NetEase Cloud Music (9899) Q2 2024 earnings summary

Executive summary

• Revenue grew 4.1% year-over-year to RMB4,070.5 million for the six months ended 30 June 2024, driven by strong growth in online music services and improved monetization of core offerings.

• Gross profit surged 47.7% year-over-year to RMB1,425.7 million, with gross margin rising to 35.0% from 24.7%, aided by economies of scale and a one-off copyright cost adjustment.

• Net profit reached RMB809.9 million, up 175.7% year-over-year; adjusted net profit (excluding share-based payments) was RMB880.7 million, up 165.4%.

• Online music subscription revenue rose 25.5% year-over-year, while social entertainment revenue declined 19.9% as focus shifted to core music business.

• The user base remained stable, with DAU/MAU ratio above 30% and strong engagement from online music subscribers.

Financial highlights

• Revenue: RMB4,070.5 million (+4.1% YoY); gross profit: RMB1,425.7 million (+47.7% YoY).

• Net profit: RMB809.9 million (+175.7% YoY); adjusted net profit: RMB880.7 million (+165.4% YoY).

• Gross margin improved to 35.0% from 24.7% YoY, with a 2.6 percentage point boost from a one-off copyright cost adjustment.

• Cost of revenue decreased by 10.1% YoY, mainly due to lower content service costs and a one-off licensing fee adjustment.

• Basic EPS: RMB3.88 (vs. RMB1.39 YoY); diluted EPS: RMB3.84 (vs. RMB1.38 YoY).

Outlook and guidance

• Plans to further diversify and enhance content offerings, deepen collaboration with copyright holders, and strengthen independent artist support.

• Focus on cultivating user willingness to pay, improving user experience, and driving profitability through scale and efficiency.

• Continued efforts to improve profitability through economies of scale and operational efficiency.