NetEase

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report.
For the transition period from ___________ to __________
Commission file number: 000-30666
NETEASE, INC.
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
Cayman Islands
(Jurisdiction of incorporation or organization)
NetEase Building, No. 599 Wangshang Road
Binjiang District, Hangzhou, 310052
People’s Republic of China
(Address of principal executive offices)
Paul W. Boltz, Jr., General Counsel
Guoco Midtown #19-01
128 Beach Road, Singapore 189773
Phone +65 6980 0628
Email ir@service.netease.com
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange On Which Registered
American Depositary Shares, each representing five
ordinary shares, par value US$0.0001 per share
NTES
The Nasdaq Stock Market LLC

(NASDAQ Global Select Market)

Ordinary shares, par value US$0.0001 per share*

NASDAQ Global Select Market*
Ordinary shares, par value US$0.0001 per share
9999
The Stock Exchange of Hong Kong Limited
*Not for trading, but only in connection with the listing of American depositary shares on the NASDAQ Global Select Market.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)

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Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
NONE
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual
report:
3,167,959,016 ordinary shares, par value US$0.0001 per share.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☒ Yes ☐ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files).
☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected
not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of
the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting
Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒ Yes ☐ No
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements.   ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).   ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☒
    
International Financial Reporting Standards as issued

by the International Accounting Standards Board ☐
    
Other ☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to
follow:
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐ Yes ☐ No

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TABLE OF CONTENTS
Page
INTRODUCTION
1
PART I.
5
Item 1.
Identity of Directors, Senior Management and Advisors
5
Item 2.
Offer Statistics and Expected Timetable
5
Item 3.
Key Information
5
Item 4.
Information on the Company
68
Item 4A.
Unresolved Staff Comments
108
Item 5.
Operating and Financial Review and Prospects
109
Item 6.
Directors, Senior Management and Employees
140
Item 7.
Major Shareholders and Related Party Transactions
148
Item 8.
Financial Information
157
Item 9.
The Offer and Listing
158
Item 10.
Additional Information
158
Item 11.
Quantitative and Qualitative Disclosures About Market Risk
175
Item 12.
Description of Securities Other than Equity Securities
176
PART II.
180
Item 13.
Defaults, Dividend Arrearages and Delinquencies
180
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
180
Item 15.
Controls and Procedures
180
Item 16A. Audit Committee Financial Expert
181
Item 16B. Code of Ethics
181
Item 16C. Principal Accountant Fees and Services
181
Item 16D. Exemptions from the Listing Standards for Audit Committees
182
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
182
Item 16F.
Change in Registrant’s Certifying Accountants
182
Item 16G. Corporate Governance
183
Item 16H. Mine Safety Disclosure
183
Item 16I.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
183
Item 16J
Insider Trading Policies
183
Item 16K
Cybersecurity
183
PART III.
184
Item 17.
Financial Statements
184
Item 18.
Financial Statements
184
Item 19.
Exhibits
185

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1
INTRODUCTION
This annual report on Form 20-F includes our audited consolidated financial statements as of December 31, 2023 and 2024 and
for the years ended December 31, 2022, 2023 and 2024. Translations in this annual report of amounts from RMB into U.S. dollars for the
convenience of the reader were calculated at the noon buying rate of US$1.00:RMB7.2993 on the last trading day of 2024 (December 31,
2024) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board.
Conventions that Apply to This Annual Report on Form 20-F
Unless the context otherwise requires, references in this annual report on Form 20-F to:
●
“2009 RSU Plan” are to our 2009 Restricted Share Unit Plan adopted in November 2009;
●
“2019 Share Plan” are to our Amended and Restated 2019 Share Incentive Plan adopted in October 2019 and amended and restated
in February 2023;
●
“ADSs” are to the American depositary shares, each of which represents five ordinary shares;
●
“Blizzard” are to Blizzard Entertainment, Inc., a division of Activision Blizzard, which was acquired by Microsoft;
●
“Boguan” are to Guangzhou Boguan Telecommunication Technology Co., Ltd., a company established under PRC laws;
●
“CAC” are to the Cyberspace Administration of China;
●
“CCASS” are to the Central Clearing and Settlement System established and operated by HKSCC;
●
“CCGs” are to collectible card games;
●
“China” or the “PRC” are to the People’s Republic of China; and only in the context of describing PRC rules, laws, regulations,
regulatory authority and other legal, tax or finance matters in this annual report, such terms exclude Taiwan, Hong Kong and Macau
(also referred to as “China mainland” or “Chinese mainland” in this annual report);
●
“CSRC” are to the China Securities Regulatory Commission;
●
“GAPP” are to the General Administration of Press and Publication of China, currently known as the NPPA;
●
“Guangzhou NetEase” are to Guangzhou NetEase Computer System Co., Ltd., a company established under PRC laws;
●
“Hangzhou Leihuo” are to Hangzhou NetEase Leihuo Technology Co., Ltd. (formerly named Hangzhou NetEase Leihuo Network
Co., Ltd.), a company established under PRC laws;
●
“Hangzhou NetEase Cloud Music” are to Hangzhou NetEase Cloud Music Technology Co., Ltd., a company established under PRC
laws;
●
“Hangzhou Yuedu” are to Hangzhou Yuedu Technology Co., Ltd., a company established under PRC laws;
●
“HFCAA” are to the Holding Foreign Companies Accountable Act;
●
“HK$” or “HK dollars” are to the legal currency of Hong Kong;
●
“HKSCC” are to Hong Kong Securities Clearing Company Limited, a wholly-owned subsidiary of Hong Kong Exchange and
Clearing Limited;
●
“HNTEs” are to High and New Technology Enterprises;

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●
“Hong Kong Listing Rules” are to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as
amended or supplemented from time to time;
●
“Hong Kong Stock Exchange” are to The Stock Exchange of Hong Kong Limited;
●
“Hong Kong NetEase” are to Hong Kong NetEase Interactive Entertainment Limited, a company incorporated under Hong Kong
laws;
●
“ICP(s)” are to internet content provider(s);
●
“in-house developed games” are primarily to games developed solely by our game development teams as well as, in some instances,
games co-developed with our collaboration partners;
●
“MAUs” for Youdao are to the average of the monthly number of unique mobile or PC devices, as the case may be, through which
such product and service is accessed at least once in that month (duplicate access to different products and services is not eliminated
from the calculation) for a specific period with respect to each of Youdao’s products and services (except for smart devices). MAUs
for Youdao are calculated using internal company data, treating each distinguishable device as a separate MAU even though some
users may access Youdao’s products and services using more than one device and multiple users may access our services using the
same device;
●
“MMORPGs” are to massively multi-player online role-playing games;
●
“MII” and later “MIIT” are to the Ministry of Information Industry of China, which later became the Ministry of Industry and
Information Technology of China;
●
“MST” are to the Ministry of Science and Technology of China;
●
“MOC” and later “MOCT” are to the Ministry of Culture of China which later became the Ministry of Culture and Tourism of
China;
●
“MOE” are to the Ministry of Education of China;
●
“MOFCOM” are to the Ministry of Commerce of China;
●
“NCIIC” are to the Ministry of Public Security’s National Citizen Identity Information Center of China;
●
“NDRC” are to the National Development and Reform Commission of China;
●
“NetEase Cloud Music” are to NetEase Cloud Music Inc. (formerly named Cloud Village Inc. and Cloud Music Inc.), a company
incorporated under Cayman Islands laws, and listed on the Hong Kong Stock Exchange under the stock code “9899” in December
2021 and a majority-controlled subsidiary of our company; and when italicized are to NetEase Cloud Music Inc.’s music streaming
platform or brand;
●
“NetEase Hangzhou” are to NetEase (Hangzhou) Network Co., Ltd., a company established under PRC laws;
●
“NMT” are to neural machine translation;
●
“NPPA” are to the National Press and Publication Administration of China;
●
“NRTA” are to the National Radio and Television Administration of China;
●
“OCR” are to optical character recognition;

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3
●
“our company” are to NetEase, Inc., which is not a PRC operating company but a Cayman Islands holding company with operations
primarily conducted through (i) our China mainland subsidiaries and (ii) contractual arrangements with the variable interest entities,
or the VIEs, based in China mainland. This structure entails unique risks to investors, see Item 3.D. “Key Information—Risk Factors
—Risks Related to Our Corporate Structure” for additional information;
●
“R&D” are to research and development;
●
“RMB” or “Renminbi” are to the legal currency of the People’s Republic of China;
●
“RPGs” are to role-playing games;
●
“PBOC” are to the People’s Bank of China;
●
“PCAOB” are to the U.S. Public Company Accounting Oversight Board;
●
“SAFE” are to the State Administration of Foreign Exchange of China;
●
“SAIC” are to the State Administration for Industry and Commerce of China, currently known as SAMR;
●
“SAMR” are to the State Administration for Market Regulation of China;
●
“SAPPRFT” are to the State Administration of Press, Publication, Radio, Film and Television of China, formerly the General
Administration of Press and Publication of China and the State Administration of Radio, Film and Television of China, and since
March 2018 has been reformed and became the National Radio and Television Administration and the National Press and
Publication Administration (National Copyright Administration);
●
“SARFT” are to the State Administration of Radio, Film and Television of China;
●
“SCIO” are to the State Council Information Office of China;
●
“SEC” are to the United States Securities and Exchange Commission;
●
“SFO” are to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended or supplemented from
time to time;
●
“shareholder(s)” are to holder(s) of shares and, where the context requires, ADSs;
●
“share(s)” or “ordinary share(s)” are to ordinary share(s) of our company with par value of US$0.0001 per share;
●
“SLGs” are to simulation games;
●
“STA” are to the State Taxation Administration of China;
●
“State Council” are to the State Council of China;
●
“US$,” “dollars” and “U.S. dollars” are to the legal currency of the United States;
●
“U.S. Exchange Act” or “Exchange Act” are to the United States Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder;
●
“U.S. GAAP” are to accounting principles generally accepted in the United States;

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●
“we,” “us,” “our,” “NetEase” or “NetEase group” are to NetEase, Inc., its subsidiaries, and, in the context of describing our
operations and consolidated financial information, the VIEs in China mainland, including, but not limited to, Guangzhou NetEase,
Hangzhou Leihuo, Youdao Computer and Hangzhou Yuedu; all of the VIEs are domestic companies incorporated in China mainland
in which we do not have any equity ownership but whose financial results have been consolidated into our consolidated financial
statements based solely on contractual arrangements in accordance with U.S. GAAP. See Item 4.B. “Information on the Company—
Business Overview—Our Organizational Structure” for an illustrative diagram of our corporate structure;
●
“Youdao” are to Youdao, Inc., a company incorporated under Cayman Islands laws, and listed on The New York Stock Exchange
under the symbol “DAO” in October 2019 and a majority-controlled subsidiary of our company;
●
“Youdao Computer” are to Beijing NetEase Youdao Computer System Co., Ltd., a company established under PRC laws; and
●
“Youdao Information” are to NetEase Youdao Information Technology (Beijing) Co., Ltd., a company established under PRC laws.
Trademarks and Service Marks
We own or have been licensed the rights to trademarks, service marks and trade names for use in connection with the operation
of our business. All other trademarks, service marks or trade names appearing in this annual report that are not identified as marks owned
by us are the property of their respective owners.
Solely for convenience, some trademarks, service marks and trade names referred to in this annual report are listed without the
®, (TM) and (sm) symbols, but we will assert, to the fullest extent under applicable law, our applicable rights in these trademarks,
service marks and trade names.
Forward-Looking Information
This annual report on Form 20-F contains statements of a forward-looking nature. These statements are made under the “safe
harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by
terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar expressions. The
accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ
materially from those projected or anticipated, including:
●
the risk that the online game market, including mobile games and PC games, will not continue to grow or that we will not be able to
maintain our leading position in that market, which could occur if, for example, our new online games or expansion packs and other
improvements to such existing games do not become as popular as management anticipates;
●
the risk that we will not be successful in our product diversification efforts, including the expansion of our mobile and other games
into overseas markets, our entry into strategic licensing arrangements and the expansion of our streaming music offerings and online
education services;
●
the risk of changes in government regulation of the online game, online education, online music, live streaming, e-commerce or
online advertising markets in China or other markets where we operate that limit future growth of our revenues or cause our
revenues to decline;
●
the risk that we may not be able to continuously develop new and creative online services or that we will not be able to set, or follow
in a timely manner, trends in the market;
●
the risk that we will not be able to control our expenses in future periods;
●
the risks related to governmental uncertainties (including possible changes in the effective tax rates applicable to us and our
subsidiaries and affiliates and our ability to receive and maintain approvals of the preferential tax treatments), general competition
and price pressures in the marketplace;
●
the risks related to economic uncertainty and capital market disruption, which are significantly impacted by rising inflation and
geopolitical instability;

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●
the risks related to the expansion of our businesses and operations internationally;
●
the risk that fluctuations in the value of the Renminbi with respect to other currencies could adversely affect our business and
financial results; and
●
other risks outlined in our filings with the SEC.
We do not undertake any obligation to update this forward-looking information, except as required under applicable law.
PART I.
Item 1.   Identity of Directors, Senior Management and Advisors
Not applicable.
Item 2.   Offer Statistics and Expected Timetable
Not applicable.
Item 3.   Key Information
Our Corporate Structure and Contractual Arrangements with the Variable Interest Entities
NetEase, Inc. is not a PRC operating company but a Cayman Islands holding company with operations primarily conducted
through (i) our subsidiaries incorporated in China mainland, or China mainland subsidiaries, and (ii) contractual arrangements with the
VIEs based in China mainland. Under current PRC laws, investors may not hold equity interests in our operating companies incorporated
or based in China mainland. Our online games, music streaming, online intelligent learning services and internet content services
businesses in China mainland have been conducted through the applicable VIEs in order to comply with the laws and regulations of
China mainland, which restrict and impose conditions on foreign direct investment in companies involved in the provision of such
businesses. Accordingly, we operate these businesses in China mainland through the VIEs, and rely on contractual arrangements among
NetEase, Inc., our China mainland subsidiaries, the VIEs and their nominee shareholders to control the business operations of the VIEs.
In 2022, 2023 and 2024, the amount of revenues generated by the VIEs accounted for 86.4%, 87.7% and 87.2%, respectively, of our total
net revenues. Total assets of the VIEs, excluding amounts due from other companies in the NetEase group, represented 7.1% and 6.1% of
our consolidated total assets as of December 31, 2023 and 2024, respectively. As used in this annual report, “our company” refers to
NetEase, Inc., whereas “we,” “us,” “our,” “NetEase” or “NetEase group” refers to NetEase, Inc., its subsidiaries, and, in the context of
describing our operations and consolidated financial information, the VIEs in China mainland. All of the VIEs are domestic companies
incorporated in China mainland in which we do not have any equity ownership, but their financial results have been consolidated into our
consolidated financial statements based solely on contractual arrangements in accordance with U.S. GAAP. Investors in our ADSs or
ordinary shares are not purchasing equity interests in the VIEs in China mainland but instead are purchasing equity interests in a holding
company incorporated in the Cayman Islands.
Our subsidiaries, the VIEs and their nominee shareholders have entered into a series of contractual agreements. These
contractual arrangements:
●
enable us to receive the economic benefits that could potentially be significant to the VIEs in consideration for the services
provided by our subsidiaries; and
●
effectively assigned all of the voting rights underlying the nominee shareholders’ equity interest in the VIEs to us.

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These contractual arrangements among NetEase, Inc., our subsidiaries, the VIEs and their nominee shareholders generally
include shareholder voting rights trust agreements, loan agreements, operating agreements or cooperation agreements, license agreements
and purchase and equity pledge agreements. For additional information on these contractual arrangements, see Item 7.B. “Major
Shareholders and Related Party Transactions—Related Party Transactions—Material VIE Agreements.” As a result of the contractual
arrangements, the shareholders of the VIEs effectively assigned all of their voting rights underlying their equity interests in the VIEs to
the primary beneficiaries of these companies, which gives our company or its subsidiaries the power to direct the activities that most
significantly impact the VIEs’ economic performance. However, the contractual arrangements may not be as effective as direct
ownership in providing us with control over the VIEs, and we may incur substantial costs to enforce the terms of the arrangements. If the
VIEs or the nominee shareholders fail to perform their respective obligations under the contractual arrangements, we could be limited in
our ability to enforce the contractual arrangements that effectively assigned us the voting rights in the VIEs. As of the date of the filing of
this annual report, the contractual arrangements with the VIEs have not been tested in a court of law in China mainland and this structure
may involve unique risks to investors. Furthermore, if we are unable to maintain such effective assignment, we would not be able to
continue to consolidate the financial results of these entities in our financial statements. See Item 3.D. “Key Information—Risk Factors
—Risks Related to Our Corporate Structure.”
The interpretation and application of current and future laws, regulations and rules of China mainland regarding the status of the
rights of our Cayman Islands holding company with respect to its contractual arrangements with the VIEs and their nominee shareholders
may change from time to time. It is uncertain whether any new laws or regulations of China mainland relating to variable interest entity
structures will be adopted. If we or any of the VIEs are found to be in violation of any existing or future laws or regulations of China
mainland, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities may take action
in dealing with such violations or failures in accordance with applicable laws and regulations, which may result in a material change in
our operations and could cause the value of the securities of NetEase, Inc. to significantly decline. See Item 3.D. “Key Information—
Risk Factors—Risks Related to Our Corporate Structure—There are uncertainties regarding the interpretation and application of current
and future PRC laws, regulations, and rules relating to the agreements that establish the VIE structure for our operations in China,
including potential future regulatory actions pursuant to the laws and regulations in force at that time, which could affect the
enforceability of our contractual arrangements with the VIEs and, consequently, significantly affect the financial condition and results of
operations of NetEase. If the PRC government finds such agreements non-compliant with relevant PRC laws, regulations, and rules, or if
these laws, regulations, and rules or the interpretation thereof change in the future, we could be subject to severe penalties or be forced to
relinquish our interests in the VIEs.”
Although the Foreign Investment Law of the PRC does not explicitly classify contractual arrangements as a form of foreign
investment, the definition of “foreign investment” thereunder is relatively wide and contains a catch-all provision which includes
investments made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the
State Council. Therefore, there is no assurance that foreign investment via contractual arrangement would not be interpreted as a type of
indirect foreign investment activity in the future. If any of the VIEs were deemed a foreign invested enterprise under any such future
laws, administrative regulations or provisions and any of our businesses would be included in any negative list or other form of
restrictions on foreign investment, we may need to take further actions to comply with such future laws, administrative regulations or
provisions. Such actions may have a material and adverse impact on our business, financial condition, result of operations and prospects.
In addition, if the PRC regulatory authorities were to find our legal structure and contractual arrangements to be in violation of any laws,
administrative regulations or provisions of China mainland, we are uncertain what impact any consequent PRC regulatory authorities’
actions would have on us and our ability to consolidate the VIEs in the consolidated financial statements. For more details, see Item 3.D.
“Key Information—Risk Factors—Risks Related to Our Corporate Structure—Our current corporate structure and business operations
may be affected by the Foreign Investment Law.”
The necessary licenses to conduct many of our businesses in China mainland, including to operate our online games, music
streaming, online intelligent learning services and internet content services businesses, are held by the VIEs and, as noted above, a
significant part of our revenues are generated by the VIEs. An event that results in the deconsolidation of the VIEs would have a material
effect on our operations and result in the value of the securities of our company diminishing substantially or even become worthless. Our
company, our China mainland subsidiaries, the VIEs and investors of our company face uncertainty about potential future actions
pursuant to the laws and regulations in force at that time that could affect the enforceability of the contractual arrangements with the
VIEs and, consequently, significantly affect the financial performance of the VIEs and our company as a whole. NetEase, Inc. may not be
able to repay its indebtedness and the ADSs or ordinary shares of our company may decline in value or become worthless if we are
unable to assert our contractual control rights over the assets of our China mainland subsidiaries and the VIEs that conduct a major
portion of our operations. For a detailed description of the risks associated with our corporate structure, please refer to risks disclosed
under Item 3.D. “Key Information—Risk Factors—Risks Related to Our Corporate Structure.”

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The PRC government has significant authority to exert influence on the ability of a China-based company, like us, to conduct its
business, accept foreign investments or be listed on a U.S. stock exchange. We also face risks associated with recent statements and
regulatory actions by the PRC government, including those related to regulatory approvals of offshore securities offerings, anti-
monopoly regulatory investigations and actions, cybersecurity and data privacy compliance. For example, the PRC government has
recently indicated an intent to exert more oversight over overseas securities offerings and published a series of laws and regulations to
regulate such transactions. If the CSRC, CAC or other PRC regulatory agencies determine that prior approval is required for any of our
offerings of securities overseas or maintenance of the trading status of our ADSs or ordinary shares, we cannot guarantee that we will be
able to obtain such approval in a timely manner, or at all. The CSRC, CAC or other PRC regulatory agencies may also take actions
requiring us, or making it advisable for us, not to proceed with such offerings or maintain the trading status of our ADSs or ordinary
shares. If we proceed with any of such offering or maintain the trading status of our ADSs or ordinary shares without obtaining the
CSRC’s, CAC’s or other PRC regulatory agencies’ approval to the extent it is required, or if we are unable to comply with any new
approval requirements which might be adopted for offerings that we have completed, we may face regulatory actions or other sanctions
from the CSRC, CAC or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in
China, limit our ability to pay dividends outside of China or accept foreign investments, delay or restrict the repatriation of the proceeds
from offering of securities overseas into China or take other actions that could have a material adverse effect on our business, financial
condition, results of operations and prospects, as well as the trading price of our ordinary shares or ADSs.
The PRC government has published new policies that affect various industries in recent years, including industries in which we
operate, and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could
adversely affect our business, financial condition and results of operations. Any such action, once taken by the PRC government, could
cause the value of our securities to significantly decline or become worthless and could significantly limit or completely hinder our
ability to offer or continue to offer securities to investors.
For more information on the permissions required from the PRC authorities for our operations and offerings, please also see
Item 4.B. “Information on the Company—Business Overview—Permissions Required from the PRC Authorities for Our Operations and
Offerings.”
For information on transfers of funds within the NetEase group, certain financial information of NetEase, Inc., its subsidiaries
and the VIEs and the restrictions on foreign exchange and the ability to transfer cash between entities, across borders and to U.S.
investors, see Item 5.B. “Operating and Financial Review and Prospects—Liquidity and Capital Resources—Transfer of Funds” and
“Operating and Financial Review and Prospects—Liquidity and Capital Resources—Management of Capital Resources,” Item 10.E.
“Additional Information—Taxation” and Item 10.D. “Additional Information—Exchange Controls.”

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8
The Holding Foreign Companies Accountable Act
Pursuant to the HFCAA, if the SEC determines that we have filed audit reports issued by a registered public accounting firm
that has not been subject to inspections by the PCAOB for two consecutive years, the SEC will prohibit our shares or the ADSs from
being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 16, 2021, the
PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered
public accounting firms headquartered in China mainland and Hong Kong, including our auditor. In May 2022, the SEC conclusively
listed us as a Commission-Identified Issuer under the HFCAA following the filing of our annual report on Form 20-F for the fiscal year
ended December 31, 2021. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and
removed China mainland and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered
public accounting firms. As of the date of this annual report, the PCAOB has not issued any new determination that it is unable to inspect
or investigate completely registered public accounting firms headquartered in any jurisdiction. For this reason, we do not expect to be
identified as a Commission-Identified Issuer under the HFCAA after we file this annual report on Form 20-F. Each year, the PCAOB will
determine whether it can inspect and investigate completely audit firms in China mainland and Hong Kong, among other jurisdictions. If
the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in China
mainland and Hong Kong and we continue to use an accounting firm headquartered in one of these jurisdictions to issue an audit report
on our financial statements filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the
annual report on Form 20-F for the relevant fiscal year. There can be no assurance that we would not be identified as a Commission-
Identified Issuer for any future fiscal year, and if we were so identified for two consecutive years, we would become subject to the
prohibition on trading under the HFCAA. See Item 3.D. “Key Information—Risk Factors—Risks related to Our ADSs and Shares—The
PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the
inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections.”
and Item 3.D. “Key Information—Risk Factors—Risks related to Our ADSs and Shares—Our ADSs may be prohibited from trading in
the United States under the HFCAA in the future if the PCAOB is unable to inspect or fully investigate auditors located in China. The
delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.”
A.               [Reserved]
B.               Capitalization and Indebtedness
Not applicable.
C.               Reasons for the Offer and Use of Proceeds
Not applicable.
D.               Risk Factors
Summary of Risk Factors
An investment in our ADSs or ordinary shares involves significant risks. Below is a summary of material risks we face,
organized under relevant headings. All the operational risks associated with being based in and having operations in China mainland also
apply to operations in Hong Kong. With respect to the legal risks associated with being based in and having operations in China
mainland, the laws, regulations and the discretion of China mainland governmental authorities discussed in this annual report are
expected to apply to China mainland entities and businesses, rather than entities or businesses in Hong Kong, which operate under a
different set of laws from China mainland. These risks are discussed more fully in Item 3.D. “Key Information—Risk Factors.”
Risks Related to Our Business and Industry
●
Risks Related to Our Games and Related Value-added Services;
●
Risks relating to developing new online games and growing the popularity of existing online games;
●
Risks relating to claims regarding our gaming contents resulting in negative publicity or a governmental response;

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9
●
Risks relating to additional restrictions to limit online game playing by the Chinese government;
●
Risks relating to uncertainties in obtaining approval for new games;
●
Risks relating to laws, regulations policies and guidelines applicable to the live streaming and online entertainment
industries;
●
Risks relating to international operations of our online games;
●
Risks relating to third-party platforms that distribute our mobile games and collect payments;
●
Risks relating to maintaining our existing licenses of game or intellectual property;
●
Risks relating to illegal game servers, acts of cheating by players and sales and purchases by players of our game accounts
and virtual items through third-party auction websites;
●
Risks Related to Our Other Businesses;
●
Risks relating to Youdao business’s compliance with the relevant after-school tutoring regulations and rules issued by the
relevant PRC government authorities;
●
Risks relating to changes in user acceptance of Youdao, and market trend of integration of technology and learning, and the
development and application of Youdao’s technologies to support and expand its product and services;
●
Risks relating to changes in Youdao’s business strategies and offerings;
●
Risks relating to obtaining legal and regulatory approvals, licenses or permits of our intelligent learning, music streaming,
e-commerce, advertising and other innovative businesses;
●
Risks relating to obtaining licenses for the music content necessary to provide our music streaming services, and our ability
to attract and retain users;
●
Risks relating to generating and maintaining significant advertising revenue;
●
Risks relating to growing our e-commerce business;
●
Risks Related to Our Operations Overall;
●
Risks relating to competing successfully against new entrants and established industry competitors and keeping up with
rapid changes in technologies and user behavior and innovating and exploring new areas of operations;
●
Risks relating to gross profit margin and profitability affected by changes in our mix of revenues;
●
Risks relating to credit risk on our accounts receivable;
●
Risks relating to a prolonged slowdown in the economies of the countries or regions where we operate;
●
Risks relating to economic uncertainty and capital market disruptions caused by rising inflation and geopolitical instability;
●
Risks relating to compliance with laws and other obligations regarding data protection in China and outside of China;
●
Risks relating to breaches of our information technology systems and system failure or performance inadequacy that causes
interruptions of our services;

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●
Risks relating to our ability to retain our existing key employees and to add and retain qualified senior and mid-level
managers to our management;
●
Risks relating to natural disasters, widespread public health problems, other outbreaks and epidemics and other events;
●
Risks relating to the expansion of our businesses and operations internationally;
●
Risks relating to being deemed an “Investment Company” under the Investment Company Act of 1940.
Risks Related to Our Corporate Structure
●
Risks relating to regulatory changes relating to the contractual arrangements with the VIEs and the viability of our current
corporate structure, corporate governance and business operations;
●
Risks relating to maintaining operational control of the VIEs through contractual arrangements;
●
Risks relating to the shareholders who have significant influence over our company and the VIEs;
●
Risks relating to our arrangements with the VIEs.
Risks Related to Doing Business in China
●
Risks relating to China’s political and economic policies;
●
Risks relating to compliance with and changes in PRC laws and regulations relating to telecommunications, internet,
foreign investment, tax, online games, virtual asset property rights, consumer protection and financial transactions;
●
Risks relating to claims and liabilities based on the information and content on our platforms;
●
Risks relating to uncertainties with respect to the interpretation and implementation of the anti-monopoly related laws in
the field of internet platforms;
●
Risks relating to our ability to protect our intellectual property from being infringed;
●
Risks relating to currency exchange rates.
Risks Related to Our ADSs and Shares
●
Risks relating to being prohibited from trading on Nasdaq under the HFCAA if the PCAOB cannot continue to inspect our
independent registered public accounting firm for two consecutive years;
●
Risks relating to the volatility of the trading price of our ADSs and shares;
●
Risks relating to the different listing rules and regulations that apply to us;
●
Risks relating to the limitation of the voting, inspection and other rights of holders of ADSs.
You should carefully consider the following risk factors in addition to the other information set forth in this annual report. If any
of the following risks were actually to occur, our business, financial condition and results of operations prospects could be adversely
affected and the value of our ADSs and shares would likely suffer.

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11
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
Risks Related to Our Games and Related Value-added Services
If we fail to develop and introduce popular, high-quality online games in a timely and successful manner, we will not be able to
compete effectively and our ability to generate revenues will suffer.
We operate in a highly competitive, quickly changing environment, and player preferences for online games are difficult to
predict. Our future success depends not only on the popularity of our existing online games but also on our ability to develop new high-
quality online games and expand our game portfolio with games in a variety of genres that are in line with market trends and to
successfully monetize such games. The development of successful new online games can be challenging and requires high levels of
innovation, a deep understanding of the online game industry in China and the other markets where our games are published (including
with respect to evolving business models), and an ability to anticipate and effectively respond to changing interests and preferences of
game players in a timely manner. Moreover, each of our new games requires long periods of time for R&D and testing and also typically
experiences a long ramp-up period as players become familiar with the game. If we are unsuccessful in developing and introducing new
online games that are appealing to players with acceptable pricing and terms, our business, financial condition and results of operations
will be negatively impacted because we would not be able to compete effectively and our ability to generate revenues would suffer.
In addition, new technologies in online game programming or operations could render our current online titles or games in
development obsolete or unattractive to our players, thereby limiting our ability to recover development costs and potentially adversely
affecting our future revenues and profitability. For example, in the past, when the gaming industry was transitioning to mobile games, we
began devoting significant resources to developing games that can be operated on mobile devices. As of December 31, 2024, we had
commercially launched approximately 100 mobile games, including the Fantasy Westward Journey mobile game, Westward Journey
Online mobile game, Infinite Borders (previously known as Invincible), Identity V, Eggy Party and Justice mobile game. While we
continue to invest in mobile games, the market for mobile games is rapidly evolving with games in an expanding range of genres being
introduced by us and our competitors, and we cannot guarantee that we will be able to effectively compete in the mobile game market.
Additionally, we have launched Naraka: Bladepoint and, more recently, Marvel Rivals on Xbox and on PlayStation consoles, with plans
to launch additional console games in the future. We will also need to continue investing in the development of new technologies and
bring new features and functionalities to our games, as well as enhance the user experience on our various platforms.
We are not able to predict if or when we will commercially launch additional new games and the pace at which our new games
will penetrate the online game market in China or elsewhere, if at all. A number of factors, including technical difficulties, lack of
sufficient game development capabilities, personnel and other resources and failure to obtain or delays in obtaining relevant
governmental authorities’ approvals could result in delayed launching of our new games or the cancellation of the development of our
pipeline games. Any delays in product releases or problems arising following the commercial release of one or more new online games
such as programming errors, or “bugs,” could negatively impact our business and reputation and could cause our results of operations to
be materially different from expectations. We believe that expectations of players regarding the quality, performance and integrity of our
online games and services are high, and if any of these issues occurs, players may stop playing our online games and may be less likely
to return to such games as often in the future, which may negatively impact our business.
If we are unable to continue to extend the life of existing online games that will encourage continued engagement with the games
through the addition of new features or functionalities, our business may be negatively impacted.
To prolong the lifespan of our online games, we need to continually improve and update them on a timely basis with new
features and functionalities that appeal to existing game players, attract new game players and improve overall player loyalty to such
games. As a result, we have devoted, and expect to continue to devote, significant resources to maintain and raise the popularity of our
online games through the release of new versions and/or expansion packs on a periodic basis. Developing successful updates and
expansion packs for our existing games depends on our ability to anticipate market trends in the online game industry. We must also
collect and analyze player behavior data and feedback from our online community in a timely manner, and we must utilize this
information to effectively incorporate features into our updates and expansion packs to improve the variety and attractiveness of our
gameplay and any virtual items sold within the games.

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In the course of operating online games, including the release of updates and expansion packs to existing games, certain game
features may periodically be introduced, changed or removed. We cannot assure you that the introduction, change or removal of any
game feature will be well received by our game players, who may decide to reduce or eliminate their playing time in response to any
such introduction, change or removal. As a result, any introduction, change or removal of game features may adversely impact our
business, financial condition and results of operations.
We are unable to predict whether these activities will be successful or adversely affect our profitability given the significant
resources required. Moreover, because of the rapidly evolving nature of the online games market in China and elsewhere, we cannot
estimate the total life cycle of any of our games, particularly our more recently launched mobile or PC games, and changes in players’
tastes or in the overall market for online games in China and elsewhere could alter the life cycle of each version or upgrade or even cause
our players to stop playing our games altogether.
The Chinese government has taken steps to limit online game playing time for all minors and to otherwise control the content
and operation of online games.
As part of its anti-addiction online game policy, the Chinese government has taken several steps to discourage minors under the
age of 18 from continuously playing online games once they exceed a set number of hours of continuous play. For a detailed description
of these regulations, see Item 4.B. “Information on the Company—Business Overview—Government Regulations—Regulations on
Online Games.”
Pursuant to the Law of the PRC on the Protection of Minors, or the Minors Protection Law, issued by the National People’s
Congress Standing Committee on September 4, 1991 and last amended on April 26, 2024, online game service providers are required to
classify game products in accordance with relevant regulations and standards, give age-appropriate tips and take technical measures to
prevent minors from accessing improper games or game functions. Violations of the Minors Protection Law could result in rectification,
confiscation of illegal gains and penalties. In 2019, the GAPP restricted play of online gamers under 18 years old to 90 minutes on
weekdays and three hours on weekends. In September 2021, the Chinese government and regulatory authorities further limited the play
of online gamers under 18 by prohibiting play on weekdays and limiting playing for one hour a day on Fridays, Saturdays, Sundays and
PRC statutory holidays. In addition, all online games must be connected to the real-name verification system for anti-addiction to online
games operated by the NPPA, and online game operators may not provide game services in any form to any users without real-name
registration and login. Furthermore, online transactions of minors in games are capped monthly at certain amounts, depending on a
minor’s age.
We have updated our anti-addiction systems accordingly to comply with the above-mentioned requirements in all material
respects. We do not believe that the above-mentioned requirements have had or will have any material impact on our gaming operations
because minors comprise only a small percentage of our total user base, but we cannot assure you that any future regulations or
restrictive rules will not adversely affect our operations.
On December 22, 2023, the NPPA publicly solicited opinions on the Draft Administrative Measures for Online Games which, if
adopted, would stipulate, among other requirements, that online game publishers and operators (i) may not publish and operate online
games that make participation in battles compulsory; (ii) may not provide inducement rewards such as daily logins, first recharges, and
continuous recharges, and must set user recharge limits; (iii) may not allow the payment of large monetary rewards in the live streaming
of online games; and (iv) may not allow minors to pay monetary rewards in online games live streaming or provide loot boxes to minors.
For more information, see Item 4.B. “Information on the Company—Business Overview—Government Regulations—Regulations on
Online Games.” As of the date of the filing of this annual report, the Draft Administrative Measures for Online Games have not been
formally adopted. It remains unclear whether a formal version will be adopted in the future and whether the adopted formal version (if
any) will have any further material changes, and it is uncertain how the measures would be enacted, interpreted or implemented and how
they will affect us.

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On October 16, 2023, the State Council promulgated the Regulation on the Protection of Minors in Cyberspace, which took
effect on January 1, 2024. This regulation establishes measures that online game service providers must implement to protect minors,
including, among other things, verifying the identity information of minor users, reasonably restricting minors’ network service
expenditure based on their age groups and setting and optimizing game rules to prevent minors from cyber addiction. As of the date of
the filing of this annual report, we have implemented measures to comply with the requirements outlined in this regulation in all material
aspects. Moreover, on November 15, 2024, the CAC issued the Guidelines for the Construction of Minors Mode in Mobile Internet.
These guidelines outline an overall plan for developing a “minors mode,” which requires mobile smart terminals, mobile internet
applications and related distribution platforms to collaborate and improve management of online content, as well as the time minors
spend online. When a device is set to “minors mode,” it will feature preset limits on the duration and type of content minors can access,
along with options to customize these settings, so as to prevent internet addiction and support parents in supervising their children’s
online activities. The spending of minors in games may be further restricted alongside the establishment of the minors mode. We are
currently developing the minors mode together with mobile smart terminals and related distribution platforms. However, given that these
guidelines and the Regulation on the Protection of Minors in Cyberspace are relatively new, there remain uncertainties as to their
interpretation and application.
Any difficulties in receiving approval from the relevant government authorities for our new games or new expansion packs for,
or material changes to, our existing games could adversely affect such games’ popularity and profitability.
All games we release in China require government approvals. Moreover, even after certain games have received government
approvals, certain expansion packs with material changes to the content and additions to the descriptions of those games may require
further government approvals. We cannot be certain of the duration of any necessary approval processes, and if we are unable to receive
government approvals within an expected timeframe, the profitability and popularity of such games could be affected. Game approvals
have experienced certain suspensions in the past, during which periods the PRC game regulatory authority, the NPPA, did not release any
new domestic online game approvals. We cannot predict whether there will be any similar suspension in the future, and the effect any
future suspension may have on our results of operations. Moreover, we are required to have an Online Publishing Service License issued
by the NPPA so that we can obtain any such approvals by ourselves. Our current license has expired, and we are in the process of
renewing it, although we cannot be certain if or when such renewal will be granted. During this renewal period, we have engaged
licensed third parties to obtain such approvals, and our operations have not been materially affected.
The content and mechanics of our games are subject to a variety of laws and regulations in China mainland and elsewhere, many
of which are unsettled and still developing, which could subject us to claims or otherwise adversely affect our business, financial
condition and results of operations.
We are subject to a variety of laws in China mainland and abroad that affect our game business, particularly laws regarding
content suitability, consumer protection, and protection of minors, which are continuously evolving and developing. The scope and
interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting. There is a risk that existing or
future laws may be interpreted in a manner that is not consistent with our current practices and which could adversely affect our business.
It is also likely that as our business grows and evolves and our games are played in a greater number of countries, we will become
subject to laws and regulations in additional jurisdictions or other jurisdictions may claim that we are required to comply with their laws
and regulations.
Our games are subject to regulations regarding the appropriateness of their content. For example, the Chinese government and
regulatory authorities prohibit any internet content that, among other things, violates PRC laws and regulations, endangers the national
security of China, or is obscene, superstitious, violent or defamatory. When ICPs and internet publishers, including online game
operators, find that information falling within the above-mentioned scope is transmitted on their websites or is stored in their electronic
bulletin service systems, they are required to terminate the transmission of such information or delete such information immediately,
keep records, and report to relevant authorities. Failure to comply with these requirements could result in the revocation of our ICP
license and other required licenses to operate our business. ICPs like us may also be held liable for prohibited information displayed on,
retrieved from or linked to their websites. In addition, any claim of us failing to comply with these prohibitions may result in negative
publicity and government actions, which in turn could have a material and adverse impact on our business. Additionally, the Chinese
government has enacted regulations that prohibit online game service providers from providing content for minors that might induce
addiction, and allowing minors to access improper games or game functions. See “—The Chinese government has taken steps to limit
online game playing time for all minors and to otherwise control the content and operation of online games” above.

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In addition, there are ongoing academic, political and regulatory discussions in many jurisdictions around the globe regarding
whether certain game genres, or certain game mechanics such as “loot boxes”, should be subject to a higher level or different type of
regulation than other game genres or mechanics to protect consumers, and, if so, what such regulation should include. Several
jurisdictions have been regulating and continue to regulate the use of loot boxes in games. For example, China mainland has been
developing and tightening regulations on the offering of loot boxes in recent years, including, among other things, that loot boxes cannot
be acquired with real money or virtual currency, and the odds of winning must be published. Loot boxes are a commonly used
monetization technique in games where a player can acquire a virtual loot box, typically through game play or by in-game purchases, but
the player does not know which virtual item(s) he or she will receive (which may be a common, rare, or extremely rare item, and may be
a duplicate of an item the player already has in inventory) until the loot box is opened. In a number of our games, certain mechanics may
be deemed to be loot boxes. New regulations which we may be required to comply with may vary significantly across jurisdictions. It is
difficult to predict how existing or new laws may be applied to these or similar game mechanics. If we become liable under these laws or
regulations, we could be directly harmed, and we may be forced to implement new measures to reduce our exposure to this liability. This
may require us to expend substantial resources or to modify our game mechanics, which would harm our business, financial condition
and results of operations. In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals
could harm our reputation or otherwise impact our growth.
Furthermore, the growth and development of e-commerce, virtual items and virtual currency may prompt calls for more
stringent consumer protection laws. For example, existing laws or new laws regarding the marketing of in-app purchases, labeling of
free-to-play games, or regulation of currency, banking institutions, unclaimed property, or money transmission may be interpreted to
cover our games and the virtual currency, virtual items or payments that we receive. If that were to occur, we may be required to seek
licenses, authorizations or approvals from relevant regulators, the granting of which may be dependent on our meeting certain
requirements. We may also be subject to additional regulation and oversight, all of which could significantly increase our operating costs,
lessen the growth of our games and impair our business, financial condition or results of operations.
Because our long-term growth strategy involves further expansion of our online games to players outside of China, our business
will be susceptible to risks associated with international operations.
An important component of our growth strategy involves the further expansion of our online games and game player base
internationally. In particular, we have launched our popular games Knives Out, Identity V and Racing Master in Japan and other markets
across the globe, and Naraka: Bladepoint, Once Human and Marvel Rivals globally. In the future, we plan to continue to launch our
online games in various international markets. The expansion of our online games to markets outside of China will involve a variety of
risks, including:
●
difficulties in anticipating the preferences of game players in markets outside of China;
●
challenges in formulating effective local sales and marketing strategies targeting users from various jurisdictions and
cultures;
●
challenges in identifying appropriate local business partners, including local game operators, and establishing and
maintaining good working relationships with them;
●
changes in a specific country’s or region’s political or economic conditions;
●
unexpected changes in regulatory requirements, taxes or trade laws;
●
difficulties in adapting and/or developing games which effectively address cultural differences and consumer preferences
and are compliant with the local legal and regulatory environment;
●
difficulties in managing a business in international markets with diverse cultures, languages, customs, legal systems,
alternative dispute systems and regulatory systems;
●
more stringent regulations relating to data security and the unauthorized use of, or access to, commercial and personal
information;

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●
currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering
into hedging transactions if we choose to do so in the future;
●
laws and business practices favoring local competitors or general preferences for local vendors;
●
limited or insufficient intellectual property protection; and
●
adverse tax burdens and foreign exchange regulations that could make it difficult to repatriate earnings and cash.
In addition, unlike a large portion of game players in China mainland who access games through PCs and mobile devices, many
game players in international markets play games predominantly via consoles such as Xbox and PlayStation. We have launched several
games, such as Naraka: Bladepoint and Marvel Rivals, on console and plan to release numerous additional console game releases in the
future. We have, however, limited experience developing and marketing console games or in adopting our PC and mobile games to
console formats, and the popularity of such games may not meet our expectations or be as profitable as our PC and mobile games.
Our limited experience in operating our business outside of China increases the risk that any potential future expansion efforts
that we may undertake will not be successful. If we invest substantial time and resources to expand our international operations and are
unable to do so successfully and in a timely manner, our business and results of operations will suffer.
We rely on third-party platforms to distribute our mobile games and collect payments. If we fail to maintain our relationships
with these platforms, or if our revenue-sharing arrangements with these platforms change to our detriment, our mobile games
business may be adversely affected.
In addition to our proprietary platforms, we publish our mobile games through the Apple iOS app store and other mobile
application stores or platforms owned and operated by third parties. We rely on these third parties to promote and distribute our mobile
games, record gross billings, maintain the security of their platforms to prevent fraudulent activities, provide certain user services and, in
some instances, process payments from users. Further, we believe that our games benefit from the strong brand recognition, large user
base and the stickiness of these mobile platforms.
We are subject to these third parties’ standard terms and conditions for application developers, which govern the promotion,
distribution and operation of games and other applications on their platforms. If we violate, or if a platform provider believes that we
have violated, its terms and conditions in a material way and/or repeatedly, the particular platform provider may discontinue or limit our
access to that platform, which could harm our business. Moreover, certain of such terms and conditions are subject to interpretation when
applied in specific circumstances, and the platform providers may disagree with our interpretation. Our business could also be harmed if
these platforms decline in popularity with users or modify their discovery mechanisms for games, the communication channels available
to developers, their terms of service or other policies such as distribution fees, how they label free-to-play games or payment methods for
in-app purchases. These platforms’ operators could also develop their own competitive offerings that could compete with our mobile
games.
Furthermore, a few of these third-party platforms dominate the distribution of mobile applications. Any changes in the revenue-
sharing, payment or other arrangements that we have with any of the major third-party application platforms may materially impact our
revenue and profitability. Failure to renew any revenue-sharing agreement or any other material agreement with these major third-party
application platforms may result in discontinued or limited access to such platforms, which could harm our business. In addition, changes
in the credit period or the settlement cycle terms of these third-party platforms may materially and adversely affect our cash flow.
Disputes with third-party platforms, such as disputes relating to intellectual property rights, distribution fee arrangements and billing
issues, may also arise from time to time and we cannot assure you that we will be able to resolve such disputes in a timely manner or at
all. If our collaboration with a major third-party platform terminates for any reason, we may not be able to find a replacement in a timely
manner or at all and the distribution of our games may be adversely affected. Any failure on our part to maintain good relationships with
a sufficient number of popular platforms for the distribution of our games could cause the number of our game downloads and
activations to decrease, which will have a material adverse effect on our business, financial condition and results of operations.

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Our business, financial condition and results of operations depend in part on the overall growth of the online game industry in
China and the other markets where our games are operated, the growth of which is subject to a number of factors that are
beyond our control.
Our business, financial condition and results of operations depend in part on continued growth of the online game industry in
China and other markets where our games are published, particularly the Asia-Pacific region and North America. The online game
industry is affected by a number of factors that are beyond our control, including:
●
general economic conditions and the level of discretionary spending devoted by players to non-essentials such as acquiring
in-game virtual items;
●
the availability and popularity of other forms of interactive entertainment, particularly games on console systems which are
more popular in North America, Europe and Japan but which we have only recently begun offering, and other leisure
activities;
●
evolving PC, smartphone and tablet technologies;
●
changes in game player demographics and public tastes and preferences;
●
any government restrictions on the playing of online games; and
●
the availability and popularity of alternative gameplay models such as cloud-gaming services.
There is no assurance that the online game industry will continue to grow in future periods at any particular rate or at all.
We may not be successful in making our mobile games profitable, and our profits from mobile games may be relatively lower
than the profits we have enjoyed historically for PC games.
In our games and related value-added services segment, which include both the operation of online games as well as other
related or ancillary services to the games, net revenues from the operation of online games accounted for 92.5%, 92.9% and 96.2% for
the years ended December 31, 2022, 2023 and 2024, respectively. We generate a large portion of revenue in our operation of online
games from our mobile games. Our profits from our mobile games, even if the games are successful, are generally lower than our profits
generated from PC games, because, in order to gain access to our games on mobile application stores, which are the primary platforms
for our mobile games, we must enter into revenue-sharing arrangements that result in lower profit margins compared with those of our
PC games. In addition, our mobile games tend to cover a wider variety of genres, some of which have historically had relatively lower
profitability than that of our PC games. Furthermore, we are releasing more of our mobile games overseas, which may involve additional
marketing and distribution costs and further impact the profitability of our mobile games.
We have devoted and expect to continue to devote a significant amount of resources to the development of our mobile games,
but the relatively lower profit margins and other uncertainties make it difficult to predict whether we will continue to succeed in making
our mobile game operations profitable. If we do not succeed in doing so, our business, financial condition and results of operations will
be adversely affected.

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Substantially all of our mobile games and many of our PC games currently utilize the item-based revenue model, which
generates a significant portion of our revenue from games and related value-added services. Under this revenue model, our game players
are able to play the games for free, but are charged for the purchase of virtual items in the games. We believe that this attracts a wider
audience of players and increases the number of potential paying users. However, the success of this business model largely depends on
whether we can attract game players to play our games and whether we can successfully encourage more players to purchase virtual
items. Game players will only pay for virtual items if they are perceived to provide value and enhance their playing experience, and we
must closely monitor and analyze in-game consumption patterns and player preferences to understand what items will be appealing and
the appropriate price for them. Moreover, we must offer sufficient in-game purchasing opportunities to make our games profitable, while
ensuring that the games are fun to play including for players who purchase no virtual items. We might fail to accurately identify and
introduce new and popular virtual items or price them properly or may not be able to market our virtual items effectively. In addition, the
item-based revenue model may not continue to be commercially successful, and in the future, we may need to change our revenue model
to a time-based or other revenue model. Any change in revenue model could result in disruption of our game operations and a decrease in
the number of our game players and thereby materially and adversely affect our business, financial condition and results of operations.
Providing a high level of customer service for our players is crucial to maintaining and growing the popularity of our online
games, and any failure to do so could harm our reputation and our business.
We devote significant resources to provide high quality customer services to our game players 24 hours a day, seven days a
week, through telephone and online support. We also maintain a team of highly trained “Game Masters” which supervise the activities
within our games to provide assistance to players as needed and stop any cheating or unfair behavior to ensure the game has an
atmosphere of fun and fair play. These activities are crucial to retaining our existing game players and attracting new players who expect
a high-quality playing experience from our online games. In addition, our license agreements with third-party developers may also
require us to provide specified minimum levels of customer support, and any breach of such obligations could result in the developer
terminating our license agreement with them and other damages.
If we underestimate the popularity of certain games or an unexpected event occurs with respect to the operation of a game, we
might receive increased complaints asserting that we were unprepared and did not provide adequate customer service. If we fail to
maintain effective player support which meets the expectations of players, it could harm our reputation and the popularity of our online
games, which may materially and adversely affect our business, financial condition and results of operations.
We may not be able to maintain stable relationships with our existing game licensors and co-developers, and we may experience
difficulties in the operation of the online games licensed from them.
Several mobile and PC games we offer are licensed from third-party developers, which accounted for 9.5%, 4.6% and 7.4% of
our total net revenues in 2022, 2023 and 2024, respectively. If we are unable to maintain stable relationships with our existing game
licensors, or if any of our licensors establishes similar or more favorable relationships with our competitors in violation of its contractual
arrangements with us or otherwise, we may not be able to ensure the smooth operation of these licensed online games, and our licensors
could terminate or fail to renew the license agreements with us, which could affect our business, financial conditions and results of
operations.
We have a number of licensing arrangements, including an exclusive agreement with Mojang AB, a subsidiary of Microsoft,
pursuant to which Microsoft and Mojang agreed to license the operation of Minecraft in the PRC to us until 2022. The term of such
license was extended in 2019 and further renewed in 2023. In addition, following the expiration of the licenses covering the publication
of several games of Blizzard in China mainland in January 2023, we entered into a new license arrangement with Blizzard in 2024 to
operate those and other titles. These games include World of Warcraft®, Hearthstone® and other titles in the Warcraft®, Overwatch®,
Diablo®, and StarCraft® universes.

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The termination of any such licenses could adversely affect our business, financial conditions and results of operations.
Moreover, the success of our arrangements with our game licensors depends on the popularity of the games licensed to us by them in the
Chinese market, which is affected by, among other things, the frequency and success of updates and expansion packs to those games
developed by them over which we have no control. Any failure of such licensors to provide game updates, enhancements and new
versions in a timely manner and that are appealing to game players, provide assistance that enables us to effectively promote the games,
or otherwise fulfill their obligations under our license agreements could adversely affect the game-playing experience of our game
players, damage our reputation, or shorten the life-spans of those games, any of which could result in the loss of game players,
acceleration of our amortization of the license fees we have paid for those games, or a decrease in or elimination of our revenues from
those games.
In addition, certain events may limit our licensors’ ability to develop or license online games, such as claims by third parties that
their online games infringe such third parties’ intellectual property rights or their inability to acquire or maintain licenses to use another
party’s intellectual property in their online games. In the case of such events, our licensors may be unable to continue licensing online
games to us or to continue participating in any joint venture with us, regardless of the stability of our relationship with them.
We also cannot be certain that these licensed online games will be viewed by the regulatory authorities as complying with
content restrictions, will be attractive to users or will be able to compete with games operated by our competitors. We may not be able to
fully recover the costs associated with licensing these online games if the games are not popular among users in the PRC, and any
difficulties in the operation of these licensed games could harm our business, financial condition and results of operations.
We also offer games that are co-developed, such as Diablo® ImmortalTM, which we developed with Blizzard pursuant to an
agreement that is in addition to the license discussed above. If we are unable to maintain stable relationships with our co-developers, we
may not be able to ensure the smooth development and operation of these co-developed online games, and our co-developers may
terminate their business relationships with us, which could harm our business, financial conditions and results of operations.
We receive relatively lower profits from the operation of online games that we license from third-party developers and are
subject to certain financial obligations in connection with such licenses.
Our revenue sharing arrangements for games that we license from third-party developers provide us with relatively less profit
than games that we develop in-house. Moreover, to secure the rights to games from such developers, we are required, as licensee of the
games, to pay them royalties for the games over the terms of the licenses, to make minimum marketing expenditure commitments, or to
provide funds for hardware to operate the games, or a combination of the forgoing. In some cases, we may not be able to recoup our
investments in such games. We often must make such commitments and investments without knowing whether the games we are
licensing will be successful and generate sufficient revenues to enable us to recoup our costs or for the games to be profitable.
Future alliances may expose us to potential risks, including those associated with the assimilation of new operation technologies
and personnel, unforeseen or hidden liabilities, and potential business disputes with our partners, among other things.
Strategic alliances with key players in the online game industry and other related industry sectors form part of our strategy to
expand our portfolio of online games. In some cases, such alliances may involve our investment into strategic partners, as we have done
with a number of game development studios in various countries. However, our ability to grow through future alliances, including
through joint ventures and direct investments, will depend on the availability of suitable partners at reasonable terms, our ability to
compete effectively to attract these partners, the availability of financing to complete larger joint ventures and investments, and our
ability to obtain any required governmental approvals. Further, the benefits of an alliance may take considerable time to develop, and we
cannot be certain that any particular alliance will produce its intended benefits.
Future alliances could also expose us to potential risks, including risks associated with the assimilation of new operation
technologies and personnel, unforeseen or hidden liabilities, the inability to generate sufficient revenue to offset the costs and expenses of
alliances and potential loss of, or harm to, our relationships with employees, customers, licensors and other suppliers as a result of
integration of new businesses. Further, we may not be able to maintain a satisfactory relationship with our partners, which could
adversely affect our business, financial conditions and results of operations. We have relatively limited experience in identifying,
financing or completing strategic alliances compared with some of our competitors. Such transactions and the subsequent integration
process would require significant attention from our management. The diversion of our management’s attention and any difficulties
encountered with respect to the alliances or in the process of integration could have an adverse effect on our ability to manage our
business.

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Termination of our material intellectual property licenses could have a material adverse effect on our business.
Certain of our online games rely on intellectual property license agreements which give us the right to use certain names,
characters, logos or storylines in connection with online games developed by us. For example, we have a license agreement with Marvel
to operate mobile games based on Marvel characters and storylines. If we were to breach any material term of our license agreements,
the licensor could terminate the agreement. If the licensor were to terminate our rights to use any such intellectual property for this
reason or any other reason, or if a licensor decides not to renew a license agreement upon the expiration of the license term, the loss of
such rights could have a material adverse effect on our business. In addition, it can be difficult to identify a suitable intellectual property
that can be adapted for use in online games and is recognizable to players in China and elsewhere, and we face significant competition
for the rights to such intellectual property from other online game companies. Obtaining license rights, and particularly exclusive license
rights, to use third-party intellectual property for use in online games can involve significant expense. In addition, we have previously
obtained, and intend to continue to seek to obtain, license rights for works from certain intellectual property owners based outside of
China, and our ability to utilize their intellectual property in China may be adversely affected by the scrutiny of such arrangements by the
relevant Chinese authorities.
Even if we obtain license rights for such intellectual property, we cannot assure you that games that we develop utilizing it will
be popular and commercially successful and that we will be able to recoup the amounts we pay for the license rights. Moreover, after the
expiration of the terms of our license agreements with the relevant copyright holders, we may not be able to renew the agreements with
commercial terms that are favorable to us, if at all. Our inability to renew such agreements could force us to discontinue the related
online games and have a significant adverse impact on our online game operations and revenues.
Our new games may attract game players away from our existing games, which may have a material adverse effect on our
business, financial condition and results of operations.
Our new online games, including mobile games and PC games, may attract game players away from our existing games and
shrink the player base of our existing online games, which could in turn make those existing games less attractive to other game players,
resulting in decreased revenues from our existing games. Players of our existing games may also spend less money to purchase time or
virtual items in our new games than they would have spent if they had continued playing our existing games. In addition, our game
players may migrate from our existing games with a higher profit margin to new games with a lower profit margin. The occurrence of
any of the foregoing could have a material and adverse effect on our business, financial condition and results of operations.
Illegal game servers and acts of cheating by players of online games could harm our business and reputation and materially and
adversely affect our results of operations.
Several of our competitors have reported in past years that certain third parties have misappropriated the source codes of their
games and set up illegal game servers and let their customers play such games on illegal servers without paying for the game playing
time. While we already have in place numerous internal control measures to protect the source codes of our games from being stolen and
to address illegal server usage and, to date, our games have not to our knowledge experienced such usage, our preventive measures may
not be effective. The misappropriation of our game server installation software and installation of illegal game servers could harm our
business and reputation and materially and adversely affect our results of operations.
In addition, acts of cheating by players of online games could lessen the popularity of our online games and adversely affect our
reputation and our results of operations. There have been a number of incidents in previous years where users, through a variety of
methods, were able to modify the rules of our online games. Although these users did not gain unauthorized access to our systems, they
were able to modify the rules of our online games during gameplay in a manner that allowed them to cheat and disadvantage our other
online game users, which often has the effect of causing players to stop using the game and shortening the game’s lifecycle. While we
have taken a number of steps to deter our users from engaging in cheating when playing our online games, we cannot assure you that we
or the third parties from whom we license some of our online games will be successful or timely in taking corrective steps necessary to
prevent users from modifying the rules of our online games.
If we suspect a player of installing cheating programs on our online games, or of engaging in other types of unauthorized
activities, we may freeze that player’s game account or even ban the player from logging on to our games and other online platforms.
Such activities to regulate the behavior of our users are essential to maintaining a fair playing environment for our users. However, our
users may dispute our regulatory activities and institute legal proceedings against us for damages or claims. Our business, financial
condition and results of operations may be materially and adversely affected as a result.

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Our online games will be less likely to be successful if we cannot adopt and implement innovative and effective marketing
strategies to attract attention to our games from game players in our targeted demographic groups.
A relatively large number of mobile and PC games are typically available at any given time in the markets in which we launch
and operate our online games, and such games compete for attention from the same game player population that we target. Our ability to
successfully promote and monetize our online games will depend on our ability to adopt and effectively implement innovative marketing
strategies, and particularly marketing through our 163.com website, game live streaming sites and other online game forums, and our
ability to cross-market new games to players of our current online games. We also engage in a wide range of other promotional activities
such as hosting game tournaments and a forum that provides an online community for elite game players, key opinion leaders and
masters of the online game industry to interact. If we fail to adopt and implement such marketing and cross-marketing strategies, or if the
marketing strategies of our competitors are more innovative and effective than ours, our online games will be less likely to be successful
and as a result we may not be able to achieve an acceptable level of revenue from those games.
Some of our players make sales and purchases of our game accounts and virtual items through third-party auction websites,
which may have a negative effect on our net revenues.
Some of our players make sales and purchases of our game accounts and virtual items through unauthorized third-party auction
websites in exchange for real money, which we do not and are unable to track or monitor. We do not generate any net revenues from
these transactions. Accordingly, purchases and sales of our game accounts or virtual items on third-party websites could lead to
decreased sales by us and also put downward pressure on the prices that we charge players for our virtual items and services, all of which
could result in lower revenues generated for us by our games. New players may decide not to play our games as a result of any rule
changes we might implement to restrict the players’ ability to trade in game accounts or virtual items, which could materially adversely
affect our business, financial condition and results of operations.
In addition, such trading activities could run afoul of PRC regulations on virtual currency and subject traders and us to potential
liability. See “—Risks Related to Doing Business in China—Restrictions on virtual currency may adversely affect our online game
revenues” for additional information.
We are subject to laws related to live streaming and online entertainment industries. Any failure to comply with or any changes
in the applicable laws, regulations, policies and guidelines may adversely impact the prospects and results of operations of our
services in such industries.
The business and services of live streaming and online entertainment must comply with numerous laws, regulations, policies
and guidelines promulgated by PRC authorities. For example, platforms providing show live streaming should have registered their
information and business operations by November 30, 2020, and live streaming platforms that provide network audio-visual program
services must hold an Audio and Video Service Permission, or AVSP, or complete the registration in the National Network Audio-visual
Platform Information Registration Management System. For more information, see Item 4.B. “Information on the Company—Business
Overview—Government Regulations—Regulations on Internet Live Streaming Services.”

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Regulatory authorities in China have been heightening their oversight of live streaming businesses. Pursuant to applicable PRC
laws and regulations, users who have not registered with their real names or who are minors are prohibited from engaging in virtual
gifting. Also, live broadcasting service providers are not allowed to register online live broadcasting publisher accounts for minors under
the age of 16, and must obtain the consent from parents or guardians and verify the identity of the minors before allowing minors aged 16
or above to register live broadcasting publisher accounts. On August 30, 2021, the MOCT published the Online Performance Brokerage
Agencies Measures. According to the Online Performance Brokerage Agencies Measures, online performance brokerage agencies cannot
provide online performance brokerage services to minors under the age of 16 and, if online performance brokerage services are provided
to minors over the age of 16, identity information of the minors must be verified and written consent must be obtained from their
guardians. On May 7, 2022, the Office of the Central Guidance Commission on Building Spiritual Civilization, MOCT, NRTA and CAC
jointly issued the Opinions on Regulating Online Live Streaming Virtual Gifting and Strengthening the Protection of Minors, or the Live
Streaming Opinions, which reiterate the requirements for live streaming platforms in respect of strengthening real-name registration,
restrictions on minors from virtual gifting and prohibition on providing live streaming services to minors. The PRC government may
further tighten the account registration and identity verification requirements for minors or impose a higher standard with respect to the
registration and identity verification for all users on our platforms in the future, which may require us to upgrade our system, purchase
additional services from third-party service providers and incur additional costs. Any such event may deter potential users from
registering with our platforms, which may in turn adversely affect the growth of our user base and business prospects.
In addition, the Notice on Strengthening the Administration of Online Show Live and E-commerce Live Streaming, or Notice
78, Online Performance Brokerage Agencies Measures and the Live Streaming Opinions set forth certain restrictions on inducing users
to spend or to promote performers on their platform. For detailed information, please refer to Item 4.B. “Information on the Company—
Business Overview—Government Regulations —Regulations on Internet Live Streaming Services.” Notice 78, the Online Performance
Brokerage Agencies Measures and the Live Streaming Opinions are relatively new, and the interpretation and enforcement of these
regulations involve uncertainties. We cannot guarantee that new rules or regulations promulgated in the future will not impose any
additional restrictions on live streaming, especially on virtual gifting. Any limits or restrictions on live streaming ultimately imposed may
adversely affect our business, financial conditions and results of operations.
Risks Related to Our Other Businesses
Our Youdao business’s compliance with the relevant after-school tutoring regulations and rules issued by the relevant PRC
government authorities has materially and adversely affected and may continue to affect Youdao’s business, financial condition,
results of operations and prospects.
The PRC private education industry, especially the after-school tutoring sector, was subject to significant regulatory changes in
the second half of 2021 that materially and adversely impacted the business of our majority-controlled subsidiary, Youdao. Youdao
disposed of its Academic AST Business in 2021 and no longer offers any AST courses on academic subjects for students receiving
compulsory education and for high-school students. With respect to Youdao’s non-academic after-school tutoring services, current laws
and regulations require local authorities to identify corresponding competent authorities for different tutoring categories of non-academic
after-school tutoring services (e.g., physical education, arts, science, etc.) and set forth standards by categories to approve institutions for
offering each category of non-academic after-school tutoring service. Youdao follows internal guidelines to make necessary registrations
and filings, except as would not have a material adverse effect on its business, and will use its commercially reasonable efforts to obtain,
maintain and renew necessary licenses and permits on a timely basis. However, we cannot assure you that Youdao may be able to obtain
and maintain all requisite licenses, permits, approvals and filings or pass all requisite assessments in a timely manner or at all.
In addition, certain aspects of our Youdao business may be deemed to not be in full compliance with relevant laws and
regulations regarding after-school tutoring services. We have been making and will continue to make efforts to comply with such
regulations as well as requirements from the relevant government authorities during such inspections. We cannot assure you, however,
that we will be able to comply with such regulatory requirements in a timely manner, or at all. It is also uncertain whether and how the
PRC government would promulgate additional laws, regulations and guidance regarding the private education industry, and there is no
assurance that we can comply with any such newly promulgated laws, regulations and guidance in a timely manner, or at all. Moreover,
Youdao’s business may be required to apply for and obtain additional licenses, permits or recordation or expand the scope of the licenses
already obtained, given the uncertainties of the interpretation and implementation of certain regulatory requirements applicable to online
education businesses.

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The success and future growth of our Youdao business will be affected by the user acceptance and market trend of integration of
technology and learning.
Youdao’s business model features integrating technology closely with learning to provide a more efficient and engaging learning
experience. Intelligent learning remains a relatively new concept in China, and there are limited proven methods to project user demand
or preferences or available industry standards. Even with the proliferation of internet and mobile devices in China, we believe that some
of Youdao’s target students may still be inclined to choose traditional face-to-face learning approaches over virtual learning as they find
the former more intimate and reliable. We cannot assure you that Youdao’s products and services will continue to be attractive to our
users in the future. If Youdao’s offering of learning services and smart devices becomes less appealing to our users, the financial
condition and results of operations of our Youdao business could be materially and adversely affected.
If Youdao fails to develop and apply technologies to support and expand its product and service offerings or if Youdao fails to
timely respond to the rapid changes in industry trends and user preferences, our Youdao business may be materially and
adversely affected.
Over the years, Youdao has developed a number of core technologies to support its comprehensive suite of products and
services. Youdao also relies on technologies to build and maintain its information technology infrastructure. The intelligent learning
industry is subject to rapid technological changes and innovations and affected by unpredictable product lifecycles and user preferences.
Youdao’s technologies may become obsolete or insufficient, and Youdao may have difficulties in following and adapting to technological
changes in the intelligent learning industry in a timely and cost-effective manner. New technologies and solutions developed and
introduced by Youdao’s competitors could render its offerings less attractive or obsolete thus materially affecting Youdao’s business and
prospects. In addition, Youdao’s substantial investments in technologies may not produce expected results. If Youdao fails to continue to
develop, innovate and utilize its technologies to support and expand its product and service offerings or if its competitors develop or
apply more advanced technologies, the financial condition and results of operations of our Youdao business could be materially and
adversely affected.
The changes in Youdao’s business strategies and offerings may make it difficult to evaluate its future prospects.
In connection with the disposal of its Academic AST Business following the PRC regulatory changes discussed above, Youdao
completed its transition to become an AI-powered solutions provider specializing in artificial intelligence applications for the learning
and advertising verticals and has developed a comprehensive suite of product and service offerings. Youdao recently introduced a
number of new intelligent learning products, such as Youdao Dictionary Pen A7 Pro and Youdao Dictionary Pen X7.
The significant changes in Youdao’s business strategies and offerings have not only rendered its historical results prior to such
disposal no longer indicative of its future performance, but they may also have some or all of the following unintended effects:
●
some users, customers and business partners may not receive the changes in Youdao’s business strategies and offerings in a
positive manner, and relationships with these parties may be jeopardized;
●
Youdao’s new products and services may not be accepted by its users as we expect;
●
Youdao’s new products and services may not attract users and customers or generate the revenue required to succeed;
●
the underlying assumptions and estimates about Youdao’s new businesses and the new markets that it attempts to enter into
may prove incorrect, which may cause Youdao’s actual results of operations to fall short of our expectations;
●
to the extent Youdao enters into new businesses, its previous operating history may be of limited use for investors to
evaluate Youdao’s future performance and prospects;
●
the development of new products and services could be costly and time-consuming and requires us to make significant
investments in research and product development, develop new technologies, and increase sales and marketing efforts, all
of which may not be successful;
●
expenses will be incurred in the implementation of the new business strategies, which could be substantial; and

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●
the changes in organizational structure that will be required to support the changes in Youdao’s business strategies and
offerings may lead to dissatisfaction among employees which could make it more difficult for Youdao to retain key
employees.
If we are unable to successfully address these risks and uncertainties, Youdao’s and hence our business, financial condition and
results of operations could be materially and adversely affected.
Our intelligent learning, music streaming, e-commerce, advertising and other innovative businesses are subject to a broad range
of laws and regulations. Any lack of requisite approvals, licenses or permits applicable to these businesses or any failure to
comply with applicable laws or regulations may have a material and adverse impact on our business, financial condition and
results of operations.
Our intelligent learning, music streaming, e-commerce, advertising and other innovative businesses are subject to a broad range
of laws and regulations, and future laws and regulations may impose additional requirements and other obligations.
For example, our online music business and services, which we conduct through our majority-controlled subsidiary NetEase
Cloud Music, must comply with laws, regulations, policies and guidelines promulgated by PRC government authorities related to music
streaming, live streaming and online entertainment industries. In addition, NetEase Cloud Music and its subsidiaries are required to
obtain various government approvals, licenses and permits or make various registrations and filings to provide internet information
services, internet culture services, internet publication services, online audio-visual products and other related value-added
telecommunications services, including the requirement to hold an AVSP or complete the registration in the national network audio-
visual platform information registration management system. For more information, see Item 4.B. “Information on the Company—
Business Overview—Government Regulations—Regulations on Internet Live Streaming Services.” NetEase Cloud Music and its
subsidiaries have submitted an application to register with the registration management system, which is currently under review, and we
cannot assure you that such registration will be approved or that NetEase Cloud Music will no longer be required to hold an AVSP if and
when such registration is completed.
Moreover, our e-commerce business is subject to numerous PRC laws and regulations that regulate retailers generally or govern
online retailers specifically. See below “—Risks Related to Doing Business in China—We are subject to consumer protection laws that
could require us to modify our current business practices and incur increased costs.” We may also be required to obtain licenses and
permits from different regulatory authorities in order to sell certain categories of products. Additionally, the online activities of all of
these businesses are subject to PRC regulations governing foreign ownership of companies in the internet industry and the licensing
requirements pertaining to them, as well as internet access and the distribution of online content including music, music videos, online
educational content and other forms of content over the internet. See “—Risks Related to Our Corporate Structure” and “—Risks Related
to Doing Business in China.”
As these industries are evolving rapidly in China, the interpretation and application of existing PRC laws may also evolve in
different ways, and new laws, regulations or policies may be adopted. We cannot assure you that we have obtained all the approvals,
licenses or permits required for our businesses or will be able to maintain our existing approvals, licenses or permits. If the PRC
governmental authorities determine that we are not in compliance with all the requirements under applicable laws and regulations, we
may be required to obtain additional licenses or permits or be subject to fines and/or other sanctions. There is no guarantee that we would
be able to obtain such licenses or permits or meet all the supervision requirements in a timely manner, or at all. Failure to maintain or
regain compliance may materially and adversely affect our business, financial condition and results of operations, including being subject
to liabilities, penalties, impediments in development of such business models and disruptions to its operations.

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Our controlling interest in Youdao and/or NetEase Cloud Music may be diluted if Youdao and/or NetEase Cloud Music raise
additional capital with the issuance and sale of additional equity in the future.
Youdao, our majority-controlled subsidiary listed on the New York Stock Exchange, and/or NetEase Cloud Music, our majority-
controlled subsidiary listed on the Hong Kong Stock Exchange, may need additional capital in the future to fund their continued
operations and support their business growth. As Youdao and/or NetEase Cloud Music will continue to invest heavily in improving
technologies, expanding their marketing efforts, hiring qualified personnel and offering additional products, services and content, Youdao
and/or NetEase Cloud Music may not generate sufficient revenue to offset such expenses. In the future, should Youdao and/or NetEase
Cloud Music require additional liquidity and capital resources to fund their business and operations, Youdao and/or NetEase Cloud
Music may need to obtain additional financing, including issuing and selling additional equity or equity-linked securities, or issuing
additional equity awards to incentivize their employees, which would dilute our interests in Youdao and/or NetEase Cloud Music.
Youdao, our majority-controlled subsidiary, relies on our financial support.
Since its formation, Youdao has received various financial support from the NetEase group, among other things, currently
including RMB878.0 million outstanding interest-bearing short-term loans as of December 31, 2024 and a US$300.0 million revolving
loan facility. If Youdao’s management cannot implement an effective business plan in light of the changing regulatory environment to
generate operating cash flows and continue to be able to obtain other sources of financing as necessary for Youdao’s future development,
it will continue to rely on the financial support from the NetEase group for its continuing operations.
We have devoted, and will continue to devote substantial efforts to monetizing our user base in NetEase Cloud Music’s music
streaming business. If we fail to effectively execute such monetization strategies, NetEase Cloud Music’s business may be
materially and adversely affected which may adversely affect our consolidated results of operations.
Our music streaming business is operated by our majority-controlled subsidiary NetEase Cloud Music, and we have devoted
substantial efforts to monetizing its user base by increasing the number of paying users and cultivating users’ willingness to pay for
music. NetEase Cloud Music monetizes its music streaming platform primarily through the sales of membership subscriptions for online
music services and sales of virtual items for social entertainment services. At a strategic level, we plan to continue to optimize our
existing monetization strategies and explore new monetization opportunities. It is crucial to balance, on the one hand, creating sufficient
monetization opportunities, which enhances the revenues of our platform, and, on the other hand, maintaining an enjoyable platform,
which helps to maintain a sizable user base, high user engagement and associated network effects. However, if these efforts fail to
achieve our anticipated results, we may not be able to increase or even maintain NetEase Cloud Music’s revenue growth.
In order to increase the number of our paying users and cultivate our users’ willingness to pay for music content and social
entertainment services, we will need to address a number of challenges, including but not limited to providing consistently high-quality
and user-friendly experience, continuing to curate a catalogue of engaging content and continuing to introduce new, appealing products,
services and content that users are willing to pay for. If we fail to address any of these challenges, especially if we fail to offer high-
quality music content and superior user experience to meet user preferences and demands, NetEase Cloud Music may not be successful
in increasing the number of paying users and cultivating users’ willingness to pay for music content and social entertainment services,
which could have a material adverse impact on NetEase Cloud Music’s business, and negatively impact our consolidated results of
operations.
If we fail to anticipate user preferences to provide online music streaming content catering to user demands, or maintain the
attractiveness of our services to users and business partners, NetEase Cloud Music’s business may be materially and adversely
affected, which may adversely affect our consolidated results of operations.
Constantly changing consumer preferences have affected and will continue to affect the music industry, in particular online
music platforms. Given that our music streaming business operates in a rapidly evolving industry, we need to anticipate user preferences
and industry changes and respond to such changes in a timely and effective manner. We must stay abreast of emerging consumer
preferences and anticipate product trends that will appeal to existing and potential users. If NetEase Cloud Music fails to cater to the
needs and preferences of NetEase Cloud Music’s users and control our costs in doing so or fail to deliver compelling user experience,
NetEase Cloud Music may suffer from reduced user traffic, and NetEase Cloud Music’s business may be materially and adversely
affected, which may adversely affect our consolidated results of operations.

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Maintaining and enhancing the “NetEase Cloud Music” brand is critical to expanding NetEase Cloud Music’s base of users,
advertisers, content contributors and other partners. Maintaining and enhancing this brand will depend largely on our ability to continue
to develop and provide an innovative and high-quality experience for our listeners and attract advertisers, content owners and other
parties to work with us, which we may not do successfully. Our brand may be impaired by a number of other factors, including service
outages, data privacy and security issues, listener perception of ad load and exploitation of our trademarks by others without permission.
In addition, if our partners fail to maintain high standards for products that integrate our service, the strength of our brand could be
adversely affected.
Our music streaming business partners include music labels, advertisers, talent agencies and others. We help our advertisers
reach and engage with their target users through the services and solutions we offer through NetEase Cloud Music. Our ability to grow
our revenues to a certain extent depends on our ability to retain and enhance our relationships with our existing business partners and
attract new ones. Our success also depends on our ability to provide effective services and solutions that meet the expectations of our
business partners. For instance, if we fail to develop new advertisement formats or effective marketing solutions that are appealing to our
business partners, they may turn to our competitors for alternative services. Our business also relies on content, services and technologies
provided by some business partners. If we fail to retain and enhance our business relationships with these business partners, or if these
business partners choose to terminate or change the terms of our cooperation arrangements for strategic, financial or other reasons, we
may suffer content loss, service interruptions or reduced revenues, which may have a material and adverse effect on NetEase Cloud
Music’s business and may adversely affect our consolidated results of operations.
We depend on third-party licenses for a significant portion of our music content, and any adverse changes to, or loss of, our
relationships with these music content providers may materially and adversely affect NetEase Cloud Music’s business, which
may adversely affect our consolidated results of operations.
Significant portions of our music offerings are licensed from music content partners, including music publishers and labels in
China and internationally, with whom we have entered into licensing agreements. There is no assurance that the licenses currently
available to us will continue to be available in the future at royalty rates and on terms that are favorable, commercially reasonable or at
all.
There is also no guarantee that we have all of the licenses for the music content available on our platform, as we need to obtain
licenses from many copyright owners, some of whom are unknown, and there are complex legal issues such as open questions of law as
to when and whether particular licenses are needed. Additionally, there is a risk that copyright owners, talent agencies, or legislative or
regulatory bodies may require or attempt to require us to enter into additional license agreements with, and pay royalties to, newly
defined groups of copyright owners, some of which may be difficult or impossible to identify.
Furthermore, there is no guarantee that the licenses or arrangements we have now will be renewed in the future. If we are unable
to secure and maintain the licenses or similar arrangements that we desire, the size and quality of our music catalog offered by our music
streaming platform and the financial condition and results of operations of this business may be materially and adversely affected, which
in turn could negatively impact the attractiveness of our brand name and online services in general to our users.
A portion of our revenues is generated from our advertising services, but we may not be able to compete effectively in this
market because of its rapidly evolving nature and intense competition, in which case our ability to generate and maintain
advertising revenue in the future could be adversely affected.
Although we anticipate that the revenues generated by our online games will continue to constitute the major portion of our
future revenues, we believe that we will continue to rely on advertising as a source of revenue for the foreseeable future. The popularity
of online advertising in China has been growing quickly in recent years, and many of our current and potential advertisers have gained
experience with using the internet as an advertising medium. Our ability to generate and maintain significant advertising revenue will
depend on a number of factors, many of which are beyond our control, including:
●
macroeconomic conditions;
●
operations and financial conditions of our advertisers and the general level of advertiser spending;
●
the development of a large base of users possessing demographic characteristics attractive to advertisers;

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competition with other major and emerging online advertising platforms;
●
the development of software that blocks internet advertisements before they appear on a user’s screen;
●
downward pressure on online advertising prices; and
●
the effectiveness of our advertising delivery and tracking system.
Changes in government policy could also restrict or curtail our online advertising services.
Our e-commerce business is subject to challenges and risks, which may have a negative impact on our financial performance.
We established our private label consumer lifestyle brand, Yanxuan, in April 2016. Yanxuan sells a wide range of products,
including pet food and supplies, home cleaning products, bedding and other categories of products, which we source from a variety of
manufacturers. This business exposes us to challenges and risks that could negatively impact our financial performance. We have
incurred significant expenses on a variety of different marketing and brand promotion efforts designed to enhance the recognition of our
Yanxuan business and increase sales of our products. However, our brand promotion and marketing activities may not be well received
by our customers and may not result in the levels of product sales that we anticipate.
We face intense competition from other e-commerce players, private label manufacturers and retailers. The e-commerce
industry in China is subject to rapid market change, the introduction of new business models, and the entry of new and well-funded
competitors. If we are unable to compete effectively, our e-commerce business’s financial condition and results of operations would be
materially and adversely affected. To effectively compete with our competitors in the e-commerce industry, we are also required to adjust
and refine our marketing approaches or to introduce new marketing approaches because the marketing approaches and tools in the
consumer products market in China are constantly evolving. If we are unable to design marketing activities that will appeal to the
Chinese consumers or market in a cost-effective manner, revenues from our e-commerce business will be adversely affected. In addition,
our e-commerce business requires us to manage a large volume of inventory effectively and requires a large amount of working capital.
If we fail to manage our inventory effectively, we may be subject to a heightened risk of inventory obsolescence, a decline in inventory
values, and significant inventory write-downs or write-offs, which may materially and adversely affect our e-commerce business and
financial position.
Moreover, the future growth of our e-commerce business depends on our ability to continue to attract new customers as well as
new purchases from existing customers. Constantly changing consumer preferences have affected and will continue to affect the online
retail industry. We must stay abreast of emerging consumer preferences and anticipate product trends that will appeal to existing and
potential customers. If we are unable to offer products that attract new customers and new purchases from existing customers, our e-
commerce business may be materially and adversely affected.
Furthermore, our profit margin from the e-commerce business, even if the business is successful, is likely to be relatively lower
than our profit margin from certain of our other businesses, such as our online game business. If we cannot successfully address
challenges specific to the e-commerce business and compete effectively, we may not be able to recover the costs of our investments, and
our future results of operations and growth prospects may be materially and adversely affected.
Risks Related to Our Operations Overall
We may be unable to compete successfully against new entrants and established industry competitors.
The Chinese market for internet content and services is intensely competitive and rapidly changing. Our competition primarily
comes from global online game developers and operators, such as Tencent, established online and offline education service providers and
manufacturers of smart hardware or devices in China, as well as leading digital media and entertainment providers. Some of our current
and potential competitors are much larger than we are, and currently offer, and could further develop or acquire, content and services that
compete with us. We mainly compete to:
●
attract, engage and retain users based on the design, quality, popularity and efficacy of our content offerings, the overall
user experience of our products and services, as well as the effectiveness of our marketing activities;

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attract and retain motivated and capable talent, including engineers, game designers, product developers and creative
professionals to build compelling content, tools and functions; and
●
win collaboration relationships with game studios and content owners based on our level of expertise in systematically
developing original games, delivering a compelling user experience through operational know-how and customizing our
established game titles for rapid expansion into overseas markets.
Our ability to compete depends on a number of other factors as well, some of which may be beyond our control, including
alliances, acquisitions or consolidations within our industries that may result in stronger competitors, and changes in the regulatory
environment in the markets we operate. Existing and new competitors may leverage their established platforms or market positions, or
introduce innovative business models, to launch highly-engaging content, products or services that may attract a large user base and
achieve rapid growth, which may materially and adversely affect our business expansion and results of operations. We increasingly face
competition from domestic and international players operating in our markets. Because many of our existing competitors as well as a
number of potential competitors have longer operating histories in the internet market, greater name and brand recognition, better
connections with the Chinese government, larger customer bases and databases and significantly greater financial, technical and
marketing resources than we have, we cannot assure you that we will be able to compete successfully against our current or future
competitors or that competition will not have a material and adverse effect on our business, financial condition and results of operations.
If we fail to keep up with rapid changes in technologies and user behavior, our future success may be adversely affected.
Our future success will depend on our ability to respond to rapidly changing technologies, adapt our products and services to
evolving industry standards and improve the performance and reliability of our products and services. Our failure to adapt to such
changes could harm our business. In addition, changes in user behavior resulting from technological developments may also adversely
affect us. For example, the number of people accessing the internet through mobile devices, including mobile phones, tablets and other
hand-held devices, has increased in recent years, and we expect this trend to continue while 5G and more advanced mobile
communications technologies are broadly implemented. If we fail to develop products and technologies that are compatible with all
mobile devices, or if the products and services we develop are not widely accepted and used by users of various mobile devices, we may
not be able to penetrate the mobile markets. In addition, the widespread adoption of new internet, networking or telecommunications
technologies or other technological changes could require substantial expenditures to modify or integrate our products, services or
infrastructure. If we fail to keep up with rapid technological changes to remain competitive, our future success may be adversely
affected.
We cannot guarantee that our efforts to innovate and explore new areas of operations would be successful or have a positive
financial impact on us.
In addition to our existing businesses, we continue to invest significant resources in innovation and exploring new products,
services and technologies to cater to the rapidly changing customer demands and trends in the internet industry. However, the success of
new products and services depends on a number of factors, including the quality of our products or services, their acceptance by the
targeted customers and our assessment of market demands and trends.
Furthermore, our competitors are constantly developing innovations, on both mobile devices and personal computers, to
enhance users’ online experience in areas where we currently operate or areas that we wish to expand our operations into. As a result, our
efforts to continually innovate and explore new growth strategies and introduce new products and services to attract more customers to
our services may not be successful, and we cannot guarantee that our innovation efforts will have a positive financial impact on us.
Our gross profit margin and profitability may be affected by changes in our mix of revenues.
Our gross profit may fluctuate from period to period due to a shifting mix of services and products we sell due to changes in the
relative demand for them in the marketplace. Shifts in the mix of our revenue contributed by our different business lines (or by shifts in
the sales of individual services or products within such businesses) can impact our gross profit because they generally produce a different
level of gross margin. For example, in general our segments, namely Youdao, NetEase Cloud Music and innovative businesses and
others, have had lower gross profit margins compared to our games and related value-added services segment. These individual gross
margins in turn can be impacted in any given period by factors such as competition, the implementation of new regulatory requirements
and other factors. If the mix of services and products sold shifts from higher margin business lines to lower margin lines as a result of
differing growth rates among such lines (or to lower margin services and products within business lines), our overall gross profit margin
and profitability may be adversely affected.

