(Yicai) March 1 -- Shares of NetEase, one of China's biggest mobile video game makers, slid after the firm reported worse-than-expected earnings for the fourth quarter of last year as its flagship game Egg Party faced competition from rival products.

NetEase's Hong Kong-listed shares [HKG: 9999] closed 1.9 percent lower at HKD172.80 (USD22.07) each today, after tumbling by as much as 4.6 percent at the open. In New York yesterday, its stock [NASDAQ: NTES] fell 3.9 percent to end at USD107.92.

Net profit on the basis of non-generally accepted accounting principles was CNY7.4 billion (USD1 billion) in the three months ended Dec. 31, the Hangzhou-based company said in an earnings report yesterday. That compared with the average CNY8 billion predicted by analysts.

Net profit surged 65 percent to CNY6.6 billion, while revenue rose 7 percent to CNY27.1 billion (USD3.8 billion), versus an expected income of CNY28.2 billion.

NetEase's main rival Tencent Holdings debuted Dream Star last December, which shares similar gameplay with Eggy Party, a popular casual mobile game. Tencent has been heavily promoting the game, prompting NetEase to hike spending on advertising. NetEase's marketing costs surged 24 percent to CNY4.2 billion in the fourth quarter from a year earlier.

Eggy Party’s registered users have swelled to 500 million since its launch in 2022 and during last month’s lunar new year holiday, its daily active users exceeded 40 million.

“The success of games like Eggy Party and our heralded new titles, such as Racing Master and Dunk City Dynasty, highlights our ability to bring players dynamic and original products in multiple genres,” Chief Executive William Ding said in a statement.

NetEase’s full-year earnings hit record highs, with net profit jumping 45 percent to CNY29.4 billion (USD4.1 billion), thanks to the gaming business, and revenue rising 7.2 percent to CNY103.5 billion (USD14.6 billion).

NetEase's Cloud Music made its first annual profit of CNY734 million (USD102.3), though revenue fell 12 percent to CNY7.9 billion. The net loss at edtech unit Youdao shrank 24 percent to CNY549.9 million (USD77.5 million), while revenue rose 7.5 percent to CNY5.4 billion (USD759.1 million).

Editors: Dou Shicong, Martin Kadiev