(Yicai) Aug. 15 -- NetEase’s stock price declined after the major Chinese video games developer failed to meet the market’s high expectations for second-quarter earnings growth.

NetEase [HKG: 9999] closed down 3.7 percent at HKD200.20 (USD25.60) a share in Hong Kong today. In New York yesterday, its stock [NASDAQ: NTES] fell 3.9 percent to end at USD129.67. Both hit record highs on July 23.

Net profit was CNY8.6 billion (USD1.2 billion) in the three months ended June 30, up 26 percent from a year earlier but down 17 percent on the first quarter, the Hangzhou-based company’s earnings report showed yesterday. Revenue logged a 9 percent year-on-year gain to CNY27.9 billion (USD3.9 billion) but fell 3 percent on a quarterly basis.

After NetEase delivered better-than-expected results for the first quarter, the market had raised its expectations for the following quarter, according to Dolphin Research, which is affiliated to stock trading app Longbridge.

First-quarter net profit jumped 35 percent to CNY10.3 billion on a 7 percent increase in revenue to CNY28.8 billion. The market had forecast revenue of CNY28.5 billion.

NetEase's revenue from gaming and related value-added services rose 14 percent to CNY22.8 billion in the June quarter, mainly thanks to horror mobile game Identity V and new titles Where Winds Meet and Marvel Rivals. Compared with the prior quarter, the figure was down 5 percent.

As one of the company’s new flagships this year, Where Winds Meet -- an open-world action role-playing game -- delivered solid overall numbers and outperformed pre-launch expectations for both active users and monetization, Chief Executive William Ding said on the firm’s the earnings call yesterday.

NetEase has been actively investing in artificial intelligence technology, which has already yielded notable results in the company's product development and operations, Ding noted, adding that AI is expected to help create more vivid and engaging games in the future.

Youdao, NetEase's online education business, had revenue of CNY1.4 billion, up 7 percent. Income from online music platform NetEase Cloud Music fell 4 percent to CNY2 billion, and that from the company's innovative and other businesses sank 18 percent to CNY1.7 billion.

Editors: Dou Shicong, Futura Costaglione