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We are exposed to credit risk on our accounts receivable, which may be heightened during periods of uncertain economic
conditions.
Our outstanding accounts receivable are not covered by collateral or credit insurance. While we have procedures to monitor and
limit exposure to credit risk on our accounts receivable, which risk is heightened during periods of uncertain economic conditions, there
can be no assurance such procedures will effectively limit our credit risk and enable us to avoid losses, which could have a material
adverse effect on our financial condition and operating results.
A prolonged slowdown in the economies of the countries or regions where we operate may materially and adversely affect our
results of operations and financial condition.
Our revenue and net income are impacted to a significant extent by economic conditions in the markets where we operate, as
well as economic conditions specific to online and mobile internet usage and advertising. Economic conditions, markets and levels of
consumer spending are influenced by many factors beyond our control, including consumer perception of current and future economic
conditions, political uncertainty, levels of employment, real disposable income, interest rates, taxation and currency exchange rates. Any
prolonged slowdown in the economies of the countries or regions where we operate could lead to a reduction in demand for our services
and consequently have a material adverse effect on our businesses, financial condition and results of operations.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly
impacted by rising inflation, energy costs and geopolitical instability, any of which could have a material adverse effect on our
business, financial condition and results of operations.
U.S. and global markets are experiencing volatility and disruption resulting from increasing inflation, energy costs and the
escalation of geopolitical tensions. The Russia-Ukraine conflict, the Hamas-Israel conflict and other volatility in the Middle East and
elsewhere have heightened geopolitical tensions across the world and led to further market disruptions, including significant volatility in
commodity prices, credit and capital markets, as well as supply chain interruptions, which has further fueled inflation. Although we have
not identified any material impact to our business due to inflation or deflation as of the date of the filing of this annual report, any future
inflation or deflation in the markets where we operate could affect our costs and consumer spending patterns in ways that negatively
impact our business.
There have also been concerns about the relationship between China and other countries, such as the U.S., which may
potentially have economic effects. In particular, there remains significant uncertainty regarding the future direction, scope, and duration
of U.S. tariffs imposed on China, as well as any retaliatory measures that may be adopted by the Chinese government in response. While
cross-border trading of goods is not a primary area of strategic focus for us, unfavorable developments in trade relations, such as
increased tariffs, could indirectly increase our costs if, for example, our vendors, such as cloud services providers and data center
operators, incur higher operating costs resulting from tariffs and pass those on to their customers.  Moreover, such developments could
adversely impact the businesses of our customers who engage in international commerce and may reduce demand for our products and
services or impair our competitive positioning in certain markets. Certain governmental officials have also raised the possibility of
targeting services, including online services, through digital services taxes or other means which could adversely affect our business.
Additionally, prolonged trade disputes may disrupt global economic conditions, potentially impacting our business and growth prospects.
As the duration, impact and interrelationship of the above-mentioned factors are difficult to predict, any of them could have a material
adverse effect on our business, financial condition and results of operations.
Trade sanctions imposed by various jurisdictions may expose us to potential compliance risks.
Trade sanctions laws prohibit us from doing business in or with certain countries, territories or governments, and with certain
persons or entities that have been sanctioned by the United States (including without limitation those administered and enforced by the
U.S. Department of Treasury’s Office of Foreign Asset Controls and the U.S. Department of State), the United Kingdom, British
Overseas Territories (including the Cayman Islands), the European Union and its Member States, and other governments and
international or regional organizations, such as the United Nations Security Council. Such trade sanctions programs may change
frequently or evolve to regulate new areas of conduct, including with respect to the countries or territories that are already subject to
trade sanctions. Additionally, more countries, territories, governments, persons or entities may be exposed to trade sanctions due to
geopolitical instability. It is not, however, possible to predict how the international regulatory environment concerning trade sanctions
may develop.

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As a company incorporated in the Cayman Islands, a British Overseas Territory, we are required to comply with sanctions
implemented in the Cayman Islands, which generally reflect the United Kingdom sanctions. As regards U.S. sanctions and the sanctions
of the European Union or its Member States, given that the substantial majority of our subsidiaries and operations are outside of the U.S.
and the European Union, or the EU, we are generally not required to comply with U.S. and EU sanctions to the same extent as U.S. or
EU entities. However, for companies like us, our U.S. and EU subsidiaries, employees who are U.S. citizens (or lawful permanent
residents) or nationals of EU Member States, activities taking place in the U.S. or the EU, activities involving U.S.-origin goods,
technology or services, activities traded in U.S. dollars, and certain conduct or dealings, among other activities, are subject to applicable
sanctions requirements. Moreover, although our websites are open and available worldwide, we do not actively solicit business in
countries that are subject to comprehensive trade sanctions or from persons who are subject to trade sanctions. Some trade sanctions
specifically target China and China-based companies which may affect our business (see “—Export controls and trade sanctions
explicitly or implicitly involving China could negatively affect our business operations and subject us to regulatory investigations, fines,
penalties or other actions and reputational harm, which could materially adversely affect our business, financial condition and results of
operations” below). We expect that our exposure to trade sanctions will increase as we continue to expand our international operations.
We have implemented internal controls to manage and monitor our compliance with applicable trade sanctions, but there can be
no assurance that we are able to prevent or detect inadvertent business dealings with or involving sanctioned parties and we have limited
control over the activities of our international business partners and non-controlled investees. We also cannot predict with certainty how
relevant authorities will interpret, implement or enforce their trade sanction laws or regulations. While we do not believe that we are in
violation of any applicable trade sanctions laws or that any of our activities are currently sanctionable under applicable laws, some of our
activities or the activities of our affiliates could expose us to penalties under these laws. Any alleged trade sanctions violations may
adversely affect our reputation, business, financial condition and results of operations. In addition, as we expand globally, we may incur
significant costs related to current, new or changing trade sanctions, embargoes, export controls programs or other restrictions and
disclosure requirements, as well as negative publicity, investigations, fines, fees or settlements, which may be difficult to predict.
Export controls and trade sanctions explicitly or implicitly involving China could negatively affect our business operations and
subject us to regulatory investigations, fines, penalties or other actions and reputational harm, which could materially adversely
affect our business, financial condition and results of operations.
A number of countries and jurisdictions, including China, the U.S., the EU and the United Kingdom have adopted various
export control and trade sanctions regimes, which are complex, change frequently with limited or no notice and have generally become
more stringent over time. The addition of new entities to restricted party lists can further increase the scope of trade sanctions and export
control restrictions applicable to our business.
In particular, the U.S. government and other governments have threatened and/or imposed export controls, as well as trade
sanctions, targeting China, and a number of China-based companies, including ZTE Corporation, Huawei Technologies Co., Ltd.,
Tencent Holdings Limited, certain of their respective affiliates, and other PRC-based technology companies. On October 7, 2022, the
U.S. Commerce Department’s Bureau of Industry and Security announced a new set of export control rules aimed at restricting China’s
ability to obtain advanced semiconductor chips, develop and maintain supercomputers, and manufacture advanced semiconductor chips.
As a result, both U.S. and non-U.S. parties cannot export, re-export, or transfer (in-country) certain U.S.-origin advanced computing
semiconductor chips, computer commodities that contain such chips, and certain semiconductor manufacturing items to China without
export licensing, and the export to China of non-U.S. origin items in these categories from other countries may be subject to U.S. export
licensing requirements if they are the product of certain controlled U.S. software and technology or of equipment or facilities that are
themselves the product of certain controlled software or technology, or incorporate certain controlled U.S.-origin items. On October 17,
2023, the U.S. Bureau of Industry and Security, or BIS, announced updated export control rules on advanced computing items and
semiconductor manufacturing equipment, including setting tighter parameters on existing restrictions on chips, which seek to strengthen
and improve the controls imposed on October 7, 2022. On December 2, 2024, BIS announced two further rules strengthening export
controls on advanced computing and semiconductor manufacturing items. BIS is continuing to finalize additional new export controls
with respect to a wide range of “emerging and foundational” technologies, which could include certain software technologies that are
relevant to our business and/or our future growth. In January 2023, Japan and the Netherlands, countries that are homes to some of the
world’s most advanced semiconductor equipment manufacturers, also announced that they have agreed to restrict exports of advanced
chip-manufacturing equipment to China. These rules may prevent us from acquiring advanced semiconductors which may impede our
ability to effectively develop new technologies and services, including in the areas which require significant computer processing power.

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It is possible that the United States or other jurisdictions may impose further export controls and/or trade sanctions, and other
heightened regulatory restrictions on China and China-based companies in a wide range of areas. These regulatory restrictions could,
among other prohibitions or restrictions, (1) prohibit or restrict firms from selling, exporting, re-exporting or transferring certain
technology, components, software and other items to China-based companies, (2) prohibit or restrict persons from entering into
transactions with China-based companies, (3) prohibit or restrict China-based companies from accessing data, providing services in or
operating in the sanctioning jurisdiction, (4) prohibit purchases and sale of securities of Chinese firms, or (5) prohibit or restrict U.S.
investment in China-based companies that operate in certain industries. In addition, Chinese companies, if targeted under U.S. trade
sanctions, may lose access to the U.S. markets and the U.S. financial system, including the ability to use U.S. dollars to conduct
transactions, settle payments or to maintain correspondent accounts with U.S. financial institutions. U.S. entities and individuals may not
be permitted to do business with sanctioned companies or persons, and international banks and other companies may as a matter of law
and/or policy decide not to engage in transactions with such companies. In January 2023, the U.S. House of Representatives formed a
new Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party, which is authorized to
investigate and submit policy recommendations concerning the status of the economic, technological, and security progress of the
Chinese Communist Party and its competition with the United States. We cannot predict what recommendations this committee may
make from time to time or what new rules and regulations may ultimately be adopted in this regard.
Furthermore, in December 2023, MOFCOM and MST issued the Announcement on Promulgation of the Catalogue of
Technologies Prohibited or Restricted from Export by China which stipulates that certain technologies, including technologies related to
personalized information push services based on data analysis, are restricted from export outside the PRC without approval. Some of our
technologies could fall within the scope of technologies subject to such export restriction. In addition, according to the PRC Export
Control Law which came into effect in December 2020, we, our affiliates and business partners may also be required to obtain licenses,
permits and governmental approvals to export certain goods, technologies and services. These and additional regulatory restrictions and
requirements that may become effective from time to time may increase our compliance burden and affect our ability and efficiency in
expanding to international markets.
Our business, financial condition and results of operations may be materially adversely affected by current or future export
controls and/or trade sanctions. Moreover, if any of our expanding portfolio of investee companies, global business partners, joint
venture partners or other parties that have collaborative relationships with us were to become affected by export controls or subject to
trade sanctions, this might result in significant negative publicity, governmental investigations and reputational harm, as well as losses
from impairments or write-offs.
We are subject to a variety of laws and other obligations regarding data security and personal information protection in China,
and our failure to comply with any of them could result in claims, complaints or proceedings against us by governmental entities,
individuals or others and could harm our public image and reputation, which could have a material adverse effect on our
business, results of operations and financial condition.
We are subject to laws in China relating to the collection, use, sharing, retention, security and transfer of confidential and private
information, such as personal information and other data. These laws apply not only to third-party transactions, but also to transfers of
information between our company and our subsidiaries and the VIEs and among our company, our subsidiaries, the VIEs and other
parties with which we have commercial relations. These laws are continuing to develop, and the PRC government may adopt other rules
and restrictions in the future. Non-compliance could result in penalties or other significant legal liabilities.
According to the Cybersecurity Law of the PRC, or Cybersecurity Law, which was promulgated by the National People’s
Congress Standing Committee on November 7, 2016, and took effect on June 1, 2017, we, as a network operator, are obligated to provide
technical assistance and support to public security and national security authorities in order to protect national security or assist with
criminal investigations. In addition, the Cybersecurity Law provides that personal information and important data collected and
generated by an operator of critical information infrastructure in the course of its operations in the PRC must be stored in the PRC. As of
the date of the filing of this annual report, we have not been recognized as the operator of critical information infrastructure. We have
undertaken significant measures in an effort to ensure compliance with the Cybersecurity Law. On September 12, 2022, the CAC issued
the Decision on Amending the PRC Cybersecurity Law (Draft for Comments), which further refines and enhances the legal liabilities for
violating various existing provisions of the Cybersecurity Law. As of the date of the filing of this annual report, these proposed
amendments to the Cybersecurity Law have not been formally adopted by the National People’s Congress Standing Committee.

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On December 28, 2021, the CAC, NDRC, MIIT and other ten PRC regulatory authorities jointly issued the Cybersecurity
Review Measures, which became effective from February 15, 2022. The Cybersecurity Review Measures require that critical information
infrastructure operator or network platform operator carrying out the prescribed activities shall be subject to cybersecurity review, but
there are uncertainties with respect to the interpretation and implementation of the measures. On September 24, 2024, the State Council
issued the Regulations on Network Data Security Management, or the Data Security Regulations, which took effect on January 1, 2025.
The Data Security Regulations provide that processors of important data are subject to a series of specific obligations, and cyber data
processors whose cyber data processing activities affect or may affect national security shall be subject to national security review. Some
of our business operations might be determined by regulatory authorities as involving processing important data, thereby requiring us to
comply with corresponding obligations. Moreover, the Data Security Regulations provide no further explanation or interpretation for the
criteria on determining the risks that “affect or may affect national security”. Given that the Data Security Regulations are relatively new,
there remain uncertainties as to their interpretation and application.
In anticipation of the strengthened implementation of cybersecurity laws and regulations and the continued expansion of our
business, we face potential risks if we are deemed a “critical information infrastructure operator” or a “network platform operator” that
affects or may affect national security under the Cybersecurity Review Measures, and would be required to follow cybersecurity review
procedures. During such review, we may be required to suspend providing any existing or new services to our customers and/or
experience other disruptions of our operations, and such review could also result in negative publicity with respect to our business and
diversion of our managerial and financial resources. Any violation of such cybersecurity laws and regulations by us may result in
warnings and fines, and if we refuse to rectify or have caused severe consequences such as endangering data security, we may be further
subject to suspension of our non-compliant operations, revocation of relevant approvals or business licenses or other sanctions. As of the
date of the filing of this annual report, we have not been involved in any investigations or become subject to a cybersecurity review
initiated by the CAC based on the Cybersecurity Review Measures, and we have not received any warning or sanction in such respect or
any regulatory objections to our listing status from the CAC.
On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law which
became effective on September 1, 2021. The PRC Data Security Law provides a national data security review system under which data
processing activities that affect or may affect national security must be reviewed. Any organizational or individual data processing
activities that violate the PRC Data Security Law will bear the corresponding civil, administrative or criminal liabilities depending on the
specific circumstances. On August 17, 2021, the State Council promulgated the Regulations on Critical Information Infrastructure
Security Protection, or the CII Regulations, which became effective on September 1, 2021. Pursuant to the CII Regulations, regulators
supervising specific industries are required to formulate detailed guidance to identify critical information infrastructure in the respective
sectors, and a critical information infrastructure operator must take the responsibility to protect the security of the critical information
infrastructure by performing certain prescribed obligations. If we are deemed to be a “critical information infrastructure operator” under
the CII Regulations, violation of provisions thereto could result in rectification, confiscation of illegal gains, fines and other legal or
administrative sanctions.
On August 20, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Personal Information
Protection Law, or the PIPL, which came into effect on November 1, 2021. The PIPL stipulates the scope of personal information and the
ways of processing personal information, establishes rules for processing personal information and for transferring personal information
abroad, and clarifies the individual’s rights and the processor’s obligations in the process of personal information. With respect to the
cross-border transfer of personal information outside the territory of PRC, PIPL requires that unless otherwise provided in the related
international treaties or agreements concluded or acceded to by PRC, the handler of personal information must meet one of the following
conditions: (i) pass the security assessment organized by CAC; (ii) have been certified by a specialized agency for protection of personal
information in accordance with the provisions of the CAC; (iii) enter into a contract with the overseas recipient under the standard
contract formulated by CAC; or (iv) meet other conditions prescribed by laws, administrative regulations or the CAC.
Regulators have also issued regulations related to artificial intelligence, or AI, services and algorithmic services such as the
Administrative Provisions on Internet Information Service Algorithm Recommendation, and the Interim Measures for the Administration
of Generative Artificial Intelligence Services. The above provisions impose algorithm filing and security assessment requirements for
specific services, and there still remain uncertainties as to whether or to what extent our business would be captured by the
aforementioned algorithm filing and security assessment requirements. Any failure to comply with such filing or assessment
requirements (to the extent that the relevant regulators deem that such regulatory procedures apply to us) or any other non-compliance or
perceived noncompliance with the above provisions may subject us to penalties and liabilities including, among other things, warnings,
public denouncement, fines, rectification orders, suspension of the provision of relevant services, and even criminal liabilities.

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These newly promulgated laws and regulations reflect the PRC government’s further attempts to strengthen the legal protection
for national network security, data security, the security of critical information infrastructure and the security of personal information
protection. These laws and regulations are relatively new, and therefore there are uncertainties with respect to their interpretation and
implementation. We may need to adjust our business operations and systems to comply with these laws and regulations regarding
network security, data security and personal information from time to time.
For more information with respect to the above laws and regulations, see Item 4.B. “Information on the Company—Business
Overview—Government Regulations—Regulations on Information Security and Censorship.”
We believe our business operations do not violate any of the above PRC laws and regulations currently in force in any material
respect. We have been taking and will continue to take reasonable measures to comply with such laws, regulations, announcement,
provisions and inspection requirements; however, as such laws, regulations, announcement and provisions are relatively new, it remains
uncertain how these announcements and provisions will be implemented. We cannot assure you we can adapt our operations to it in a
timely manner. Evolving interpretations of such laws, regulations, announcements and provisions or any future regulatory changes might
impose additional restrictions on us generating and processing personal and behavioral data. We may be subject to additional regulations,
laws and policies adopted by the PRC government to apply more stringent social and ethical standards in data privacy resulting from the
increased global focus on this area. To the extent that we need to alter our business model or practices to adapt to these announcement
and provisions and future regulations, laws and policies, we could incur additional expenses.
Our privacy policies and practices concerning the use and disclosure of data are posted on the NetEase websites and other online
and mobile platforms. Any failure by us, our business partners or other parties with whom we do business to comply with its posted
privacy policies or with other applicable privacy-related or data protection laws and regulations could result in proceedings against us by
governmental entities or others, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, any negative publicity on our website or platform’s safety or privacy protection mechanism and policy could harm our public
image and reputation and have a material and adverse effect on our business, results of operations and financial condition.
We are subject to various data protection and privacy laws and regulations in jurisdictions outside of China. Failure to comply
with these carries risks including, but not limited to, financial penalties, legal proceedings, claims and/or complaints to
regulatory authorities and negative publicity. If these risks materialize, they could harm our reputation and have a material
adverse impact on our business, results of operations and financial condition.
Our business is subject to various data protection laws and regulations in jurisdictions outside of China where we operate. These
include existing regulations such as the European Union General Data Protection Regulation, or EU GDPR, UK GDPR (which is the EU
GDPR as saved into the United Kingdom law by virtue of the European Union (Withdrawal) Act 2018 GDPR (as may be amended from
time to time)) (together with the EU GDPR, referred to as GDPR), state and federal privacy laws in the United States, including the
California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020, together the “CCPA”, and similar
state laws, as well as federal and provincial privacy laws in Canada. In addition, new laws, regulations and regimes continue to be
proposed and enacted. Monitoring, assessing and complying with the continuously evolving requirements can carry substantial costs and
has the potential to introduce additional complexities for our business which may necessitate changes to our business plans and practices.
In Europe, GDPR imposes a comprehensive privacy compliance regime, setting out rigorous requirements in relation to
processing of personal data, including, for example, requirements pertaining to the legality, transparency and fairness of data processing;
data minimization; security; data breach reporting and restrictions on transfers of personal data outside of the EU and the United
Kingdom. With regards to cross border transfers, case law from the Court of Justice of the European Union states that reliance on
standard contractual clauses - a standard form of contract approved by the European Commission as an adequate personal data transfer
mechanism – alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case by case basis. As
the regulatory guidance and enforcement in relation to data transfers continues to develop, this could introduce operational complexities
for our business and result in additional costs as well as the risk of complaints, regulatory investigations and/or fines.

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The Digital Services Act, or DSA, governs, among other things, our potential liability for illegal services or content on our
platform, obligations around traceability of business users, and requires enhanced transparency measures. Further changes in the
regulatory landscape are expected including through the e-Privacy Regulation. In parallel with these changes, there is also an increasing
focus on regulatory enforcement actions; penalties under GDPR alone can, for example, carry maximum fines of up to EUR20,000,000
(GBP17,500,000) or up to 4% of the total worldwide annual turnover. Similarly, fines under the DSA can reach up to 6% of total annual
worldwide turnover.
Addressing these challenges can result in unplanned costs to our business. For example, engineering resources may have to be
diverted from existing or future projects to build and maintain mechanisms which facilitate compliance or we may need additional
dedicated compliance resources and personnel. Finally, an adverse or challenging regulatory environment can also impact demand and
the market for our offerings.
In the United States, potential changes to, and differences in, privacy laws at both the federal and state level introduce
operational and compliance complexities. At the federal level, the Federal Trade Commission, or FTC, enforces a variety of data privacy
issues such as promises made in privacy policies or failure to appropriately protect the information of individuals and deceptive acts or
practices in violation of the FTC Act. Meanwhile, the CCPA established a comprehensive suite of consumer rights including the right of
correction and the right for consumers to request businesses limit the use and disclosure of sensitive data such as health or geolocation
data. The CCPA also led to the establishment of the California Privacy Protection Agency, or CPPA, a first-of-its-kind government
agency with a broad mandate, including the ability to enforce the CCPA, impose fines and create new regulations. The CCPA provides
for co-enforcement authority for violations between the CPPA and the California Attorney General, as well as a private right of action for
certain data breaches that has increased data breach litigation and could increase liability, in light of the potential for statutory damages.
Such changes introduce uncertainty in business operations and markets which could have a knock-on effect on our business
operations in the U.S. and our results of operations and financial condition. For example, the enactment of the CCPA and introduction of
the CPPA have also prompted a wave of similar legislative reviews and developments in other U.S. states and at the federal level. In
addition, various laws restricting or governing the use of websites, online services, and platforms by minors have passed or been
proposed at the federal level and in certain states. These include laws prohibiting direct advertising to minors (individuals under the age
of 18), requiring age verification, limiting the use of minors’ Personal Information (as defined in the following risk factor), mandating
parental consent for particular uses, including the selling and sharing of minors’ Personal Information, and providing other parental
rights.
Preparing for and complying with the plethora of changing requirements and navigating the overlap or inconsistencies in legal
requirements and regulatory approaches will continue to necessitate changes in our operational approach or service deployment in each
jurisdiction which will likely impact our efficiency, ability to scale and/or market uptake and may cause us to incur substantial costs.
Non-compliance with any of such requirements could result in penalties, fines or significant legal liability, including, as noted above,
penalties calculated as a percentage of global revenue under the GDPR or the DSA.

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Cybersecurity and the threat environment remain a dynamic and ever-changing landscape with new threats and increasingly
sophisticated attacks continually emerging. Successful security breaches can lead to unauthorized access to our network, systems
and, in turn, Confidential Information which may include personal and sensitive information, and system failures, either as a
result of a cyber attack or other outage, could result in our operations being down. This could materially adversely affect our
business, results of operations and financial condition and expose us to liability claims.
We face evolving cybersecurity risks that threaten the confidentiality, integrity, and availability of the computer systems,
hardware, software, technology infrastructure and online sites and networks for both internal and external operations that we rely on and
are critical to our business as well as the information we collect and process that relates to individuals and/or constitutes “personal data,”
“personal information,” “personally identifiable information,” or similar terms under applicable data privacy laws (referred to as
“Personal Information” in this annual report), sensitive information and proprietary information belonging to our business or to our
business partners (referred to, collectively, as Confidential Information in this risk factor). This includes threats from diverse threat
actors, such as state-sponsored organizations, opportunistic hackers and hacktivists, who are becoming increasingly sophisticated in
using techniques and tools—including AI—that circumvent security controls, evade detection and remove forensic evidence. These
actors utilize diverse attack vectors such as social engineering/phishing, malware/ransomware, and viruses, worms, bugs, and other
malicious software programs to attack websites or other online and mobile platforms and obtain access to networks and data centers. Bad
actors may also act in a coordinated manner to launch distributed denial of service attacks (DDoS), or other coordinated attacks, that may
cause service outages or other interruptions. Moreover, the potential for bad actors to exploit software, hardware, errors,
misconfigurations, bugs and other vulnerabilities in commercial systems that interface with our or our third party service providers’ IT
systems, products and services presents another area of vulnerability for our business. We have implemented a number of security
measures designed to protect our IT systems and Confidential Information, but we cannot guarantee that these security measures are or
will be sufficient.
While we are not aware of any material hacking activity or cybersecurity incident that allowed unauthorized access to any
Confidential Information stored on our IT systems or caused any loss or corruption of Confidential Information and other data, software
or other computer equipment, we have been subject to denial of service attacks that have caused portions of our network to be
inaccessible for limited periods of time. Although these are industry wide problems that affect many companies worldwide, we anticipate
that we may be subject to additional attacks in the future. If a cybersecurity incident allows unauthorized access to or release of
Confidential Information and other data of our users, our reputation and brand could be materially damaged, and use of the NetEase
websites and other online and mobile platforms could decrease. We could also be exposed to a risk of loss, litigation (including class
action lawsuits), regulatory inquiries, enforcement, investigations, and possible liability, which could result in a material adverse effect
on our business, results of operations and financial condition.  
We own and manage many of our IT systems but also rely on third parties for a range of IT systems and related products and
services, including cloud computing services. Any compromise of the security of our or our third-party vendors’ IT systems could
materially adversely affect the operations of NetEase’s websites and other online and mobile platforms and result in unauthorized
disclosure of Confidential Information. For example, we use third-party payment platforms for certain mobile and online games and
applications. In this context, these vendors will collect, process, transmit and store sensitive and Personal Information of our users. If
their security is compromised, this could have a secondary impact on our reputation and operations, and we may be held liable for failing
to properly assess and manage our third-party risks.
In addition, human error remains a target area for bad actors who may also attempt to fraudulently induce employees or
customers into disclosing usernames, passwords or other sensitive information, which may in turn be used to access our IT systems.
Finally, both the continual accessibility of the NetEase websites and other online and mobile platforms and the performance and
reliability of our technical infrastructure are critical to our reputation and the ability of the NetEase websites and other online and mobile
platforms to attract and retain users and advertisers. Any system failure or performance inadequacy that causes interruptions in the
availability of our services or increases the response time of our services could reduce user satisfaction and traffic, which would reduce
the NetEase websites and other online and mobile platforms’ appeal to users and advertisers. As the number of NetEase websites, mobile
applications and traffic increase, we cannot assure you that we will be able to scale our systems proportionately. Any system failures and
electrical outages could materially and adversely impact our business.

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We expect that we will be required to continue to expend significant resources to protect our IT systems and Confidential
Information, but there can be no assurance that our cybersecurity risk management program and processes, including our policies,
controls or procedures, will be implemented effectively, complied with or effective in protecting our systems and information. For more
information on our Cybersecurity program, see Item 16K. “Cybersecurity.”
Risks relating to AI technologies may present legal, regulatory and business risks and adversely affect our business and operating
results.
We develop and use artificial intelligence technologies, including proprietary AI and machine learning algorithms and models
(collectively referred to as “AI technologies”), throughout our businesses, and continue to make investments in this area. For example, in
some cases, we have deployed in-game audio and visual generative AI technologies to enhance the user experience by, for example,
providing in-game “AI teammates” and using AI technologies in the development process for some of our games. Other examples
include a number of Youdao’s products, such as Confucius, its large language model designed for the education sector and related AI
tools underpinned by Confucius such as Hi Echo, an AI-driven virtual English-speaking tutor, and Mr. P AI Tutor, a conversation-based
tutorial function.
We are in varying stages of developing products, services and internal business tools involving AI technologies. The continuous
development, maintenance and operation of our AI technologies is expensive and complex, and may involve unforeseen difficulties
including material performance problems, undetected defects or errors. For instance, the models underlying AI technologies can
experience decay (also known as “model drift”) in which performance and accuracy decreases over time without further human
intervention to correct such decay. There can be no assurance that the usage of, or our investments in, such technologies will always
enhance our products or services or be beneficial to our business or profitability.
With respect to our products or services that incorporate AI technologies, the market for such products and services is rapidly
evolving and consumer acceptance remains uncertain. Important assumptions (such as pricing, performance and demand) about the
characteristics of targeted markets for our services or products may be inaccurate. Our failure to successfully develop and commercialize
our products or services involving AI technologies could depress the market price of our ADSs and ordinary shares and impair our ability
to expand our business, improve and diversify our product offerings, and respond effectively to competitive developments.  
A number of aspects of intellectual property protection in the field of AI and machine learning are currently under development,
and there is uncertainty and ongoing litigation in different jurisdictions as to the degree and extent of protection warranted for AI and
machine learning systems and relevant system input and outputs. The law is also uncertain across jurisdictions regarding the copyright
ownership of content that is produced in whole or in part by generative AI tools. If we fail to obtain protection for the intellectual
property rights concerning our AI technologies, or later have our intellectual property rights invalidated or otherwise diminished, our
competitors may be able to take advantage of our research and development efforts to develop competing products which could
adversely affect our business, reputation and financial condition.
The regulatory framework for AI technologies is rapidly evolving as many governmental bodies and agencies have introduced
or are currently considering additional laws and regulations. For example, on November 25, 2022, the CAC, the MIIT and the Ministry
of Public Security jointly issued the Administrative Provisions on Deep Synthesis of Internet Information Services, which became
effective on January 10, 2023. According to these provisions, no organization or individual may use deep synthesis services to produce,
reproduce, release or disseminate information prohibited by laws and administrative regulations, or to engage in activities that endanger
national security and interests, damage the national image, infringe upon social public interests, disrupt the economic and social order or
undermine the legitimate rights and interests of others. Additionally, the providers of deep synthesis services shall, among other things,
establish and maintain management systems for algorithmic mechanism review, data security and personal information protection. On
July 10, 2023, the CAC published the Provisional Administrative Measures for Generative Artificial Intelligence Services, which took
effect on August 15, 2023. These measures provide, among other things, that any providers of generative AI products with public opinion
attributes or social mobilization capabilities shall conduct security assessment in accordance with relevant regulations and complete
certain filing procedures. On March 14, 2025, the CAC released the Measures for Labeling Artificial Intelligence Generated Synthetic
Contents, effective on September 1, 2025, which require network information service providers to include clear labels indicating any AI-
generated synthetic content.

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Outside of China mainland, certain existing legal regimes (e.g., relating to data privacy) regulate aspects of AI technologies, and
new laws regulating this area are also being enacted. For example, the EU Artificial Intelligence Act, or the EU AI Act, became effective
in August 2024, and establishes a comprehensive, risk-based governance framework for AI in the EU market. The EU AI Act applies to
companies that develop, use and/or provide AI in the EU and – depending on the AI use case - includes requirements around
transparency, conformity assessments and monitoring, risk assessments, human oversight, security, accuracy, general purpose AI and
foundation models. Fines under the EU AI Act can reach up to 7% of worldwide annual turnover. Other jurisdictions such as the US,
Singapore and Canada are also developing AI regulations, and this area continues to be a focus for regulators globally.  
Since these laws and regulations are still relatively new and significant uncertainties remain with respect to their interpretation
and implementation, we cannot assure you whether we will be able to comply with the requirements of such laws and regulations in a
timely manner or at all. If we are unable to complete all necessary filings and/or assessments, or to comply with applicable laws and
regulations, or if we have any dispute with any third party relating to intellectual property or data security, our reputation, business
operation and financial condition may be materially and adversely affected.
The success of our business is dependent on our ability to retain our existing key employees and to attract and retain qualified
senior and mid-level managers to our management.
We depend on the services of our existing key employees. Our success will largely depend on our ability to retain these key
employees and to attract and retain qualified senior and mid-level managers to our management team. Future changes in management
could cause material disruptions to our business. We also depend on our ability to attract and retain in the future highly skilled technical,
editorial, marketing and customer service personnel, especially experienced online game software developers. We cannot assure you that
we will be able to attract or retain such personnel or that any personnel we hire in the future will successfully integrate into our
organization or ultimately contribute positively to our business. In particular, the market for experienced online game software
programmers is intensely competitive in China and other countries in which we operate. While we believe we offer compensation
packages that are consistent with market practice, we cannot be certain that we will be able to hire and retain sufficient experienced
programmers to support our online games business. We may also be unsuccessful in training and retaining less-experienced programmers
on a cost-effective basis. The loss of any of our key employees would significantly harm our business. We do not maintain key person
life insurance on any of our employees.
We face risks associated with the possible misconduct committed by our employees or third parties.
Misconduct by our employees, such as unauthorized business transactions, bribery, corruption and breach of our internal
policies and procedures, or by consultants or other third parties, such as breach of law, may be difficult to detect or prevent. Any such
activities could subject us to financial loss and damage our reputation.
We have zero tolerance toward any illegal activities and have put in place internal policies and procedures against employee and
third-party misconduct. For example, our risk management systems, information technology systems and internal control procedures are
designed to monitor our operations and overall compliance. Moreover, we have established Ethics & Compliance Committees for our
operations inside and outside of China mainland which are responsible for identifying and investigating misconduct and taking
appropriate remedial measures.
We have from time to time identified certain incidents of misconduct involving employees and third-parties. However, there can
be no assurance that we will be able to identify non-compliance or illegal activities promptly, or at all. Furthermore, it is not always
possible to detect and prevent such non-compliance or illegal activities, and the precautions we take to prevent and detect such activities
may not be effective. This may materially and adversely affect our business, brand, financial condition and results of operations.

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Our operations are vulnerable to natural disasters and other events.
We have limited backup systems and have experienced system failures and electrical outages from time to time in the past,
which have disrupted our operations. We have servers and routers in several different countries, with most of our servers and routers are
currently located at several different locations in China. Our disaster recovery plan may not fully ensure safety in the event of damage
from fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, geopolitical events and similar events. If
any of the foregoing occurs, we may experience a system shutdown. We generally do not carry any business interruption insurance. To
improve performance and to prevent disruption of our services, we may have to make substantial investments to deploy additional
servers. We carry property insurance with low coverage limits that may not be adequate to compensate us for all losses, particularly with
respect to loss of business and reputation that may occur.
Regulatory and legislative developments related to climate change, may materially adversely affect our business and financial
condition.
Numerous governmental bodies have introduced or are contemplating legislative and regulatory changes in response to various
climate change interest groups and the impact of climate change. Legislation and increased regulation relating to climate change and the
transition to a low carbon economy could impose significant costs on us and our suppliers, including costs related to increased energy
requirements, capital equipment, environmental monitoring and reporting, and other costs to comply with such regulations. Any future
climate change related regulations could also negatively impact our ability to compete with companies situated in areas not subject to
such requirements. Given the uncertainty around the impact of climate change and how it should be addressed, we cannot predict how
legislation and regulation will affect our financial condition, operating performance and ability to compete. Any of the foregoing could
result in a material adverse effect on our business and financial condition.
Our business could be adversely affected by widespread public health or other outbreaks and epidemics.
There have been outbreaks of epidemics globally in recent years. Our operations could be disrupted if any future outbreak
occurs in the countries or regions where a substantial portion of our revenue is derived or where our employees are located. Our
operations could also be severely disrupted if health problems or outbreaks lead to a general slowdown in the global economy or if our
suppliers, customers or business partners are affected by such outbreaks or health epidemics.
We face risks relating to our acquisitions, investments and joint ventures.
We have acquired and invested in numerous businesses, particularly with respect to online game development, and have also
entered into joint venture arrangements from time to time. At any given time, we may have a number of pending investments and
acquisitions that are subject to closing conditions and risks of failure to close. We expect to continue to evaluate and consider a wide
array of potential strategic transactions as part of our overall business strategy, including business combinations, acquisitions and
dispositions of businesses, technologies, services, products and other assets, as well as strategic investments and joint ventures. At any
given time, we may be engaged in discussing or negotiating a range of these types of transactions. These transactions involve significant
challenges and risks, including:
●
difficulties in, and significant and unanticipated additional costs and expenses resulting from, integrating into our business
the personnel, operations, products, services, technology, internal controls and financial reporting of the businesses we
acquire;
●
disruptions to our ongoing business and distractions to our management and employees when engaging in or negotiating
these transactions, or when integrating the new business we acquire with our existing business, both of which will increase
our expenses;
●
departure of skilled professionals and experienced management teams of the acquired businesses, in particular senior game
designers and programmers;
●
lack of influence over the controlling partners or shareholders or the misalignment of interests between us and our partners
or other shareholders, for those investments in which we may not obtain management and operational control;

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●
complex regulatory requirements, restrictions and/or scrutiny on our investments and acquisitions in foreign jurisdictions,
including those related to national security, anti-monopoly and competition laws, export controls, etc.;
●
actual or alleged misconduct, unscrupulous business practices or non-compliance by us and/or any company we acquire or
invest in or by its affiliates or current or former employees, whether before, during or after our acquisition or investments;
●
difficulties in and costs associated with identifying and selecting appropriate targets and strategic partners;
●
loss of potential opportunities to enter into strategic transactions with competitors of our investee companies and strategic
partners;
●
difficulties in conducting sufficient and effective due diligence on potential targets to identify hidden liabilities, incidences
of non-compliance, operating losses, or costs and expenses, which may adversely affect us following our acquisitions or
investments or other strategic transactions;
●
losses arising from disposal of investments or split-up of businesses; and
●
actual or potential impairment charges or write-offs of investments in equity method investees or intangible assets
(including intellectual property we acquire), and goodwill recorded in connection with invested businesses, in the event
that a decline in fair value below the carrying value of our equity method investments is other-than-temporary, or the
carrying amount of a reporting unit to which goodwill is allocated exceeds its fair value. See Item 5.E. “Operating and
Financial Review and Prospects—Critical Accounting Estimates—Impairment of long-term investments.”
These and other risks could lead to negative publicity, increased regulatory scrutiny, litigation, government inquiries,
investigations, actions or penalties against us and the companies we invest in or acquire on the ground of non-compliance with regulatory
requirements and may force us to incur significant additional expenses and allocate significant management and human resources to
rectify or improve these companies’ corporate governance standards, disclosure controls and procedures or internal controls and systems.
Due to business or financial underperformance, regulatory scrutiny or compliance reasons, we may need to divest interests in, or
terminate business cooperation with, businesses and entities in which we have invested capital and other resources. As a result, we may
experience significant difficulties and uncertainties carrying out investments and acquisitions, and our growth strategy, reputation and/or
the trading prices of our ADSs, shares and/or other securities may be materially adversely affected.
Our failure to address these risks or other problems encountered in connection with our acquisitions and investments could
cause us to fail to realize the anticipated benefits of such acquisitions or investments, incur unanticipated liabilities and expenses and
harm our business generally. If we use our equity securities to pay for acquisitions, we may dilute the value of your ADSs and shares. If
we borrow funds to finance acquisitions, such debt instruments may contain restrictive covenants that could, among other things, restrict
us from distributing dividends. Such acquisitions and investments may also lead to significant amortization expenses related to intangible
assets, impairment charges or write-offs.
In addition, our strategic investments and acquisitions may adversely affect our financial results, at least in the short term.
Acquired businesses that are loss-making may continue to sustain losses and may not become profitable in the near future or at all. The
performance of our current and future equity method investees may also adversely affect our net income. There can be no assurance that
we will be able to grow our acquired or invested businesses, or realize returns, benefits of synergies and growth opportunities we expect
in connection with these investments and acquisitions.
We face risks associated with the expansion of our businesses and operations internationally.
In addition to risks that generally apply to our acquisitions and investments, we face risks associated with expanding into an
increasing number of markets where we have limited or no experience, we may be less well-known or have fewer local resources and we
may need to localize our business practices, culture and operations. We also face protectionist or national security policies that could,
among other things, hinder our ability to execute our business strategies and put us at a competitive disadvantage relative to domestic
companies in other jurisdictions. The expansion of our online game business and potentially other businesses outside of China will also
expose us to risks and challenges inherent in operating businesses globally, including:

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●
challenges in replicating or adapting our corporate policies and procedures to operating environments different from that of
China, including technology and logistics infrastructure;
●
challenges in maintaining efficient and consolidated internal systems, including IT infrastructure, and customizing and
integrating these systems with the other parts of our business;
●
lack of acceptance of our product and service offerings, and challenges of adapting our offerings to appeal to local tastes;
●
failure to understand cultural differences, local consumer behavior and preferences and local business practices;
●
protectionist or national security policies that restrict our ability to:
●
invest in or acquire companies;
●
develop, import or export certain technologies;
●
utilize technologies that are deemed by local governmental to pose a threat to their national security; or
●
obtain or maintain the necessary licenses and authorizations to operate our businesses;
●
the need for increased resources to manage regulatory compliance across our international businesses;
●
failure to attract and retain capable talent with international perspectives who can effectively manage and operate local
businesses;
●
compliance with local and international laws and regulations, including those relating to online games, e-commerce, digital
services and platforms, such as the DSA and Digital Markets Act, privacy and data security, such as the GDPR and CCPA, and
consumer and labor protection laws, which will increase our compliance costs across different legal systems;
●
heightened restrictions and barriers on the transfer of data between different jurisdictions;
●
availability, reliability and security of international and cross-border payment systems and logistics infrastructure;
●
exchange rate fluctuations; and
●
political instability and general economic or political conditions in particular countries or regions, including territorial or trade
disputes, war and terrorism.
Failure to manage these risks and challenges could negatively affect our ability to expand our international and cross-border
businesses and operations as well as materially and adversely affect our business, financial condition and results of operations.
If our server and bandwidth service providers fail to provide these services, our business could be materially curtailed.
We mainly rely on affiliates of China Telecom, China Unicom, and China Mobile to provide us with server and bandwidth
service for internet users to access the NetEase websites and other online and mobile platforms. If China Telecom, China Unicom, and
China Mobile or their affiliates fail to provide such services or raise prices for their services, we may not be able to find a reliable and
cost-effective substitute provider on a timely basis or at all. If this happens, our business could be materially curtailed.

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We also rely on cloud servers maintained by third-party cloud service providers particularly for the operation of our games
outside of China mainland. We do not control the operation of these providers or their facilities, and the facilities are vulnerable to
damage, interruption or misconduct. Unanticipated problems at these facilities could result in lengthy interruptions in our services.
Problems with our cloud service providers or the telecommunications network providers with whom they contract could adversely affect
the experience of our users. Any change in service levels at our cloud servers or any errors, defects, disruptions, or other performance
problems with our platform could harm our business or reputation or we could be required to retain the services of replacement
providers, which could increase our operating costs.
We may be held liable for information or content displayed on, retrieved from or linked to the NetEase websites and other
NetEase online and mobile platforms.
We may face liability for defamation, negligence, copyright, patent or trademark infringement and other claims based on the
nature and content of the materials that are published on the NetEase websites and other products and services. We are involved in
intellectual property infringement claims or actions from time to time and are occasionally subject to defamation claims or infringement
claims related to an individual’s publicity rights. We believe that the amounts claimed in these actions, in the aggregate, are not material
to our business. However, these amounts may be increased for a variety of reasons as the claims progress, and we and our affiliates could
be subject to additional defamation or infringement claims which, singly or in the aggregate, could have a material adverse effect on our
business, financial conditions and results of operations, if successful. Also, we may be subject to administrative actions brought by
relevant PRC governmental authorities and in the most severe scenario criminal prosecution for alleged infringement, and as a result may
be subject to fines and other penalties and be required to discontinue infringing activities. Furthermore, as we expand our operations
outside of China, we may be subject to claims brought against us in jurisdictions outside of China.
We also could be subject to copyright, defamation and other claims based upon user-generated content that is accessible on the
NetEase websites or other online and mobile platforms such as content and materials posted or uploaded by users on message boards,
online communities, voting systems, e-mail, chat rooms or our other online and mobile platforms including our music streaming
platform, NetEase Cloud Music, and our portal and related mobile app, Wangyi Xinwen. By providing technology for hypertext links to
third-party websites, we may be held liable for copyright, trademark or other violations by those third- party sites. Third parties could
assert claims against us for losses incurred in reliance on any erroneous information distributed by us. Moreover, users of the NetEase
web-based e-mail services could seek damages from us for:
●
unsolicited e-mails;
●
lost or misplaced messages;
●
illegal or fraudulent use of e-mail; or
●
interruptions or delays in e-mail services.
We may incur significant costs in investigating and defending these claims, even if they do not result in liability.
Divestitures of businesses and assets may have a material and adverse effect on our business and financial condition.
We have undertaken, and may undertake in the future, partial or complete divestitures or other disposal transactions in
connection with certain of our businesses and assets, particularly ones that are not closely related to our core focus areas or might require
excessive resources or financial capital, to help us meet our objectives. These decisions are largely based on our management’s
assessment of the business models and likelihood of success of these businesses. However, our judgment could be inaccurate, and we
may not achieve the desired strategic and financial benefits from these transactions. Additionally, we have undertaken, and may
undertake in the future, partial or complete divestitures or other disposal transactions to comply with evolving legal and regulatory
requirements, such as Youdao’s disposal of its Academic AST Business as part of its efforts to comply with new regulatory requirements
adopted by the PRC government in the second half of 2021. Our financial results could be adversely affected by the impact from the loss
of earnings and corporate overhead contribution/allocation associated with divested businesses. In addition, as our net income/(loss) from
discontinued operations are non-recurrent, it may be difficult for investors and analysts to predict our future earnings potential based on
our historical financial performance.

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Dispositions may also involve continued financial involvement in the divested business, such as through guarantees, indemnities
or other financial obligations. Under these arrangements, performance by the divested businesses or other conditions outside of our
control could affect our future financial results. We may also be exposed to negative publicity as a result of the potential misconception
that the divested business is still part of our consolidated group. On the other hand, we cannot assure you that the divesting business
would not pursue opportunities to provide services to our competitors or other opportunities that would conflict with our interests. If any
conflicts of interest that may arise between the divesting business and us cannot be resolved in our favor, our business, financial
condition, results of operations could be materially and adversely affected.
Furthermore, reducing or eliminating our ownership interests in these businesses might negatively affect our operations,
prospects, or long-term value. We may lose access to resources or know-how that would have been useful in the development of our own
business. Our ability to diversify or expand our existing businesses or to move into new areas of business may be reduced, and we may
have to modify our business strategy to focus more exclusively on areas of business where we already possess the necessary expertise.
We may sell our interests too early, and thus forego gains that we otherwise would have received had we not sold. Selecting businesses to
dispose of or spin off, finding buyers for them (or the equity interest in them to be sold) and negotiating prices for what may be relatively
illiquid ownership interests with no easily ascertainable fair market value will also require significant attention from our management
and may divert resources from our existing business, which in turn could have an adverse effect on our business operations.
If our company were deemed to be an “investment company” under the Investment Company Act of 1940, applicable restrictions
could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our
business and the price of our ADSs and ordinary shares.
We intend to continue to conduct our operations so that our company will not be deemed to be an investment company under the
Investment Company Act of 1940 (the “Investment Company Act”). Section 3(a)(1) of the Investment Company Act provides, in
relevant part, that an issuer will generally be deemed to be an “investment company” for purposes of the Investment Company Act if,
absent an applicable exemption: under Section 3(a)(1)(A), it is or holds itself out as being engaged primarily, or proposes to engage
primarily, in the business of investing, reinvesting or trading in securities; or, under Section 3(a)(1)(C), it is engaged or proposes to
engage in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment
securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an
unconsolidated basis.
Additionally, Rule 3a-1 under the Investment Company Act generally provides that an entity will not be deemed to be an
“investment company” if: (a) it does not hold itself out as being engaged primarily, and does not propose to engage primarily, in the
business of investing, reinvesting or trading securities and (b) consolidating the entity’s wholly-owned subsidiaries (within the meaning
of the Investment Company Act), no more than 45% of the value of its assets (exclusive of U.S. government securities and cash items)
consists of, and no more than 45% of its net income after taxes (for the past four fiscal quarters combined) is derived from, securities
other than U.S. government securities, securities issued by employees’ securities companies, securities issued by qualifying majority
owned subsidiaries of such entity and securities issued by qualifying companies that are controlled primarily by such entity.
We are engaged primarily in the business of providing internet-related services and products and not in the business of
investing, reinvesting or trading in securities. Furthermore, our company’s assets and income are of a nature that we believe allows our
company to satisfy the requirements set forth in the 45% test in Rule 3a-1 under the Investment Company Act as described in clause (b)
of the description provided above.

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From time to time and as of December 31, 2024, we held assets consisting of a significant amount of Chinese banking
instruments that have the characteristics of and are referred to as time deposits for purposes of U.S. financial reporting. Our time deposit
holdings are of varying maturities, but primarily maturities of less than 12 months, which we hold for a variety of cash management-
related purposes. We consider our time deposits with maturities of less than 12 months as “cash items” for purposes of Rule 3a-1 under
the Investment Company Act, which we believe is the correct treatment of such assets, and, as such, we satisfy Rule 3a-1’s 45% asset test
described above as of December 31, 2024. To our knowledge no court, and neither the SEC nor the SEC Staff, has taken a definitive
position as to the circumstances under which time deposits of the type we hold may or may not be “cash items” or “investment
securities” for purposes of the various definitions of investment company and exclusions from the definitions under the Investment
Company Act. However, we are aware that the SEC Staff may not agree with the treatment of such time deposits as cash items. If all of
our time deposits, regardless of their term, were determined to be investment securities by a court or the SEC, then we would have held
as of December 31, 2024 investment securities exceeding 45% of the value of our total assets, exclusive of U.S. government securities
and cash items, and the SEC or a court might then determine that we are an investment company under the provisions of Section 3(a)(1)
(C).
We believe that, even if we were determined to be an investment company under Section 3(a)(1)(C), we are entitled to rely on
the exclusion from investment company status afforded by Section 3(b)(1) of the Investment Company Act. Section 3(b)(1) provides, in
relevant part, that, notwithstanding Section 3(a)(1)(C) of the Investment Company Act, an “issuer primarily engaged, directly or through
… wholly-owned … subsidiaries, in a business or businesses other than that of investing, reinvesting, owning, holding, or trading in
securities” is not an investment company. We are engaged primarily, and have always since our founding in 1997 been engaged, through
our direct and indirect wholly-owned subsidiaries, including through contracts between our direct and indirect wholly-owned subsidiaries
and the VIEs, in businesses other than investing, reinvesting, or trading in securities (including online games, music streaming, online
intelligent learning services, e-commerce and other internet-related services and products). In addition, (i) our filings with the SEC, press
releases, other public statements, website, and advertising and marketing materials have solely represented the NetEase group as being
engaged in internet-related lines of business and have never emphasized either our investment income or the potential for significant
appreciation from investments or cash management activities as a material factor in our business or future growth, (ii) our executive
officers and directors are substantially involved in our internet-related business activities and none of them devotes significant time to the
management of our cash, short-term or long-term investments, (iii) the overwhelming majority of our income is derived from our
internet-related business activities, and (iv) the nature of our asset base is not a function of investment intent or activity but rather a result
of our generation of cash flow from operations without the need for a corresponding amount of spending on overhead or capital
expenditures for operations. We also do not propose to engage primarily in the business of investing, reinvesting or trading in securities
and monitor our holdings of securities regularly to confirm our continued compliance with the assets and income test described above.
Notwithstanding our view that we are not an investment company given our ability to rely on Rule 3a-1 under of the Investment
Company Act and that, in any event, we fit within the exclusion from the definition of “investment company” afforded by Section 3(b)
(1) of the Investment Company Act, it is possible, in view of (i) uncertainty regarding the meaning and application of the term “cash
items” as it is used in Rule 3a-1 and (ii) the fact that the availability of the exclusion from investment company status afforded by Section
3(b)(1) of the Investment Company Act is based in part on subjective judgments as to a given issuer’s particular facts and circumstances,
that the SEC, a court, or the SEC Staff would determine or take a position that we are indeed an investment company under the
Investment Company Act. If we were to become subject to the Investment Company Act, any violation of the Investment Company Act
could subject us to material adverse consequences, including potentially significant regulatory penalties and the possibility that certain of
our contracts would be deemed unenforceable. Additionally, as an issuer organized outside the United States, we would not be eligible to
register under the Investment Company Act absent an SEC exemptive order. Accordingly, in order to fall outside the definition of an
investment company, we would either have to obtain exemptive relief from the SEC, modify our contractual rights or dispose of certain
assets, including shifting some of our cash that is currently maintained in time deposits into more traditional demand deposits and money
market funds, which would more clearly qualify as “cash items.” Additionally, we may have to forego potential future acquisitions of
interests in companies that may be deemed to be investment securities within the meaning of the Investment Company Act. Finally,
failure to avoid being deemed an investment company under the Investment Company Act could also make us unable to comply with our
reporting obligations as a public company in the United States and lead to our being delisted from Nasdaq Stock Market LLC, which
would have a material adverse effect on the liquidity and value of our ADSs and ordinary shares.

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RISKS RELATED TO OUR CORPORATE STRUCTURE
There are uncertainties regarding the interpretation and application of current and future PRC laws, regulations, and rules
relating to the agreements that establish the VIE structure for our operations in China, including potential future regulatory
actions pursuant to the laws and regulations in force at that time, which could affect the enforceability of our contractual
arrangements with the VIEs and, consequently, significantly affect the financial condition and results of operations of NetEase. If
the PRC government finds such agreements non-compliant with relevant PRC laws, regulations, and rules, or if these laws,
regulations, and rules or the interpretation thereof change in the future, we could be subject to severe penalties or be forced to
relinquish our interests in the VIEs.
Due to legal restrictions on foreign investment in Chinese companies providing value-added telecommunications services and
holding ICP licenses and other regulated licenses, we operate our primary businesses, including the online games, music streaming,
online intelligent learning services and internet content services businesses, in China mainland through contractual arrangements with the
VIEs and their nominee shareholders. The contractual arrangements provide us with (i) the power to direct the activities that most
significantly impact the economic performance of the VIEs; (ii) economic benefits of these VIEs; and (iii) an exclusive option to
purchase all or part of the equity interests in the VIEs when and to the extent permitted by PRC law or request any existing shareholders
of the VIEs to transfer any or part of the equity interests in the relevant VIE to another PRC person or entity designated by us at any time
at our discretion. Because of the contractual arrangements, we are the primary beneficiary of the VIEs and their respective subsidiaries
and consolidate the results of operations of the VIEs into ours. The VIEs and their respective subsidiaries hold the licenses, approvals
and key assets that are essential for the major portion of our business operations.
Although we have been advised by our PRC counsel that these contractual arrangements are valid and binding under existing
PRC laws and regulations, these contractual arrangements may not be as effective in providing control over these VIEs as direct
ownership. In addition, we have been further advised by our PRC counsel that there are uncertainties regarding the interpretation and
application of current or future PRC laws and regulations. Thus, if the PRC government finds that our contractual arrangements do not
comply with the existing or future restrictions on foreign investment, or if the PRC government otherwise finds that we, the VIEs or any
of their subsidiaries are in violation of the existing or future PRC laws or regulations or lack the necessary permits or licenses to operate
our business, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations or failures, including,
without limitation:
●
revoking our business and operating licenses;
●
discontinuing or restricting our operations;
●
imposing fines or confiscating any of our income that they deem to have been obtained through illegal operations;
●
imposing conditions or requirements with which we may not be able to comply;
●
requiring us to restructure the relevant ownership structure or operations;
●
restricting our financing activities to finance the business and operations of the VIEs; or
●
taking other regulatory or enforcement actions that could be harmful to our business.

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Any of these actions could cause significant disruption to our business operations and may materially and adversely affect our
business, financial condition and results of operations. In addition, it is unclear what impact the PRC government actions would have on
us and on our ability to consolidate the financial results of any of the VIEs in our consolidated financial statements, if the PRC
governmental authorities find our legal structure and contractual arrangements to be in violation of PRC laws, rules and regulations.
Moreover, new PRC laws, regulations and rules may be introduced to impose additional requirements, posing additional challenges to
our corporate structure and contractual arrangements. If any of these penalties results in our inability to direct the activities of VIEs, our
failure to receive the economic benefits from the VIEs and/or our inability to claim our contractual control rights over the assets of the
VIEs that conduct substantially all of our operations in China, we may not be able to consolidate the VIEs and their respective
subsidiaries into our consolidated financial statements in accordance with U.S. GAAP which could materially and adversely affect our
financial condition and results of operations and cause our ADSs and ordinary shares to significantly decline in value or become
worthless. Please also see the below risk factors “—Our current corporate structure and business operations may be affected by the
Foreign Investment Law.” and “— Risks Related to Doing Business in China—The Chinese government restricts the ability for foreign
investors to invest in and operate in certain types of telecommunications and internet businesses.”
Our current corporate structure and business operations may be affected by the Foreign Investment Law.
On March 15, 2019, the Standing Committee of National People’s Congress promulgated the Foreign Investment Law of the
PRC, or the 2019 PRC Foreign Investment Law, which became effective on January 1, 2020. The 2019 PRC Foreign Investment Law
replaced the trio of previous laws regulating foreign investment in China, namely, the Wholly Foreign-owned Enterprises Law, the Sino-
foreign Equity Joint Ventures Law, and the Sino-foreign Cooperative Joint Ventures Law, together with their implementation rules and
ancillary regulations, and embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with
prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic
investments. The VIE structure has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits
in the industries that are currently subject to foreign investment restrictions in China. While the 2019 PRC Foreign Investment Law does
not comment on the concept of “de facto control” or contractual arrangements with variable interest entities, it does have a catch-all
provision under the definition of “foreign investment,” which includes investments made by foreign investors in China through means
stipulated by laws or administrative regulations or other methods prescribed by the State Council. As such, there remains leeway for
future laws to define contractual arrangements as a form of “foreign investment.” Therefore, there can be no assurance that our
consolidation of the VIEs through contractual arrangements will not be deemed as foreign investment in the future.
In the event that any possible future laws, administrative regulations or provisions deem contractual arrangements as foreign
investment, or if any of our operations through contractual arrangements is classified in the “restricted” or “prohibited” industry in the
future “negative list” under the 2019 Foreign Investment Law, our contractual arrangements may be deemed invalid and illegal, and we
may be required to unwind the VIE contractual arrangements and/or dispose of any affected business. Also, if future laws, administrative
regulations or provisions mandate further actions to be taken with respect to existing contractual arrangements, we may face substantial
uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to
handle any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure,
corporate governance and business operations.

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Our contractual arrangements with the VIEs may not be as effective in providing operational control as direct ownership. If the
VIEs or their ultimate shareholders violate our contractual arrangements with them, our business could be disrupted, our
reputation may be harmed and we may have to resort to litigation to enforce our rights, which may be time consuming and
expensive.
Since PRC laws prohibit or restrict foreign equity ownership in certain types of businesses in China, we have relied and expect
to continue to rely on the contractual arrangements with the VIEs and their nominee shareholders to operate our business in China.
However, these contractual arrangements may not be as effective as direct ownership in providing us with control over the VIEs, and the
VIEs are owned by shareholders whose interests may differ from ours and those of our shareholders because they own a larger
percentage of such companies than of our company. These VIEs or their ultimate shareholders could violate our arrangements with them
by, among other things, failing to operate and maintain the NetEase websites and other online and mobile platforms, or their various
businesses in an acceptable manner, failing to remit revenue to us on a timely basis or at all or diverting customers or business
opportunities from us. If these companies or their ultimate shareholders violate our agreements with them, we may have to incur
substantial costs and expend significant resources to enforce those arrangements and rely on legal remedies under the PRC laws. In the
event we are unable to enforce these agreements, or suffer significant delay or other obstacles in the process of enforcing these
agreements, and may materially and adversely affect our results of operations and financial position.
Because our contractual arrangements with certain of the VIEs and their ultimate shareholders do not detail the parties’ rights
and obligations, our remedies for a breach of these arrangements are limited.
Our current relationship with the VIEs, including Guangzhou NetEase, Hangzhou Leihuo, Youdao Computer and Hangzhou
Yuedu, and their ultimate shareholders is based on a number of contracts, and these affiliated companies are considered the VIEs for
accounting purposes. The terms of these agreements are often statements of general intent and do not detail the rights and obligations of
the parties. Some of these contracts provide that the parties will enter into further agreements on the details of the services to be
provided. Others contain price and payment terms that are subject to monthly adjustment. These provisions may be subject to differing
interpretations, particularly on the details of the services to be provided and on price and payment terms. It may be difficult for us to
obtain remedies or damages from these VIEs or their ultimate shareholders for breaching our agreements. Because we rely significantly
on these companies for our business, the realization of any of these risks may disrupt our operations or cause degradation in the quality
and service provided on, or a temporary or permanent shutdown of, the NetEase websites or other online and mobile platforms.
One of our shareholders has significant influence over our company.
Our founder, Chief Executive Officer and director, William Lei Ding, beneficially owned, as of February 28, 2025,
approximately 45.8% of our total outstanding shares and is our largest shareholder. Accordingly, Mr. Ding has significant influence in
determining the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers,
consolidations, the sale of all or substantially all of our assets, election of directors and other significant corporate actions. He also has
significant influence in preventing or causing a change in control. In addition, without the consent of this shareholder, we may be
prevented from entering into transactions that could be beneficial to us. The interests of Mr. Ding may differ from the interests of our
other shareholders.
A majority of the share capital of certain of the VIEs is held by our major shareholder, who may cause these agreements to be
amended in a manner that is adverse to us.
William Lei Ding, directly or indirectly holds the majority interest in certain of the VIEs. As a result, Mr. Ding may be able to
cause the agreements related to those companies to be amended in a manner that will be adverse to us, or may be able to cause these
agreements not to be renewed, even if their renewal would be beneficial for us. Although we have entered into an agreement that
prevents the amendment of these agreements without the approval of the members of our board of directors other than Mr. Ding, we can
provide no assurances that these agreements will not be amended in the future to contain terms that might differ from the terms that are
currently in place. These differences may be adverse to our interests.

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We may not be able to conduct our operations without the services provided by certain of the VIEs.
Our operations are currently dependent upon our commercial relationships with the VIEs, and we derive most of our revenues
from these companies. If these companies are unwilling or unable to perform the agreements which we have entered into with them, we
may not be able to conduct our operations in the manner in which we currently do. In addition, the VIEs may seek to renew these
agreements on terms that are disadvantageous to us. Although we have entered into a series of agreements that provide us with
substantial ability to control these companies, we may not succeed in enforcing our rights under them. If we are unable to renew these
agreements on favorable terms, or to enter into similar agreements with other parties, our business may not expand, and our operating
expenses may increase.
Our corporate structure may restrict our ability to receive dividends from, and transfer funds to, our China mainland
subsidiaries and VIEs, which could restrict our ability to act in response to changing market conditions and reallocate funds
internally in a timely manner.
NetEase, Inc. is a holding company with no significant assets other than cash on hand and its equity interests in its directly and
indirectly-owned subsidiaries, including those set forth in the organizational diagram appearing in Item 4.B. “Information on the
Company—Business Overview—Our Organizational Structure.” As a result, our company’s primary internal source of funds for our cash
and financing requirements is dividend payments and other distributions on equity from our subsidiaries. If these subsidiaries incur debt
on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other
distributions to us, which in turn would limit our ability to pay dividends on our ordinary shares and service any debt we may incur. PRC
tax authorities may also require us to amend our contractual arrangements with the VIEs and their respective shareholders in a manner
that would adversely affect the ability of our subsidiaries to pay dividends and other distributions to us. In addition, Chinese legal
restrictions permit payment of dividends only out of net income as determined in accordance with Chinese accounting standards and
regulations. Under Chinese law, our China mainland subsidiaries and the VIEs are also required to set aside a portion of their net income
each year to fund certain reserve funds, except in cases where a company’s cumulative appropriations have already reached the statutory
limit of 50% of that company’s registered capital. These reserves are not distributable as cash dividends. Also see “—Risks Related to
Doing Business in China—We may be treated as a resident enterprise for PRC tax purposes under the Enterprise Income Tax Law, which
may subject us to PRC income tax for our global income and result in dividends payable by us to our foreign investors, and gains on the
sales of our ordinary shares or ADSs, becoming subject to taxes under PRC tax laws, which may materially reduce the value of your
investment.” Any limitation on the ability of our China mainland subsidiaries and the VIEs to transfer funds to us in the form of
dividends or other distributions could materially and adversely limit our ability to grow, make investments or acquisitions that could be
beneficial to our businesses, pay debt or dividends, and otherwise fund and conduct our business.
In addition, any transfer of funds from us to any of our China mainland subsidiaries or the VIEs, either as a shareholder loan or
as an increase in registered capital, is subject to certain statutory limit requirements and registration or approval of the relevant PRC
governmental authorities, including the relevant administration of foreign exchange and/or the relevant examining and approval
authority.
Therefore, it is difficult to change our capital expenditure plans once the relevant funds have been remitted from our company
or our subsidiaries outside of China to our China mainland subsidiaries or the VIEs. These limitations on the free flow of funds between
our company and our China mainland subsidiaries and the VIEs could restrict our ability to act in response to changing market conditions
and reallocate funds internally in a timely manner.
Our arrangements with certain of the VIEs and their respective shareholders may cause a transfer pricing adjustment and may
be subject to scrutiny by the PRC tax authorities.
We could face material and adverse tax consequences if the PRC tax authorities determine that our contracts with the VIEs and
their respective shareholders were not entered into based on arm’s-length negotiations. Although our contractual arrangements are similar
to those of other companies conducting similar operations in China, if the PRC tax authorities determine that these contracts were not
entered into on an arm’s-length basis, they may adjust our income and expenses for PRC tax purposes in the form of a transfer pricing
adjustment which may result in an increase in our taxes. In addition, the PRC tax authorities may also impose late payment interest.

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A transfer of shares of the VIEs may trigger tax liability.
If we need to cause the transfer of shareholdings of the VIEs from their current respective shareholders to any other individual,
we may be required to pay individual income tax in the PRC on behalf of the transferring shareholder. Such individual income tax would
be based on any gain deemed to have been realized by such shareholder on such transfer, and may be calculated based on a tax rate of
20% applied to the transferring shareholder’s interest in net book value of the entity whose shares are being transferred minus the
original investment cost. A significant tax obligation arising from any such transfer of shares could materially adversely affect our
business, financial conditions and results of operations.
We may lose the ability to use and enjoy assets held by any of the principal VIEs that are important to the operation of our
business if such VIE declares bankruptcy or becomes subject to a dissolution or liquidation proceeding.
The principal VIEs hold assets that are material to our business operations, such as our certain intellectual property and core
licenses and permits. Although the VIE contracts between our subsidiaries and the VIEs and the shareholders of the VIEs contain terms
that prohibit the shareholders of the VIEs from adversely affecting the existence of the VIEs, in the event the shareholders breach this
obligation and voluntarily liquidate the VIEs, or if any of the VIEs declare bankruptcy and all or part of its assets become subject to liens
or rights of third-party creditors, we might be unable to continue some or all of our business operations. Furthermore, if any of the VIEs
were to undergo a voluntary or involuntary liquidation proceeding, its shareholders or unrelated third-party creditors might claim rights
to some or all of such VIE’s assets and their rights could be senior to our rights under the VIE contracts, thereby hindering our ability to
operate our business.
The custodians or authorized users of our controlling non-tangible assets, including chops and seals, may fail to fulfill their
responsibilities, or misappropriate or misuse these assets.
Under the PRC law, legal documents for corporate transactions, including agreements and contracts are executed using the chop
or seal of the signing entity or with the signature of a legal representative whose designation is registered and filed with relevant PRC
industry and commerce authorities. In order to secure the use of our chops and seals, we have established internal control procedures and
rules for using these chops and seals. In any event that the chops and seals are intended to be used, the responsible personnel will submit
the application which will then be verified and approved by authorized employees in accordance with our internal control procedures and
rules. In addition, in order to maintain the physical security of our chops, we generally have them stored in secured locations accessible
only to authorized employees. Although we monitor such authorized employees, the procedures may not be sufficient to prevent all
instances of abuse or negligence. There is a risk that our employees could abuse their authority, for example, by entering into a contract
not approved by us or seeking to gain control of one of our subsidiaries or VIEs. If any employee obtains and misuses or misappropriates
our chops and seals or other controlling non-tangible assets for whatever reason, we could experience disruption to our normal business
operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve and divert
management from our operations.

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RISKS RELATED TO DOING BUSINESS IN CHINA
The political relationships between China and other countries may affect our business, financial condition, results of operations,
cash flows and prospects.
We have launched numerous mobile games in global markets since 2015 and also offer certain other services outside of China.
Any deterioration of political relationships between China and other foreign jurisdictions may result in bans or restrictions that could
impact our products. As a result, China’s political relationships with other countries in which our services are available may affect our
business operations. For instance, in September 2020, after heightened tensions between China and India over the disputed Himalayan
mountain border, the government of India announced the ban of 118 mobile applications of Chinese origin, including several of our
products. In addition, in August 2020, then U.S. President Trump issued an executive order blocking TikTok and WeChat from
processing transactions for U.S. citizens and from being downloaded in U.S. app stores due to national security concerns. In January
2021, he also prohibited transactions between U.S. persons and eight Chinese applications, including AliPay and QQ. In June 2021,
former U.S. President Biden rescinded these two executive orders and directed the U.S. Commerce Department to monitor software
applications that could affect U.S. national security and make recommendations. In October 2021, the U.S. Commerce Department
submitted an initial set of recommendations on data scrutiny. In April 2024, former President Biden signed into law certain measures
requiring TikTok owner ByteDance to sell TikTok or face a total ban in the U.S. The law was subsequently upheld by the U.S. Supreme
Court in January 2025. In January 2025 and subsequently in April 2025, President Trump granted TikTok two 75-day extensions to
comply with the law. Although the foregoing executive orders or actions are not directed at our services and the ban in India has not
materially impacted our online games services revenue, there can be no assurance that the deterioration of political relationships between
China and other foreign jurisdictions will not result in further bans or restrictions that could impact our products.
Changes in government regulation of the telecommunications and internet industries in China may result in our having to obtain
additional licenses or other governmental approvals to conduct our business, both of which may restrict our operations.
The telecommunications and internet industry, including ICP services and online games, is highly regulated by the Chinese
government. In addition, the telecommunication and internet-related laws and regulations are relatively new and constantly evolving, and
their interpretation and enforcement involve uncertainties. As a result, in certain circumstances, it may be difficult to determine what
actions or omissions may be deemed to be in violation of applicable laws and regulations in this area.
The evolving PRC regulatory system for the telecommunications and internet industries may lead to the establishment of new
regulatory agencies. For example, in May 2011, the State Council announced the establishment of the CAC, whose primary role is to
facilitate the policy-making and legislative development in the telecommunications and internet industries by coordinating with other
relevant governmental agencies in connection with online content administration and handling cross-ministry regulatory matters in
relation to such industries.
In addition, we are uncertain as to how the Chinese government will reclassify our business, due to our acceptance of fees for
internet advertising, online games, e-commerce, and other innovative services as sources of revenues, or as a result of our current
corporate structure. Such reclassification could subject us to penalties, fines or significant restrictions on our business. Moreover,
NetEase, Inc. may have difficulties enforcing its rights under the agreements with the VIEs if any of these parties breaches any of the
agreements with them because NetEase, Inc. does not have approval from appropriate Chinese authorities to provide internet content
services, internet advertising services, e-commerce services or other innovative services. Future changes in Chinese government policies
affecting the provision of information services, including the provision of online services, internet access, e-commerce services, online
advertising and online gaming may impose additional regulatory requirements on us or our service providers or otherwise harm our
business.

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The Chinese government restricts the ability for foreign investors to invest in and operate in certain types of telecommunications
and internet businesses.
Foreign ownership of certain types of telecommunications and internet businesses which we operate, including value-added
telecommunications services, internet cultural services and internet publication services, is subject to restrictions under applicable PRC
laws. For example, on September 28, 2009, GAPP, together with the National Copyright Administration and National Office of
Combating Pornography and Illegal Publications issued a Notice Regarding the Consistent Implementation of the “Regulation on Three
Provisions” of the State Council and the Relevant Interpretations of the State Commission Office for Public Sector Reform and the
Further Strengthening of the Administration of Examination and Approval of Online Games and the Examination and Approval of
Imported Online Games, or Circular 13. According to Circular 13, foreign investors are not permitted to invest in online game operating
businesses in China via wholly-owned, equity joint venture or cooperative joint venture investments and expressly prohibits foreign
investors from gaining control over or participating in domestic online game operators through indirect ways such as establishing other
joint venture companies, or contractual or technical arrangements. In addition, the Administration of Online Publishing Service jointly
issued by the SAPPRFT and the MIIT, effective on March 10, 2016, forbids foreign investments in the online publishing business.
With respect to our internet portal and related mobile app, the CAC’s Provisions for the Administration of Internet News
Information Services, which became effective from June 1, 2017, expressly prohibit any Sino-foreign equity joint venture or cooperative
joint venture or any foreign-funded enterprise to conduct internet-based news information services. We believe we are in compliance
with such requirement because our internet portal and related mobile app business is conducted through the contractually controlled VIEs
that are PRC entities. Additionally, in accordance with the Several Opinions on the Introduction of Foreign Capital to the Culture Sector
(Wen Ban Fa [2005] No. 19) issued by the MOC on July 6, 2005, foreign investors (excluding Hong Kong and Macau) are prohibited
from establishing or operating internet-based cultural institutions. We believe we are in compliance with this requirement because we
operate our other innovative businesses and other services through the contractually controlled VIEs.
It is unclear whether the authorities will deem the VIE structure of the NetEase group as a kind of “indirect way” for foreign
investors to gain control over or participate in domestic online game operators, internet-based news information services or internet-
based cultural institutions. If the VIE structure is deemed as one such “indirect way,” the VIE structure may be challenged by the
authorities and the authorities may require us to restructure the VIE structure and take action to prohibit or restrict our business
operations. In such case, we may not be able to operate or control business in the same manner as we currently do and may not be able to
consolidate the VIEs. Please also see “—Risks Related to Our Corporate Structure” above for a discussion of the risks associated with
the VIE structure.
The approval, filing or other requirements of the CSRC, CAC or other PRC government authorities may be required under PRC
law in connection with our issuance of securities overseas or maintenance of the listing status of our ADSs or ordinary shares,
and the PRC government’s oversight and discretion over our business operations could result in a material adverse change in our
operations and the value of our ADSs or ordinary shares.
The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, purport to
require offshore special purpose vehicles that are controlled by PRC companies or individuals and that have been formed for the purpose
of seeking a public listing on an overseas stock exchange through acquisitions of PRC domestic companies or assets to obtain CSRC
approval prior to publicly listing their securities on an overseas stock exchange. We cannot predict how such regulations will be
interpreted and applied. If CSRC approval under the M&A Rules is required, it is uncertain whether it would be possible for us to obtain
the approval, and any failure to obtain or delay in obtaining CSRC approval for our future issuance of securities overseas would subject
us to sanctions imposed by the CSRC and other PRC regulatory agencies.

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Furthermore, our operations in China are governed by PRC laws and regulations. The PRC government has significant oversight
and discretion over the operation of our business, and it may influence our operations, which could result in a material adverse change in
our operation and the value of our ADSs and ordinary shares. The PRC government has recently indicated an intent to exert more
oversight over overseas offerings and/or foreign investment in China-based issuers like us. For example, the Opinions on Strictly
Cracking Down on Illegal Securities Activities issued on July 6, 2021 emphasized the need to strengthen the administration over “illegal
securities activities” and the supervision on overseas listings by China-based companies, and proposed to take effective measures, such
as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed
companies, although such opinions did not specify the definition of “illegal securities activities.”. Subsequently, CAC, NDRC, MIIT and
other ten PRC regulatory authorities jointed issued the Cybersecurity Review Measures and CAC issued the Data Security Regulations
which further strengthened the cybersecurity review measures. For example, the Cybersecurity Review Measures require that any
network platform operator which has personal information of more than one million users and is going to be listed abroad, is subject to
cybersecurity review. For more details, please see “—Risks Related to Our Operations Overall—We are subject to a variety of laws and
other obligations regarding data security and personal information protection in China, and our failure to comply with any of them could
result in claims, complaints or proceedings against us by governmental entities, individuals or others and could harm our public image
and reputation, which could have a material adverse effect on our business, results of operations and financial condition.”
In addition, on February 17, 2023, CSRC issued a new set of regulations consists of the Trial Administrative Measures of
Overseas Securities Offering and Listing by Domestic Companies and five supporting guidelines (collectively, the “Filing Rules”) which
came into effect on March 31, 2023. The Filing Rules regulate both direct and indirect overseas offering and listing of PRC domestic
companies’ securities by adopting a filing-based regulatory regime. The Filing Rules apply to overseas offerings by domestic companies
of equity shares, depository receipts, convertible corporate bonds and other equity securities that are offered and listed overseas, and we
may be required to submit filings to the CSRC in connection with future issuances of our equity securities to foreign investors.  In order
to support domestic companies’  overseas securities offering and listing pursuant to PRC laws and regulations, as a supplement to the
Trial Measures, on February 24, 2023, CSRC and other three PRC regulatory authorities jointly issued the Provisions on Strengthening
Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the Confidentiality
and Archives Administration Provisions, which took effect on March 31, 2023, according to which, a domestic company that seeks
overseas offering and listing and the securities companies and securities service providers that undertake relevant businesses must
institute a sound confidentiality and archives administration system, and take necessary measures to fulfil confidentiality and archives
administration obligations. For more information with respect to the Filing Rules and the Confidentiality and Archives Administration
Provisions, see Item 4.B. “Information on the Company—Business Overview—Government Regulations—Regulations Relating to
Overseas Listing.” As the Filing Rules and the Confidentiality and Archives Administration Provisions are relatively new, there are
uncertainties with respect to their interpretation and implementation.
If the CSRC, CAC or other relevant PRC regulatory agencies subsequently determine that approval is required for any of our
future offerings of securities overseas or to maintain the listing status of our ADSs or ordinary shares, we cannot guarantee that we will
be able to obtain such approval in a timely manner, or at all. The CSRC, CAC or other PRC regulatory agencies also may take actions
requiring us, or making it advisable for us, not to proceed with such offering or maintain the listing status of our ADSs or ordinary
shares. If we proceed with any of such offering or maintain the listing status of our ADSs or ordinary shares without obtaining the
CSRC’s or other relevant PRC regulatory agencies’ approval to the extent it is required, or if we are unable to comply with any new
approval requirements which might be adopted for offerings that we have completed prior to the publication of the above-referenced
opinions, we may face regulatory actions or other sanctions from the CSRC, CAC or other PRC regulatory agencies. These regulatory
agencies may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our
operating privileges in China, delay or restrict the repatriation of the proceeds from offering of securities overseas into China or take
other actions that could have a material adverse effect on our business, financial condition, results of operations and prospects, as well as
the trading price of the ADSs or ordinary shares.
Furthermore, if there are any other approvals, filings and/or other administration procedures to be obtained from or completed
with the CSRC, CAC or other PRC regulatory agencies as required by any new laws and regulations for any of our future proposed
offering of securities overseas or the listing of the ADSs or ordinary shares, we cannot assure you that we can obtain the required
approval or complete the required filings or other regulatory procedures in a timely manner, or at all. Any failure to obtain the relevant
approvals or complete the filings and other relevant regulatory procedures may subject us to regulatory actions or other sanctions from
the CSRC or other PRC regulatory agencies, which may have a material adverse effect on our business, financial condition or results of
operations. In addition, implementation of industry-wide regulations affecting our operations could cause the value of our securities to
significantly decline. Therefore, investors of our company and our business face potential uncertainty from actions taken by the PRC
government affecting our business.

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The Chinese government has not enacted any specific laws regarding virtual asset property rights and, accordingly, it is not clear
what liabilities, if any, online game providers may have for virtual assets.
One of the features of our PC and mobile MMORPG and other games which helps to build a large user base and maintain
loyalty is that users can accumulate virtual tools, powers and rankings as they play the games. We believe that these virtual assets are
highly valued by our users, particularly long-term users, and are traded among users. However, on occasion, such assets can be lost if, for
example, a user’s identity is stolen by another user or we experience a system error or crash. Other than the PRC Civil Code, which was
passed by the National People’s Representative Meeting on May 28, 2020 and took effect on January 1, 2021, which prescribes that
network virtual property will be protected according to the laws and regulations stipulating the protection of such property, the Chinese
government has not yet enacted any specific laws regarding virtual property rights. Accordingly, we have no basis to determine what are
the legal rights, if any, associated with virtual assets and what liabilities we could be exposed to for the loss or destruction of virtual
assets. We could therefore potentially be held liable for the way in which we handle and protect virtual assets.
Restrictions on virtual currency may adversely affect our online game revenues.
A large part of our online game revenues is collected through the sale of prepaid points, as described elsewhere in this annual
report.
On February 15, 2007, the MOC, the PBOC, and 12 other PRC regulatory authorities jointly issued the Notice on the
Reinforcement of the Administration of Internet Cafés and Online Games, or the Internet Cafés Notice, which strengthens the
administration of virtual currency in online games to avoid any adverse impact on the PRC economy and financial system. Under the
Internet Cafés Notice, the total amount of virtual currency issued by online game operators and the amount purchased by individual users
should be strictly limited, with a clear distinction between virtual transactions and real transactions, so that virtual currency should only
be used to purchase virtual items.
On June 4, 2009, the MOC and the MOFCOM jointly issued the Notice on Strengthening the Administration of Online Game
Virtual Currency, or the Online Game Virtual Currency Notice, which defined “Virtual Currency” as a type of virtual exchange
instrument that is issued by online game operators, purchased directly or indirectly by the game user by exchanging legal currency at a
certain exchange rate, saved outside the game programs, stored in servers provided by the online game operators in electronic record
format and represented by specific numeric units. In addition, the Online Game Virtual Currency Notice categorizes companies involved
with virtual currency as either issuers or trading platforms and prohibits companies from simultaneously engaging both as issuers and as
trading platforms. The Online Game Virtual Currency Notice’s objective is to limit the circulation of virtual currency and thereby reduce
concerns that it may impact real world inflation. To accomplish this, the Online Game Virtual Currency Notice requires online game
operators to report the total amount of their issued virtual currencies on a quarterly basis and to refrain from issuing disproportionate
amounts of virtual currencies in order to generate revenues. In addition, the Online Game Virtual Currency Notice reiterates that virtual
currency can only be provided to users in exchange for an RMB payment and can only be used to pay for virtual goods and services of
the issuers. Online game operators are strictly prohibited from conducting lucky draws or lotteries in which participants pay cash or
virtual currency to win game items or virtual currency. The Online Game Virtual Currency Notice also requires online game operators to
keep transaction data records for no less than 180 days and to not provide virtual currency trading services to minors.
On December 22, 2023, the NPPA publicly solicited opinions on the Draft Administrative Measures for Online Games, which
provide for rules on the distribution, trading and trading enterprises of online game coins, as well as rules on the distribution and trading
of virtual items for online games, including, among other things, (i) trading of online game coins shall be conducted via real-name digital
RMB wallets, and (ii) online game publishers and operators shall not exchange the virtual props of online games acquired by users into
legal tender. As of the date of the filing of this annual report, the Draft Administrative Measures for Online Games have not been
formally adopted. It remains unclear whether a formal version will be adopted in the future and whether the adopted formal version (if
any) will have any further material changes, and it is uncertain how the measures will be enacted, interpreted or implemented and how
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Information displayed on, retrieved from or linked to the NetEase websites and other online and mobile platforms may subject
us to claims of violating PRC laws.
Internet companies in China are subject to a variety of existing and new rules, regulations, policies, and license and permit
requirements on the distribution of information over the mobile and internet. Under these rules and regulations, content service providers
are prohibited from posting or displaying over the mobile or internet content that, among other things, violates PRC laws and regulations,
impairs the national security of China, is obscene, superstitious, defamatory, or may be deemed by relevant government authorities as
“socially destabilizing” or leaking “state secrets” of China. Violations or perceived violations of Chinese laws arising from information
displayed on, retrieved from or linked to the NetEase websites and other online and mobile platforms could result in significant penalties,
including a temporary or complete cessation of our business.
Multiple organizations are involved in the administering of such regulations, including the Propaganda Department of the
Chinese Communist Party, which has been given the responsibility to censor news published in China to ensure a particular political
ideology, and the CAC, which has been given the responsibility to protect, supervise and administer cyber security issues in China. In
addition, the MIIT has published implementing regulations that subject online information providers to potential liability for content
included in their media and the actions of subscribers and others using their systems. The Ministry of Public Security has also from time
to time prohibited the distribution over the internet of information which it believes to be socially destabilizing. In addition, the NRTA is
involved in the supervising, administering and reviewing of the content and quality of radio and television programs and internet audio-
visual programs. The MOCT is involved in guiding and administering the literary and artistic undertakings and artistic creation and
production. The PRC government and regulatory authorities strengthen the regulation on internet content from time to time. For example,
the Administrative Provisions on Mobile Internet Applications Information Services, which were issued by CAC on June 14, 2022 and
became effective on August 1, 2022, require the application providers not only to establish sound information content review and
management mechanism, establish sound management measures such as user registration, daily inspection and emergency disposal, but
also to conduct security assessments in accordance with Chinese laws before launching new technologies, new applications and new
functions with the attribute of public opinions or capable of social mobilization.
The Ministry of Public Security has the authority to require any local internet service provider to block any website maintained
outside China at its sole discretion. The State Secrecy Bureau, which is directly responsible for the protection of state secrets of all PRC
government and Chinese Communist Party organizations, is authorized to block any website it deems to be leaking state secrets or failing
to meet the relevant regulations relating to the protection of state secrets in the distribution of online information. We may be liable under
any of these pronouncements for content and materials posted, uploaded or transmitted by users on our platform. User-generated content
is accessible on the NetEase websites and our other online and mobile platforms including Wangyi Xinwen and NetEase Cloud Music,
such as content and materials posted or uploaded by users on message boards, online communities and social networking platforms. We
have implemented an efficient and thorough content screening and monitoring mechanism for NetEase Cloud Music and our other
platforms which involve both automated filtering and manual review, to timely remove any inappropriate or illegal content, including
interactive content on our platform. However, such procedures may not prevent all illegal or impropriate content or comments from being
posted, and our editorial staff may fail to review and screen such content or comments effectively. To the extent that PRC regulatory
authorities find any content on our platform objectionable, they may require us to limit or eliminate the dissemination of such content on
our platform in the form of take-down orders or otherwise. Failure to identify and prevent illegal or inappropriate content from being
distributed on our platform may subject us to liability. Recently, PRC governmental authorities have tightened regulations on online
content. For example, in 2024, the CAC launched the “Clear and Bright” campaign to rectify a variety of online misconduct, such as
misconduct in the field of online live streaming, generative AI services and internet news information services. If the PRC governmental
authorities determine that we are not in compliance with all the requirements under applicable laws and regulations relating to internet
content, we may be subject to fines and/or other sanctions such as an order to correct the violation, confiscation of illegal earnings,
suspension or shutdown of the related business and website, cessation of business operation for rectification, and revocation of business
license, any of which could disrupt our operations. In addition, PRC laws and regulations are subject to interpretation by the relevant
authorities, and it may not be possible to determine in all cases the types of content that could result in our liability as a platform
operator.
Furthermore, under the relevant regulations, internet companies which provide bulletin board systems, chat rooms or similar
services, such as NetEase, must apply for the approval of the State Secrecy Bureau. As the implementing rules of these regulations have
not been issued, we do not know how or when we will be expected to comply, or how our business will be affected by the application of
these regulations.

