total net revenues: 20,525 23,556 23,159 3,458 -1.7% 12.8% Games and related value-added 15,775 18,642 18,140 2,708 -2.7% 15.0% services Youdao 1,293 1,201 956 143 -20.4% -26.1% Cloud Music 1,693 2,067 2,192 327 6.0% 29.5% Innovative businesses and others 1,764 1,646 1,871 280 13.7% 6.1% Gross profit 11,190 12,836 12,941 1,932 0.8% 15.6% Gross profit margin 54.5% 54.5% 55.9% 55.9% Operating profit 3,758 5,507 4,946 738 -10.2% 31.6% Operating profit margin 18.3% 23.4% 21.4% 21.4% Net income attributable to the 3,542 Company's shareholders 4,394 5,291 790 20.4% 49.4% Diluted net income per ADS ¥5.23 ¥6.63 ¥8.00 $1.19 20.7% 53.0% 網易 NETEASE Note: All percentages are calculated based on numbers in millions except per ADS data#14THANK YOU 網易 NETEASE