(Yicai) Feb. 12 -- NetEase shares fell in both Hong Kong and US trading after the Chinese company reported a 30 percent year-on-year drop in fourth-quarter net profit due to higher marketing expenses for online games.

NetEase’s Hong Kong-listed shares [HKG: 9999] closed 4.1 percent lower at HKD187 (USD23.90) today, after its US-listed stock [NASDAQ: NTES] dropped 4.1 percent to USD118.50 yesterday.

The Hangzhou-based firm posted net profit of CNY6.2 billion (USD892.6 million) for the three months ended Dec. 31, while revenue rose 3 percent year-on-year to CNY27.5 billion (USD3.9 billion), according to the company’s financial statement released yesterday.

Revenue from gaming and value-added services rose 4 percent to CNY22 billion. Income from online education platform Youdao and music streaming service Cloud Music increased 17 percent and 5 percent to CNY1.6 billion and CNY2 billion, respectively.

Total operating expenses climbed 11 percent year-on-year to CNY9.4 billion, primarily due to increased marketing spending on online games.

“We concluded 2025 with another healthy quarter, reflecting the durability of our long-term game operations and the growing impact of our global titles,” said William Ding, founder and chief executive.

“AI has become a foundational competency for our development and operations. We have been systematically applying AI throughout game development and gameplay, where it is already driving meaningful improvement in production efficiency and unlocking new interactive experiences for our players that were previously out of reach,” Ding noted.

During the quarter, long-running title Fantasy Westward Journey Online and newly launched games Where Winds Meet and Marvel Rivals contributed to revenue growth, the company said.

AI Debate Roils Gaming Industry

Earlier this month, US tech giant Google released its generative world model Genie 3, stirring debate in the gaming industry. Some industry insiders suggested that artificial intelligence could replace game engines and developers, significantly lowering development barriers and leading to sharp share price declines in recent days for game development platforms such as Unity and Roblox.

Addressing the issue during yesterday’s earnings call, Ding said the market has largely misunderstood AI’s impact on the gaming sector. While AI lowers the entry barrier for game production, it also significantly raises the success threshold for leading products, he said.

“How to perfectly integrate AI technology with complex digital systems, long-term economic models, and deep social ecosystems requires a profound understanding of game design and operational experience. This creates a significant barrier that is difficult for inexperienced newcomers to overcome,” Ding emphasized.

For the full year of 2025, NetEase’s net profit rose 14 percent year-on-year to CNY33.8 billion, while revenue increased 7 percent to CNY112.6 billion (USD16.1 billion), according to the earnings report.

Editors: Dou Shicong, Emmi Laine