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We face uncertainties with respect to the interpretation and implementation of the anti-monopoly related laws in the field of
internet platforms.
The PRC Anti-Monopoly Law, which took effect on August 1, 2008, prohibits monopolistic conduct such as entering into
monopoly agreements, abusing market dominance and concentration of undertakings that may have the effect of eliminating or
restricting competition. Violations of such law can result in an order to stop the illegal conduct, confiscation of revenue earned from such
conduct and a fine of 1% to 10% of the total amount of revenue earned in the prior year. On February 7, 2021, the Anti-Monopoly
Commission of the State Council promulgated the Guidelines to Anti-Monopoly in the Field of Internet Platforms, or the Anti-Monopoly
Guidelines, which took effect on the same date and operate as a compliance guidance for platform economy operators under the existing
PRC anti-monopoly laws and regulations. The Anti-Monopoly Guidelines aim at specifying some of the circumstances under which an
activity of internet platforms may be identified as monopolistic conduct as well as setting out filing procedures for concentration of
undertakings involving variable interest entities. The Anti-Monopoly Guidelines mainly covers five aspects, including general
provisions, monopoly agreements, abusing market dominance, concentration of undertakings, and abusing of administrative powers
eliminating or restricting competition.
On June 24, 2022, the Standing Committee of the National People’s Congress issued the 2022 Amendment to the Anti-
Monopoly Law, which amends the penalties for illegal concentration of business operators to include the discontinuation of
concentration, disposal of the shares or assets within a specified time limit, transfer of the business within a specified time limit and the
adoption of other necessary measures to return to the state prior to the concentration, and a fine of no more than ten percent of its prior
year’s sales revenue if the concentration of the business operators has or may have an effect of eliminating or restricting competitions; or
a fine of up to RMB5 million if the concentration of business operators does not have an effect of eliminating or restricting competitions.
The amendment also authorizes the relevant authority to investigate transactions where there is evidence that the concentration has or
may have the effect of eliminating or restricting competitions, even if such concentration does not reach the filing threshold.
In recent years, the SAMR has imposed administrative penalties in a number of anti-monopoly cases in the internet industry,
and the regulatory environment for anti-monopoly in the internet industry has been entering into a phase of normalized regulation and
control. Given the uncertainties of the interpretation and implementation of the Anti-Monopoly Guidelines and the newly amended Anti-
Monopoly Law and considering the evolving legislative activities and varied local implementation practices of anti-monopoly and
competition laws and regulations in the PRC, we may be required to make expenditures and adjust our business practice to comply with
existing or future laws and regulations, which may increase our costs and limit our ability to operate our business. In addition, failure or
perceived failure to comply with Anti-Monopoly Guidelines, and the newly amended Anti-Monopoly Law or other anti-monopoly
related laws and regulations may result in investigations or enforcement actions, litigation or claims against us and could have an adverse
effect on our business, financial conditions and results of operations.
We may not be able to adequately protect our intellectual property and may be exposed to infringement claims by third parties.
We rely on a combination of copyright, trademark, patent and trade secrecy laws and contractual restrictions on disclosure to
protect our intellectual property rights. Our efforts to protect our proprietary rights may not be effective in preventing unauthorized
parties from copying or otherwise obtaining and using our technology or imitating our name, private label merchandise or other
intellectual property. Monitoring unauthorized use of our intellectual property is difficult and costly, and we cannot be certain that the
steps we take will effectively prevent misappropriation of our technology or other intellectual property.
From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in
substantial costs and diversion of our resources. In addition, our current and future business activities, including our portal service and
private label merchandise, may infringe upon the proprietary rights of others, and third parties may assert infringement claims against us,
including claims alleging, among other things, copyright, trademark or patent infringement. Third parties have initiated litigation against
us for alleged infringement of their proprietary rights, and additional claims may arise in the future. In the event of a successful claim of
infringement and our failure or inability to develop non-infringing technology or content or to license the infringed or similar technology
or content on a timely basis, our business could suffer. Moreover, even if we are able to license the infringed or similar technology or
content, license fees that we pay to licensors could be substantial or uneconomical. See Item 4.B. “Information on the Company—
Business Overview—Intellectual Property.”

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We are subject to consumer protection laws that could require us to modify our current business practices and incur increased
costs.
Our e-commerce business is subject to numerous PRC laws and regulations that regulate retailers generally or govern online
retailers specifically, such as the Consumer Protection Law. If these regulations were to change or if we or our suppliers were to violate
them, the costs of certain products or services could increase, or we could be subject to fines or penalties or suffer reputational harm,
which could reduce demand for the products or services offered on our e-commerce platform as well as third-party platforms and hurt
our business, financial conditions and results of operations. For example, the amended Consumer Protection Law, which became
effective in March 2014, strengthens the protection of consumers and imposes more stringent requirements and obligations on business
operators, with a particular focus on businesses that operate via the internet. Pursuant to the Consumer Protection Law, consumers are
generally entitled to return goods purchased within seven days upon receipt without giving any reasons if the purchases are made through
the internet. Consumers whose interests have been harmed due to their purchase of goods or acceptance of services on e-commerce
platforms may claim damages from sellers or service providers.
Laws and regulations regarding consumer protection, particularly those involving transactions conducted over the internet,
frequently change and are subject to interpretation. We are therefore unable to predict the ultimate cost of compliance of the relevant
laws or regulations or their effect on our operations. We may be required to make significant expenditures or modify our business
practices to comply with existing or future laws and regulations, which may increase our costs and materially limit our ability to operate
our business.
Regulatory restrictions on financial transactions may adversely affect the operation and profitability of our business.
We currently operate an online payment platform used by both distributors of our prepaid points and end-users of our online
services, which requires a permit under the Measures for the Administration of Non-financial Institutions Engaging in Payment and
Settlement Services issued by PBOC on June 14, 2010. In addition, on December 28, 2015, the PBOC issued a notice regarding the
Administrative Measures for the Internet Payment Services of Non-bank Payment Institutions, or the PBOC Notice 43, which took effect
on July 1, 2016. According to the PBOC Notice 43, a payment institution is required to follow the principles of “know your clients,” and
maintain records on its clients using their real names when opening payment accounts for its clients. Pursuant to the PBOC Notice 43, a
payment institution may not engage in, including in a disguised form, such businesses as securities, insurance, credit loans, financing,
wealth management, guarantee, trust, currency exchange, cash deposit and withdrawal services. In addition, a payment institution is
required to, based on client identity, conduct affiliated management of all the payment accounts opened by the same client. On January
19, 2021, the PBOC issued the Measures for Deposit and Management of Customer Reserve Funds by Non-bank Payment Institutions, or
the Measures for Customer Reserve Funds, which became effective on March 1, 2021. The Measures for Customer Reserve Funds define
“Clients’ Reserves” as funds actually received by non-bank payment institutions when processing payments for clients and payable upon
clients’ order, which must be fully deposited by the non-bank payment institutions into a dedicated deposit account held in the custody of
banking institutions. The Measures for Customer Reserve Funds standardize the centralized deposit and management business of
customer’s reserves after centralized deposit of reserves, further refine the provisions on deposit, use and transfer of reserves, clarify the
corresponding reserve management responsibilities of the PBOC and its branches, clearing institutions and reserve banks, set punishment
standards for violations of customer’s reserves and promote the development of the industry. On September 2, 2022, the Standing
Committee of the National People’s Congress promulgated the Anti-Telecom and Online Fraud Law of the PRC, effective on December
1, 2022, which requires that non-bank payment institutions, together with banking financial institutions, must establish a customer due
diligence system during the opening of bank accounts and payment accounts and the provision of payment and settlement services for
customers, and during the existence of the business relationship with customers, identify the beneficial owners and take appropriate risk
management measures to prevent the use of bank accounts and payment accounts for telecom or online fraud according to relevant laws.
On December 9, 2023, the State Council promulgated the Regulation on Supervision and Administration of Non-bank Payment
Institutions, which will become effective on May 1, 2024, to provide principal rules for regulating activities of non-bank payment
institutions, such as implementing access management of the non-bank payment institutions by specifying certain access requirements
and reinforcing management systems with respect to payment accounts, reserve funds and payment instructions. On July 9, 2024, the
PBOC issued the Detailed Rules for the Implementation of the Regulation on Supervision and Administration of Non-Banking Payment
Institutions to further implement the Regulation on Supervision and Administration of Non-bank Payment Institutions. On November 11,
2024, the Standing Committee of the National People’s Congress issued the amended PRC Anti-money Laundering Law, which came
into effect on January 1, 2025, to require entities such as non-bank payment institutions to fulfill the anti-money laundering obligations
of financial institutions under this Law, such as reporting of large-value transactions and doubtful transactions.

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We are in compliance with the PBOC Notice 43 and the recent PBOC requirements to transfer our customer reserve funds to its
designated bank account, and we are also in compliance with the new regulation relating to financial transactions in all material aspects.
However, we cannot predict how the regulations relating to financial transactions will evolve or be certain that we will be able to
maintain compliance with all relevant regulations at a reasonable cost. Any inability to continue operating our current online payment
platform would likely materially and adversely affect the operation and profitability of our business.
Uncertainties with respect to the PRC legal system could adversely affect us.
The PRC legal system is a civil law system based on written statutes. Unlike the common law system, decided legal cases under
the civil law system may be cited for reference but have less precedential value. In the late 1970s, the Chinese government began to
promulgate a comprehensive system of laws and regulations governing economic matters. The overall effect of legislation enacted over
the past 50 years has significantly enhanced the protections afforded to foreign invested enterprises in China. However, many of these
laws, regulations and legal requirements are relatively recent and are evolving rapidly, and their interpretation and enforcement involve
uncertainties. Since PRC administrative and court authorities have discretion in interpreting and implementing statutory provisions and
contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we
enjoy. These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual
rights or tort claims. Furthermore, the PRC legal system is based in part on government policies and China mainland is geographically
large and divided into various provinces and municipalities. As such, different regulations and policies may have different and varying
applications and interpretations in different parts of China mainland, and it is possible that we may not be aware in a timely manner that
we have been identified to be in violation of these policies and rules until sometime after the occurrence of the violation. In addition, any
administrative and court proceedings may be protracted, resulting in substantial costs and diversion of resources and management
attention.
The PRC government has recently published new policies that adversely affected our industry and our business, and we cannot
rule out the possibility that it will in the future further release regulations or policies regarding our industry that could further adversely
affect our business, financial condition and results of operations.
Contract drafting, interpretation and enforcement in China involve uncertainty.
We have entered into numerous contracts governed by PRC law, many of which are material to our business. As compared with
contracts in the United States, certain contracts governed by PRC law may contain less detail and may not be as comprehensive in
defining contracting parties’ rights and obligations in some instances. As a result, those contracts are more vulnerable to disputes and
legal challenges. In addition, contract interpretation and enforcement by the court in China is subject to uncertainties. Therefore, we
cannot assure you that we will not be subject to disputes under our material contracts, and if such disputes arise, we cannot assure you
that we will prevail. Any dispute involving material contracts, even without merit in plaintiff’s regard, may materially and adversely
affect our reputation and our business operations, and may cause the price of our ADSs and/or shares to decline.
Our business benefits from certain PRC government incentives. Expiration of, or changes to, these incentives and PRC tax laws
could have a material adverse effect on our operating results.
Under China’s Enterprise Income Tax Law, the enterprise income tax, or EIT, rate payable by domestic and foreign invested
enterprises is 25.0%. Preferential tax treatments are granted to entities that conduct business in encouraged sectors and to entities that are
classified as HNTEs, or “Software Enterprises” or “Key Software Enterprises,” whether such entities are foreign invested enterprises or
domestic companies.
A number of our China mainland subsidiaries, such as Boguan, NetEase Hangzhou and certain other subsidiaries, enjoyed
preferential tax rates of 15.0% for 2022, 2023 and 2024 by being recognized as an HNTE. See Item 5.A. “Operating and Financial
Review and Prospects—Operating Results—Income Taxes.”

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Although we will attempt to obtain or maintain similar preferential tax statuses for our subsidiaries in the future, we cannot
assure you that we will obtain or maintain any particular preferential tax status, and typically the relevant government agencies do not
confirm that we have obtained or maintained a particular tax status until late in a given tax year or the following tax year. The
qualifications for HNTE or “Software Enterprise” or “Key Software Enterprise” status are subject to an annual assessment by the
relevant government authorities in China, and the PRC policies on preferential tax treatments may change from time to time. Without any
preferential tax status, the standard EIT rate of 25.0% will apply. Moreover, if there are further changes to the relevant income tax laws
and their implementation, our subsidiaries and the VIEs may need to pay additional taxes, which could have a material adverse effect on
our results of operations.
We may be treated as a resident enterprise for PRC tax purposes under the Enterprise Income Tax Law, which may subject us to
PRC income tax for our global income and result in dividends payable by us to our foreign investors, and gains on the sales of
our ordinary shares or ADSs, becoming subject to taxes under PRC tax laws, which may materially reduce the value of your
investment.
Under the Enterprise Income Tax Law, enterprises established outside of the PRC whose “de facto management bodies” are
located in the PRC are considered “resident enterprises,” and will generally be subject to the uniform 25.0% EIT rate for their global
income. Under the implementation rules of the Enterprise Income Tax Law, “de facto management body” is defined as the body that has
material and overall management control over the business, personnel, accounts and properties of the enterprise. In April 2009, the PRC
tax authority promulgated a circular to clarify the criteria for determining whether the “de facto management bodies” are located within
the PRC for enterprises established outside of the PRC that are controlled by entities established within the PRC. However, the relevant
laws and regulations remain unclear regarding treatment of an enterprise established outside the PRC that is not controlled by entities
established within the PRC.
If we were considered a “resident enterprise”, we would be subject to the EIT rate of 25.0% of our global income, and as a
result, the amount of dividends we can pay to our shareholders could be reduced. We believe that none of NetEase, Inc. and its
subsidiaries outside of China is a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is
subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto
management body.” We cannot confirm whether we will be considered a “resident enterprise” because the implementation rules are
unclear at this time.
Under the implementation rules of the Enterprise Income Tax Law, dividends paid to “non-resident enterprises” by “resident
enterprises” on profits earned after January 1, 2008 are regarded as income from “sources within the PRC” and therefore subject to a
10.0% withholding income tax, while dividends on profits earned before January 1, 2008 are not subject to the withholding income tax.
Similarly, gains realized on the transfer of ordinary shares or ADSs by “non-resident enterprises” are also subject to a 10.0% PRC EIT if
such gains are regarded as income derived from sources within the PRC. A lower withholding income tax rate is applied if the “non-
resident enterprises” are registered in Hong Kong or other jurisdictions that have a favorable tax treaty arrangement with China.
Nevertheless, the Announcement on Issues Concerning “Beneficial Owners” in Tax Treaties, or the STA Circular 9, which was issued on
February 3, 2018 by the STA and effective on April 1, 2018, provides that a “non-resident enterprise” which does not engage in
substantive business activities may not be deemed to be a beneficial owner that is entitled to the above-mentioned reduced income tax
rate of 5%. It is unclear at this stage whether STA Circular 9 applies to dividends from our China mainland subsidiaries paid to us
through our Hong Kong subsidiaries. It is possible that under STA Circular 9 our Hong Kong subsidiaries would not be considered to be
the beneficial owners of any such dividends, and that, if such dividends are subject to withholding, such withholding rate would be 10%
rather than the favorable 5% rate generally applicable under the tax treaty between China mainland and Hong Kong.
Because we may be treated as a “resident enterprise,” any dividends paid to the investors which are considered “non-resident
enterprises” and individual shareholders who are non-PRC residents may be subject to withholding income tax, and gains realized on the
transfer of our ordinary shares or ADSs by such investors may be subject to PRC income tax if such dividends or gains are deemed to be
from PRC sources, which may adversely and materially affect the value of the investment in our shares or ADSs. The tax rate for gains
and dividends is 10% for “non-resident enterprise” shareholders and 20% for non-PRC individual shareholders, subject to any reduction
or exemption set forth in applicable tax treaties. However, it is unclear whether in practice non-PRC shareholders would be able to obtain
the benefits of income tax treaties entered into between PRC and their countries or areas.

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We and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by a
non-PRC company.
On February 3, 2015, the STA issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-
PRC Resident Enterprises, or Bulletin 7, which has been further amended by the Announcement on Issues Concerning the Withholding
of Enterprise Income Tax at Source on Non-PRC Resident Enterprises, or Bulletin 37, issued by the STA on October 17, 2017 and
amended on June 15, 2018. Pursuant to these bulletins, subject to a safe harbor for purchase and sale of equity securities through a public
securities market, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises
may be re-characterized and treated as a direct transfer of PRC taxable assets, if the arrangement does not have a reasonable commercial
purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from this
indirect transfer may be subject to PRC enterprise income tax.
Fluctuation in Renminbi exchange rates could adversely affect the value of our ADSs and ordinary shares and any cash dividend
declared on them.
The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things,
changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. In 2022, 2023 and 2024,
the value of the Renminbi depreciated by approximately 7.6%, 2.9% and 2.7% against the U.S. dollar, respectively. It is difficult to
predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in
the future. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, including
from the U.S. government.
Our revenues are primarily denominated in Renminbi, and any significant depreciation of the RMB may affect the value of, and
dividends (if any) payable on, our ordinary shares or ADSs in U.S. dollar terms. For example, to the extent that we need to convert U.S.
dollars into RMB for our operations, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount
we would receive from the conversion. Conversely, if we decide to convert our RMB into U.S. dollars for the purpose of making
payments for dividends on our ordinary shares, repaying our U.S. dollar denominated loans or other payment obligations or for other
business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to
us. In addition, appreciation or depreciation in the value of the RMB relative to U.S. dollars would affect our financial results reported in
U.S. dollar terms regardless of any underlying change in our business or results of operations. For example, we experienced RMB1.6
billion and RMB255.4 million net foreign exchange gains in 2022 and 2024, respectively, and we experienced a RMB133.0 million net
foreign exchange loss in 2023, which were mainly due to the fluctuation of the exchange rate of the RMB against the U.S. dollar. Theses
fluctuations had a significant effect on our profit and our cash dividend.
Regulation on currency exchange may limit our ability to utilize our revenues effectively.
Most of our revenues and operating expenses are denominated in Renminbi. The Renminbi is currently freely convertible under
the “current account” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital
account” which includes foreign direct investment and loans.
Under existing PRC foreign exchange regulations, payments of current account items, including payment of dividends, interest
payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of
SAFE, by complying with certain procedural requirements. Our China mainland subsidiaries and affiliates may also retain foreign
exchange in its current account to satisfy foreign exchange liabilities or to pay dividends.
Since a significant amount of our future revenues will be denominated in Renminbi, the existing and any future regulations on
currency exchange may limit our ability to utilize revenues generated in Renminbi to fund our business activities outside China, if any, or
expenditures denominated in foreign currencies.

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In addition, foreign exchange transactions under the capital account are subject to limitations and require registration with or
approval by the relevant PRC governmental authorities. In particular, any transfer of funds from us to any of our China mainland
subsidiaries or the VIEs, either as a shareholder loan or as an increase in registered capital, is subject to certain statutory limit
requirements and registration or approval of the relevant PRC governmental authorities, including the relevant administration of foreign
exchange and/or the relevant examining and approval authority. Our ability to use the U.S. dollar proceeds of the sale of our equity or
debt to finance our business activities conducted through our China mainland subsidiaries or the VIEs will depend on our ability to
obtain these governmental registrations or approvals. In addition, because of the regulatory issues related to foreign currency loans to,
and foreign investment in, domestic PRC enterprises, we may not be able to finance the operations of our China mainland subsidiaries or
the VIEs by loans or capital contributions. We cannot assure you that we can obtain these governmental registrations or approvals on a
timely basis, if at all. Any future restrictions imposed by SAFE or tightened foreign exchange regulation by SAFE as a matter of practice
may adversely affect our ability to utilize our revenues effectively and pay dividends to our shareholders.
Failure to comply with PRC regulations regarding the registration requirements for employee equity incentive plans may subject
our PRC citizen employees or us to fines and other legal or administrative sanctions.
On February 15, 2012, SAFE issued the Notices on Issues Concerning the Foreign Exchange Administration for Domestic
Individuals Participating in Stock Incentive Plan of Overseas-Listed Company, or the Stock Incentive Plan Rule. Under the Stock
Incentive Plan Rule, PRC citizens who are granted share options or other employee equity incentive awards by an overseas publicly-
listed company are required, through a qualified PRC agent or a PRC subsidiary of such overseas publicly-listed company, to register
with SAFE and complete certain other procedures related to the share options or other employee equity incentive plans. If we or such
PRC participants fail to comply with these regulations, we or such PRC participants may be subject to fines and other legal or
administrative sanctions.
The Chinese government has strengthened the regulation of investments made by Chinese residents in offshore companies and
reinvestments in China made by these offshore companies. Our business may be adversely affected by these restrictions.
The SAFE has adopted certain regulations that require registration with, and approval from, Chinese government authorities in
connection with direct or indirect control of an offshore entity by Chinese residents. The term “control” under SAFE regulation is
broadly defined as the operation rights, beneficiary rights or decision-making rights acquired by PRC residents in the offshore special
purpose vehicles or PRC companies by means of acquisition, trust, proxy, voting rights, repurchase, convertible bonds or other
arrangements. The SAFE regulations retroactively require registration of investments in non-Chinese companies previously made by
Chinese residents. In particular, the SAFE regulations require Chinese residents to register with SAFE information about offshore
companies in which they have directly or indirectly invested and to make follow-up registrations in connection with certain material
transactions involving such offshore companies, such as mergers or division, capital increases and decreases, in equity transfer or
exchange. A newly established enterprise in China which receives foreign investments is also required to provide detailed information
about its controlling shareholders and to certify whether it is directly or indirectly controlled by a domestic entity or resident.
In the event that a Chinese shareholder with a direct or indirect stake in an offshore parent company fails to make the requisite
SAFE registration, the Chinese subsidiaries of such offshore parent company may be prohibited from making distributions of profit to the
offshore parent and from paying the offshore parent proceeds from any reduction in capital, share transfer or liquidation in respect of the
Chinese subsidiaries. Further, failure to comply with the various SAFE registration requirements described above can result in liability
under Chinese law for foreign exchange evasion.

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These regulations may have a significant impact on our present and future structuring and investment. We have requested our
shareholders who to our knowledge are PRC residents to make the necessary applications, registrations and amendments as required
under these regulations. We intend to take all necessary measures to ensure that all required applications and registrations will be duly
made and all other requirements will be met. We further intend to structure and execute our future offshore acquisitions in a manner
consistent with these regulations and any other relevant legislation. However, because it is presently uncertain how the SAFE regulations,
and any future legislation concerning offshore or cross-border transactions, will be interpreted and implemented by the relevant
government authorities in connection with our future offshore financings or acquisitions, we cannot provide any assurances that we will
be able to comply with, qualify under, or obtain any approvals required by the regulations or other legislation. Furthermore, we cannot
assure you that any PRC shareholders of our company or any PRC company into which we invest will be able to comply with those
requirements. The inability of our company or any PRC shareholder to secure required approvals or registrations in connection with our
future offshore financings or acquisitions may subject us to legal sanctions, restrict our ability to pay dividends from our Chinese
subsidiaries to our offshore holding company, and restrict our overseas or cross-border investment activities or affect our ownership
structure.
RISKS RELATED TO OUR ADSs AND SHARES
The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial
statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the
benefits of such inspections.
Our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this annual
report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws
in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional
standards. The auditor is located in China mainland a jurisdiction where the PCAOB was historically unable to conduct inspections and
investigations completely before 2022. As a result, we and investors in the ADSs were deprived of the benefits of such PCAOB
inspections. The inability of the PCAOB to conduct inspections of auditors in China in the past has made it more difficult to evaluate the
effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to
auditors outside of China that are subject to the PCAOB inspections.
On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed China
mainland and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public
accounting firms. However, if the PCAOB determines in the future that it no longer has full access to inspect and investigate completely
accounting firms in China mainland and Hong Kong, and we use an accounting firm headquartered in one of these jurisdictions to issue
an audit report on our financial statements filed with the SEC, we and investors in our ADSs would be deprived of the benefits of such
PCAOB inspections again, which could cause investors and potential investors in the ADSs to lose confidence in our audit procedures
and reported financial information and the quality of our financial statements.
Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to
inspect or fully investigate auditors located in China. The delisting of our ADSs, or the threat of their being delisted, may
materially and adversely affect the value of your investment.
Pursuant to the HFCAA, if the SEC determines that we have filed audit reports issued by a registered public accounting firm
that has not been subject to inspections by the PCAOB for two consecutive years, the SEC will prohibit our shares or ADSs from being
traded on a national securities exchange or in the over-the-counter trading market in the United States.
On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to
inspect or investigate completely registered public accounting firms headquartered in China mainland and Hong Kong and our auditor
was subject to that determination. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA
following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021. On December 15, 2022, the PCAOB
removed China mainland and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered
public accounting firms. As of the date of this annual report, the PCAOB has not issued any new determination that it is unable to inspect
or investigate completely registered public accounting firms headquartered in any jurisdiction. For this reason, we do not expect to be
identified as a Commission-Identified Issuer under the HFCAA after we file this annual report on Form 20-F.

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Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in China mainland and
Hong Kong, among other jurisdictions. If the PCAOB determines in the future that it no longer has full access to inspect and investigate
completely accounting firms in China mainland and Hong Kong and we use an accounting firm headquartered in one of these
jurisdictions to issue an audit report on our financial statements filed with the SEC, we would be identified as a Commission-Identified
Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year. In accordance with the HFCAA, our securities
would be prohibited from being traded on a national securities exchange or in the over-the-counter trading market in the United States if
we are identified as a Commission-Identified Issuer for two consecutive years in the future. Although our ordinary shares have been
listed on the Hong Kong Stock Exchange and the ADSs and ordinary shares are fully fungible, we cannot assure you that an active
trading market for our ordinary shares on the Hong Kong Stock Exchange will be sustained or that the ADSs can be converted and traded
with sufficient market recognition and liquidity, if our shares and ADSs are prohibited from trading in the United States. A prohibition of
being able to trade in the United States would substantially impair your ability to sell or purchase our ADSs when you wish to do so, and
the risk and uncertainty associated with delisting would have a negative impact on the price of our ADSs. Also, such a prohibition would
significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our
business, financial condition, and prospects.
On February 21, 2025, U.S. President Donald J. Trump issued the “America First Investment Policy,” which mandates that the
U.S. administration will, among other things, assess if adequate financial auditing standards are upheld for companies covered by the
HFCAA and review the use of VIE structures by companies from designated “foreign adversaries,” including the PRC, to evaluate
potential risks to U.S. investors. While specific implementation measures have not yet been announced, we may be subject to heightened
scrutiny under the America First Investment Policy given that we conduct our operations in China utilizing VIE structures. If U.S.
authorities determine that our auditing practices are insufficient or that our VIE structure poses risks to investors, we could be subject to
increased compliance obligations, regulatory penalties or trading restrictions. Such actions and increased compliance costs could
adversely affect our business operations and the value of our securities.
The trading price of our ADSs and shares has been and is likely to continue to be volatile, which could result in substantial losses
to holders of our ADSs and/or shares.
The trading price of our ADSs has been and is likely to continue to be volatile and could fluctuate widely in response to a
variety of factors, many of which are beyond our control. The trading price of our shares, likewise, can be volatile for similar or different
reasons. For example, the trading prices of our ADSs ranged from US$75.85 to US$114.50 per ADS in 2024 and the trading prices of
our ordinary shares ranged from HK$117.10 to HK$180.50 per ordinary share in 2024. In addition, the performance and fluctuation of
the market prices of other companies with business operations located mainly in China, especially internet and technology companies
that have listed their securities in Hong Kong and/or the United States, may affect the overall investor attitude towards Chinese public
companies. The securities of some of these companies have experienced and may continue to experience significant volatility, resulting
from, among other things, underperformance and deteriorating financial results, negative news or perceptions about inadequate corporate
governance practices, and fraudulent behaviors of such companies. Consequently, the trading performance of our shares and/or ADSs
may be adversely and materially affected, regardless of our actual operation performance.
In addition to market and industry factors, the price and trading volume for our shares and/or ADSs may be highly volatile for
factors specific to our operation, including the following:
●
variations in our results of operations that are not in line with market or research analyst expectations or changes in
financial estimates by securities research analysts;
●
announcements of studies and reports relating to the quality of our product and service offerings or those of our
competitors;
●
changes in the economic performance or market valuations of other market players in our industries;
●
announcements made by us or our competitors of new features or functionalities or other product and service offerings,
investments, acquisitions, strategic relationships, joint ventures or capital commitments;
●
press and other reports, whether or not true, about our business, including negative reports published by short sellers,
regardless of their veracity or materiality to us;

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●
litigation and regulatory allegations or proceedings that involve us and our directors;
●
additions to or departures of our management;
●
political or market instability or disruptions, and actual or perceived social unrest in the markets where we operate;
●
fluctuations of exchange rates among the Renminbi, the Hong Kong dollar and the U.S. dollar;
●
sales or perceived potential sales or other dispositions of existing or additional ADSs or other equity or equity-linked
securities;
●
any actual or alleged illegal acts of our senior management or other key employees;
●
any share repurchase program; and
●
regulatory developments affecting us or our industry, customers, licensors and other suppliers.
In particular, our revenues and results of operations have varied significantly in the past and may continue to fluctuate in the
future, which may adversely impact the trading price of our ADSs and shares. Historically, usage of our online games has generally
increased around the Chinese holidays, in particular winter and summer school holidays. Revenues from certain of our innovative
businesses and others, including advertising services, have followed the same general seasonal trend throughout each year, with the first
quarter of the year being the weakest quarter due to the Chinese New Year holiday and the traditional close of customers’ annual budgets,
and the fourth quarter as the strongest. Our e-commerce business revenues are relatively lower during the Chinese New Year holiday
season in the first quarter of each year, while sales in the fourth quarter are higher than each of the preceding three quarters due to a
variety of promotional activities conducted by retail and e-commerce businesses in China. Accordingly, you should not rely on quarter-
to-quarter comparisons of our results of operations as an indication of our future performance. It is possible that future fluctuations may
cause our results of operations to be below the expectations of market analysts and investors. This could cause the trading price of our
shares, ADSs or any other securities of ours which may become publicly traded to decline.
Furthermore, the stock market in general experiences price and volume fluctuations that are often unrelated or disproportionate
to the operating performance of companies like us. These market and industry fluctuations may significantly affect the trading price of
our shares and/or ADSs. In the past, following periods of instability in the market price of a company’s securities, shareholders have
often instituted securities class action suits against that company.
Furthermore, our directors and employees may face additional exposure to claims and lawsuits as a result of their position in
other companies. The existence of litigation, claims, investigations and proceedings against our directors and employees, even if they do
not involve NetEase, may harm our reputation and adversely affect the trading price of our ADSs.
Substantial future sales or perceived potential sales of our shares, ADSs, or other equity or equity-linked securities in the public
market could cause the price of our shares and/or ADSs to decline.
Sales of our shares, ADSs, or other equity or equity-linked securities in the public market, or the perception that these sales
could occur, could cause the market price of our shares and/or ADSs to decline significantly. All of our shares represented by ADSs were
freely transferable by persons other than our affiliates without restriction or additional registration under the U.S. Securities Act. The
shares held by our affiliates are also available for sale, subject to volume and other restrictions as applicable under Rule 144 of the U.S.
Securities Act, under trading plans adopted pursuant to Rule 10b5-1 or otherwise.
Divesture in the future of our shares and/or ADSs by shareholders, the announcement of any plan to divest our shares and/or
ADS, or hedging activity by third-party financial institutions in connection with similar derivative or other financing arrangements
entered into by shareholders, could cause the price of our shares and/or ADSs to decline.

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The different characteristics of the capital markets in the United States and Hong Kong may negatively affect the trading prices
of our shares and/or ADSs.
We are subject to Hong Kong and U.S. listing and regulatory requirements concurrently. The Nasdaq and Hong Kong Stock
Exchange have different trading hours, trading characteristics (including trading volume and liquidity), trading and listing rules, and
investor bases (including different levels of retail and institutional participation). As a result of these differences, the trading prices of our
shares and our ADSs may not be the same, even allowing for currency differences. Fluctuations in the price of our ADSs due to
circumstances peculiar to the U.S. capital markets could materially and adversely affect the price of the shares, or vice versa. Certain
events having significant negative impact specifically on the U.S. capital markets may result in a decline in the trading price of our
shares notwithstanding that such event may not impact the trading prices of securities listed in Hong Kong generally or to the same
extent, or vice versa. Because of the different characteristics of the U.S. and Hong Kong capital markets, the historical market prices of
our ADSs may not be indicative of the trading performance of our shares, and vice versa.
Exchange between our ADSs and shares may adversely affect the liquidity and/or trading price of each other.
Subject to compliance with U.S. securities law and the terms of the deposit agreement which governs our ADS program, any
holder of ADSs may withdraw the underlying shares represented by the ADSs pursuant to the terms of the deposit agreement for trading
on the Hong Kong Stock Exchange. Holders of our shares may also deposit shares with the depositary in exchange for the issuance of
our ADSs. In the event that a substantial number of ADSs are deposited with the depositary in exchange for shares or vice versa, the
liquidity and trading price of our ADSs on Nasdaq and shares on the Hong Kong Stock Exchange may be adversely affected.
The time required for the exchange between ADSs and shares might be longer than expected and investors might not be able to
settle or effect any sale of their securities during this period, and the exchange of shares into ADSs involves costs.
There is no direct trading or settlement between Nasdaq and the Hong Kong Stock Exchange on which our ADSs and shares are
respectively traded. In addition, the time differences between Hong Kong and New York and unforeseen market circumstances or other
factors may delay the withdrawal of shares underlying the ADSs or the deposit of shares in exchange for ADSs. Investors will be
prevented from settling or effecting the sale of their securities during such periods of delay. In addition, there is no assurance that any
exchange of ADSs into shares (and vice versa) will be completed in accordance with the timelines investors may anticipate.
Furthermore, the depositary for the ADSs is entitled to charge holders fees for various services including for the issuance of
ADSs upon deposit of shares, cancelation of ADSs, distributions of cash dividends or other cash distributions, distributions of ADSs
pursuant to share dividends or other free share distributions, distributions of securities other than ADSs and annual service fees. As a
result, shareholders who exchange shares into ADSs, and vice versa, may not achieve the level of economic return the shareholders may
anticipate.
As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to
corporate governance matters that differ significantly from Nasdaq rules.
As a Cayman Islands exempted company listed on Nasdaq, we are subject to Nasdaq rules. However, Nasdaq rules permit a
foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in
the Cayman Islands, which is our home country, may differ significantly from Nasdaq rules applicable to U.S. domestic issuers. For
instance, we are not required to:
●
have a majority of the board be independent (although all of the members of the audit committee must be independent
under the U.S. Exchange Act);
●
have a compensation committee or a nominating or corporate governance committee consisting entirely of independent
directors;
●
have regularly scheduled executive sessions for non-management directors; or
●
have executive sessions of solely independent directors each year.

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We have relied on and intend to continue to rely on some of these exemptions. Specifically, although we sought and obtained
shareholder’s approval for the amended and restated 2019 Share Plan at the annual general meeting of shareholders held on June 15,
2023, our board of directors had initially adopted our 2009 RSU Plan and 2019 Share Plan without seeking shareholder approval which
is generally required under Rule 5635(c) of the Nasdaq Marketplace Rules. There is no specific requirement under Cayman Islands law
for shareholder approval to be obtained with respect to the establishment or amendment of equity compensation arrangements. In
situations where we choose to follow home country practices, our shareholders may be afforded less protection than they otherwise
would under Nasdaq rules applicable to U.S. domestic issuers.
We are a foreign private issuer within the meaning of the rules under the U.S. Exchange Act, and as such we are exempt from
certain provisions applicable to U.S. domestic public companies.
Because we qualify as a foreign private issuer under the U.S. Exchange Act, we are exempt from certain provisions of the
securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:
●
the rules under the U.S. Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current
reports on Form 8-K;
●
the sections of the U.S. Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a
security registered under the U.S. Exchange Act;
●
the sections of the U.S. Exchange Act requiring insiders to file public reports of their stock ownership and trading activities
and liability for insiders who profit from trades made in a short period of time; and
●
the selective disclosure rules by issuers of material non-public information under Regulation FD.
We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend
to continue to publish our results on a quarterly basis as press releases, distributed pursuant to Nasdaq rules. Press releases relating to
financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file
with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic
issuers. As a result, holders of our ADSs may be afforded less protection or information than they would under the U.S. Exchange Act
rules applicable to U.S. domestic companies.
We are a company listed on the Hong Kong Stock Exchange under Chapter 19C and as such are not subject to certain provisions
of the Hong Kong Listing Rules.
As a company listed under Chapter 19C of the Hong Kong Listing Rules, we have adopted different practices as to certain
matters as compared with many other companies listed on the Hong Kong Stock Exchange. We are not subject to certain provisions of
the Hong Kong Listing Rules pursuant to Rule 19C.11, including, among other things, rules on notifiable transactions, connected
transactions, share option schemes, content of financial statements as well as certain other continuing obligations.
In addition, we have been granted a number of waivers and/or exemptions from strict compliance with, among other things, the
Hong Kong Listing Rules and the SFO. We have also been granted a ruling from the Securities and Futures Commission of Hong Kong,
as a result of which the Takeovers Codes do not apply to us. Therefore, we will adopt different practices as to those matters as compared
with other companies listed on the Hong Kong Stock Exchange that do not enjoy those exemptions or waivers. However, if 55% or more
of the total worldwide trading volume, by dollar value, of our shares and ADSs over our most recent fiscal year takes place on the Hong
Kong Stock Exchange, the Hong Kong Stock Exchange will regard us as having a dual primary listing in Hong Kong and we will no
longer enjoy certain exemptions or waivers from strict compliance with the requirements under the Hong Kong Listing Rules, the
Takeovers Codes and the SFO, which could result in our incurring of incremental compliance costs. On December 19, 2022, we were
removed from Nasdaq-100 Index, which may cause a reduction in the holdings of our ADS by some institutional investors on NASDAQ.
As a result, there may be an increase in the proportion of our total worldwide trading volume taking place on Hong Kong Stock
Exchange, and this in turn will increase our risk of losing our ability to enjoy exemptions or waivers from strict compliance with the
requirements under the Hong Kong Listing Rules, the Takeovers Codes and the SFO.

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The voting rights of holders of ADSs are limited by the terms of the Deposit Agreement.
Holders of ADSs may exercise their voting rights with respect to the underlying shares represented by their ADSs only in
accordance with the provisions of the deposit agreement which governs our ADS programs. Upon receipt of voting instructions from
them in the manner set forth in the deposit agreement, the depositary will endeavor, in so far as practicable, to vote the underlying shares
represented by their ADSs in accordance with these instructions. However, the depositary and its agents may not be able to send voting
instructions to holders of ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the
depositary to extend voting rights to holders of ADSs in a timely manner, but they may not receive the voting materials in time to ensure
that they can instruct the depositary to vote the underlying shares represented by their ADSs. Furthermore, the depositary and its agents
will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of
any vote. As a result, holders of ADSs may not be able to exercise their rights to vote and they may lack recourse if the underlying shares
represented by their ADSs are not voted as they requested.
Except in limited circumstances, the depositary will give us a discretionary proxy to vote our shares underlying the ADSs if
holders of these ADSs do not give voting instructions to the depositary, which could adversely affect the interests of holders of
shares and/or the ADSs.
Under the deposit agreement, the depositary will give us a discretionary proxy to vote the shares underlying the ADSs at
shareholders’ meetings if holders of these ADSs do not give voting instructions to the depositary, unless:
●
we have instructed the depositary that we do not wish a discretionary proxy to be given;
●
we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting;
●
a matter to be voted on at the meeting would have a material adverse impact on shareholders; or
●
voting at the meeting is made on a show of hands.
The effect of this discretionary proxy is that, if holders of ADSs fail to give voting instructions to the depositary, they cannot
prevent our shares underlying their ADSs from being voted, except under the circumstances described above. This may make it more
difficult for shareholders to influence our management. Holders of our shares are not subject to this discretionary proxy.
Holders of ADSs may be subject to limitations on transfer of their ADSs.
ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from
time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver,
transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the
depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any
provision of the deposit agreement, or for any other reason.
Holders of ADSs may not receive distributions on our shares if the depositary decides it is impractical or unlawful to make such
distributions.
The depositary has agreed to pay cash to holders of ADSs to the extent that we decide to distribute cash dividends or other cash
distributions on our shares or other deposited securities. Under our current dividend policy, the determination to make dividend
distributions and the amount of such distributions in any particular quarter will be made at the discretion of our board of directors and
will be based upon our operations and earnings, cash flow, financial condition and other relevant factors.
To the extent that there is a distribution in shares, rights or other securities and properties, the depositary has agreed to distribute
to holders of ADSs the shares, rights or other distributions it or the custodian receives on our shares or other deposited securities after
deducting its fees and expenses. ADS holders will receive these distributions in proportion to the number of shares their ADSs represent.
However, the depositary may, at its discretion, decide that it is impractical to make a distribution available to holders of ADSs. For
example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the
U.S. Securities Act but that are not properly registered or distributed pursuant to an applicable exemption from registration. We have no
obligation to take any other action to permit the distribution of shares, rights or anything else to holders of ADSs. This means that
holders of ADSs may not receive the distributions we make on our shares if it is impractical for us to make them available. These
restrictions may materially reduce the value of the ADSs.

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If we fail to maintain an effective system of internal control over financial reporting, we may lose investor confidence in the
reliability of our financial statements which in turn could negatively impact the trading price of our shares and/or ADSs or
otherwise harm our reputation.
The SEC, as required under Section 404 of the Sarbanes-Oxley Act of 2002, has adopted rules requiring public companies to
include a report of management on the effectiveness of such companies’ internal control over financial reporting in their respective
annual reports. In addition, an independent registered public accounting firm for a public company may be required to issue an attestation
report on the effectiveness of such company’s internal control over financial reporting.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting and concluded that
our internal control over financial reporting was effective as of December 31, 2024. Our independent registered public accounting firm
has also, in its audit report, concluded that our internal control over financial reporting was effective in all material aspects as of
December 31, 2024. Please refer to Item 15 “Controls and Procedures.” However, if we fail to maintain effective internal control over
financial reporting in the future, our management and our independent registered public accounting firm may not be able to conclude that
we have effective internal control over financial reporting in accordance with the Sarbanes-Oxley Act of 2002. Moreover, effective
internal control over financial reporting is necessary for us to produce reliable financial reports. As a result, any failure to maintain
effective internal control over financial reporting could result in the loss of investor confidence in the reliability of our financial
statements, which in turn could negatively impact the trading price of our shares and/or ADSs or otherwise harm our reputation.
Furthermore, we may need to incur additional costs and use additional management and other resources in an effort to comply with
Section 404 of the Sarbanes-Oxley Act of 2002 and other requirements going forward.
Holders of our ADSs and shares may have difficulty effecting service of process and enforcing judgments obtained against us and
our management, the ability of U.S. authorities to bring actions in the PRC may also be limited, and our Articles of Association
include certain provisions that may be different from common practices in Hong Kong.
Our company is incorporated in the Cayman Islands, and the major portion of our assets are located outside the United States
and Hong Kong. A substantial portion of our current operations are conducted in the PRC. In addition, some of our directors and
executive officers are nationals and residents of countries or areas other than the United States and Hong Kong. A substantial portion of
the assets of these persons are located outside the United States and Hong Kong. As a result, it may be difficult or impossible for holders
of our shares and ADSs to effect service of process within the United States or Hong Kong upon these persons, or to bring an action
against us or against these individuals in the United States or Hong Kong in the event that they believe that their rights have been
infringed under the U.S. federal securities laws, Hong Kong laws or otherwise. Even if shareholders are successful in bringing an action
of this kind, the laws of the Cayman Islands and China may render them unable to enforce a judgment against our assets or the assets of
our directors and officers. There is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce
judgments. Furthermore, class action lawsuits, which are available in the United States for investors to seek remedies, are generally
uncommon in the Cayman Islands and the PRC.
The SEC, the U.S. Department of Justice and other U.S. authorities may also have difficulties in bringing and enforcing actions
against us or our directors or executive officers in the PRC. The SEC has stated that there are significant legal and other obstacles to
obtaining information needed for investigations or litigation in China. China has adopted a revised securities law which provides, among
other things, that without governmental approval in China, no entity or individual in China may provide documents and information
relating to securities business activities to overseas regulators which could present significant legal and other obstacles to obtaining
information needed for investigations and litigation conducted outside of China.
Furthermore, our Articles of Association are specific to us and include certain provisions that may be different from common
practices in Hong Kong, such as the absence of requirements that the appointment, removal and remuneration of auditors must be
approved by a majority of our shareholders.
As a result of the foregoing, our public shareholders may have more difficulty in protecting their interests through actions
against us, our management, our directors or our major shareholders than they would as public shareholders of a company incorporated
in the United States or Hong Kong.

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It may be difficult for overseas regulators to conduct investigations or collect evidence within China.
Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter
of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for
regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation
mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and
administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of
mutual and practical cooperation mechanisms. Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which
became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigations or evidence collection
activities within the territory of the PRC. While detailed interpretations of or implementation rules under Article 177 have yet to be
promulgated, the inability for an overseas securities regulator to directly conduct investigations or evidence collection activities within
China may further increase difficulties you may face in protecting your interests. In addition, on February 24, 2023, CSRC and other
three PRC regulatory authorities jointly issued the Confidentiality and Archives Administration Provisions, which took effect on March
31, 2023, according to which, overseas securities regulators and competent overseas authorities may request to inspect, investigate or
collect evidence from a domestic company concerning its overseas offering and listing or from the domestic securities companies and
securities service providers that undertake relevant businesses for such domestic companies, such inspection, investigation and evidence
collection shall be conducted under a cross-border regulatory cooperation mechanism, and the CSRC or other competent Chinese
authorities will provide necessary assistance pursuant to bilateral and multilateral cooperation mechanisms. The domestic company,
securities companies and securities service providers shall first obtain approval from the CSRC or other competent Chinese authorities
before cooperating with the inspection and investigation by the overseas securities regulator or competent overseas authority, or
providing documents and materials requested in such inspection and investigation. As the Confidentiality and Archives Administration
Provisions are relatively new, there are uncertainties with respect to their interpretation and implementation.
If we are classified as a passive foreign investment company, or a PFIC, for United States federal income tax purposes, such
classification could result in adverse U.S. federal income tax consequences to U.S. investors.
If we are classified as a PFIC for U.S. federal income tax purposes, such characterization could result in adverse U.S. federal
income tax consequences to you if you are a U.S. investor. For example, U.S. investors who owned our ADSs or ordinary shares during
any taxable year in which we were a PFIC generally are subject to increased U.S. tax liabilities and reporting requirements for that
taxable year and all succeeding years, regardless of whether we actually continue to be a PFIC, although a shareholder election to
terminate such deemed PFIC status may be available in certain circumstances.
The determination of whether or not we are a PFIC is made on an annual basis and depends on the composition of our income
and assets, including goodwill, from time to time. We would be classified as a PFIC for U.S. tax purposes for a taxable year if either (a)
75% or more of our gross income for such taxable year is “passive income” (as defined in the relevant provisions of the U.S. Internal
Revenue Code of 1986, as amended, or the Code), or (b) 50% or more of the value of our assets (generally determined on the basis of a
quarterly average) during such taxable year is attributable to assets that either produce passive income or are held for the production of
passive income. For such purposes, if we directly or indirectly own 25% or more of the shares of another corporation, we generally will
be treated as if we (a) held directly a proportionate share of the other corporation’s assets, and (b) received directly a proportionate share
of the other corporation’s income.
Based on the value of our assets, including goodwill, and the composition of our income and assets, we do not believe that we
were a PFIC for the taxable year ended December 31, 2024. We have not obtained any opinion of counsel or any rulings from the U.S.
Internal Revenue Service, or the IRS, regarding our status as a PFIC. The PFIC determination is highly fact-intensive and made at the
end of each taxable year. We hold and may continue to hold a substantial amount of cash and cash equivalents. In addition, the value of
our assets, including goodwill, for purposes of the asset test will generally be determined by reference to the market price of the ADSs
and ordinary shares, which may fluctuate significantly. Moreover, the application of the PFIC rules is subject to uncertainty in several
respects. For these reasons, there can be no assurance that we were not a PFIC in any prior taxable years and will not be a PFIC in the
current taxable year or any future taxable year or that the IRS will not challenge our determination concerning our PFIC status.

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If we are or become a PFIC, U.S. investors would be subject to adverse U.S. federal income tax consequences, such as increased
tax liability on capital gains and actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting
requirements under U.S. federal income tax laws and regulations. Whether U.S. investors make (or are eligible to make) a timely mark-
to-market election may affect the U.S. federal income tax consequences to U.S. investors with respect to the acquisition, ownership and
disposition of our ADSs or ordinary shares and any distributions such U.S. investors may receive. We do not expect to provide the
information regarding our income that would be necessary in order for a U.S. investor to make a qualified electing fund, or the QEF,
election if we are classified as a PFIC. Investors should consult their tax advisors regarding all aspects of the application of the PFIC
rules to our ADSs or ordinary shares.
If we are a PFIC in any year with respect to a U.S. investor, the U.S. investor will generally be required to file an annual
information return on IRS Form 8621 (or other then applicable IRS Form or statement) regarding distributions received on our ADSs or
ordinary shares and any gain realized on the disposition of our ADSs or ordinary shares, and certain U.S. investors will be required to file
an annual information return (also on IRS Form 8621 or other then applicable IRS Form or statement) relating to their ownership of our
ADSs or ordinary shares. U.S. investors should consult their tax advisors regarding the potential application of the PFIC regime and
related reporting requirements.
For further discussion of the adverse U.S. federal income tax consequences in the event we are classified as a PFIC, see Item
10.E. “Additional Information—Taxation—Material United States Federal Income Taxation Considerations.”
If a United States person is treated as owning at least 10% of our ADSs or ordinary shares, such holder may be subject to
adverse U.S. federal income tax consequences.
If a U.S. Holder (as defined in Item 10.E. “Additional Information—Taxation—Material United States Federal Income Taxation
Considerations”) is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our ADSs or
ordinary shares, such U.S. Holder will be treated as a “United States shareholder” with respect to each “controlled foreign corporation”
in our group. Because our group includes one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries will be treated as
“controlled foreign corporations” (regardless of whether we are treated as a “controlled foreign corporation”). A “United States
shareholder” of a “controlled foreign corporation” may be required to report annually and include in its U.S. taxable income its pro rata
share of “Subpart F income,” “global intangible low-taxed income” and investments in U.S. property by “controlled foreign
corporations,” regardless of whether we make any distributions. Failure to comply with these reporting obligations may subject a “United
States shareholder” to significant monetary penalties and may prevent the statute of limitations from starting with respect to such
shareholder’s U.S. federal income tax return for the year for which reporting was due. Further, an individual that is a “United States
shareholder” with respect to a “controlled foreign corporation” generally would not be allowed certain tax deductions or foreign tax
credits that would be allowed to a “United States shareholder” that is a U.S. corporation. We cannot provide any assurances that we will
assist investors in determining whether any of our non-U.S. subsidiaries are treated as a “controlled foreign corporation” or whether such
investor is treated as a “United States shareholder” with respect to any of such “controlled foreign corporations.” Further, we cannot
provide any assurances that we will furnish to any “United States shareholders” information that may be necessary to comply with the
aforementioned reporting and tax payment obligations. U.S. Holders should consult their tax advisors regarding the potential application
of these rules to their investment in our ADSs or ordinary shares.
There is uncertainty as to whether Hong Kong stamp duty will apply to deposits of our ordinary shares into or withdrawal of our
ordinary shares from the ADS facility or trading of our ADSs.
In connection with our initial public offering of shares in Hong Kong, we established a branch register of members in Hong
Kong, or the Hong Kong share register. Our shares that are traded on the Hong Kong Stock Exchange, as well as shares represented by
ADSs, are registered on the Hong Kong share register, and the trading of these shares on the Hong Kong Stock Exchange are subject to
the Hong Kong stamp duty. To facilitate conversion between ADSs and shares and their respective trading on Nasdaq and the Hong
Kong Stock Exchange, we moved a portion of our issued shares, including all of the ordinary shares deposited in our ADS program, from
our Cayman share register to our Hong Kong share register.
Under the Hong Kong Stamp Duty Ordinance, any person who effects any sale or purchase of Hong Kong stock, defined as
stock the transfer of which is required to be registered in Hong Kong, is required to pay Hong Kong stamp duty. The stamp duty is
currently set at a total rate of 0.2% of the greater of the consideration for, or the value of, shares transferred, with 0.1% payable by each
of the buyer and the seller.

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To the best of our knowledge, Hong Kong stamp duty has not been levied in practice on the trading of ADSs representing shares
of companies that are listed in both the United States and Hong Kong and that have maintained all or a portion of their ordinary shares,
including ordinary shares underlying ADSs, in their Hong Kong share registers, or on the deposit of shares in or withdrawal of shares
from ADS facilities of that kind. However, it is unclear whether, as a matter of Hong Kong law, the trading of ADSs representing shares
of these dual-listed companies or the deposit of shares in or withdrawal of shares from those ADS facilities constitutes a sale or purchase
of the underlying Hong Kong-registered ordinary shares that is subject to Hong Kong stamp duty. We advise investors to consult their
own tax advisors on this matter. If Hong Kong stamp duty is determined by the competent authority to apply to the trading of those ADSs
or deposits of shares in or withdrawal of shares from those ADS facilities, the trading price and the value of your investment in our ADSs
and/or shares may be affected.
Item 4.   Information on the Company
A.           History and Development of the Company
Our business was founded in June 1997 and our company was incorporated on July 6, 1999 under the Cayman Companies Act
(As Revised). Our principal executive offices are located at NetEase Building, No. 599 Wangshang Road, Binjiang District, Hangzhou,
People’s Republic of China 310052. Our telephone number is (86-571) 8985-3378.
Our key business milestones are summarized below:
●
Founding of our business
1997
●
Launch of free web-based e-mail services, and business model shifted from software development to internet
technology with the launch of our NetEase website (“www.163.com”)
1998
●
Launches of advertisement services, online platforms, online shopping malls, and other internet services in China 1999
●
Listing on Nasdaq on June 30
2000
●
Introduction of fee-based premium services and online entertainment services, including online games, wireless
value-added services and other subscription-type services
2001
●
Launch of our first PC-client MMORPG game, Westward Journey Online, our widely popular in-house developed
game series
2001
●
Launch of our Fantasy Westward Journey series, our second widely popular original game series
2004
●
Founding of Youdao, our intelligent learning and advertising solutions provider
2006
●
Launch of NetEase Cloud Music, our music streaming platform
2013
●
Launch of our first mobile game, the mobile version of Fantasy Westward Journey II
2013
●
Launch of Yanxuan, our e-commerce business
2016
●
Listing of Youdao on the New York Stock Exchange on October 26
2019
●
Listing on the Hong Kong Stock Exchange on June 11
2020
●
Listing of NetEase Cloud Music on the Hong Kong Stock Exchange on December 2
2021
Our principal capital expenditures for 2024, 2023 and 2022 consisted mainly of expenditures related to our new office buildings
in Shanghai and Hangzhou in China and the acquisition of new servers in connection with the operation of our business for a total of
approximately RMB1.3 billion, RMB2.3 billion and RMB2.1 billion, respectively.

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As of December 31, 2024, we had capital expenditure commitments of RMB632.3 million (US$86.6 million) for 2025 and
thereafter, which primarily consist of commitments made in connection with the construction of new office buildings in Shanghai,
Hangzhou and other cities.
The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers
that file electronically with the SEC, including us, at http://www.sec.gov. Our corporate website can be accessed at http://ir.netease.com.
The information on our website is not part of this annual report.
B.            Business Overview
OUR ORGANIZATIONAL STRUCTURE
We conduct our business in China through our subsidiaries and the VIEs. Due to legal restrictions and prohibitions on foreign
investment in Chinese companies providing, among other things, value-added telecommunications services, internet cultural services and
internet publication services, we operate our primary businesses, including the online games, music streaming, online intelligent learning
services and internet content services businesses in China mainland, through contractual arrangements with the VIEs and their nominee
shareholders. The contractual arrangements provide us with the: (a) the power to direct the activities that most significantly impact the
economic performance of the VIEs and their subsidiaries; (b) the economic benefits of these VIEs and their subsidiaries; and (c) an
exclusive option to purchase all or part of the equity interests in the VIEs when and to the extent permissible under PRC laws. The VIEs
hold ICP licenses and other regulated licenses in which foreign investment is restricted or prohibited and operate our internet businesses
and other businesses. Under the contractual arrangements, we provide our computer software, mobile applications, technologies and
relevant services to such VIEs, and they operate the NetEase game services in China, education platforms, websites, as well as our other
online businesses. For more information on these agreements, see Item 7.B. “Major Shareholders and Related Party Transactions—
Related Party Transactions.”
As a result of these contractual arrangements, we bear the risks of, and enjoy the rewards associated with, and therefore are the
primary beneficiary of these entities. We therefore consolidate the results of operations of these entities and their subsidiaries in our
consolidated financial statements. See also Item 5 “Operating and Financial Review and Prospects.”
Any violations by the VIEs of our agreements with them could disrupt our operations or adversely affect our services. See Item
3.D. “Key Information—Risk Factors” for a detailed discussion of the risks to NetEase, Inc. regarding its dependency on these
companies.
The diagram below summarizes our corporate structure as of March 31, 2025 and identifies the subsidiaries and the VIEs that
together are representative of our major business units, including our significant subsidiaries, as that term is defined under Section 1-02
of Regulation S-X under the Securities Act, and other representative subsidiaries:

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(1) Hangzhou NetEase Leihuo Technology Co., Ltd. is owned by two of our employees.
(2) Each of Guangzhou NetEase Computer System Co., Ltd. and Hangzhou Yuedu Technology Co., Ltd. is 99.0% owned by William
Lei Ding, our founder, Chief Executive Officer and director, and 1.0% by two of our employees, respectively. Our indirect, wholly
owned subsidiary NetEase Information Technology (Beijing) Co., Ltd. is also a party to certain contractual arrangements with
Guangzhou NetEase Computer System Co., Ltd.
(3) Beijing NetEase Youdao Computer System Co., Ltd. is 71.1% owned by William Lei Ding and 28.9% owned by the chief executive
officer of Youdao, Inc.

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OUR SERVICES
We have a successful online game business, developing and operating a rich portfolio of highly popular titles. We currently offer
over 100 mobile and PC games across a wide range of genres, satisfying the ever growing and diversifying needs of the gamer
community. Leveraging our user insights and execution expertise, we have also incubated and developed in-house a pipeline of
innovative and successful businesses, including intelligent learning and other businesses, ranging from music streaming and e-commerce
to advertising services, e-mail, payment platform and other services. For a breakdown of total revenue by segment for the last three
financial years, see Item 5.A. “Operating and Financial Review and Prospects—Operating Results.”
Games and Related Value-added Services
Our Games
Our game products and services are comprised of in-house developed mobile and PC games as well as games licensed from
renowned global developers. As a global early mover that anticipated and captured the trend toward mobile games, we have significantly
expanded our portfolio of mobile game offerings in recent years. At the same time, our flagship titles continue to provide solid support
for our online games business with persistent longevity and user loyalty. In addition, while solidifying our leadership position in the
Chinese domestic market, we have also expanded globally with launches in Japan, Southeast Asia, the United States and other
international markets.
Our Game Library
Mobile games
Mobile games have gained increasing popularity and an expanding user base as internet users in China and across the world rely
more and more on mobile devices to access the internet. We are one of the largest mobile game providers globally in terms of game
revenue, offering around 100 mobile games of various genres as of December 31, 2024, including in-house developed and licensed
MMORPGs, casual games, shooting games, racing simulations, CCGs, battle arena games and SLGs, as well as other types of games.
To date, the majority of our most popular mobile games are in-house developed games. We have launched the mobile versions
of our in-house developed flagship titles, including the Fantasy Westward Journey and Westward Journey Online mobile games. We
distribute our mobile games through partnerships with major Android- and iOS-based application stores in China, as well as our
proprietary platforms. We offer a variety of in-game virtual items that players can purchase, including avatars, skills, privileges and other
in-game consumables, features and functionalities.

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The table below sets forth certain of our major in-house developed mobile games:
Game
     Genre
    
Date of Initial
Launch
Mobile Version of Fantasy Westward Journey II
Turn-based MMORPG
July 2013
Fantasy Westward Journey mobile game
Turn-based MMORPG
March 2015
Westward Journey Online mobile game
Turn-based MMORPG
September 2015
Infinite Borders
SLG
October 2015
The mobile version of Ghost
Real-time MMORPG
May 2016
Onmyoji
CCG & RPG
September 2016
Knives Out
Battle Arena
November 2017
Identity V
Battle Arena
April 2018
LifeAfter
Cooperative Survival RPG
November 2018
Fantasy Westward Journey H5
MMORPG
June 2020
Eggy Party
Casual Party Mobile Game
May 2022
Diablo® Immortal™*
MMO Action-RPG
June 2022
Racing Master*
Racing Simulation
June 2023
Justice mobile game
MMORPG
June 2023
Dunk City Dynasty
Basketball
August 2023
Naraka: Bladepoint mobile game
Action Battle Royale
July 2024
* Diablo® Immortal™ and Racing Master were co-developed with Blizzard and Codemasters, respectively.
PC games
We launched our first PC based MMORPG, Westward Journey Online, in December 2001. Subsequently, we launched Westward
Journey Online II in August 2002 and our second original PC based MMORPG, Fantasy Westward Journey, in January 2004. Westward
Journey Online II and Fantasy Westward Journey were upgraded to Westward Journey Online 2 and Fantasy Westward Journey Online
in 2013. Both game series remain popular with gamers today as a result of continued content updating and innovation in play modes over
the past two decades. On Steam’s Best of 2024 games list, Naraka: Bladepoint and Once Human were named as “Top Seller” and “Most
Played” games.
PC game players can purchase prepaid points to pay for game playing time, virtual items and other fee-based services that
enhance their playing experience such as special powers, costumes, weapons and other accessories. We regularly introduce new virtual
items and other fee-based services, as well as change the features of virtual items based on player feedback, market trends and other
factors.

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The table below sets forth our major in-house developed PC games:
Game
    Genre
    Date(s) of Launch and Major Upgrade
Westward Journey Online 2 (a comprehensive upgrade
of Westward Journey Online II)
2D MMORPG, classical
Chinese setting
August 2002 
September 2013
Fantasy Westward Journey Online (previously known as
Fantasy Westward Journey II)
2D MMORPG, classical
Chinese setting
January 2004
July 2013
Tianxia III
3D MMORPG, classical
Chinese setting
October 2011
New Ghost (a new version of Ghost II)
2.5D MMORPG,
classical Chinese setting
April 2012
September 2015
Justice
3D MMORPG, classical
Chinese setting
June 2018
Naraka: Bladepoint
Action Battle Royale
July 2021
Once Human*
Survival\Open-
world\Crafting
July 2024
Marvel Rivals
Shooting
December 2024
Where Winds Meet*
Open-world action-
adventure RPG
December 2024
* Once Human and Where Winds Meet are cross-platform games which are available both on PC and mobile devices.
Licensed Games
In addition to our in-house developed mobile and PC games, we also offer games licensed from other international game
developers, including Blizzard and Microsoft. For further details, see Item 4.B. “Information on the Company—Business Overview—
Our Services—Games and Related Value-added Services—International Partnerships.” Revenues from licensed games accounted for
9.5%, 4.6% and 7.4% of our total revenues in 2022, 2023 and 2024, respectively.
Global Presence
We continue to advance our games and make inroads that expand our reach in overseas markets. We have launched numerous
mobile games in global markets since 2015. Our mobile game, Knives Out, has remained popular in Japan since its launch in 2017 and
ranked No.1 and No.2 in Japan’s iOS grossing chart in 2023 and 2024, respectively. We also launched Identity V and Racing Master in
Japan in 2018 and 2024, respectively, further evidencing our potential to operate a diverse range of games in overseas markets over the
long term. In addition to our success in Japan, we have expanded our footprint across more regions. We launched Naraka: Bladepoint
and Marvel Rivals globally in 2022 and 2024, respectively.
We have also strengthened our global R&D capabilities by launching or acquiring overseas game studios in North America,
Japan and Europe and working with top international game developers.
International Partnerships
Building on our strong in-house content development capabilities, we have formed strategic partnerships and collaborations
with world-famous game studios and content owners. As a leader in online games in China, we have successfully partnered with leading
international game studios and content owners with our development and operational capabilities, such as Blizzard, Marvel and
Microsoft, to co-develop and/or operate games in China and abroad. In addition, we established a series of IP collaborations with various
third parties.
For example, we entered into an exclusive license agreement with Blizzard in 2024 to operate a number of its titles including
World of Warcraft®, Hearthstone® and other titles in the Warcraft®, Overwatch®, Diablo®, and StarCraft® universes in China mainland.
We had previously partnered with Blizzard for the operation of many of these games pursuant to a prior license arrangement from 2008
to 2023.

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We have also co-developed and successfully launched Diablo® ImmortalTM, an MMO action-RPG, with Blizzard in 2022 and
entered into a license agreement with Marvel in May 2019 to operate original entertainment content based on internationally beloved
Marvel characters and stories. In 2019, we launched in the PRC Sky which is an award-winning adventure mobile game featuring unique
graphics and gameplay that we have licensed from thatgamecompany, Inc.
In addition, in May 2016, we entered into an exclusive agreement with Microsoft, pursuant to which Microsoft agreed to license
both the mobile and PC versions of Minecraft to us for operation in China until 2022. The term of such license was extended in 2019 and
further renewed in 2023.
We continue to establish and deepen collaboration with other leading international game studios, including entering into a joint
development agreement with Codemasters, a leading United Kingdom game studio focusing on racing games. In conjunction with
Codemasters, we launched Racing Master, a real-time simulation racing game that has gained widespread acclaim in Hong Kong,
Macau, Taiwan, China mainland and Japan.
Game Design and Development
Building upon the success of our classic titles, we have accumulated a better and deeper understanding of our users in terms of
their interests and preferences in style, aesthetics and gameplay. We have integrated our experience and know-how into the design of our
new games, enhancing our ability to deliver popular titles to users. We have established multiple studios of game developers to research
and develop new games and expansion packs.
Our Franchises
We continue to build upon existing successful games to offer multi-dimensional content by leveraging our in-house developed
franchises and intellectual property. Our Fantasy Westward Journey and Westward Journey Online franchises remain popular and have
been instilled in the collective memory of a generation of Chinese players. We further expanded the reach of these franchises through the
introduction of Fantasy Westward Journey 3D and Fantasy Westward Journey H5 in 2019 and 2020, respectively, captivating both
returning fans and new players. We subsequently successfully launched Westward Journey Return in early 2023.
In addition to growing and strengthening our existing franchises, we have continually incubated new ideas and delivered new
and long-lasting game titles to our users. For example, one of our in-house developed young IPs is Identity V, which we believe has the
potential to become another successful NetEase franchise. We are continually enriching this IP through a variety of initiatives, including
e-sports, game collaborations and off-line activities. We have hosted a number of high-profile events featuring Identity V, including both
international and regional series tournaments.
The prerequisite to building a successful franchise is the ability to create popular game IPs in-house, which is propelled by our
strong R&D capabilities. Over the past two decades, we have built a large in-house R&D team with talented and passionate game
creators. We empower each of our talent with our game-enthusiastic corporate culture and our carefully-designed training programs. For
more description on our R&D capabilities, see Item 4.B. “Information on the Company—Business Overview—Our Services—Games
and Related Value-added Services—Game R&D and Technologies.”
Content Quality and User Experience
We focus on providing an innovative and superior user experience in game design and development and strive to make games of
the highest quality. From the initial proposal to final launch, our games will typically go through a number of carefully designed steps
including market research, proposal, demo, repeated prototype review and beta testing to ensure that the best quality and user experience
can be delivered to our players. In addition to creating a highly realistic and immersive gaming experience through the use of advanced
technologies, we also employ innovative gamification thinking that takes into consideration both the in-game and out-of-game user
experience.
Game R&D and Technologies
Our consistent and significant investment in innovative game R&D is a key contributor to the success of our online game
business and has been widely recognized in the games industry.

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Our Proprietary Game R&D Capabilities
Proprietary R&D is the key focus of our game business. We continually strengthen and upgrade our game R&D infrastructure
through recruiting and cultivating top talent, optimizing our game production pipeline and fostering a culture of creativity and
innovation. We have founded a number of in-house research institutions to explore the application of various technologies in games.
We strive to recruit and grow the best talent in the industry. We were awarded the 2023-2024 ATD Excellence in Practice Award
by the Association for Talent Development, one of the most authoritative international awards in the global talent development industry.
In addition, we established our in-house game advanced technology research institutions to focus on researching, among other things,
reinforcement learning, computer vision and graphics, natural language processing, speech synthesis and music generation. Having built
a virtuous cycle among our talent, established development pipeline and dynamic culture of innovation and craftsmanship, our strong
R&D capabilities continue to enable high-quality production and expansion of successful games.
Key Game Technologies
Our game R&D is centered around using technologies to deliver a superior and differentiated user experience. The key areas of
our proprietary game technologies include:
Proprietary game engines: In addition to game development, we have continually invested in proprietary game engine R&D.
Since the initial launch of our first game engine, NeoX, in 2005, we have continually expanded and optimized our proprietary engines to
systematically support enhanced game features and aesthetics. As part of our early strategy to focus on mobile games, we successfully
adapted NeoX to iOS and Android systems as well as developed Messiah, a 3D game engine specifically designed for mobile platforms.
We believe that our R&D in game engines and games reinforces each other and promotes a virtuous cycle of innovation. NeoX and
Messiah enable us to systematically develop mobile games with the highest quality in lighting, audio, special effects, physics and
animation, and other key game features, while our drive for better games in turn motivates development of more powerful engines.
User profile analytics: We perform an in-depth analysis of our users profile by analyzing activities and performances in games,
in-game purchasing preferences and other data and information. We leverage our user data on an aggregate basis to guide game
development and upgrades, marketing and other activities.
Intelligent non-player characters (NPCs): Enabled by deep learning technology, we have created intelligent NPCs that can join
players’ in-game activities, simulate real-life interactions, facial expressions and body language and enable a more engaging gaming
experience. We also deploy multiple reinforcement learning technologies to produce NPCs with diverse styles and difficulty levels,
catering to a wide range of player preferences.
Natural language processing (NLP): We apply NLP technology in our games to enable players to develop their own storyline
by carrying out conversations with NPCs and explore hidden elements in the game, creating an immersive gaming experience for
players.
Advanced game graphics: Our advanced game graphics enable game players to create unique characters with customized facial
features. We also offer automatic character customization based on real-life photographs uploaded by players. In addition, we deploy
high-quality 3D game graphics and automatic scene generation in our games.
Related Value-added Services
The related value-added services include a live streaming service and other related or ancillary value-added services related to
games, such as the sales of game-themed merchandise.
Intelligent Learning and Advertising Solutions Provider – Youdao
Youdao’s Products and Services
Youdao is strategically positioned as an AI-powered solutions provider specializing in artificial intelligence applications for the
learning and advertising verticals, which operates in China and a number of overseas markets. We founded Youdao in 2006 and launched
the flagship Youdao Dictionary in 2007, which remains the top language app in China in terms of MAUs. Youdao has experienced rapid
growth since its founding and completed its public listing on the New York Stock Exchange in October 2019.

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Building on the early success of Youdao Dictionary, we have attracted a massive user base, built a strong brand, and expanded
into a broad range of products and services addressing people’s lifelong learning needs, including learning services, AI-driven
subscription services and smart devices. Youdao historically offered a major portion of its learning services through its Academic AST
Business, but it disposed of such business in 2021 in order to comply with applicable PRC regulatory requirements adopted by the PRC
government. Leveraging its strong course and content development capabilities, Youdao continues to develop online learning services,
which mainly include digital content services, STEAM courses, and adult courses, such as China University MOOC. Youdao’s smart
devices seamlessly integrate advanced AI algorithms and data analytics which supplement its online learning services and further
enhance the user experience and efficiency.
Youdao’s revenues consist of three parts: learning services, smart devices and online marketing services. We currently generate
the majority of the revenues of Youdao’s learning services from its tutoring services, which mainly include its online courses and digital
content services. In addition, we generate revenues from sales of smart devices and from Youdao’s online marketing services through the
provision of different formats of advertisements.
Online Learning. We have developed a comprehensive offering of learning services catering to the diverse learning needs of
different age groups. Our learning service offerings primarily consist of (i) digital content services, (ii) STEAM courses, and (iii) adult
courses, such as China University MOOC.
●
Digital Content Services. In 2022, we launched digital content services with interactive learning features, primarily
including Youdao Lingshi and Youdao Literature. For example, within Youdao Lingshi we customize learning tracks for
students based on their diverse and ever-evolving learning needs, providing them with learning performance assessments,
personalized exercise banks and quizzes, customized learning planning, and live streaming counselling services to enhance
their learning performance. Youdao Lingshi also adopted a small-size class format to improve students’ learning experience
and efficiency. In 2024, we upgraded Youdao Lingshi with a tiered teaching approach tailored to individual learning needs
and capabilities. In addition, our video tutorials break down complex topics into manageable segments to help students
achieve better learning results.
●
STEAM Courses. Our current STEAM courses primarily include computer coding courses and other STEAM courses. We
have transitioned from a large-class format to smaller, more focused sessions, ensuring a more personalized and engaging
learning experience for students.
●
Adult Courses. Our adult courses primarily include China University MOOC. MOOC stands for “massive open online
course,” which is a course designed to offer free or low-cost access to learning resources to a wide audience. In
collaboration with the Higher Education Press, a publishing house under the supervision of the MOE, we operate China
University MOOC, a platform offering online courses primarily targeting college students and adults in China.
AI-driven Subscription
●
Youdao Dictionary. Launched in 2007, Youdao Dictionary is Youdao’s first major product and flagship online language
tool. Today, it is China’s most popular and trusted online dictionary and translation tool with 44.5 million MAUs in 2024.
As of December 31, 2024, Youdao Dictionary offered over 560 million entries across 109 languages.
●
AI-based Learning Tools. We launched Confucius, our own large language model (LLM), in 2023, which is China’s first
LLM specifically designed for the education sector. Powered by Confucius, we also launched Hi Echo, an AI-driven virtual
English-speaking tutor, and Mr. P AI Tutor, a conversation-based tool designed with real-time and multi-modality learning
features across major subjects for students. To enhance Mr. P AI Tutor’s in-depth analytical reasoning capabilities, we
recently integrated it with DeepSeek-R1 and Confucius models to deliver more intuitive, responsive and cost-efficient
services to users.
●
Other AI-driven Subscription. Other AI-driven subscription primarily include (i) Youdao Desktop Translation, a leading
desktop dictionary tool primarily for Chinese users; (ii) U-Dictionary, an online dictionary and translation app offered in
overseas market; (iii) iRecord, an audio transcription tool based on LLM capabilities; (iv) LectMate, a simultaneous
interpretation software for study-abroad lecture scenarios; (v) iArch, an AI home design software; (vi) Baby Genius, an AI
baby generator; and (vii) One Translate Translator, a translation tool for travelers.

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Online Marketing Services. We offer online marketing services through different formats of advertisement, including banners,
text links, videos, logos, buttons and rich media. Our online marketing services primarily consist of performance-based advertising
services and global marketing and promotion services.
●
Performance-based Advertising Services. Our domestic online marketing services focus on performance-based advertising.
Our performance-based advertising services provide comprehensive advertising services which feature AI-based data
mining and application. In 2024, leveraging our advanced AI technology and enhanced data infrastructure, we upgraded
our Real-Time API (RTA) technology capabilities, which broadened our client base and expanded the range of
applications.
●
In addition, leveraging our advancements in AI, we have developed an advanced advertising large language model (LLM)
designed for versatile applications across various marketing scenarios. Furthermore, our AI-driven model improves
conversion efficiency by continuously refining advertisement strategies through data-driven insights and performance
analytics. We further strengthen the role of AI in advertising efficiency through deepening the integration of advanced data
analysis and algorithm optimization.
●
Global Marketing and Promotion Services. We also offer Youdao Ads, a global leading digital marketing solution for brand
expansion in global markets, which provides four main types of services, including integrated marketing, influencer
campaigns, paid social advertising and e-commerce live.
Smart Devices. We develop and offer smart devices, including Youdao Dictionary Pen, Youdao Listening Pod and Youdao Smart
Learning Pad, to make learning more productive and efficient for our users. Our smart devices are developed and designed by us or in
collaboration with third parties, while the manufacturing of such devices is outsourced to third-party manufacturers under original
equipment manufacturer agreements.
●
Youdao Dictionary Pen. In July 2018, we launched Youdao Dictionary Pen, a sleek, modern electronic translation pen with
powerful Chinese/English translation capabilities. With our NMT and OCR technologies, users can simply scan the words
and the screen will instantly display the translations and definitions of the words without connecting to the internet. We
launched Youdao Dictionary Pen X6 Pro and Youdao Dictionary Pen S6 in August 2023. Youdao Dictionary Pen X6 Pro,
Youdao’s flagship product, is equipped with an AI grammar instruction application and digital human language coach, Hi
Echo, powered by our Confucius LLM. We launched Youdao Dictionary Pen X7 in July 2024, featuring our proprietary AI-
powered applications, Hi Echo and Mr. P AI Tutor. In addition, we launched Youdao Dictionary Pen A7 Pro in January
2025, which enables instant scanning and translation, and Youdao SpaceOne, a brand-new dictionary pen equipped with the
DeepSeek reasoning model, delivering in-depth analytical reasoning capabilities and providing clear guidance for complex
problem-solving scenarios.
●
Youdao Listening Pod. Building on our AI-adaptive learning technology, in September 2021 we launched Youdao Listening
Pod, a portable learning device that is designed to deliver an immersive English learning experience to users, and offer
them with differentiated, interactive listening and speaking practices. With Youdao Listening Pod, users can study natural
pronunciation by listening and reading over 30,000 recording clips of training content, interact and communicate live with
AI-powered chat bots and practice on mock questions to score their English listening and speaking capabilities. In August
2023, we launched Youdao Listening Pod Pro, which features improved hardware functionality, such as an enhanced CPU
and microphones. Our Youdao Listing Pod Pro customizes English listening content to cater to learners’ specific needs at
various stages, leveraging our AI dialogue functions powered by Confucius LLM. In 2024, we launched Youdao Listening
E6 Pro, which incorporates Hi Echo to optimize the user experience.
Technology-driven Learning Experience
We integrate technologies into every major aspect of the learning and teaching process to ensure a superb learning experience
across Youdao’s products and services. Over the years, we have built proprietary OCR, NMT, language data mining, voice recognition
technologies, data analytics and LLM that serve as the foundation to our products and services. Such technologies are iteratively refined
based on the vast data generated by our users.

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For example, we offer a set of advanced AI-based technologies to make learning more personalized and efficient while
maintaining a high level of human touch. We have also built massive “knowledge graphs” depicting different knowledge points, concepts
and learning objectives, supported by a large quiz bank curated by our course development professionals to help students understand the
subject matter. In addition, we have adopted an adaptive learning approach which tracks each student’s learning progress and
dynamically adapts teaching to the student’s unique learning needs. We collect student learning and behavior data throughout their
learning cycles to help us understand their learning progress and predict through our adaptive learning model how they will perform to
achieve future learning objectives.
Online Music Platform – NetEase Cloud Music
NetEase Cloud Music’s Products and Services
We founded NetEase Cloud Music in 2013 and launched the iconic cornerstone product, NetEase Cloud Music, in the same
year. NetEase Cloud Music experienced rapid growth since its founding and completed its public listing on the Hong Kong Stock
Exchange in December 2021.
Over the years, NetEase Cloud Music has built a large-scale, robust and rapidly growing business to provide community-centric
online music services and social entertainment services to users. Leveraging NetEase Cloud Music, and ancillary, social entertainment
products, it empowers music enthusiasts with a wide variety of technology-driven tools to discover, enjoy, share and create diverse music
and music-inspired content and to interact with each other.
NetEase Cloud Music generates the majority of the revenue from its music platform through the sales of membership
subscriptions for its online music services and sales of virtual items for its social entertainment services. To diversify its revenue streams,
NetEase Cloud Music has also been actively developing other monetization channels, such as the provision of advertising services, sales
of digital albums and songs, copyright sublicensing and music-inspired services.
Online Music Services
NetEase Cloud Music provides a number of membership subscription packages for users to enjoy high-quality streaming access
to our catalogue of music tracks (including both licensed music and in-house original music) and long-form audio content such as
podcasts, audio books and radio dramas, and provide users with services that allow them to purchase access to certain new digital music
albums and singles. In addition, NetEase Cloud Music offers advertising services for both brand advertisers and performance-based
advertisers and sublicense certain of its licensed music content to other parties, including other online music platforms. NetEase Cloud
Music has put ongoing efforts into elevating users’ experience in terms of personalized content recommendations, and creating a music
centric community to encourage user interactions.
Social Entertainment Services and Others
As the size and engagement level of its online music services’ user base continues to grow, NetEase Cloud Music also provides
music-inspired social entertainment services, which include its live streaming services and social networking platforms. NetEase Cloud
Music generates revenue from sales of virtual items. Users can purchase virtual items to gift to live streaming performers as a way to
show support and appreciation for their performance or send the virtual items to other users on the social networking platforms for better
interaction and social networking experience. NetEase Cloud Music also generates revenue from providing membership and value-added
services on its social networking platforms. Other revenue sources primarily include movie soundtrack production and ticketing services
for offline music events.

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Technological-driven Music Experience
NetEase Cloud Music needs to ensure that it can deliver a satisfying music experience consistently at scale by continuously
innovating and improving its platform and investing in R&D. Our advanced data analytics and other capabilities lay the foundation for
the platform’s personalized content recommendations, assisted content creation, interactive social functions and other powerful features
that optimize the user experience and realize the unique value of our diverse content. For example, our NetEase Music Audio Lab
developed an audio melody extraction solution that broke three world records at the Music Information Retrieval Evaluation eXchange,
or MIREX, in 2020. In addition, with its strong music recognition ability, the lab’s “robust fingerprinting algorithm” achieved the
second-best performance in the task of “audio fingerprinting” since MIREX launched this competition in 2014, representing a significant
improvement in recognition rate.
Other Innovative Business and Services
We derive our innovative businesses and others revenues primarily from Yanxuan, advertising services, premium e-mail and
other value-added services.
Yanxuan
Yanxuan, our private label consumer lifestyle brand, was established in 2016. Starting with the development of a well-designed
towel, Yanxuan has always focused on optimizing the user experience of its products and improving the lives of consumers in China
through simple, practical, comfortable and elegant designs. Over the past years, Yanxuan has gradually evolved into a lifestyle brand
favored by younger generations from all walks of life.
Yanxuan offers products in a wide range of categories, including home life, clothing, shoes, bags, gourmet food, drinks, pet food
and supplies, personal care and cleaning products, among other things. Yanxuan pursues the brand concept of “thoughtfully curated
products for mindful moments,” which is an extension of NetEase’s overall “user-first” attitude towards its services and products.
Yanxuan continuously evaluates the needs and wants of its users and searches around the world to identify and cooperate with the best
suppliers available. By better understanding customers’ needs and participating in the production process, Yanxuan can provide
customers with competitive prices, excellent quality and quality customer service.
Other Innovative Services
We also offer a wide range of other innovative services, including our (i) www.163.com portal and related mobile app, Wangyi
Xinwen, which deliver quality information such as news, sports events, technology, fashion trends and online entertainment to our users
and generate revenues mainly from online advertising services, (ii) NetEase Pay, an online payment platform, (iii) NetEase Mail, China’s
leading email service provider since 1997, through which we provide free and fee-based email services, and (iv) certain other services,
such as customized B-to-B technology services and e-reading services.
TECHNOLOGIES AND IT INFRASTRUCTURE
As one of the inaugural classes of internet platforms and one of the first to provide e-mail services to the masses in China, we
have consistently prioritized investing in technologies since our inception. With our strong R&D capabilities and advanced technologies,
we successfully digitalized traditional offline services, such as music and learning, and significantly transformed entertainment, learning
and other activities. We focus on exploring viable applications of cutting-edge technologies to meaningfully enhance our service
offerings and deliver a superior experience for our users. Empowered by advanced core proprietary technologies, we deliver engaging
content and services that are highly individualized and personalized across our businesses.
Machine Learning and Other Advanced Technologies
Our machine learning and other advanced technologies enable us to effectively process data generated from across our services
and products, optimize recommendations, personalize offerings and predict user behavior. Our key capabilities include:
●
Advanced technologies focusing on user experience: We have developed advanced technologies such as natural language
processing, automatic speech recognition (ASR) and text-to-speech (TTS) technologies that enable us to deliver an
enjoyable and effective user experience.

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●
Machine learning-powered applications, such as content recommendation and customization: We have developed and
adapt machine learning and related technologies in content recommendation and customization, which enables us to
achieve greater user engagement and stickiness.
IT Infrastructure
Our infrastructure and technology have been designed for reliability, scalability and flexibility and are administered by our
technical staff. Our NetEase websites and other online and mobile platforms are made available primarily through network servers co-
located in the facilities of the respective affiliates of China Telecom, China Unicom and China Mobile, as well as our self-built Gui’an
Data Center. We also utilize certain cloud-based servers maintained by third parties such as Google Cloud Platform.
In addition, we have developed our own systems to facilitate sales planning, targeting, trafficking, inventory management and
reporting tools, such as advertisement tracking systems for our advertising services.
We have also established a comprehensive user profile system, which we monitor and review on a regular basis. We also deploy
a single sign-on system that allows users to easily access our services offered through the various NetEase products. We intend to
continue to use a combination of internally developed software products as well as third-party products to enhance our products and
services in the future.
SALES AND MARKETING
We employ a variety of online and traditional sales and marketing programs and promotional activities to build our brand as part
of our overall marketing strategy. We focus on building brand awareness through online marketing campaigns, proactive public relations
and other offline advertising. We invest in a series of marketing activities to further strengthen our brand image and continue to grow our
user base, including collaborating with leading social networking, video and live streaming platforms, TV, movie and stage production
companies as well as book and comic publishers to extend our brand to a broader potential user group.
Games and Related Value-added Services
Our mobile games are available on the Apple app store for iOS and third-party Android app stores. In addition, to leverage our
existing user bases, we also publish our mobile games through our own internet properties. We conduct in-game marketing campaigns in
connection with special holiday editions or launches of new games or expansion packs throughout the year. We have also promoted our
games and related value-added services in collaboration with online and offline third-party promoters.
Youdao
Youdao generates user traffic and leads primarily from online platforms. As a key sales and marketing strategy, Youdao cross-
sells its comprehensive portfolio of products and services, which allows it to effectively scale its business with modest traffic acquisition
and marketing spending. In addition, Youdao also employs mobile marketing, such as brand advertisements and marketing campaigns on
app stores, leading mobile news apps and social networking platforms, as well as through optimization techniques designed to improve
its ranking in popular search engines’ results. Youdao also engages in offline marketing and branding to supplement its overall sales and
marketing strategies.
NetEase Cloud Music
NetEase Cloud Music primarily relies on word-of-mouth referrals and benefits from its high-quality music content, social
networking functions and strong brands to attract users to its platforms. Besides word-of-mouth, NetEase Cloud Music engages in
various marketing and promotional initiatives to promote its brand and increase its user base, including, for example, by partnering with
key opinion leaders, holding various marketing campaigns and implementing new technologies and introduce new features to improve
user experience.

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Innovative Businesses and Others
For our innovative businesses and other online services, content and services are generally provided through mobile applications
or their respective websites. Users purchase our services either at a pre-determined package rate or on an item-based basis. We attract
users through a variety of channels, such as our online and offline advertising channels. We also offer our customers special pricing
discounts in connection with promotion activities and strive to expand our products selection to attract more visitors. Advertising
services are conducted through our dedicated advertising services sales force, or through online advertising sales networks and
advertising agencies.
SEASONALITY
See Item 5.A. “Operating and Financial Review and Prospects—Operating Results—Key Components of Results of Operations
—Revenues—Seasonality of Revenues.”
INTELLECTUAL PROPERTY
We rely on a combination of copyright, trademark, patent and trade secrecy laws and contractual restrictions on disclosure to
protect our intellectual property rights. We require our employees to enter into agreements requiring them to keep confidential all
information relating to our customers, methods, business and trade secrets during and after their employment with us. Our employees are
required to acknowledge and recognize that all inventions, trade secrets, works of authorship, developments and other processes, whether
or not patentable or copyrightable, made by them during their employment are our property. They also sign all necessary documents to
substantiate our sole and exclusive right to those works and to transfer any ownership that they may claim in those works to us.
We have registered a number of domain names. We have also successfully registered numerous trademarks with China’s
Trademark Office, including marks incorporating the words “NetEase” and “Yeah!” in English and for marks for “NetEase” as written in
Chinese in traditional and simplified Chinese characters. In addition, we have registered trademarks involving Chinese characters and
phrases that have meanings relating to our web pages, products and services, including our online games, intelligent learning services,
online music services, chat services, e-commerce and certain other online services. In addition, we have registered a number of
trademarks involving the “NetEase” name as well as the names and logos of our products and services in the U.S., the EU, the Republic
of Korea, Japan, the United Kingdom, Thailand and other jurisdictions.
In addition, we have registered our various in-house developed games and other online products with the National Copyright
Protection Center of China. Moreover, we have filed certain patent applications with the National Intellectual Property Administration of
China, U.S. Patent and Trademark Office, European Patent Office and Japan Patent Office, and have obtained Certificates of Design
Patent, Utility Model Patent and/or Invention Patent for technologies related to our games, live video, news, educational products, e-
commerce and finance, music platform, hardware products, cloud technology, augmented reality technology, audio/video technology,
computer technology and e-mail from the National Intellectual Property Administration of China, as well as Certificates of Utility Patent
and Certificates of Design Patent in the United States, Europe and Japan.
Moreover, Youdao owns the intellectual property relating to in-house developed content used on its platform and the
registrations of the core trademarks “Youdao.” NetEase Cloud Music owns the intellectual properties relating to NetEase Cloud Music
and the registrations of the core trademarks “NetEase Cloud Music.” We also own the intellectual property (other than the content)
relating to the NetEase websites and other online and mobile platforms, and the technology that enables online community,
personalization, online games, news sharing, instant messaging, video streaming, e-commerce and other services on those platforms. We
license content from various freelance providers and other content providers.
While we actively take steps to protect our proprietary rights, such steps may not be adequate to prevent the infringement or
misappropriation of our intellectual property. See Item 3.D. “Key Information—Risk Factors—Risks Related to Doing Business in China
—We may not be able to adequately protect our intellectual property and may be exposed to infringement claims by third parties.”

