NetDragon Websoft (777) H2 2025 earnings summary

Executive summary

• Significant profitability recovery in H2 2025, driven by aggressive cost optimization, AI integration, and the 'AI Now' strategy, despite revenue pressures and macro challenges.

• Gaming business remains highly profitable and cash generative, with core profit margin up 3.9 ppts YoY and strong MAU growth for Eudemons IP (+11.1% YoY); education (Mynd.ai) positioned for future growth as markets stabilize.

• Expanded product lines and global reach, especially in emerging markets like Africa and Asia, supported by strategic partnerships with Volcengine, Thailand's MHESI, and Cameroon's MINESEC.

• Strong commitment to shareholder returns, including dividends and buybacks totaling at least HKD 600 million.

• MSCI ESG rating upgraded to A, reflecting sustainability achievements.

Financial highlights

• FY2025 revenue was RMB 4.5 billion, down 26% YoY; gross profit RMB 3.1 billion, down 20.2% YoY; gross margin improved by 5.1 ppts to 70.3%.

• Gaming and application services revenue was RMB 3.3 billion (-16.8% YoY); Mynd.ai revenue was RMB 1.2 billion (-43.2% YoY).

• Operating profit in H2 2025 grew 47.7% YoY to RMB 164 million; operating margin rose to 7.9%.

• Profit attributable to owners was RMB 151 million, down 51.4% YoY, impacted by one-off items: RMB 59 million Ethereum impairment and RMB 220 million severance payment.

• Adjusted profit attributable to owners rose 53.6% YoY to RMB 430 million, excluding one-off items.

Outlook and guidance

• Cost optimization benefits expected to be fully realized in 2026, supporting long-term value creation and market recovery, especially if geopolitical tensions ease.

• Plans to expand AI-native games portfolio and launch multiple new titles in 2026; Mynd.ai targets EBITDA breakeven via aggressive cost optimization and market recovery.

• Continued investment in AI, AR, and frontier technologies, with CapEx for 2025 to double YoY to RMB 300 million.

• Committed to a dividend of no less than HKD 1 and total shareholder return of at least HKD 600 million in 2026.