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COMPETITION
Our competition primarily comes from global online game developers and operators, such as Tencent, established online and
offline education service and/or product providers in China, as well as leading digital content and entertainment providers. Some of our
current and potential competitors are larger than we are, and currently offer, and could further develop or acquire, content and services
that compete with us. The areas in which we compete primarily include:
User traffic, time and spending. We compete to attract, engage and retain users based on the design, quality, popularity and
efficacy of our content offerings, the overall user experience of our products and services, as well as the effectiveness of our marketing
activities.
Talent. We compete for motivated and capable talent, including engineers, game designers, product developers and creative
professionals to build compelling content, tools and functions.
Global collaboration opportunities. We compete to win collaboration relationships with well-known global IP and content
owners based on our level of expertise in systematically developing in-house developed games, delivering a compelling user experience
through operational knowhow and customizing established game titles for rapid expansion into overseas markets.
There can be no assurance that we will be able to compete successfully against our current or future competitors or that
competition will not have a material adverse effect on our business, results of operations and financial condition.
CORPORATE SOCIAL RESPONSIBILITY
Since our founding, we have been committed to realizing the values of creating corporate social responsibility (CSR), striving to
contribute to communities and operating in a sustainable way. We aim to improve people’s lives with digital technologies and make
positive contributions to material social issues, such as education inequity, disaster recovery, workplace equality and diversity and green
and low-carbon development.
We have been focused on reducing education inequity and have launched several initiatives for that purpose. For example, in
2018, we launched the “One Screen” program, aiming to promote the equitable distribution of educational resources and stimulating
balanced development among students from different regions. By the end of 2024, the One Screen program had provided support in the
form of donations and teaching resources to over 300 schools across nine provinces and regions in China, benefiting nearly 200,000
teachers and students. In 2024, using remote, collaborative online classroom technology, the One Screen program helped students in
many remote areas to achieve breakthroughs in terms of academic performance at the National College Entrance Examination. Last year,
the overall university admission rate for students supported by this project was nearly 80%, and most notably, five students were
admitted to Tsinghua University or Peking University.
We also provide swift and impactful aid to victims of nature disasters. In January 2025, we donated RMB8 million worth of
emergency supplies to aid local emergency relief efforts in response to a magnitude 6.8 earthquake in the Xizang Autonomous Region.
We have always adhered to the vision of improving society and have conducted a series of related projects to empower county-
level entrepreneurship and innovation. We helped grow the cultural tourism industry in various provinces by fusing their local cultures
and commodities with new digital technologies. With Yanxuan, our e-commerce platform, we have assisted local artisans and farmers to
sell their products to customers that they had never reached before. We also helped farmers and small to medium-sized enterprises in
rural areas to establish their brands or upgrade their existing brands in an effort to revitalize the rural China. Moreover, the players in our
games have contributed to advance the vision of social improvement. For example, in collaboration with Xinhuanet and China Social
Welfare Foundation, our game Eggy Party initiated a charity project in 2024 focusing on youth health development. All proceeds from
this project were converted into over 28,000 free lunches donated to children living in rural areas.

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We adhere to our commitment to equality and diversity in our recruitment and career development policies. Our games division
was honored with the 2023-2024 ATD Excellence in Practice Award for its long-term efforts in talent training and development,
becoming the only Chinese Internet enterprise to win an award in the competition. We were also named as a member of 2023 Bloomberg
Gender-Equality Index, which comprises 484 companies that are committed to gender equality in the workplace. We understand the
importance and value in having a diversified workforce and currently recruit talent from various backgrounds and cultures. We have built
a multidimensional talent training and development system to help employees succeed in their areas of expertise and achieve career
advancement. Due to our efforts in promoting sustainable growth and employee well-being, we were listed in Forbes World’s Best
Employers for 2024 and TIME World’s Best Companies 2024.
Given that the majority of our operations are conducted online, our impact on the environment is limited. We deployed carbon
mitigation measures to reduce our carbon footprint and will continue to explore ways to further improve energy efficiency. For example,
we implemented energy monitoring measures at our self-built Gui’an Data Center and adopted various energy-saving solutions in its
operation. We choose partners with a strong commitment to carbon emission reduction in our collaboration with third-party cloud
servers. Moreover, we spread green and environment-friendly concepts to the public through innovative methods. In 2024, we organized
an Environmental Day focused on Carbon Neutrality at our Beijing campus, encouraging participants to explore sustainable and eco-
friendly lifestyles through interactive games, hands-on activities, and upcycling projects.
RISK MANAGEMENT AND INTERNAL CONTROL
We have devoted ourselves to establishing and maintaining risk management and internal control systems consisting of policies
and procedures that we consider to be appropriate for our business operations, and we are dedicated to continuously improving these
systems.
We have adopted and implemented comprehensive risk management policies in various aspects of our business operations, such
as financial reporting, information system, internal control, human resources and investment management.
Financial Reporting Risk Management
We have in place a set of accounting policies in connection with our financial reporting risk management, such as financial
reporting management policies, budget management policies, treasury management policies, financial statements preparation policies
and finance department and staff management policies. We have various procedures and IT systems in place to implement our accounting
policies, and our finance department reviews our management accounts based on such procedures. We also provide regular training to
our finance department employees to ensure that they understand our financial management and accounting policies and implement them
in our daily operations.
Information System Risk Management
Proper maintenance, storage and protection of confidential information, including personal and sensitive information, is critical
to our business. We have implemented various internal procedures and controls designed to maintain the confidentiality and integrity of
our IT systems and confidential information, and we monitor these processes to help identify opportunities for improvement.
Data protection is a priority at NetEase. We have also obtained ISO 27001 and ISO 27701:2019 certifications and filing
certificates of the multi-level protection scheme, or MLPS, in China for some of our entities and products.
Our network technical security measures include use of firewalls, network segmentation, network access controls and intrusion
prevention systems. We also employ application security and software protection measures to protect our IT systems and the confidential
information that resides in it. Additionally, we encrypt user data during network transmission and, for back-end storage, we also use
various encryption technologies at the software and hardware levels to protect sensitive user data. At the enterprise level, we established
a systematic and universal user account authorization and management mechanism based on which we periodically review the status of
user accounts and the related authorization information. We periodically perform security configuration assessments on our databases
and servers and implement procedures for system log management. Processing of and access to user data is also subject to strict
assessment and approval procedures in order to safeguard against unauthorized access and processing.

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To reduce the risk of data loss, we conduct periodic data backup and data recovery tests and back-up management procedures.
We tailor our approach by deploying different back-up mechanisms, including local back-ups and remote back-ups, depending on the
needs of our business. This helps reduce the risk of user data loss. We have also established protocols to enable us to review and improve
the design, implementation and ongoing monitoring of remote back-up systems. In addition, we have implemented an emergency
response mechanism to evaluate critical risks, formulate disaster response plans and perform emergency drills on a regular basis to help
ensure the resiliency and availability of our systems and services.
From a governance perspective, our information security policy is reviewed periodically. Each of our business units is
responsible for ensuring compliance with the policy. We also provide information security training to our employees on an ongoing basis
to help all employees remain aware of their role in maintaining a secure environment.
Internal Control Risk Management
We have designed and adopted internal procedures to help ensure the compliance of our business operations with the relevant
rules and regulations. Our internal control team works closely with our legal, compliance and finance departments as well as our business
units to: (a) perform risk assessments and give advice on risk management strategies; (b) improve business process efficiency and
monitor internal control effectiveness; and (c) promote risk awareness throughout the NetEase group.
In accordance with our internal procedures, our in-house legal department performs the basic function of reviewing and
updating the form of contracts we enter into with our consumers, merchants and relevant third-parties. Our legal department examines
the contract terms and reviews relevant documents for our business operations, and the necessary underlying due diligence materials,
before we enter into any contract or business arrangements.
Our in-house legal department reviews our services for regulatory compliance before they are made available to the general
public. Our in-house legal department works with relevant business units to obtain requisite governmental approvals or consents,
including preparing and submitting all necessary documents for filing with relevant government authorities within the prescribed
regulatory timelines.
We continually review the implementation of our risk management policies and measures to ensure our policies and
implementation are effective and sufficient.
Human Resources Risk Management
We provide regular and specialized training tailored to: (a) the needs of our employees in different departments and/or
jurisdictions, and (b) our policies and procedures on business ethics and compliance. These training sessions are conducted by senior
employees or qualified outside consultants.
We have in place employee handbooks and have distributed them to all our employees. The handbooks are tailored to the legal
requirements of the relevant jurisdictions, but all contain rules and guidelines regarding, among other things, business ethics and
compliance, anti-harassment, fraud prevention, anti-bribery and anti-corruption, conflicts of interest, and channels to report concerns. We
provide employees with regular training as well as resources to explain the rules and guidelines in the employee handbooks.
We have in place policies and procedures on anti-bribery and anti-corruption to safeguard against corrupt practices within the
NetEase group. These materials clearly define bribery and corruption and outline our anti-bribery and anti-corruption measures. We
make our internal reporting channels open and available for anyone to report any actual or suspected misconduct. Reports can also be
made anonymously to our Ethics & Compliance Committee which is responsible for investigating reported incidents and taking
appropriate remedial measures.
Investment Risk Management
We invest in or acquire businesses that are complementary to our business from time to time, such as businesses that can expand
the services we offer and strengthen our R&D capabilities.
In order to protect our interests as shareholders and control the potential risks associated with our investments, we generally
request our investee companies to grant us customary investor protective rights.

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Our finance department monitors the deal performance on a regular basis. Our finance and legal departments cooperate with our
deal execution teams on deal analysis, communication, execution, risk control and reporting. Any material factors will be timely reported
to the senior management or board of directors for further evaluation.
Audit Committee Experience and Qualification and Board Oversight
We have established an audit committee to monitor the implementation of our risk management policies across the NetEase
group on an ongoing basis to ensure that our internal control system is effective in identifying, managing and mitigating risks involved in
our business operations.
The audit committee consists of three members, namely Grace Tang, Alice Cheng and Joseph Tong, all of whom are
independent non-executive directors. Grace Tang is the chairperson of the audit committee. For the professional qualifications and
experiences of the members of our audit committee, see “Item 6.A. Directors and Senior Management.”
We also maintain internal control and internal audit departments which are responsible for reviewing the effectiveness of
internal controls. Our internal control and internal audit department members hold regular meetings with management to discuss any
internal control issues we face and the corresponding measures to implement toward resolving such issues. The internal audit department
reports to the audit committee to ensure that any major issues identified are channeled to the committee on a timely basis. The audit
committee then discusses the issues and reports to the board of directors, if necessary.
Ongoing Measures to Monitor the Implementation of Risk Management Policies
Our audit committee, internal audit department and senior management together monitor the implementation of our risk
management policies on an ongoing basis to ensure our policies and implementation are effective and sufficient.
INSURANCE
We have in place all the mandatory insurance policies required by Chinese laws and regulations and in accordance with the
commercial practices in our industry. Our employee-related insurance consists of pension insurance, maternity insurance, unemployment
insurance, work-related injury insurance, medical insurance and housing funds, as required by Chinese laws and regulations. We also
purchase supplemental commercial medical insurance and accident insurance for our employees.
Additionally, we maintain insurance policies for our international operations outside of China as required by our leases and
contracts and in accordance with the commercial practices in our industry. These policies generally include, but are not limited to,
general liability, property, non-owned and hired auto liability and excess liability insurance coverages.
We generally do not maintain any business interruption insurance, product liability insurance, key person life insurance, or
insurance policies covering damages to our network infrastructures or IT systems. We carry property insurance with low coverage limits
that may not be adequate to compensate us for all losses, particularly with respect to loss of business and reputation that may occur. We
also do not maintain insurance policies against risks relating to the contractual arrangements with the VIEs. In 2024, we did not make
any material insurance claims in relation to our business.

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PERMISSIONS REQUIRED FROM THE PRC AUTHORITIES FOR OUR OPERATIONS AND OFFERINGS
We believe our China mainland subsidiaries and the VIEs have obtained the requisite licenses and permits from the PRC
government authorities that are necessary for their material business operations in China, except for our Online Publishing Service
License which we are in the process of renewing as disclosed in Item 3.D. “Key Information—Risk Factors—Risks Related to Our
Business And Industry—Risks Related to Our Games and Related Value-added Services—Any difficulties in receiving approval from the
relevant government authorities for our new games or new expansion packs for, or material changes to, our existing games could
adversely affect such games’ popularity and profitability,” Such licenses and permits include, among other things, Value-added
Telecommunications Business Operating License, Online Publishing Service License, Internet Audiovisual Program Services License,
Internet Cultural Business License, and Commercial Performance License. If we or any of the VIEs is found to be in violation of any
existing or future PRC laws or regulations or fail to obtain or maintain any of the required permits or approvals, the relevant PRC
regulatory authorities would have discretion to take action in dealing with such violations or failures. In addition, if we had inadvertently
concluded that such approvals, permits, registrations or filings were not required, or if applicable laws, regulations or interpretations
change in a way that requires us to obtain such approval, permits, registrations or filings in the future, we may be unable to obtain such
necessary approvals, permits, registrations or filings in a timely manner, or at all, and such approvals, permits, registrations or filings
may be rescinded even if obtained. Any such circumstance may subject us to fines and other regulatory, civil or criminal liabilities, and
we may be ordered by the competent government authorities to suspend relevant operations, which will materially and adversely affect
our business operation.
Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by
relevant government authorities, we may be required to obtain additional licenses, permits, filings, or approvals for our business
operations in the future. For more detailed information, see Item 3.D. “Key Information—Risk Factors—Risks Related to Doing
Business in China.”
In connection with our prior overseas offerings and listing status, as of the date of the filing of this annual report, we (i) have not
been required to obtain any permission from or complete any filing with the CSRC, and (ii) have not been required to go through a
cybersecurity review by the CAC. As advised by our PRC legal counsel, under the currently effective PRC laws and regulations, we are
not required to obtain any permission from or complete any filing with CSRC or go through a cybersecurity review by the CAC to
maintain our listing status, based on their consultation with competent government authorities.
However, the PRC government has promulgated certain regulations and rules to exert more oversight and control over offerings
that are conducted overseas and/or foreign investment in China-based issuers. On February 17, 2023, the CSRC released the Trial
Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies and five supporting guidelines, or,
collectively, the Filing Rules, which took effect on March 31, 2023. According to the Filing Rules, domestic companies in China
mainland that directly or indirectly offer or list their securities in an overseas market are required to file with the CSRC. In addition, an
overseas listed company must also submit the filing with respect to its follow-on offerings, issuance of convertible corporate bonds and
exchangeable bonds, and other equivalent offering activities, within a specific time frame requested under the Filing Rules. Therefore,
we will be required to file with the CSRC for our overseas offering of equity and equity linked securities in the future within the
applicable scope of the Filing Rules. For more detailed information, see Item 3.D. “Key Information—Risk Factors—Risks Related to
Doing Business in China—The approval, filing or other requirements of the CSRC, CAC or other PRC government authorities may be
required under PRC law in connection with our issuance of securities overseas or maintenance of the listing status of our ADSs or
ordinary shares, and the PRC government’s oversight and discretion over our business operations could result in a material adverse
change in our operations and the value of our ADSs or ordinary shares.”

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GOVERNMENT REGULATIONS
Regulations on Foreign Investment
On March 15, 2019, the National People’s Congress promulgated the 2019 PRC Foreign Investment Law, which became
effective on January 1, 2020, and replaced the Wholly Foreign-owned Enterprises Law, the Sino-foreign Equity Joint Ventures Law, and
the Sino-foreign Cooperative Joint Ventures Law. Investment activities in the PRC by foreign investors are principally governed by the
Catalogue of Industries for Encouraging Foreign Investment, or the Encouraging Catalogue, and the Special Management Measures
(Negative List) for the Access of Foreign Investment, or the Negative List, both of which were promulgated and are amended from time
to time by the MOFCOM, and the NDRC. The Encouraging Catalogue and the Negative List lay out the basic framework for foreign
investment in China, classifying businesses into three categories with regard to foreign investment: “encourage,” “restricted” and
“prohibited.” Industries not listed in the Encouraging Catalogue and the Negative List are generally deemed as falling into a fourth
category “permitted” unless specifically restricted by other PRC laws. On October 26, 2022, MOFCOM and the NDRC released the
Catalog of Industries for Encouraging Foreign Investment (2022 Version), which became effective on January 1, 2023, to replace the
previous Encouraging Catalogue. On September 6, 2024, MOFCOM and the NDRC released the Special Management Measures
(Negative List) for the Access of Foreign Investment (2024 Version), which became effective on November 1, 2024, to replace the
previous 2021 Negative List. To comply with the above foreign investment restrictions and to obtain necessary licenses and permits in
industries that are currently subject to foreign investment restrictions in China, we operate in China through the VIEs. See Item 4.B.
“Information on the Company—Business Overview—Our Organizational Structure.” There remain uncertainties with respect to the
interpretation and application of existing or future PRC laws and regulations on foreign investment. See Item 3.D. “Key Information—
Risk Factors—Risks Related to Our Corporate Structure.”
According to the 2019 PRC Foreign Investment Law, foreign investment shall enjoy “pre-entry national treatment,” which
generally means that at an investment-entrance stage, foreign investment should be treated no less favorably than domestic investment,
except for foreign investments in industries deemed to be “restricted” or “prohibited” in the “negative list.” The 2019 PRC Foreign
Investment Law provides that foreign invested entities operating in “restricted” or “prohibited” industries will require entry clearance and
other approvals. However, uncertainties still exist when it comes to interpreting or implementing the 2019 PRC Foreign Investment Law
and its implementation rules. For example, the 2019 PRC Foreign Investment Law does not comment on the concept of “de facto
control” or contractual arrangements with variable interest entities. It does, however, have a catch-all provision under the definition of
“foreign investment,” which includes investments made by foreign investors in China through means stipulated by laws or administrative
regulations or other methods prescribed by the State Council. As such, there remains a leeway for future laws to define contractual
arrangements as a form of “foreign investment.” For further details, please see Item 3.D. “Key Information—Risk Factors—Risks
Related to Our Corporate Structure.”
On December 26, 2019, the State Council promulgated the Implementation Rules to the Foreign Investment Law, which became
effective on January 1, 2020, and repealed the Regulations on Implementing the Sino-Foreign Equity Joint Venture Enterprise Law of the
PRC, the Provisional Regulations on the Duration of Sino-Foreign Equity Joint Venture, the Regulations on Implementing the Wholly
Foreign Invested Enterprise Law of the PRC, and the Regulations on Implementing the Sino-Foreign Cooperative Joint Venture
Enterprise Law of the PRC. The implementation rules further clarified and elaborated on the relevant provisions of the 2019 PRC
Foreign Investment Law.
On December 30, 2019, the MOFCOM and the SAMR, jointly promulgated the Measures for Information Reporting on Foreign
Investment, which became effective on January 1, 2020. Pursuant to the measures, where a foreign investor directly or indirectly carries
out investment activities in China, the foreign investor or the foreign invested enterprise must submit the investment information to the
competent commerce department for further handling.
On December 19, 2020, MOFCOM and the NDRC jointly promulgated the Measures for the Security Review of Foreign
Investments, which took effect on January 18, 2021, pursuant to which a security review shall be conducted for foreign investments that
affect or may affect national security. The measures established a working mechanism for the security review of foreign investments, or
the Security Review Working Mechanism, to be responsible for organizing, coordinating and guiding the security review of foreign
investments. For foreign investments in material information technology and internet products and services which relate to national
security, the foreign investors who obtain the actual controlling stake in the investee enterprise in the PRC shall declare to the office of
the Security Review Working Mechanism prior to implementation of the investments.

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Regulations on Telecommunication Services
In September 2000, China’s State Council promulgated the Telecommunications Regulations of the PRC, or the Telecom
Regulations, which was last revised in February 2016. The Telecom Regulations categorized all telecommunications businesses in China
as either a “basic telecommunications business” or “value-added telecommunications business,” ICP services, e-mail services, and other
telecommunications businesses operated by us are classified as value-added telecommunications businesses. According to the Telecom
Regulations, the commercial operator of these services must obtain an operating license. The Telecom Regulations also set out extensive
guidelines with respect to different aspects of telecommunications operations in China.
On December 28, 2015, MIIT issued the Telecommunication Services Classification Catalog (2015 Edition). The 2015 Catalog
took effect on March 1, 2016 and was amended on June 6, 2019. The Catalog divided the information services business into an additional
five sub-categories and reclassified the online data processing and transaction processing services business from a “basic
telecommunications business” to a “value-added telecommunications business.” In 2017, MIIT issued the new version of the Measures
for the Administration of Telecom Business Licensing, or the MIIT Measures 2017, which became effective on September 1, 2017. The
MIIT Measures 2017 require companies who are engaged in telecommunications businesses to have a Telecom Business License.
In December 2001, in order to comply with China’s commitments with respect to its entry into the WTO, the State Council
promulgated the Regulation for the Administration of Foreign-Invested Telecommunications Enterprises, or the FITE Regulations, which
was last revised in March 2022 and came into effect on May 1, 2022. The FITE Regulations set out detailed requirements with respect to
capitalization, investor qualifications, and application procedures in connection with establishing a foreign invested telecom enterprise.
Pursuant to the FITE Regulations, foreign investors may hold an aggregate of no more than 50% of the total equity in any value-added
telecommunications business in China. The Notice of the MIIT on Removing the Restrictions on Foreign Equity Ratios in Online Data
Processing and Transaction Processing (Operating E-commerce) Business issued by the MIIT in June 2015 set out an exception, under
which, foreign investors may hold up to the entire equity interest in online data processing and transaction processing (operating e-
commerce) businesses. In addition, the Negative List removes some of the previous restrictions on value-added telecommunications
providers by allowing foreign investors to hold up to the entire equity interest in domestic multi-party communication, e-storage and
forwarding and call center businesses in China. However, other requirements provided by the SAPPRFT and MIIT regulations still apply.
Regulations on Internet Information Services
The Measures for the Administration of Internet Information Services, or the ICP Measures, issued by the State Council went
into effect on September 25, 2000 and was last revised on December 6, 2024. Under the ICP Measures, any entity that provides
information to internet users must obtain an operating license from the MII, or its local branch at the provincial level in accordance with
the Regulations on Telecommunication Services described above.
On June 1, 2017, the Provisions for the Administration of Internet News Information Services, promulgated by the CAC, came
into effect, which superseded the previous regulations. According to the revised provisions, to provide internet-based news information
services to the public via internet websites, applications, forums, blogs, micro-blogs, public accounts, instant communication tools and
online live-stream, providers must obtain an Internet News Information Service License, issued by the CAC or a local cyberspace
administration. In addition, the provisions prohibit organizations from establishing foreign, partially or wholly owned, entities that invest
or operate internet-based news information services. The CAC and the local cyberspace administrative offices are responsible for the
supervision, management and inspection of internet-based news information services. On March 12, 2022, the NDRC and the MOFCOM
jointly issued the Negative List for Market Access (2022 Edition), pursuant to which market entities are prohibited from illegally
conducting news media related businesses. To be specific, non-public capital shall not: (i) be engaged in business of news gathering,
editing and broadcasting; (ii) invest in the establishment and operation of news organizations; (iii) operate the layout, frequency, channel,
column and public account of news organizations; (iv) be engaged in live broadcasting related to politics, economics, military, diplomatic
or related to major social, cultural, scientific and technological, health, education, sports activities and events and other activities and
events related to political discretion, direction of public opinion and value orientation; (v) introduce news released by foreign subjects; or
(vi) hold forum, summit or award selection activities in the field of news and public opinion. In December 2016, the MOC issued the
Circular on the Administrative Measures for Business Activities Relating to Online Performance, pursuant to which an internet platform
operator that provides online performance shall: (i) apply for a Network Culture Operation License with the relevant provincial-level
authority; (ii) notify the MOC of any access or performance channels created for domestic performers within ten days; and (iii) submit an
application to the MOC before creating any access or performance channels for foreign performers.

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On June 27, 2002, the MII and the GAPP jointly promulgated the Provisional Measures for the Administration of Internet
Publishing, which was replaced by the Rules for the Administration of Online Publishing Service jointly issued by SAPPRFT and MIIT
that became effective on March 10, 2016. These rules require online publishers to secure approval from the SAPPRFT for their
operations. The term “online publication service” refers to providing online publications to the public through information networks. The
term “online publications” is defined as the digital works with publishing features such as editing, production or processing provided to
the public through information networks (including contents from books, newspapers, periodicals, audio and video products, electronic
publications that have already been formally published or works that have been made public in other media format, and the digital works
of literature, art and science). These rules also forbid foreign investment in the online publishing sector.
Pursuant to the Measures for the Administration of Internet E-mail Services, or the Internet E-mail Measures, which was issued
by MII on February 20, 2006, e-mail service providers must obtain value-added telecommunications business operating licenses or file
for recordation as non-profit internet service providers. In addition, each e-mail service provider must keep a record of the timing,
sender’s or recipient’s e-mail address and IP address of each e-mail transmitted through its servers for 60 days. The Internet E-mail
Measures also state that an internet e-mail service provider is obligated to keep confidential the users’ personal registered information
and internet e-mail addresses. An internet e-mail service provider and its employees may not illegally use any user’s personal registered
information or internet e-mail address, and may not, without consent of the user, divulge the user’s personal registered information or
internet e-mail address, unless otherwise prescribed by another law.
The SARFT and MII jointly issued the Regulations for the Administration of Internet Audiovisual Program Services, or the
Audiovisual Regulations, on December 20, 2007, which was revised on August 28, 2015 by the SAPPRFT. The Audiovisual Regulations
require that online audio and video service providers obtain a permit from NRTA in accordance with the Audiovisual Regulations.
On November 18, 2019, the CAC, the MOCT and the NRTA jointly issued the Promulgation of the Administrative Provisions
on Online Audio and Video Information Services, or the Audio and Video Provisions, which took effect on January 1, 2020. The Audio
and Video Provisions require that online audio and video information service providers: (i) acquire relevant qualifications required by
law and regulations; (ii) adopt rules and policies in relation to, for example, user registration, information distribution and review,
information security management, emergency disposal, educational training for employees, the protection of minors and intellectual
property rights protection; (iii) verify personal information submitted by users as required under applicable laws; and (iv) undertake
technical and other necessary measures to ensure network security and stable operations. The Audio and Video Provisions further set out
requirements for the creation, distribution and transmission of audio videos based on new technologies and applications such as deep
learning and virtual reality, including requirements for safety evaluation, labeling requirements and mechanisms for refuting fake rumors.
On 14 June 2022, the CAC issued a revised version of the Administrative Provisions on Mobile Internet Application
Information Services, or the APP Provisions, which emphasizes that mobile internet app providers shall comply with the relevant
provisions on the scope of necessary personal information when engaging in personal information processing activities. According to the
APP Provisions, mobile internet app providers shall not compel users to agree to non-essential personal information collection out of any
reason and are prohibited from banning users from their basic functional services due to the users’ refusal of providing non-essential
personal information.
On December 31, 2021, the CAC and other three regulatory authorities jointly promulgated the Administrative Provisions on
Internet Information Service Algorithm Recommendation, which became effective on March 1, 2022. The Administrative Provisions on
Internet Information Service Algorithm Recommendation stipulates that algorithm recommendation service providers with public
opinion attributes or social mobilization capabilities shall submit the relevant information within ten business days from the date of
providing such services. Pursuant to the Administrative Provisions on Internet Information Service Algorithm Recommendation,
algorithmic recommendation service providers are required to provide users with options that are not specific to their personal
characteristics, or provide users with convenient options to cancel algorithmic recommendation services and shall not set up algorithm
models against applicable laws, regulations and social norms, including without limitation inducing users to indulge or engage in excess
consumption.

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On November 25, 2022, the CAC, MIIT and Ministry of Public Security jointly issued the Administrative Provisions on Deep
Synthesis of Internet Information Services, which took effect on January 10, 2023. Deep synthesis technology refers to any technology
utilizing generative and/or synthetic algorithms, such as deep learning and virtual reality, to produce text, images, audio, video, virtual
scenes or other online content. Under these provisions, deep synthesis service providers must, among other things, (i) ensure their
services do not engage in activities prohibited by applicable laws and regulations; (ii) take responsibility for information security and
implement measures to address data security, personal information protection, telecom fraud, emergency response and other technical
safeguards; (iii) adopt content moderation rules and use both automated and human review methods to monitor input data and
synthesized results for illegal or harmful information; and (iv) implement notice and takedown procedures to deal with the publication of
false, illegal or harmful information by deep synthesis users.
On July 10, 2023, the CAC and other relevant authorities promulgated the Interim Measures for the Administration of
Generative Artificial Intelligence Services, or the Generative Artificial Intelligence Services Measures, which became effective on
August 15, 2023. The Generative Artificial Intelligence Services Measures impose compliance requirements for providers of generative
artificial intelligence services to the general public within the territory of PRC. The Generative Artificial Intelligence Services Measures
provide, among other things, that the provider of generative AI services of text, image, audio or video to the general public shall, (i)
assume the responsibilities as the producers of the network information contents in accordance with the law and fulfill its obligation of
network information security, (ii) if personal information is involved, assume its responsibility as a personal information handler in
accordance with the law and fulfill its obligation of protecting personal information, and (iii) in case of providing generative AI services
with attribute of public opinions or capable of social mobilization, conduct security assessments in accordance with the relevant
regulations and complete certain filings in accordance with the Administrative Provisions on Internet Information Service Algorithm
Recommendation. On February 29, 2024, the National Technical Committee 260 on Cybersecurity of Standardization Administration of
China promulgated the Basic Security Requirements for Generative Artificial Intelligence Service as a supporting document for the
Generative Artificial Intelligence Services Measures to provide specific guidelines and assessment requirements for security of
generative AI services.
On September 7, 2023, the MST and other relevant authorities promulgated the Measures for Ethical Review of Science and
Technology (for Trial Implementation), or the Ethical Review Measures, which came into effect on December 1, 2023, according to
which, any universities, scientific research institutions, medical and health institutions, and enterprises engaged in “ethically sensitive”
science and technology activities in certain areas, including AI, must establish a science and technology ethical review committee. The
Appendix of the Ethical Review Measures set out a special list of science and technology activities that shall be subject to (i) the
preliminary review by the ethical review committee; and (ii) the additional expert review by the local or relevant industry-competent
department. Science and technology activities that fall under such special list include, among other things, the R&D of algorithm models,
applications and systems with the ability to mobilize public opinions and guide social awareness, and R&D of automated decision-
making systems with a high degree of autonomy for scenarios with safety or personal health risks. In addition, the obligor is required to
complete certain registration requirements, such as to register (i) its ethical review committee within 30 days after establishment; and (ii)
its science and technology activities that require additional expert review within 30 days after clearance of ethical review, in each case on
the National Science and Technology Ethics Management Information Registration Platform to be established by the MST.
On July 21, 2023, the MIIT promulgated the Notice of the Ministry of Industry and Information Technology on the Record-
filing of Mobile Internet Application (hereinafter referred to as App), which requires that holders of mobile Internet Apps engaged in
Internet information services within the Mainland of PRC must fulfill the filing formalities in accordance with the Anti-Telecom and
Online Fraud Law of the PRC and the Measures for the Administration of Internet Information Services and such holders shall not
engage in the App Internet information service without completion of such filing.
On August 8, 2023, the CAC issued the Regulations on Safety Management of Face Recognition Technology Application
(Trial) (Draft for Comments) for public comments, which require the use of face recognition technology to process face information shall
obtain the individual’s separate consent or written consent according to law, except where personal consent is not required by laws and
administrative regulations. Furthermore, users of face recognition technology who use face recognition technology in public places, or
store face information of more than 10,000 people, should file with the competent Internet information department within 30 working
days.

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On October 16, 2023, the State Council promulgated the Regulation on the Protection of Minors in Cyberspace, which became
effective on January 1, 2024. The Regulation on the Protection of Minors in Cyberspace specifies that the State Cyberspace
Administration is responsible for the overall leadership and coordination in protecting minors in cyberspace. Moreover, any organization
or individual should not perform cyberbullying towards minors. Network product and service providers should establish a sound
mechanism for early warning, identification and monitoring, and handling of cyberbullying acts. Besides, more efforts should be made to
protect the privacy information of minors. That said, personal information processors should strictly limit the access to minors’ personal
information, and conduct personal information compliance audits. Additionally, online games, live streaming and other network service
providers should reasonably restrict minors’ network service expenditure according to their age groups, as well as set and optimize rules
for preventing minors from cyber addiction.
On March 14, 2025, the CAC released the Measures for Labeling Artificial Intelligence Generated Synthetic Contents, which
will take effect on September 1, 2025. These measures require network information service providers to include explicit or implicit labels
indicating any AI-generated synthetic content. For example, content considered high risk under the Administrative Provisions on Deep
Synthesis of Internet Information Services for causing public confusion or misrecognition—such as smart dialogue, voice synthesis, and
face generation services—must feature clear labels, including text prompts, voice alerts, or visual symbols. Additionally, network
information service providers must embed implicit labels in the metadata of AI-generated content, which should include details such as
content attributes, provider name, content serial number, and other relevant production information.
Regulations on Information Security and Censorship
Under various Laws, ICP operators and internet publishers are prohibited from posting or displaying any content that:
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opposes the fundamental principles set out in China’s Constitution;
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compromises state security, divulges state secrets, subverts state power or damages national unity;
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harms the dignity or interests of the state;
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incites ethnic hatred or racial discrimination or damages inter-ethnic unity;
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sabotages China’s religious policy or propagates heretical teachings or feudal superstitions;
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disseminates rumors, disturbs social order or disrupts social stability;
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propagates obscenity, pornography, gambling, violence, murder or fear or incites the commission of crimes;
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insults or slanders a third party or infringes upon the lawful rights and interests of a third party; or
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includes other content prohibited by laws or administrative regulations.
Failure to comply with the content censorship requirements may result in the revocation of licenses and the closing down of the
concerned websites or other online and mobile platforms. In addition, it is mandatory for internet companies in the PRC to complete
security-filing procedures and regularly update information security and censorship systems for their websites and other online and
mobile platforms with the local public security bureau. On June 22, 2007, the Ministry of Public Security, the State Secrecy Bureau, the
State Cryptography Administration Bureau and the SCIO jointly issued the Administrative Regulations for the Classified Protection of
Information Security, according to which websites should determine the protection classification of their information systems pursuant to
a classification guideline and file their classification with the Ministry of Public Security or its bureaus at or above the municipal level
with subordinate districts.
On December 28, 2012, the Standing Committee of the National People’s Congress issued the Decision on Strengthening
Network Information Protection, or the Information Protection Decision, which provides that electronic information through which a
citizen’s identity can be identified or in which a citizen’s privacy is involved (“personal information”), is protected and no person shall
steal, illegally obtain, sell or illegally provide to others any personal information.

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On February 4, 2015, the CAC issued the Internet User Account Name Management Regulations, which defines “Internet User
Account Name” as an account name registered or used in internet information services, including without limitation, blogs, micro-blogs,
instant communication tools, forums and thread comments. In addition, according to the regulations, internet information service
providers must prohibit their users from using any illegal or harmful information in their account name, avatar, profile or other
registration information.
On June 27, 2022, the CAC issued the Internet User Account Information Management Regulations, which took effect on
August 1, 2022. The Internet User Account Information Management Regulations stipulates that an internet information service provider
shall perform the responsibility of internet user account information management as a service provider, be equipped with professional
personnel and technical capabilities corresponding to its service scale, and establish a sound and strictly implement authentic identity
information verification, account information verification, information content security, ecological governance, emergency response and
personal information protection management systems.
On November 7, 2016, the Standing Committee of the National People’s Congress promulgated the Cybersecurity Law, which
became effective on June 1, 2017. In accordance with the Cybersecurity Law, network operators must comply with applicable laws and
regulations and fulfill their obligations to safeguard network security in conducting business and providing services. Network service
providers must take technical and other necessary measures as required by Laws to safeguard the operation of networks, respond to
network security effectively, prevent illegal and criminal activities, and maintain the integrity, confidentiality and usability of network
data. In addition, network operators must not collect personal information irrelevant to their services. In addition, the Cybersecurity Law
provides that personal information and important data collected and generated by an operator of critical information infrastructure in the
course of its operations in the PRC must be stored in the PRC. In the event of any unauthorized disclosure, damage or loss of collected
personal information, network operators must take immediate remedial measures, notify the affected users and report the incidents to the
relevant authorities in a timely manner. On September 12, 2022, the CAC, issued the Decision on Amending the PRC Cybersecurity Law
(Draft for Comments), focusing on the following four aspects: (i) to improve the legal liability system for violating the general provisions
on the security of cyber operation; (ii) to amend the legal liability system for the security protection of critical information infrastructure;
(iii) to adjust the legal liability system for network information security; and (iv) to amend the legal liability system for the protection of
personal information. As of the date of the filing of this annual report, the PRC Cybersecurity Law (Draft for Comments) has not been
formally adopted.
On July 7, 2022, the CAC promulgated the Measures for the Security Assessment of Data Cross-border Transfer, which took
effect on September 1, 2022. On March 22, 2024, the CAC promulgated the Provisions on Promoting and Regulating Cross-border Data
Flows (together with the Security Assessment of Data Cross-border Transfer, the “Data Cross-border Transfer Provisions”), which
further clarify the implementation rules of existing systems to facilitate the cross-border flow of data, including, among other things,
relaxing the conditions for the cross-border transfer of data and narrowing the scope of security assessment on the cross-border transfer
of data. The Data Cross-border Transfer Provisions require that, with certain exceptions, a data processor providing data overseas and
falling under any of the following circumstances shall apply for the security assessment of cross-border data transfer by the national
cybersecurity authority through its local counterpart: (i) where a critical information infrastructure operator intends to provide personal
information or important data overseas; or (ii) where any data processor other than a critical information infrastructure operator intends
to provide important data overseas or, as from January 1 of the current year, provide personal information (excluding sensitive personal
information) of not less than 1 million individuals or sensitive personal information of not less than 10,000 individuals in aggregate to
overseas recipients. Furthermore, the data processor shall conduct a self-assessment on the risk of data cross-border transfer prior to
applying for the foregoing security assessment, under which the data processor shall focus on certain factors including, among other
things, the legitimacy, fairness and necessity of the purpose, scope and method of data cross-border transfer and the data processing of
overseas recipients, the risks that the cross-border data transfer may bring to national security, public interests and the legitimate rights
and interests of individuals or organizations as well as whether the cross-border data transfer related contracts or the other legally binding
documents to be entered with overseas recipients have fully included the data security protection responsibilities and obligations. On
March 22, 2024, the CAC issued the Guidelines for Declaring Data Cross-border Security Assessment (Second Edition), which became
effective on the same date and further clarifies the scope of application, declaration methods and processes of data cross-border security
assessment.
On December 8, 2022, the MIIT promulgated the Measures for Data Security Administration in the Industry and Information
Technology Field (Trial Implementation), or the Trial Measures, which took effect on January 1, 2023. In accordance with the Trial
Measures, industrial and information technology field data processors must classify data based on the data’s category and the security
level, and also classify and identify data based on the industry requirements, business needs, data sources and purposes and other factors,
and to make a data classification catalogue.

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On May 28, 2020, the National People’s Congress issued the PRC Civil Code, which took effect on January 1, 2021. In
accordance with the PRC Civil Code, natural person’s personal information shall be protected by law, and the processing of personal
information shall be subject to the principle of legitimacy, rightfulness and necessity, with no excessive processing.
The PRC Data Security Law was released by the National People’s Congress Standing Committee on June 10, 2021 and became
effective on September 1, 2021. The PRC Data Security Law stipulates the measures to support and promote data security and
development, to establish and optimize the national data security management system, and to clarify organizations’ and individuals’
responsibilities in data security. According to the PRC Data Security Law, data processing activities shall be carried out in accordance
with PRC laws and regulations, establishing and improving the data security management system of the whole process, organizing and
carrying out data security education and training, and taking corresponding technical measures and other necessary measures to
guarantee data security. Where data processing activities are carried out through the internet and other information networks, the above-
mentioned data security protection obligations shall be fulfilled on the basis of the hierarchical network security protection system. In
carrying out data processing activities, risk monitoring shall be strengthened, and remedial measures shall be taken immediately when
data security defects, loopholes and other risks are found.
On September 24, 2024, the Regulations on Network Data Security Management, or the Data Security Regulations, were issued
by the State Council, which took effect on January 1, 2025. The Data Security Regulations reiterate and refine the general regulations for
cyber data processing activities and rules of personal information protection, important data security protection, cyber data cross-border
transfer security management, and the responsibilities of online platform service providers. In particular, the Data Security Regulations
provide that cyber data processors whose cyber data processing activities affect or may affect national security shall be subject to
national security review in accordance with the relevant regulations. Moreover, the Data Security Regulations provide certain obligations
of the processors of important data, such as conducting risk assessment and reporting to the competent authorities for their network data
handling activities on an annual basis.
On December 28, 2021, the CAC, NDRC, MIIT and other ten PRC regulatory authorities jointly issued the Cybersecurity
Review Measures, effective on February 15, 2022. The Cybersecurity Review Measures require that, (i) any procurement of network
products and services by critical information infrastructure operators, which affects or may affect national security, or (ii) any data
processing activities by network platform operators, which affects or may affect national security, including that any network platform
operators which has personal information of more than one million users and is going to be listed abroad, are subject to cybersecurity
review. Since the measures were recently promulgated, there exists uncertainties with respect to their interpretation and implementation.
On August 17, 2021, the State Council promulgated the Regulations on Critical Information Infrastructure Protection, or the CII
Regulations, which came into effect on 1 September 2021. Pursuant to the CII Regulations, “critical information infrastructures” refers to
important network facilities and information systems of important industries and sectors such as public communications and information
services, energy, transport, water conservation, finance, public services, e-government, and science and technology industry for national
defense, as well as other important network facilities and information systems that may seriously endanger national security, national
economy and citizen’s livelihood and public interests if they are damaged or suffer from malfunctions, or if any leakage of data in
relation thereto occurs. Competent authorities as well as the supervision and administrative authorities of the above-mentioned important
industries and sectors are responsible for the security protection of critical information infrastructures (the “Protection Authorities”).
The Personal Information Protection Law, or the PIPL, was released by the National People’s Congress Standing Committee on
August 20, 2021 and became effective on November 1, 2021. The PIPL stipulates the scope of personal information and the general
principles of processing personal information, establishes rules for processing personal information, special rules for processing sensitive
personal information and rules for the cross-border transfer of personal information abroad, as well as clarifies the individual’s rights and
the processor’s obligations in the process of personal information. The PIPL applies to (i) the processing within the territory of the PRC
of natural persons’ personal information; or (ii) the processing outside the territory of the PRC of personal information of natural persons
within the PRC, provided that such information is processed (x) for the purpose of providing products or services to domestic natural
persons, (y) to analyze or assess the conduct of domestic natural persons, or (z) under any other circumstances as prescribed by laws and
administrative regulations. Failure to comply with the requirements of the PIPL may result in various legal liabilities including
confiscation of unlawful income, a warning, a fine of up to RMB50 million or 5% of annual revenue, and suspension of related business
activities, among other things.
As we expand our operations internationally, we have become subject to privacy and data protection laws of other jurisdictions.

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In Europe, the GDPR has applied directly in all European Union member states since May 25, 2018. GDPR also has
extraterritorial effect, applying to both processing carried out by companies with an establishment in the European Economic Area, or
EEA, and to the processing carried out by entities which offer goods or services to individuals located in the EEA or monitor the
behavior of individuals located in the EEA. GDPR imposes robust requirements for controllers and processors of personal data. These
include requiring a legal basis for processing, limits on the collection and use of personal data (purpose limitation principle), as well as
transparency, data minimization and storage limitation obligations. In addition, controllers and processors are required to implement (and
be able to evidence) robust technical and organizational measures, such as encryption, to ensure the confidentiality and integrity of
personal data. Failure to comply with the principles set out in GDPR can result in substantial fines. The European Data Protection Board,
or EDPB, has made clear that fines will be used as a means of deterring non-compliance and both the EDPB and local data protection
authorities, such as the Irish Data Protection Commission have been active in bringing enforcement actions.
GDPR also sets out strict requirements pertaining to transfers of personal data outside of the EU. These requirements necessitate
careful consideration, and detailed risk assessments, of potential cross border transfers of personal data to ensure compliance with
GDPR. In addition to conducting data transfer impact assessments, companies may also need to introduce additional safeguards and put
in place contract provisions to ensure that such transfers do not diminish the level of protection data subjects would otherwise have under
GDPR.
Failure to comply with the various laws of European Union may result in criminal liability and/or significant fines, such as those
applicable under the GDPR which can amount up to EUR20,000,000 or up to 4% of the total worldwide annual turnover.
In the U.S., new privacy related regimes are under discussion at both the federal and state level and a number of states have
already enacted comprehensive privacy laws and more topic-specific privacy laws. California is widely seen to be leading the way with
the CCPA, which went into effect on January 1, 2020 and was amended by the California Privacy Rights Act, which largely became
operative on January 1, 2023. The CCPA confer an extensive suite of rights on California residents (including employees and business-
to-business contacts), including the right to transparency (e.g. the right to request detailed information about how Personal Information is
collected, used, and shared), the right of access to, correction of and/or deletion of their Personal Information, and a right to opt out of the
sale or sharing of their Personal Information. The CCPA also introduces clear requirements for businesses to adopt appropriate security
measures.
In terms of enforcement, the CCPA established a “first-of-its-kind” enforcement agency, the California Privacy Protection
Agency, or CPPA, with a broad mandate which includes the ability to take enforcement action, issue new rules and raise awareness
among businesses and consumers about their rights and obligations. The CPRA provides for co-enforcement authority for violations
between the CCPA and the California Attorney General, as well as a private right of action for certain data breaches that has increased
data breach litigation and could increase liability, in light of the potential for statutory damages. To date, there have been three publicly
announced enforcement actions by the California Attorney General alleging violations of the CCPA, and both state and federal privacy
laws continue to evolve, with state Attorneys General as well as the FTC investigating and enforcing against alleged violations of certain
privacy laws (including in the context of minor data).
In addition to California, a number of other states have passed their own comprehensive state privacy laws which are now in
effect, with more expected to take effect in the near future. Moreover, various laws restricting or governing the use of websites, online
services, and platforms by minors have passed or been proposed at the federal level and in certain states, including laws prohibiting
direct advertising to minors (individuals under the age of 18), requiring age verification, limiting the use of minors’ Personal Information
and mandating parental consent or providing other parental rights. These additional laws, amendments and interpretations are subject to
change (and in certain instances have been challenged in court and/or blocked), which further complicates our compliance efforts and
may therefore increase legal risk and compliance costs on us and any third parties on which we rely.
At the U.S. federal level, legislative proposals such as the executive order issued by President Biden (February 28, 2024) on
“Preventing Access to Americans’ Bulk Sensitive Personal Data and United States Government-Related Data by Countries of Concern,”
or the Executive Order, pose additional complexity for us and could adversely impact our business. The Executive Order directed the
U.S. Department of Justice, in consultation with other government agencies, to issue regulations which, among other things, prohibit or
otherwise restrict certain categories of transactions that involve American’s bulk sensitive personal data or U.S. government-related data.
On December 27, 2024, the U.S. Department of Justice issued its comprehensive final rule, carrying out the Executive Order by
promulgating the generally applicable rules for certain categories of data transactions that pose an unacceptable risk to the national
security of the United States. The final rule, and other related developments could have the ability to impact not only our service
offerings but our third-party vendor arrangements.

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As outlined above, the legal and operational complexity and cost and potential regulatory scrutiny that will result from such
existing and new laws and regulations, including enacted and proposed regulations that govern AI, could have a material adverse impact
on our business.
Regulations on Online Games
Pursuant to the Provisional Regulations for the Administration of Online Culture promulgated by the MOC in May 2003, and
last revised in December 2017, online game operators are required to obtain an Internet Culture Operating License from relevant local
departments of the MOC. On May 14, 2019, the General Office of the MOCT issued the Circular on Adjusting the Scope of Examination
and Approval of Online Culture Business Permit and Further Regulating the Work Concerning Examination and Approval, or the MOCT
Notice 81, pursuant to which the MOCT is no longer responsible for the administration and supervision of online games and local
counterparts of the MOCT may no longer approve Internet Culture Operating Licenses that involve online game operation via
information networks (with or without distribution of virtual currency of online games) and virtual currency of online games trading
operation via information networks. Internet Culture Operating Licenses that are already issued and only contain the above business
scope will remain effective until their expiration. As of date of the annual report, no laws, regulations or official guidelines have been
promulgated on whether the responsibility of MOCT for regulating online games will be undertaken by another governmental
department.
On June 4, 2009, the MOC and MOFCOM jointly issued the Notice on Strengthening Administration on Online Game Virtual
Currency, or the Online Game Virtual Currency Notice. According to this notice, online game virtual currency should only be used to
exchange virtual services provided by the issuing enterprise for a designated extent and time, and is strictly prohibited from being used to
purchase tangible products or any service or product of another enterprise. In addition, the Online Game Virtual Currency Notice requires
the issuing enterprise to give users 60 days prior notice and refund in the form of legal tender or other forms acceptable to users in case it
plans to terminate the provision of its products or services.
On July 1, 2011, GAPP and several other government authorities jointly issued the Notice Regarding the Initiation of Work on
the Online Games Real-Name Verification System to Prevent Online Gaming Addiction, which requires that online game operators be
responsible for data registration and identification of online game users, and that online game operators shall duly submit user
identification information for verification with the NCIIC, which will be in charge of real-name verification for the national anti-
addiction system. In addition, online game operators must ensure that, via the NCIIC real-name verification, users with fraudulent
identification data be enrolled in the operators’ anti-addiction systems.
On October 25, 2019, the NPPA promulgated the Notice on Preventing Minors from Indulging in Online Games, according to
which the length of minors’ use of online games should be strictly controlled. It requires all online game users to register their
identification information. The total length of time for minors to access online games must be limited on a daily basis. Every day from
22:00 to 8:00 the next day, online game companies are not permitted to provide game services to minors in any form. Game services
provided to minors must not exceed three hours per day on public holidays and 1.5 hours on other days. In addition, online transactions
are capped monthly at RMB200 or RMB400, depending on a minor’s age. On August 30, 2021, the NPPA issued the Notice on Further
Preventing Minors from Indulging in Online Games, which became effective on September 1, 2021. The Notice on Further Preventing
Minors from Indulging in Online Games imposes stricter time limits for playing online games by minors and provides that online game
operators may only provide online game services to minors on every Friday, Saturday, Sunday or PRC statutory holiday for one hour per
day from 8:00 p.m. to 9:00 p.m. In addition, the Notice on Further Preventing Minors from Indulging in Online Games requires that all
online games must be connected to the real-name registration and game addiction prevention system of the NPPA, all online game
players must register or login in using authentic and valid identity information, and online game operators may not provide game
services, in any manner (including in visitor experience mode), to any users who have not registered using their real names. On October
20, 2021, six PRC governmental authorities jointly issued the Notice on Strengthening the Management of Preventing Primary and
Middle School Students from Indulging in Online Games, which further stipulates that online game companies shall fulfill the
requirements for real-name registration. Real-name registration information submitted by online game users must be verified by the real-
name verification system of the NPPA. Online game operators may only provide online game services to primary and middle school
students on every Friday, Saturday, Sunday or PRC statutory holiday for one hour per day from 8:00 p.m. to 9:00 p.m.

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On September 28, 2009, GAPP, the National Copyright Administration and the National Office of Combating Pornography and
Illegal Publications jointly published the Notice Regarding the Consistent Implementation of the “Regulation on Three Provisions” of the
State Council and the Relevant Interpretations of the State Commission Office for Public Sector Reform and the Further Strengthening of
the Administration of Examination and Approval of Online Games and the Examination and Approval of Imported Online Games, or
Circular 13. According to Circular 13, no entity should engage in the operation of online games without receiving an Internet Publishing
License and the approval from GAPP. Circular 13 expressly prohibits foreign investors from participating in online game operating
business via wholly owned, equity joint venture or cooperative joint venture investments in China, and from controlling and participating
in these businesses directly or indirectly through contractual or technical support arrangements. Moreover, for online games that have
been approved by GAPP, when the operational entity changes, or when new versions, expansion packs or new content is implemented,
the operating entity shall once again undertake the same procedures for examination and approval by GAPP of the changed operating
entity, new versions, expansion packs or new content. On May 24, 2016, SAPPRFT issued the Circular on the Administration over
Mobile Game Publishing Services, or Circular 44, which came into effect on July 1, 2016, and provides that no mobile game shall be
published and operated online without the approval of the SAPPRFT.
On December 22, 2023, the NPPA publicly solicited opinions on the Draft Administrative Measures for Online Games to
regulate activities related to the online game industry in several respects, including requirements on the establishment and administration
of online game publishing and operating entities, publication and operation of online games and protection of minors. The Draft
Administrative Measures for Online Games set forth certain obligations of online game publishing and operating entities of protecting
minors, including requirements on controlling the period and time of playing online games, addiction prevention and identity
verification, etc. Furthermore, it provides for rules on the distribution, trading and trading enterprises of online game coins, as well as
rules on the distribution and trading of virtual items for online games, including, among other things, (i) trading of online game coins
shall be conducted via real-name digital RMB wallets, (ii) an enterprise shall not provide both the distribution of online game coins and
the trading service for online game coins simultaneously, and (iii) online game publishers and operators shall not exchange the virtual
props of online games acquired by users into legal tender. As of the date of the filing of this annual report, the Draft Administrative
Measures for Online Games have not been formally adopted.
Regulations on Private Education
The PRC Education Law, or the Education Law, sets forth provisions relating to the fundamental education systems of the PRC,
including a school system of pre-school education, primary education, secondary education and higher education, a system of nine-year
compulsory education and a system of education certificates. The Education Law stipulates that the government formulates plans for the
development of education, establishes and operates schools and other types of educational institutions, and in principle, enterprises,
institutions, social organizations and individuals are encouraged to operate schools and other types of educational organizations in
accordance with PRC Laws.
On December 28, 2002, the Standing Committee of the National People’s Congress, promulgated the Law for Promoting Private
Education, or the Private Education Law, which was last amended on December 29, 2018. Under the amended Private Education Law,
sponsors of private schools may choose to establish non-profit or for-profit private schools at their own discretion and the establishment
of the private schools shall be subject to approvals granted by relevant government authorities and registered with relevant registration
authorities.
On April 7, 2021, the State Council published the amendment to the Regulations on the Implementation of the Law for
Promoting Private Education of the PRC, or the Amended Implementation Rules, which became effective on September 1, 2021. The
Amended Implementation Rules stipulate that online education activities using internet technology are encouraged by the regulatory
authorities and shall comply with laws and regulations related to internet management. A private school using internet technology shall
obtain the private school operating permit, as well as the internet operating permit. It shall also establish and implement internet security
management systems and take technical security measures. Upon discovery of any information whose release or transmission is
prohibited by applicable laws or regulations, the private school shall immediately cease the transmission of that information and take
further remedial actions, such as deleting that information, to prevent it from spreading. Records pertaining to the situation shall be kept
and reported to the appropriate authorities. The Amended Implementation Rules further stipulates that relevant government authorities
shall enhance the supervision on the agreements entered into between non-profit private schools and its related party and shall review
such transaction on an annual basis.

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Uncertainties exist with respect to the interpretation and application of the existing and future laws governing the online private
education industry, as well as how the local government would promulgate implementing rules relating to the specific requirements
applicable to online education service providers.
Regulations on After-school Tutoring and Educational Apps
On February 13, 2018, the MOE, the Ministry of Civil Affairs, the Ministry of Human Resources and Social Security and the
SAIC (currently known as the SAMR) jointly promulgated the Circular on Alleviating After-school Burden on Elementary and
Secondary School Students and Implementing Inspections on After-school Training Institutions, or Circular 3. Pursuant to Circular 3, the
above government authorities will carry out a series of inspections on after-school training institutions and order those with material
potential safety risks to suspend business for self-inspection and rectification, and those without proper establishment licenses or school
operating permits to apply for relevant qualifications and certificates under the guidance of competent government authorities. Moreover,
after-school training institutions must file with the local education authorities and make public the classes, courses, target students, class
hours and other information relating to their academic training courses (including primarily courses on Chinese and mathematics). After-
school training institutions are prohibited from providing academic training services beyond the scope or above the level of school
textbooks, or organizing any academic competitions or level tests for students of elementary or middle schools. In addition, elementary
or middle schools may not reference a student’s performance in the after-school training institutions as part of their admission criteria.
On August 6, 2018, the State Council issued the Opinion on the Regulation of the Development of After-school Training
Institutions, or State Council Circular 80, which primarily regulates after-school training institutions targeting K-12 students. State
Council Circular 80 reiterates prior guidance that after-school training institutions must obtain a private school operating permit, and
further requires these institutions to meet certain minimum requirements. According to the circular, after-school training institutions are
required to disclose and file relevant information regarding the institution, including their training content, schedule, targeted students
and school timetable to the relevant education authority, and their training classes may not end later than 8:30 p.m. each day or otherwise
conflict with the teaching time of local primary and secondary schools. In relation to online education service providers, State Council
Circular 80 generally provides that regulatory authorities of networking, culture, information technology, radio and television industries
shall cooperate with the education department in supervising online education within their relevant industry. On May 6, 2020, the
General Office of the MOE promulgated the Notice on the Negative List of Advanced Trainings for Six Compulsory Education Subjects
(for Trial Implementation), which, in accordance with the State Council Circular 80, prohibits after-school training institutions from
providing advanced trainings that do not follow the formal school curricula to the students in primary school and secondary school, and
further defined activities that will be regarded as advanced training in the subjects of Chinese, mathematics, English, physics, chemistry
and biology.
On August 30, 2018, the MOE, SAMR and certain other government authorities issued the Implementation Scheme for
Comprehensive Prevention and Control of Myopia in Children and Youth which requires, among other things, that the schools shall (i)
shall use electronic products based on the principle of necessity, shall not rely on electronic products for teaching and homework
assignment and shall rather assign paper-based homework in principle, and the teaching time using electronic products shall account for,
in principle, not more than 30% of the total teaching time, and (ii) shall strictly implement the learning and development guidelines for
children aged 3-6, pay attention to the value of life and play for these children and shall not teach them primary-school-level lessons.

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On November 20, 2018, the General Office of the MOE, the General Office of the SAMR and the General Office of the
Ministry of Emergency Management of the PRC jointly issued the Notice on Improving the Specific Governance and Rectification
Mechanisms of After-school Education Institutions, or Circular 10, which provides that provincial education departments shall be
responsible for the filing of training institutions that use internet technology to provide online training for primary and middle school
students. Provincial education departments shall regulate the online after-school training institutions based on the management policies
governing offline afterschool training institutions. In addition, online after-school education institutions shall file the information of their
courses, such as names, contents, target students, syllabi and schedules with the provincial education departments and shall publish the
name, photo, class schedule and certificate number of the teacher qualification license of each teacher on their websites.
On December 25, 2018, the General Office of the MOE issued the Notice on Strictly Forbidding Harmful APP Entering Primary
and Secondary Schools, which stipulates, among other things, that: (i) local primary schools, secondary schools and education
departments, shall conduct comprehensive investigations on apps used on campus, and shall call off using any apps that contain harmful
content such as commercial advertisements and internet games, or that increase the burden on students; and (ii) the filing and reviewing
system of learning apps shall be established.
The Central Committee of the Communist Party and the State Council jointly issued the Opinions on the Further Reform of
Education and Teaching and Comprehensive Improvement on the Compulsory Education Quality, or the Opinions, which became
effective on June 23, 2019. The Opinions stipulates, among other things, that: (i) the SAMR and its local counterparts shall be
responsible for the registrations and filings of all after-school training institutions and shall supervise and govern their operational
behaviors, such as advertising, fee collecting, and antitrust competitions etc.; and (ii) the integrated application of information technology
and education shall be promoted, and the “education plus internet” operation model shall be encouraged, but in the meantime, the
approval and supervision system for digital educational resource applied by schools shall be established.
The MOE, jointly with certain other PRC government authorities, issued the Opinions on Guiding and Regulating the Orderly
and Healthy Development of Educational Mobile Apps on August 10, 2019, or the Opinions on Educational Apps, which requires,
among other things, mobile apps that provide services for school teaching and management, student learning and student life, or home-
school interactions, with school faculty, students or parents as the main users, and with education or learning as the main application
scenarios, or the Educational Apps, be filed with competent provincial regulatory authorities for education. The Opinions on Educational
Apps also requires, among other things, that: (i) before filing, the Educational App’s provider obtain the ICP license or complete the ICP
filing and obtain the certificate and the grade evaluation report for graded protection of cybersecurity; (ii) Educational Apps whose main
users are under the age of 18 must limit the use time, specify the range of suitable ages, and have strictly monitored content; (iii) before
an Educational App is introduced as a mandatory app to students, the Educational App must be approved by the applicable school
through its collective decision-making process and be filed with the competent education authority; and (iv) Educational Apps adopted
by education authorities and schools as their uniformly used teaching or management tools shall not charge the students or parents any
fee, and not offer any commercial advertisements or games. On November 11, 2019, MOE issued the Administrative Measures on Filing
of Educational Mobile Apps. In 2020, the MOE established a public complaints channel with respect to educational apps. The
educational apps provider or user may be complained due to a wide variety of matters, among other things, failure to complete the filing
or obtain relevant permits, existence of internet illegal or improper information, collect or unreasonably use personal information in
violation of relevant laws and regulations, violations of the requirements on educational apps used by primary and secondary schools,
violations of the Online After-school Training Opinions. The MOE sets a scoring system with respect to such complaints. Each
educational app provider shall have 12 points during a period of 12 months. If serious complaints were to occur and substantiated by
relevant government authority, corresponding penalty points will be recorded and such educational app provider may be required to
rectify relevant noncompliance. In the event that 12 penalty points are recorded within a period of 12 months or the most serious
compliant were to occur, filings of relevant educational apps may be revoked, relevant educational apps may be removed from apps
store, educational apps provider may be blacklisted and made public and the involved provider may be prohibited to submit filings of
educational apps within six months.
On September 19, 2019, the MOE, jointly with certain other PRC government authorities, issued the Guidance Opinions on
Promoting the Healthy Development of Online Education, which provides, among other things, that: (i) social forces are encouraged to
establish online education institutions, develop online education resources, and provide high quality education services; and (ii) an online
education negative list shall be promulgated and industries not included in the negative list are open for all types of entities to enter into.

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On June 10, 2020, the General Office of MOE and the General Office of SAMR promulgated the Notice on Issuing the Form of
Service Contract for After-school Training Provided to Primary and Secondary School Students, which requires the local competent
regulatory authorities to guide the relevant parties to use the form of service contract for after-school training activities provided to
primary and secondary school students. The form of service contract covers the obligations and rights of parties involved in the after-
school training, including detailed provisions on training fees, refund arrangement and default liabilities. On September 27, 2021, the
General Office of MOE and the General Office of SAMR promulgated the Notice on Issuing the Form of Service Contract for After-
school Training Provided to Primary and Secondary School Students (Revised 2021), which added the special notes, adjusted the
contract structure and updated certain provisions in the prior version of form of service contract.
On August 17, 2020, the MOE and certain other PRC government authorities jointly promulgated the Opinion on Further
Strengthening and Regulating the Management of Educational Fees, or the Education Fees Opinions, pursuant to which all fees collected
by private schools shall be paid into the school’s bank account filed with the education authority, be unifiedly managed, and mainly used
for educational and teaching activities, improving the operational conditions, protection of teachers’ and staffs’ treatment and allocating
development fund according to relevant laws and regulations.
On October 13, 2020, the General Office of the MOE and the General Office of the SAMR jointly promulgated the Notice on
the Centralized Rectification of After-school Tutoring Institutions’ Illegal Acts of Infringing Consumers’ Rights by Using Unfair
Standard Terms. The Notice stipulates that local education and market regulation authorities shall increase the efforts for the
investigation of after-school tutoring institutions’ illegal acts which infringes consumers’ rights by using unfair standard terms/ to exempt
them from their own responsibility, increase consumers’ liability and exclude consumers’ legal rights.
The Minors Protection Law issued by the National People’s Congress Standing Committee on September 4, 1991 was recently
amended on October 17, 2020, which took effect on June 1, 2021. According to the amended Minors Protection Law, kindergartens and
after-school training agencies may not carry out primary school curriculum education for the preschool-aged minors, and online
education products and services which are targeted at minors shall not include any links to online games or push any advertisements and
other information irrelevant to teaching.
On July 24, 2021, the General Office of State Council and the General Office of Central Committee of the Communist Party of
China jointly promulgated the Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in
Compulsory Education, or the Alleviating Burden Opinion, which provides that, among other things, (i) local government authorities
shall no longer approve new after-school tutoring institutions providing tutoring services on academic subjects for students in
compulsory education, and the existing after-school tutoring institutions providing tutoring services on academic subjects shall be
registered as non-profit; (ii) online after-school tutoring institutions that have filed with the local education administration authorities
providing tutoring services on academic subjects shall be subject to review and re-approval procedures by competent government
authorities, and any failure to obtain such approval will result in the cancellation of its previous filing and ICP license; (iii) academic
AST institutions are prohibited from raising funds by listing on stock markets or conducting any capitalization activities and listed
companies are prohibited from investing in academic AST institutions through capital markets fund raising activities, or acquiring assets
of academic AST institutions by paying cash or issuing securities; and (iv) foreign capital is prohibited from controlling or participating
in any academic AST institutions through mergers and acquisitions, entrusted operation, joining franchise or variable interest entities.
Any violation of the foregoing shall be rectified. Moreover, the Alleviating Burden Opinion specifies a series of operating requirements
that after-school tutoring institutions must meet regarding the course time, advertisements, tuition fees, etc.
On September 7, 2021, the MOE published on its official website that the MOE, together with two other government
authorities, issued a circular requiring all academic AST institutions to complete registration as non-profit by the end of 2021, and all
academic AST institutions shall, before completing such registration, suspend enrollment of students and charging fees.
On September 18, 2021, the MOE further published on its official website that the General Office of MOE, together with five
other government authorities, issued a circular requiring all online after-school tutoring institutions that have filed with the local
education administration authorities providing tutoring services on academic subjects to obtain the private school operating permit by the
end of 2021, and all online after-school tutoring institutions shall, before obtain such permit, suspend enrollment of students and charging
fees.

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On October 21, 2021, the MOE jointly with certain other PRC government authorities, promulgated the Notice on
Strengthening the Supervision of After-School Tutoring Institutions Pre-collection of Fees, which requires the pre-collection of fees by
academic AST institutions and non-academic AST institutions be supervised. Local governments will establish bank custodians or risk
reserves to mitigate the related risks suitable for their own jurisdictions.
On March 3, 2022, the MOE jointly with SAMR and NDRC promulgated the Notice on Regulating Non-Academic After-school
Training Institutions, which provide that, among other things, (i) non-academic after-school tutoring institutions shall have the
corresponding qualifications and their staffs shall have the corresponding certificates for their profession; (ii) non-academic after-school
tutoring institutions shall ensure that training contents and training methods are suitable for the students’ age, mental and physical
characteristics and cognitive level. The notice also specifies a series of operating requirements that non-academic after-school tutoring
institutions must meet regarding the course content, course time, advertisements, tuition fees, contract form and premise, etc.
On November 30, 2022, the MOE together with twelve other government authorities issued the Opinions on Standardizing Non-
Academic After-School Tutoring for Primary and Secondary School Students, or Standardizing Opinions, which reiterates that local
authorities shall identify corresponding competent authorities for different tutoring categories and shall set forth basic standards for
establishment and approval procedures for online and offline tutoring institutions of the corresponding categories based on local
conditions. In addition, the Standardizing Opinions provide that local authorities shall standardize daily operations and strengthen daily
supervision of non-academic after-school tutoring, including: (i) in terms of training content and training time, non-academic tutoring
institutions shall not provide academic tutoring courses, and the training time shall not conflict with the teaching time of local primary
and secondary schools; the offline training shall end no later than 20:30, and the online training shall end no later than 21:00; (ii) in terms
of price, non-academic tutoring institutions shall follow the principles of fairness, legality and good faith, set prices according to training
costs, market supply and demand, etc. and such prices shall be reported to the competent authorities and be made to the public; (iii) in
terms of pre-collection of fees, all fees collected by the tutoring institution shall be put into the special account, training fees shall not be
paid by training loans; the pre-collected fees shall be included into supervision and shall not be collected for more than 60 classes, for a
course length of more than three months or over RMB5,000 in one time or in the form of recharge, card and other disguised charges; and
(iv) all non-academic tutoring institutions shall be included in the unified management through the National Platform for Supervision and
Service of After-School Education and Training.
The MOE issued the Provisional Measures on Administrative Penalties for After-School Tutoring effective from October 15,
2023, which clarify various non-complaint activities of after-school tutoring institutions and stipulate corresponding penalties. According
to these measures, the conduct of after-school tutoring by any person, legal person or an organization that satisfies the following
conditions constitutes unauthorized conduct of after-school tutoring institutions, who shall be ordered to cease the operations of the
institutions, return collected fees and be imposed a fine: (i) having specific training sites for offline training or websites or applications
for online training, (ii) having more than two training practitioners, and (iii) having organizational structures and division of labor. In
addition, if the management of after-school tutoring institutions is chaotic, and involves one of the following acts, the competent
government authorities shall require such after-school tutoring institutions to rectify within a fixed time and issue a warning: (i) enrolling
students in violation of regulations, such as joint enrollment with primary and secondary schools; (ii) recruiting and managing
practitioners in violation of laws, regulations and the other relevant provisions promulgated by the competent department of the State
Council; (iii) charging price, charging behavior, pre-collected fees management in violation of laws, regulations and other relevant
provisions promulgated by the competent department of the State Council; (iv) containing online game content and links that are not
related to tutoring in online after-school tutoring; (v) failing to retain training content, training data and live training images by online
after-school tutoring in accordance with relevant provisions promulgated by the competent department of the State Council; (vi)
publishing advertisements illegally; and (vii) other disorders that may seriously affect education and teaching. The illegal income (if any)
shall be confiscated after the refund of the fees charged; if the situation is serious, the institution shall be ordered to stop recruiting
trainees and the license shall be revoked.

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Regulations on E-commerce
The E-Commerce Law of the PRC, which was promulgated on August 31, 2018 and became effective on January 1, 2019, set
out detailed obligations for operators of e-commerce businesses and e-commerce platforms and guidelines in terms of contract
performance and dispute resolutions in relation to e-commerce. Pursuant to this law, e-commerce operators shall, for example: (i) present
unbiased search results and general product recommendations that are not based on a potential customer’s particular purchase history and
personal profile in addition to tailored product recommendations and services; and (ii) not cite any provision of a form contract or any
other means to invalidate an agreement with a customer after it has received payment from that customer. In addition, e-commerce
platform operators shall: (i) report information such as identity and tax information of third-party vendors to relevant authorities; (ii)
make platform service agreement or web-links thereto prominently displayed and accessible on its homepage; (iii) be jointly liable in the
event that the platform operator fails to take necessary measures when it has or should have the knowledge that any vendor using its
platform has infringed consumers’ rights; and (iv) be jointly liable for any damage or threat to a customer’s personal health and well-
being caused by the products sold on its platform if a platform operator fails to examine the qualifications of its vendor using its platform
or fails to protect its customers’ safety in respect of goods or services that may affect a customer’s health. We are subject to this new law
as both an e-commerce business operator and e-commerce platform operator. Failure to comply with this law could subject us to civil
liabilities or administrative penalties.
The PRC Consumer Protection Law, as amended on October 25, 2013, sets out the obligations of business operators and the
rights and interests of consumers. Pursuant to this law, business operators must guarantee that the commodities they sell satisfy the
requirements for personal or property safety, provide consumers with authentic information about the commodities, and guarantee the
quality, function, usage and term of the validity of commodities. The amendment in 2013 further strengthens the protection of consumers
and imposes more stringent requirements and obligations on business operators, especially on the businesses operating through the
internet. For example, consumers are entitled to return the goods (except for certain specified goods) within seven days upon receipt
without any reasons when they purchase the goods from business operators via the internet. When a consumer purchases products
(including cosmetics and food) or accepts services via an online trading platform and his/her interests are prejudiced, if the online trading
platform provider fails to provide the name, address and valid contact information of the seller, the manufacturer or the service provider,
the consumer is entitled to demand compensation from the online trading platform provider. Failure to comply with this law may subject
business operators to civil liabilities such as refunding purchase prices, replacement of commodities, repairing or ceasing damages,
compensation, and restoring the reputation, and could subject business operators or the responsible individuals to criminal penalties when
personal damages are involved or if the circumstances are severe.
On March 15, 2024, the Implementing Rules of the Consumer Protection Law of the PRC were promulgated by the State
Council and implemented on July 1, 2024, to further specify the obligations stipulated in the PRC Consumer Protection Law.
Additionally, these rules, among other things: (i) add the obligations of business operators regarding the protection of elderly and minors
as consumers; (ii) provide requirements to address situations where business operators may abuse technology, platform rules or their
dominant positions to infringe on consumer rights, such as prohibiting price discrimination, fraudulent advertising and excessively
collecting consumers’ personal information; (iii) require live streaming marketing platform operators to establish and improve
mechanisms for consumer rights protection.
In order to regulate online transaction activities, on March 15, 2021, SAMR issued the Online Trading Supervision and
Management Measures, or the Online Trading Supervision Measures, which became effective on May 1, 2021. The Online Trading
Supervision Measures shall apply to the business activities of selling commodities or providing services in social networking, internet
live streaming or other information network activities, and provide general obligations and responsibilities of online trading operators
and online trading platform providers.
On April 14, 2022, the SAMR issued the Provisions on Clearly Marking Prices and Prohibiting Price Fraud to regulate the clear
marking of prices (referring to such activities of business operators as publicly marking prices and other information in accordance with
the law in the process of selling or purchasing goods or providing services), prevent and stop price fraud (referring to such activities of
business operators as luring consumers or other business operators into trading with them by false or misleading pricing means), which
became effective on July 1, 2022.

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On January 6, 2017, SAIC issued the Interim Measures for Return of Online Purchases within seven Days without Reason, or
the Online Return Measures, which was amended on October 23, 2020 and became effective on the same date. According to these
measures, any consumer goods purchased online could be returned without any reason, if in good condition and are returned within
seven days of receipt with signature from the consumers, except for customized products, fresh or live products, perishable goods, digital
products, newspapers, periodicals and the goods confirmed to be exempted from the Online Return Measures by consumers at the time of
purchase.
The Food Safety Law of the PRC, promulgated on February 28, 2009 and effective on June 1, 2009, was amended on April 29,
2021 with effect from the same date. This amendment provides that the sale of pre-packaged food only is not subject to a permit but
needs to file a record with the competent authority. On October 11, 2019, the State Council revised and adopted the Implementing
Regulation for the Food Safety Law of the PRC, which became effective on December 1, 2019. The regulation underscores tougher
supervision, requiring governments above county levels to establish a uniform and authoritative supervision mechanism to enhance
supervisory capabilities. The regulation clarifies the primary responsibilities of producers and business operators in food safety, specifies
the duties of major corporate leaders, regulates the storage and transportation of food products, bans false promotion of food products,
and improves the management of special foods.
Regulations on Online Advertising
On April 24, 2015, the Standing Committee of the National People’s Congress enacted the Advertising Law of the PRC, or the
New Advertising Law, and last amended on April 29, 2021. The New Advertising Law, which was a major overhaul of an advertising
law enacted in 1994, increases the potential legal liability of advertising services providers, and includes provisions intended to
strengthen identification of false advertising and the power of regulatory authorities. The New Advertising Law forbids the usage of
certain words or phrases in advertisements, such as “national,” “supreme,” or “best” and provides a more detailed definition of “false
advertisement.” The New Advertising Law also forbids sending advertisements to residences, vehicles, fixed or mobile telephones or
personal email addresses if the advertisement is not invited or the receiver of the advertisement has rejected the advertising.
On July 4, 2016, SAIC promulgated the Provisional Measures of Internet Advertising Management, which provide basic rules
for regulating internet advertising activities. On February 25, 2023, the SAMR promulgated the Measures for Internet Advertising
Management, which became effective on May 1, 2023, to replace the Provisional Measures of Internet Advertising Management. The
new measures (i) detail the rules on advertising management in some key areas, such as internet advertising with links, advertising paid
for ranking, advertising published via algorithmic recommendation, and advertising published via online live streaming; (ii) specify that
internet platform operators providing information services shall fulfill obligations of internet information service providers such as
recording and keeping relevant information, actively discovering and deleting illegal advertisements, establishing a complaint handling
mechanism, and cooperating with market regulatory authorities to monitor advertisements and investigate illegal activities in internet
advertisements; (iii) provide that entities engaged in the design, production, agency, publishing or other activities of internet
advertisements shall bear the obligations and responsibilities of advertising agencies, advertisement publishers and other subjects
according to relevant laws.
Regulations on Online Music
On November 20, 2006, the Ministry of Culture issued the Several Opinions of the Ministry of Culture on the Development and
Administration of Online Music, or the Online Music Opinions, which became effective on the same date. The Online Music Opinions
provide that, among other things, an internet music service provider must obtain an Online Culture Operating Permit.
In 2010 and 2011, the MOC greatly intensified its regulations on online music products by issuing a series of circulars regarding
online music industry, such as the Circular on Regulating the Market Order of Online Music Products and Renovating Illegal Conducts
of Online Music Websites and the Circular on Investigating Illegal Online Music Websites in 2010. In addition, the Ministry of Culture
issued the Circular on Clearing Illegal Online Music Products in 2011, which clarified that entities engaging in any of the following
conducts will be subject to relevant penalties or sanctions imposed by the Ministry of Culture: (i) providing online music products or
relevant services without obtaining corresponding qualifications; (ii) importing online music products that have not been reviewed by the
Ministry of Culture; or (iii) providing domestically developed online music products that have not been filed with the Ministry of
Culture.

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Regulations on Internet Live Streaming Services
On November 4, 2016, the CAC issued Administrative Provisions on Internet Live Streaming Services, which became effective
on December 1, 2016. Under the regulation, “internet live streaming” refers to the activities of continuously releasing real-time
information to the public based on the internet in forms such as video, audio, images and texts, and “internet live streaming service
providers” refers to the operators that provide internet live streaming platform services. In addition, the internet live streaming service
providers shall take various measures when operating their services, such as (i) establish a live streaming content review platform; (ii)
require authentication for the registration of live streaming content providers; and (iii) enter into a service agreement with live streaming
service users to specify each of the live streaming service user’s and the service provider’s rights and obligations.
On December 2, 2016, the MOC issued the Administrative Measures for Business Activities Relating to Online Performance,
which took effect on January 1, 2017. Under the Measures, an online performance business operator engaging in business operations of
online performance shall obtain a Permit for Cyber Culture Business Operations, the business scope of which shall specify that online
performance is included. An online performance business operator shall assume the primary responsibility for the business operations of
online performance carried out thereby.
According to the Guiding Opinions on Strengthening the Standardized Management of Online Live Streaming issued by CAC
and several other governmental authorities on February 9, 2021, live streaming platforms that carry out business-oriented online
performance activities must hold the internet cultural business license and carry out ICP filing; live streaming platforms that carry out
network audio-visual program services must hold the AVSP (or complete the registration in the national network audio-visual platform
information registration management system) and carry out ICP filing; live streaming platforms that carry internet news information
service must hold internet news information service license. Live streaming platforms shall file with local cyberspace administration
office in a timely manner, and shall cancel its filing immediately after it ceases to provide live streaming services.
On August 30, 2021, the MOCT issued the Online Performance Brokerage Agencies Measures, which took effect on the same
date. Pursuant to the Measures, an online performance business entity shall assume the primary responsibilities for its online
performance business activities and verify the qualifications of online performance brokerage agencies on the platform.
The Minors Protection Law issued by the National People’s Congress Standing Committee on September 4, 1991 was last
amended on April 26, 2024. Under the amended Minors Protection Law, online product and service providers shall avoid providing
content for minors that might induce addiction. Online product and service providers such as providers of online games, online
broadcasts, online audio/video or online social networks shall set up appropriate functions such as the management of time, authority and
spending of minors using their services.
In November 2020, NRTA issued the Notice on Strengthening the Administration of Online Show Live and E-commerce Live
Streaming, or Notice 78, which set forth registration requirements for platforms providing online show live streaming or e-commerce
live streaming to have their information and business operations registered by November 30, 2020. Notice 78 made it clear that live
streaming platforms should implement real-name management systems.
On April 12, 2022, the NRTA and the Propaganda Department of the Central Committee of the Communist Party of China
issued the Circular on Strengthening the Administration of Game Live Streaming on Online Audio-visual Platforms, which regulates
game live streaming from various aspects, such as the content of live streaming, the conduct of hosts and the protection of minors. On
May 7, 2022, the Office of the Central Guidance Commission on Building Spiritual Civilization, MOCT, NRTA and CAC jointly issued
the Opinions on Regulating Online Live Streaming Virtual Gifting and Strengthening the Protection of Minors, or the Live Streaming
Opinions, which iterate the requirements for live streaming platforms in respect of strengthening real-name registration, prohibiting
minors from virtual gifting and restrictions on providing live streamer services to minors. Pursuant to the Live Streaming Opinions,
online platforms are prohibited from ranking, introducing or recommending live streaming performers solely by the monetary amount of
virtual gifts that they have received from users, nor could the platforms rank users based on the monetary amount of virtual gifts that they
have sent to live streaming performers.
Protection of minors in the field of Internet live streaming will be further strengthened under the newly promulgated laws and
regulations.

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On October 16, 2023, the State Council promulgated the Regulation on the Protection of Minors in Cyberspace, which became
effective on January 1, 2024. The Regulation on the Protection of Minors in Cyberspace stipulates that online live streaming service
providers shall, among other things, (i) establish a dynamic verification mechanism for the real identity information of online live
streaming uploaders and shall not provide online live streaming uploading services for minor users who do not conform to the legal
provisions, (ii) set the mode for minors, and manage the period, duration, function and content of use, and (iii) reasonably restrict
minors’ network service expenditure according to their age groups.
On December 22, 2023, the NPPA publicly solicited opinions on the Draft Administrative Measures for Online Games which, if
adopted, would stipulate, among other requirements, that large-sum gifting or gifting by minors shall be prohibited in live online games.
As of the date of the filing of this annual report, the Draft Administrative Measures for Online Games have not been formally adopted.
Regulations on Anti-Unfair Competition and Anti-Monopoly Matters
According to the PRC Anti-Unfair Competition Law, which took effect on December 1, 1993 and last amended on April 23,
2019, unfair competition refers to that the operator disrupts the market competition order and damages the legitimate rights and interests
of other operators or consumers in violation of the provisions of the Anti-Unfair Competition Law in the production and operating
activities. Pursuant to the PRC Anti-Unfair Competition Law, operators shall abide by the principle of voluntariness, equality,
impartiality, integrity and adhere to laws and business ethics during market transactions, and operators in violation of the provisions shall
bear corresponding civil, administrative or criminal liabilities depending on the specific circumstances.
The PRC Anti-Monopoly Law, which took effect on August 1, 2008 and last amended on June 24, 2022, prohibits monopolistic
conduct such as entering into monopoly agreements, abusing market dominance and concentration of undertakings that may have the
effect of eliminating or restricting competition. On February 7, 2021, the Anti-Monopoly Commission of the State Council promulgated
the Guidelines to Anti-Monopoly in the Field of Internet Platforms, or the Anti-Monopoly Guidelines, which took effect on the same date
and will operate as a compliance guidance for platform economy operators under the existing PRC anti-monopoly laws and regulations.
The Anti-Monopoly Guidelines mainly covers five aspects, including general provisions, monopoly agreements, abusing market
dominance, concentration of undertakings, and abusing of administrative powers eliminating or restricting competition.
On June 24, 2022, the Standing Committee of the National People’s Congress issued the PRC Anti-Monopoly Law (Revised
2022), which took effective on August 1, 2022. The revised version, among other things, (i) makes changes to the merger review process
by enabling SAMR to review non-threshold transactions and introducing the stop-clock system, (ii) changes the rules on monopoly
agreements for resale price maintenance, introducing a “safe harbor” for vertical monopoly agreement, and (iii) increases fines imposed
on different parties, e.g., amending the fine for illegal concentration of business operators from “a fine of up to RMB500,000” to “a fine
of no more than ten percent of its prior year’s sales revenue if the concentration of the business operators has or may have an effect of
eliminating or restricting competitions; or a fine of up to RMB5 million if the concentration of business operators does not have an effect
of eliminating or restricting competitions.”
On March 10, 2023, the SAMR issued the Provisions on the Prohibitions of Monopoly Agreements, the Provisions on the
Prohibitions of Acts of Abuse of Dominant Market Positions and the Provisions on Review of Concentration of Undertakings, all of
which took effect on April 15, 2023. The provisions detail the relevant rules set forth in the PRC Anti-Monopoly Law (Revised 2022)
and further elaborate on the factors to be taken into consideration when assessing monopoly agreements, acts of abusing market
dominance and concentration of undertakings.
On January 22, 2024, the State Council issued the Rules of the State Council on Declaration Threshold for Concentration of
Undertakings (Revised 2024), or the Revised Declaration Threshold Rules, which substantially raised the declaration threshold for
concentration of undertakings. According to the Revised Declaration Threshold Rules, where a concentration of undertakings meets any
of the following thresholds, an undertaking shall declare to the competent anti-monopoly law enforcement agency in advance: (i) the
total global turnover of all the undertakings participating in the concentration in the last accounting year exceeds RMB12 billion, and at
least two of these undertakings each have a turnover of more than RMB800 million within China in the last accounting year; or (ii) the
total turnover within China of all the undertakings participating in the concentration in the last accounting year exceeds RMB 4 billion,
and at least two of these undertakings each have a turnover of more than RMB800 million within China in the last accounting year.

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On August 17, 2021, the SAMR issued the Draft Provisions on Preventing Unfair Online Competition for public comment,
which mainly regulates the production and operation activities of business operators through the internet and other information networks,
and specifically stipulates the general norms of online competition, prohibits the use of technical means to impede, interfere or conduct
other unfair competition behaviors and prohibits the use of technical means to conduct other online unfair competition behaviors. On
December 25, 2024, the Standing Committee of the National People’s Congress issued a draft amendment to the PRC Anti-Unfair
Competition Law for public comments, which sets forth detailed rules on network unfair competition, supplements the existing forms of
unfair competition behaviors, strengthens the commercial bribery governance, and improves the legal liability for violation of anti-unfair
competition provisions. As of the date of the filing of this annual report, the Draft Provisions on Preventing Unfair Online Competition
and the draft amendment to the PRC Anti-Unfair Competition Law have not been formally adopted.
Regulations on Payment and Finance Services
On December 28, 2015, the PBOC issued the Administrative Measures for Internet Payment Services of Non-bank Payment
Institutions, which became effective on July 1, 2016, and requires that non-bank payment institutions implement the real-name
verification system for payment accounts and take effective measures to verify the personal information of clients. On December 9, 2023,
the State Council promulgated the Regulation on Supervision and Administration of Non-bank Payment Institutions, which became
effective on May 1, 2024, to provide principal rules for regulating activities of non-bank payment institutions, including, among other
things, implementing access management by specifying certain access requirements of the non-bank payment institutions, and
reinforcing management systems with respect to payment accounts, reserve funds and payment instructions. On July 9, 2024, the PBOC
issued the Detailed Rules for the Implementation of the Regulation on Supervision and Administration of Non-Banking Payment
Institutions, which set out detailed rules to implement the Regulation on Supervision and Administration of Non-bank Payment
Institutions, including refining the way payment businesses are categorized and the requirements for the ratio of net assets to the average
daily balance of the reserve funds. In respect of the establishment conditions for non-bank payment institutions and the ratio of net assets
to the average daily balance of reserve funds, the rules provide for a transitional period for existing non-bank payment institutions to
meet such requirements, i.e., from the date of implementation of the Rules to the expiration date of their respective payment business
license, and if the transitional period is less than 12 months, it will be counted as 12 months.
On January 19, 2021, the PBOC issued the Measures for Deposit and Management of Customer Reserve Funds by Non-bank
Payment Institutions, or the Measures for Customer Reserve Funds, which became effective on March 1, 2021. The Measures for
Customer Reserve Funds standardize the centralized deposit and management business of customer’s reserves after centralized deposit of
reserves, further refine the provisions on deposit, use and transfer of reserves, clarify the corresponding reserve management
responsibilities of the PBOC and its branches, clearing institutions and reserve banks, set punishment standards for violations of
customer’s reserves and promote the development of the industry.
On July 20, 2021, the PBOC issued the Measures for the Administration of Reporting of Major Events by Non-bank Payment
Institutions, which became effective on September 1, 2021. Under the Measures, “major events” refers to major business operation
matters that shall be reported in advance in accordance with the laws and regulations and the rules of the PBOC, as well as matters that
may have major impact on the business operation status of payment institutions (including branches), rights and interests of financial
consumers, and financial and social stability, and shall be reported ex post. Pursuant to the Measures, a payment institution shall maintain
communication with branches of the PBOC, and actively cooperate with the PBOC and its branches in effectively monitoring, preventing
and resolving risks.
On September 2, 2022, the Standing Committee of the National People’s Congress issued the Anti-Telecom and Online Fraud
Law of PRC, effective on December 1, 2022, which requires that non-bank payment institutions, together with banking financial
institutions, shall establish a customer due diligence system during the opening of bank accounts and payment accounts and the provision
of payment and settlement services for customers, and during the existence of the business relationship with customers, identify the
beneficial owners, and take appropriate risk management measures to prevent the use of bank accounts and payment accounts for
telecom or online fraud according to relevant laws.  
On November 11, 2024, the Standing Committee of the National People’s Congress issued the amended PRC Anti-money
Laundering Law, which came into effect on January 1, 2025. According to the amended PRC Anti-money Laundering Law, entities such
as non-bank payment institutions shall fulfill the anti-money laundering obligations of financial institutions under this Law, including,
among other things, establishing sound internal control for anti-money laundering, and fulfill other obligations such as customer due
diligence, preserving the identity records of customers and transaction records, reporting of large-value transactions and doubtful
transactions, and taking special preventive measures against money laundering.

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Regulations on Intellectual Property Rights
The PRC has adopted comprehensive legislation governing intellectual property rights, including patents, trademarks,
copyrights and domain names.
Patent
According to the Patent Law of the PRC (Revised in 2008) promulgated by the Standing Committee of the National People’s
Congress, and its Implementation Rules (Revised in 2010) promulgated by the State Council, the National Intellectual Property
Administration of China is responsible for administering patent affairs in the PRC. The patent administration departments of provincial
or autonomous regions or municipal governments are responsible for administering patent affairs within their respective jurisdictions.
The Patent Law of the PRC and its implementation rules provide for three types of patents, “invention,” “utility model” and “design.”
The Chinese patent system adopts a first-to-file rule, which means that where more than one person files a patent application for the same
invention, the patent will be granted to the person who files the application first. To be patentable, invention or utility models must meet
three criteria: novelty, inventiveness and practicability.
The Patent Law of the PRC was further amended in October, 2020 and its Implementation Rules were amended on December
11, 2023, pursuant to which invention patents are valid for twenty years, while design patents are valid for fifteen years and utility model
patents are valid for ten years, commencing from the date of application. Where a patent right for invention is granted after three years
from the date of request for substantial examination of a patent for invention and after four years from the filing date, the patent
administrative department under the State Council shall grant compensation for the duration of the patent right due to any unreasonable
delay in grant of patent rights at the request of the applicant, except for any unreasonable delay caused by the applicant.
Trademark
According to the Trademark Law of the PRC promulgated by the Standing Committee of the National People’s Congress in
August 1982 and recently amended in April 2019, and its Implementation Regulation promulgated in August 2002 and amended in April
2014 by the State Council, the period of validity for a registered trademark is ten years, commencing from the date of registration. The
registrant must go through the formalities for renewal within twelve months prior to the expiry date of the trademark if continued use is
intended. Where the registrant fails to do so, a grace period of six months may be granted. The validity period for each renewal of
registration is ten years, commencing from the day immediately after the expiry of the preceding period of validity for the trademark. In
the absence of a renewal upon expiry, the registered trademark will be cancelled. The Trademark Law and its Implementation Regulation
also stipulate rules regarding trademark infringement and compensation. Industrial and commercial administrative authorities have the
authority to investigate any alleged infringement of the exclusive right under a registered trademark. If there is a suspected criminal
offense, the case shall be timely referred to and decided by a judicial authority.
Copyright
The Standing Committee of National People’s Congress adopted the Copyright Law of the PRC in 1990 and amended it in
2001, 2010 and 2020, respectively. The latest amended Copyright Law became effective on June 1, 2021, according to which relevant
provisions on copyright protection in cyberspace have been further improved, including, for example, the scope of “broadcasting right”
and the scenarios in which sound recording producers can receive remunerations have been expanded, and the description of
“cinematographic works or works created using methods similar to film making” are revised as “audio-visual works.” In addition, the
latest amendment raises the maximum amount of statutory damages for copyright infringement while setting a minimum limit.
In order to further implement the Copyright Law of the PRC, the Regulations of the PRC for the Implementation of Copyright
Law was promulgated by the State Council on September 15, 2002 and last amended on January 30, 2013.
Pursuant to the Copyright Law and its implementation rules, creators of protected works enjoy personal and property rights,
including, among other things, the right of disseminating the works through information networks.

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Domain name
Domain names are protected under the Administrative Measures on the Internet Domain Names promulgated by the MIIT on
August 24, 2017. The MIIT is the major regulatory body responsible for the administration of the PRC internet domain names. The
registration of domain names adopts a first-to-file rule. On November 27, 2017, the MIIT promulgated the Notice of the MIIT on
Regulating the Use of Domain Names in Providing Internet-based Information Services, which became effective on January 1, 2018.
Pursuant to the notice, the domain name used by an internet-based information service provider in providing internet-based information
services must be registered and owned by such provider in accordance with the law. If the internet-based information service provider is
an entity, the domain name registrant must be the entity (or any of the entity’s shareholders), or the entity’s principal or senior manager.
Regulations Relating to Overseas Listing
On 6 July 2021, the General Office of the Chinese Communist Party Central Committee and the General Office of the State
Council jointly promulgated the Opinions on Strictly Cracking Down on Illegal Securities Activities, which call for the enhanced
administration and supervision of overseas-listed China-based companies, propose to revise the relevant regulation governing the
overseas issuance and listing of shares by such companies and clarified the responsibilities of competent domestic industry regulators
and government authorities.
On February 17, 2023, CSRC issued a new set of regulations consists of the Trial Administrative Measures of Overseas
Securities Offering and Listing by Domestic Companies and five supporting guidelines (collectively, the “Filing Rules”) which came into
effect on March 31, 2023. The Filing Rules regulate both direct and indirect overseas offering and listing of PRC domestic companies’
securities by adopting a filing-based regulatory regime. A “direct” overseas offering and listing by domestic companies refers to such
overseas offering and listing by a joint-stock company incorporated domestically. An “indirect” overseas offering and listing by domestic
companies refers to such overseas offering and listing by a company in the name of an overseas incorporated entity, whereas the
company’s major business operations are located domestically and such offering and listing is based on the underlying equity, assets,
earnings or other similar rights of a domestic company. The Filing Rules apply to overseas offerings by domestic companies of equity
shares, depository receipts, convertible corporate bonds and other equity securities that are offered and listed overseas. For an indirect
initial public offering and listing in an overseas market, the issuer shall designate a major domestic operating entity to submit the filing
documents to the CSRC, including but not limited to the prospectus within three working days after such application of overseas offering
and listing is submitted. The CSRC would, within 20 working days if filing documents are complete and in compliance with the
stipulated requirements, complete the filing and publish the filing information on the CSRC’s official website. In addition, subsequent
securities offerings of an issuer in the same overseas market where it has previously offered and listed securities shall be filed with the
CSRC within three working days after the offering is completed. Meanwhile, overseas offering and listing would be prohibited under
certain circumstances, including but not limited to that (i) the offering and listing are expressly forbidden by the PRC laws, regulations
and relevant rules; (ii) the intended overseas securities offering and listing may endanger national security as reviewed and determined
by competent authorities under the State Council in accordance with laws or (iii) there are material disputes with regard to the ownership
of the equity held by the domestic company’s controlling shareholder or by other shareholders that are controlled by the controlling
shareholder and/or actual controller. If a domestic company falls into the circumstances where overseas offering and listing is prohibited
prior to the overseas offering and listing, the domestic company shall postpone or terminate the intended overseas offering and listing,
and report to the CSRC and competent authorities under the State Council in a timely manner. If domestic companies fail to fulfill the
above-mentioned filing procedures or offer and list in an overseas market against the prohibited circumstances, they would be warned
and fined up to RMB10 million. The controlling shareholders and actual controllers of such domestic companies that organize or instruct
the aforementioned violations would be fined up to RMB10 million and directly liable persons-in-charge and other directly liable persons
would be each fined up to RMB5 million.

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In order to support domestic companies’  overseas securities offering and listing pursuant to PRC laws and regulations, as a
supplement to the Filing Rules, on February 24, 2023, CSRC and other three PRC regulatory authorities jointly issued the Provisions on
Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the
Confidentiality and Archives Administration Provisions, which took effect on March 31, 2023 with the Filing Rules, according to which,
a domestic company that seeks overseas offering and listing, and the securities companies and securities service providers that undertake
relevant businesses shall strictly abide by applicable PRC laws and regulations and perform relevant confidentiality and archives
administration obligations. Specifically, a domestic company that plans to, either directly or through its overseas listed entity, publicly
disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators,
(i) any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from
competent authorities and file with competent secrecy administrative department; and (ii) any other documents and materials that, if
leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national
regulations. A domestic company that provides documents and materials to securities companies and securities service providers shall
abide by applicable national regulations on confidentiality in handling such documents and materials, and shall provide a written
statement simultaneously.
As the Filing Rules and the Confidentiality and Archives Administration Provisions are relatively new, there are uncertainties
with respect to their interpretation and implementation.
C.          Organizational Structure
Our organizational structure is set forth above under Item 4.B. “Information on the Company—Business Overview—Our
Organizational Structure.”
D.          Property, Plants and Equipment
Our principal executive offices are currently located at NetEase Building, No. 599 Wangshang Road, Binjiang District,
Hangzhou, People’s Republic of China 310052. In addition, as of December 31, 2024, we have leased office, warehouse, store facilities
and others with an aggregate of approximately 0.4 million square meters of space at properties mainly in Zhejiang and Guangdong
provinces.
We own and occupy several office buildings and R&D centers in Shanghai, Hangzhou and Guangzhou, China with an aggregate
total floor area of approximately 1.1 million square meters, where our online game and innovative businesses and other services
developers, as well as their related sales, marketing, technology, management and administrative functions are located. We also own and
occupy an office building in Beijing with an aggregate total estimated floor area of 0.1 million square meters, where our advertising
services and Youdao are located. In addition, we have completed construction of our first self-built data center, Gui’an Data Center, in
Guizhou province, China.
We are in the process of constructing new office buildings, primarily located in Shanghai and Hangzhou. As of December 31,
2024, we had incurred construction in progress costs of RMB1.7 billion (US$232.4 million) for these new office buildings, which
primarily comprise costs for building construction.
We continue to assess our needs with respect to office space and may, in the future, vacate or add additional facilities. We
believe that our current facilities and those under construction will be adequate for our needs in the immediate and foreseeable future.
Our server and bandwidth service fees were approximately RMB2.2 billion (US$303.0 million) for the year ended December
31, 2024.
Item 4A.   Unresolved Staff Comments
Not applicable.

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Item 5.   Operating and Financial Review and Prospects
The following discussion of our financial condition and results of operations is based upon and should be read in conjunction
with our consolidated financial statements and their related notes included in this annual report. This report contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the
Exchange Act, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are
signified by the words “expect,” “anticipate,” “intend,” “believe,” or similar language. All forward-looking statements included in this
annual report are based on information available to us on the date hereof, and we assume no obligation to update any such forward-
looking statements. In evaluating our business, you should carefully consider the information provided under Item 3.D. “Key Information
—Risk Factors.” Actual results could differ materially from those projected in the forward-looking statements. We caution you that our
businesses and financial performance are subject to substantial risks and uncertainties.
A.           Operating Results
OVERVIEW
We have a successful online game business, developing and operating a rich portfolio of highly popular titles. Leveraging on
our user insights and execution expertise, we have also incubated and developed in-house a pipeline of thriving businesses, including our
intelligent learning and advertising solutions provider, Youdao, online music platform, NetEase Cloud Music, and other innovative
businesses, ranging from e-commerce to advertising services, e-mail and other services.
We generated net revenues of RMB96.5 billion, RMB103.5 billion and RMB105.3 billion (US$14.4 billion) in 2022, 2023 and
2024, respectively. Our net income attributable to the company’s shareholders was RMB20.3 billion, RMB29.4 billion and RMB29.7
billion (US$4.1 billion) in 2022, 2023 and 2024, respectively.
OUR CORPORATE STRUCTURE
Our company was incorporated in the Cayman Islands. NetEase, Inc. conducts its business in China through its subsidiaries and
the VIEs. Under current Chinese regulations, there are restrictions and prohibitions on foreign investment in Chinese companies
providing, among other things, value-added telecommunications services, internet cultural services and internet publication services,
which include the provision of online game, online education, online music and other internet content and services. In addition, the
operation by foreign or foreign-invested companies of advertising businesses in China is subject to government approval. In order to
comply with these restrictions and other Chinese rules and regulations, NetEase, Inc. and certain of its subsidiaries have entered into a
series of contractual arrangements for the provision of such services with certain affiliated companies, including Guangzhou NetEase,
Hangzhou Leihuo, Youdao Computer, Hangzhou Yuedu and certain other affiliated companies. These affiliated companies are considered
“variable interest entities” for accounting purposes and are referred to collectively in this annual report as “VIEs.” These contractual
arrangements provide us with the power to direct the activities that most significantly impact the economic performance of the VIEs and
provide us with economic benefits of these VIEs and as such we are the primary beneficiary and consolidate the VIEs for financial
reporting. The VIEs hold ICP licenses and other regulated licenses in which foreign investment is restricted or prohibited and operate our
internet businesses and other businesses. The revenue earned by the VIEs largely flows through to NetEase, Inc. and its subsidiaries
pursuant to such contractual arrangements. Based on these agreements, NetEase Hangzhou, Boguan and certain other subsidiaries
provide technical consulting and related services to the VIEs. Please also see Item 4.B. “Information on the Company—Business
Overview—Our Organizational Structure.”
As of December 31, 2024, the total assets of all the consolidated VIEs were RMB23.8 billion (US$3.3 billion), mainly
comprising cash and cash equivalents, restricted cash, accounts receivable, net, prepayments and other current assets, net, amounts due
from group companies and long-term investments. As of December 31, 2024, the total liabilities of the consolidated VIEs were RMB21.9
billion (US$3.0 billion), mainly comprising contract liabilities, amounts due to group companies and accrued liabilities and other
payables.

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We believe that our present operations are structured to comply with the relevant PRC laws and regulations. However, the
interpretation and enforcement of these laws and regulations involve uncertainties. We are therefore unable to predict if, when and how
the relevant PRC regulatory authorities might take action that could materially affect our business activities. Future changes in Chinese
government policies affecting the provision of information services, including the provision of online games, online education, online
music, live streaming, internet access, online advertising and online payment services, may impose additional regulatory requirements on
us or our service providers or otherwise harm our business. Please see Item 3.D. “Key Information—Risk Factors—Risks Related to Our
Corporate Structure.”
BASIS OF CONSOLIDATION
Our consolidated financial statements include the financial statements of our subsidiaries and the VIEs for which we are the
primary beneficiary with the ownership interests of minority shareholders reported as noncontrolling interests. All significant
transactions and balances among our company, our subsidiaries and the VIEs have been eliminated upon consolidation. We consolidate a
VIE if we have the power to direct matters that most significantly impact the activities of the VIE, and have the obligation to absorb
losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.
FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Our ability to continue to deliver original and compelling content and service offerings and effectively operate our existing
products
We take pride in being an original content provider. Our continued success in producing and delivering original and compelling
content and services to our users largely depends on our ability to stay abreast of users’ evolving needs and preferences and dynamics in
the digital content and service industries. We seek to identify trend-setting content and services while striving to maintain the longevity
and vitality of our existing products by effectively leveraging our rich operational know-how. In particular, as we generate a substantial
amount of revenues from our game services, our ability to successfully update and expand our existing game franchises and maintain a
pipeline of new games across diversified genres and geographic regions will affect our future revenue and financial results.
Our ability to grow our user base and drive user engagement and loyalty, as well as the mix of products and services purchased
by our users
We have built a massive and highly engaged user base across our business segments. We generate a substantial part of our
revenues through sales of in-game virtual items and play time, merchandise sales, music streaming, advertising services and tuition fees
for online courses. Our ability to generate these revenues is affected by the size of our user base and the level of their engagement,
including, for example, the amount of time played on our games and the frequency of in-game purchases of virtual items. Our ability to
continue to grow our user base and engagement is driven by various factors, including our ability to offer diverse, attractive and relevant
content and services, deliver differentiated and superior user experiences, improve the community features on our platforms and enhance
our brand reputation. In addition, our results are affected by the mix of products and services purchased by our users. For example, with
respect to online games, our revenues depend in part on the types of virtual items purchased in-game and their pricing, as well as the
proportion of players who are playing games developed in-house by us, games co-developed with third parties or licensed games.
Our ability to continue to develop proprietary technologies and apply them meaningfully
We have demonstrated capabilities in developing proprietary technologies and applying technology to enhance our products and
services and improve our user experience, which is a critical competitive advantage of ours and a key factor that affects our operations
and financial results. We have successfully developed industry-leading proprietary game, big data and other technologies and integrate
these technologies into our products and services, and we will continue to significantly invest in developing and upgrading our
technology with a focus on optimizing our products and services and delivering a superior and differentiated user experience.

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Our ability to manage our costs and expenses effectively across all business segments
Our results of operations are affected by our ability to effectively control our costs and expenses across all of our business
segments. We incur revenue sharing costs, including fees shared with third-party platform providers, game developers, owners of
intellectual property licensed to us and other third parties related to mobile games, course instructors related to Youdao’s services, music
labels and other copyright and content partners related to NetEase Cloud Music’s services and others in connection with our other
innovative businesses, which may increase in absolute amounts as we continue to scale up our operations across our business segments.
We may also incur higher content costs as we continue to expand our product and service offerings to cater to the evolving user needs.
Our ability to continue to manage and control our cost of revenues, including revenue sharing costs and content costs, while maintaining
the high-quality and attractiveness of our products and services will have a significant impact on our business, financial condition and
results of operations.
We have incurred substantial research and development expenses as we developed more products and improved our content
offerings and technologies to deliver high quality services and value to our users. We strongly believe that R&D must be guided by the
principles of commercial viability and applicability, and we plan to continue making purpose-driven investment in technologies. We have
also been able to maintain our sales and marketing expenses as a relatively low percentage of our net revenues due to our strong brand
reputation. Our ability to sell and market our products and services cost-effectively depends on our ability to continue to leverage our
existing brand value, grow and monetize our user bases, and improve our sales and marketing efficiency.
Our ability to make successful strategic investments and acquisitions
We have made, and intend to make, strategic investments and acquisitions. Our investment and acquisition strategy is focused
on strengthening our content development and R&D capabilities, creating strategic synergies across our businesses, and enhancing our
overall value. Our strategic investments and acquisitions may affect our future financial results, including our margins and net income. In
addition, some of our acquisitions and investments may not be successful. We have recorded net investment losses in equity method
investees and impairment provisions related to certain equity investments in the past and may incur net investment losses or impairment
provisions in the future.
KEY COMPONENTS OF RESULTS OF OPERATIONS
Revenues
The following table sets forth our revenue by segment for the periods indicated.
For the year ended December 31,
    
2022
    
2023
    
2024
    
2024
RMB
RMB
RMB
US$
(in thousands)
Net revenues:
Games and related value-added services
 74,566,471
 81,565,449
 83,622,643
 11,456,254
Youdao
 
 5,013,182
 5,389,208
 5,625,919
 770,748
NetEase Cloud Music
 8,992,221
 7,866,992
 7,950,146
 1,089,166
Innovative businesses and others
 
 7,923,935
 8,646,510
 8,096,528
 1,109,220
Total net revenues
   96,495,809
 103,468,159
 105,295,236
 14,425,388
We generate our revenues from the provision of games and related value-added services, Youdao, NetEase Cloud Music,
innovative businesses and others. No customer individually accounted for greater than 10% of our total revenues for the years ended
December 31, 2022, 2023 and 2024.

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Games and Related Value-added Services
We generate our mobile game revenues primarily from the sale of in-game virtual items, including avatars, skills, privileges or
other in-game consumables, features or functionalities. We distribute our mobile games through partnerships with major Android- and
iOS-based app stores as well as proprietary platforms, such as our mobile apps and websites. Users have a variety of payment options for
in-game virtual items, including using prepaid points or by making online payments through app stores and other online payment
platforms. Our mobile game portfolio now consists of approximately 100 diverse games, and we expect to continue introducing new
mobile games each year for the foreseeable future, which we believe will contribute to future growth in net revenues from this segment.
We generate revenues from our PC games mainly through sales of prepaid points and sales of in-game virtual items. Customers
can purchase prepaid points and use the points to play our PC games, either to pay for playing time or to purchase virtual items within
the games, and use our other fee-based services. Customers can also purchase the in-game virtual items directly and use them.
We also generate revenue from services which are related or ancillary to the operation of our games including our live streaming
service and other value-added services.
Youdao
Youdao’s revenue consists of three parts: learning services, smart devices and online marketing services. We currently generate
the majority of the revenues of Youdao’s learning services from its tutoring services, which mainly include its existing online courses and
digital content services. We also generate revenues from sales of smart devices as well as Youdao’s online marketing services through the
provision of different formats of advertisements.
NetEase Cloud Music
NetEase Cloud Music’s revenue is primarily generated from (i) online music services through the sales of membership
subscriptions in various content and service packages and (ii) social entertainment services and others mainly through the sale of virtual
items.
Innovative Businesses and Others
We derive our innovative businesses and others revenues primarily from e-commerce, advertising services and other value-
added services.
Seasonality of Revenues
Historically, usage of our online games has generally increased around the Chinese holidays, particularly the winter and summer
school holidays. Revenues from certain of our innovative businesses and others, including advertising services, have followed the same
general seasonal trend throughout each year, with the first quarter of the year being the weakest quarter due to the Chinese New Year
holiday and the traditional close of customers’ annual budgets, and the fourth quarter as the strongest. Our Youdao platform tends to
experience strong sales of its smart devices during the period leading up to commencement of school terms in September. Our e-
commerce business revenues are relatively lower during the Chinese New Year holiday season in the first quarter of each year, while
sales in the fourth quarter are higher than each of the preceding three quarters due to a variety of promotional activities conducted by
retail and e-commerce businesses in China.

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Cost of Revenues
The following table sets forth our cost of revenues by segment for the periods indicated:
For the year ended December 31,
    
2022
    
2023
    
2024
    
2024
RMB
RMB
RMB
US$
(in thousands)
Cost of revenues:
Games and related value-added services
 (27,784,419)
 (25,938,865)
 (26,142,623)
 (3,581,525)
Youdao
 
 (2,430,738)
 (2,621,746)
 (2,877,428)
 (394,206)
NetEase Cloud Music
 (7,699,103)
 (5,764,322)
 (5,268,634)
 (721,800)
Innovative businesses and others
 
 (5,815,423)
 (6,079,832)
 (5,199,467)
 (712,324)
Total cost of revenues
   (43,729,683)
 (40,404,765)
 (39,488,152)
 (5,409,855)
Games and Related Value-added Services
Cost of revenues for our games and related value-added services consists primarily of revenue sharing costs paid to platforms,
game developers, content providers and performers, staff-related costs, royalties related to licensed games, server and bandwidth service
fees and other direct costs of providing these services.
Youdao
Our cost of revenues of Youdao consists primarily of revenue sharing costs paid to Youdao’s course instructors and teaching
assistants, staff-related costs, costs of course materials, costs relating to the sales of smart devices and traffic acquisition costs.
NetEase Cloud Music
Our cost of revenues of NetEase Cloud Music consists primarily of content licensing fees paid to music labels, independent
artists and other copyright partners, revenue sharing fees related to social entertainment services, advertising service-related costs, music
and entertainment event related costs, staff-related costs and professional fees.
Innovative Businesses and Others
Cost of revenues related to our innovative businesses and others segment consists primarily of cost of merchandise sold in our
e-commerce business, staff-related costs and content fees and revenue sharing costs paid to third-parties.
Operating Expenses
The following table sets forth the principal components of our operating expenses for the periods indicated:
For the year ended December 31,
    
2022
    
2023
    
2024
    
2024
RMB
RMB
RMB
US$
(in thousands)
Operating expenses:
Selling and marketing expenses
 (13,402,721)
 (13,969,460)
 (14,147,657)
 (1,938,221)
General and administrative expenses
 
 (4,695,798)
 (4,899,880)
 (4,550,625)
 (623,433)
Research and development expenses
   (15,039,014)
 (16,484,910)
 (17,524,812)
 (2,400,889)
Total operating expenses
   (33,137,533)
 (35,354,250)
 (36,223,094)
 (4,962,543)
Operating expenses include selling and marketing expenses, general and administrative expenses and research and development
expenses.

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Selling and Marketing Expenses
Selling and marketing expenses consist primarily of staff-related costs for our sales and marketing staff, marketing and
advertising expenses, and shipping and handling costs.
General and Administrative Expenses
General and administrative expenses consist primarily of staff-related costs for our general administrative and management
staff, office rental, legal, professional and consultancy fees, expected credit loss and depreciation charges.
Research and Development Expenses
Research and development expenses consist primarily of staff-related costs for our professionals and outsourcing technology
expenses.
Share-Based Compensation Cost
The following table sets forth the allocation of our share-based compensation costs for the periods indicated:
For the year ended December 31,
 
2022
 
2023
 
2024
 
2024
RMB
RMB
RMB
US$
(in thousands)
Share-based compensation cost included in:
    
      
      
      
  
Cost of revenues
 758,413
 823,765
 1,185,854
 162,461
Selling and marketing expenses
 
 120,171
 132,801
 104,534
 14,321
General and administrative expenses
 
 1,214,995
 1,119,018
 1,069,850
 146,569
Research and development expenses
 
 1,080,581
 1,167,226
 1,522,701
 208,609
Total
 
 3,174,160
 3,242,810
 3,882,939
 531,960
NetEase 2009 and 2019 Restricted Share Unit Plans
In November 2009, we adopted the 2009 RSU Plan for our employees, directors and consultants. We reserved 323,694,050
ordinary shares for issuance under this plan. The 2009 RSU Plan expired on November 16, 2019 in accordance with its terms.
In October 2019, we adopted our 2019 Restricted Share Unit Plan, for our employees, directors and consultants. Such plan was
amended and restated in February 2023 and renamed the Amended and Restated 2019 Share Incentive Plan, or the 2019 Share Plan. We
have reserved 322,458,300 ordinary shares for issuance under this plan. The 2019 Share Plan became effective on October 15, 2019 and
will expire in February 2033.
For the years ended December 31, 2022, 2023 and 2024, we recorded share-based compensation cost of approximately RMB3.2
billion, RMB3.2 billion and RMB3.9 billion (US$532.0 million), respectively, for awards granted under the 2009 RSU Plan and 2019
Share Plan, as well as the other share incentive plans discussed as below. This cost has been allocated to (i) cost of revenues, (ii) selling
and marketing expenses, (iii) general and administrative expenses, and (iv) research and development expenses, depending on the
responsibilities of the relevant employees.
As of December 31, 2024, total unrecognized compensation cost related to unvested awards granted under the 2019 Share Plan,
adjusted for estimated forfeitures, was RMB2.9 billion (US$402.1 million), which is expected to be recognized through the remaining
vesting period of each grant. As of December 31, 2024, the weighted average remaining vesting period was 1.44 years.

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Other Share Incentive Plans
Certain of our subsidiaries have adopted stock option plans or RSU plans to grant options or restricted share units to our
employees. The options expire four to seven years from the date of grant and either vest or have a vesting commencement date upon
certain conditions being met. The awards can become 100% vested on the vesting commencement date, or vest in two, three, four or five
substantially equal annual installments with the first installment vesting on the vesting commencement date. For the years ended
December 31, 2022, 2023 and 2024, we recorded share-based compensation costs of RMB327.9 million, RMB289.0 million and
RMB266.4 million, respectively, under these plans. But for certain share options granted with vesting conditions outside our control, no
expenses will be recorded until the occurrence of the vesting conditions when we determine that it is probable that the vesting conditions
will be satisfied.
As of December 31, 2024, there were unrecognized share-based compensation expenses of RMB18.0 million related to such
share options for which the service conditions were met and are expected to be recognized when the vesting conditions are achieved.
Income Taxes
Cayman Islands
Under the current laws of the Cayman Islands, we and our intermediate holding companies which are incorporated in the
Cayman Islands are not subject to tax on income or capital gain. Additionally, upon payments of dividends by us to our shareholders or
by our intermediate holding companies in the Cayman Islands to us, no Cayman Islands withholding tax will be imposed.
British Virgin Islands
Our subsidiaries in the British Virgin Islands, or the BVI, are exempted from income tax on its foreign-derived income in the
BVI. There are no withholding taxes in the BVI.
Hong Kong
Our subsidiaries in Hong Kong were subject to income tax on their taxable income generated from operations in Hong Kong at
a rate of 16.5%. For the years 2022, 2023 and 2024, the first HK$2 million of profits earned by one of our subsidiaries incorporated in
Hong Kong is taxed at a rate of 8.25%, while the remaining profits will continue to be taxed at the 16.5% tax rate. The payments of
dividends by these companies to us are not subject to any Hong Kong withholding tax.
China
The PRC Enterprise Income Tax Law subjects foreign invested enterprises and domestic companies to EIT at a uniform rate of
25%, and preferential tax treatments may be granted to foreign invested enterprises or domestic companies which conduct businesses in
certain encouraged sectors and to entities otherwise classified as “Software Enterprises”, “Key Software Enterprises” and/or HNTEs.
Boguan, NetEase Hangzhou and certain of our other China mainland subsidiaries were qualified as HNTEs and enjoyed a
preferential tax rate of 15% for 2022, 2023 and 2024.
The foregoing preferential income tax rate, however, is subject to periodic review and renewal by PRC authorities.
Sales Tax
Pursuant to the Provisional Regulation of the PRC on Value Added Tax, or VAT, and its implementation rules, our China
mainland subsidiaries and the VIEs are generally subject to VAT at a rate of 6% for revenues earned from rendering services. Our sales of
general goods to our customers in the PRC are also subject to VAT of 13%.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Please see the Notes to the Consolidated Financial Statements—Note 2(bb) “Recently issued accounting pronouncements not
yet adopted.”

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116
RESULTS OF OPERATIONS
The following table sets forth a summary of our audited consolidated statements of operations for the periods indicated both in
Renminbi and as a percentage of total revenues. Unless otherwise stated, financial results discussed herein refer to our continuing
operations. Net income from discontinued operations attributable to the company’s shareholders in 2022 was related to the disposal of
our Kaola e-commerce business.
For the year ended December 31,
    
2022
    
2023
    
2024
    
RMB
    
%
    
RMB
    
%
    
RMB
    
US$
    
%
(RMB and US$ in thousands)
Consolidated Statements of Operations and
Comprehensive Income Data:
 
   
   
   
   
   
   
  
Net revenues
 
 96,495,809
 100.0
 103,468,159
 100.0
 105,295,236
 14,425,388
 100.0
Cost of revenues
   (43,729,683)
 (45.3)
 (40,404,765)
 (39.1)
 (39,488,152)
 (5,409,855)
 (37.5)
Gross profit
 
 52,766,126
 54.7
 63,063,394
 60.9
 65,807,084
 9,015,533
 62.5
Operating expenses:
 
Selling and marketing expenses
   (13,402,721)
 (13.9)
 (13,969,460)
 (13.5)
 (14,147,657)
 (1,938,221)
 (13.4)
General and administrative expenses
 
 (4,695,798)
 (4.8)
 (4,899,880)
 (4.7)
 (4,550,625)
 (623,433)
 (4.4)
Research and development expenses
   (15,039,014)
 (15.6)
 (16,484,910)
 (15.9)
 (17,524,812)
 (2,400,889)
 (16.6)
Total operating expenses
   (33,137,533)
 (34.3)
 (35,354,250)
 (34.1)
 (36,223,094)
 (4,962,543)
 (34.4)
Operating profit
 
 19,628,593
 20.4
 27,709,144
 26.8
 29,583,990
 4,052,990
 28.1
Other income/(expenses):
Investment income, net
 
 53,976
 0.1
 1,306,722
 1.3
 355,286
 48,674
 0.3
Interest income, net
 
 2,149,673
 2.1
 4,120,418
 3.9
 4,920,915
 674,163
 4.7
Exchange gains/ (losses), net
 
 1,571,207
 1.6
 (132,999)
 (0.1)
 255,430
 34,994
 0.2
Other, net
 
 846,815
 0.9
 1,053,642
 1.0
 602,134
 82,492
 0.6
Income before tax
 
 24,250,264
 25.1
 34,056,927
 32.9
 35,717,755
 4,893,313
 33.9
Income tax
 
 (5,031,838)
 (5.2)
 (4,699,704)
 (4.6)
 (5,461,408)
 (748,210)
 (5.3)
Net income from continuing operations
 
 19,218,426
 19.9
 29,357,223
 28.3
 30,256,347
 4,145,103
 28.6
Net income from discontinued operations
 
 624,864
 0.7
—
—
—
—
—
Net income
 
 19,843,290
 20.6
 29,357,223
 28.3
 30,256,347
 4,145,103
 28.6
Accretion of redeemable noncontrolling
interests
 
 (2,978)
 (0.0)
 (3,589)
 (0.0)
 (3,919)
 (537)
 (0.0)
Net loss/(income) attributable to
noncontrolling interests and redeemable
noncontrolling interests
 
 497,288
 0.5
 62,918
 0.1
 (554,819)
 (76,010)
 (0.4)
Net income attributable to the Company’s
shareholders
 
 20,337,600
 21.1
 29,416,552
 28.4
 29,697,609
 4,068,556
 28.2
Share-based compensation cost included in:
Cost of revenues
 
 758,413
 0.8
 823,765
 0.8
 1,185,854
 162,461
 1.1
Selling and marketing expenses
 
 120,171
 0.1
 132,801
 0.1
 104,534
 14,321
 0.1
General and administrative expenses
 
 1,214,995
 1.3
 1,119,018
 1.1
 1,069,850
 146,569
 1.0
Research and development expenses
 
 1,080,581
 1.1
 1,167,226
 1.1
 1,522,701
 208,609
 1.4

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Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
We have organized our operations into following segments: games and related value-added services, Youdao, NetEase Cloud
Music and innovative businesses and others. These segments reflect the way we evaluate, view and run our business operations. The
following table sets forth the net revenues and cost of revenues by segment for the period presented as derived from our audited financial
statements.
    
For the year ended December 31,
2023
2024
2024
    
RMB
    
RMB
    
US$
(in thousands)
Net revenues:
Games and related value-added services
 
 81,565,449
 83,622,643
 11,456,254
Youdao
 
 5,389,208
 5,625,919
 770,748
NetEase Cloud Music
 
 7,866,992
 7,950,146
 1,089,166
Innovative businesses and others
 
 8,646,510
 8,096,528
 1,109,220
Total net revenues
 
 103,468,159
 105,295,236
 14,425,388
Cost of revenues:
 
Games and related value-added services
 
 (25,938,865)
 (26,142,623)
 (3,581,525)
Youdao
 
 (2,621,746)
 (2,877,428)
 (394,206)
NetEase Cloud Music
 
 (5,764,322)
 (5,268,634)
 (721,800)
Innovative businesses and others
 
 (6,079,832)
 (5,199,467)
 (712,324)
Total cost of revenues
 
 (40,404,765)
 (39,488,152)
 (5,409,855)
Net Revenues
Total net revenues increased by 1.8% to RMB105.3 billion (US$14.4 billion) in 2024 from RMB103.5 billion in 2023. Net
revenues from games and related value-added services, Youdao, NetEase Cloud Music and innovative businesses and others constituted
79.4%, 5.3%, 7.6% and 7.7%, respectively, of our total net revenues in 2024, compared with 78.8%, 5.2%, 7.6% and 8.4%, respectively,
in 2023.
Games and Related Value-added Services
Net revenues from games and related value-added services increased by 2.5% to RMB83.6 billion (US$11.5 billion) in 2024
from RMB81.6 billion in 2023, which was principally attributable to the strong performance of certain self-developed titles, such as
Identity V, Naraka: Bladepoint PC and mobile games and certain licensed titles, which was partially offset by decreased net revenues
from live streaming services. Net revenues from the operation of online games accounted for approximately 96.2% of this segment in
2024, compared to 92.9% in 2023.
Net revenues from our in-house developed games increased by 2.3% to RMB72.6 billion (US$10.0 billion) in 2024 from
RMB71.0 billion in 2023 as a result of the expansion of our portfolio of both PC and mobile games and their increased popularity in
2024. Net revenues from licensed games increased by 64.3% to RMB7.8 billion (US$1.1 billion) in 2024 from RMB4.7 billion in 2023,
which was mainly attributable to the return of certain hit titles. Net revenues generated from licensed games represented 7.4% of our total
net revenues in 2024, compared to 4.6% in 2023.
Youdao
Net revenues from our Youdao segment increased by 4.4% to RMB5.6 billion (US$770.7 million) in 2024 from RMB5.4 billion
in 2023, which was mainly due to increased net revenues from its online marketing services, which was offset in part by decreased net
revenues from its learning services.

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118
NetEase Cloud Music
Net revenues from our NetEase Cloud Music segment increased by 1.1% to RMB8.0 billion (US$1.1 billion) in 2024 from
RMB7.9 billion in 2023, which was mainly attributable to increased net revenues from online music services as a result of the growth in
sales of membership subscriptions, which was offset in part by decreased net revenues from social entertainment services.
Innovative Businesses and Others
Net revenues from the innovative businesses and others segment decreased by 6.4% to RMB8.1 billion (US$1.1 billion) in 2024
from RMB8.6 billion in 2023, which mainly resulted from decreased net revenues from advertising services and certain other innovative
businesses in this segment.
Cost of Revenues
Our cost of revenues decreased by 2.3% to RMB39.5 billion (US$5.4 billion) in 2024 from RMB40.4 billion in 2023, which
was mainly due to a decrease in revenue sharing costs with talent agencies of live streaming performers and other third parties. In 2024,
costs relating to games and related value-added services, Youdao, NetEase Cloud Music and innovative businesses and others
represented 66.2%, 7.3%, 13.3% and 13.2% of total cost of revenues, respectively, as compared with 64.2%, 6.5%, 14.3% and 15.0% of
total cost of revenues, respectively, in 2023.
Games and Related Value-added Services
Cost of revenues from our games and related value-added services increased by 0.8% to RMB26.1 billion (US$3.6 billion) in
2024 from RMB25.9 billion in 2023, which was primarily due to an increase in royalty fees related to certain licensed games and staff
costs, which was partially offset by a decrease in revenue sharing costs with talent agencies of live streaming performers and other third
parties.
Youdao
Cost of revenues from Youdao increased by 9.8% to RMB2.9 billion (US$394.2 million) in 2024 from RMB2.6 billion in 2023,
which was mainly attributable to an increase in revenue sharing costs in line with increased net revenues from online marketing services.
NetEase Cloud Music
Cost of revenues from NetEase Cloud Music decreased by 8.6% to RMB5.3 billion (US$721.8 million) in 2024 from RMB5.8
billion in 2023, which was primarily attributable to a decrease in revenue sharing costs in line with decreased net revenues from social
entertainment services.
Innovative Businesses and Others
Cost of revenues from our innovative businesses and others decreased by 14.5% to RMB5.2 billion (US$712.3 million) in 2024
from RMB6.1 billion in 2023, which was primarily due to decreased revenue sharing costs and products costs related to certain
innovative businesses.
Gross Profit
Our gross profit increased by 4.4% to RMB65.8 billion (US$9.0 billion) in 2024 from RMB63.1 billion in 2023.

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119
The following table sets forth the consolidated gross profits and gross profit margins of our business activities for the periods
indicated as derived from our audited financial statements. The gross profit margins in 2023 and 2024 were calculated by dividing our
gross profits over our net revenues for the corresponding type of services.
    
For the year ended December 31,
 
2023
2024
2024
 
RMB
    
RMB
    
US$
 
(in thousands)
 
Gross profit:
    
 
   
  
Games and related value-added services
   55,626,584
 57,480,020
 7,874,729
Youdao
 
 2,767,462
 2,748,491
 376,542
NetEase Cloud Music
 
 2,102,670
 2,681,512
 367,366
Innovative businesses and others
 
 2,566,678
 2,897,061
 396,896
Total gross profit
   63,063,394
 65,807,084
 9,015,533
Gross profit margin:
 
Games and related value-added services
 
 68.2 %
 68.7 %
 68.7 %
Youdao
 
 51.4 %
 48.9 %
 48.9 %
NetEase Cloud Music
 
 26.7 %
 33.7 %
 33.7 %
Innovative businesses and others
 
 29.7 %
 35.8 %
 35.8 %
Total gross profit margin
 
 60.9 %
 62.5 %
 62.5 %
The slight increase in gross profit margin in 2024 for games and related value-added services was primarily attributable to
decreased revenue contribution from live streaming services, which have relatively lower gross profit margins, as well as increased net
revenues from the operation of online games compared to other products and services in the segment. The decrease in gross profit margin
in 2024 for Youdao was mainly due to increased net revenues from online marketing services which have comparatively lower gross
profit margins. The improvement in gross profit margin in 2024 for NetEase Cloud Music was mainly due to increased net revenues from
sales of membership subscriptions and continued improvement in cost control measures. The increase in gross profit margin in 2024 for
innovative businesses and others was mainly due to increased gross profit from Yanxuan and several other businesses included within the
segment.
Operating Expenses
Total operating expenses increased by 2.5% to RMB36.2 billion (US$5.0 billion) in 2024 from RMB35.4 billion in 2023 as a
result of higher R&D investments mainly for games and related value-added services. The following table sets forth our operating
expenses for the periods indicated as derived from our audited financial statements.
For the year ended December 31,
2023
2024
2024
RMB
RMB
US$
(in thousands)
Selling and marketing expenses
     (13,969,460)     (14,147,657)      (1,938,221)
General and administrative expenses
 
 (4,899,880) 
 (4,550,625) 
 (623,433)
Research and development expenses
 
 (16,484,910) 
 (17,524,812) 
 (2,400,889)
Total operating expenses
 
 (35,354,250) 
 (36,223,094) 
 (4,962,543)
Selling and marketing expenses increased by 1.3% to RMB14.1 billion (US$1.9 billion) in 2024 from RMB14.0 billion in 2023,
primarily due to increased marketing spending for games and related value-added services.
General and administrative expenses decreased by 7.1% to RMB4.6 billion (US$623.4 million) in 2024 from RMB4.9 billion in
2023, primarily due to one-off expenses recorded in 2023, such as the settlement of certain litigation as well as an impairment provision
made for fixed assets and land use rights.
Research and development expenses increased by 6.3% to RMB17.5 billion (US$2.4 billion) in 2024 from RMB16.5 billion in
2023, primarily due to increased staff-related costs and expenses for outsourced game development activities.

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120
Other Income/(Expenses)
The following table sets forth our other income/(expenses) for the periods indicated as derived from our audited financial
statements.
For the year ended December 31,
2023
2024
2024
RMB
RMB
US$
(in thousands)
Investment income, net
      1,306,722     
 355,286     
 48,674
Interest income, net
 
 4,120,418  
 4,920,915  
 674,163
Exchange (losses)/ gains, net
 
 (132,999) 
 255,430  
 34,994
Other, net
 
 1,053,642  
 602,134  
 82,492
Other income/(expenses) mainly consisted of investment income related to short-term investments, interest income, government
incentives, net foreign exchange gains/(losses), impairment provisions related to certain equity investments, net investment gain in equity
method investees and fair value change related to our equity investments with readily determinable fair value.
Investment income was RMB355.3 million (US$48.7 million) in 2024, compared to investment income of RMB1.3 billion in
2023, consisting primarily of (i) a gain from fair value change related to equity investments with readily determinable fair value of
RMB841.9 million (US$115.3 million) in 2024 compared to RMB535.3 million in 2023, (ii) investment income related to short-term
investments of RMB530.6 million (US$72.7 million) in 2024 compared to RMB414.2 million in 2023, (iii) a gain on disposal of certain
long-term investments of RMB272.4 million (US$37.3 million) in 2024 compared to RMB63.8 million in 2023, and (iv) dividend
income from certain long-term investments of RMB125.2 million (US$17.2 million) in 2024 compared to RMB63.7 million in 2023,
which was offset in part by impairment provisions related to certain investments of RMB1.3 billion (US$177.0 million) compared to
RMB274.2 million in 2023, and a net investment loss in equity method investees of RMB155.6 million (US$21.3 million) in 2024
compared to a gain of RMB473.9 million in 2023.
Interest income, net increased to RMB4.9 billion (US$674.2 million) in 2024 from RMB4.1 billion in 2023, which included
interest expenses of RMB598.0 million (US$81.9 million) in 2024 related to our short-term and long-term loans.
We also incurred net foreign exchange gains of RMB255.4 million (US$35.0 million) in 2024, compared to net foreign
exchange losses of RMB133.0 million in 2023, primarily due to the fluctuation between the U.S. dollar against the RMB over the
periods.
Other, net decreased to RMB602.1 million (US$82.5 million) in 2024 from RMB1.1 billion in 2023, which were mainly related
to government incentives received and recognized in 2023 and 2024.
Income Tax
Income tax increased to RMB5.5 billion (US$748.2 million) in 2024 from RMB4.7 billion in 2023. Our effective tax rate in
2024 was 15.3%, compared to 13.8% in 2023.

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121
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
We have organized our operations into following segments: games and related value-added services, Youdao, NetEase Cloud
Music and innovative businesses and others. These segments reflect the way we evaluate, view and run our business operations. The
following table sets forth the net revenues and cost of revenues by segment for the period presented as derived from our audited financial
statements.
For the year ended December 31,
2022
2023
RMB
RMB
(in thousands)
Net revenues:
    
      
  
Games and related value-added services
 
 74,566,471  
 81,565,449
Youdao
 
 5,013,182  
 5,389,208
NetEase Cloud Music
 
 8,992,221  
 7,866,992
Innovative businesses and others
 
 7,923,935  
 8,646,510
Total net revenues
 
 96,495,809  
 103,468,159
Cost of revenues:
 
   
  
Games and related value-added services
 
 (27,784,419) 
 (25,938,865)
Youdao
 
 (2,430,738) 
 (2,621,746)
NetEase Cloud Music
 
 (7,699,103) 
 (5,764,322)
Innovative businesses and others
 
 (5,815,423) 
 (6,079,832)
Total cost of revenues
 
 (43,729,683) 
 (40,404,765)
Net Revenues
Total net revenues increased by 7.2% to RMB103.5 billion in 2023 from RMB96.5 billion in 2022. Net revenues from games
and related value-added services, Youdao, NetEase Cloud Music and innovative businesses and others constituted 78.8%, 5.2%, 7.6%
and 8.4%, respectively, of our total net revenues in 2023, compared with 77.3%, 5.2%, 9.3% and 8.2%, respectively, in 2022.
Games and Related Value-added Services
Net revenues from games and related value-added services increased by 9.4% to RMB81.6 billion in 2023 from RMB74.6
billion in 2022. The increase was principally attributable to the strong performance of certain of our mobile games including newly
launched titles such as Justice mobile game and hit titles such as Eggy Party. Net revenues from the operation of online games accounted
for approximately 92.9% of this segment in 2023 compared to 92.5% in 2022.
Net revenues from our in-house developed games (including certain games co-developed with our collaboration partners)
increased by 18.7% to RMB71.0 billion in 2023 from RMB59.8 billion in 2022 as a result of the expansion of our portfolio of mobile
games and increased popularity in 2023. Net revenues from licensed games decreased by 48.2% to RMB4.7 billion in 2023 from
RMB9.2 billion in 2022, which was mainly attributable to the termination of certain licensed titles. Net revenues generated from licensed
games represented 4.6% of our total net revenues in 2023, compared to 9.5% in 2022.
The increase in net revenues of this segment also resulted from an increase in revenue contribution by game related value-added
services such as game development services provided to third-parties.
Youdao
Net revenues from our Youdao segment increased by 7.5% to RMB5.4 billion in 2023 from RMB5.0 billion in 2022. The
increase was mainly due to increased revenue contribution from its online marketing services and learning services.

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122
NetEase Cloud Music
Net revenues from our NetEase Cloud Music segment decreased by 12.5% to RMB7.9 billion in 2023 from RMB9.0 billion in
2022. The decrease was mainly attributable to the introduction of a number of measures to its live streaming services to enhance the
listening experience of more dedicated music fans and reinforce its risk controls. These included reducing the in-app exposure of certain
live streaming functions and lowering performers’ and agencies’ revenue sharing ratio. These measures led to a decrease in net revenues
from NetEase Cloud Music’s social entertainment services, which was partially offset by increased revenues from online music services
as a result of the growth in sales of membership subscriptions.
Innovative Businesses and Others
Net revenues from the innovative businesses and others segment increased by 9.1% to RMB8.6 billion in 2023 from RMB7.9
billion in 2022. This increase mainly resulted from an increase in revenue contribution by our Yanxuan e-commerce business and certain
other innovative businesses in this segment.
Cost of Revenues
Our cost of revenues decreased by 7.6% to RMB40.4 billion in 2023 from RMB43.7 billion in 2022. The year-over-year
decrease was mainly due to a decrease in royalty fees and revenue sharing costs with game developers, talent agencies of live streaming
performers and other third parties. In 2023, costs relating to games and related value-added services, Youdao, NetEase Cloud Music and
innovative businesses and others represented 64.2%, 6.5%, 14.3% and 15.0% of total cost of revenues, respectively, as compared with
63.5%, 5.6%, 17.6% and 13.3% of the total cost of revenues, respectively, in 2022.
Games and Related Value-added Services
Cost of revenues from our games and related value-added services decreased by 6.6% to RMB25.9 billion in 2023 from
RMB27.8 billion in 2022. The decrease in cost of revenues in 2023 was primarily due to a decrease in royalty fees and revenue sharing
costs with game developers. The decrease was offset in part by an increase in revenue sharing costs to platforms as a result of the
increased revenue from our mobile games in 2023.
Youdao
Cost of revenues from Youdao increased by 7.9% to RMB2.6 billion in 2023 from RMB2.4 billion in 2022, which was
primarily attributable to an increase in revenues shared to third parties’ internet properties related to increased revenue from online
marketing services.
NetEase Cloud Music
Cost of revenues from NetEase Cloud Music decreased by 25.1% to RMB5.8 billion in 2023 from RMB7.7 billion in 2022,
which was primarily attributable to a decrease in revenue sharing costs in line with the decline of its revenue from social entertainment
services.
Innovative Businesses and Others
Cost of revenues from our innovative businesses and others increased by 4.5% to RMB6.1 billion in 2023 from RMB5.8 billion
in 2022. The increase in cost of revenues in 2023 was primarily due to increased cost of merchandise sold in our e-commerce business
resulting from increased sales volume, as well as revenue sharing costs related to our innovative businesses.
Gross Profit
Our gross profit increased by 19.5% to RMB63.1 billion in 2023 from RMB52.8 billion in 2022.

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123
The following table sets forth the consolidated gross profits and gross profit margins of our business activities for the periods
indicated as derived from our audited financial statements. The gross profit margins in 2022 and 2023 were calculated by dividing our
gross profits over our net revenues for the corresponding type of services.
For the year ended December 31,  
    
2022
    
2023
 
RMB
RMB
 
(in thousands)
 
Gross profit:
Games and related value-added services
 
 46,782,052
 55,626,584
Youdao
 
 2,582,444
 2,767,462
NetEase Cloud Music
 
 1,293,118
 2,102,670
Innovative businesses and others
 
 2,108,512
 2,566,678
Total gross profit
 
 52,766,126
 63,063,394
Gross profit margin:
 
Games and related value-added services
 
 62.7 %  
 68.2 %
Youdao
 
 51.5 %  
 51.4 %
NetEase Cloud Music
 
 14.4 %  
 26.7 %
Innovative businesses and others
 
 26.6 %  
 29.7 %
Total gross profit margin
 
 54.7 %  
 60.9 %
The increase in gross profit margin in 2023 for games and related value-added services was primarily attributable to increased
contribution from our in-house developed games, which have a relatively higher gross profit margin, as well as changes in the revenue
contribution from different platforms. The gross profit margin for Youdao remained relatively stable in 2023 compared to 2022. The
improvement in gross profit margin in 2023 for NetEase Cloud Music was mainly due to increased net revenues from sales of
membership subscriptions and continued improvement in cost control measures. The gross profit margin in innovative businesses and
others increased from 2022 to 2023 mainly due to increased gross profit from Yanxuan and several other businesses included within the
segment.
Operating Expenses
Total operating expenses increased by 6.7% to RMB35.4 billion in 2023 from RMB33.1 billion in 2022 as a result of higher
R&D investments and marketing expenditures mainly for games and related value-added services. The following table sets forth our
operating expenses for the periods indicated as derived from our audited financial statements.
For the year ended December 31,
2022
2023
    
RMB
    
RMB
(in thousands)
Selling and marketing expenses
 
 (13,402,721)
 (13,969,460)
General and administrative expenses
 
 (4,695,798)
 (4,899,880)
Research and development expenses
 
 (15,039,014)
 (16,484,910)
Total operating expenses
 
 (33,137,533)
 (35,354,250)
Selling and marketing expenses increased by 4.2% to RMB14.0 billion in 2023 from RMB13.4 billion in 2022, primarily due to
increased marketing spending for games and related value-added services.
General and administrative expenses increased by 4.3% to RMB4.9 billion in 2023 from RMB4.7 billion in 2022, primarily due
to the settlement of certain litigation as well as an impairment provision made for fixed assets and land use rights.
Research and development expenses increased by 9.6% to RMB16.5 billion in 2023 from RMB15.0 billion in 2022, primarily
due to increased staff-related costs and outsourcing game development expenses.

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124
Other Income/(Expenses)
The following table sets forth our other income/(expenses) for the periods indicated as derived from our audited financial
statements.
For the year ended December 31,
    
2022
    
2023
RMB
RMB
(in thousands)
Investment income, net
 
 53,976
 1,306,722
Interest income, net
 
 2,149,673
 4,120,418
Exchange gains/(losses), net
 
 1,571,207
 (132,999)
Other, net
 
 846,815
 1,053,642
Other income/(expenses) mainly consisted of investment income related to short-term investments, interest income, government
incentives, net foreign exchange gains/(losses), impairment provisions related to certain equity investments, net investment gain in equity
method investees and fair value change related to our equity investments with readily determinable fair value.
Investment income was RMB1.3 billion in 2023 compared to investment income of RMB54.0 million in 2022, consisting
primarily of (i) a gain from fair value change related to equity investments with readily determinable fair value of RMB535.3 million in
2023 compared to a loss of RMB3.4 billion in 2022, (ii) a net investment gain in equity method investees of RMB473.9 million in 2023
compared to RMB1.3 billion in 2022, (iii) investment income related to short-term investments of RMB414.2 million in 2023 compared
to RMB342.6 million in 2022, and (iv) a gain on disposal of certain long-term investments of RMB63.8 million in 2023 compared to
RMB1.8 billion in 2022, which was offset in part by impairment provisions related to certain investments of RMB274.2 million
compared to RMB282.8 million in 2022.
Interest income increased to RMB4.1 billion in 2023 from RMB2.1 billion in 2022, among which, we incurred interest expenses
of RMB884.1 million in 2023 related to our short-term and long-term loans.
We also incurred net foreign exchange losses of RMB133.0 million in 2023, compared to net foreign exchange gains of
RMB1.6 billion in 2022, primarily due to the fluctuation between the U.S. dollar against the RMB over the years.
Other, net increased to RMB1.1 billion in 2023 from RMB846.8 million in 2022, which were mainly related to government
incentives received and recognized in 2023 and 2022.
Income Tax
Income tax decreased to RMB4.7 billion in 2023 from RMB5.0 billion in 2022. Our effective tax rate in 2023 was 13.8%
compared with 20.7% in 2022.
B.
Liquidity and Capital Resources
To date, we have financed our operations primarily through operating cash flows and existing capital resources. As of December
31, 2024, we had RMB51.4 billion (US$7.0 billion) in cash and cash equivalents, RMB78.5 billion (US$10.7 billion) in time deposits
and RMB10.8 billion (US$1.5 billion) in short-term investments. Net cash provided by operating activities was RMB39.7 billion
(US$5.4 billion) in 2024. We had short-term and long-term loans of RMB11.8 billion (US$1.6 billion) and RMB428.0 (US$58.6 million)
as of December 31, 2024, respectively. On June 2, 2021, we entered into a five-year term loan facility and revolving loan facility
agreement with aggregate commitments of US$1.0 billion at an interest rate of 85 basis points over LIBOR. As of December 31, 2023,
we had not drawn any amount of these facilities and in early 2024, we voluntarily canceled such facilities. We have also entered into
several uncommitted loan credit facility agreements provided by certain financial institutions. As of December 31, 2024, US$4.6 billion
of such credit facilities had not been utilized.

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We believe that our current levels of cash and cash equivalents, cash flows from operations and short-term investments will be
sufficient to meet our anticipated cash needs for at least the next 12 months. However, we may need additional cash resources if we
experience changed business conditions or other developments. We may also need additional cash resources if we find and wish to
pursue opportunities for investment, acquisition, strategic cooperation or other similar action. If we determine that our cash requirements
exceed our amounts of cash and cash equivalents on hand, we may seek to issue debt or equity securities or obtain a credit facility. Any
issuance of equity securities could cause dilution for our shareholders. Any incurrence of indebtedness could increase our debt service
obligations and cause us to be subject to restrictive operating and finance covenants. It is possible that, when we need additional cash
resources, financing will only be available to us in amounts or on terms that would not be acceptable to us or financing will not be
available at all.
CASH FLOWS
The following table sets forth a summary of consolidated cash flow data for the periods indicated as derived from our audited
financial statements. Unless otherwise stated, cash flows discussed herein refer to our continuing activities only.
    
For the year ended December 31,
2022
2023
2024
2024
RMB
    
RMB
    
RMB
    
US$
(in thousands)
Net cash provided by operating activities
 
 27,709,233
 35,331,275
 39,676,813
 5,435,701
Net cash (used in)/provided by investing activities
 
 (7,369,727)
 (17,043,431)
 17,916,402
 2,454,537
Net cash used in financing activities
   (10,237,699)
 (21,467,054)
 (27,335,702)
 (3,744,976)
Operating Activities
Net cash provided by operating activities was RMB39.7 billion (US$5.4 billion) for the year ended December 31, 2024. The
difference between our net income of RMB30.3 billion (US$4.1 billion) and the net cash provided by operating activities was primarily
due to (i) the adjustment of non-cash items, mainly including adding back share-based compensation cost of RMB3.9 billion (US$532.0
million), depreciation and amortization charges of RMB2.4 billion (US$331.3 million) and impairment losses on investments of RMB1.3
billion (US$177.0 million), partially offset by gains on fair value change of equity security, other investments and financial instruments
of RMB841.9 million (US$115.3 million), unrealized exchange gains of RMB719.2 million (US$98.5 million), and fair value changes of
short-term investments of RMB530.6 million (US$72.7 million), and (ii) an increase in cash resulting from the changes in operating
assets and liabilities, mainly including an increase in contract liabilities of RMB2.0 billion (US$277.0 million), an increase in payables of
RMB1.4 billion (US$193.3 million), including content costs, bonus and professional and technical charges, and a decrease  in accounts
receivable of RMB716.4 million (US$98.1 million), partially offset by an increase in prepayments and other assets of RMB809.6 million
(US$110.9 million).
Net cash provided by operating activities was RMB35.3 billion for the year ended December 31, 2023. The difference between
our net income of RMB29.4 billion and the net cash provided by operating activities was primarily due to (i) the adjustment of non-cash
items, mainly including adding back share-based compensation cost of RMB3.2 billion, depreciation and amortization charges of
RMB3.1 billion, and impairment losses on investments and other long-term assets of RMB469.2 million, partially offset by gains on fair
value change of equity security investments of RMB535.3 million, share of results on equity method investees and revaluation results
from previously held equity interest of RMB473.9 million, fair value changes of short-term investments of RMB414.2 million, and (ii)
an increase in cash resulting from the changes in operating assets and liabilities, mainly including an increase in contract liabilities of
RMB1.2 billion and an increase in payables of RMB544.3 million, including content costs, bonus and professional and technical charges,
partially offset by an increase in accounts receivable of RMB1.5 billion.

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Net cash provided by operating activities was RMB27.7 billion for the year ended December 31, 2022. The difference between
our net income of RMB19.8 billion and the net cash provided by operating activities was primarily due to (i) the deduction of net income
from discontinued operations of RMB624.9 million; (ii) the adjustment of non-cash items, mainly including adding back share-based
compensation cost of RMB3.2 billion, fair value change of equity security investments of RMB3.1 billion, depreciation and amortization
charges of RMB2.9 billion, and deferred income taxes of RMB489.7 million, partially offset by gains on disposal of long-term
investments, business and subsidiaries of RMB1.8 billion, unrealized exchange gains of RMB1.6 billion, share of results on equity
method investees of RMB1.3 billion, and fair value changes of short-term investments of RMB342.6 million, and (iii) the increase in
cash resulting from the changes in operating assets and liabilities, mainly including an increase in payables of RMB2.8 billion, including
content costs, bonus and professional and technical charges and an increase in contract liabilities of RMB385.4 million, as well as a
decrease in accounts receivable, prepayments and other current assets of RMB1.3 billion, partially offset by a decrease of tax payables of
RMB917.6 million.
Investing Activities
Net cash provided by investing activities was RMB17.9 billion (US$2.5 billion) for the year ended December 31, 2024, which
was mainly attributable to (i) proceeds from maturities of time deposits of RMB179.4 billion (US$24.6 billion), (ii) proceeds from
maturities of short-term investments with terms over three months of RMB2.9 billion (US$391.0 million), and (iii) proceeds from
disposal of long-term investments, businesses, subsidiaries and other financial instruments of RMB2.8 billion (US$386.7 million), which
were partially offset by (i) placement/rollover of matured time deposits of RMB154.8 billion (US$21.2 billion), (ii) purchase of short-
term investments with terms over three months of RMB8.2 billion (US$1.1 billion), (iii) purchase of property, equipment and software of
RMB1.3 billion (US$174.7 million), (iv) purchase of intangible assets, content and licensed copyrights of RMB931.0 million (US$127.5
million), (v) investment in other equity investments and acquisition of subsidiaries of RMB589.6 million (US$80.8 million), (vi)
investment in equity method investees of RMB513.4 million (US$70.3 million) and (vii) net change of short-term investments with
terms of three months or less of RMB408.3 million (US$55.9 million).
Net cash used in investing activities was RMB17.0 billion for the year ended December 31, 2023, which was mainly attributable
to (i) placement/rollover of matured time deposits of RMB124.7 billion, (ii) investment in other equity investments and acquisition of
subsidiaries of RMB2.4 billion, (iii) purchase of property, equipment and software of RMB2.3 billion, (iv) purchase of intangible assets,
content and licensed copyrights of RMB2.0 billion, and (v) net change of short-term investments with terms of three months or less of
RMB1.8 billion, which were partially offset by (i) proceeds from maturities of time deposits of RMB111.4 billion, and (ii) proceeds from
maturities of short-term investments with terms over three months of RMB5.4 billion.
Net cash used in investing activities was RMB7.4 billion for the year ended December 31, 2022, which was mainly attributable
to (i) placement/rollover of matured time deposits of RMB99.0 billion, (ii) purchase of short-term investments with terms over three
months of RMB6.0 billion, (iii) investment in other equity investments and acquisition of subsidiaries of RMB4.4 billion, (iv) purchase
of property, equipment and software of RMB2.1 billion, (v) investment in equity method investees of RMB705.9 million, and (vi)
purchase of intangible assets, content and licensed copyrights of RMB543.2 million, which were partially offset by (i) proceeds from
maturities of time deposits of RMB92.2 billion, (ii) proceeds from maturities of short-term investments with terms over three months of
RMB10.2 billion, (iii) proceeds from disposals of long-term investments and business of RMB2.4 billion, and (iv) net change of short-
term investments with terms of three months or less of RMB776.4 million.
Financing Activities
Net cash used in financing activities was RMB27.3 billion (US$3.7 billion) for the year ended December 31, 2024, which was
mainly attributable to (i) dividends paid to shareholders of RMB11.2 billion (US$1.5 billion), (ii) repurchase of NetEase’s ADSs and
purchase of subsidiaries’ ADSs and shares of RMB8.8 billion (US$1.2 billion), and (iii) net payment of short-term and long-term loans
of RMB7.5 billion (US$1.0 billion).
Net cash used in financing activities was RMB21.5 billion for the year ended December 31, 2023, which was mainly
attributable to (i) net payment of short-term and long-term loans of RMB8.3 billion, (ii) dividends paid to shareholders of RMB8.0
billion, and (iii) repurchase of NetEase’s ADSs and purchase of subsidiaries’ ADSs and shares of RMB5.2 billion.
Net cash used in financing activities was RMB10.2 billion for the year ended December 31, 2022, which was mainly
attributable to (i) repurchase of NetEase’s ADSs and purchase of subsidiaries’ ADSs and shares of RMB8.3 billion and (ii) dividends
paid to shareholders of RMB6.7 billion, which were partially offset by net proceeds from short-term and long-term loans of RMB4.8
billion.

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MANAGEMENT OF CAPITAL RESOURCES
In managing our capital, we seek to maintain a reasonable amount of liquidity to support new business growth and maximize
returns on our capital resources, while at the same time focusing on the preservation of capital and complying with applicable legal
requirements. Our capital resources include primarily cash and cash equivalents, time deposits and short-term investments mainly placed
with banks in Hong Kong and China. Although we consolidate the results of our subsidiaries and the VIEs in our consolidated financial
statements, we do not have direct access to the cash and cash equivalents or future earnings of our subsidiaries and the VIEs. As of
December 31, 2024, these subsidiaries and VIEs had RMB129.8 billion (US$17.8 billion) in cash and cash equivalents and short-term
and long-term time deposits. Our cash and cash equivalents and time deposits held outside of China are mainly denominated in U.S.
dollars.
To fund any cash requirements we may have, we may need to rely on dividends and other distributions on equity paid by our
subsidiaries. Since substantially all of our operations are conducted through our China mainland subsidiaries and the VIEs, our
subsidiaries may need to rely on dividends, loans or advances made by another China mainland subsidiary or VIE. Certain of these
payments are subject to PRC taxes, including sales taxes, which effectively reduce the received amount. In addition, the PRC
government could impose restrictions on such payments or change the tax rates applicable to such payments. In 2022, 2023 and 2024, we
accrued RMB2.1 billion, RMB1.5 billion and RMB1.6 billion (US$215.9 million) withholding tax liabilities, respectively, mainly
associated with dividends expected to be distributed from our China mainland subsidiaries to companies in our corporate group outside
of China for general corporate purposes. We repatriated a portion of these earnings and paid related withholding income tax in 2022,
2023 and 2024.
In addition, the payment of dividends by entities established in the PRC is subject to limitations. Regulations in the PRC
currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and
regulations in the PRC. Each of our China mainland subsidiaries that is a domestic company is also required to set aside at least 10.0% of
its after-tax profit based on PRC accounting standards each year to its general reserves or statutory capital reserve fund until the
accumulative amount of such reserves reach 50.0% of its respective registered capital. These restricted reserves are not distributable as
cash dividends. As a result of these and other restrictions under PRC laws and regulations, our China mainland subsidiaries and the VIEs
are restricted in their ability to transfer a portion of their net assets to us either in the form of dividends, loans or advances, which
restricted portion amounted to approximately RMB14.2 billion, or 10% of our total consolidated net assets, as of December 31, 2024. In
addition, if any of our China mainland subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may
restrict its ability to pay dividends or make other distributions to us.
Furthermore, any transfer of funds from us to any of our China mainland subsidiaries or the VIEs, either as a shareholder loan or
as an increase in registered capital, is subject to certain statutory limit requirements and registration or approval of the relevant PRC
governmental authorities, including the relevant administration of foreign exchange and/or the relevant examining and approval
authority. Therefore, it is difficult to change our capital expenditure plans once the relevant funds have been remitted from our company
or our subsidiaries outside of China to our China mainland subsidiaries or the VIEs. These limitations on the free flow of funds between
us and our China mainland subsidiaries and the VIEs could restrict our ability to act in response to changing market conditions and
reallocate funds internally in a timely manner.
For additional information, see Item 3.D. “Key Information—Risk Factors—Risks Related to Our Corporate Structure—Our
corporate structure may restrict our ability to receive dividends from, and transfer funds to, our China mainland subsidiaries and VIEs,
which could restrict our ability to act in response to changing market conditions and reallocate funds internally in a timely manner.” and
“Key Information—Risk Factors—Risks Related to Doing Business in China—Regulation on currency exchange may limit our ability to
utilize our revenues effectively.” and Item 10.D. “Additional Information—Exchange Controls.”
CAPITAL EXPENDITURES
Our capital requirements relate primarily to financing:
●
our working capital requirements, such as servers and bandwidth service fees, inventory purchase costs, content and
copyrights purchase costs, staff costs, selling and marketing expenses and R&D costs; and
●
costs incurred for the construction of our new office buildings and acquisition of new servers and other facilities.

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MATERIAL CASH REQUIREMENTS
Our material cash requirements as of December 31, 2024 primarily include our operating lease commitments, server and
bandwidth service fee commitments, capital commitments, royalties and expenditure for licensed content commitments and other
commitments.
Our operating lease commitments are the lease commitments under the lease agreements mainly for our corporate offices and
warehouses. Our server and bandwidth service fee commitments are related to our network servers located mainly in the facilities of the
respective affiliates of China Telecom, China Unicom and China Mobile. Our capital commitments are primarily the commitments made
in connection with the construction of new office buildings. Our royalties and expenditures for licensed content commitments primarily
relate to the costs of acquiring the rights to certain content by our online game and online music businesses. Other commitments
primarily consist of expenditures related to marketing and administration activities.  
We intend to fund our existing and future material cash requirements primarily with anticipated cash flows from operations, our
existing cash balance and other financing alternatives. We will continue to make cash commitments to support the growth of our
business.
The following sets forth our contractual obligations by specified categories as of December 31, 2024:
Royalties and
Server and
Expenditures
Operating
Bandwidth
for Licensed
Lease
Service Fee
Capital
Content
Other
Commitments
Commitments
Commitments
Commitments
Commitments
Total
    
RMB
    
RMB
    
RMB
    
RMB
    
RMB
    
RMB
(in thousands)
2025
 
 189,853
 364,056
 393,743
 692,640
 214,284
 1,854,576
2026
 
 141,039
 211,660
 182,897
 261,029
 2,519
 799,144
2027
 
 101,221
 101,866
 48,363
 116,286
 318
 368,054
2028
 
 92,245
 91,796
—
—
 8
 184,049
Beyond 2028
 
 112,071
 91,449
 7,343
—
—
 210,863
 
 636,429
 860,827
 632,346
 1,069,955
 217,129
 3,416,686
Other than as discussed above, we did not have any significant capital and other commitments, long-term obligations or
guarantees as of December 31, 2024.
TRANSFER OF FUNDS
Transfer of Funds and Other Assets within the NetEase Group
NetEase, Inc. transfers cash to its wholly-owned overseas subsidiaries by making capital contributions or providing loans, and
the overseas subsidiaries transfer cash to our subsidiaries in China by making capital contributions or providing loans to them. Although
NetEase, Inc. and its subsidiaries are the primary beneficiaries of the VIEs through contractual arrangements, they are not able to make
direct capital contributions to the VIEs and their subsidiaries. However, they may transfer cash to the VIEs by loans or by making
payment to the VIEs for inter-group transactions.
As of December 31, 2024, NetEase, Inc. had made cumulative capital contributions of US$2.3 billion to our China mainland
subsidiaries through intermediate holding companies, which were accounted for as “Investments in subsidiaries” of NetEase, Inc. These
funds have been used by our China mainland subsidiaries for their operations. As of December 31, 2024, the aggregate loan balance
owed by our subsidiaries under our agreements with the VIEs was US$48.9 million. In 2022, 2023 and 2024, the VIEs transferred
RMB67.0 billion, RMB73.3 billion and RMB73.8 billion (US$10.1 billion), respectively, to our China mainland subsidiaries as payment
or prepayment of service fees. Our China mainland subsidiaries maintain certain personnel for content production, sales and marketing,
R&D and general and administrative functions to support the operations of the VIEs.

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The following is a summary of cash transfers that have occurred between our subsidiaries and the VIEs:
    
For the year ended December 31,
2022
2023
2024
RMB
    
RMB
    
RMB
(in thousands)
Net cash paid by the VIEs to our subsidiaries under service agreements
   (66,970,818)
 (73,298,667)
 (73,785,893)
Net cash provided by/(used in) other transactions with intra-Group companies
 
 299,452
 639,545
 (45,054)
Net loans made to intra-Group companies
 
 —
 —
 (1,438,000)
Loans received from intra-Group companies
 
 201,349
 209,735
 876,994
Loans repaid to intra-Group companies
 
 (306,797)
 (262,574)
 (647,441)
For any amounts owed by the VIEs to our China mainland subsidiaries under the VIE agreements, unless otherwise required by
the PRC tax authorities, we are able to settle such amounts without limitations under the currently effective PRC laws and regulations,
provided that the VIEs have sufficient funds to do so. Our China mainland subsidiaries are permitted to pay dividends to their
shareholders, and eventually to NetEase, Inc. only out of their retained earnings, if any, as determined in accordance with PRC
accounting standards and regulations. Such payment of dividends by entities registered in China is subject to limitations, which could
result in limitations on the availability of cash to fund dividends or make distributions to shareholders of our securities. For example, our
China mainland subsidiaries and the VIEs are required to make appropriations to certain statutory reserve funds or may make
appropriations to certain discretionary funds, which are not distributable as cash dividends except in the event of a solvent liquidation of
the companies. We currently do not have cash management policies in place that dictate how funds are transferred between NetEase, Inc.,
our subsidiaries, the VIEs and the investors. Rather, the funds can be transferred in accordance with the applicable PRC laws and
regulations. For the purpose of illustration, the below table reflects the hypothetical taxes that might be required to be paid within China,
assuming that: (i) we have taxable earnings, and (ii) we determine to pay a dividend in the future:
Taxation Scenario(1) Statutory Tax and Standard Rates
Hypothetical pre-tax earnings(2)
100%
Tax on earnings at statutory rate of 25%(3)
 (25%)
Net earnings available for distribution
75%
Withholding tax at standard rate of 10%(4)
 (7.5%)
Net distribution to Parent/Shareholders
67.5%
Notes:
(1) The tax calculation has been simplified for the purpose of this example. The hypothetical book pre-tax earnings amount, which
does not consider timing differences, is assumed to equal the taxable income in the PRC.
(2) Under the terms of the VIE agreements, service fees are charged by our China mainland subsidiaries to the VIEs. For all the
periods presented, these fees are recognized as expenses of the VIEs, with a corresponding amount as service income by our
China mainland subsidiaries and eliminated in consolidation. For income tax purposes, our China mainland subsidiaries and the
VIEs file income taxes on a separate company basis. The fees paid are recognized as a tax deduction by the VIEs and as income
by our China mainland subsidiaries and are tax neutral.
Upon the VIEs reaching a cumulative level of profitability, because our China mainland subsidiaries own certain trademarks and
copyrights, the agreements will be updated to reflect charges for such trademarks and copyrights usage on the basis that they
will qualify for tax neutral treatment.
(3) Certain of our subsidiaries and the VIEs qualify for a 15% preferential income tax rate in China. However, such rate is subject
to qualification, is temporary in nature, and may not be available in a future period when distributions are paid. For purposes of
this hypothetical example, the table above reflects a maximum tax scenario under which the full statutory rate would be
effective.

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(4) China’s Enterprise Income Tax Law imposes a withholding income tax of 10% on dividends distributed by a foreign invested
enterprise to its immediate holding company outside of China. A lower withholding income tax rate of 5% is applied if the
foreign invested enterprises’ immediate holding company is registered in Hong Kong or other jurisdictions that have a tax treaty
arrangement with China, subject to a qualification review at the time of the distribution. For the purpose of this hypothetical
example, this table has been prepared based on a taxation scenario under which the full withholding tax would be applied.
The table above has been prepared under the assumption that all profits of the VIEs will be distributed as fees to our China
mainland subsidiaries under tax neutral contractual arrangements. If in the future, the accumulated earnings of the VIEs exceed the fees
paid to our China mainland subsidiaries, or if the current and contemplated fee structure between the intercompany entities is determined
to be non-substantive and disallowed by Chinese tax authorities, the VIEs could make a non-deductible transfer to our China mainland
subsidiaries for the amounts of the stranded cash in the VIEs. This would result in such transfer being non-deductible expenses for the
VIEs but still taxable income for the China mainland subsidiaries. Such a transfer and the related tax burdens would reduce our after-tax
income to approximately 50.6% of the pre-tax income. Our management believes that there is only a remote possibility that this scenario
would happen.

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131
Condensed Consolidating Schedule
The following tables present the condensed consolidating schedule of financial information for NetEase, Inc., its wholly owned
subsidiaries that are the primary beneficiaries of the VIEs under U.S. GAAP (the “Primary Beneficiaries of VIEs”), our other
subsidiaries that are not the Primary Beneficiaries of VIEs (the “Other Subsidiaries”), and the VIEs and their subsidiaries that we
consolidate for the periods presented.
    
As of December 31, 2023
Primary
VIEs and
    
NetEase,
    
Other
    Beneficiaries    
their
     Eliminating     Consolidated
Inc.
Subsidiaries
of VIEs
subsidiaries
adjustments
totals
(RMB in thousands)
Assets
 
   
   
   
   
   
  
Cash and cash equivalents
 
 224,824  
 13,269,440  
 6,132,382  
 1,802,256  
 —  
 21,428,902
Time deposits
 
—  
 63,445,277  
 38,040,757  
 420,000  
 —  
 101,906,034
Restricted cash
 
—  
 20,075  
 56,098  
 2,701,583  
 —  
 2,777,756
Accounts receivable, net
 
—  
 1,421,964  
 337,122  
 4,663,331  
 —  
 6,422,417
Inventories
 
—  
 586,212  
 72,254  
 36,908  
 —  
 695,374
Prepayments and other current assets, net
 
 262,937  
 2,933,583  
 1,114,866  
 1,765,209  
 —  
 6,076,595
Short-term investments
 
—  
 39,620  
 4,322,533  
 73,904  
 —  
 4,436,057
Amounts due from group companies (1)
 
 48,884,976  
 32,562,994  
 18,972,738  
 9,192,463  
 (109,613,171) 
—
Property, equipment and software, net
 
 829  
 709,387  
 7,312,616  
 52,212  
—  
 8,075,044
Land use right, net
 
—  
 64,264  
 4,010,879  
—  
—  
 4,075,143
Operating lease right-of-use assets, net
 
 3,996  
 280,906  
 410,687  
 53,686  
—  
 749,275
Deferred tax assets
 
—  
 15,158  
 1,396,083  
 148,847  
—  
 1,560,088
Investments in subsidiaries (2)
 
 103,785,841  
 28,944,158  
 (410,515) 
—  
 (132,319,484) 
—
Contractual interests in the VIEs and VIEs’ subsidiaries (2)
—
—
 1,619,075
—
 (1,619,075)
—
Long-term investments
 
 393,580  
 19,211,745  
 965,058  
 1,212,804  
—  
 21,783,187
Other long-term assets
 
 42,303  
 4,471,840  
 1,221,219  
 203,744  
—  
 5,939,106
Total assets
 
153,599,286  
 167,976,623  
 85,573,852  
 22,326,947  
 (243,551,730) 
 185,924,978
Liabilities, redeemable noncontrolling interests and shareholders’
equity
 
 
 
 
 
 
Accounts payable
 
 32  
 536,021  
 79,826  
 265,137  
 —  
 881,016
Salary and welfare payables
 
 1,678  
 669,323  
 4,071,411  
 114,794  
 —  
 4,857,206
Taxes payable
 
 10,278  
 35,066  
 2,383,421  
 142,769  
 —  
 2,571,534
Short-term loans
 
 920,751  
 8,669,455  
 9,633,862  
 16,095  
 —  
 19,240,163
Contract liabilities-current
 
—  
 732,809  
 227,931  
 12,401,426  
 —  
 13,362,166
Accrued liabilities and other payables
 
 9,008  
 2,071,530  
 6,900,483  
 3,689,885  
 —  
 12,670,906
Operating lease liabilities
 
 3,536  
 316,747  
 442,348  
 52,691  
 —  
 815,322
Amounts due to group companies (1)
 
 28,368,227  
 45,955,508  
 32,466,685  
 2,822,751  
 (109,613,171) 
 —
Deferred tax liabilities
 
—  
 1,951,981  
 347,322  
 —  
 —  
 2,299,303
Long-term loans
 
—  
 —  
 427,997  
 —  
 —  
 427,997
Other long-term liabilities
 
—  
 101,713  
 58,923  
 554,648  
 —  
 715,284
Total liabilities
 
 29,313,510  
 61,040,153  
 57,040,209  
 20,060,196  
 (109,613,171) 
 57,840,897
Redeemable noncontrolling interests
 
—  
 77,798  
—  
 37,961  
—  
 115,759
Total equity
 
 124,285,776  
 106,858,672  
 28,533,643  
 2,228,790  
 (133,938,559) 
 127,968,322
Total liabilities, redeemable noncontrolling interests and shareholders’
equity
 
 153,599,286  
 167,976,623  
 85,573,852  
 22,326,947  
 (243,551,730) 
 185,924,978

Table of Contents
132
As of December 31, 2024
    
    
    
Primary
     VIEs and     
    
NetEase,
Other
Beneficiaries of
their
Eliminating
Consolidated
Inc.
Subsidiaries
VIEs
subsidiaries
adjustments
totals
(RMB in thousands)
Assets
 
   
   
   
   
   
  
Cash and cash equivalents
 
 68,315  
 22,226,946  
 28,074,849  
 1,013,200  
—  
 51,383,310
Time deposits
 
—  
 67,221,715  
 11,174,640  
 70,000  
—  
 78,466,355
Restricted cash
 
—  
 22,636  
 40,326  
 3,028,651  
—  
 3,091,613
Accounts receivable, net
 
—  
 1,765,642  
 285,361  
 3,618,024  
—  
 5,669,027
Inventories
 
—  
 494,666  
 49,547  
 27,335  
—  
 571,548
Prepayments and other current assets, net
 
 65,235  
 3,341,726  
 663,724  
 2,346,183  
—  
 6,416,868
Short-term investments
 
—  
 123,191  
 10,219,436  
 413,516  
—  
 10,756,143
Amounts due from group companies (1)
 
 47,134,874  
 24,332,449  
 17,541,728  
 11,716,452  
 (100,725,503) 
—
Property, equipment and software, net
 
 765  
 806,010  
 7,703,421  
 9,905  
—  
 8,520,101
Land use right, net
 
—  
 61,354  
 4,111,111  
—  
—  
 4,172,465
Operating lease right-of-use assets, net
 
 2,541  
 232,315  
 271,200  
 35,015  
—  
 541,071
Deferred tax assets
 
—  
 12,763  
 1,085,481  
 15,191  
—  
 1,113,435
Investments in subsidiaries (2)
 
 110,875,457  
 27,503,090  
 (691,849) 
—  
 (137,686,698) 
—
Contractual interests in the VIEs and VIEs’ subsidiaries (2)
—
—
 1,810,627
—
 (1,810,627)
—
Long-term investments
 
 393,580
 17,737,532  
 955,281  
 1,119,963  
—  
 20,206,356
Other long-term assets
 
 30,137  
 3,938,040  
 773,016  
 342,065  
—  
 5,083,258
Total assets
 
 158,570,904  
 169,820,075  
 84,067,899  
 23,755,500  
 (240,222,828) 
 195,991,550
 
Liabilities, redeemable noncontrolling interests and
shareholders’ equity
 
Accounts payable
 
 1,540  
 457,395  
 209,709  
 51,905  
—  
 720,549
Salary and welfare payables
 
 1,897  
 638,774  
 3,948,479  
 93,859  
—  
 4,683,009
Taxes payable
 
 10,389  
 422,409  
 2,186,974  
 139,413  
—  
 2,759,185
Short-term loans
 
—  
 7,899,918  
 3,905,133  
—  
—  
 11,805,051
Contract liabilities-current
 
—  
 1,319,742  
 276,933  
 13,702,547  
—  
 15,299,222
Accrued liabilities and other payables
 
 32,143  
 2,716,831  
 6,924,271  
 4,555,787  
—  
 14,229,032
Operating lease liabilities
 
 2,317  
 256,038  
 292,603  
 33,251  
—  
 584,209
Amounts due to group companies (1)
 
 19,837,012  
 39,620,317  
 38,609,798  
 2,658,376  
 (100,725,503) 
—
Deferred tax liabilities
 
—  
 1,756,535  
 416,582  
—  
—  
 2,173,117
Long-term loans
 
—  
—  
 427,997  
—  
—  
 427,997
Other long-term liabilities
 
—  
 109,239  
 58,179  
 648,623  
—  
 816,041
Total liabilities
 
 19,885,298  
 55,197,198  
 57,256,658  
 21,883,761  
 (100,725,503) 
 53,497,412
Redeemable noncontrolling interests
 
—  
 84,272  
—  
—  
—  
 84,272
Total equity
 
 138,685,606
  114,538,605
 
 26,811,241
   1,871,739
  (139,497,325)    142,409,866
Total liabilities, redeemable noncontrolling interests and
shareholders’ equity
 
 158,570,904
  169,820,075
 
 84,067,899
  23,755,500
  (240,222,828)    195,991,550
    
Year Ended December 31, 2022
Primary
VIEs and 
     NetEase,     
Other
    Beneficiaries of    
their
     Eliminating     Consolidated
Inc.
Subsidiaries
VIEs
subsidiaries
adjustments
totals
(RMB in thousands)
Net revenues
 
   
   
   
   
   
  
Third-party revenues
 
 —
 12,788,652
 1,157,713
 82,549,444
—
 96,495,809
Intra-Group revenues related to technical consulting and related service
(3)
 
 —
 692,337
 64,085,249
—
 (64,777,586)
—
Other intra-Group revenues (4)
 
 —
 913,644
 1,876,699
 817,962
 (3,608,305)
—
Total net revenues
 
 —
 14,394,633
 67,119,661
 83,367,406
 (68,385,891)
 96,495,809
Cost of revenues and operating expenses
 
Third-party cost of revenues and operating expenses
 
 (62,115)
 (13,477,853)
 (44,968,961)
 (18,358,287)
—
 (76,867,216)
Intra-Group cost of revenues and operating expenses related to
technical consulting and related services (3)
 
—
—
—
 (64,777,586)
 64,777,586
—
Other intra-Group cost of revenues and operating expenses (4)
 
—
 (1,822,670)
 (1,667,214)
 (185,608)
 3,675,492
—
Total cost of revenues and operating expenses
 
 (62,115)
 (15,300,523)
 (46,636,175)
 (83,321,481)
 68,453,078
 (76,867,216)
Operating (losses)/profit
 
 (62,115)
 (905,890)
 20,483,486
 45,925
 67,187
 19,628,593
Share of income/(losses) from subsidiaries and VIEs (2)
 
 24,489,042
 20,442,796
 (151,361)
—
 (44,780,477)
—
Other (expenses)/income, net
 
 (4,156,514)
 6,458,954
 2,334,424
 (15,193)
—
 4,621,671
Income before tax
 
 20,270,413
 25,995,860
 22,666,549
 30,732
 (44,713,290)
 24,250,264
Income tax
 
—
 (2,437,898)
 (2,481,879)
 (112,061)
—
 (5,031,838)
Net income from continuing operations
 
 20,270,413
 23,557,962
 20,184,670
 (81,329)
 (44,713,290)
 19,218,426

Table of Contents
133
    
Year Ended December 31, 2023
Primary 
VIEs and 
 
     NetEase,     
Other 
    Beneficiaries of    
their
     Eliminating     Consolidated
Inc.
Subsidiaries
VIEs
subsidiaries
adjustments
totals
(RMB in thousands)
Net revenues
  
  
  
  
  
  
Third-party revenues
 —
 12,193,244
 1,220,371
 90,054,544
—
 103,468,159
Intra-Group revenues related to technical consulting and related service
(3)
 —
 386,828
 72,605,740
—
 (72,992,568)
—
Other intra-Group revenues (4)
 —
 873,787
 1,440,970
 734,857
 (3,049,614)
—
Total net revenues
 —
 13,453,859
 75,267,081
 90,789,401
 (76,042,182)
 103,468,159
Cost of revenues and operating expenses
Third-party cost of revenues and operating expenses
 (26,012)
 (14,240,361)
 (44,024,077)
 (17,468,565)
—
 (75,759,015)
Intra-Group cost of revenues and operating expenses related to
technical consulting and related services (3)
—
—
—
 (72,992,568)
 72,992,568
—
Other intra-Group cost of revenues and operating expenses (4)
—
 (1,454,070)
 (1,571,998)
 (23,546)
 3,049,614
—
Total cost of revenues and operating expenses
 (26,012)
 (15,694,431)
 (45,596,075)
 (90,484,679)
 76,042,182
 (75,759,015)
Operating (losses)/profit
 (26,012)
 (2,240,572)
 29,671,006
 304,722
—
 27,709,144
Share of income/ (losses) from subsidiaries and VIEs (2)
 29,849,939
 30,023,775
 (88,094)
—
 (59,785,620)
—
Other (expenses)/ income, net
 (345,851)
 3,929,431
 2,537,239
 226,964
—
 6,347,783
Income before tax
 29,478,076
 31,712,634
 32,120,151
 531,686
 (59,785,620)
 34,056,927
Income tax
—
 (1,928,340)
 (2,568,035)
 (203,329)
—
 (4,699,704)
Net income from continuing operations
 29,478,076
 29,784,294
 29,552,116
 328,357
 (59,785,620)
 29,357,223
    
Year Ended December 31, 2024
    
    
    
Primary 
     VIEs and      
    
NetEase,
Other 
Beneficiaries of 
their
Eliminating
Consolidated
Inc.
Subsidiaries
VIEs
subsidiaries
adjustments
totals
(RMB in thousands)
Net revenues
  
  
  
  
  
  
Third-party revenues
—
 13,062,383
 1,360,569
 90,872,284
—
 105,295,236
Intra-Group revenues related to technical consulting and related
service (3)
—
 359,211
 72,339,430
—
 (72,698,641)
—
Other intra-Group revenues (4)
—
 1,416,369
 1,525,153
 938,100
 (3,879,622)
—
Total net revenues
—
 14,837,963
 75,225,152
 91,810,384
 (76,578,263)
 105,295,236
Cost of revenues and operating expenses
Third-party cost of revenues and operating expenses
 (38,022)
 (14,872,314)
 (42,256,868)
 (18,544,042)
—
 (75,711,246)
Intra-Group cost of revenues and operating expenses related to
technical consulting and related services (3)
—
—
—
 (72,698,641)
 72,698,641
—
Other intra-Group cost of revenues and operating expenses (4)
—
 (1,453,656)
 (2,270,346)
 (155,620)
 3,879,622
—
Total cost of revenues and operating expenses
 (38,022)
 (16,325,970)
 (44,527,214)
 (91,398,303)
 76,578,263
 (75,711,246)
Operating (losses)/profit
 (38,022)
 (1,488,007)
 30,697,938
 412,081
—
 29,583,990
Share of income/ (losses) from subsidiaries and VIEs (2)
 30,071,305
 29,362,928
 55,384
—
 (59,489,618)
—
Other (expenses)/ income, net
 (335,674)
 4,658,054
 1,852,504
 (41,119)
—
 6,133,765
Income before tax
 29,697,609
 32,532,975
 32,605,826
 370,962
 (59,489,618)
 35,717,755
Income tax
—
 (1,895,096)
 (3,372,468)
 (193,844)
—
 (5,461,408)
Net income from continuing operations
 29,697,609
 30,637,879
 29,233,358
 177,118
 (59,489,618)
 30,256,347

Table of Contents
134
    
Year Ended December 31, 2022
Primary 
VIEs and 
    
NetEase,
    
Other
    Beneficiaries of    
their
     Eliminating     Consolidated
Inc.
Subsidiaries
VIEs
subsidiaries
adjustments
totals
(RMB in thousands)
Cash flows from operating activities:
 
   
   
   
  
  
  
Net cash (used in)/provided by transactions with third-parties
 
 (255,519)
 707,587
 (40,202,699)
 67,459,864
—
 27,709,233
Net cash provided by/(used in) transactions with intra-Group
companies related to technical consulting and related service
 
—
 820,545
 66,150,273
 (66,970,818)
—
—
Dividends received from subsidiaries and VIEs (5)
 
—
 29,094,971
—
—
 (29,094,971)
—
Net cash provided by/(used in) other transactions with intra-Group
companies
 
 2,893
 (3,478,205)
 3,175,860
 299,452
—
—
Net cash (used in)/provided by operating activities
 
 (252,626)
 27,144,898
 29,123,434
 788,498
 (29,094,971)
 27,709,233
Cash flows from investing activities:
 
  
  
  
  
  
  
Net cash (used in)/provided by transactions with third-parties
 
 (223)
 (10,434,166)
 3,136,494
 (71,832)
—
 (7,369,727)
Loans made to intra-Group companies (6)
 
 (6,013,061)
 (33,737,997)
 (1,356,487)
—
 41,107,545
—
Loans repaid by intra-Group companies (6)
 
 2,501,060
 8,292,517
 668,856
—
 (11,462,433)
—
Other investing activities with intra-Group companies (7)
 
—
 (1,912)
 (31,000)
—
 32,912
—
Net cash (used in)/provided by investing activities
 
 (3,512,224)
 (35,881,558)
 2,417,863
 (71,832)
 29,678,024
 (7,369,727)
Cash flows from financing activities:
 
  
  
  
  
  
  
Net cash (used in)/provided by transactions with third-parties
 
 (21,326,822)
 6,636,050
 4,505,614
 (52,541)
—
 (10,237,699)
Cash dividend paid to intra-Group companies (5)
 
—
—
 (29,094,971)
—
 29,094,971
—
Loans received from intra-Group companies (6)
 
 33,461,057
 7,168,199
 276,940
 201,349
 (41,107,545)
—
Loans repaid to intra-Group companies (6)
 
 (8,292,517)
 (2,862,847)
 (272)
 (306,797)
 11,462,433
—
Other financing activities with intra-Group companies (7)
 
—
 31,000
 1,912
—
 (32,912)
—
Net cash provided by/(used in) financing activities
 
 3,841,718
 10,972,402
 (24,310,777)
 (157,989)
 (583,053)
 (10,237,699)
    
Year Ended December 31, 2023
Primary 
VIEs and 
    
NetEase,
    
Other 
    Beneficiaries of    
their
     Eliminating     Consolidated
Inc.
Subsidiaries
VIEs
subsidiaries
adjustments
totals
(RMB in thousands)
Cash flows from operating activities:
 
   
   
  
  
   
  
Net cash (used in)/provided by transactions with third-parties
 
 (354,694)
 475,946
 (37,115,437)
 72,325,460
—
 35,331,275
Net cash provided by/(used in) transactions with intra-Group
companies related to technical consulting and related service
 
—
 411,369
 72,887,298
 (73,298,667)
—
—
Dividends received from subsidiaries and VIEs (5)
 
—
 26,455,948
—
—
 (26,455,948)
—
Net cash provided by/(used in) other transactions with intra-Group
companies
 
 476
 (502,444)
 (137,577)
 639,545
—
—
Net cash (used in)/provided by operating activities
 
 (354,218)
 26,840,819
 35,634,284
 (333,662)
 (26,455,948)
 35,331,275
Cash flows from investing activities:
 
Net cash used in transactions with third-parties
 
 (589)
 (3,584,348)
 (13,375,849)
 (82,645)
—
 (17,043,431)
Loans made to intra-Group companies (6)
 
 (5,100,814)
 (32,331,958)
 (13,748,357)
—
 51,181,129
—
Loans repaid by intra-Group companies (6)
 
 246,020
 7,004,819
 1,200,611
—
 (8,451,450)
—
Other investing activities with intra-Group companies (7)
 
—
 (347,375)
 (17,100)
—
 364,475
—
Net cash used in investing activities
 
 (4,855,383)
 (29,258,862)
 (25,940,695)
 (82,645)
 43,094,154
 (17,043,431)
Cash flows from financing activities:
 
Net cash (used in)/provided by transactions with third-parties
 
 (19,980,650)
 (6,357,771)
 4,855,694
 15,673
—
 (21,467,054)
Cash dividend paid to intra-Group companies (5)
 
—
—
 (26,455,948)
—
 26,455,948
—
Loans received from intra-Group companies (6)
 
 32,327,958
 18,639,436
 4,000
 209,735
 (51,181,129)
—
Loans repaid to intra-Group companies (6)
 
 (7,004,819)
 (1,184,057)
—
 (262,574)
 8,451,450
—
Other financing activities with intra-Group companies (7)
 
—
 17,100
 347,375
—
 (364,475)
—
Net cash provided by/(used in) financing activities
 
 5,342,489
 11,114,708
 (21,248,879)
 (37,166)
 (16,638,206)
 (21,467,054)

Table of Contents
135
    
Year Ended December 31, 2024
Primary 
VIEs and 
    
NetEase,
    
Other 
    Beneficiaries of    
their
     Eliminating     Consolidated
Inc.
Subsidiaries
VIEs
subsidiaries
adjustments
totals
(RMB in thousands)
Cash flows from operating activities:
 
  
  
   
   
  
  
Net cash (used in)/provided by transactions with third-parties
 
 (20,988)
 2,140,247
 (37,271,070)
 74,828,624
—
 39,676,813
Net cash provided by/(used in) transactions with intra-Group
companies related to technical consulting and related service
 
—
 259,015
 73,526,878
 (73,785,893)
—
—
Dividends received from subsidiaries and VIEs (5)
 
—
 30,766,934
—
—
 (30,766,934)
—
Net cash provided by/(used in) other transactions with intra-Group
companies
 
 228,056
 (117,507)
 (65,495)
 (45,054)
—
—
Net cash provided by operating activities
 
 207,068
 33,048,689
 36,190,313
 997,677
 (30,766,934)
 39,676,813
Cash flows from investing activities:
 
Net cash (used in)/provided by transactions with third-parties
 
 (292)
 (1,633,126)
 19,784,580
 (234,760)
—
 17,916,402
Loans made to intra-Group companies (6)
 
 (6,437,272)
 (34,610,921)
 (14,876,404)
 (1,438,000)
 57,362,597
—
Loans repaid by intra-Group companies (6)
 
 3,634,436
 11,781,140
 16,200,334
—
 (31,615,910)
—
Other investing activities with intra-Group companies (7)
 
 (356)
—
 (22,250)
—
 22,606
—
Net cash (used in)/provided by investing activities
 
 (2,803,484)
 (24,462,907)
 21,086,260
 (1,672,760)
 25,769,293
 17,916,402
Cash flows from financing activities:
 
Net cash used in transactions with third-parties
 
 (20,630,929)
 (919,224)
 (5,769,454)
 (16,095)
—
 (27,335,702)
Cash dividend paid to intra-Group companies (5)
 
—
—
 (30,766,934)
—
 30,766,934
—
Loans received from intra-Group companies (6)
 
 34,610,921
 20,436,682
 1,438,000
 876,994
 (57,362,597)
—
Loans repaid to intra-Group companies (6)
 
 (11,529,250)
 (19,187,330)
 (251,889)
 (647,441)
 31,615,910
—
Other financing activities with intra-Group companies (7)
 
—
 22,606
—
—
 (22,606)
—
Net cash provided by/(used in) financing activities
 
 2,450,742
 352,734
 (35,350,277)
 213,458
 4,997,641
 (27,335,702)
Note:
(1) It represents the elimination of intercompany balances among NetEase, Inc., other subsidiaries, primary beneficiary of VIEs,
and VIEs and their subsidiaries.
(2) It represents the elimination of the investments among NetEase, Inc., other subsidiaries, primary beneficiary of VIEs, and VIEs
and their subsidiaries.
(3) It represents the elimination of the intercompany technical consulting and related service charges at the consolidation level.
(4) It represents the elimination of the other intercompany activities at the consolidation level.
(5) It represents the elimination of the dividends payment at the consolidation level. 
(6) It represents the elimination of intra-Group loans related cash activities among NetEase, Inc., other subsidiaries, primary
beneficiary of VIEs, and VIEs and their subsidiaries.
(7) It represents the elimination of other investing and financing activities among NetEase, Inc., other subsidiaries, primary
beneficiary of VIEs, and VIEs and their subsidiaries.
Restrictions on Foreign Exchange and the Ability to Transfer Cash between Entities, Across Borders and to U.S. Investors
NetEase, Inc.’s ability to pay dividends, if any, to its shareholders and ADS holders and to service any debt it may incur will
depend upon dividends paid by our China mainland subsidiaries. See “—Management of Capital Resources” above.

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Furthermore, if certain procedural requirements are satisfied, the payment of current account items, including profit distributions
and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE or its
local branches. However, where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses, such as
the repayment of loans denominated in foreign currencies, approval from or registration with competent government authorities or its
authorized banks is required. The PRC government may take measures at its discretion from time to time to restrict access to foreign
currencies for current account or capital account transactions. If the foreign exchange regulatory system prevents us from obtaining
sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our
offshore intermediary holding companies or ultimate parent company, and therefore, our shareholders or investors in our ADSs. Further,
we cannot assure you that new regulations or policies will not be promulgated in the future, which may further restrict the remittance of
RMB into or out of the PRC. We cannot assure you, in light of the restrictions in place, or any amendment to be made from time to time,
that our current or future China mainland subsidiaries will be able to satisfy their respective payment obligations that are denominated in
foreign currencies, including the remittance of dividends outside of the PRC. If any of our subsidiaries incurs debt on its own behalf in
the future, the instruments governing such debt may restrict its ability to pay dividends. In addition, our China mainland subsidiaries are
required to make appropriations to certain statutory reserve funds, which are not distributable as cash dividends except in the event of a
solvent liquidation of the companies.
For PRC and United States federal income tax consideration of an investment in the ADSs, see Item 10.E. “Additional
Information—Taxation.”
C.
Research and Development, Patents and Licenses, etc.
We believe that an integral part of our future success will depend on our ability to develop and enhance our services. Our
product development efforts and strategies consist of incorporating new technologies from third parties as well as continuing to develop
our own proprietary technologies.
We have utilized and will continue to utilize the products and services of third parties to enhance our platform of technologies
and services to provide competitive and diverse online game, education and other innovative services to our users. In addition, we plan to
continue to expand our technologies, products and services and registered user base through diverse online community products and
services developed internally, particularly with respect to our games and related value-added services. We will seek to continually
improve and enhance our existing services to respond to rapidly evolving competitive and technological conditions. For the years 2022,
2023 and 2024, we spent RMB15.0 billion, RMB16.5 billion and RMB17.5 billion (US$2.4 billion), respectively, on R&D activities.
D.
Trend Information
Other than as described elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or
events that are reasonably likely to have a material adverse effect on our revenue, income from continuing operations, profitability,
liquidity or capital resources, or that would cause our reported financial information not necessarily to be indicative of future operation
results or financial condition.

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E.
Critical Accounting Estimates
The preparation of our consolidated financial statements requires our management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements, which have been prepared in accordance with U.S. GAAP. Our
management periodically re-evaluates these estimates and assumptions based on historical experience and other factors, including
expectations of future events that they believe to be reasonable under the circumstances. Actual results may differ significantly from
those estimates and assumptions. We have identified the following accounting policies and estimates as the most critical to an
understanding of our financial position and results of operations, because the application of these policies requires significant and
complex management estimates, assumptions and judgment, and the reporting of materially different amounts could result if different
estimates or assumptions were used or different judgments were made.
We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters
that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to
occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material
impact on our financial condition or results of operations. There are other items within our financial statements that require estimation
but are not deemed critical, as defined above. Changes in estimates used in these and other items could have a material impact on our
financial statements.
For a detailed discussion of our significant accounting policies and related judgments, please see “Notes to the Consolidated
Financial Statements—Note 2 Principal Accounting Policies.” You should read the following description of critical accounting estimates
in conjunction with our consolidated financial statements and other disclosures included in this annual report.
Estimate of Average Playing Period of Paying Players
We operate mobile games and PC games. We are the principal of substantially all games we operate, including both in-house
developed games and licensed games. As all these games are hosted on our servers, we have the pricing discretion, and are responsible
for the sale and marketing of the games as well as any related customer services.
Most of our game revenues are generated from the sale of in-game virtual items and revenues of certain online games in-game
virtual items are recognized ratably over the respective estimated average playing period of paying players in these games.
Nature of Estimates Required – average playing period of paying players. The average playing period of paying players is
subjected to period assessment. Considering the events or circumstances may change that indicate the change of the estimate, we
assessed the average playing period of paying players on a quarterly basis. We make a qualitative and quantitative assessment to
determine the average playing period of paying players for each game. If a qualitative and quantitative assessment identifies the change
of the average playing period of paying players based on newly available paying players information, we may prospectively apply the
change of estimate.
Assumptions Used. Changes in assumptions or estimates can materially affect average playing period of paying players and,
therefore, can affect the test results. The following are key assumptions we use in making the average playing period of paying players
for each game:
●
Players’ churn rates. A churn rate is calculated starting from the point-in-time when related in-game virtual items are
delivered to the paying players’ accounts and track populations of paying players who made their initial purchases during
the interval period, or the Cohort. Then, we track the number of paying players from each Cohort who left subsequent to
their initial purchase. We make assumptions about the future players’ churn rate to the ending point of a paying player’s
lifespan beyond the date for which we observed and extrapolate the actual observed churn rate to arrive at an estimated
weighted average playing period for paying players of the selected games.
●
Similarities between new games and existing games. We make assumption regarding similarities between new games and
existing games with sufficient historical data. These assumptions include, but not limited to types of games and
characteristics of targeted players.

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In connection with our periodic reviews of the estimate, the assumptions are evaluated accordingly considering historical
players’ churn rates, similarities between new games and existing games and management judgment. Updates to these assumptions will
impact the estimate of average playing period of paying players and the revenue recognized accordingly. If the estimate of average
playing period of paying players is extended, the revenue will be recognized over a longer period and vice versa. See Note 2(c)(i) of the
Notes to the Consolidated Financial Statements for more information.
Impairment of Long-term Investments
For investments in common stock or in-substance commons stocks issued by privately-held companies over which we did not
have significant influence, and investments in privately-held companies’ shares that are not common stock or in-substance common
stocks, as these securities do not have readily determinable fair value, we measure these investments at cost, less impairment, if any, plus
or minus changes resulting from observable price changes in orderly transactions for the same or a similar investment in the same
issuer(referred to as Measurement Alternative).
Nature of Estimates Required – Impairment assessment of long-term equity investments without readily determinable fair
values. We regularly evaluate the impairment of the investments in privately-held companies without readily determinable fair value
periodically or when events or circumstances indicate that the carrying amount may not be recoverable. For equity investments without
readily determinable fair value for which we have elected to use the measurement alternative, we make a qualitative assessment of
whether the investment is impaired periodically, or when events or circumstances indicate that the carrying amount may not be
recoverable, applying significant judgement in considering various events and factors.
Assumptions and Approach Used – Impairment assessment. The approach we used to assess investment impairment are based
on assumptions and management judgement in considering various factors and events. The events or circumstances and factors we
consider for the impairment assessment including a) significant deterioration in the earnings performance, credit rating, asset quality, or
business prospects of the investees; b) significant adverse change in the regulatory, economic, or technological environment of the
investees; c) significant adverse change in the general market condition of either the geographical area or the industry in which the
investees operate; d) bona fide offer to purchase, an offer by the investee to sell, or a completed auction process for the same or similar
investment for an amount less than the carrying amount of that investment; e) factors that raise significant concerns about the investees’
ability to continue as a going concern; f) factors that raise significant concerns about the performance of new products and g) valuation
methods and key estimates in the determination of the impairment amounts. Many of the factors used in assessing performance and
financial position of the investee are outside the control of management, and these assumptions and judgement may change in future
periods.
Assumptions and Approach Used – Fair value of the investees. If the assessment indicates that there is an impairment indicator,
we estimate the investment’s fair value in accordance with the principles of ASC 820. We measure the fair value of the investees
considering the severity and duration of the impairment indicator and the existence of any positive or mitigating factors or based on
income approach or market approach.
Income approach uses cash flow projections. Inherent in the investees’ development of cash flow projections are assumptions
and estimates derived from a review of the investees’ operating results, business plan forecasts, expected growth rates, and cost of
capital, similar to those a market participant would use to assess fair value. We also make certain assumptions about future economic
conditions and other data. Many of the factors used in assessing fair value are outside the control of management, and these assumptions
and estimates may change in future periods.
The market approach is another method for measuring the fair value of the investment which relies on the market value (i.e.,
market capitalization) of companies that are engaged in the same or similar investment of investees being evaluated. In addition, to the
extent available we also consider third-party valuations that were prepared for other business purposes.
Assumptions used in Income Approach: The following are key assumptions we use in making cash flow projections:
●
Business projections. We make assumptions about the investees’ business in the marketplace. These assumptions drive our
planning assumptions for each revenue streams. We also make assumptions about cost levels (e.g., capacity utilization, cost
performance). These projections are derived using investees’ business plan forecasts.

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●
Long-term growth rate. A growth rate is used to calculate the terminal value of the business and is added to the present
value of the debt-free interim cash flows. The growth rate is the expected rate at which the investees’ business unit’s
earnings stream is projected to grow beyond the planning period.
●
Discount rate. When measuring possible impairment, future cash flows are discounted at a rate that is consistent with a
weighted-average cost of capital that we anticipate a potential market participant would use. Weighted-average cost of
capital is an estimate of the overall risk-adjusted pre-tax rate of return expected by equity and debt holders of a business
enterprise.
●
Economic projections. Assumptions regarding general economic conditions are included in and affect our assumptions
regarding industry sales and pricing estimates for the investees’ business. These macroeconomic assumptions include, but
are not limited to, regulatory, economic, or technological development, inflation, interest rates, customer preference, and
foreign currency exchange rates.
Assumptions used in Market Approach: The following are key assumptions we use in market approach:
●
Selection of comparable companies and multiples. We make selection of listed comparable companies and appropriate
multiples by taking into account of the main businesses, the scale and the business performance, development stage,
product mix, financial position of these companies and the investees.
●
Timing and probabilities of different scenarios. Timing and probabilities of different scenarios such as redemption,
liquidation and IPO are based on our best estimate.
●
Estimated volatility rate. Estimated volatility rate was estimated based on annualized standard deviation of the daily return
embedded in historical stock prices of comparable companies with a time horizon close to the expected term.
●
Risk-free rate. We determined the risk-free rate based on the interest rate of different government bonds with a time horizon
close to expected term. The selections of government bonds are made mainly based on the financing currency of the
investee and the country where the main operation of the investee take place.
●
Discount for lack of marketability. The discount for lack of marketability, or the DLOM, was estimated based on the
option-pricing method. Under this method, the cost of put option, which can hedge the price change before the privately
held share can be sold, was considered as a basis to determine the lack of marketability discount.
For long-term equity investments without readily determinable fair values, we record an impairment in the consolidated
statements of operations and comprehensive income to the extent the carrying amount exceeds the fair value.
Changes in assumptions or estimates can materially affect the fair value measurement of the investment and, therefore, can
affect the test results. For the year ended December 31, 2024, an aggregate of RMB1.0 billion in investment impairments were recorded.
See Note 11 of Notes to the Consolidated Financial Statements for more information.

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Item 6.   Directors, Senior Management and Employees
A.           Directors and Senior Management
The names of our directors and executive officers, their ages as of the date of the filing of this annual report and the principal
positions with NetEase held by them are as follows:
Name
    
Age
    
Position
William Lei Ding
53
Director and Chief Executive Officer
Alice Yu-Fen Cheng (1)
63
Independent Director
Grace Hui Tang (1)
65
Independent Director
Joseph Tze Kay Tong (1)
62
Independent Director
Michael Man Kit Leung
71
Independent Director
Yingfeng Ding
53
Executive Vice President
Paul W. Boltz, Jr.
55
General Counsel
Sarah Ying Li
42
Head of Financial Reporting
(1) Alice Cheng, Grace Tang and Joseph Tong are members of the audit, compensation, nominating and environmental, social and
governance (ESG) committee.
Biographical Information
Lei Ding, also known as William Lei Ding, our founder, has served as a director of our company since July 1999 and as Chief
Executive Officer for the NetEase group since November 2005. From March 2001 until November 2005, Mr. Ding served as our chief
architect, and from June 2001 until September 2001, he served as our acting chief executive officer and acting chief operating officer.
From July 1999 until March 2001, Mr. Ding served as co-chief technology officer, and from July 1999 until April 2000, he also served as
our interim chief executive officer. Mr. Ding holds a Bachelor of Science degree in Communication Technology from the University of
Electronic Science and Technology of China.
Alice Yu-Fen Cheng, also known as Alice Cheng, has served as a director of our company since June 2007. Ms. Cheng has also
served as a non-executive director of J&T Global Express Limited since May 2020 and as a member of its audit committee since the
company listed on the Hong Kong Stock Exchange in October 2023 (HKEX: 1519). From 2005 to 2021, Ms. Cheng served as the chief
financial officer of BBK Electronics Corp., Ltd., a PRC-based manufacturer of audio-visual equipment. From 2010 to 2013, Ms. Cheng
served as a supervisor of Wistron Information Technology Corporation in Taiwan, an information technology company with operations in
Taiwan, China and Japan. From 2002 to 2005, Ms. Cheng served as financial controller of Wistron Corporation, a Taiwanese original
design manufacturer of notebook computers and other electronics. Prior to that, Ms. Cheng held various positions with Acer Inc., a
Taiwanese computer manufacturer, culminating in the position of financial controller. Ms. Cheng received a Bachelor of Accounting
from the Chinese Culture University in Taiwan in 1983 and a Master of Business Administration from the Thunderbird School of Global
Management in Arizona in 2003. Ms. Cheng is also licensed as a certified public accountant in Taiwan and the PRC.
Grace Hui Tang, also known as Grace Tang, has served as a director of our company since July 2022. Ms. Tang worked at
PricewaterhouseCoopers for more than 30 years, including approximately 19 years as an audit partner in Hong Kong and Chinese
mainland, until her retirement in 2020. At PricewaterhouseCoopers, Ms. Tang was responsible for the audits of numerous public and
private companies in Hong Kong, China mainland, the United States and other jurisdictions. Since 2009, she has also been a professor at
the Guanghua School of Management of Peking University where she teaches courses on accounting and auditing for the graduate school
of the accounting department and on career development. Since September 2022, Ms. Tang has been teaching accounting and auditing
courses to foreign students at Beijing Foreign Studies University as a professor. In addition, Ms. Tang serves as an independent director
of Brii Biosciences Ltd. (HKEX: 2137), Elkem ASA (OSLO: ELK), ECARX Holdings Inc. (Nasdaq: ECX) and Pirelli & C.S.p.A.
(PIRC.MI). Ms. Tang received a bachelor’s degree in accounting from the University of Utah and a Master of Business Administration
degree from Utah State University. Ms. Tang is a U.S. certified public accountant and a fellow of the Hong Kong Institute of Certified
Public Accountants.

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Joseph Tze Kay Tong, also known as Joseph Tong, has served as a director of our company since March 2003. From January
2003 to November 2021, Mr. Tong was a director of Parworld Investment Management Limited, which provides financial and
investment advisory services. From December 2002 until April 2004, Mr. Tong was engaged in establishing offices and operations in
Hong Kong and China mainland, setting up accounting and internal control policies and overseeing the overall operations for TLM
Apparel Co., Ltd., a garment trading company operating in Hong Kong and China mainland which he co-founded. Prior to that, from
September 2000 to September 2002, Mr. Tong was the e-commerce director of the Asia Region for Universal Music Limited where he
was responsible for forming e-business development strategies and overseeing new promotional opportunities. Mr. Tong received a
Bachelor of Social Science degree with honors in Accounting and Statistics from the University of Southampton, England. He is a
member of the American Institute of Certified Public Accountants and an associate member of the Hong Kong Institute of Certified
Public Accountants.
Michael Man Kit Leung, also known as Michael Leung, has served as a director of our company since July 2002. Mr. Leung was
a responsible officer of Grand Moore Capital Limited from September 2019 to November 2021. Mr. Leung was appointed executive
director of Unitas Holdings Limited (stock code: 8020) from September 2011 to November 2018, and served as a responsible officer
from May 2011 to November 2018 of Chanceton Capital Partners Limited, a subsidiary of Unitas Holdings Limited. Previously, Mr.
Leung was a director of Emerging Markets Partnership (Hong Kong) Limited, the principal adviser to the AIG Infrastructure Fund L.P.,
in 1999. Mr. Leung also held senior positions in the Hong Kong Branch of the Swiss Bank Corporation, SG Securities (HK) Limited
(formerly known as Crosby Securities (Hong Kong) Limited) and Peregrine Capital Limited. Mr. Leung currently is an independent non-
executive director and chairman of the audit committee for Orange Sky Golden Harvest Entertainment (Holdings) Limited (stock code:
1132) and Luye Pharma Group Ltd. (stock code: 2186), all of which are companies listed on the Hong Kong Stock Exchange. Mr. Leung
also serves as an independent non-executive director on the board of China Ting Group Holdings Limited (stock code: 3398), a company
listed on the Hong Kong Stock Exchange. Mr. Leung received a Bachelor’s Degree in Social Sciences from the University of Hong Kong
in October 1977 with a major in Accounting, Management and Statistics.
Yingfeng Ding, also known as Ding Ding, has served as Executive Vice President for the NetEase group since 2016 and is
currently in charge of our Interactive Entertainment Group, a part of our online games division. Mr. Ding previously served as Vice
President for the NetEase group, responsible for the product development, operation and management of our online games division from
2011 to 2016. Mr. Ding has more than 25 years of experience in game development and design. Since joining NetEase in 2002, Mr. Ding
has also led the design and development of several signature products of the NetEase group, including Fantasy Westward Journey.
Paul W. Boltz, Jr. has served as General Counsel for the NetEase group since January 2024. Mr. Boltz previously served as our
International General Counsel from February 2023 to January 2024. Prior to joining NetEase, he was a partner with the international law
firms of Gibson, Dunn & Crutcher, Ropes & Gray (where he was the managing partner of their Hong Kong office) and Morrison &
Foerster in Hong Kong. Mr. Boltz has 25 years of experience practicing law in Asia, with a particular focus on capital markets, M&A,
joint ventures and public company compliance for technology companies, including the NetEase group since its listing on Nasdaq in
2000. Mr. Boltz is qualified to practice law in Pennsylvania and New Jersey and a practicing solicitor in Hong Kong. He received his
Bachelor of Arts degree in Economics from the University of Pennsylvania and a Juris Doctor degree from Villanova University School
of Law.
Sarah Ying Li, also known as Sarah Li, has served as Head of Financial Reporting for the NetEase group since February 2024.
Ms. Li previously served as our Group Financial Controller from April 2016. Prior to joining NetEase, Ms. Li worked in international
audit firms. She worked at KPMG from January 2006 to April 2016, culminating in the position of senior audit manager and department
head. She also worked at PricewaterhouseCoopers from September 2004 to January 2006 as an audit associate. Ms. Li received a
Bachelor of Arts (English (International Business)) degree from Guangdong University of Foreign Studies in 2004. She is a member of
the American Institute of Certified Public Accountants, the Association of Chartered Certified Accountants and the Chinese Institute of
Certified Public Accountants.
Relationships Among Directors or Executive Officers; Right to Nominate Directors
There are no family relationships among any of the directors or executive officers of our company. None of our directors were
nominated pursuant to a contractual or other right.

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B.           Compensation
Executive Officer and Director Compensation
In 2024, we paid our executive officers and directors aggregate cash compensation of RMB466.1 million (US$63.8 million). In
2024, we also granted restricted share unit awards under our 2019 Share Plan to our executive officers, which, if vested, represented less
than 1% of our total outstanding ordinary shares as of December 31, 2024.
We have not separately set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive
officers and directors, other than pursuant to relevant statutory requirements. Our PRC subsidiaries and the consolidated VIEs are
required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical
insurance, unemployment insurance and other statutory benefits and a housing provident fund.
Indemnification Agreements
All of our current directors and executive officers have entered into indemnification agreements in which we agree to indemnify,
to the fullest extent allowed by Cayman Islands law, our charter documents or other applicable law, those persons from any liability or
expenses, unless the liability or expense arises from such person’s own willful negligence or willful default. The indemnification
agreements also specify the procedures to be followed with respect to indemnification.
Employment Agreements
We have entered into employment and related agreements with each of our executive officers. These agreements include: (i) a
covenant that prohibits the executive officer from engaging in any activities that compete with our business during and for twelve (12)
months after their employment with us, (ii) a requirement that executive officers assign all rights in company-related inventions to us and
to keep our proprietary information confidential, and (iii)  provisions for severance payments in the event the employment of the
executive officer is terminated.
Share Incentive Plans
General
We have two share incentive plans, which we refer to collectively in this annual report as our “Share Plans.” Our board
approved the 2009 RSU Plan in November 2009. The 2009 RSU Plan expired in November 2019 in accordance with its terms, such that
no new awards may be granted under this plan although outstanding awards granted previously will remain governed by it. Our board
approved our 2019 Restricted Share Unit Plan, or the 2019 RSU Plan, in October 2019, as a replacement for the 2009 RSU Plan. Our
board subsequently approved an amendment and restatement of the 2019 RSU Plan in February 2023 to enable share option awards to be
granted pursuant to such plan and make certain other amendments and renamed it as the Amended and Restated 2019 Share Incentive
Plan (referred to in this annual report as the 2019 Share Plan).
The purpose of our Share Plans is to attract and retain the best available personnel, to provide additional incentive to employees,
directors and consultants and to promote the success of our business. The Share Plans provide for the granting of incentive awards of
restricted share units, which may or may not be granted with dividend equivalent rights, and the 2019 Share Plan also provides for the
granting of share option awards.
The Share Plans are not subject to the Employee Retirement Income Security Act of 1974, as amended, and neither of the Share
Plans a “qualified plan” within the meaning of Section 401(a) of the Code.
Plan Administration
Our board has designated our compensation committee to administer the Share Plans, and it may designate one or more of our
officers to exercise its authority thereunder from time to time.

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Securities Subject to the Share Plans
The maximum aggregate number of our ordinary shares which were issuable pursuant to all awards under the 2009 RSU Plan
was 323,694,050 ordinary shares.
The maximum aggregate number of our ordinary shares which may be issued pursuant to all awards under the 2019 Share Plan
is 322,458,300 ordinary shares. Such ordinary shares may, in whole or in part, be authorized but unissued shares or shares that will have
been or may be reacquired by us. It is anticipated that all future awards to our employees, directors and consultants will be granted
pursuant to the 2019 Share Plan or any other future plan adopted by our board and, if appropriate, our shareholders.
The 2009 RSU Plan provides that in the event of certain corporate transactions, including specified types of mergers and
acquisition transactions, each outstanding award granted under the 2009 RSU Plan shall automatically become fully vested and be
released from any restrictions on transfer and repurchase or forfeiture rights, immediately prior to the specified effective date of such
corporate transaction, unless the award is assumed by the successor company or its parent company in connection with the corporate
transaction. Upon consummation of such corporate transactions, each outstanding award shall be terminated unless the award is assumed
by the successor company or its parent company in connection with the applicable corporate transaction. Our board will determine
whether an award was assumed in the manner contemplated by the 2009 RSU Plan.
The 2019 Share Plan provides that in the event of certain corporate transactions, including specified types of mergers and
acquisition transactions, the administrator may (a) accelerate the vesting, in whole or in part, of any award; (b) purchase any award for an
amount of cash or ordinary shares of our company equal to the value that could have been attained upon the exercise of the award or the
realization of the plan participant’s rights had the award been currently fully vested; or (c) provide for the assumption, conversion or
replacement of any award by the successor corporation, or a parent or subsidiary of the successor corporation, with other rights or
property selected by the plan administrator in its sole discretion, or the assumption or substitution of the award by the successor or
surviving corporation, or a parent or subsidiary of the surviving or successor corporation, with appropriate adjustments as to the number
and kind of shares and prices as the plan administrator deems, in its sole discretion, reasonable, equitable and appropriate.
Eligibility
Awards can be issued to participants in the Share Plans, which include employees, directors or consultants of us, our
subsidiaries, the VIEs and certain other related entities.
Awards under the Share Plans
Awards under the Share Plans are evidenced by an award agreement which contains, among other things, such provisions
concerning the exercise price (in the case of share options), how the award may be settled upon vesting (in the case of restricted share
unit awards) and forfeiture upon termination of an award grantee’s service with our company or entities within our group (by reason of
death, disability, retirement or otherwise), as have been determined by our board, either acting directly or through our compensation
committee or one or more of our officers.
Restricted share units do not represent any actual ownership interest in us. The units granted correspond in number and value to
a specified number of our ordinary shares. No actual shares are issued. Instead, the units are tracked in a bookkeeping account. The units
may be subject to forfeiture provisions to replicate the treatment of restricted shares. The units can ultimately be paid in cash or ordinary
shares, as our board determines and as set forth in the applicable award agreement. Dividend equivalents may be paid on the restricted
share units. A dividend equivalent right entitles the participant to receive cash compensation measured by the dividends paid with respect
to our ordinary shares. The dividend equivalents may be paid out at the time of the dividend or may be credited to the participant’s
account and converted to additional units.
With respect to share options which may be granted under the 2019 Share Plan, the exercise price for each award is determined
in accordance with the terms of the 2019 Share Plan and stated in the award agreement. The vested portion of an option will expire if not
exercised prior to the expiration date of the award as set forth in the award agreement. The 2019 Share Plan provides that the maximum
exercisable term of share option awards is ten years from the date of a grant.

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Conditions of Awards
Our board, either acting directly or through our compensation committee or one or more of our officers, is authorized to
determine the provisions, terms and conditions of each award, including, without limitation, the award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, settlement of the award, payment contingencies and satisfaction of any
performance criteria established by our board. Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the award agreement.
Amendment; Termination
Under the Share Plans, our board may at any time terminate, suspend, or amend the Share Plans in any respect, except that no
termination, suspension or amendment will be effective without shareholder approval if such approval is required to comply with any
law, regulation or stock exchange rule and no such change may adversely affect any award previously granted without the written
consent of the recipient. The 2009 RSU Plan expired in November 2019 in accordance with its terms. The 2019 Share Plan, amended and
restated and effective on February 22, 2023, will expire in February 2033.
Non-Transferability of Awards
Under the Share Plans, awards may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except
by will or by the laws of descent and distribution and during the lifetime of the participants, to the extent and in the manner provided in
the award agreement. The Share Plans permit the designation of beneficiaries by holders of awards in the event of the participant’s death.
After any such transfer, the original recipient shall continue to remain subject to the withholding tax requirements described below.
Payment of Taxes
No ordinary shares shall be delivered under the Share Plans to any participant or other person until such participant or other
person has made arrangements acceptable to us regarding payment of Chinese, Cayman Islands, U.S. and any other federal, state,
provincial, local or other taxes required by law. Alternatively, we will withhold or collect from the participant an amount sufficient to
satisfy such tax obligations.
Other Equity Incentive Plans
Youdao, our subsidiary, adopted its 2015 Share Incentive Plan, or the 2015 Youdao Plan, in February 2015 (and amended it in
April 2018), under which 10,222,222 ordinary shares of Youdao are reserved for issuance. As of March 31, 2025, options to purchase a
total of 2,694,185 ordinary shares were outstanding under the 2015 Youdao Plan, and 2,371,225 of such options had vested and become
exercisable. Additionally, as of March 31, 2025, restricted share units representing an aggregate of 605,288 shares were outstanding
under the 2015 Youdao Plan. In April 2023, Youdao adopted a 2023 Share Incentive Plan, or the 2023 Youdao Plan, under which
5,668,625 shares of Youdao are reserved for issuance. As of March 31, 2025, no options or restricted share units were outstanding under
the 2023 Youdao Plan.
NetEase Cloud Music, our subsidiary, adopted its 2016 Share Incentive Plan, or the 2016 NetEase Cloud Music Plan, in May
2016, under which 15,000,000 ordinary shares of NetEase Cloud Music are reserved for issuance. As of March 31, 2025, options to
purchase a total of 1,258,490 ordinary shares were outstanding under the 2016 NetEase Cloud Music Plan, and 1,038,665 of such options
had vested and become exercisable; and restricted share units representing an aggregate of 182,997 shares were outstanding and remain
unsettled under the 2016 NetEase Cloud Music Plan, which may be satisfied by new or existing shares of NetEase Cloud Music.
Additionally, NetEase Cloud Music adopted the 2022 Restricted Share Unit Plan, or the 2022 NetEase Cloud Music Plan (together with
the 2016 NetEase Cloud Music Plan, the “NetEase Cloud Music Plans”) in August 2022 (and as amended from time to time), pursuant to
which it may issue up to 10,462,280 new shares. As of March 31, 2025, 4,260,547 restricted share units had been granted under the 2022
NetEase Cloud Music Plan.

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In addition, certain of our other subsidiaries have adopted their own equity incentive plans, which allow the relevant subsidiaries
to grant options or other awards to certain of our employees. The awards under the 2015 Youdao Plan, the NetEase Cloud Music Plans
and such other plans expire in four to seven years from the date of grant and either vest or have a vesting commencement date upon
certain conditions being met. The awards can become 100% vested on the vesting commencement date, or vest in two, three, four or five
substantially equal annual installments with the first installment vesting on the vesting commencement date.
C.           Board Practices
At each annual general meeting of our shareholders, our shareholders are asked to elect the directors nominated to serve for the
ensuing year until the next annual general meeting of shareholders and until their successors are elected and duly qualified, or until such
directors are otherwise vacated in accordance with our company’s memorandum and articles of association. For information regarding
the period during which our officers and directors have served in their respective positions, please refer to Item 6.A. “Directors, Senior
Management and Employees—Directors and Senior Management.” We have no specific policy with respect to director attendance at our
annual general meetings of shareholders, and no director attended the annual general meeting of shareholders held on June 26, 2024.
Each of our non-executive directors has been determined by our board to be “independent” under applicable U.S. regulations, as
that term is defined in NASDAQ Marketplace Rule 5606(a)(2) and acts as an “independent non-executive director” of our company for
the purpose of the Hong Kong Listing Rules. Our company has received an annual confirmation on his/her “independence” from each of
the non-executive directors, addressing the factors set out in Rule 3.13 of the Hong Kong Listing Rules, and our board continues to
consider all of them to be “independent.”
We do not have service contracts with any of our directors which provide for benefits upon termination.
Our board has four committees, the audit committee, the compensation committee, the nominating committee and the ESG
committee. Alice Cheng, Grace Tang and Joseph Tong are currently the members of each of these committees. Grace Tang is the
chairperson of the audit committee, the compensation committee and the nominating committee. Alice Cheng is the chairperson of the
ESG committee. The board of directors has determined that Mr. Joseph Tong is an “audit committee financial expert” as defined by Item
16A. “Audit Committee Financial Expert” of Form 20-F. The board of directors has adopted a written audit committee charter pursuant
to which the audit committee is responsible for overseeing our accounting and financial reporting processes, including the appointment,
compensation and oversight of the work of our independent auditors, monitoring compliance with our accounting and financial policies,
and related legal and regulatory requirements, and evaluating management’s procedures and policies relative to the adequacy of our
internal accounting controls. For more information regarding the audit committee, please refer to “Audit Committee Experience and
Qualification and Board Oversight” under Item 4.B. “Information on the Company—Business Overview.”
The board of directors has adopted a written compensation committee charter pursuant to which the compensation committee is
responsible for, among other things, annually reviewing and approving our corporate goals and objectives relevant to the compensation
of our chief executive officer. The committee also annually reviews and makes recommendations to the board with respect to non-chief
executive officer compensation, incentive compensation plans and equity based plans, administers our incentive compensation plans and
equity-based plans as in effect and as adopted from time to time by our board (the board retains, however, the authority to interpret such
plans, and the committee may authorize one or more officers of our company to designate the recipients of equity awards created by our
company and to determine the number of such equity awards, and the terms thereof, to be received by such recipients). In addition, the
committee reviews and approves any new equity compensation plan or any material change to an existing plan where shareholders’
approval has not been obtained.
The board of directors has adopted a written nominating committee charter pursuant to which the nominating committee is
responsible for, among other things, monitoring the size and composition of our board and considering and making recommendations to
our board with respect to the nominations or elections of directors of our company.
In February 2022, our board of directors approved the establishment of ESG committee responsible for coordinating ESG-
related issues and providing recommendations to the board.
The audit, compensation, nominating and ESG committees are composed solely of non-employee directors, as such term is
defined in Rule 16b-3 under the Exchange Act and the board of directors has determined that all such members are “independent” as that
term is defined in NASDAQ Marketplace Rule 5605(a)(2).

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146
Compensation Committee Interlocks
No interlocking relationships have existed between our board of directors or compensation committee and the board of directors
or compensation committee of any other company.
D.           Employees
As of December 31, 2022, 2023 and 2024, we had 31,119, 29,128 and 26,028 full-time employees, respectively. A substantial
majority of our employees are based in China. We believe that we have a generally good working relationship with our employees, and
we have not experienced any significant labor disputes.
The following table sets forth information regarding our staff as of December 31, 2024. Our R&D staff consisted of 49.0% of
our total employees as of December 31, 2024.
Games and related value-added services
    
 16,041
Youdao
 3,750
NetEase Cloud Music
 1,331
Innovative businesses and others
 4,906
Total
 26,028
All employees of our company, subsidiaries and the VIEs are employed under employment contracts which specify, among
other things, the employee’s responsibilities, remuneration and grounds for termination of employment. Each employee signs a
confidentiality agreement in respect of our intellectual property rights.
E.           Share Ownership
The table in this section sets forth certain information known to us with respect to the beneficial ownership as of February 28,
2025 (unless otherwise indicated) by:
●
all persons who are beneficial owners of 5% or more of our ordinary shares,
●
each of our directors,
●
each of our current executive officers, and
●
all current directors and executive officers as a group.
As of February 28, 2025, 3,165,991,421 of our ordinary shares were outstanding (excluding 53,573,160 ordinary shares issued
to and held by The Bank of New York Mellon, the depositary of our ADS program, which were the ordinary shares underlying our
treasury ADSs and were reserved for future delivery upon vesting of share awards granted under our Share Plans). The amounts and
percentages of ordinary shares beneficially owned are reported on the basis of regulations of the SEC governing the determination of
beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person
has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which
includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any
securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may
be deemed a beneficial owner of securities as to which such person has no economic interest. The shareholders listed below do not have
different voting rights.
Number of Shares
 
Beneficially Owned
 
    
Number
    
Percentage
 
5% Shareholder
Shining Globe International Limited/William Lei Ding(1)
 
 1,450,300,000
 45.8 %

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147
Number of Shares
Beneficially Owned
    
Number
    
Percentage
Executive Officers and Directors (2)
William Lei Ding(1)
 
 1,450,300,000  
 45.8 %
Alice Cheng
 
*  
*
Grace Tang
*
*
Joseph Tong
 
*  
*
Michael Leung
 
*  
*
Yingfeng Ding
 
*  
*
Paul W. Boltz, Jr.
 
*  
*
Sarah Li
 
*  
*
All current directors and executive officers as a group (eight persons)(3)
 
 1,472,083,436  
 46.4 %
*
Less than 1%.
(1) Shining Globe International Limited is the record owner of 1,450,300,000 ordinary shares, consisting of 1,406,000,000 ordinary
shares and 8,860,000 ADSs. Shining Globe International Limited is wholly owned by Shining Globe Holding Limited, which is in
turn wholly owned by Shining Globe Trust, or the Trust, for which TMF (Cayman) Ltd. acts as the trustee. William Lei Ding, our
founder, Chief Executive Officer and a director, is the sole director of Shining Globe International Limited and the settlor of the
Trust, retaining the investment and dispositive powers with respect to the assets of the Trust. The beneficiaries of the Trust are
William Lei Ding and his family. The principal business address of Shining Globe International Limited is c/o NetEase, Inc.,
NetEase Building, No. 599 Wangshang Road, Binjiang District, Hangzhou, People’s Republic of China 310052.
(2) The address of our current executive officers and directors are c/o NetEase Building, No. 599 Wangshang Road, Binjiang District,
Hangzhou, People’s Republic of China 310052.
(3) Shares owned by all of our current directors and executive officers as a group includes shares beneficially owned by William Lei
Ding.
As of February 28, 2025, based on public filings with the SEC, there are no major shareholders holding 5% or more of our
ordinary shares or ADSs representing ordinary shares, except as described above.
As of February 28, 2025, there were four ordinary shareholders of record with an address in the United States. The Bank of New
York Mellon, depositary of our ADS program, held 518,172,325 outstanding ordinary shares as of that date, which accounted for 16.4%
of our total issued and outstanding ordinary shares (excluding 53,573,160 ordinary shares issued to and held by The Bank of New York
Mellon, which were the ordinary shares underlying our treasury ADSs and were reserved for future delivery upon vesting of share
awards granted under our Share Plans).
To our knowledge, except as disclosed above, we are not owned or controlled, directly or indirectly, by another corporation, by
any foreign government or by any other natural or legal person or persons, severally or jointly.
To our knowledge, there are no arrangements the operation of which may at a subsequent date result in us undergoing a change
in control.
Our major shareholders do not have different voting rights than any of our other shareholders.
F.          Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
None.

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148
Item 7.  Major Shareholders and Related Party Transactions
A.          Major Shareholders
Please see Item 6.E. “Directors, Senior Management and Employees—Share Ownership.”
B.           Related Party Transactions
Material VIE Agreements
NetEase, Inc. and certain of its subsidiaries have entered into a series of agreements with Guangzhou NetEase, Hangzhou
Leihuo, Youdao Computer, Hangzhou Yuedu and certain other VIEs and the shareholders of these entities, under which we provide our
computer software, mobile applications, technologies and relevant services to Guangzhou NetEase, Hangzhou Leihuo, Youdao Computer
and certain other VIEs, and they in turn provide certain of our online games and operate the NetEase websites, our online advertising
business, and e-mail and certain of our other fee-based premium services. We believe that the terms of each agreement are no less
favorable than the terms that we could obtain from disinterested third parties and that the shareholders of Guangzhou NetEase, Hangzhou
Leihuo, Youdao Computer, Hangzhou Yuedu and our other VIEs will not receive material benefits from these agreements except as
shareholders of NetEase. The agreements with Guangzhou NetEase, Hangzhou Leihuo, Youdao Computer and Hangzhou Yuedu are
described below.
Agreements relating to Guangzhou NetEase
As of the date of the filing of this annual report, William Lei Ding, our Chief Executive Officer, and Xiaojun Hui, one of our
employees, own 99.0% and 1.0% of the equity interest in Guangzhou NetEase, respectively.
●
Copyright License Agreement between NetEase Beijing and Guangzhou NetEase. NetEase Information Technology
(Beijing) Co. Ltd., or “NetEase Beijing,” granted Guangzhou NetEase the right to use NetEase Beijing’s web page layout
in China for a royalty of RMB10,000 per year. NetEase Beijing may waive this fee at any time.
●
Trademark License Agreement between NetEase Beijing and Guangzhou NetEase. NetEase Beijing granted Guangzhou
NetEase a license to use NetEase Beijing’s registered trademarks on the NetEase websites in China for license fees of
RMB10,000 per year. NetEase Beijing may waive this fee at any time.
●
Cooperative Agreements. Guangzhou NetEase has entered into cooperative agreements with each of NetEase Beijing,
Boguan and NetEase Hangzhou pursuant to which such subsidiaries have agreed to provide the following services:
●
R&D of computer software (including, but not limited to, online games software) and technical support and
maintenance for the operation of computer software;
●
technical support for internet services, including, but not limited to, server maintenance and development, update
and upgrade of relevant application software; and
●
R&D of electronic publishing technology and relevant technical assistance and support.
Guangzhou NetEase has agreed to pay a monthly service fee to each such subsidiary in accordance with a formula based on
their respective expenses incurred. The cooperative agreements with each of NetEase Beijing, Boguan and NetEase Hangzhou were
effective from September 1, November 1, and December 1, 2012, respectively, and each will continue to be effective unless any one of
the two respective parties terminates such agreement by written notice.
●
Online Advertising Agreement between Guangzhou NetEase and NetEase Advertising. Guangzhou NetEase sells all of the
banner space on the NetEase websites to Beijing NetEase Chuanmei Co., Ltd. (previously named Beijing Guangyitong
Advertising Co., Ltd.), or “NetEase Advertising,” and publishes the advertisements provided by NetEase Advertising on
the banner space purchased by NetEase Advertising. NetEase Advertising pays Guangzhou NetEase RMB10,000 per year.
Guangzhou NetEase may waive this fee at any time.

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The term of the foregoing agreement is automatically renewable for successive one year term.
●
Trademark Transfer Agreement between Guangzhou NetEase and NetEase Beijing. Under this agreement, Guangzhou
NetEase transferred its registered trademarks to NetEase Beijing.
●
Supplemental Agreement between NetEase Beijing and Guangzhou NetEase. NetEase Beijing may not grant the license to
use its domain name, copyright and trademark to any third party without Guangzhou NetEase’s consent and may not
provide technical service to any third party.
●
Shareholder Voting Rights Trust Agreement among NetEase Beijing and the Individual Shareholders of Guangzhou
NetEase. William Lei Ding and Xiaojun Hui agreed to irrevocably appoint NetEase Beijing to represent him to exercise all
voting rights to which he is entitled as a shareholder of Guangzhou NetEase. The term of this agreement is 20 years from
May 12, 2010. This agreement was amended and novated on May 1, 2014 in connection with Mr. Hui’s acquisition of his
equity interest in Guangzhou NetEase from a prior shareholder and further amended and restated on November 30, 2015 in
connection with the equity transfer of NetEase Advertising to William Lei Ding and Li Li.
●
Agreement between NetEase Beijing and Guangzhou NetEase. NetEase Beijing agrees to pay the operating costs of
Guangzhou NetEase.
●
Letter of Agreement. Each of William Lei Ding and Xiaojun Hui have agreed that any amendments to be made to the
Shareholder Voting Rights Trust Agreement, the Equity Pledge Agreement (described below) and the Loan Agreement
(described below), as well as all other agreements to which our company, NetEase Beijing and/or their respective affiliates
is a party, on the one hand, and any of their VIEs and/or the shareholders of such entities, on the other hand, shall be
subject to the approval by the vote of a majority of our board, excluding the vote of William Lei Ding. Messrs. Ding and
Hui have also agreed that, if any amendments to the above-mentioned agreements require a vote of the shareholders of our
company or Guangzhou NetEase, as applicable, both of them will vote in their capacity as direct or indirect shareholders of
these companies to act based upon the instructions of our board. The term of this agreement is 20 years from May 12, 2010,
and this agreement was amended and novated on May  1, 2014 in connection with Mr.  Hui’s acquisition of his equity
interest in Guangzhou NetEase from a prior shareholder and further amended and restated on November  30, 2015 in
connection with the equity transfer of NetEase Advertising to William Lei Ding and Li Li.
●
Loan Agreement and Equity Pledge Agreement. Concurrent with Mr. Hui’s acquisition of his equity interest in Guangzhou
NetEase from a prior shareholder, Mr. Hui entered into a Loan Agreement and Equity Pledge Agreement with NetEase
Beijing, each dated May 1, 2014. Under the Loan Agreement, NetEase Beijing provided Mr. Hui with an interest-free loan
in the principal amount of RMB0.2 million to Mr. Hui, which funds were used by Mr. Hui to pay the consideration to
acquire such 1.0% equity interest. The loan can be repaid by transferring such 1.0% equity interest to NetEase Beijing or its
designee or through such other method as NetEase Beijing shall determine. The term of the loan is 10 years from the date
of the agreement and can be extended upon the mutual consent of both parties. Under the Equity Pledge Agreement,
Mr. Hui pledges his 1.0% equity interest in Guangzhou NetEase to NetEase Beijing to secure his respective obligations
under the Loan Agreement and Shareholder Voting Rights Trust Agreement. Mr. Hui agrees he shall not transfer, pledge or
encumber his 1.0% equity interest without the prior written consent of NetEase Beijing. During the term of this agreement,
NetEase Beijing is entitled to all dividends and other distributions made by Guangzhou NetEase. The Equity Pledge
Agreement will remain binding until Mr. Hui discharges all his obligations under the above-mentioned agreements.

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Agreements relating to Hangzhou Leihuo
As of the date of the filing of this annual report, the ultimate shareholders of Hangzhou Leihuo are Zhipeng Hu and Long
Cheng, two of our employees, who each hold a 50.0% equity interest. Mr. Cheng’s equity interest in Hangzhou Leihuo was transferred to
him in April 2019 by the prior equity holder and our former employee, Tianlei Hu, at which time Mr. Cheng assumed all of Mr. Hu’s
rights and obligations under the loan agreement, operating agreement, equity pledge agreement, exclusive purchase option agreement and
shareholder voting rights trust agreement described below.
●
Loan Agreements and Equity Pledge Agreements between NetEase Hangzhou and each of the ultimate shareholders of
Hangzhou Leihuo. Each of the ultimate shareholders of Hangzhou Leihuo has entered into a Loan Agreement and an
Equity Pledge Agreement with NetEase Hangzhou, each dated December 1, 2015. Under the Loan Agreements, NetEase
Hangzhou provided each of the ultimate shareholders of Hangzhou Leihuo with an interest-free loan in the principal
amount of RMB5.0 million, which funds were used by each of the ultimate shareholders of Hangzhou Leihuo to pay the
consideration to acquire their 50.0% equity interests in Hangzhou Leihuo. Each loan can be repaid by transferring the
ultimate shareholder’s equity interest in Hangzhou Leihuo to NetEase Hangzhou or its designee or through such other
method as NetEase Hangzhou shall determine. The term of each Loan Agreement is 10  years from the date of the
agreement and will be automatically extended for further 10-year terms unless otherwise decided by NetEase Hangzhou.
Under the Equity Pledge Agreements, each of the ultimate shareholders of Hangzhou Leihuo pledges his 50.0% equity
interest in Hangzhou Leihuo to NetEase Hangzhou to secure his respective obligations under the Loan Agreement as well
as the Exclusive Purchase Option Agreement, the Shareholder Voting Rights Trust Agreement and the Operating
Agreement. Each of the ultimate shareholders of Hangzhou Leihuo agrees he shall not transfer, assign or pledge his equity
interest in Hangzhou Leihuo without the prior written consent of NetEase Hangzhou. The Equity Pledge Agreements will
remain binding until the pledgor discharges all his obligations under the above-mentioned agreements.
●
Exclusive Purchase Option Agreements among NetEase Hangzhou, Hangzhou Leihuo and each of the ultimate
shareholders of Hangzhou Leihuo. Under the Exclusive Purchase Option Agreements, each dated December 1, 2015, each
of the ultimate shareholders of Hangzhou Leihuo has granted NetEase Hangzhou an option to purchase all or a portion of
his equity interest in Hangzhou Leihuo at a price equal to the original and any additional paid-in capital paid by the
ultimate shareholder. In addition, Hangzhou Leihuo has granted NetEase Hangzhou an option under the Exclusive Purchase
Option Agreements to purchase all or a portion of the assets held by Hangzhou Leihuo or its subsidiaries at a price equal to
the net book value of such assets. Each of Hangzhou Leihuo and the ultimate shareholders of Hangzhou Leihuo agrees not
to transfer, mortgage or permit any security interest to be created on any equity interest in or assets of Hangzhou Leihuo
without the prior written consent of NetEase Hangzhou. Each Exclusive Purchase Option Agreement shall remain in effect
until all of the equity interests in or assets of Hangzhou Leihuo have been acquired by NetEase Hangzhou or its designee or
until NetEase Hangzhou unilaterally terminates the agreement by written notice.
●
Shareholder Voting Rights Trust Agreement between NetEase Hangzhou and each of the ultimate shareholders of
Hangzhou Leihuo. Under these agreements, each dated December 1, 2015, each of the ultimate shareholders of Hangzhou
Leihuo has agreed to irrevocably entrust a person designated by NetEase Hangzhou to represent him to exercise all the
voting rights and other shareholders’ rights to which he is entitled as a shareholder of Hangzhou Leihuo. Each agreement
shall remain effective for as long as such shareholder remains a shareholder of Hangzhou Leihuo unless NetEase Hangzhou
unilaterally terminates the agreement by written notice.
●
Operating Agreement among NetEase Hangzhou, Hangzhou Leihuo and the ultimate shareholders of Hangzhou Leihuo. To
ensure the successful performance of the various agreements between the parties, Hangzhou Leihuo and its ultimate
shareholders have agreed that, except for transactions in the ordinary course of business, Hangzhou Leihuo will not enter
into any transaction that would materially affect the assets, liabilities, rights or operations of Hangzhou Leihuo without the
prior written consent of NetEase Hangzhou. NetEase Hangzhou has also agreed that it will provide performance guarantees
and, at NetEase Hangzhou’s discretion, guarantee loans for working capital purposes to the extent required by Hangzhou
Leihuo for its operations. Furthermore, the ultimate shareholders of Hangzhou Leihuo have agreed that, upon instruction
from NetEase Hangzhou, they will appoint Hangzhou Leihuo’s board members, president, chief financial officer and other
senior executive officers. The term of this agreement is 20 years from December 1, 2015 and can be extended with the
written consent of NetEase Hangzhou.

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●
Cooperation Agreement between NetEase Hangzhou and Hangzhou Leihuo. Under this Cooperation Agreement, NetEase
Hangzhou has agreed to provide the following services:
●
the development of computer software (including, but not limited to, online games) and technical support and
maintenance for computer software operation;
●
the provision of broadband internet access and other operational support; and
●
jointly with Hangzhou Leihuo, the provision of value-added telecommunication and other services to users of the
Leihuo website and relevant products.
Hangzhou Leihuo has agreed to pay a monthly service fee to NetEase Hangzhou in accordance with a formula based on its
expenses incurred. This agreement was effective from January  1, 2010 and will continue to be effective unless it is
terminated by written notice of NetEase Hangzhou or, in case of a material breach of the agreement, it is terminated by
written notice of the non-breaching party.
Agreements relating to Youdao Computer
As of the date of the filing of this annual report, Feng Zhou, the chief executive officer of Youdao, owns 28.9% of the equity
interest in Youdao Computer, and William Lei Ding owns 71.1% of the equity interest in Youdao Computer.
●
Loan Agreements between Youdao Information and each of William Lei Ding and Feng Zhou. Each of William Lei Ding
and Feng Zhou entered into a Loan Agreement with Youdao Information, dated September 26, 2016 and November 20,
2017, respectively. Under these Loan Agreements, Youdao Information provided each of William Lei Ding and Feng Zhou
with an interest-free loan in the principal amount of approximately RMB3.6 million and RMB1.4 million, respectively. The
proceeds from the loans were used by each of William Lei Ding and Feng Zhou to pay the consideration to acquire his
respective equity interest in Youdao Computer. Such loans can be repaid by transferring each of William Lei Ding and
Feng Zhou’s respective equity interest in Youdao Computer to Youdao Information or its designee or through such other
method as Youdao Information shall determine. The term of each of the Loan Agreements is 10 years from the date of such
agreement and will be automatically extended for a further 10-year term unless otherwise decided by Youdao Information.
●
Equity Pledge Agreements between Youdao Information and each of William Lei Ding and Feng Zhou. Each of William Lei
Ding and Feng Zhou entered into an Equity Pledge Agreement with Youdao Information, dated September 26, 2016 and
November 20, 2017, respectively. Under such Equity Pledge Agreements, each of William Lei Ding and Feng Zhou
pledged his respective equity interest in Youdao Computer to Youdao Information to secure his obligations under the
applicable Loan Agreement, Exclusive Purchase Option Agreement, Shareholder Voting Rights Trust Agreement, and
Operating Agreement. Each of William Lei Ding and Feng Zhou further agreed to not transfer or pledge his respective
equity interest in Youdao Computer without the prior written consent of Youdao Information. Each of the Equity Pledge
Agreement will remain binding until the respective pledger, William Lei Ding or Feng Zhou, as the case may be,
discharges all his obligations under the above-mentioned agreements.
●
Exclusive Purchase Option Agreements. Each of William Lei Ding and Feng Zhou entered into an Exclusive Purchase
Option Agreement with Youdao Information and Youdao Computer, dated September 26, 2016 and November 20, 2017,
respectively. Under such Exclusive Purchase Option Agreements, each of William Lei Ding and Feng Zhou granted
Youdao Information an option to purchase all or a portion of his respective equity interest in Youdao Computer at a price
equal to the original and any additional paid-in capital paid by him. In addition, under each Exclusive Purchase Option
Agreement, Youdao Computer has granted Youdao Information an option to purchase all or a portion of the assets held by
Youdao Computer or its subsidiaries at a price equal to the net book value of such assets. Each of Youdao Computer,
William Lei Ding and Feng Zhou agreed not to transfer, mortgage or permit any security interest to be created on any
equity interest in or assets of Youdao Computer without the prior written consent of Youdao Information. Each Exclusive
Purchase Option Agreement shall remain in effect until all of the equity interests in or assets of Youdao Computer have
been acquired by Youdao Information or its designee or until Youdao Information unilaterally terminates the agreement by
written notice.

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●
Shareholder Voting Rights Trust Agreements between Youdao Information and each of William Lei Ding and Feng Zhou.
Each of William Lei Ding and Feng Zhou entered into a Shareholder Voting Rights Trust Agreement with Youdao
Information, dated September 26, 2016 and November 20, 2017, respectively. Under such Shareholder Voting Rights Trust
Agreements, each of William Lei Ding and Feng Zhou, agreed to irrevocably entrust a person designated by Youdao
Information to represent him to exercise all the voting rights and other shareholders’ rights to which he is entitled as a
shareholder of Youdao Computer. Each Shareholder Voting Rights Trust Agreement shall remain effective for as long as
William Lei Ding or Feng Zhou, as applicable, remains a shareholder of Youdao Computer unless Youdao Information
unilaterally terminates the agreement by written notice.
●
Operating Agreements among Youdao Computer, Youdao Information and each of William Lei Ding and Feng Zhou. To
ensure the successful performance of the various agreements between the parties, each of William Lei Ding and Feng Zhou
entered into an Operating Agreement with Youdao Computer and Youdao Information, dated September 26, 2016 and
November 20, 2017, respectively. Under such Operating Agreements, each of Youdao Computer, William Lei Ding and
Feng Zhou agreed that, except for transactions in the ordinary course of business, Youdao Computer will not enter into any
transaction that would materially affect the assets, liabilities, rights or operations of Youdao Computer without the prior
written consent of Youdao Information. Youdao Information also agreed that it would provide performance guarantees and,
at Youdao Information’s discretion, guarantee loans for working capital purposes to the extent required by Youdao
Computer for its operations. As counter-guarantee, Youdao Computer agreed to pledge the account receivable in its
operations and all of its assets to Youdao Information, which pledge has not been implemented as of the date of the filing
of this annual report. Furthermore, each of William Lei Ding and Feng Zhou agreed that, upon instruction from Youdao
Information, he would appoint candidates recommended by Youdao Information as Youdao Computer’s board members,
president, chief financial officer and other senior executive officers. The term of each Operating Agreement is 20 years
from the date of execution and can be extended with the written consent of Youdao Information.
●
Cooperation Agreement between Youdao Information and Youdao Computer. Under this Cooperation Agreement, Youdao
Information has agreed to provide the following services:
●
the development of computer software (including, but not limited to, generating online advertisement and
distribution and maintenance of related software) and technical support and maintenance for computer software
operation;
●
the development of computer software related to generating online advertisement, establishment of platforms for
online advertisement and related updates and operational support; and
●
the provision of technology support, including, but not limited to, server maintenance, development of server
software and related maintenance and updates.
Youdao Computer has agreed to share its monthly income (after tax and expenses) with Youdao Information in accordance
with certain formulas as specified in the Cooperation Agreement. This agreement was effective from July 1, 2015 and will
continue to be effective unless it is terminated by written notice of Youdao Information or, in case of a material breach of
the agreement, it is terminated by written notice of the non-breaching party.

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Agreements relating to Hangzhou Yuedu
As of the date of the filing of this annual report, William Lei Ding, our Chief Executive Officer, and Wei Li, an employee of
NetEase Cloud Music, own 99.0% and 1.0% of the equity interest in Hangzhou Yuedu, respectively.
●
Cooperation Agreement. Under the amended and restated cooperation agreement entered into by Hangzhou Yuedu and
Hangzhou NetEase Cloud Music dated on May 18, 2021, Hangzhou Yuedu have agreed to engage Hangzhou NetEase
Cloud Music as its exclusive cooperation partner, providing users, among other things and as the case may be, with
technical services, including software development, technical support and maintenance, network technology services,
server maintenance, relevant software development and update, and technology development, technical assistance and
support in relation to electronic publication and telecommunication, in exchange for service fees. Hangzhou Yuedu and
Hangzhou NetEase Cloud Music shall share the income generated from its cooperation. The distributable income shall
consist of the total income of Hangzhou Yuedu, after deduction of any relevant operating costs, expenses, taxes and other
statutory contributions, and profits to be retained by Hangzhou Yuedu. Hangzhou NetEase Cloud Music shall be entitled to
receive the entire portion of the distributable income, or if applicable, to share the distributable income with other entities
who are affiliates of Hangzhou NetEase Cloud Music according to the service statements confirmed by Hangzhou NetEase
Cloud Music and these entities. Hangzhou Yuedu and Hangzhou NetEase Cloud Music shall settle the service fees on a
regular basis. This agreement remains in effect unless terminated by written notice from Hangzhou NetEase Cloud Music,
and Hangzhou Yuedu shall not terminate the cooperation agreement without the written consent from Hangzhou NetEase
Cloud Music.
●
Operating Agreement. Under the operating agreement entered into by Hangzhou Yuedu, William Lei Ding, Wei Li and
Hangzhou NetEase Cloud Music dated November 2, 2023, Hangzhou NetEase Cloud Music agreed to be the guarantor of
Hangzhou Yuedu in, and provide full guarantees for the performance of, the contracts, agreements or transactions entered
into between Hangzhou Yuedu and any third-party in connection with Hangzhou Yuedu’s businesses and operations.
Hangzhou Yuedu, in return, agreed to pledge the accounts receivable in its operations and all of its assets to Hangzhou
NetEase Cloud Music. Hangzhou Yuedu, William Lei Ding and Wei Li also jointly agreed that without Hangzhou NetEase
Cloud Music’s prior written consent, Hangzhou Yuedu would not engage in any transaction that may materially affect their
assets, liabilities, rights or operations, except that Hangzhou Yuedu may enter into business contracts or agreements, sell or
purchase assets and create liens in favor of relevant counter parties as required by law in the ordinary course of business.
William Lei Ding and Wei Li shall appoint candidates recommended by Hangzhou NetEase Cloud Music as directors of
Hangzhou Yuedu, and Hangzhou Yuedu shall appoint Hangzhou NetEase Cloud Music’s senior executive officers
recommended by Hangzhou NetEase Cloud Music as Hangzhou Yuedu’ senior management.
●
Exclusive Purchase Option Agreement. On May 18, 2021, Hangzhou Yuedu, Hangzhou NetEase Cloud Music and William
Lei Ding entered into an amended and restated exclusive purchase option agreement, and on November 2, 2023, Hangzhou
Yuedu, Hangzhou NetEase Cloud Music and Wei Li entered into an exclusive purchase option agreement on substantially
the same terms (collectively, the “Exclusive Purchase Option Agreements”). Under the Exclusive Purchase Option
Agreements, William Lei Ding and Wei Li irrevocably granted Hangzhou NetEase Cloud Music an option, exercisable in
one or more times, to purchase or cause any person(s) designated by Hangzhou NetEase Cloud Music to purchase, to the
extent permitted under any applicable PRC laws, a portion of or all of William Lei Ding and Wei Li’s equity interests in
Hangzhou Yuedu at any time and from time to time, for a consideration equals to, the outstanding loan amounts under the
relevant Loan Agreements or otherwise for the minimum amount of consideration permitted by applicable PRC laws, under
circumstances in which Hangzhou NetEase Cloud Music or its designated third party is permitted under PRC laws to
acquire all or part of the assets of Hangzhou Yuedu, subject to adjustments. None of the material assets of Hangzhou Yuedu
are to be sold, transferred or otherwise disposed of without the written consent of Hangzhou NetEase Cloud Music. In
addition, under the Exclusive Purchase Option Agreements, William Lei Ding and Wei Li may not transfer or permit the
encumbrance of or allow any guarantee or security to be created on any of its equity interest in Hangzhou Yuedu without
Hangzhou NetEase Cloud Music’s prior written consent.

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●
Equity Pledge Agreements. On May 18, 2021, Hangzhou NetEase Cloud Music and William Lei Ding entered into an
amended and restated equity pledge agreement, and on November 2, 2023, Hangzhou NetEase Cloud Music and Wei Li
entered into an equity pledge agreement on substantially the same terms (collectively, the “Equity Pledge Agreements”).
Under the Equity Pledge Agreements, William Lei Ding and Wei Li agreed to pledge all their respective equity interests in
Hangzhou Yuedu that they legally own to Hangzhou NetEase Cloud Music as a first security interest to guarantee the
timely and complete payment and performance of contractual obligations under the relevant VIE agreements. William Lei
Ding and Wei Li have further agreed that, without prior written consent of Hangzhou NetEase Cloud Music, they will not
transfer or dispose the pledged equity interests or create or allow any third party to create any encumbrance on the pledged
equity interests that would prejudice Hangzhou NetEase Cloud Music’s interest.
●
Shareholder Voting Right Trust Agreements and Powers of Attorney. Hangzhou NetEase Cloud Music entered into (i) an
amended and restated shareholder voting right trust agreement and (ii) a power of attorney with William Lei Ding on May
18, 2021 and with Wei Li on November 2, 2023, both on substantially the same terms (collectively, (i) the “Shareholder
Voting Right Trust Agreements” and (ii) “Powers of Attorney,” respectively). Under the Shareholder Voting Right Trust
Agreements and the Powers of Attorney, William Lei Ding and Wei Li have appointed Hangzhou NetEase Cloud Music
and the person designated by Hangzhou NetEase Cloud Music director or his/her successor as their agent and attorney to
act on their behalf on all matters concerning Hangzhou Yuedu and to exercise all of their rights as a registered shareholder
of Hangzhou Yuedu.
●
Loan Agreement. On May 18, 2021, Hangzhou NetEase Cloud Music and William Lei Ding entered into an amended and
restated loan agreement, and on November 2, 2023, Hangzhou NetEase Cloud Music and Wei Li entered into a loan
agreement on substantially the same terms (collectively, the “Loan Agreements”). Under the Loan Agreements, Hangzhou
NetEase Cloud Music agreed to provide loans to William Lei Ding and Wei Li to be used exclusively as investment in
Hangzhou Yuedu. The loans must not be used for any other purposes without the lender’s prior written consent. The term
of each loan shall be ten years from the date of the respective Loan Agreement and will be automatically extended for
another ten years unless otherwise indicated by the lender. The borrowers shall not make any repayment of their respective
loan prior to the expiration of the term or termination of the relevant loan without the lender’s prior written consent. The
loans shall terminate on the date the lender exercises its exclusive purchase option under the relevant Exclusive Purchase
Option Agreement, or when certain defined termination events occur, such as when the lender sends a written notice
demanding repayment to the respective borrower, or upon the default of the respective borrower, whichever is earlier. After
the lender exercises its exclusive purchase option, the respective borrower shall repay the respective loan by transferring all
of his equity interest in Hangzhou Yuedu to the lender, or persons designated by the lender. If the transfer price for the
equity interest in Hangzhou Yuedu is higher than the principal of the loan under the relevant Loan Agreement, any surplus
would be considered interest for the loan.
Subsidiary Guarantees
We have entered into several guarantee agreements in the aggregate amount of US$2.7 billion in respect of certain credit
facilities taken by our subsidiaries. As of December 31, 2024, US$1.5 billion of such credit facilities had not been utilized.
Agreements with Youdao
Youdao, which became listed on the New York Stock Exchange in October 2019, is currently our majority-controlled subsidiary.
We have entered into agreements with Youdao with respect to various ongoing relationships between us, which became effective upon
the completion of Youdao’s initial public offering in October 2019. These include a master transaction agreement, a transitional services
agreement, a non-competition agreement, a cooperation framework agreement, an intellectual property license agreement and multiple
loan agreements, each of which are summarized below.

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Master Transaction Agreement
We have entered into a master transaction agreement with Youdao to govern certain key aspects of our relationship with
Youdao, including the allocation of liabilities. Pursuant to the master transaction agreement, Youdao is responsible for, among other
things, the liabilities associated with the “Online Learning Business,” which is defined to include the online learning products and online
learning services offered by Youdao as of the date of the master transaction agreement, excluding the NetEase open online courses and
the K-12 curriculum course offered by us as of the date of the master transaction agreement and certain other specified businesses, and
we are responsible for, among other things, the liabilities arising on or after June 30, 2019 associated with the “NetEase Business,” which
is defined to include the business conducted by the NetEase as of the date of the master transaction agreement and any business that is
derived from such businesses.
The master transaction agreement will automatically terminate five years following the earlier of (i) the first date when we no
longer own at least 20% of the voting power of Youdao’s then outstanding voting securities and (ii) the first date when we cease to be the
largest beneficial owner of Youdao’s then outstanding voting securities. We refer to such earlier date as the “Control Ending Date.” It can
also be terminated early or extended by mutual written consent of Youdao and us. The termination of the master transaction agreement
will not affect the validity and effectiveness of the other business cooperation agreements described below.
Transitional Services Agreement
Under the transitional services agreement, we agreed to provide Youdao with various corporate support and services such as
legal support, human resources support, financial reporting, internal control and internal audit support, technology and operational
support, and administrative support. The transitional services agreement expired in accordance with its terms in October 2024, although
we continue to provide such services to Youdao pursuant to arms’ length arrangements.
Non-competition Agreement
Under the non-competition agreement, Youdao and we have each agreed to be subject to certain non-compete restrictions during
a “Non-competition Period,” beginning from the completion of Youdao’s initial public offering and ending on the earlier of (i) five years
after the Control Ending Date; (ii) the date on which Youdao’s ADSs cease to be listed on the New York Stock Exchange; and (iii) the
tenth anniversary of the completion of Youdao’s initial public offering. Specifically:
●
We have agreed not to compete with Youdao in the provision of the Online Learning Business, provided that such non-
compete restrictions shall not prevent us from (i) engaging in the Online Learning Business through or on behalf of
Youdao, (ii) continuing to engage in the NetEase Business, (iii) owning a non-controlling interest in any company engaging
in any business that is of the same nature as the Online Learning Business, or (iv) engaging in any other business that we
and Youdao may agree from time to time.
●
Youdao has agreed not to compete with us in the NetEase Business or business of a similar nature, provided that such non-
compete restrictions shall not prevent Youdao from (i) engaging in the NetEase Business or business of a similar nature
through us or on our behalf, (ii) continuing to engage in any business that we operate as of the date of the non-competition
agreement, (iii) owning a non-controlling interest in any company engaging in any business that is of the same nature as the
NetEase Business, and (iv) engaging in any other business that we and Youdao may agree from time to time.
The non-competition agreement provides that if there is any ambiguity in the scope of business subject to the foregoing non-
compete restrictions, our interpretation shall prevail.
In addition, we and Youdao have each undertaken to each other that during the Non-competition Period, should a party have a
business or investment opportunity relating to the other party’s businesses covered by the foregoing non-compete restrictions, it shall
notify the other party of such opportunity in writing. If the party receiving the notice elects not to or otherwise fails to take up the
opportunity within 30 days, the notifying party may proceed to take up such business or investment opportunity.

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The non-competition agreement also provides for a mutual non-solicitation obligation that neither Youdao nor we may, during
the Non-competition Period, hire, or solicit for hire, any active employees of or individuals providing consulting services to the other
party, or any former employees of or individuals providing consulting services to the other party within six months of the termination of
their employment or consulting services, without the other party’s consent, except for solicitation activities through generalized non-
targeted advertisement not directed to such employees or individuals that do not result in a hiring within the Non-competition Period. In
addition, during the Non-competition Period, we and Youdao have each agreed not to solicit business falling within the other party’s
business scope from the other party’s customer, supplier, distributor or similar third parties.
Cooperation Framework Agreement
Under the cooperation framework agreement, we and Youdao have agreed to cooperate with each other in the marketing and
promotion of each other’s services and products on our respective platforms. Also, we have agreed to purchase Youdao’s translation
services and to allow our users to log on Youdao’s platforms with their NetEase Passports. The cooperation framework agreement
became effective on the date of completion of Youdao’s initial public offering and will expire on the earlier of (i) the fifteenth
anniversary of the effective date of such agreement or (ii) five years after the Control Ending Date.
Intellectual Property License Agreement
Under the intellectual property license agreement, we and Youdao grant to each other a worldwide, fully paid-up, non-
sublicensable (subject to certain specified exceptions), non-transferable, limited and non-exclusive license of certain intellectual
properties for a royalty as agreed by both parties solely to use, reproduce, modify, prepare derivative works of, perform, display, or
otherwise exploit the licensed intellectual property within the term of such agreement. This agreement became effective on the
completion of Youdao’s initial public offering and expires on the earlier of (i) the fifteen anniversary of the effective date of such
agreement, and (ii) one year after the Control Ending Date with respect to the sharing of information and data and user registration
information, or five years after the Control Ending Date with respect to other licenses under such agreement.
Loan Agreements and Guarantees
We have entered into various loan agreements to extend loans to Youdao. These loans were used to provide working capital for
the daily operations of Youdao with the original term of one year. In April 2021, we also entered into a 36-month revolving loan facility
with Youdao in the principal amount of US$300 million to support its long-term growth. In September 2023, we and Youdao entered into
an agreement to further extend such revolving loan facility agreement to March 31, 2027. As of December 31, 2024, the total principal
amount of interest-bearing short-term loan outstanding to Youdao was RMB878.0 million (US$120.3 million). As of March 31, 2025, the
total principal amount of interest-bearing long-term loans outstanding to Youdao was US$128.1 million (equivalent to RMB926.7
million), which was drawn down from the above-mentioned revolving loan facility.
Agreements with NetEase Cloud Music
NetEase Cloud Music, which became listed on the Hong Kong Stock Exchange in December 2021, is currently our majority-
controlled subsidiary. On August 5, 2021, we entered into a framework agreement with NetEase Cloud Music to govern key aspects of
the intragroup transactions between NetEase Cloud Music and us, or the NetEase Cloud Music Framework Agreement, including (a)
from us to NetEase Cloud Music (i) intellectual property licensing services where we grant NetEase Cloud Music a royalty-free license
to non-exclusively use certain intellectual property, including software copyrights, domain names, trademarks and logos relating or
registered by us, in perpetuity, (ii) advertising agency services, (iii) bandwidth, server custody and rack services, (iv) information
technology services, (v) shared services and (vi) product procurement, and (b) from NetEase Cloud Music to us, advertising services and
others. On November 28, 2023, we entered into a new framework agreement, which superseded the original NetEase Cloud Music
Framework Agreement, pursuant to which the intragroup transactions between NetEase Cloud Music and us set forth in the NetEase
Cloud Music Framework Agreement (save for the aforementioned advertising agency services provided by us) were renewed for a term
of three years (other than the intellectual property license which, as noted above, was granted in perpetuity), commencing from January
1, 2024.
C.           Interests of Experts and Counsel
Not applicable.

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Item 8.  Financial Information
A.          Consolidated Statements and Other Financial Information
Please see Item 18. “Financial Statements” for our audited consolidated financial statements filed as part of this annual report.
A.7        Legal Proceedings
From time to time, we become subject to legal proceedings and claims in the ordinary course of our business, including claims
of alleged infringement of trademarks, copyrights and other intellectual property rights, and a variety of claims arising in connection with
our e-mail and other communications and community features, such as claims alleging defamation or invasion of privacy. However, such
legal proceedings or claims, even if not meritorious, could result in the expenditure of significant financial and management resources.
In April 2018, PUBG Corporation and PUBG Santa Monica, Inc. (now known as Krafton, Inc. and Krafton Americas, Inc.,
respectively, or “the Krafton Parties”), filed a lawsuit against defendants NetEase, Inc., NetEase Information Technology Corp. and
NetEase (Hong Kong) Limited in the U.S. District Court for the Northern District of California. The Krafton Parties subsequently
dropped all claims against NetEase (Hong Kong) Limited, and added Hong Kong NetEase Interactive Entertainment Limited to the
lawsuit. The Krafton Parties’ complaint generally alleged that two of NetEase’s mobile games, Rules of Survival and Knives Out,
infringed the Krafton Parties’ copyrights and trade dress in their competing game, Player Unknown’s Battlegrounds. On March 11, 2019,
NetEase entered into a settlement agreement with the Krafton Parties, and the lawsuit was dismissed. On October 15, 2019, the Krafton
Parties filed a second lawsuit against the same NetEase defendants, also in the U.S. District Court for the Northern District of California,
claiming NetEase had allegedly breached the settlement agreement. On March 3, 2020, the court dismissed the Krafton Parties’ new
lawsuit, without prejudice, for lack of subject matter jurisdiction. On March 4, 2020, NetEase initiated a declaratory judgment action
against the Krafton Parties in the Superior Court of California for the County of San Mateo, requesting a declaration that NetEase had not
breached the settlement agreement. On March 13, 2020, the Krafton Parties filed a cross claim in the same Court, realleging that we
breached the settlement agreement. In May 2023, the court held a bench trial and subsequently found that we had breached such
settlement agreement and awarded the Krafton Parties US$6 million in liquidated damages but denied a request for injunctive relief by
the Krafton Parties. After the court issued its final statement of decision, the parties settled the matter to avoid further litigation. The
settlement amount we paid has no material impact on our consolidated financial statements.
We are not currently a party to, nor are we aware of, any other legal proceeding, investigation or claim which, in the opinion of
our management, is likely to have a material adverse effect on our business, financial condition or results of operations.
A.8         Dividend Policy
Under our current dividend policy, the determination to make dividend distributions and the amount of such distributions in any
particular quarter will be made at the discretion of our board of directors and will be based upon our operations and earnings, cash flow,
financial condition and other relevant factors. Our board of directors declared dividends of US$0.0990 per ordinary share  (US$0.4950
per ADS), US$0.0870 per ordinary share (US$0.4350 per ADS), US$0.0870 per ordinary share (US$0.4350 per ADS) and US$0.24405
per ordinary share (US$1.22025 per ADS) for the first, second, third and fourth quarters of 2024, respectively.
We are a holding company incorporated in the Cayman Islands, and our ability to pay dividends to our shareholders depends
upon dividends, loans or advances that we receive from our subsidiaries and the VIEs. Please refer to Item 3.D. “Key Information—Risk
Factors—Risks Related to Our Corporate Structure—Our corporate structure may restrict our ability to receive dividends from, and
transfer funds to, our China mainland subsidiaries and VIEs, which could restrict our ability to act in response to changing market
conditions and reallocate funds internally in a timely manner.”
Holders of our ADSs will be entitled to receive dividends, if any, subject to the terms of the deposit agreement (including the
fees and expenses payable thereunder), to the same extent as the holders of our ordinary shares. Cash dividends will be paid to the
depositary in U.S. dollars, which will distribute them to the holders of ADSs according to the terms of the deposit agreement. Other
distributions, if any, will be paid by the depositary to the holders of ADSs in any means it deems legal, fair and practical.

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B.           Significant Changes
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our
audited consolidated financial statements included in this annual report.
Item 9.   The Offer and Listing
Not applicable except for Item 9.A.4 and Item 9.C.
Our ADSs have been listed on the NASDAQ Global Select Market since June 30, 2000 and trade under the symbol “NTES.”
Our shares have been listed on the Hong Kong Stock Exchange since June 11, 2020 and trade under the symbol “9999.”
Item 10. Additional Information
A.           Share Capital
Not applicable.
B.           Memorandum and Articles of Association
The following presents a description of the terms and provisions of our currently effective memorandum and articles of
association, which were adopted by a special resolution passed at the annual general meeting of our company held on June 15, 2023,
insofar as they relate to the material terms of our ordinary shares.
General
We were incorporated in the Cayman Islands on July 6, 1999 and operate under the Cayman Islands Companies Act, as revised
and amended from time to time, or the Companies Act. Our corporate objectives and purpose are unrestricted.
Directors
Subject to any separate requirement for approval by our board or any committee of our board under applicable law or the
designated stock exchange rules, a director may vote in respect of any contract or transaction in which he is interested, provided
however, that the nature of the interest of any director in any such contract or transaction shall be disclosed by him at or prior to its
consideration and any vote on that matter. A general notice or disclosure to the directors or otherwise contained in the minutes of a
meeting or a written resolution of the directors or any committee thereof that a director is a shareholder of any specified firm or company
and is to be regarded as interested in any transaction with such firm or company shall be sufficient disclosure and after such general
notice it shall not be necessary to give special notice relating to any particular transaction.
Our board of directors may determine the remuneration to be paid to the directors. Our directors may exercise all the powers of
our company to borrow money and to mortgage or charge its undertaking, property and uncalled capital or any part thereof, and to issue
debentures, debenture stock and other securities, whether outright or as security for any of our debts, liabilities, or obligations or those of
any third party.
A shareholding qualification for directors may be fixed by our company in a general meeting, but unless and until so fixed, there
are no shareholding qualifications. Further, there are no age limitations or retirement requirements applicable to our directors.

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Rights, Preferences and Restrictions of Ordinary Shares
General. All of our issued and outstanding shares are fully paid and non-assessable. Shares are issued in registered form. Our
shareholders who are non-residents of the Cayman Islands may freely hold and vote their shares.
Dividends. The holders of shares are entitled to such dividends as may be declared by our board of directors. Under Cayman
Islands law, dividends may be declared and paid only out of funds legally available therefor, namely out of either profit or our share
premium account, and provided further that a dividend may not be paid if this would result in our company being, immediately following
such payment, unable to pay its debts as they fall due in the ordinary course of business. Any dividend which cannot be paid to a
shareholder and/or which remains unclaimed after six (6) months from the date of declaration of such dividend may, in the discretion of
our directors, be invested or otherwise made use of by our board for the benefit of our company until claimed. Any dividend which
remains unclaimed after a period of six years from the date of declaration of such dividend shall be forfeited and shall revert to our
company.
Voting Rights. Each share is entitled to one vote on all matters upon which the shares are entitled to vote, including the election
of directors. A resolution put to the vote of any general meeting shall be decided on the vote of the requisite majority pursuant to a poll of
the shareholders. A quorum required for a meeting of shareholders consists of one or more member’s holding shares which carry, in
aggregate, not less than one third of the votes attaching to all issued and outstanding shares and entitled to vote, present at the meeting.
Any ordinary resolution to be made by the shareholders requires the affirmative vote of a simple majority of the votes which are
cast by those shareholders who, being entitled to do so, vote at the shareholders’ meeting, while a special resolution (a) in respect of (i)
any amendment to our memorandum of association or articles of association, or (ii) the voluntary liquidation or winding up of our
company, requires the affirmative vote of no less than three-fourths (3/4) of the votes which are cast by those shareholders who, being
entitled to do so, vote at the shareholders’ meeting, or (b) in respect of any other matter that requires a special resolution (other than
those specified in (a) above), requires the affirmative vote of no less than two-thirds (2/3) of the votes which are cast by those
shareholders who, being entitled to do so, vote at the shareholders’ meeting. A special resolution is required for certain significant
corporate actions, such as amending our memorandum of association or articles or association, changing our company’s name, approving
a statutory merger, or commencing a voluntary winding up. Our shareholders may by ordinary resolution, among other things, appoint or
remove directors, appoint auditors, and increase our share capital. Both ordinary resolutions and special resolutions may also be passed
by a unanimous written resolution signed by all the shareholders of our company entitled to vote.
Liquidation. Upon the winding up of our company, if the assets available for distribution among the holders of our shares shall
be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed
among the holders of the shares in proportion to the capital paid up at the commencement of the winding up on the shares held by them
respectively. If the assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that
the losses are borne by our shareholders in proportion to the capital paid up, or which ought to have been paid up, at the commencement
of the winding up on the shares held by them respectively.
Calls on Shares and Forfeiture of Shares. Our board of directors may from time to time make calls upon shareholders for any
amounts unpaid on their shares in a notice served to such shareholders at least fourteen (14) days prior to the specified time or times of
payment. The shares that have been called upon and remain unpaid are subject to forfeiture.

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Redemption, Repurchase and Surrender of Shares. Subject to the provisions of the Companies Act, our memorandum and
articles of association and, where applicable, the designated stock exchange rules and/or the rules of any competent governmental
authority, we may issue shares on the terms that they are, or at our option or at the option of the holders are, subject to redemption on
such terms and in such manner as may, before the issue of the shares, be determined by our board of directors or by a special resolution
of our shareholders. Subject to the provisions of the Companies Act, our memorandum and articles of association and, where applicable,
the designated stock exchange rules and/or the rules of any competent governmental authority, we may also repurchase any of our shares
provided that the manner of such purchase has first been authorized by our board of directors or by our company in general meeting,
provided that no repurchase may be made contrary to the terms or manner recommended by our directors. Under the Companies Act, the
redemption or repurchase of any share may be paid out of our profits or out of the proceeds of a fresh issue of shares made for the
purpose of such redemption or repurchase, or out of capital (including share premium account and capital redemption reserve) if we can,
immediately following such payment, pay our debts as they fall due in the ordinary course of business. In addition, under the Companies
Act no such share may be redeemed or repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in
there being no shares outstanding, or (c) if we have commenced liquidation. In addition, we may accept the surrender of any fully paid
share for no consideration.
Variations of Rights of Shares
The rights attached to any class of shares (unless otherwise provided by the terms of issue of the shares of that class) may only
be varied either with the consent in writing of the holders of three-fourths of the voting rights of the issued shares of that class or with the
sanction of a resolution passed at a separate general meeting by the holders of a majority of not less than three-fourths of the shares of
that class present and voting at such a meeting.
The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise
expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares
ranking equally with or in priority or subsequent to such existing class or the redemption or purchase of any shares of any class by our
company. The rights of the holders of shares shall not be deemed to be varied or abrogated by the creation or issue of shares with
preferred or other rights.
General Meetings of Shareholders
Our company is required, in each financial year, to hold a general meeting as its annual general meeting, to be held within six
(6) months after the end of such financial year (or such other period as may be permitted by the designated stock exchange rules), to be
held at such time and place as our directors shall determine.
The directors may whenever they think fit, and they shall on the requisition of one or more our shareholders holding together, at
the date of the deposit of the requisition, shares representing not less than 10% of the voting rights of our company which carry the right
of voting at general meetings of our company, on a one vote per share basis in the share capital of our company, proceed to convene a
general meeting of our company and add resolutions to the meeting agenda. If the directors do not within twenty-one (21) days from the
date of the deposit of the requisition duly proceed to convene a general meeting, the requisitionists, or any of them representing more
than one-half of the total voting rights of all of them, may themselves convene a general meeting, but any meeting so convened shall not
be held after the expiration of three months after the expiration of such twenty-one (21) days. At least twenty-one (21) days’ notice in
writing shall be given of an annual general meeting and at least fourteen (14) days’ notice in writing shall be given of any extraordinary
general meeting.
Limitations on the Right to Own Shares
There are no limitations on the right to own our shares.
Limitations on Transfer of Shares
Subject to our articles of association and the designated stock exchanges rules, any shareholder may transfer all or any of his
shares by an instrument of transfer in the usual or common form or in a form prescribed by the designated stock exchanges or in any
other form approved by our board and may be under hand or, if the transferor or transferee is a clearing house or a central depository
house or its nominee(s), by hand or by machine imprinted signature or by such other manner of execution as our board may approve
from time to time.

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Our directors may (a) decline to register any transfer of shares where holders proposing or effecting the transfers of the shares
are subject to binding written agreements or applicable laws which restrict the transfer of the shares held by such holders and such
holders have not complied with the terms of such agreements or the restrictions have not been waived in accordance with their terms, or
such applicable law, as the case may be; (b) in their absolute discretion decline to register any transfer of shares which is not fully paid up
or on which our company has a lien; and (c) decline to register any transfer of any share unless certain requirements as specified in our
memorandum and articles of association have been satisfied.
Anti-Takeover Provisions
Some provisions of our memorandum and articles of association may have the effect of delaying, deferring or preventing a
change of control of our company, including provisions that authorize our board of directors to issue preference shares in one or more
series and to designate the rights (including, without limitation, voting, dividend and redemption rights), restrictions, preferences,
privileges and payment obligations of such preference shares without any further vote or action by our shareholders, and provisions
which limit the ability of our shareholders to requisition and convene general meetings of shareholders.
However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our currently
effective amended and restated memorandum and articles of association for a proper purpose and for what they believe in good faith to
be in the best interests of our company.
Disclosure of Shareholder Ownership
There are no provisions in our memorandum or articles of association that require our company to disclose shareholder
ownership above any particular ownership threshold.
Changes in Capital
We may from time to time by ordinary resolution increase our share capital by such sum, to be divided into shares of such
amount, as the resolution shall prescribe. The new shares shall be subject to the same provisions with reference to the payment of calls,
lien, transfer, transmission, forfeiture and otherwise as the shares in the original share capital. We may by ordinary resolution:
(a) consolidate and divide all or any of our share capital into shares of larger amount than our existing shares;
(b) sub-divide our existing shares, or any of them, into shares of smaller amount than is fixed by our memorandum of
association or into shares without nominal or par value; and
(c) cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any
person.
We may by special resolution reduce our share capital and any capital redemption reserve fund in any manner authorized by the
Companies Act.
Differences in Corporate Law
The Companies Act of the Cayman Islands is modeled after that of the English companies’ legislation but does not follow
recent English law statutory enactments and accordingly there are significant differences between the Companies Act of the Cayman
Islands and the current Companies Act of England. In addition, the Companies Act of the Cayman Islands differs from laws applicable to
U.S. corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the
Companies Act of the Cayman Islands applicable to us and the laws applicable to companies incorporated in the United States and their
shareholders.

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Mergers and Similar Arrangements. The Companies Act permits mergers and consolidations between Cayman Islands
companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) “merger” means the
merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as
the surviving company and (b)  a “consolidation” means the combination of two or more constituent companies into a consolidated
company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect
such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation (a
“Plan”), which must then be authorized by each constituent company by way of (a) a special resolution of the shareholders of each such
constituent company; and (b) such other authorization, if any, as may be specified in such constituent company’s articles of association.
The consent of each holder of a fixed or floating security interest of a Cayman Islands constituent company must be obtained, unless the
Grand Court of the Cayman Islands waives such requirement. The Plan must be filed with the Registrar of Companies together with,
among other documents, a director’s declaration as to the solvency of the constituent company and of the consolidated or surviving
company, a director’s declaration of the assets and liabilities of each constituent company and an undertaking that a copy of the
certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the
merger or consolidation will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value
of their shares (which, if not agreed between the parties, will be determined by the Grand Court of the Cayman Islands) if they follow the
required procedures set out in the Companies Act, subject to certain exceptions. Court approval is not required for a merger or
consolidation which is effected in compliance with these statutory procedures.
Separate from the statutory provisions relating to mergers and consolidations, the Companies Act also contains statutory
provisions that facilitate the reconstruction and amalgamation of companies by way of schemes of arrangement, provided that the
arrangement in question is approved by (a) 75% in value of shareholders, or (b) a majority in number representing 75% in value of
creditors, depending on the circumstances, that are present and voting either in person or by proxy at a meeting, or meetings convened
for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the
Cayman Islands. While a dissenting shareholder would have the right to express to the court the view that the transaction ought not to be
approved, the court can be expected to approve the arrangement if it satisfies itself that:
●
the statutory provisions as to required vote have been complied with;
●
the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide
without coercion of the minority to promote interests adverse to those of the class;
●
the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of
his interest; and
●
the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act.
The Companies Act contains a statutory power of compulsory acquisition which may facilitate the “squeeze out” of dissentient
minority shareholders upon a tender offer. When a tender offer is made and accepted by holders of 90% of the affected shares within
four months, the offeror may, within a two-month period after expiry of such four-month period, require the holders of the remaining
shares to transfer such shares to the offeror on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands
but this is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.
If an arrangement and reconstruction by way of a scheme of arrangement is thus approved and sanctioned, or if a tender offer is
made and accepted, in accordance with the foregoing statutory provisions, a dissenting shareholder would have no rights comparable to
appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of United States corporations, providing rights
to receive payment in cash for the judicially determined value of the shares.
Shareholders’ Suits. In principle, we will normally be the proper plaintiff and as a general rule a derivative action may not be
brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the
Cayman Islands, there are exceptions to the foregoing principle, including when: (a) a company acts or proposes to act illegally or ultra
vires; (b) the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote
that has not been obtained; and (c) those who control the company are perpetrating a “fraud on the minority.”

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Indemnification. Cayman Islands law does not (other than as set forth hereafter) limit the extent to which a company’s
memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such
provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud
or the consequences of committing a crime. Our articles of association provide for indemnification of officers and directors for losses,
damages, costs and expenses incurred in their capacities as such, except through their own willful neglect or default.
Insofar as indemnification or liability arising under the Securities Act of 1933 may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable.
C.          Material Contracts
We have not entered into any material contracts other than in the ordinary course of business and other than those described in
Item 4. “Information on the Company” or elsewhere in this annual report.
D.          Exchange Controls
Foreign currency exchange in the PRC is primarily governed by the Foreign Exchange Administration Rules issued by the State
Council on January  29, 1996 and effective as of April  1, 1996 (and amended on January  14, 1997 and August  1, 2008) and the
Regulations of Settlement, Sale and Payment of Foreign Exchange which came into effect on July 1, 1996.
Under the Foreign Exchange Administration Rules, Renminbi is freely convertible for current account items, including the
distribution of dividends payments, interest payments, trade and service-related foreign exchange transactions. Conversion of Renminbi
for capital account items, such as direct investment, loans, securities investment and repatriation of investment, however, is still generally
subject to the approval or verification of SAFE or its competent local branches.

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In March 2015, SAFE released the Circular on Reforming the Management Approach regarding the Foreign Exchange Capital
Settlement of Foreign Invested Enterprises, or the Foreign Exchange Capital Settlement Circular, which became effective from June 1,
2015. This circular replaced SAFE’s previous related circulars, including the Circular on Issues Relating to the Improvement of Business
Operation with Respect to the Administration of Foreign Exchange Capital Payment and Settlement of Foreign Invested Enterprises. The
Foreign Exchange Capital Settlement Circular clarifies that foreign invested enterprises may settle a specified proportion of their foreign
exchange capital in banks at their discretion, and may choose the timing for such settlement. The proportion of foreign exchange capital
to be settled at foreign invested enterprises’ discretion for the time being is 100% and the SAFE may adjust the proportion in due time
based on the situation of international balance of payments. The foreign invested enterprises’ capital and Renminbi capital gained from
the settlement of foreign exchange capital may not be directly or indirectly used for expenditure beyond the business scope of the foreign
invested enterprises or as prohibited by laws and regulations of the PRC. Such capital may not be directly or indirectly used for
investments in securities, except as otherwise provided by laws and regulations. Except foreign-funded real estate enterprises, such
capital may not be used for paying the costs relevant to the purchase of the real estate not for self-use. Such capital also may not be
directly or indirectly used for issuing Renminbi entrusted loans except as permitted by the business scope of the foreign invested
enterprise, for repaying inter-enterprise borrowings including any third-party advance, or for repaying the bank loans denominated in
RMB that have been sub-lent to a third party. On June 9, 2016, SAFE issued the Circular on Reform and Regulating of the
Administrative Policy of the Settlement under Capital Accounts, or SAFE Circular 16, which became effective on the same date.
Pursuant to SAFE Circular 16, foreign invested enterprises may either continue to follow the current payment-based foreign currency
settlement system or choose to follow the “conversion-at-will” system for foreign currency settlement. Where a Foreign Invested
Enterprise elects the conversion-at-will system for foreign currency settlement, it may convert, in part or in whole, the amount of the
foreign currency in its capital account into Renminbi. The converted Renminbi will be kept in a designated account labeled as settled but
pending payment, and if such Foreign Invested Enterprise needs to make payment from such designated account, it is required to provide
authenticity proof materials to declare the usage of such funds. Although SAFE Circular 16 effectively simplifies the administrative
process for converting foreign currencies into Renminbi for settlement of capital account items, the Notice on Further Promoting the
Reform of Foreign Exchange Administration and Improving Authenticity and Compliance Review (Hui Fa [2017] No. 3), or Notice No.
3, released by SAFE on January 26, 2017, requires a domestic company to provide explanations to the banks through which it seeks to
exchange currency of the sources of funds for investment and the intended use of such funds. Under Notice No. 3, submission of relevant
corporate documents, including board resolutions and relevant contracts is also required to support a domestic company’s claim of
intended use. On October 23, 2019, the SAFE promulgated Notice of the State Administration of Foreign Exchange on Further
Promoting the Facilitation of Cross-border Trade and Investment (Hui Fa [2019] No.28), or Notice No. 28, which took effect on the same
date (except for Article 8.2, which became effective on January 1, 2020). Under Notice 28, foreign invested enterprises without an
investment business scope are also allowed to utilize and convert capital received from foreign investors for making equity investment in
China. Previously this had been limited to foreign invested enterprises who explicitly had an investment business scope. However, it is
not clear how Notice 28 will be implemented in practice and the implementing rules for Notice 28 have yet to be promulgated by the
SAFE. On April 10, 2020, SAFE promulgated the Notice of the SAFE on Optimizing Foreign Exchange Administration to Support the
Development of Foreign-related Business (Hui Fa [2020] No.8), or Notice No. 8, which took effect on the same date. According to
Notice 8, under the prerequisite of ensuring true and compliant use of funds and compliance with the prevailing administrative provisions
on use of income under the capital account, enterprises which satisfy the criteria are allowed to use income under the capital account,
such as capital funds, foreign debt and overseas listing, for domestic payment, without prior provision of proof materials for veracity to
the bank for each transaction. We closely monitor any changes and new regulatory releases, especially given the recently increased
frequency of SAFE enforcement actions, to ensure that our operations remain in compliance.
In addition, the payment of dividends by entities established in the PRC is subject to limitations. Regulations in the PRC
currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and
regulations in the PRC. Each of our China mainland subsidiaries that is a domestic company is also required to set aside at least 10.0% of
its after-tax profit based on PRC accounting standards each year to its general reserves or statutory capital reserve fund until the
accumulative amount of such reserves reach 50.0% of its respective registered capital. These restricted reserves are not distributable as
cash dividends. In addition, if any of our China mainland subsidiaries incurs debt on its own behalf in the future, the instruments
governing the debt may restrict its ability to pay dividends or make other distributions to us.
Furthermore, pursuant to regulations promulgated by SAFE, China mainland subsidiaries of offshore parent companies may be
prohibited from making distributions of profits to such offshore parent companies and from paying the offshore parent companies
proceeds from any reduction in capital, share transfer or liquidation in respect of such China mainland subsidiaries, if PRC shareholders
with a direct or indirect stake in the offshore parent company fail to make the requisite SAFE registrations.

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These regulations require PRC residents to file with the competent SAFE offices information about offshore companies in
which they have directly or indirectly invested (including with respect to investments already made as of the inception of the new
regulation) and to make follow-up filings in connection with certain material transaction involving such offshore companies, such as
mergers or acquisitions, capital increases or decreases, and external equity investments or equity transfers.
For more information about foreign exchange regulation, see Item 3.D. “Key Information—Risk Factors—Risks Related to Our
Corporate Structure—Our corporate structure may restrict our ability to receive dividends from, and transfer funds to, our China
mainland subsidiaries and VIEs, which could restrict our ability to act in response to changing market conditions and reallocate funds
internally in a timely manner.” and “Key Information—Risk Factors—Risks Related to Doing Business in China—Regulation on
currency exchange may limit our ability to utilize our revenues effectively.”
E.           Taxation
The following summary of the material Cayman Islands, PRC, Hong Kong and United States federal income tax consequences
relevant to the purchase, ownership or sale of our ordinary shares or ADSs is based upon laws and relevant interpretations thereof in
effect as of the date of the filing of this annual report, all of which are subject to change. To the extent that the discussion relates to
matters of Cayman Islands tax law, it represents the opinion of Maples and Calder (Hong Kong) LLP, our Cayman Islands counsel.
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation
and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the
government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution
brought within, the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to
any payments made by or to our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
People’s Republic of China Taxation
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with “de
facto management body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax on its global
income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and
substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In 2009,
the STA issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the “de facto
management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to
offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the
criteria set forth in the circular may reflect the STA’s general position on how the “de facto management body” text should be applied in
determining the tax resident status of all offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by
a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in
China if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii)
decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or
personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder
resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in
the PRC. We are not aware of any offshore holding companies with a similar corporate structure to ours that have been deemed a PRC
resident enterprise by the PRC tax authorities. Accordingly, we believe that none of NetEase, Inc. and its subsidiaries outside of China is
a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC
tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.”
If the PRC tax authorities determine that NetEase, Inc. is a PRC resident enterprise for enterprise income tax purposes, we may
be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the
holders of our ADSs. In addition, non-resident enterprise shareholders (including our ADS holders) may be subject to a 10% PRC
withholding tax on gains realized on the sale or other disposition of ADSs or ordinary shares, if such income is treated as sourced from
within the PRC. In addition, gains derived by our non-PRC individual shareholders from the sale of our shares and ADSs may be subject
to a 20% PRC withholding tax.

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Pursuant to the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, the withholding tax rate in respect
to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10% if the
Hong Kong enterprise directly holds at least 25% of the PRC enterprise. Pursuant to the Notice of the STA on the Issues concerning the
Application of the Dividend Clauses of Tax Agreements, a Hong Kong resident enterprise must meet the following conditions, among
other things, in order to apply the reduced withholding tax rate: (i) it must be a company; (ii) it must directly own the required percentage
of equity interests and voting rights in the PRC resident enterprise; and (iii) it must have directly owned such required percentage in the
PRC resident enterprise throughout the 12 months prior to receiving the dividends.
It is unclear whether our non-PRC individual shareholders (including our ADS holders) would be subject to any PRC tax on
dividends obtained by such non-PRC individual shareholders in the event we are determined to be a PRC resident enterprise. If any PRC
tax were to apply to dividends realized by non-PRC individuals, it would generally apply at a rate of 20% unless a reduced rate is
available under an applicable tax treaty. However, it is also unclear whether non-PRC shareholders of NetEase, Inc. would be able to
claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that NetEase, Inc. is treated as a
PRC resident enterprise.
Provided that our Cayman Islands holding company, NetEase, Inc., is not deemed to be a PRC resident enterprise, holders of our
ADSs and ordinary shares who are not PRC residents will not be subject to PRC income tax on dividends distributed by us or gains
realized from the sale or other disposition of our shares or ADSs. STA Circular 7 further clarifies that, if a non-resident enterprise derives
income by acquiring and selling shares in an offshore listed enterprise in the public market, such income will not be subject to PRC tax.
In addition, STA Public Notice 37 provided certain key changes to the previous withholding regime, such as (i) the withholding
obligation for a non-resident enterprise deriving dividend arises on the date on which the payment is actually made rather than on the
date of the resolution that declared the dividends, (ii) non-resident enterprises shall report tax to relevant authorities if their withholding
agents fail to perform the withholding obligation. However, because there is uncertainty as to the application of STA Public Notice 37
and STA Circular 7, we and our non-PRC resident investors may be at risk of being required to file a return and being taxed under STA
Public Notice 37 and STA Circular 7, and we may be required to expend valuable resources to comply with STA Public Notice 37 and
STA Circular 7 or to establish that we should not be taxed under STA Public Notice 37 and STA Circular 7. See Item 3.D. “Key
Information—Risk Factors—Risks Related to Doing Business in China—We and our shareholders face uncertainties with respect to
indirect transfers of equity interests in PRC resident enterprises by a non-PRC company.”
Hong Kong Taxation
Our subsidiaries in Hong Kong were subject to income tax on their taxable income generated from operations in Hong Kong at
a rate of 16.5%. For the years 2022, 2023 and 2024, the first HK$2 million of profits earned by one of our subsidiaries incorporated in
Hong Kong was taxed at a rate of 8.25%, while the remaining profits were taxed at the 16.5% tax rate. The payments of dividends by
these companies to us are not subject to any Hong Kong withholding tax.
Our principal register of members is maintained by our principal share registrar, Maples Fund Services (Cayman) Limited, in
the Cayman Islands, and our Hong Kong register of members is maintained by the Hong Kong share registrar, Computershare Hong
Kong Investor Services Limited, in Hong Kong.
Dealings in our ordinary shares registered on our Hong Kong share register are subject to Hong Kong stamp duty. The stamp
duty is charged to each of the seller and purchaser at the rate of 0.1% of the consideration for, or (if greater) the value of, our ordinary
shares transferred. In other words, a total of 0.2% is currently payable on a typical sale and purchase transaction of our ordinary shares.
In addition, a fixed duty of HK$5.00 is charged on each instrument of transfer (if required).
To facilitate ADS-ordinary share conversion and trading between the Nasdaq and the Hong Kong Stock Exchange, we have
moved a portion of our issued ordinary shares, including all of the ordinary shares deposited in our ADS program, from our Cayman
share register to our Hong Kong share register. It is unclear whether, as a matter of Hong Kong law, the trading or conversion of ADSs
constitutes a sale or purchase of the underlying Hong Kong-registered ordinary shares that is subject to Hong Kong stamp duty. We
advise investors to consult their own tax advisors on this matter. See Item 3.D. “Key Information—Risk Factors—Risks Related to Our
ADSs and Shares—There is uncertainty as to whether Hong Kong stamp duty will apply to deposits of our ordinary shares into or
withdrawal of our ordinary shares from the ADS facility or trading of our ADSs.”

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Material United States Federal Income Taxation Considerations
The following discussion is a summary of certain United States federal income tax considerations applicable to the purchase,
ownership and disposition of our ordinary shares or ADSs by a U.S. Holder (as defined below) who holds such ordinary shares or ADSs
as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). This summary does not
purport to be a complete analysis of all potential United States federal income tax consequences of the purchase, ownership, and
disposition of the ordinary shares or ADSs. This discussion is based on the Code as in effect on the date of this annual report and on
United States Treasury regulations in effect or, in some cases, proposed, as of the date of the filing of this annual report, as well as
judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change,
which change could apply retroactively and could affect the tax consequences described below. No assurance can be given that the IRS
would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below.
This summary does not address all aspects of United States federal income taxation that may be relevant to particular U.S.
Holders in light of their specific circumstances (for example, U.S. Holders subject to the alternative minimum tax provisions of the
Code) or to holders that may be subject to special rules under United States federal income tax law, including:
●
broker dealers in stocks, securities, commodities or currencies;
●
persons (including securities traders) that use a mark-to-market accounting method;
●
banks and financial institutions;
●
insurance companies;
●
regulated investment companies;
●
real estate investment trusts;
●
tax-exempt entities (including private foundations);
●
grantor trusts;
●
persons holding ordinary shares or ADSs as part of a hedging, conversion, straddle, or other integrated transaction for U.S.
federal income tax purposes;
●
persons deemed to sell ordinary shares or ADSs under the constructive sale provisions of the Code;
●
certain former citizens or residents of the United States;
●
persons whose functional currency is not the U.S. dollar;
●
partnerships or other entities taxable as partnerships or pass-through entities for U.S. federal income tax purposes, or
persons holding ADSs or ordinary shares through such entities;
●
direct, indirect or constructive owners of 10% or more of the total combined vote or value of all classes of our equity; and
●
persons who acquired ordinary shares or ADSs pursuant to the exercise of any employee share option or otherwise as
compensation.

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This summary also does not address the U.S. federal estate, gift, and other non-income tax considerations, the Medicare
contribution tax on certain net investment income, or any state, local or non-U.S. tax considerations, relating to the ownership or
disposition of our ordinary shares or ADSs. Prospective purchasers are urged to consult their tax advisors about the United States federal,
state and local and non-U.S. tax consequences to them of the purchase, ownership and disposition of our ordinary shares or ADSs.
For purposes of this summary, “U.S. Holder” means a beneficial holder of our ordinary shares or ADSs that for United States
federal income tax purposes is:
●
an individual citizen or resident of the United States;
●
a corporation (or other entity classified as a corporation for United States federal income tax purposes) created or organized
in or under the laws of the United States, any state thereof or the District of Columbia;
●
an estate, the income of which is subject to United States federal income taxation regardless of its source; or
●
a trust, (a) if a court within the United States is able to exercise primary supervision over the administration of such trust
and one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code) have the authority to
control all substantial decisions of the trust, or (b) if a valid election is in effect to be treated as a United States person.
If a partnership or other entity or arrangement classified as a partnership for United States federal income tax purposes holds
ordinary shares or ADSs, the United States federal income tax treatment of a partner generally will depend on the status of the partner
and the activities of the partnership. This summary does not address the tax consequences of any such partner. If you are a partner of a
partnership holding ordinary shares or ADSs, you should consult your tax advisor regarding the U.S. federal income tax consequences of
acquiring, owning or disposing of our ordinary shares or ADSs.
ADSs
The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the
deposit agreement and any related agreement will be performed in accordance with their terms. Based on such assumptions, a U.S.
Holder of ADSs generally should be treated as the owner of the underlying ordinary shares represented by those ADSs for United States
federal income tax purposes. Accordingly, no gain or loss will be recognized if a U.S. Holder exchanges ADSs for the underlying shares
represented by those ADSs.
The U.S. Treasury Department has expressed concern that parties to whom ADSs are released before shares are delivered to the
depositary or intermediaries in the chain of ownership between holders and the issuer of the security underlying the ADSs, may be taking
actions that are inconsistent with the claiming of foreign tax credits by U.S. Holders of ADSs. These actions would also be inconsistent
with the claiming of the reduced rate of tax, described below, applicable to dividends received by certain non-corporate U.S. Holders.
Accordingly, the creditability of non-U.S. withholding taxes (if any), and the availability of the reduced tax rate for dividends received by
certain non-corporate U.S. Holders, each described below, could be affected by actions taken by such parties or intermediaries. For
purposes of the discussion below, we assume that intermediaries in the chain of ownership between the holder of an ADS and us are
acting consistently with the claim of U.S. foreign tax credits by U.S. Holders.

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Taxation of Dividends and Other Distributions on the Ordinary Shares or ADSs
Subject to the passive foreign investment company, or PFIC, rules discussed below, the gross amount of any distributions
(including withheld taxes, if any) paid by our company out of current or accumulated earnings and profits (as determined for United
States federal income tax purposes) generally will be taxable to a U.S. Holder as foreign source dividend income on the date such
distribution is actually or constructively received, and will not be eligible for the dividends received deduction generally allowed to
corporations in respect of dividends received from other United States corporations. Distributions in excess of current and accumulated
earnings and profits will be treated as a non-taxable return of capital to the extent of the U.S. Holder’s adjusted tax basis in the ordinary
shares or ADSs, and thereafter as capital gain. However, we do not maintain calculations of our earnings and profits in accordance with
United States federal income tax accounting principles. U.S. Holders should therefore assume that any distribution by our company with
respect to the ordinary shares or ADSs will constitute dividend income even if that distribution would otherwise be treated as a non-
taxable return of capital or as capital gain under the rules described above. U.S. Holders should consult their tax advisors with respect to
the appropriate United States federal income tax treatment of any distribution received from our company. This discussion assumes that
distributions, if any, will be made in U.S. dollars.
Certain dividends received by non-corporate U.S. Holders, including individuals, may be eligible for the special reduced rates
normally applicable to long-term capital gains, provided that certain conditions are satisfied. A U.S. Holder is not able to claim the
reduced rate for any year in which we are treated as a PFIC. See “—Passive Foreign Investment Companies” below. Dividends may be
taxed at the lower applicable capital gains rate provided that (1) our ordinary shares or ADSs, as applicable, are readily tradable on an
established securities market in the United States, (2) our company is not a PFIC (as discussed below) for either our taxable year in
which the dividends were paid or the preceding taxable year, and (3) certain holding period and other requirements are met. Because our
ADSs are listed on the NASDAQ Global Select Market, they are considered for purposes of clause (1) above to be readily tradable on an
established securities market in the United States. However, because our ordinary shares are not listed on an established securities
market, we do not believe that dividends paid on our ordinary shares that are not represented by ADSs currently meet the conditions
required for these reduced tax rates. There can be no assurance that our ADSs will be considered readily tradable on an established
securities market in subsequent years.
Alternatively, certain non-corporate U.S. Holders may be eligible for the special reduced rates normally applicable to long-term
capital gains if we are eligible for benefits under a comprehensive U.S. income tax treaty that includes an exchange of information
program and which the U.S. Treasury Department has determined is satisfactory for these purposes. The United States does not have a
comprehensive income tax treaty with the Cayman Islands. However, in the event that we were deemed to be a PRC resident enterprise
under the enterprise income tax law, although no assurance can be given, we might be considered eligible for the benefits of the income
tax treaty between the United States and the PRC, or the U.S.-PRC Tax Treaty, for purposes of these rules. U.S. Holders should consult
their tax advisors regarding the availability of the reduced tax rates on dividends paid with respect to our ordinary shares or ADSs in light
of their particular circumstances.
In the event that dividends from our company are subject to withholding by the PRC, a U.S. Holder may be eligible, subject to a
number of complex limitations, to claim a foreign tax credit in respect of foreign withholding taxes imposed on dividends received on the
ordinary shares or ADSs. For purposes of calculating the U.S. foreign tax credit, dividends paid on our ordinary shares or ADSs will be
treated as income from sources outside the United States, and will generally constitute passive category income. A U.S. Holder who does
not elect to claim a foreign tax credit for foreign income tax withheld, may instead claim a deduction, for United States federal income
tax purposes, in respect of such withholdings, but only for a year in which such holder elects to do so for all creditable foreign income
taxes. Recently issued U.S. Treasury regulations may restrict the availability of any such credit based on the nature of the tax imposed by
the foreign jurisdiction, though under current IRS guidance, taxpayers generally may elect to determine the creditability of foreign taxes
without regard to such restrictions for taxable years ending prior to the year further guidance is issued. The U.S. foreign tax credit rules
are complex. U.S. Holders should consult their tax advisors regarding the foreign tax credit rules in light of their particular
circumstances.

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Taxation of Disposition of Ordinary Shares or ADSs
Subject to the PFIC rules discussed below, you will generally recognize taxable gain or loss on any sale or exchange or other
taxable disposition of an ordinary share or ADS in an amount equal to the difference between the amount realized for the ordinary share
or ADS and your adjusted tax basis in the ordinary share or ADS. The gain or loss will generally be capital gain or loss and will be long-
term capital gain or loss if you have held the ordinary share or ADS for more than one year. Long-term capital gains of non-corporate
U.S. Holders are eligible for reduced rates of taxation. The deductibility of a capital loss may be subject to limitations. Any gain or loss
that you recognize generally will be treated as United States source gain or loss for United States foreign tax credit purposes. In the event
PRC tax were to be imposed on any gain from the disposition of ordinary shares or ADSs, such gain may be treated as PRC source gain
under the U.S.-PRC Tax Treaty, in which case a U.S. Holder eligible for treaty benefits may be able to claim a foreign tax credit, subject
to applicable limitations. See the discussion above under the heading “—Taxation of Dividends and Other Distributions on the Ordinary
Shares or ADSs” regarding the potential availability of U.S.-PRC Tax Treaty benefits. Recently issued U.S. Treasury regulations may
impose additional restrictions on the creditability of any PRC taxes on disposition gains, though under current IRS guidance, taxpayers
generally may elect to determine the creditability of foreign taxes without regard to such restrictions for taxable years ending prior to the
year further guidance is issued. Because the determination of treaty benefit eligibility is fact intensive and depends upon a holder’s
particular circumstances, U.S. Holders should consult their tax advisors regarding U.S.-PRC Tax Treaty benefit eligibility. U.S. Holders
are also encouraged to consult their own tax advisors regarding the tax consequences in the event PRC tax were to be imposed on a
disposition of ordinary shares or ADSs, including the availability of the U.S. foreign tax credit and the ability and whether to treat any
gain as PRC source gain for the purposes of the U.S. foreign tax credit in consideration of their particular circumstances.
Passive Foreign Investment Companies
A non-U.S. corporation will be classified as a PFIC for any taxable year in which, after taking into account the income and
assets of the corporation and certain subsidiaries pursuant to applicable “look-through rules,” either (i) 75% or more of its gross income
for such taxable year is “passive income” or (ii) 50% or more of the value of our assets (generally determined on the basis of a quarterly
average) during such taxable year is attributable to assets that either produce passive income or are held for the production of passive
income. Passive income generally includes dividends, interest, rents and royalties (other than certain rents and royalties derived in the
active conduct of a trade or business), annuities and gains from assets that produce passive income.
We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any
other corporation in which we own, directly or indirectly, 25% or more (by value) of the stock.
Additionally, if we are classified as a PFIC in any taxable year with respect to which a U.S. Holder owns ordinary shares or
ADSs, we generally will continue to be treated as a PFIC with respect to such U.S. Holder in all succeeding taxable years, regardless of
whether we continue to meet the tests described above, unless the U.S. Holder makes the “deemed sale election” described below.
Furthermore, if we are treated as a PFIC then one or more of our subsidiaries may also be treated as PFICs with respect to a U.S. Holder
(as discussed below under the heading “—U.S. Federal Income Tax Treatment of a Shareholder of a PFIC”).
Based on the value of our assets, including goodwill, and the composition of our income and assets, we do not believe that we
were a PFIC for the taxable year ended December 31, 2024. We have not obtained any opinion of counsel or any rulings from the IRS
regarding our status as a PFIC. The PFIC determination is highly fact-intensive and made at the end of each taxable year. We hold and
may continue to hold a substantial amount of cash and cash equivalents. In addition, the value of our assets, including goodwill, for
purposes of the asset test will generally be determined by reference to the market price of the ADSs and ordinary shares, which may
fluctuate significantly. Moreover, the application of the PFIC rules is subject to uncertainty in several respects. For these reasons, there
can be no assurance that we were not a PFIC in any prior taxable years and will not be a PFIC in the current taxable year or any future
taxable year or that the IRS will not challenge our determination concerning our PFIC status.

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U.S. Federal Income Tax Treatment of a Shareholder of a PFIC
If we are classified as a PFIC for any taxable year during which a U.S. Holder owns ordinary shares or ADSs, the U.S. Holder,
absent certain elections (including a mark-to-market election and a QEF election as described below), will generally be subject to
adverse rules (regardless of whether our company continues to be classified as a PFIC) with respect to (i) any “excess distributions”
(generally, any distributions received by the U.S. Holder on the ordinary shares or ADSs in a taxable year that are greater than 125% of
the average annual distributions received by the U.S. Holder in the three preceding taxable years or, if shorter, the U.S. Holder’s holding
period for the ordinary shares or ADSs) and (ii) any gain realized on the sale or other disposition of ordinary shares or ADSs.
Under these rules (a) the excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period, (b) the
amount allocated to the current taxable year and any taxable year prior to the first taxable year in which our company is classified as a
PFIC will be taxed as ordinary income, and (c) the amount allocated to each of the other taxable years during which our company was
classified as a PFIC will be subject to tax at the highest rate of tax in effect for the applicable category of taxpayer for that year and an
interest charge will be imposed with respect to the resulting tax attributable to each such other taxable year.
If we are a PFIC in any year with respect to a U.S. Holder, and any of our subsidiaries are also PFICs (“lower-tier PFICs”), such
U.S. Holder will be treated as owning a proportionate share (by value) of the shares of the lower-tier PFICs for purposes of these rules.
Non-corporate U.S. Holders will not be eligible for the reduced tax rate on any dividends received from us if we are a PFIC in the taxable
year in which such dividends are paid or in the preceding taxable year.
If we are classified as a PFIC and then cease to be so classified, a U.S. Holder may make an election (a “deemed sale election”)
to be treated for U.S. federal income tax purposes as having sold such U.S. Holder’s ordinary shares or ADSs on the last day of our
taxable year during which we were a PFIC. After the deemed sale election, the ordinary shares or ADSs with respect to which the
deemed sale election was made will not be treated as shares in a PFIC unless we subsequently become a PFIC. However, gain recognized
as a result of making the deemed sale election would be subject to the adverse rules described above and loss would not be recognized.
If we are a PFIC in any year with respect to a U.S. Holder, such U.S. Holder generally will be required to file an annual
information return on IRS Form 8621 (or other then applicable IRS Form or statement) regarding distributions received on our ordinary
shares or ADSs and any gain realized on the disposition of our ordinary shares or ADSs, and certain U.S. Holders will be required to file
an annual information return (also on IRS Form 8621 or other then applicable IRS Form or statement) relating to their ownership of our
ordinary shares or ADSs.
Mark-to-Market Election
In certain circumstances, a U.S. Holder may be eligible to make a mark-to-market election with respect to its ordinary shares or
ADSs if such ordinary shares or ADSs qualify as “marketable stock” under applicable U.S. federal income tax rules. For purposes of
these rules, “marketable stock” is stock which is “regularly traded” (traded in greater than de minimis quantities on at least 15 days
during each calendar quarter) on a “qualified exchange” or other market within the meaning of applicable U.S. Treasury regulations. A
“qualified exchange” includes a national securities exchange that is registered with the SEC.
A U.S. Holder that makes an effective mark-to-market election must include in gross income, as ordinary income, rather than
capital gain, for each taxable year an amount equal to the excess, if any, of the fair market value of the ordinary shares or ADSs, as
applicable, at the close of the taxable year over the U.S. Holder’s adjusted basis in the ordinary shares or ADSs.
An electing U.S. Holder may also claim an ordinary loss deduction for the excess, if any, of the U.S. Holder’s adjusted tax basis
in such ordinary shares or ADSs over their fair market value at the close of the taxable year, but this deduction is allowable only to the
extent of any net mark-to-market gains previously included in income pursuant to the mark-to-market election. The adjusted tax basis of
a U.S. Holder’s ordinary shares or ADSs with respect to which the mark-to-market election applies would be adjusted to reflect amounts
included in gross income or allowed as a deduction because of such election. If a U.S. Holder makes an effective mark-to-market election
with respect to our ordinary shares or ADSs, gains from an actual sale or other disposition of such ordinary shares or ADSs in a year in
which we are a PFIC would be treated as ordinary income, and any losses incurred on such sale or other disposition would be treated as
ordinary losses to the extent of any net mark-to-market gains previously included in income.

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If we are classified as a PFIC for any taxable year in which a U.S. Holder owns ordinary shares or ADSs but before a mark-to-
market election is made, the adverse PFIC rules described above will apply to any mark-to-market gain recognized in the year the
election is made. Otherwise, a mark-to-market election will be effective for the taxable year for which the election is made and all
subsequent taxable years unless the ordinary shares or ADSs are no longer regularly traded on a qualified exchange or the IRS consents
to the revocation of the election. Our ADSs are listed on the NASDAQ Global Select Market, which is a qualified exchange or other
market for purposes of the mark-to-market election. Consequently, if the ADSs continue to be so listed, and are “regularly traded” for
purposes of these rules (for which no assurance can be given) we expect that the mark-to-market election would be available to a U.S.
Holder with respect to our ADSs.
A mark-to-market election may not be available with respect to the shares of lower-tier PFICs that are treated as owned by you.
Consequently, you could be subject to the PFIC rules with respect to income of the lower-tier PFICs the value of which already had been
taken into account indirectly via mark-to-market adjustments. Prospective investors should consult their tax advisors regarding the
availability of, and the procedure for, and the effect of making, a mark-to-market election, and whether making the election would be
advisable, including in light of their particular circumstances.
“QEF” Election
The PFIC rules permit a holder of PFIC stock in certain circumstances to avoid some of the disadvantageous tax treatment
described above by making a “qualified electing fund,” or QEF, election to be taxed currently on its share of the PFIC’s undistributed
income. We do not, however, intend to provide the information regarding our income that the U.S. Holder would need to make a QEF
election if we are classified as a PFIC.
U.S. Holders should consult their tax advisors regarding the potential application of the PFIC regime, including eligibility for
and the manner and advisability of making a mark-to-market election and related reporting requirements.
NO ASSURANCE CAN BE GIVEN THAT WE HAVE NOT BEEN A PFIC, ARE NOT CURRENTLY A PFIC OR THAT WE
WILL NOT BECOME A PFIC IN THE FUTURE. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE OPERATION OF THE PFIC RULES AND RELATED REPORTING REQUIREMENTS IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES, INCLUDING THE ADVISABILITY AND EFFECTS OF MAKING ANY ELECTION THAT
MAY BE AVAILABLE.
Information Reporting and Backup Withholding; Specified Foreign Financial Assets
The proceeds of a sale or other disposition, as well as dividends paid with respect to ordinary shares or ADSs by a United States
payor (including any payments received from a U.S. financial intermediary), generally will be reported to the IRS and to the U.S. Holder
as required under applicable regulations. Backup withholding tax (currently at a rate of 24%) may apply to these payments if the U.S.
Holder is not otherwise exempt and:
●
the holder fails to furnish the holder’s taxpayer identification number, which for an individual is generally his or her social
security number;
●
the holder furnishes an incorrect taxpayer identification number;
●
the applicable withholding agent is notified by the IRS that the holder previously failed to properly report payments of
interest or dividends; or
●
the holder fails to certify under penalties of perjury that the holder has furnished a correct taxpayer identification number
and that the IRS has not notified the holder that the holder is subject to backup withholding.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a U.S. Holder’s
U.S. federal income tax liability (if any) or refunded provided the required information is furnished to the IRS in a timely manner. U.S.
Holders should consult their tax advisors as to their qualification for exemption from backup withholding tax and the procedure for
establishing an exemption.

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Certain U.S. Holders of specified foreign financial assets with an aggregate value in excess of the applicable dollar threshold are
required to report information relating to their holding of stock or securities issued by a non-U.S. person (such as our company), subject
to certain exceptions (including an exception for shares held in accounts maintained by certain financial institutions) with their tax return
for each  year in which they hold such stock or securities. U.S. Holders should consult their tax advisors regarding the information
reporting obligations that may arise from their acquisition, ownership or disposition of our ordinary shares or ADSs.
THE ABOVE DISCUSSION DOES NOT COVER ALL TAX MATTERS THAT MAY  BE OF IMPORTANCE TO A
PARTICULAR INVESTOR. PROSPECTIVE INVESTORS ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISORS
ABOUT THE TAX CONSEQUENCES OF AN INVESTMENT IN OUR ORDINARY SHARES OR ADSs.
Enforcement of Civil Liabilities
We are an exempted company incorporated in the Cayman Islands because of the following benefits found there:
●
political and economic stability;
●
an effective judicial system;
●
a favorable tax system;
●
the absence of exchange control or currency restrictions; and
●
the availability of professional and support services.
However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include, but are not
limited to, the following:
●
the Cayman Islands has a less developed body of securities laws as compared to the United States and provides
significantly less protection to investors; and
●
Cayman Islands companies may not have standing to sue before the federal courts of the United States.
Our constitutional documents do not contain provisions requiring that disputes, including those arising under the securities laws
of the United States, between us, our officers, directors and shareholders be arbitrated.
A substantial portion of our current operations is conducted in China through our wholly-owned subsidiaries which are
incorporated in China, Hong Kong, the BVI or the Cayman Islands. All or most of our assets are located in China. A majority of our
directors and officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are
located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States
upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the
civil liability provisions of the securities laws of the United States or any state in the United States.
Maples and Calder (Hong Kong) LLP, our counsel as to Cayman Islands law, and Zhong Lun Lawyers, our counsel as to
Chinese law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands or China would:
(1) recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the
civil liability provisions of the securities laws of the United States or any state in the United States; or
(2) entertain original actions brought in the Cayman Islands or China against us or our directors or officers predicated upon the
securities laws of the United States or any state in the United States.

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Maples and Calder (Hong Kong) LLP has further advised us that there is uncertainty under Cayman Islands law with regard to
whether a judgment obtained from the United States courts under the civil liability provisions of the securities laws will be determined by
the courts of the Cayman Islands as penal or punitive in nature. If such a determination is made, the courts of the Cayman Islands will not
recognize or enforce the judgment against a Cayman company. Because the courts of the Cayman Islands have yet to rule on whether
such judgments are penal or punitive in nature, it is uncertain whether they would be enforceable in the Cayman Islands. Maples and
Calder (Hong Kong) LLP has advised us that although there is no statutory enforcement in the Cayman Islands of judgments obtained in
the federal or state courts of the United States, a judgment obtained in a foreign court of competent jurisdiction will be recognized and
enforced in the courts of the Cayman Islands at common law, without any re-examination of the merits of the underlying dispute, by an
action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided that such judgment: (a) is given by
a foreign court of competent jurisdiction; (b) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment
has been given; (c) is final; (d) is not in respect of taxes, a fine or a penalty; and (e) was not obtained in a manner and is not of a kind the
enforcement of which is contrary to natural justice or the public policy of the Cayman Islands.
Zhong Lun Lawyers has advised us further that the recognition and enforcement of foreign judgments are provided for under
Chinese Civil Procedures Law. Chinese courts may recognize and enforce foreign judgments in accordance with the requirements of
Chinese Civil Procedures Law based either on treaties between China and the country where the judgment is made or on reciprocity
between jurisdictions.
F.           Dividends and Paying Agents
Not applicable.
G.           Statement by Experts
Not applicable.
H.           Documents on Display
We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we
are required to file reports and other information with the SEC. The SEC maintains a website that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC, including us, at http://www.sec.gov.
Our corporate website can be accessed at http://ir.netease.com. The information on our website is not part of this annual report.
As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of
quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing
profit recovery provisions contained in Section 16 of the Exchange Act.
Our financial statements have been prepared in accordance with U.S. GAAP.
In accordance with NASDAQ Marketplace Rule 5250(d)(1), we will post this annual report on Form 20-F on our website at
http://ir.netease.com under the heading “Annual Reports.” In addition, we will provide hardcopies of our annual report free of charge to
shareholders and ADS holders upon request.
I.
Subsidiary Information
Not applicable.
J.
Annual Report to Security Holders
Not applicable.

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Item 11. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Our exposure to market rate risk for changes in interest rates relates primarily to the interest income generated by excess cash
invested in financial products issued by commercial banks in China, as well as interest expenses payable on our short-term and long-term
bank borrowings. All of our short-term bank borrowings as of December 31, 2024 were at fixed rates.
Interest instruments carry a degree of interest rate risk. We have not been exposed nor do we anticipate being exposed to
material risks due to changes in interest rates. However, our future net interest income may fall short of expectations due to changes in
interest rates. Based on our interest instruments as of December 31, 2024, a 10% change in the interest rate would result in an increase or
decrease of RMB492.1 million (US$67.4 million) of our total amount of net interest income and of RMB48.7 million (US$6.7 million)
of our total amount of investment income from short-term investments in 2024.
Foreign Currency Risk
A significant majority of our revenues and expenses are denominated in Renminbi, but as noted above, a certain portion of our
cash is also kept in U.S. dollars as well as various other currencies. Although we believe that, in general, our exposure to foreign
exchange risks should be limited, the value of our ADSs will be affected by the foreign exchange rate between U.S. dollars, other foreign
currencies and Renminbi. For example, to the extent that we need to convert U.S. dollars and other foreign currencies into Renminbi for
our operational needs and the Renminbi appreciates against the U.S. dollars and other foreign currencies at that time, our financial
position and the price of our ADSs may be adversely affected. Conversely, if we decide to convert our Renminbi into U.S. dollars for the
purpose of declaring dividends on our ADSs or otherwise and the U.S. dollar or other foreign currencies appreciates against the
Renminbi, the U.S. dollar equivalent of our earnings from our subsidiaries and controlled entities in China would be reduced.
The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the PBOC. The PRC
government allowed the Renminbi to appreciate by more than 20% against the U.S. dollar between July 2005 and July 2008. Between
July 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the U.S. dollar remained within a
narrow band. Since June 2010, Renminbi has fluctuated against the U.S. dollar, at certain times significantly and unpredictably. With the
development of the foreign exchange market progressing towards interest rate liberalization and Renminbi internationalization and
economic uncertainties in both China and the world, the PRC government may in the future announce further changes to the exchange
rate system and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in
the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the
Renminbi and the U.S. dollar in the future.
We translate our monetary assets and liabilities which are denominated in currencies other than Renminbi into Renminbi as of
each accounting period end, in accordance with applicable accounting standards. As a result of this foreign currency translation, we
reported net foreign exchange gains of RMB255.4 million (US$35.0 million) in 2024, compared to net foreign exchange losses of
RMB133.0 million in 2023. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign
currency exchange risk. While we may decide to enter into hedging transactions in the future, the effectiveness of these hedges may be
limited and we may not be able to successfully hedge our exposure. Accordingly, we may incur economic losses in the future due to
foreign exchange rate fluctuations, which could have a negative impact on our financial condition and results of operations.  
As of December 31, 2024, we had U.S. dollar-denominated debt outstanding of US$1.0 billion. If the U.S. dollar had
appreciated/depreciated by 10% against the Renminbi, our U.S. dollar-denominated debt as of December 31, 2024 would have
increased/decreased by RMB729.9 million in Renminbi terms.
As of December 31, 2024, we had U.S. dollar-denominated cash and cash equivalents and time deposits of US$12.2 billion. If
the U.S. dollar had appreciated/depreciated by 10% against the Renminbi, our U.S. dollar-denominated cash and cash equivalents and
time deposits as of December 31, 2024 would have increased/decreased by RMB8.9 billion in Renminbi terms.

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Item 12. Description of Securities Other than Equity Securities
A.          Debt Securities
Not applicable.
B.          Warrants and Rights
Not applicable.
C.          Other Securities
Not applicable.
D.          American Depositary Shares
Our ADSs
Our ADSs representing our ordinary shares trade on Nasdaq. Dealings in our ADSs on Nasdaq are conducted in U.S. dollars.
ADSs may be held either:
(a) directly: (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing a
specific number of ADSs registered in the holder’s name; or (ii) by having uncertificated ADSs registered in the holder’s
name; or
(b) indirectly, by holding a security entitlement in ADSs through a broker or other financial institution that is a direct or
indirect participant in The Depository Trust Company, also called DTC.
The depositary for our ADSs is The Bank of New York Mellon, whose office is located at 240 Greenwich Street, New York,
New York 10286, United States.

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Fees and charges our ADS holders may have to pay
The Bank of New York Mellon collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary
shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for
making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to
pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing
investors or by charging the book-entry system accounts of participants acting for them. The depositary may collect any of its fees by
deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are
obligated to pay those fees. The depositary may refuse to provide fee-attracting services until its fees for those services are paid.
Persons depositing or withdrawing shares or ADS holders must pay:    
For:
US$5.00 or less per 100 ADSs (or portion of 100 ADSs)
●
Issuance of ADSs, including issuances resulting from
a distribution of ordinary shares or rights or other
property
●
Cancellation of ADSs for the purpose of withdrawal,
including if the deposit agreement terminates
US$0.02 or less per ADS
●
Cash dividend or any cash distribution to ADS
holders
A fee equivalent to the fee that would be payable if
securities distributed to you had been shares and the
shares had been deposited for issuance of ADSs
●
Distribution of securities distributed to holders of
deposited securities (including rights) that are
distributed by the depositary to ADS holders
US$1.50 or less per certificate presented for transfer
●
Transfer of American depositary receipts, or ADRs
Registration or transfer fees
●
Transfer and registration of shares on our share
register to or from the name of the depositary or its
agent when you deposit or withdraw shares
Expenses of the depositary
●
Cable (including SWIFT) and facsimile transmissions
(when expressly provided in the deposit agreement)
●
Converting foreign currency to U.S. dollars
Taxes and other governmental charges the depositary or
the custodian has to pay on any ADSs or shares
underlying ADSs, such as stock transfer taxes, stamp duty
or withholding taxes
●
As necessary
Any charges incurred by the depositary or its agents for
servicing the deposited securities
●
As necessary
Fees and other payments made by the depositary to us
From time to time, the depositary may make payments to us to reimburse and/or share revenue from the fees collected from
ADS holders, or waive fees and expenses for services provided, generally relating to costs and expenses arising out of establishment and
maintenance of the ADS program. In performing its duties under the deposit agreement, the depositary may use brokers, dealers or other
service providers that are affiliates of the depositary and that may earn or share fees or commissions. Our depositary has agreed to share
with us certain fees payable to the depositary by holders of ADSs. For the year ended December 31, 2024, the depositary paid us US$1.5
million pursuant to this arrangement.
Ordinary Shares
Our ordinary shares trade on the Hong Kong Stock Exchange in board lots of 100 ordinary shares. Dealings in our ordinary
shares on the Hong Kong Stock Exchange will be conducted in Hong Kong dollars.

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The transaction costs of dealings in our ordinary shares on the Hong Kong Stock Exchange include:
(a) Hong Kong Stock Exchange trading fee of 0.00565% of the consideration of the transaction, charged to each of the buyer
and seller;
(b) Securities and Futures Commission of Hong Kong transaction levy of 0.0027% of the consideration of the transaction,
charged to each of the buyer and seller;
(c) Accounting and Financial Reporting Council (AFRC) Transaction Levy of 0.00015% (rounded to the nearest cent) is
charged to each of the buyer and seller;
(d) transfer deed stamp duty of HK$5.00 per transfer deed (if applicable), payable by the seller;
(e) ad valorem stamp duty at a total rate of 0.2% of the value of the transaction, with 0.1% payable by each of the buyer and
the seller;
(f)
stock settlement fee, which is currently 0.002% of the gross transaction value, subject to a minimum fee of HK$2.00 and a
maximum fee of HK$100.00 per side per trade;
(g) brokerage commission, which is freely negotiable with the broker (other than brokerage commissions for IPO transactions
which are currently set at 1% of the subscription or purchase price and will be payable by the person subscribing for or
purchasing the securities); and
(h) the Hong Kong share registrar will charge between HK$2.50 to HK$20, depending on the speed of service (or such higher
fee as may from time to time be permitted under the Hong Kong Listing Rules), for each transfer of ordinary shares from
one registered owner to another, each share certificate canceled or issued by it and any applicable fee as stated in the share
transfer forms used in Hong Kong.
Investors must settle their trades executed on the Hong Kong Stock Exchange through their brokers directly or through
custodians. For an investor who has deposited his/her ordinary shares in his/her stock account or in his/her designated CCASS
participant’s stock account maintained with CCASS, settlement will be effected in CCASS in accordance with the General Rules of
HKSCC and HKSCC Operational Procedures in effect from time to time. For an investor who holds the physical certificates, settlement
certificates and the duly executed transfer forms must be delivered to his/her broker or custodian before the settlement date.
In connection with the initial public offering of our ordinary shares in Hong Kong, or the Hong Kong Public Offering, we
established a branch register of members in Hong Kong, or the Hong Kong share register, which is maintained by our Hong Kong Share
Registrar, Computershare Hong Kong Investor Services Limited. Our principal register of members, or the Cayman share register,
continues to be maintained by our Principal Share Registrar, Maples Fund Services (Cayman) Limited.
All ordinary shares offered in the Hong Kong Public Offering were registered on the Hong Kong share register in order to be
listed and traded on the Hong Kong Stock Exchange.
Converting Ordinary Shares Trading in Hong Kong into ADSs
An investor who holds ordinary shares registered in Hong Kong and wishes to receive delivery of ADSs that trade on the
Nasdaq must deposit or have his/her broker deposit the ordinary shares with the depositary’s Hong Kong custodian, The Hong Kong and
Shanghai Banking Corporation Limited, or the custodian, in exchange for ADSs.
A deposit of ordinary shares trading in Hong Kong in exchange for ADSs involves the following procedures:
(a) If the ordinary shares have been deposited with CCASS, the investor must transfer the ordinary shares to the depositary’s
account with the custodian within CCASS by following the CCASS procedures for transfer and submit and deliver a duly
completed and signed ADS delivery form to the custodian via his/her broker.

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(b) If the ordinary shares are held outside CCASS, the investor must arrange for the registration of a transfer of his/her ordinary
shares into the depositary’s name and delivery of evidence of that registration to the custodian, and must sign and deliver an
ADS delivery form to the depositary.
(c) Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, if
applicable, the depositary will register the corresponding number of ADSs in the name(s) requested by an investor and will
deliver the ADSs as instructed in the ADS delivery form.
For ordinary shares deposited in CCASS, under normal circumstances, the above steps generally require two business days,
provided that the investor has provided timely and complete instructions. For ordinary shares held outside CCASS in physical form, the
above steps may take 14 business days, or more, to complete. Temporary delays may arise. For example, the transfer books of the
depositary may from time to time be closed to ADS issuances. The investor will be unable to trade the ADSs until the procedures are
completed.
Converting ADSs to Ordinary Shares Trading in Hong Kong
An investor who holds ADSs and wishes to receive ordinary shares that trade on the Hong Kong Stock Exchange must cancel
the ADSs the investor holds and withdraw the ordinary shares from our ADS program and cause his/her broker or other financial
institution to trade such ordinary shares on the Hong Kong Stock Exchange.
An investor that holds ADSs indirectly through a broker or other financial institution should follow the procedures of the broker
or financial institution and instruct the broker to arrange for cancellation of the ADSs, and transfer of the underlying ordinary shares
from the depositary’s account with the custodian within the CCASS system to the investor’s Hong Kong stock account.
For investors holding ADSs directly, the following steps must be taken:
(a) To withdraw the ordinary shares from our ADS program, an investor who holds ADSs may turn in such ADSs at the office
of the depositary (and the applicable ADR(s) if the ADSs are held in certificated form), and send an instruction to cancel
such ADSs to the depositary. Those instructions must have a Medallion signature guarantee.
(b) Upon payment or net of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or
fees, if applicable, the depositary will instruct the custodian to deliver the ordinary shares underlying the canceled ADSs to
the CCASS account designated by the investor.
(c) If an investor prefers to receive the ordinary shares outside CCASS, he/she must so indicate in the instruction delivered to
the depositary.
For the ordinary shares to be received in CCASS, under normal circumstances, the above steps generally require two business
days, provided that the investor has provided timely and complete instructions. For the ordinary shares to be received outside CCASS in
physical form, the above steps may take 14 business days, or more, to complete. The investor will be unable to trade the ordinary shares
on the Hong Kong Stock Exchange until the procedures are completed.
Temporary delays may arise. For example, the transfer books of the depositary may from time to time be closed to ADS
cancelations. In addition, completion of the above steps and procedures for delivery of ordinary shares in a CCASS account is subject to
there being a sufficient number of ordinary shares on the Hong Kong share register to facilitate a withdrawal from the ADS program
directly into the CCASS system. We are not under any obligation to maintain or increase the number of ordinary shares on the Hong
Kong share register to facilitate such withdrawals.
Depositary Requirements
Before the depositary delivers ADSs or permits withdrawal of the ordinary shares, the depositary may require:
(a) production of satisfactory proof of the identity and genuineness of any signature or other information it deems necessary;
and

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(b) compliance with procedures it may establish, from time to time, consistent with the deposit agreement, including
completion and presentation of transfer documents.
The depositary may refuse to deliver, transfer, or register issuances, transfers and cancelations of ADSs generally when the
transfer books of the depositary or of the Hong Kong ordinary share Registrar are closed or at any time if the depositary or we determine
it advisable to do so.
All costs attributable to the transfer of the ordinary shares to effect a withdrawal from or deposit of the ordinary shares into our
ADS program will be borne by the investor requesting the transfer or deposit. In particular, holders of ordinary shares and ADSs should
note that the Hong Kong Share Registrar will charge between HK$2.50 to HK$20, depending on the speed of service (or such higher fee
as may from time to time be permitted under the Hong Kong Listing Rules), for each transfer of the ordinary shares from one registered
owner to another, each share certificate canceled or issued by it and any applicable fee as stated in the share transfer forms used in Hong
Kong. In addition, holders of the ordinary shares and ADSs must pay up to US$5.00 per 100 ADSs (or portion thereof) for each issuance
of ADSs and each cancelation of ADSs, as the case may be, in connection with the deposit of the ordinary shares into, or withdrawal of
the ordinary shares from, the ADS facility.
PART II.
Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable.
Item 15. Controls and Procedures
Disclosure Controls and Procedures
Our management, with the participation of William Lei Ding, our Chief Executive Officer, and Sarah Li, our Head of Financial
Reporting (principal financial officer), have conducted an evaluation pursuant to Rule 13a-15 promulgated under the Exchange Act, as
amended, of the effectiveness of our disclosure controls and procedures as of December 31, 2024. Based on this evaluation, our Chief
Executive Officer and our Head of Financial Reporting concluded that such disclosure controls and procedures were effective as of
December 31, 2024.
Management’s Annual Report on Internal Control over Financial Reporting
Our management’s annual report on internal control over financial reporting is included in this annual report on pages F-2.
Attestation report of the registered public accounting firm
PricewaterhouseCoopers Zhong Tian LLP, our independent registered public accounting firm that audited our financial
statements included in this annual report, has issued an attestation report on the effectiveness of our internal control over the financial
reporting period of December 31, 2024, which can be found on page F-3 of this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting identified in connection with the evaluation required by
Rules 13a-15 or 15d-15 that occurred during the period covered by this annual report that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.

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181
Item 16A.            Audit Committee Financial Expert
Our board of directors has determined that Mr. Joseph Tong qualifies as an “audit committee financial expert” as defined by the
applicable rules of the SEC and that Mr. Tong is “independent” as that term is defined in NASDAQ Marketplace Rule 5605(a)(2).
Item 16B.             Code of Ethics
We have adopted a Code of Business Conduct, which applies to our employees, officers and non-employee directors, including
our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar
functions. The Code of Business Conduct may also apply on a contractual basis to other persons (e.g. third party vendors) that provide
goods or services to, or act on half of, the NetEase group and is intended to qualify as a “code of ethics” within the meaning of the
applicable rules of the SEC.
The Code of Business Conduct is filed as an exhibit to this annual report on Form 20-F and also available on our website under
the Investor Relations section at https://ir.netease.com.
Item 16C.            Principal Accountant Fees and Services
Disclosure of Fees Charged by Independent Accountants
The following table summarizes the fees charged by PricewaterhouseCoopers Zhong Tian LLP and its affiliates for certain
services rendered to us during 2023 and 2024.
For the year ended December 31,
    
2023(1)
    
2024(1)
RMB (in thousands)
Audit fees (2)
 
 30,491  
 27,649
Tax fees (3)
 
 1,712  
 1,064
All other fees (4)
 
 346  
 8
Total
 
 32,549  
 28,721
(1) The fees disclosed are exclusive of out-of-pocket expenses, which totaled approximately RMB1.3 million and RMB1.3 million in
2023 and 2024, respectively.
(2) “Audit fees” means the aggregate fees billed in each of the fiscal years for professional services rendered by our principal auditors
for the audit of our annual financial statements and our internal controls over financial reporting, as well as assistance with and
review of documents filed with the SEC and other statutory and regulatory filings.
(3) “Tax fees” means the aggregate fees billed in each of the fiscal years for professional services rendered by our principal auditors for
tax compliance and tax advice.
(4) “All other fees” includes the aggregate fees billed in each of the fiscal years for non-audit services rendered which were not listed
above.
Audit Committee Pre-approval Policies and Procedures
Our audit committee has adopted procedures which set forth the manner in which the committee will review and approve all
audit and non-audit services to be provided by PricewaterhouseCoopers Zhong Tian LLP and its affiliates before that firm is retained for
such services. The pre-approval procedures are as follows:
●
Any audit or non-audit service to be provided to us by the independent accountant must be submitted to the audit
committee for review and approval, with a description of the services to be performed and the fees to be charged.
●
The audit committee in its sole discretion then approves or disapproves the proposed services and documents such
approval, if given, through written resolutions or in the minutes of meetings, as the case may be.

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All of the services related to us provided by PricewaterhouseCoopers Zhong Tian LLP and its affiliates listed above have been
approved by our audit committee.
Item 16D.            Exemptions from the Listing Standards for Audit Committees
We have not sought an exemption from the applicable listing standards for the audit committee of our board of directors.
Item 16E.             Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On November 17, 2022, we announced a share repurchase program authorized by our board of directors pursuant to which we
were authorized to purchase up to US$5.0 billion of our outstanding ADSs and ordinary shares for a period not to exceed 36 months.
This share repurchase program became effective on January 10, 2023, immediately following the expiration of the prior program
authorized by our board of directors in February 2021. As of December 31, 2024, approximately 21.2 million ADSs were repurchased in
open market transactions under this program for a total cost of US$1.9 billion.
The table below shows the ADSs that we repurchased for each month in 2024:
Total Number of
Approximate
ADSs
Maximum
Purchased
Dollar Value
as Part of
of ADSs
Publicly
that May Yet
Total
Average
Announced
Be
Number of
Price
Plans
Purchased
ADSs
Paid
or
Under
Period
    
Purchased(1)
    
Per ADS
    
Programs
    
The Latest Plan
US$
US$
January 2024
 
 1,030,966  
 91.84  
 94,688,124  
 4,261,204,679
February 2024
 
 384,552  
 103.77  
 39,905,645  
 4,221,299,034
March 2024
 
 304,559  
 106.04  
 32,294,288  
 4,189,004,746
April 2024
 
 780,076  
 94.93  
 74,055,442  
 4,114,949,304
May 2024
 
 813,161  
 95.33  
 77,516,011  
 4,037,433,293
June 2024
 
 1,332,128  
 91.83  
 122,334,549  
 3,915,098,744
July 2024
 
 1,461,565  
 93.05  
 136,001,832  
 3,779,096,912
August 2024
 
 2,620,534  
 85.95  
 225,222,863  
 3,553,874,049
September 2024
 
 2,298,855  
 79.22  
 182,115,435  
 3,371,758,614
October 2024
 1,071,960
 83.20
 89,187,139
 3,282,571,475
November 2024
 1,248,990
 81.64
 101,968,013
 3,180,603,462
December 2024
 592,488
 91.60
 54,271,868
 3,126,331,594
Total
 
 13,939,834
 
 1,229,561,209
(1) Our ADS to ordinary share ratio is one ADS for every five ordinary shares.
On August 31, 2021, we announced a share purchase program authorized by our board of directors pursuant to which we were
authorized to purchase up to US$50.0 million worth of Youdao’s outstanding ADSs on the New York Stock Exchange in open market
transactions beginning on September 2, 2021 and for a period not to exceed 36 months. The program has expired and as of December 31,
2024, an aggregate of approximately 2.7 million ADSs had been purchased in the open market under this program for approximately
US$22.0 million.
Item 16F.             Change in Registrant’s Certifying Accountants
Not applicable.

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Item 16G.            Corporate Governance
As permitted by NASDAQ, in lieu of the NASDAQ corporate governance rules, but subject to certain exceptions, we may
follow the practices of our home country which for the purpose of such rules is the Cayman Islands. Specifically, although we sought and
obtained shareholder’s approval for the amended and restated 2019 Share Plan at the annual general meeting of shareholders held on
June 15, 2023, our board of directors had initially adopted our 2009 RSU Plan and 2019 Share Plan without seeking shareholder approval
which is generally required under Rule 5635(c) of the NASDAQ Marketplace Rules. There is no specific requirement under Cayman
Islands law for shareholder approval to be obtained with respect to the establishment or amendment of equity compensation
arrangements.
Item 16H.          Mine Safety Disclosure
Not applicable.
Item 16I.          Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Item 16J.            Insider Trading Policies
NetEase, Inc.’s board of directors has adopted insider trading policies and procedures governing the purchase, sale, and other
dispositions of NetEase, Inc.’s securities by directors, senior management, and employees that are reasonably designed to promote
compliance with applicable insider trading laws, rules and regulations, and any listing standards applicable to us. A copy of the insider
trading policy of NetEase, Inc. is filed as an exhibit to this annual report on Form 20-F and incorporated herein by reference.
Item 16K.            Cybersecurity
Cybersecurity Risk Management and Strategy
We have developed and implemented a cybersecurity risk management program designed to protect the confidentiality, integrity,
and availability of our critical systems and information. Our cybersecurity risk management program is integrated into our overall
enterprise risk management program and shares common methodologies, reporting channels and governance processes that apply across
the risk management program to other risk areas.
Key elements of our cybersecurity risk management program include the following:
●
risk assessments designed to help identify material cybersecurity risks to our IT systems and information;
●
an information security office, supported by security teams of business units, principally responsible for managing (1) our
cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents;
●
the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security
processes;
●
cybersecurity awareness training of our employees, including incident response personnel and senior management;
●
an information security incident management policy that includes procedures for responding to cybersecurity incidents; and
●
a security review process, where appropriate, to assess the risks associated with the use of key third-party service providers,
suppliers, and vendors based on our assessment of their criticality to our operations and respective risk profile.

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As of the date of the filing of this annual report, we have not experienced any material cybersecurity incidents or identified any
material cybersecurity threats that have affected or are reasonably likely to materially affect us, our business strategy, results of
operations or financial condition. We face certain ongoing risks from cybersecurity threats that, if realized, could potentially materially
affect us. See Item 3.D. “Key Information—Risk Factor—Risks Related to Our Operations Overall—Cybersecurity and the threat
environment remain a dynamic and ever-changing landscape with new threats and increasingly sophisticated attacks continually
emerging. Successful security breaches can lead to unauthorized access to our network, systems and, in turn, Confidential Information
which may include personal and sensitive information. This could materially adversely affect our business, results of operations and
financial condition and expose us to liability claims.”
Cybersecurity Governance
Our board of directors considers cybersecurity risk as part of its risk oversight function and has also designated the audit
committee to oversee cybersecurity and other information security risks. The audit committee reviews our cybersecurity management
and strategy periodically and receives regular reports from the management on our cybersecurity risks. In addition, our management
updates the audit committee, where it deems appropriate, regarding cybersecurity incidents it considers to be significant.
At the management level, we have established an information security committee that is responsible for implementing a global
information security program which is aligned with our strategy, establishing and promoting the corresponding policies and procedures,
and, as necessary, assisting in ensuring adequate and timely disclosure of information security incidents and certain threats to our
company’s management and board of directors, in accordance with our information security incident management policy.
Our information security committee is comprised of members of senior management and senior personnel, including our chief
executive officer, the head of our information security office, and other members of management, leaders of business units and the legal,
IT and other departments. The head of our information security office, who reports to our chief executive officer and leads our
cybersecurity efforts, has over 15 years of experience in information technology and cybersecurity, with a career that includes various
cybersecurity roles at several technology companies.
Our information security committee reports to the audit committee on the state of information security risks on periodic basis, as
well as on an as-needed basis in the case of information security incidents it deems significant.
PART III.
Item 17.            Financial Statements
We have elected to provide financial statements pursuant to Item 18.
Item 18.            Financial Statements
The consolidated financial statements for NetEase, Inc. and its subsidiaries are included at the end of this annual report.

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185
Item 19.            Exhibits
Exhibit
Number
    
Document
1.1
Second Amended and Restated Memorandum of Association and Articles of Association of NetEase, Inc., as currently
in effect (incorporated by reference to Exhibit 1.1 to our company’s Form 6-K (file no. 000-30666) furnished to the
SEC on June 15, 2023)
2.1
Specimen American Depositary Receipt of NetEase.com, Inc. (incorporated by reference to Exhibit 4.1 to Amendment
No. 1 to our company’s Registration Statement on Form F-1 (file no. 333-11724) filed with the SEC on May 15, 2000)
2.2
Specimen Stock Certificate of NetEase.com, Inc. (incorporated by reference to Exhibit 4.2 to Amendment No. 1 to our
company’s Registration Statement on Form F-1 (file no. 333-11724) filed with the SEC on May 15, 2000)
2.3
Deposit Agreement dated July 6, 2000 by and among NetEase.com, Inc., The Bank of New York and the owners and
beneficial owners of American depositary receipts (incorporated by reference to Exhibit 1 to our company’s
Registration Statement on Form F-6EF (File No. 333-115868) filed with the SEC on May 26, 2004)
2.4
Description of Ordinary Shares (incorporated by reference to Exhibit 2.4 to our company’s Annual Report on Form 20-
F for the year ended December 31, 2023 filed with the SEC on April 25, 2024)
2.5
Description of American Depositary Shares (incorporated by reference to Exhibit 2.5 to our company’s Annual Report
on Form 20-F for the year ended December 31, 2023 filed with the SEC on April 25, 2024)
3.1
Proxy Agreement dated April 15, 2009 between NetEase (Hangzhou) Network Co., Ltd. and Zhipeng Hu (incorporated
by reference to Exhibit 3.3 to our company’s Annual Report on Form 20-F for the year ended December 31, 2014 filed
with the SEC on April 24, 2015)
3.2
Shareholder Voting Rights Trust Agreement dated December 1, 2015 between NetEase (Hangzhou) Network Co., Ltd.
and Tianlei Hu (incorporated by reference to Exhibit 3.8 to our company’s Annual Report on Form 20-F for the year
ended December 31, 2015 filed with the SEC on April 22, 2016)
3.3
Shareholder Voting Rights Trust Agreement dated December 1, 2015 between NetEase (Hangzhou) Network Co., Ltd.
and Zhipeng Hu (incorporated by reference to Exhibit 3.9 to our company’s Annual Report on Form 20-F for the year
ended December 31, 2015 filed with the SEC on April 22, 2016)
3.4
Amended and Restated Shareholder Voting Right Trust Agreement dated November 30, 2015 among NetEase
Information Technology (Beijing) Co., Ltd., Beijing Guangyitong Advertising Co., Ltd., William Lei Ding and
Xiaojun Hui (incorporated by reference to Exhibit 3.7 to our company’s Annual Report on Form 20-F for the year
ended December 31, 2015 filed with the SEC on April 22, 2016)
3.5
Shareholder Voting Rights Trust Agreement dated September 26, 2016 between NetEase Youdao Information
Technology (Beijing) Co., Ltd. and William Lei Ding (incorporated by reference to Exhibit 3.6 to our company’s
Annual Report on Form 20-F for the year ended December 31, 2016 filed with the SEC on April 21, 2017)
3.6
Shareholder Voting Right Trust Agreement dated November 20, 2017 between NetEase Youdao Information
Technology (Beijing) Co., Ltd. and Feng Zhou (incorporated by reference to Exhibit 3.8 to our company’s Annual
Report on Form 20-F for the year ended December 31, 2017 filed with the SEC on April 20, 2018)
4.1
2009 Restricted Share Unit Plan (incorporated by reference to Exhibit 10.1 to our company’s Registration Statement on
Form S-8 (file no. 333-164249) filed with the SEC on January 8, 2010)
4.2
Form of Employment Agreement between NetEase, Inc. and its executive officers (incorporated by reference to
Exhibit 4.2 to our company’s Annual Report on Form 20-F for the year ended December 31, 2023 filed with the SEC
on April 25, 2024)

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186
Exhibit
Number
    
Document
4.3
Copyright License Agreement dated February 3, 2000 between NetEase Information Technology (Beijing) Co., Ltd.
and Guangzhou NetEase Computer System Co.,  Ltd. (incorporated by reference to Exhibit  10.8 to our company’s
Registration Statement on Form F-1 (file no. 333-11724) filed with the SEC on March 27, 2000)
4.4
Trademark License Agreement dated February 3, 2000 between NetEase Information Technology (Beijing) Co., Ltd.
and Guangzhou NetEase Computer System Co.,  Ltd. (incorporated by reference to Exhibit  10.9 to our company’s
Registration Statement on Form F-1 (file no. 333-11724) filed with the SEC on March 27, 2000)
4.5
Supplemental Agreement (to Copyright License Agreement) dated April  27, 2000 between NetEase Information
Technology (Beijing) Co.,  Ltd. and Guangzhou NetEase Computer System Co.,  Ltd. (incorporated by reference to
Exhibit 10.10 to Amendment No.1 to our company’s Registration Statement on Form F-1 (file no. 333-11724) filed
with the SEC on May 15, 2000)
4.6
Notice of Renewal dated April  2, 2001 relating to the Copyright License Agreement and the Trademark License
Agreement each dated February 3, 2000 and made between NetEase Information Technology (Beijing) Co., Ltd. and
Guangzhou NetEase Computer System Co., Ltd. (incorporated by reference to Exhibit 4.14 to our company’s Annual
Report on Form 20-F for the year ended December 31, 2000 filed with the SEC on August 31, 2001)
4.7
Online Advertising Agreement dated February 15, 2000 between Guangzhou NetEase Computer System Co., Ltd. and
Beijing Guangyitong Advertising Co., Ltd. (incorporated by reference to Exhibit 10.15 to our company’s Registration
Statement on Form F-1 (file no. 333-11724) filed with the SEC on March 27, 2000)
4.8
Notice of Renewal dated April 2, 2001 relating to the Online Advertising Agreement dated February 15, 2000 and
made between Guangzhou NetEase Computer System Co.,  Ltd. and Beijing Guangyitong Advertising Co.,  Ltd.
(incorporated by reference to Exhibit  4.21 to our company’s Annual Report on Form  20-F for the year ended
December 31, 2000 filed with the SEC on August 31, 2001)
4.9
Agreement dated May 12, 2000 between NetEase Information Technology (Beijing) Co., Ltd. and Guangzhou NetEase
Computer System Co.,  Ltd. (incorporated by reference to Exhibit  10.41 to Amendment No.  1 to our company’s
Registration Statement on Form F-1 (file no. 333-11724) filed with the SEC on May 15, 2000)
4.10
Supplemental Agreement dated May 12, 2000 (supplementing the Online Advertising Agreement dated February 15,
2000) between Guangzhou NetEase Computer System Co., Ltd. and Beijing Guangyitong Advertising Co., Ltd.
(incorporated by reference to Exhibit 10.47 to Amendment No. 1 to our company’s Registration Statement on Form F -
1 (file no. 333 - 11724) filed with the SEC on May 15, 2000)
4.11
Letter of Agreement dated June 6, 2000 among William Lei Ding, Bo Ding and NetEase.com, Inc. (incorporated by
reference to Exhibit 10.49 to Amendment No. 2 to our company’s Registration Statement on Form F-1 (file no. 333-
11724) filed with the SEC on June 15, 2000)
4.12
Supplemental Agreement dated June 15, 2000 (supplementing the Online Advertising Agreement dated February 15,
2000), between Beijing Guangyitong Advertising Co., Ltd. and Guangzhou NetEase Computer System Co., Ltd.
(incorporated by reference to Exhibit 10.50 to Amendment No. 2 to our company’s Registration Statement on Form F-
1 (file no. 333-11724) filed with the SEC on June 15, 2000)
4.13
Supplemental Letter of Agreement dated May 17, 2004 (supplementing the Letter Agreement dated June 6, 2000 by
and among William Lei Ding, Bo Ding and NetEase.com, Inc.) by and among William Lei Ding, Bo Ding, Jun Liang
and NetEase.com, Inc. (incorporated by reference to Exhibit 4.39 to our company’s Annual Report on Form 20-F for
the year ended December 31, 2004 filed with the SEC on June 27, 2005)

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187
Exhibit
Number
    
Document
4.14
Second Supplemental Letter of Agreement dated July 15, 2004 (supplementing the Letter Agreement dated June 6,
2000 by and among William Lei Ding, Bo Ding and NetEase.com, Inc., as supplemented by the Supplemental Letter of
Agreement dated May 17, 2004 by and among William Lei Ding, Bo Ding, Jun Liang and NetEase.com, Inc.) by and
among William Lei Ding, Bo Ding, Jun Liang and NetEase.com, Inc. (incorporated by reference to Exhibit 4.40 to our
company’s Annual Report on Form 20-F for the year ended December 31, 2004 filed with the SEC on June 27, 2005)
4.15
No. 3 Supplemental Letter of Agreement dated July 20, 2004 (supplementing the Letter Agreement dated June 6, 2000
by and among William Lei Ding, Bo Ding and NetEase.com, Inc., as supplemented by the Supplemental Letter of
Agreement dated May 17, 2004 and the Second Supplemental Letter of Agreement dated July 15, 2004, each by and
among William Lei Ding, Bo Ding, Jun Liang and NetEase.com, Inc.) by and among William Lei Ding, Bo Ding, Jun
Liang and NetEase.com, Inc. (incorporated by reference to Exhibit 4.41 to our company’s Annual Report on Form 20-
F for the year ended December 31, 2004 filed with the SEC on June 27, 2005)
4.16*
Form of Cooperative Agreement
4.17
Amendment and Novation of Operating Agreement dated May 1, 2014 among NetEase Information Technology
(Beijing) Co., Ltd., Beijing Guangyitong Advertising Co., Ltd., Bo Ding and William Lei Ding (incorporated by
reference to Exhibit 4.33 to our company’s Annual Report on Form 20-F for the year ended December 31, 2014 filed
with the SEC on April 24, 2015)
4.18
Loan Agreement dated May 1, 2014 between NetEase Information Technology (Beijing) Co., Ltd. and Xiaojun Hui
(incorporated by reference to Exhibit 4.35 to our company’s Annual Report on Form 20-F for the year ended
December 31, 2014 filed with the SEC on April 24, 2015)
4.19
Equity Pledge Agreement dated May 1, 2014 between NetEase Information Technology (Beijing) Co., Ltd. and
Xiaojun Hui (incorporated by reference to Exhibit 4.36 to our company’s Annual Report on Form 20-F for the year
ended December 31, 2014 filed with the SEC on April 24, 2015)
4.20
Amended and Restated Letter of Agreement dated November 30, 2015 among NetEase, Inc., William Lei Ding and
Xiaojun Hui (incorporated by reference to Exhibit 4.44 to our company’s Annual Report on Form 20-F for the year
ended December 31, 2015 filed with the SEC on April 22, 2016)
4.21
Amended and Restated Loan Agreement dated December 1, 2015 between NetEase (Hangzhou) Network Co., Ltd. and
Tianlei Hu (incorporated by reference to Exhibit 4.45 to our company’s Annual Report on Form 20-F for the year
ended December 31, 2015 filed with the SEC on April 22, 2016)
4.22
Amended and Restated Loan Agreement dated December 1, 2015 between NetEase (Hangzhou) Network Co., Ltd. and
Zhipeng Hu (incorporated by reference to Exhibit 4.46 to our company’s Annual Report on Form 20-F for the year
ended December 31, 2015 filed with the SEC on April 22, 2016)
4.23
Amended and Restated Equity Pledge Agreement dated December 1, 2015 between NetEase (Hangzhou) Network Co.,
Ltd. and Tianlei Hu (incorporated by reference to Exhibit 4.47 to our company’s Annual Report on Form 20-F for the
year ended December 31, 2015 filed with the SEC on April 22, 2016)
4.24
Amended and Restated Equity Pledge Agreement dated December 1, 2015 between NetEase (Hangzhou) Network Co.,
Ltd. and Zhipeng Hu. (incorporated by reference to Exhibit 4.48 to our company’s Annual Report on Form 20-F for the
year ended December 31, 2015 filed with the SEC on April 22, 2016)
4.25
Amended and Restated Exclusive Purchase Option Agreement dated December 1, 2015 among NetEase (Hangzhou)
Network Co., Ltd., Hangzhou NetEase Leihuo Technology Co., Ltd. and Tianlei Hu (incorporated by reference to
Exhibit 4.49 to our company’s Annual Report on Form 20-F for the year ended December 31, 2015 filed with the SEC
on April 22, 2016)

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188
Exhibit
Number
    
Document
4.26
Amended and Restated Exclusive Purchase Option Agreement dated December 1, 2015 among NetEase (Hangzhou)
Network Co., Ltd., Hangzhou NetEase Leihuo Technology Co., Ltd. and Zhipeng Hu (incorporated by reference to
Exhibit 4.50 to our company’s Annual Report on Form 20-F for the year ended December 31, 2015 filed with the SEC
on April 22, 2016)
4.27
Amended and Restated Operating Agreement dated December 1, 2015 among NetEase (Hangzhou) Network Co., Ltd.,
Hangzhou NetEase Leihuo Technology Co., Ltd., Tianlei Hu and Zhipeng Hu (incorporated by reference to Exhibit
4.51 to our company’s Annual Report on Form 20-F for the year ended December 31, 2015 filed with the SEC on
April 22, 2016)
4.28
Loan Agreement dated September 26, 2016 between William Lei Ding and NetEase Youdao Information Technology
(Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.51 to our company’s Annual Report on Form 20-F for the
year ended December 31, 2016 filed with the SEC on April 21, 2017)
4.29
Equity Pledge Agreement dated September 26, 2016 between William Lei Ding and NetEase Youdao Information
Technology (Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.52 to our company’s Annual Report on Form
20-F for the year ended December 31, 2016 filed with the SEC on April 21, 2017)
4.30
Exclusive Purchase Option Agreement dated September 26, 2016 among William Lei Ding, NetEase Youdao
Information Technology (Beijing) Co., Ltd. and Beijing NetEase Youdao Computer System Co., Ltd. (incorporated by
reference to Exhibit 4.53 to our company’s Annual Report on Form 20-F for the year ended December 31, 2016 filed
with the SEC on April 21, 2017)
4.31
Operating Agreement dated September 26, 2016 among Beijing NetEase Youdao Computer System Co., Ltd., NetEase
Youdao Information Technology (Beijing) Co., Ltd. and William Lei Ding. (incorporated by reference to Exhibit 4.54
to our company’s Annual Report on Form 20-F for the year ended December 31, 2016 filed with the SEC on April 21,
2017)
4.32
Cooperation Agreement dated July 1, 2015 between NetEase Youdao Information Technology (Beijing) Co., Ltd. and
Youdao Computer System Co., Ltd. (incorporated by reference to Exhibit 4.55 to our company’s Annual Report on
Form 20-F for the year ended December 31, 2016 filed with the SEC on April 21, 2017)
4.33
Loan Agreement dated November 20, 2017 between Feng Zhou and NetEase Youdao Information Technology
(Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.52 to our company’s Annual Report on Form 20-F for the
year ended December 31, 2017 filed with the SEC on April 20, 2018)
4.34
Equity Pledge Agreement dated November 20, 2017 between Feng Zhou and NetEase Youdao Information Technology
(Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.53 to our company’s Annual Report on Form 20-F for the
year ended December 31, 2017 filed with the SEC on April 20, 2018)
4.35
Exclusive Purchase Option Agreement dated November 20, 2017 among NetEase Youdao Information Technology
(Beijing) Co., Ltd., Feng Zhou and Beijing NetEase Youdao Computer System Co., Ltd. (incorporated by reference to
Exhibit 4.54 to our company’s Annual Report on Form 20-F for the year ended December 31, 2017 filed with the SEC
on April 20, 2018)
4.36
Operating Agreement dated November 20, 2017 among NetEase Youdao Information Technology (Beijing) Co., Ltd.,
Beijing NetEase Youdao Computer System Co., Ltd. and Feng Zhou (incorporated by reference to Exhibit 4.55 to our
company’s Annual Report on Form 20-F for the year ended December 31, 2017 filed with the SEC on April 20, 2018)
4.37
Supplementary Agreement of Assignment among NetEase (Hangzhou) Network Co., Ltd., Hangzhou NetEase Leihuo
Technology Co., Ltd., Zhipeng Hu, Tianlei Hu and Long Cheng dated April 18, 2019 (incorporated by reference to
Exhibit 4.58 to our company’s Annual Report on Form 20-F for the year ended December 31, 2018 filed with the SEC
on April 26, 2019)

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189
Exhibit
Number
    
Document
4.38
Master Transaction Agreement dated September 27, 2019 between NetEase, Inc. and Youdao, Inc. (incorporated by
reference to Exhibit 4.52 to our company’s Annual Report on Form 20-F for the year ended December 31, 2019 filed
with the SEC on April 29, 2020)
4.39
Non-Competition Agreement dated September 27, 2019 between NetEase, Inc. and Youdao, Inc. (incorporated by
reference to Exhibit 4.54 to our company’s Annual Report on Form 20-F for the year ended December 31, 2019 filed
with the SEC on April 29, 2020)
4.40
Cooperation Framework Agreement dated September 27, 2019 between NetEase, Inc. and Youdao, Inc. (incorporated
by reference to Exhibit 4.55 to our company’s Annual Report on Form 20-F for the year ended December 31, 2019
filed with the SEC on April 29, 2020)
4.41
Intellectual Property License Agreement dated September 27, 2019 between NetEase, Inc. and Youdao, Inc.
(incorporated by reference to Exhibit 4.56 to our company’s Annual Report on Form 20-F for the year ended
December 31, 2019 filed with the SEC on April 29, 2020)
4.42
Amended and Restated 2019 Share Incentive Plan (incorporated by reference to Exhibit 4.5 to our company’s Post-
effective Amendment No. 1 to Registration Statement on Form S-8 (file no. 333-234189) filed with the SEC on March
2, 2023)
4.43+
Facility agreement for a revolving loan facility of US$300 million between NetEase, Inc. as lender and Youdao, Inc. as
borrower dated September 12, 2023 (incorporated by reference to Exhibit 4.46 to our company’s Annual Report on
Form 20-F for the year ended December 31, 2023 filed with the SEC on April 25, 2024)  
4.44
Amended and Restated Loan Agreement dated May 18, 2021 between Hangzhou NetEase Cloud Music Technology
Co., Ltd. and William Lei Ding (incorporated by reference to Exhibit 4.47 to our company’s Annual Report on Form
20-F for the year ended December 31, 2022 filed with the SEC on April 27, 2023)
4.45
Amended and Restated Equity Pledge Agreement dated May 18, 2021 between Hangzhou NetEase Cloud Music
Technology Co., Ltd. and William Lei Ding (incorporated by reference to Exhibit 4.48 to our company’s Annual
Report on Form 20-F for the year ended December 31, 2022 filed with the SEC on April 27, 2023)
4.46
Amended and Restated Exclusive Purchase Option Agreement dated May 18, 2021 among Hangzhou NetEase Cloud
Music Technology Co., Ltd., Hangzhou Yuedu Technology Co., Ltd. and William Lei Ding (incorporated by reference
to Exhibit 4.49 to our company’s Annual Report on Form 20-F for the year ended December 31, 2022 filed with the
SEC on April 27, 2023)
4.47
Amended and Restated Shareholder Voting Right Trust Agreement dated May 18, 2021 between Hangzhou NetEase
Cloud Music Technology Co., Ltd. and William Lei Ding (incorporated by reference to Exhibit 4.50 to our company’s
Annual Report on Form 20-F for the year ended December 31, 2022 filed with the SEC on April 27, 2023)
4.48
Loan Agreement dated November 2, 2023 between Hangzhou NetEase Cloud Music Technology Co., Ltd. and Wei Li
(incorporated by reference to Exhibit 4.51 to our company’s Annual Report on Form 20-F for the year ended
December 31, 2023 filed with the SEC on April 25, 2024)
4.49
Equity Pledge Agreement dated November 2, 2023 between Hangzhou NetEase Cloud Music Technology Co., Ltd.
and Wei Li (incorporated by reference to Exhibit 4.52 to our company’s Annual Report on Form 20-F for the year
ended December 31, 2023 filed with the SEC on April 25, 2024)
4.50
Operating Agreement dated November 2, 2023 among Hangzhou NetEase Cloud Music Technology Co., Ltd.,
Hangzhou Yuedu Technology Co., Ltd., William Lei Ding and Wei Li (incorporated by reference to Exhibit 4.53 to our
company’s Annual Report on Form 20-F for the year ended December 31, 2023 filed with the SEC on April 25, 2024)

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190
Exhibit
Number
    
Document
4.51
Exclusive Purchase Option Agreement dated November 2, 2023 among Hangzhou NetEase Cloud Music Technology
Co., Ltd., Hangzhou Yuedu Technology Co., Ltd. and Wei Li (incorporated by reference to Exhibit 4.54 to our
company’s Annual Report on Form 20-F for the year ended December 31, 2023 filed with the SEC on April 25, 2024)
4.52
Shareholder Voting Right Trust Agreement dated November 2, 2023 between Hangzhou NetEase Cloud Music
Technology Co., Ltd., and Wei Li (incorporated by reference to Exhibit 4.55 to our company’s Annual Report on Form
20-F for the year ended December 31, 2023 filed with the SEC on April 25, 2024)
4.53
Amended and Restated Cooperation Agreement dated May 18, 2021 between Hangzhou NetEase Cloud Music
Technology Co., Ltd. and Hangzhou Yuedu Technology Co., Ltd. (incorporated by reference to Exhibit 4.56 to our
company’s Annual Report on Form 20-F for the year ended December 31, 2022 filed with the SEC on April 27, 2023)
4.54
Form of Indemnification Agreement between NetEase, Inc. and its directors and executive officers (incorporated by
reference to Exhibit 4.57 to our company’s Annual Report on Form 20-F for the year ended December 31, 2023 filed
with the SEC on April 25, 2024)
8.1
List of Significant Subsidiaries and Variable Interest Entities of NetEase, Inc. (incorporated by reference to Exhibit 8.1
to our company’s Annual Report on Form 20-F for the year ended December 31, 2020 filed with the SEC on April 28,
2021)
11.1
Code of Business Conduct (incorporated by reference to Exhibit 11.1 to our company’s Annual Report on Form 20-F
for the year ended December 31, 2023 filed with the SEC on April 25, 2024)
11.2*
Insider Trading Policy of our company
12.1*
Certification of Principal Executive Officer Required by Rule 13a-14(a)
12.2*
Certification of Principal Financial Officer Required by Rule 13a-14(a)
13.1**
Certification of Principal Executive Officer Required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of
the United States Code
13.2**
Certification of Principal Financial Officer Required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of
the United States Code
15.1
Charter of Audit Committee of the Board of Directors of our company (incorporated by reference to Exhibit 15.1 to
our company’s Annual Report on Form 20-F for the year ended December 31, 2023 filed with the SEC on April 25,
2024)
15.2*
Consent of PricewaterhouseCoopers Zhong Tian LLP, Independent Registered Public Accounting Firm
15.3*
Consent of Maples and Calder (Hong Kong) LLP
15.4*
Consent of Zhong Lun Law Firm
97.1
Clawback Policy of our company (incorporated by reference to Exhibit 97.1 to our company’s Annual Report on Form
20-F for the year ended December 31, 2023 filed with the SEC on April 25, 2024)
101.INS*
Inline XBRL Instance Document
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document

Table of Contents
191
Exhibit
Number
    
Document
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*
Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Filed with this annual report on Form 20-F
** Furnished with this annual report on Form 20-F.
+ Certain identified information has been excluded from the exhibit because it is both not material and is the type that our company treats
as private or confidential.

Table of Contents
192
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.
NETEASE, INC.
By:
/s/ William Lei Ding
William Lei Ding
Chief Executive Officer
Date: April 15, 2025

Table of Contents
F-1
NETEASE, INC.
Management’s report on internal control over financial reporting
F-2
Report of independent registered public accounting firm (PCAOB ID:1424)
F-3
Consolidated balance sheets at December 31, 2023 and 2024
F-6
Consolidated statements of operations and comprehensive income for the years ended December 31, 2022, 2023 and 2024
F-7
Consolidated statements of shareholders’ equity for the years ended December 31, 2022, 2023 and 2024
F-8
Consolidated statements of cash flows for the years ended December 31, 2022, 2023 and 2024
F-9
Notes to the consolidated financial statements
F-10

Table of Contents
F-2
Management’s Report on Internal Control over Financial Reporting
The management of NetEase,  Inc., or the Company, is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, assessed
the effectiveness of the Company’s internal control over financial reporting as of the end of the most recent fiscal year, December 31,
2024. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on its assessment, management
concluded that, as of the end of the Company’s most recent fiscal year, December 31, 2024, the Company’s internal control over financial
reporting is effective based on those criteria.
PricewaterhouseCoopers Zhong Tian LLP, the Company’s independent registered public accounting firm, has audited the effectiveness of
the Company’s internal control over financial reporting as of December 31, 2024, as stated in their report, which is included herein.

Table of Contents
F-3
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of NetEase, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of NetEase, Inc. and its subsidiaries (the “Company”) as of December
31, 2024 and 2023, and the related consolidated statements of operations and comprehensive income, of shareholders’ equity and of cash
flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the
“consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31,
2024, based on criteria established in Internal Control  - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s
Report on Internal Control over Financial Reporting appearing on Page F-2 of this Annual Report on Form 20-F. Our responsibility is to
express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error
or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i)  pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii)  provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.

Table of Contents
F-4
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements
that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are
material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
Estimate of average playing period of paying players for recognition of in-game virtual items revenue
As described in Notes 2(c) and 28 to the consolidated financial statements, the Company recognized RMB83.6 billion of revenues from
games and related value-added services for the year ended December 31, 2024. Revenues of certain online games in-game virtual items
are recognized ratably over the respective estimated average playing period of paying players in these games. Management considered
the average period that players typically play the games and other game player behavior patterns, as well as various other factors, to
arrive at the estimated average playing period of the paying players for each game. If a new game was launched and only a limited period
of paying player data was available, then management considered other qualitative factors  to estimate the average playing period of the
paying players for the new game. Significant management assumptions applied to the estimated average playing period of paying players
for recognition of in-game virtual items revenue include (i) estimating future players’ churn rates based on historical players’ churn rates;
and (ii) similarities between new games and existing games with sufficient historical data.
The principal considerations for our determination that performing procedures relating to the estimates of average playing period of
paying players for recognition of in-game virtual items revenue is a critical audit matter are the significant judgment made by
management in developing these estimates, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing
procedures to evaluate the reasonableness of the significant assumptions used by management related to estimates of future players’
churn rates and estimates of similarities between new games and existing games.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on
the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the key judgments,
inputs and assumptions of the estimates of average playing period of paying players for recognition of in-game virtual items revenue.
These procedures also included, among others, evaluating the appropriateness of methods used by management; testing the
completeness, accuracy and relevance of underlying data used in management’s development of the estimates; checking the
mathematical formula used in calculating the historical players’ churn rate and estimated average playing period of paying players for
recognition of in-game virtual items revenue and evaluating significant assumptions used by management. Evaluating management’s
assumptions involved assessing the reasonableness of the significant assumptions used by management including estimating future
players’ churn rates based on historical players’ churn rates and similarities between new games and existing games with sufficient
historical data.

Table of Contents
F-5
Impairment assessment of long-term equity investments without readily determinable fair values
As described in Notes 2(j) and 11 to the consolidated financial statements, the Company’s consolidated balance of long-term equity
investments without readily determinable fair values as of December 31, 2024 was RMB11.1 billion. Long-term equity investments
without readily determinable fair value include ownership of stock or in-substance common stock issued by privately-held companies on
which the Company does not have significant influence, and investments in privately-held companies’ shares that are not ordinary shares
or in-substance ordinary shares. Management conducted impairment tests for investments in long-term equity investments without
readily determinable fair values periodically, or when events or circumstances indicate that the carrying amount may not be recoverable.
Management performed a qualitative assessment of the fair value of the equity interest in comparison to its carrying amount to determine
if there is an indication of potential impairment. If such indication exists, management estimated the fair value of the investment, and
recorded an impairment in the consolidated statements of operations and comprehensive income to the extent the carrying amount
exceeds the fair value. Management applied significant judgments in the impairment assessment for these equity investments when
determining whether any impairment indicators exist during the year and estimating the impairment amount if an impairment exists.
These judgments consider various factors and events including a) significant deterioration in the earnings performance, credit rating,
asset quality, or business prospects of the investees; b) significant adverse change in the regulatory, economic, or technological
environment of the investees; c) significant adverse change in the general market condition of either the geographical area or the industry
in which the investees operate; d) bona fide offer to purchase, an offer by the investee to sell, or a completed auction process for the same
or similar investment for an amount less than the carrying amount of that investment; e) factors that raise significant concerns about the
investees’ ability to continue as a going concern; f) factors that raise significant concerns about the performance of new products and g)
valuation methods and key estimates in the determination of the impairment amounts based on the severity of the impairment indicator
and the existence of any positive or mitigating factors.
The principal considerations for our determination that the impairment assessment of long-term equity investments without readily
determinable fair values is a critical audit matter are the high degree of auditor judgment, subjectivity and audit effort involved in
performing procedures to evaluate the reasonableness of significant judgments and key estimates management applied in the impairment
assessment.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on
the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s
impairment assessment of long-term equity investments without readily determinable fair values. These procedures also included, among
others, (i) testing the completeness, accuracy and relevance of underlying data management used to identify the indicators of impairment;
(ii) testing management’s qualitative evaluation as to whether indicators of impairment existed by assessing the evidence considered by
management, as well as other relevant market information; (iii) evaluating the reasonableness of key estimates used by management in
the determination of the impairment amounts, by considering (a) the investee’s current and past performances, (b) the consistency with
industry and third party data, and (c) whether these estimates were consistent with evidence obtained in other areas of the audit.
/s/ PricewaterhouseCoopers Zhong Tian LLP
Beijing, the People’s Republic of China
April 15, 2025
We have served as the Company’s auditor since 2002.

Table of Contents
F-6
NetEase, Inc.
Consolidated Balance Sheets
(in thousands except per share data)
    
    
December 31, 
    
December 31, 
    
December 31, 
2023
2024
2024
Notes
RMB
RMB
US$
Note 2(q)
Assets
Current assets:
Cash and cash equivalents
2(f)
21,428,902
51,383,310
7,039,485
Time deposits
2(f)
 
100,856,034
75,441,355
10,335,423
Restricted cash
2(f)
 
2,777,206
3,086,405
422,836
Accounts receivable, net
 
6,422,417
5,669,027
776,654
Inventories
2(i)
695,374
571,548
78,302
Prepayments and other current assets, net
6
 
6,076,595
6,416,868
879,107
Short-term investments
7
 
4,436,057
10,756,143
1,473,586
Total current assets
 
142,692,585
153,324,656
21,005,393
Non-current assets:
Property, equipment and software, net
8
 
8,075,044
8,520,101
1,167,249
Land use rights, net
9
 
4,075,143
4,172,465
571,625
Operating lease right-of-use assets, net
10
749,275
541,071
74,126
Deferred tax assets
13(c)
 
1,560,088
1,113,435
152,540
Time deposits
2(f)
 
1,050,000
3,025,000
414,423
Restricted cash
2(f)
550
5,208
713
Long-term investments
11
21,783,187
20,206,356
2,768,259
Other long-term assets
12
 
5,939,106
5,083,258
696,404
Total non-current assets
 
43,232,393
42,666,894
5,845,339
Total assets
 
185,924,978
195,991,550
26,850,732
Liabilities, Redeemable noncontrolling interests and Shareholders’ equity
Current liabilities:
Accounts payable
 
881,016  
720,549
98,715
Salary and welfare payables
 
4,857,206  
4,683,009
641,570
Taxes payable
14
 
2,571,534
2,759,185
378,007
Short-term loans
15
 
19,240,163  
11,805,051
1,617,285
Contract liabilities
16
 
13,362,166  
15,299,222
2,095,985
Accrued liabilities and other payables
17
 
12,670,906
14,229,032
1,949,369
Short-term operating lease liabilities
10
259,493
171,609
23,510
Total current liabilities
53,842,484
49,667,657
6,804,441
Non-current liabilities:
Deferred tax liabilities
13(c)
2,299,303  
2,173,117
297,716
Long-term operating lease liabilities
10
555,829
412,600
56,526
Long-term loans
18
 
427,997
427,997
58,635
Other long-term liabilities
715,284
816,041
111,797
Total non-current liabilities
 
3,998,413
3,829,755
524,674
Total liabilities
 
57,840,897  
53,497,412
7,329,115
Commitments and contingencies
24
Redeemable noncontrolling interests
19
115,759
84,272
11,545
Shareholders’ equity:
Ordinary shares, US$0.0001 par value:
1,000,300,000,000 shares authorized, 3,210,783,141 and 3,167,959,016 shares issued and
outstanding as of December 31, 2023 and 2024, respectively
 
2,710
2,631
360
Additional paid-in capital
 
22,604,651
9,860,962
1,350,946
Treasury stock
(12,694,364)
(4,473,063)
(612,807)
Statutory reserves
2(u)
1,541,416
1,954,872
267,817
Accumulated other comprehensive income
616,780
1,006,807
137,932
Retained earnings
 
112,214,583
130,333,397
17,855,602
NetEase, Inc.’s shareholders’ equity
 
124,285,776
138,685,606
18,999,850
Noncontrolling interests
19
 
3,682,546
3,724,260
510,222
Total equity
 
127,968,322
142,409,866
19,510,072
Total liabilities, redeemable noncontrolling interests and shareholders’ equity
 
185,924,978
195,991,550
26,850,732
The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents
F-7
NetEase, Inc.
Consolidated Statements of Operations and Comprehensive Income
(in thousands except per share data or per ADS data)
For the year ended December 31, 
    
    
2022
    
2023
    
2024
    
2024
Notes
RMB
RMB
RMB
US$
Note 2(q)
Net revenues
28
96,495,809
103,468,159
105,295,236
14,425,388
Cost of revenues
28
(43,729,683) 
(40,404,765) 
(39,488,152)
(5,409,855)
Gross profit
 
52,766,126
63,063,394
65,807,084
9,015,533
Operating expenses:
Selling and marketing expenses
 
(13,402,721) 
(13,969,460) 
(14,147,657)
(1,938,221)
General and administrative expenses
 
(4,695,798) 
(4,899,880) 
(4,550,625)
(623,433)
Research and development expenses
 
(15,039,014) 
(16,484,910) 
(17,524,812)
(2,400,889)
Total operating expenses
 
(33,137,533) 
(35,354,250) 
(36,223,094)
(4,962,543)
Operating profit
 
19,628,593  
27,709,144  
29,583,990
4,052,990
Other income/(expenses):
Investment income, net
 
53,976  
1,306,722  
355,286
48,674
Interest income, net
 
2,149,673  
4,120,418  
4,920,915
674,163
Exchange gains/(losses), net
 
1,571,207  
(132,999) 
255,430
34,994
Other, net
 
846,815  
1,053,642  
602,134
82,492
Income before tax
 
24,250,264  
34,056,927  
35,717,755
4,893,313
Income tax
 
13(a)
(5,031,838) 
(4,699,704) 
(5,461,408)
(748,210)
Net income from continuing operations
19,218,426
29,357,223
30,256,347
4,145,103
Net income from discontinued operations
624,864
—
—
—
Net income
 
19,843,290  
29,357,223  
30,256,347
4,145,103
Accretion of redeemable noncontrolling interests
 
(2,978) 
(3,589) 
(3,919)
(537)
Net loss/(income) attributable to noncontrolling interests and redeemable noncontrolling
interests
497,288
62,918
(554,819)
(76,010)
Net income attributable to the Company’s shareholders
 
20,337,600  
29,416,552  
29,697,609
4,068,556
Including:
Net income from continuing operations attributable to the Company’s shareholders
19,712,736
29,416,552
29,697,609
4,068,556
Net income from discontinued operations attributable to the Company’s shareholders
3
624,864
—
—
—
Net income
19,843,290  
29,357,223  
30,256,347
4,145,103
Other comprehensive income
Foreign currency translation adjustment
1,441,414
221,872
424,356
58,137
Total comprehensive income
 
21,284,704
29,579,095
30,680,703
4,203,240
Comprehensive loss/(income) attributable to noncontrolling interests and redeemable
noncontrolling interests
 
315,725  
26,040  
(589,148)
(80,713)
Comprehensive income attributable to the Company’s shareholders
 
21,600,429  
29,605,135  
30,091,555
4,122,527
Net income per share, basic
 
23
6.23  
9.15  
9.28
1.27
-Continuing operations
6.04
9.15
9.28
1.27
-Discontinued operations
0.19
—
—
—
Net income per ADS, basic
 
31.16  
45.73  
46.40
6.36
-Continuing operations
30.20
45.73
46.40
6.36
-Discontinued operations
0.96
—
—
—
Net income per share, diluted
 
23
6.17  
9.05  
9.19
1.26
-Continuing operations
5.98
9.05
9.19
1.26
-Discontinued operations
0.19
—
—
—
Net income per ADS, diluted
 
30.85  
45.23  
45.95
6.29
-Continuing operations
29.90
45.23
45.95
6.29
-Discontinued operations
0.95
—
—
—
Weighted average number of ordinary shares outstanding, basic
 
23
3,263,455  
3,216,475  
3,200,453
3,200,453
Weighted average number of ADS outstanding, basic
 
652,691  
643,295  
640,091
640,091
Weighted average number of ordinary shares outstanding, diluted
 
23
3,296,014  
3,252,029  
3,230,602
3,230,602
Weighted average number of ADS outstanding, diluted
 
659,203  
650,406  
646,120
646,120
The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents
F-8
NetEase, Inc.
Consolidated Statements of Shareholders’ Equity
(in thousands)
Accumulated
Ordinary shares
Additional paid-
Treasury stock
Statutory
other comprehensive
Retained
Noncontrolling
Total
    
Share
    Amount    
 in capital
     Share     
Amount
     reserves     
(loss)/ income
    
earnings
    
interests
    
equity
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
Balance as of December 31, 2021
3,446,311
2,794
37,915,939
(172,476)
(20,502,188)
1,245,125
(828,065)
77,494,475
3,950,558
99,278,638
Vesting of restricted share units
 
518
0
(2,569,917)
22,632
2,569,917
—
—
—
—
—
Share-based compensation
 
—
—
2,763,611
—
—
—
—
—
277,999
3,041,610
Appropriation to statutory reserves
 
—
—
—
—
—
33,541
—
(33,541)
—
—
Net income/(loss) attributable to the Company and noncontrolling interest
shareholders
 
—
—
—
—
—
—
—
20,340,578
(483,268)
19,857,310
Repurchase of shares
—
—
—
(73,361)
(8,006,226)
—
—
—
—
(8,006,226)
Cancellation of repurchased shares
(125,553)
(84)
(15,027,659)
125,553
15,027,743
—
—
—
—
—
Net change of capital from noncontrolling interest shareholders
—
—
(227,740)
—
—
—
—
—
81,115
(146,625)
Dividends to shareholders
 
—
—
—
—
—
—
—
(6,723,859)
—
(6,723,859)
Foreign currency translation adjustment
—
—
—
—
—
—
1,259,851
—
181,563
1,441,414
Accretion of redeemable noncontrolling interests
—
—
—
—
—
—
—
(2,978)
(2,244)
(5,222)
Balance as of December 31, 2022
3,321,276
2,710
22,854,234
(97,652)
(10,910,754)
1,278,666
431,786
91,074,675
4,005,723
108,737,040
Vesting of restricted share units
—
—
(3,007,404)
25,951
3,007,404
—
—
—
—
—
Share-based compensation
—
—
2,913,644
—
—
—
—
—
149,757
3,063,401
Appropriation to statutory reserves
—
—
—
—
—
262,750
—
(262,750)
—
—
Net income/(loss) attributable to the Company and noncontrolling interest
shareholders
—
—
—
—
—
—
—
29,420,141
(66,677)
29,353,464
Repurchase of shares
—
—
—
(38,792)
(4,791,014)
—
—
—
—
(4,791,014)
Net change of capital from noncontrolling interest shareholders
—
—
(155,823)
—
—
—
—
—
(471,164)
(626,987)
Reclassification from mezzanine equity to noncontrolling interest shareholders
—
—
—
—
—
—
—
—
30,369
30,369
Dividends to shareholders
—
—
—
—
—
—
—
(8,013,894)
—
(8,013,894)
Foreign currency translation adjustment
—
—
—
—
—
—
184,994
—
36,878
221,872
Accretion of redeemable noncontrolling interests
—
—
—
—
—
—
—
(3,589)
(2,340)
(5,929)
Balance as of December 31, 2023
  3,321,276
2,710
22,604,651
(110,493)
(12,694,364)
1,541,416
616,780
112,214,583
3,682,546
127,968,322
Vesting of restricted share units
—
—
(3,297,794)
26,874
3,297,794
—
—
—
—
—
Share-based compensation
—
—
3,554,037
—
—
—
—
—
261,409
3,815,446
Appropriation to statutory reserves
—
—
—
—
—
413,456
—
(413,456)
—
—
Net income attributable to the Company and noncontrolling interest
shareholders
—
—
—
—
—
—
—
29,701,528
558,829
30,260,357
Repurchase of shares
—
—
—
(69,698)
(8,742,223)
—
—
—
—
(8,742,223)
Cancellation of repurchased shares
(110,000)
(79)
(13,665,651)
110,000
13,665,730
—
—
—
—
—
Net change of capital from noncontrolling interest shareholders
—
—
665,719
—
—
—
—
—
(844,249)
(178,530)
Reclassification from mezzanine equity to noncontrolling interest shareholders
—
—
—
—
—
—
—
—
33,951
33,951
Dividends to shareholders
—
—
—
—
—
—
—
(11,165,339)
—
(11,165,339)
Foreign currency translation adjustment
—
—
—
—
—
—
390,027
—
34,329
424,356
Accretion of redeemable noncontrolling interests
—
—
—
—
—
—
—
(3,919)
(2,555)
(6,474)
Balance as of December 31, 2024
3,211,276
2,631
9,860,962
(43,317)
(4,473,063)
1,954,872
1,006,807
130,333,397
3,724,260
142,409,866
The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents
F-9
NetEase, Inc.
Consolidated Statements of Cash Flows
(in thousands)
For the year ended December 31, 
    
2022
    
2023
    
2024
    
2024
RMB
RMB
RMB
US$
Note 2(q)
Cash flows from operating activities:
Net income
 
19,843,290  
29,357,223  
30,256,347
4,145,103
Net income from discontinued operations
(624,864)
—
—
—
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
 
2,858,209
3,055,260
2,417,894
331,250
Fair value changes of equity security, other investments and financial instruments
3,104,336
(535,316)
(841,901)
(115,340)
Impairment losses on investments
 
300,249
469,159
1,291,627
176,952
Share-based compensation cost
 
3,174,160
3,242,810
3,882,939
531,960
Allowance for expected credit losses
 
61,393
61,146
68,934
9,444
Losses/(gains) on disposal of property, equipment and software
 
3,620
5,676
(4,758)
(652)
Unrealized exchange (gains)/losses
 
(1,604,260)
119,935
(719,162)
(98,525)
Gains on disposal of long-term investments, business and subsidiaries
(1,791,355)
(63,784)
(272,415)
(37,321)
Deferred income taxes
 
489,670
131,437
320,726
43,939
Share of results on equity method investees and revaluation results from previously held equity interest
 
(1,259,941)
(473,947)
155,568
21,313
Fair value changes of short-term investments
 
(342,642)
(414,207)
(530,607)
(72,693)
Changes in operating assets and liabilities:
Accounts receivable
 
554,340
(1,470,374)
716,375
98,143
Inventories
(27,613)
296,764
123,780
16,958
Prepayments and other assets
 
731,100
87,556
(809,590)
(110,913)
Accounts payable
 
447,666
(559,419)
91,142
12,486
Salary and welfare payables
 
424,513
(62,917)
(210,918)
(28,896)
Taxes payable
 
(917,614)
(244,261)
187,788
25,727
Contract liabilities
 
385,396
1,161,861
2,022,196
277,041
Accrued liabilities and other payables
 
1,899,580
1,166,673
1,530,848
209,725
Net cash provided by operating activities
 
27,709,233
35,331,275
39,676,813
5,435,701
Cash flows from investing activities:
Purchase of property, equipment and software
 
(2,100,264) 
(2,301,554) 
(1,275,400)
(174,729)
Proceeds from sale of property, equipment and software
 
41,467  
10,302  
14,533
1,991
Purchase of intangible assets, content and licensed copyrights
 
(543,220) 
(1,974,323) 
(930,988)
(127,545)
Net change of short-term investments with terms of three months or less
 
776,357  
(1,777,687) 
(408,256)
(55,931)
Purchase of short-term investments with terms over three months
 
(5,950,000) 
—  
(8,235,000)
(1,128,190)
Proceeds from maturities of short-term investments with terms over three months
 
10,175,160  
5,378,510  
2,853,778
390,966
Investment in equity method investees
 
(705,907) 
(444,557) 
(513,397)
(70,335)
Investment in other equity investments and acquisition of subsidiaries
(4,423,773)
(2,387,129)
(589,629)
(80,779)
Proceeds from disposal of long-term investments, businesses, subsidiaries and other financial instruments
2,411,070
152,564
2,822,585
386,692
Placement/rollover of matured time deposits
 
(98,973,884) 
(124,693,598) 
(154,792,305)
(21,206,459)
Proceeds from maturities of time deposits
 
92,247,046  
111,417,969  
179,377,113
24,574,564
Change in other long-term assets
 
(323,779) 
(423,928) 
(406,632)
(55,708)
Net cash (used in)/provided by investing activities
 
(7,369,727) 
(17,043,431) 
17,916,402
2,454,537
Cash flows from financing activities:
Net changes from short-term loans with terms of three months or less
(1,274,043)
(13,654,704)
(6,656,988)
(912,004)
Proceeds of loans with terms over three months
 
6,392,695  
13,569,160  
13,920,080
1,907,043
Payment of loans with terms over three months
(273,639)
(8,219,472)
(14,739,347)
(2,019,282)
Dividends paid to shareholders
 
(6,723,667) 
(8,013,903) 
(11,165,338)
(1,529,645)
Net amounts (paid)/received related to capital contribution from or repurchase of noncontrolling interests
shareholders
 
(30,921) 
86,159  
136,006
18,633
Cash paid for repurchase of NetEase’s ADSs/purchase of subsidiaries’ ADSs and shares
 
(8,328,124) 
(5,234,294) 
(8,830,115)
(1,209,721)
Net cash used in financing activities
 
(10,237,699) 
(21,467,054) 
(27,335,702)
(3,744,976)
Effect of exchange rate changes on cash, cash equivalents and restricted cash held in foreign currencies
 
110,403  
(202,457) 
10,752
1,473
Net increase/(decrease) in cash, cash equivalents and restricted cash
 
10,212,210
(3,381,667)
30,268,265
4,146,735
Cash, cash equivalents and restricted cash, at the beginning of the year
 
17,376,115
27,588,325
24,206,658
3,316,299
Cash, cash equivalents and restricted cash, at end of the year
 
27,588,325
24,206,658
54,474,923
7,463,034
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net
 
5,092,391
4,895,752
5,189,585
710,970
Cash paid for interest expenses
588,381
779,872
489,622
67,078
Supplemental schedule of non-cash investing and financing activities:
Fixed asset purchases financed by accounts payable and accrued liabilities
 
689,093  
1,026,852  
1,024,116
140,303
The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents
F-10
Notes to the Consolidated Financial Statements
(Amounts expressed in Renminbi (“RMB”), unless otherwise stated)
1.
Organization and Nature of Operations
(a) The Group
NetEase.com, Inc. was incorporated in the Cayman Islands on July 6, 1999 and changed its name to “NetEase, Inc.” (“the Company”)
with effect from March 29, 2012. The Company completed its initial public offering (“IPO”) in July 2000 in connection with its listing
on the Nasdaq National Market (now the Nasdaq Global Select Market) in the United States of America. In June 2020, the Company
successfully listed its ordinary shares on the main board of the Hong Kong Stock Exchange.
As of December 31, 2024, the Company has wholly-owned and majority-owned subsidiaries incorporated in countries and jurisdictions
mainly in the People’s Republic of China (“PRC” or “China”, references to “China” and “PRC” are to the People’s Republic of China,
excluding, for the purposes of the financial statements only, Hong Kong, Macau and Taiwan), Hong Kong, Cayman Islands and British
Virgin Islands (“BVI”) and other countries. The Company is also the primary beneficiary of a number of variable interest entities
(“VIEs”) and consolidates the VIEs for financial reporting. The Company, its subsidiaries and the VIEs are hereinafter collectively
referred to as the “Group”.
On October 26, 2019, Youdao, Inc. (“Youdao”), one of the Company’s majority-controlled subsidiaries completed its IPO on the New
York Stock Exchange. In February 2021, Youdao completed a follow-on public offering in the New York Stock Exchange. After
Youdao’s offerings, the Company continues to control Youdao and consolidates Youdao as its controlling shareholder.
On December 2, 2021, Cloud Village, Inc. (“NetEase Cloud Music”), one of the Company’s majority-controlled subsidiaries completed
its IPO on the Hong Kong Stock Exchange. After NetEase Cloud Music’s offering, the Company continues to control NetEase Cloud
Music and consolidates NetEase Cloud Music as its controlling shareholder.
The major subsidiaries and the VIEs through which the Company conducts its business operations as of December 31, 2024 are
described below:
    
Place and year of
Major Subsidiaries
Incorporation
Guangzhou Boguan Telecommunication Technology Co., Ltd. (“Boguan”)
 
Guangzhou, China 2003
NetEase (Hangzhou) Network Co., Ltd. (“NetEase Hangzhou”)
 
Hangzhou, China 2006
Hong Kong NetEase Interactive Entertainment Limited
Hong Kong, China 2007
    
Place and year of
Major VIEs and VIEs’ subsidiaries
Incorporation
Guangzhou NetEase Computer System Co., Ltd. (“Guangzhou NetEase”)
 
Guangzhou, China 1997
Hangzhou NetEase Leihuo Technology Co., Ltd. (“Hangzhou Leihuo”, formerly known as Hangzhou
NetEase Leihuo Network Co., Ltd.)
 
Hangzhou, China 2009
Guangzhou NetEase was incorporated in June 1997 in China and owned by William Lei Ding, or Mr. Ding, the Company’s Chief
Executive Officer, director and major shareholder, and another Chinese employee of the Group. It is responsible for providing online
game and other value-added telecommunication services.
Hangzhou Leihuo was incorporated in April 2009 in China by two Chinese employees of the Group and currently operates the
Company’s mobile game business.

Table of Contents
F-11
The following combined financial information of the VIEs was included in the accompanying consolidated financial statements of the
Group as follows (in thousands):
December 31, 
December 31, 
    
2023
    
2024
RMB
RMB
Cash and cash equivalents
1,802,256
1,013,200
Time deposits
420,000
70,000
Restricted cash
2,701,083
3,025,450
Accounts receivable, net
4,663,331
3,618,024
Inventories
36,908
27,335
Prepayments and other current assets, net
1,765,209
2,346,183
Short-term investments
73,904
413,516
Amounts due from Group companies
9,192,463
11,716,452
Total current assets
20,655,154
22,230,160
Property, equipment and software, net
52,212
9,905
Operating lease right-of-use assets, net
53,686
35,015
Deferred tax assets
148,847
15,191
Restricted cash
500
3,201
Long-term investments
1,212,804
1,119,963
Other long-term assets
203,744
342,065
Total non-current assets
1,671,793
1,525,340
Total assets
 
22,326,947  
23,755,500
Accounts payable
265,137
51,905
Salary and welfare payables
114,794
93,859
Taxes payable
142,769
139,413
Short-term loans
16,095
—
Contract liabilities
12,401,426
13,702,547
Accrued liabilities and other payables
3,689,885
4,555,787
Short-term operating lease liabilities
22,413
18,398
Amounts due to Group companies
2,822,751
2,658,376
Total current liabilities
19,475,270
21,220,285
Long-term operating lease liabilities
30,278
14,853
Other long-term liabilities
554,648
648,623
Total non-current liabilities
584,926
663,476
Total liabilities
 
20,060,196  
21,883,761

Table of Contents
F-12
For the year ended December 31, 
    
2022
    
2023
    
2024
RMB
RMB
RMB
Net revenues
 
 
 
Third-party revenues
82,549,444
90,054,544
90,872,284
Intra-Group revenues
817,962
734,857
938,100
Total net revenues
83,367,406
90,789,401
91,810,384
Cost of revenues and operating expenses
Third-party cost of revenues and operating expenses
(18,358,287)
(17,468,565)
(18,544,042)
Intra-Group cost of revenues and operating expenses related to technical
consulting and related service
(64,777,586)
(72,992,568)
(72,698,641)
Other intra-Group cost of revenues and operating expenses
(185,608)
(23,546)
(155,620)
Total cost of revenues and operating expenses
(83,321,481)
(90,484,679)
(91,398,303)
Net income
 
(81,329) 
328,357  
177,118
For the year ended December 31, 
    
2022
    
2023
    
2024
RMB
RMB
RMB
Cash flows from operating activities:
Net cash provided by transactions with third-parties
67,459,864
72,325,460
74,828,624
Net cash used in transactions with intra-Group companies related to technical
consulting and related service
(66,970,818)
(73,298,667)
(73,785,893)
Net cash provided by/(used in) other transactions with intra-Group companies
299,452
639,545
(45,054)
Net cash provided by/(used in) operating activities
 
788,498  
(333,662) 
997,677
Cash flows from investing activities:
Net cash used in transactions with third-parties
(71,832)
(82,645)
(234,760)
Net loans made to intra-Group companies
—
—
(1,438,000)
Net cash used in investing activities
 
(71,832) 
(82,645) 
(1,672,760)
Cash flows from financing activities:
Net cash (used in)/provided by transactions with intra-Group companies
(105,448)
(52,839)
229,553
Net cash (used in)/provided by transactions with third-parties
(52,541)
15,673
(16,095)
Net cash (used in)/provided by financing activities
 
(157,989) 
(37,166) 
213,458
In accordance with various contractual agreements, the Company has the power to direct the activities of the VIEs and can have assets
transferred out of the VIEs. Therefore, the Company considers that there are no assets in the respective VIEs that can be used only to
settle obligations of the respective VIEs, except for the registered capital of the VIEs amounting to approximately RMB626.1 million and
RMB642.1 million, respectively, as of December 31, 2023 and 2024, as well as certain non-distributable statutory reserves amounting to
approximately RMB96.3 million and RMB104.5 million, respectively, as of December 31, 2023 and 2024. As the respective VIEs are
incorporated as limited liability companies under the PRC Company Law, creditors do not have recourse to the general credit of the
Company for the liabilities of the respective VIEs.
Currently, there are certain contractual arrangements between the Company and several of VIEs which require the Company to provide
additional financial support or guarantees to the VIEs, where necessary. Please see Note 1(b) for additional information.
There is no entity in the Group for which the Company has a variable interest but is not the primary beneficiary as of December 31, 2023
and 2024.
(b) Nature of operations
The Group generates revenues mainly from providing online game services, tutoring services, sales of smart devices, online music
services, live streaming services, advertising services, e-commerce and other fee-based premium services.

Table of Contents
F-13
The industry in which the Group operates is subject to a number of industry-specific risk factors, including, but not limited to, rapidly
changing technologies; government regulations of the Internet, online game, online education, online music, live streaming and e-
commerce industry in China; numbers of new entrants; dependence on key individuals; competition of similar services from larger
companies; customer preferences; and the need for the continued successful development, marketing and selling of its services.
VIE arrangements with major VIEs
The Group conducts its business mainly in China. The Chinese government regulates Internet access, telecommunications services, the
distribution of various information and the provision of commerce through strict business licensing requirements and other governmental
regulations, which include, among others, those restricting foreign ownership in Chinese companies providing Internet advertising and
other Internet or telecommunications value-added services. To comply with the existing Chinese laws and regulations, the Company and
certain of its subsidiaries have entered into a series of contractual arrangements with the major VIEs with respect to the operation of the
NetEase websites, operation of in-house developed and licensed PC and mobile games, Internet content and wireless value-added
services, as well as the provision of advertising services.
Based on the agreements with these VIEs, certain of the Company’s subsidiaries provided technical consulting and related services to
these VIEs. The principal agreements that transfer economic benefits of Guangzhou NetEase and Hangzhou Leihuo to the Company and
its subsidiaries are:
●
Cooperative agreements with Guangzhou NetEase - under these agreements, certain of the Company’s subsidiaries,
including Boguan and NetEase Hangzhou provide various technical consulting and related services to Guangzhou NetEase
in exchange for substantially all of Guangzhou NetEase’s net profits.
●
Cooperative agreements with Hangzhou Leihuo - under these agreements, certain of the Company’s subsidiaries, including
NetEase Hangzhou provide various technical consulting and related services to Hangzhou Leihuo in exchange for
substantially all of Hangzhou Leihuo’s net profits.
Each cooperative agreement will remain in effect indefinitely unless any one of the contract parties terminates such agreement by written
notice or otherwise required by law.
Each VIE, the relevant subsidiary of the Company and the relevant VIE shareholders have entered into a series of agreements that
provide the Company with the power to direct the activities that most significantly impact the economic performance of the VIEs and
provide the Company with economic benefits of these VIEs and as such the Company is the primary beneficiary and consolidate the
VIEs for financial reporting. The principal agreements that provide the Company and its subsidiaries with such power and economic
benefits over Guangzhou NetEase are:
●
Shareholder Voting Rights Trust Agreement among the VIE shareholders of Guangzhou NetEase and the Company’s
subsidiary, NetEase Information Technology (Beijing) Co., Ltd. (“NetEase Beijing”). Each of the VIE shareholders
irrevocably appoints NetEase Beijing to represent him to exercise all the voting rights to which he is entitled as a
shareholder of Guangzhou NetEase. The term of this agreement is 20 years from May 12, 2010.
●
Letter of Agreement. Each of the VIE shareholders of Guangzhou NetEase have agreed that any amendments to be made to
the agreements to which the Company, NetEase Beijing and/or their respective affiliates is a party, on the one hand, and
any of their variable interest entities and/or the shareholders of such entities, on the other hand, shall be subject to the
approval by the vote of a majority of the Board of the Company, excluding the vote of Mr. Ding. The VIE shareholders
have also agreed that, if any amendments to the above-mentioned agreements require a vote of the shareholders of the
Company or Guangzhou NetEase, as applicable, both of them will vote in their capacity as direct or indirect shareholders
of these companies to act based upon the instructions of the Company’s Board. The term of this agreement is 20 years from
May 12, 2010.
●
Other Governance Arrangements. The parties have agreed that upon the Company’s determination and at any time when
NetEase Beijing or its affiliates are able to obtain approval to invest in and operate all or any part of any business operated
by Guangzhou NetEase, NetEase Beijing or its affiliates may acquire all or any part of the assets or equity interests of
Guangzhou NetEase, to the extent permitted by Chinese law.

Table of Contents
F-14
The principal agreements that provide the Company and its subsidiaries with such power and economic benefits over Hangzhou Leihuo
are:
●
Operating Agreement among NetEase Hangzhou, Hangzhou Leihuo and the VIE shareholders of Hangzhou Leihuo. To
ensure the successful performance of the various agreements between the parties, Hangzhou Leihuo and its VIE
shareholders have agreed that, except for transactions in the ordinary course of business, Hangzhou Leihuo will not enter
into any transaction that would materially affect the assets, liabilities, rights or operations of Hangzhou Leihuo without the
prior written consent of NetEase Hangzhou. NetEase Hangzhou has also agreed that it will provide performance guarantees
and, at NetEase Hangzhou’s discretion, guarantee loans for working capital purposes to the extent required by Hangzhou
Leihuo for its operations. Furthermore, the VIE shareholders of Hangzhou Leihuo have agreed that, upon instruction from
NetEase Hangzhou, they will appoint Hangzhou Leihuo’s board members, president, chief financial officer and other senior
executive officers. The term of this agreement is 20 years from December 1, 2015 and can be extended with the written
consent of NetEase Hangzhou.
●
Shareholder Voting Rights Trust Agreement among NetEase Hangzhou and the VIE shareholders of Hangzhou Leihuo.
Under these agreements, each of the VIE shareholders of Hangzhou Leihuo agreed to irrevocably entrust a person
designated by NetEase Hangzhou to represent him to exercise all the voting rights and other shareholders’ rights to which
he is entitled as a shareholder of Hangzhou Leihuo. Each agreement shall remain effective for as long as the VIE
shareholder remains a shareholder of Hangzhou Leihuo unless NetEase Hangzhou unilaterally terminates the agreement by
written notice.
●
Exclusive Purchase Option Agreements among NetEase Hangzhou, Hangzhou Leihuo and the VIE shareholders of
Hangzhou Leihuo. Under the Exclusive Purchase Option Agreements, each of the VIE shareholders has granted NetEase
Hangzhou an option to purchase all or a portion of his equity interest in Hangzhou Leihuo at a price equal to the original
and any additional paid-in capital paid by the VIE shareholder. In addition, Hangzhou Leihuo has granted NetEase
Hangzhou an option to purchase all or a portion of the assets held by Hangzhou Leihuo or its subsidiaries at a price equal to
the net book value of such assets. Each of Hangzhou Leihuo and the VIE shareholders of Hangzhou Leihuo agrees not to
transfer, mortgage or permit any security interest to be created on any equity interest in or assets of Hangzhou Leihuo
without the prior written consent of NetEase Hangzhou. Each Exclusive Purchase Option Agreement shall remain in effect
until all of the equity interests in or assets of Hangzhou Leihuo have been acquired by NetEase Hangzhou or its designee or
until NetEase Hangzhou unilaterally terminates the agreement by written notice.
The principal agreements amongst the other VIEs, the relevant subsidiaries and VIE shareholders that provide the Company with the
power to direct the activities that most significantly impact the economic performance of the VIEs and provide the Company with
economic benefits of these VIEs contains substantially the same terms as those aforementioned agreements related to Hangzhou Leihuo,
except that contract expiry date varies.
The Company conducts substantially all of its business through the various VIEs discussed above and their subsidiaries, and therefore
these companies directly affect the Company’s financial performance and cash flows. As discussed below, if the Chinese government
determines the VIE agreements do not comply with applicable laws and regulations and requires the Company to restructure its
operations entirely or discontinue all or any portion of its business, or if the uncertainties in the PRC legal system limit the Group’s
ability to enforce these contractual agreements, the Group’s business operations will be significantly disrupted and the Group might be
unable to consolidate these companies in the future. In the opinion of management, the likelihood of loss in respect of the Group’s
current ownership structure or the contractual arrangements with the VIEs is remote.

Table of Contents
F-15
Risks related to the VIE arrangements
The Company believes that its contractual arrangements with the VIEs are in compliance with PRC law and are legally enforceable. Mr.
Ding, who is the major shareholder of Guangzhou NetEase and certain of the other VIEs, is the largest shareholder of the Company. He
therefore has no current interest in seeking to act contrary to the contractual arrangements. However, uncertainties in the PRC legal
system could limit the Company’s ability to enforce these contractual arrangements and if Mr. Ding were to reduce his interest in the
Company, his interests may diverge from that of the Company and that may potentially increase the risk that he would seek to act
contrary to the contractual terms, for example by influencing the VIEs not to pay the service fees when required to do so. If the VIEs or
their respective shareholder fail to perform their respective obligations under the current contractual arrangements, the Company may
have to incur substantial costs and expend significant resources to enforce those arrangements and rely on legal remedies under Chinese
laws. Many Chinese laws, rules and regulations are relatively new, and because of the limited volume of published decisions and their
non-binding nature, the interpretation and enforcement of these laws, rules and regulations involve substantial uncertainties. These
uncertainties may impede the ability of the Company to enforce these contractual arrangements, or cause the Company to suffer
significant delay or other obstacles in the process of enforcing these contractual arrangements and may materially and adversely affect
the results of operations and the financial position of the Company.
In addition, many Chinese regulations are subject to extensive interpretive powers of governmental agencies and commissions, and there
are substantial uncertainties regarding the interpretation and application of current and future Chinese laws and regulations. Accordingly,
the Company cannot be assured that Chinese regulatory authorities will not ultimately take a contrary view to its belief and will not take
action to prohibit or restrict its business activities. The relevant regulatory authorities would have broad discretion in dealing with any
deemed violations which may adversely impact the financial statements, operations and cash flows of the Company (including the
restriction on the Company to carry out the business). If the legal structure and contractual arrangements were found to be in violation of
any existing PRC laws and regulations, the PRC government could potentially:
●
revoke the Group’s business and operating licenses;
●
require the Group to discontinue or restrict operations;
●
restrict the Group’s right to collect revenues;
●
block the Group’s websites;
●
require the Group to restructure the operations in such a way as to compel the Group to establish a new enterprise, re-apply
for the necessary licenses or relocate the Group’s businesses, staff and assets;
●
impose additional conditions or requirements with which the Group may not be able to comply; or
●
take other regulatory or enforcement actions against the Group that could be harmful to the Group’s business.
The imposition of any of these penalties may result in a material and adverse effect on the Group’s ability to conduct the Group’s
business. In addition, if the imposition of any of these penalties causes the Group to lose the rights to direct the activities of the VIEs or
the right to receive their economic benefits, the Group would no longer be able to consolidate the VIEs. The Group does not believe that
any penalties imposed or actions taken by the PRC government would result in the liquidation of the Company, its subsidiaries or the
VIEs. The Company believes the possibility that it will no longer be able to consolidate the VIEs as a result of the aforementioned risks
and uncertainties is remote.

Table of Contents
F-16
2.
Principal Accounting Policies
(a) Basis of consolidation
The consolidated financial statements include the financial statements of the Company, its subsidiaries and the VIEs for which the
Company is the primary beneficiary with the ownership interests of minority shareholders reported as noncontrolling interests. All
significant transactions and balances among the Company, its subsidiaries and the VIEs have been eliminated upon consolidation. The
Company consolidates a VIE if the Company has the power to direct matters that most significantly impact the activities of the VIE, and
has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.
(b) Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in
the United States of America (“US GAAP”).
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the balance sheet dates and the
reported amounts of revenues and expenses during the reporting periods. Actual results might differ from those estimates. Critical
accounting estimates and assumptions include, but are not limited to, assessing the following: revenues for in-game virtual items over the
estimated average playing period of paying players and impairment of long-term investments.
(c) Revenue recognition
Revenues from contracts with customers are recognized when control of the promised goods or services is transferred to the Group’s
customers, in an amount that reflects the consideration the Group expects to be entitled to in exchange for those goods or services,
reduced by estimates for return allowances, promotional discounts, rebates and Value Added Tax (“VAT”).
The recognition of revenues involves certain management judgments, including estimated lives of virtual items purchased by game
players, estimated breakage of game points, return allowance for goods sold, volume sales rebates. The amount and timing of the
Group’s revenues could be different if management made different judgments or utilized different estimates.
The Group’s revenues are mainly generated from online game services, tutoring services, sale of smart devices, online music services,
live streaming services, advertising services, e-commerce and other fee-based premium services. Refer to “Note 28 - Segment
Information” for disaggregation of revenue.
(i)
Online game services
The Group operates mobile games and PC games. The Group is the principal of substantially all games it operates, including both in-
house developed games and licensed games. As these games are hosted on the Group’s servers, the Group has the pricing discretion, and
is responsible for the sale and marketing of the games as well as customer services. Fees paid to game developers, app stores and
payment platforms are recorded as cost of revenues.
Mobile games
The Group generates mobile game revenues from the sale of in-game virtual items, including items, avatars, skills, privileges or other in-
game consumables, features or functionality, within the games. The Group’s performance obligation is to provide on-going game services
to players who purchased virtual items to gain an enhanced game-playing experience. This performance obligation is satisfied over the
playing period of the paying players. Accordingly, the Group recognizes the revenues ratably over the estimated average playing period
of these paying players.

Table of Contents
F-17
The Group considers the average period that players typically play the games and other game player behavior patterns, as well as various
other factors to arrive at the best estimates for the estimated average playing period of the paying players for each game based on
historical players’ churn rates. If a new game is launched and only a limited period of paying player data is available, then the Group
considers other qualitative factors. While the Group believes its estimates to be reasonable based on available game player information,
the Group may revise such estimates based on new information indicating a change in the game player behavior patterns and any
adjustments are applied prospectively.
PC games
The Group sells prepaid points to the end users. Customers can use the points to play the Group’s PC games, pay for in-game items and
use other fee-based premium services. Customers can also purchase in-game items and other fee-based premium services online and
consume the in-game items and services directly. Proceeds received from the sales of prepaid online points and in-game items and other
fee-based premium services to players are recorded as contract liabilities.
The Group earns revenue through providing PC game services to players mainly under two types of revenue models: time-based revenue
model and item-based revenue model. For PC games using the time-based model, players are charged based on the time they spend
playing games. Revenues are recognized ratably over the game playing period as the performance obligations are satisfied.
Under the item-based model, the basic game play functions are free of charge, and players are charged for purchases of in-game items.
In-game items have different life patterns: one-time use, limited life and permanent life. Revenues from the sales of one-time use in-
game items are recognized upon consumption. Limited life items are either limited by the times of uses (for example, 10 times) or
limited by time (for example, three months). Revenues from the sales of limited life in-game items are recognized ratably based on the
extent of time passed or expired or the times used. Players are allowed to use permanent life in-game items without any use or time
limits. Revenues from the sales of permanent life in-game items are recognized ratably over the estimated average playing period of the
paying players.
The Group considers the average period that players typically play the games and other game player behavior patterns, as well as various
other factors to arrive at the best estimates for the estimated average playing period of the paying players for the permanent in-game
items of each PC game based on historical players’ churn rate. This estimate is re-assessed on a quarterly basis. Adjustments arising from
the changes of estimated average playing period of the paying players are applied prospectively as such changes are resulted from new
information indicating a change in the game player behavior patterns.
(ii) Tutoring services
The Group offers various types of integrated learning services through Youdao, which primarily cover a wide spectrum of topics and
target people from broad age groups through its diverse offerings of tutoring courses and digital learning contents, foreign languages,
professional and interest education services as well as IT computer skills, etc. Youdao’s tutoring courses consist of online live streaming
and other activities during the online live streaming period, as well as the content playback service. The aforementioned services are
highly interdependent and interrelated in the context of the contract and are only considered accessory services to the online live
streaming courses and therefore are not distinct and are not sold standalone. Therefore, the Group’s tutoring courses are accounted for as
a single performance obligation, which is satisfied over the learning period of the students. Accordingly, the Group recognizes the
revenues ratably over the estimated average learning period for different courses. The Group considers the average period that students
typically spend time on the courses and other learning behavior patterns to arrive at the best estimates for the estimated learning period
for each course based on the estimated learning time customers spend on the courses and the expected number of times customers will
take the courses.

Table of Contents
F-18
The Group also offers digital learning contents to customers which are delivered together with online live streaming courses and
customized planning services. The customers can either stream the digital learning contents online or download and watch them offline.
The downloadable digital learning contents, streaming services, online live streaming courses and customized planning services are
considered as distinct performance obligations in the contract. The transaction price is generally collected in advance and allocated to
each performance obligation in the contract based on the relative standalone selling prices. The Group recognizes the revenues of
downloadable digital learning contents as the performance obligation is satisfied upon the time of delivery. The revenues of streaming
services and customized planning services are recognized ratably over the service period. For online live streaming courses, the revenues
are recognized ratably over the estimated average learning period.
(iii) Smart devices
The Group sells smart devices such as dictionary pen, smart learning pad and listening pod through Youdao to customers through
retailers or distributors. The Group recognizes revenues when control of the goods is transferred to the customer, which generally occurs
upon the delivery to the end customers or upon the delivery to distributors.
(iv) Online music services
The Group offers online music services through NetEase Cloud Music, which mainly include membership subscriptions, sales of digital
music album and songs and contents sublicensing on the Group’s online platforms.
The Group offers users membership subscription packages which entitled paying subscriber access to the Group’s relevant music
contents and other privileged features on its platforms. The subscription fees for these packages are primarily time-based mainly from
weekly to yearly and is collected upfront. The receipt of subscription fees is initially recognised as contract liabilities. The Group
satisfies its performance obligations throughout the subscription period and revenue from the membership subscriptions is recognised
over time.
The Group also offers users to purchase exclusive digital music albums and songs which can listen both online and offline. The Group
considers that the control has been transferred to customer at time of purchase. As a result, the performance obligation is satisfied and
revenue is recognised at a point in time.
The Group sublicenses certain of its music contents to other music platforms for a fixed period of one to three years, which generally
falls within the original license period. The Group determines sublicense of contents as a single performance obligation, and the revenue
from sublicensing of contents is recognised over time throughout the sublicense period.
(v) Live streaming services
The Group operates live streaming platforms mainly through NetEase Cloud Music whereby users can enjoy live performances provided
by the live streaming performers and interact with them on a real time basis free of charge. The Group sells virtual items to users at pre-
determined price so that the users gift them to live streaming performers to show their support and appreciation. The virtual items sold by
the Group comprise of either (i) consumable items or (ii) time-based item, such as privilege titles etc. Under the arrangements with the
live streaming performers, the Group shares with them a portion of the revenues derived from the sales of virtual items. Revenues
derived from the sale of virtual items are recorded on a gross basis as the Group acts as the principal to fulfill all obligations related to
the sale of virtual items. Accordingly, revenue is recognized when the virtual item is delivered and consumed if the virtual item is a
consumable item or, in the case of time-based virtual item, recognized ratably over the period each virtual item is made available to the
user.

Table of Contents
F-19
(vi) Advertising services
The Group derives its advertising revenues principally from short-term online advertising contracts. Advertising service contracts may
consist of multiple performance obligations with a typical term of less than three months. In arrangements where the Group has multiple
performance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price. The
Group generally determines standalone selling prices based on the prices charged to customers. If the performance obligation has not
been sold separately, the Group estimates the standalone selling price by taking into consideration of the pricing for advertising areas of
the Group’s platform with a similar popularities and advertisements with similar formats and quoted prices from competitors as well as
other market conditions. Considerations allocated to each performance obligation is recognized as revenue over the advertisement
display period, which is usually within three months.
The Group also enters into performance-based advertising arrangements with customers. For example, cost per mille (“CPM”) or cost-
per-click (“CPC”) advertising arrangements with customers, the Group recognizes revenues based on the number of times that the
advertisement has been displayed or the number of actions completed resulted from the advertisements, respectively.
Certain customers may receive volume rebates, which are accounted for as variable consideration. The Group estimates annual expected
rebate volume with reference to their historical results and reduce revenues recognized.
(vii) E-commerce
The Group’s e-commerce revenue is primarily from its private label consumer lifestyle brand Yanxuan, which was established in April
2016. Yanxuan sells its private label products, including pet supplies, home cleaning products, bedding and other categories which
mainly source directly from some excellent manufacturers. The Group is the principal for the online direct sales, as it controls the
inventory before they are transferred to customers. The Group has the primary responsibility for fulfilling the contracts, bears the
inventory risk, and has sole discretion in establishing the prices. E-commerce revenues from online direct sales are recognized when
control of the goods is transferred to the customer, which generally occurs upon delivery to the customer. The Group also provides
discount coupons to its customers for use in purchases, which are treated as a reduction of revenue when the related transaction is
recognized.
Return allowances, which reduce revenue and cost of sales, are estimated using historical experience. Liabilities for return allowances
and rights to recover products from customers associated with the Group’s liabilities are recorded as “Accrued liabilities and other
payables” and “Inventories”, respectively, on the Group’s consolidated balance sheets. Both of the balances are not material as of
December 31, 2022, 2023 and 2024.
(viii) Fee-based premium services
Fee-based premium services revenues, mostly operated on either consumption-basis or a monthly subscription basis, are derived
principally from providing innovative businesses. Prepaid subscription fees collected from customers are deferred and are recognized as
revenue on a straight-line basis by the Group over the subscription period, during which customers can access the premium online
services provided by the Group. Fees collected from customer to be consumed to purchase online services are recognized as revenue
when related services are rendered.
Practical expedients
The Group has used the following practical expedients as allowed under ASC 606:
(i)
The effects of a significant financing component have not been adjusted for contracts which the Group expects, at contract inception,
that the period between when the Group transfers a promised good or service to the customer and when the customer pays for that
good or service will be one year or less.
(ii) The Group applied the portfolio approach in determining the commencement date of consumption of permanent virtual items and the
estimated average playing period of paying players for PC games and mobile games for the recognition of online game revenue
given that the effect of applying a portfolio approach to a group game players’ behaviors would not differ materially from
considering each one of them individually.
(iii) The Group elects to expense certain costs to obtain a contract as incurred when the expected amortization period is one year or less.

Table of Contents
F-20
Contract balances
Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable represent amounts invoiced
and revenue recognized prior to invoicing, when the Group has satisfied its performance obligations and has the unconditional right to
payment.
The Group’s right to consideration in exchange for goods or services that the Group has transferred to a customer is recognized as a
contract asset.
Contract assets as of December 31, 2023 and 2024 were not material.
A contract liability is the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration
(or an amount of consideration is due) from the customer. Refer to Note 16 - Contract liabilities for further information, including
changes in contract liabilities during the year.
(d) Cost of revenues
Costs of revenues consist primarily of revenue sharing cost, staff-related costs, royalty fees related to licensed games, traffic acquisition
cost, content acquisition cost, service fees related to online payments, server and bandwidth service fee, depreciation and amortization of
severs, computers and software, and other direct costs of providing these services, as well as cost of merchandise sold. These costs are
charged to the consolidated statements of operations and comprehensive income as incurred.
(e) Research and development costs
Research and development costs mainly consist of staff-related costs and technology service costs incurred for the development of online
games and other products.
Software development costs for software to be sold, leased or otherwise marketed are charged to research and development expense until
technological feasibility is established. The technological feasibility is not established until substantially all product development and
testing is complete, and the period after the date technical feasibility is reached and the time when the software marketed was short
historically. The Group’s software development costs qualifying for capitalization has been immaterial for the years ended December 31,
2022, 2023 and 2024.
(f)
Cash, cash equivalents and time deposits
Cash and cash equivalents mainly represent cash on hand, demand deposits and time deposits with original maturities less than three
months placed with large reputable banks in Hong Kong and/or China. As of December 31, 2023 and 2024, there were cash and cash
equivalent denominated in U.S. dollars amounting to approximately US$1.6 billion and US$2.8 billion, respectively (equivalent to
approximately RMB11.1 billion and RMB20.3 billion, respectively).
Time deposits represent time deposits placed with banks with original maturities of three months or more. As of December 31, 2023 and
2024, there were time deposits denominated in U.S. dollars amounting to approximately US$8.6 billion and US$9.3 billion, respectively
(equivalent to approximately RMB61.2 billion and RMB67.2 billion, respectively).
As of December 31, 2023 and 2024, the Group had approximately RMB48.5 billion and RMB41.1 billion cash and cash equivalents and
time deposits held by its PRC subsidiaries and the VIEs, representing 39.3% and 31.7% of total cash and cash equivalents and time
deposits of the Group, respectively.

Table of Contents
F-21
As of December 31, 2023 and 2024, the Group had a restricted cash balance approximately RMB2.8 billion and RMB3.1 billion,
respectively, comprising as follows (in millions):
    
December 31,      
December 31, 
2023
2024
RMB
RMB
Customer deposit of NetEase Pay accounts
 
2,664.1  
2,989.7
Others
113.7
101.9
Total
2,777.8
3,091.6
The Group had no other material lien arrangements during 2023 and 2024.
(g) Receivables, net
The Group’s receivables are subject to the measurement of credit losses within the scope of ASC Topic 326.The impact of this standard
was immaterial to the Company.
The Group’s accounts receivable, other receivables recorded in prepayments and other current assets and other long-term receivables
recorded in other long-term assets are within the scope of ASC Topic 326. Accounts receivable consist primarily of receivables from
mobile games services, online music services and advertising services.
To estimate expected credit losses, the Group has identified the relevant risk characteristics of its customers and the related receivables
and other receivables which include size, type of the services or the products the Group provides, or a combination of these
characteristics. Receivables with similar risk characteristics have been grouped into pools. For each pool, the Group considers the past
collection experience, current economic conditions, future economic conditions (external data and macroeconomic factors) and changes
in the Group’s customer collection trends. This is assessed at each quarter based on the Group’s specific facts and circumstances.
The following table sets out the movements of the allowance for expected credit losses for the years ended December 31, 2022, 2023 and
2024 (in thousands):
For the year ended December 31,
    
2022
    
2023
    
2024
RMB
RMB
RMB
Balance at the beginning of year
 
369,982  
403,360  
448,562
Provisions
 
61,393  
61,146  
256,039
Write-offs
 
(28,015) 
(15,944) 
(15,173)
Balance at the end of year
403,360
448,562
689,428
(h) Fair value of financial instruments
Accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and
liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it
would transact and it considers assumptions that market participants would use when pricing the asset or liability.
Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the
use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based
upon the lowest level of input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs
that may be used to measure fair value:
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets
Level 2 - Include other inputs that are directly or indirectly observable in the marketplace
Level 3 - Unobservable inputs which are supported by little or no market activity

Table of Contents
F-22
The Group’s financial instruments include cash and cash equivalents and time deposits, restricted cash, accounts receivable, prepayments
and other current assets, short-term investments, accounts payable, short-term loans and accrued liabilities and other payables, which the
carrying values approximate their fair value. Please see Note 29 for additional information.
(i)
Inventories
Inventories mainly represent products for the Group’s e-commerce business, are stated at the lower of cost or net realizable value in the
consolidated balance sheets. Cost of inventory is determined using the weighted average cost method. Adjustments are recorded to write
down the cost of inventory to the estimated net realizable value due to slow-moving merchandise and damaged goods, which is
dependent upon factors such as historical and forecasted consumer demand, and promotional environment. The Group takes ownership,
risks and rewards of the products purchased. Write downs are recorded in “Cost of revenues” in the consolidated statements of operations
and comprehensive income. Certain costs attributable to buying and receiving products, such as purchase freights, are also included in
inventories.
(j)
Investments
Short-term investments
Short-term investments include investments in financial instruments with a variable interest rate indexed to performance of underlying
assets, all of which are with an original maturity of less than 12 months.
In accordance with ASC 825, for investments in financial instruments with a variable interest rate indexed to performance of underlying
assets, the Group elected the fair value method at the date of initial recognition and carried these investments at fair value. Changes in the
fair value are reflected in the consolidated statements of operations and comprehensive income as “Other income/(expense)”. Fair value
is estimated based on quoted prices of similar products provided by banks at the end of each period. The Group classifies the valuation
techniques that use these inputs as Level 2 of fair value measurements. Please see Note 7 and Note 29 for additional information.
Long-term investments
Long-term investments are mainly comprised of equity investments in publicly traded companies, privately-held companies and limited-
partnership.
Equity investments in publicly traded companies are reported at fair value as equity investment with readily determinable fair value.
Unrealized gains and losses for the years ended December 31, 2022, 2023 and 2024 are recognized in “Other income/(expense)”.
For investments in common stock or in-substance common stock issued by privately-held companies on which the Group does not have
significant influence, and investments in privately-held companies’ shares that are not common stocks or in-substance common stocks, as
these equity securities do not have readily determinable fair value, the Group measure these equity securities investments at cost, less
impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar
investment of the same issuer (referred to as the measurement alternative). All gains and losses on these equity securities without readily
determinable fair value, realized and unrealized, are recognized in “Other income /(expense)”.
Investments in common stock or in-substance common stock of investees and limited-partnership investments in which the Group is in a
position to exercise significant influence by participating in, but not controlling or jointly controlling, the financial and operating policies
are accounted for using the equity method.

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F-23
Management regularly evaluates the impairment of the investments in privately-held companies without readily determinable fair value
and equity method investments periodically, or when events or circumstances indicate that the carrying amount may not be recoverable.
For investments without readily determinable fair values, management performs a qualitative assessment of the fair value of the equity
interest in comparison to its carrying amount to determine if there is an indication of potential impairment. If such indication exists,
management estimates the fair value of the investment, and records an impairment in the consolidated statements of operations and
comprehensive income to the extent the carrying amount exceeds the fair value. Management applies significant judgments in the
impairment assessment for these equity investments when: (i) determining as to whether any impairment indicators exist during the year;
(ii) estimating the impairment amount if an impairment exists; and (iii) making the judgments as to whether a decline in value of equity
method investments was other than temporary. These judgments consider various factors and events including: a) significant
deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investees; b) significant adverse change
in the regulatory, economic, or technological environment of the investees; c) significant adverse change in the general market condition
of either the geographical area or the industry in which the investees operate; d) bona fide offer to purchase, an offer by the investee to
sell, or a completed auction process for the same or similar investment for an amount less than the carrying amount of that investment; e)
factors that raise significant concerns about the investees’ ability to continue as a going concern; f) factors that raise significant concerns
about the performance of new products and g) valuation methods and key estimates in the determination of the impairment amounts
based on the severity and duration of the impairment indicator and the existence of any positive or mitigating factors. For equity method
investments, management considers if the investment is impaired when events or circumstances suggest the carrying amount may not be
recoverable, and recognizes any impairment charge in the consolidated statements of operations and comprehensive income for a decline
in value that is determined to be other than temporary.
(k) Leases
The Group adopted ASU 2016-02, “Leases (Topic 842)”, including certain transitional guidance and subsequent amendments within
ASU 2018-01, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, including ASU 2016-02, “ASC 842”).
Leases that transfer substantially all of the benefits and risks incidental to the ownership of assets are accounted for as finance leases as if
there was an acquisition of an asset and incurrence of an obligation at the inception of the lease. All other leases are accounted for as
operating leases. As of December 31, 2023 and 2024, the Group has no material finance leases.
Under ASC 842, the Group determines if an arrangement is a lease at inception. The Group is the lessee in a lease contract when the
Group obtains the right to control the asset. Operating leases are included in operating lease right-of-use (“ROU”) assets, and short-term
and long-term operating lease liabilities in the Group’s consolidated balance sheets. ROU assets represent the Group’s right to use an
underlying asset for the lease term and lease liabilities represent the Group’s obligation to make lease payments arising from the lease.
Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the
lease term. As most of the Group’s leases do not provide an implicit rate, the Group generally uses its incremental borrowing rate based
on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The
operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense is recognized on a
straight-line basis over the lease term.
For leases with a term of twelve months or less (“short-term leases”), the Group has elected not to recognize lease liabilities and
associated ROU assets. Lease payments on short-term leases are recognized as lease expense within cost of revenues or operating
expenses on the consolidated statements of operations and comprehensive income, depending on the nature of the lease, on a straight-line
basis over the lease term.

Table of Contents
F-24
(l)
Property, equipment and software
Property, equipment and software are stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line basis
over the following estimated useful lives, taking into account any estimated residual value:
Building
    20-30 years
Decoration
 
5 years
Leasehold improvements
 
lesser of the term of the lease and the estimated useful lives of the assets
Furniture, fixtures, office and other equipment
 
3-20 years
Vehicles
 
5 years
Servers and computers
 
3-5 years
Software
 
3 years
Repairs and maintenance expenditures, which are not considered improvements and do not extend the useful life of the property and
equipment, are expensed as incurred.
(m) Land use rights
Land use rights represent lease prepayments to the local government authorities. Upon the adoption of ASC 842 on January 1, 2019, land
use rights, net were identified as operating lease right-of-use assets, which is separately disclosed as “Land use rights, net” in the Group’s
consolidated balance sheets. Accordingly, the Group disclosed the cash used for obtaining the land use rights in operating cash flow
activities for the years ended December 31, 2022, 2023 and 2024.
(n) Intangible assets
Finite-lived intangible assets are tested for impairment if impairment indicators arise. The Group amortizes its finite-lived intangible
assets using the straight-line method:
License right
     over the license period
Technology
7-10 years
Trademark
 
10 years
The Group obtains music content for customers through licensing agreements. When the license fee for music title is determinable or
reasonably estimable, the content is available for streaming and the Group has a binding obligation for the payment, the Group
recognizes an asset representing the fee and a corresponding liability for the amounts owed. The Group relieves the liability as payments
are made and the Group amortizes the asset to “Cost of revenues” on a straight-line basis over the term of the respective licensing
agreements.
Intangible assets and other long-term assets are tested for recoverability whenever events or changes in circumstances indicate that its
carrying amount may not be recoverable. When these events occur, the Group evaluates the impairment for intangible assets and other
long-term assets by comparing the carrying amount of the assets to an estimate of future undiscounted cash flows expected to be
generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than
the carrying amount of the assets, the Group recognizes an impairment loss based on the excess of the carrying amount of the assets over
the fair value of the assets.
(o) Goodwill
Goodwill represents the excess of the purchase consideration over the fair value of the identifiable assets and liabilities acquired as a
result of the Group’s acquisitions of interests in its subsidiaries and consolidated VIEs. The Group allocates goodwill to reporting units
based on the reporting unit expected to benefit from the business combination. Goodwill is tested for impairment at the reporting unit
level on an annual basis, or more frequently if events occur or circumstances change that indicate that it is more likely than not the fair
value of a reporting unit would be below its carrying value. A goodwill impairment loss, if any, shall be measured as the amount by
which the carrying amount of the reporting unit including goodwill exceeds its fair value, limited to the total carrying amount of
goodwill allocated to that reporting unit.

Table of Contents
F-25
Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and
liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The fair
value of each reporting unit is estimated primarily through the use of a discounted cash flow methodology. This analysis requires
significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the growth rate
for business, estimation of the useful life over which cash flows will occur, and determination of weighted average cost of capital.
Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each
reporting unit.
(p) Advertising and promotional expenses
The Group expenses advertising and promotional costs as incurred and reports these costs under selling and marketing expense.
Advertising and promotional expenses totaled approximately RMB10.0 billion, RMB10.4 billion and RMB10.9 billion (US$1.5 billion)
for the years ended December 31, 2022, 2023, and 2024, respectively.
(q) Foreign currency translation
The Group’s reporting currency is RMB. The Company and its subsidiaries and the VIEs, with an exception of many overseas
subsidiaries, use RMB as their functional currency. Several of the Company’s overseas subsidiaries used US$ or their respective local
currencies as their functional currency. The determination of the respective functional currency is based on the criteria of ASC 830,
Foreign Currency Matters.
Transactions in currencies other than the functional currency are measured and recorded in the functional currency using the exchange
rate in effect at the date of the transaction. At the balance sheet date, monetary assets and liabilities that are denominated in currencies
other than the functional currency are translated into the functional currency using the exchange rate at the balance sheet date. The
resulting exchange differences are included in the consolidated statements of operations and comprehensive income.
Assets and liabilities of the Group companies are translated from their respective functional currencies to the reporting currency at the
exchange rates at the balance sheet dates, equity accounts are translated at historical exchange rates and revenues and expenses are
translated at the average exchange rates in effect during the reporting period. The exchange differences for the translation of Group
companies with non-RMB functional currency into the RMB functional currency are included in foreign currency translation
adjustments, which is a separate component of shareholders’ equity on the consolidated financial statements.
Translations of amounts from RMB into United States dollars for the convenience of the reader were calculated at the noon buying rate
of US$1.00 = RMB7.2993 on the last trading day of 2024 (December 31, 2024) as set forth in the H.10 statistical release of the U.S.
Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into United States
dollars at such rate.
(r) Share-based compensation
Under its 2009 Restricted Share Unit Plan and 2019 Restricted Share Unit Plan (see Note 22(a)), the Company issues restricted share
units (RSUs) to its employees, directors and consultants with performance conditions and service vesting periods ranging from one year
to five years. Some of the RSUs issued are to be settled, at the Company’s discretion, in stock or cash upon vesting based on the stock
price at grant date. At each reporting period, the Company evaluates the likelihood of performance conditions being met. Share-based
compensation costs are then recorded for the number of RSUs expected to vest on a graded-vesting basis, net of estimated forfeitures,
over the requisite service period. The compensation cost of the RSUs to be settled in stock only is measured based on the fair value of
stock when all conditions to establish the grant date have been met. The compensation cost of RSUs to be settled either in stock or cash
at the Company’s discretion is remeasured until the date when settlement in stock or cash is determined by the Company.
Effective February 22, 2023, the Board of Directors of the Company amended and restated the 2019 Restricted Share Unit Plan to permit
the grant of stock option awards thereunder as an additional award type and to make certain other ministerial and administrative changes
and renamed it the NetEase, Inc. Amended and Restated 2019 Share Incentive Plan (the “Amended and Restated 2019 Plan”).

Table of Contents
F-26
The Company records share-based compensation to the consolidated statements of operations and comprehensive income with the
corresponding credit to the additional paid-in-capital for share options and RSUs to the extent that such awards are to be settled only in
stock.
Certain subsidiaries of the Company granted options exercisable for ordinary shares and RSUs to certain of the Group’s employees. The
options expire four to seven years from the date of grant and either vest or have a vesting commencement date upon certain conditions
being met (“Vesting Commencement Date”). The Group adopts the binomial option pricing model to determine the fair value of stock
options and RSUs are measured at the fair market value of the shares on the grant date and accounts for share-based compensation cost
using an estimated forfeiture rate.
Forfeitures were estimated based on the Group’s weighted average historical forfeiture rate of the last five years. Differences between
actual and estimated forfeitures are expensed in the period that the differences occur. See Note 22 for further information regarding
share-based compensation assumptions and expense.
(s) Taxation
Income tax expense is recognized in accordance with the laws of the relevant taxing authorities, with deferred taxes being provided for
temporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax
laws. Tax rate changes are reflected in income during the period the changes are enacted.
A deferred income tax asset or liability is computed for the expected future impact of differences between the financial reporting and tax
bases of assets and liabilities as well as the expected future tax benefit to be derived from tax loss and tax credit carry forwards.
On March 16, 2007, the National People’s Congress of PRC enacted the Enterprise Income Tax (“EIT”) Law which imposes a
withholding income tax of 10% on dividends distributed by an enterprise in China to its non-resident enterprise investors. A lower
withholding income tax rate of 5% is applied if the non-resident enterprise investor is registered in Hong Kong with at least 25% equity
interest in the PRC enterprise and meets the relevant conditions or requirements pursuant to the tax arrangement between mainland China
and Hong Kong.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount “more likely than not” to be realized in
future tax returns.
For a particular tax-paying component of an enterprise and within a particular tax jurisdiction, all deferred tax assets and liabilities are
offset and presented as a single amount. The Group does not offset deferred tax assets and liabilities attributable to different tax-paying
components of the enterprise or to different tax jurisdictions.
The Group reports tax-related interest expense and penalty in “Other, net” in the consolidated statements of operations and
comprehensive income, if there is any. The Group did not incur any material penalty or interest payments in connection with tax
positions during the years ended December 31, 2022, 2023 and 2024.
The Group did not have any significant unrecognized uncertain tax positions as of December 31, 2023 and 2024.
In order to assess uncertain tax positions, the Group applies a more likely than not threshold and a two-step approach for the tax position
measurement and financial statement recognition. Under the two-step approach, the first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained,
including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount
that is more than 50% likely of being realized upon settlement.
(t)
Net earnings per share (“EPS”) and per American Depositary Share (“ADS”)
Basic earnings per share is computed on the basis of the weighted-average number of ordinary shares outstanding during the period
under measurement. Diluted earnings per share are based on the weighted-average number of ordinary shares outstanding and potential
ordinary shares. Potential ordinary shares result from the assumed exercise of outstanding stock options, RSUs or other potentially
dilutive equity instruments, when they are dilutive under the treasury stock method or the if-converted method.

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F-27
(u) Statutory reserves
The Company’s subsidiaries and the VIEs incorporated in China are required to make appropriations to certain non-distributable
statutory reserves. In accordance with the laws applicable to foreign invested enterprises in China, its subsidiaries have to make
appropriations from its after-tax profit as reported in their PRC statutory accounts to non-distributable statutory reserves including (i)
general reserve fund, (ii) enterprise expansion fund and (iii) staff bonus and welfare fund. The appropriation to the general reserve fund
is at least 10% of the after-tax profits as reported in the PRC statutory accounts. Appropriation is not required if the reserve fund has
reached 50% of the registered capital of the respective company. The appropriation to the other reserve funds is at the discretion of the
board of directors of the respective company. At the same time, the VIEs, in accordance with the China Company Laws, must make
appropriations from their after-tax profit as reported in their PRC statutory accounts to non-distributable statutory reserves including (i)
statutory surplus fund and (ii) discretionary surplus fund. The appropriation to the statutory surplus fund is at least 10% of the after-tax
profits as reported in their PRC statutory accounts. Appropriation is not required if the statutory surplus fund has reached 50% of the
registered capital of the respective company. Appropriation to the discretionary surplus fund is made at the discretion of the board of
directors of the respective companies.
The general reserve fund and statutory surplus fund are restricted to set off against losses, expansion of production and operation or
increase in the registered capital of the respective companies. The staff bonus and welfare fund is available to fund payments of special
bonuses to staff and for collective welfare benefits. Upon approval by the board of directors, the discretionary surplus and enterprise
expansion fund can be used to offset accumulated losses or to increase capital.
(v) Business combination
The Group accounts for its business combinations using the acquisition method of accounting in accordance with ASC 805, Business
Combinations. The cost of an acquisition is measured as the aggregate of the acquisition date fair values of the assets transferred and
liabilities assumed by the Group to the sellers and equity instruments issued. Transaction costs directly attributable to the acquisition are
expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the
acquisition date, irrespective of the extent of any noncontrolling interests. The excess of (i) the total costs of acquisition, fair value of the
noncontrolling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the
identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the
subsidiary acquired, the difference is recognized directly in the consolidated statements of operations and comprehensive income. During
the measurement period, which can be up to one year from the acquisition date, the Group may record adjustments to the assets acquired
and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination
of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded on the
consolidated statements of operations and comprehensive income.
In a business combination achieved in stages, the Group re-measures the previously held equity interests in the acquiree when obtaining
control at its acquisition date fair value and the re-measurement gain or loss, if any, is recognized on the consolidated statements of
operations and comprehensive income.
When there is a change in ownership interests or a change in contractual arrangements that results in a loss of control of a subsidiary, the
Company deconsolidates the subsidiary from the date control is lost. Any retained noncontrolling investment in the former subsidiary is
measured at fair value and is included in the calculation of the gain or loss upon deconsolidation of the subsidiary.
(w) Noncontrolling interests and redeemable noncontrolling interests
Noncontrolling interests are recognized to reflect the portion of the equity of majority-owned subsidiaries and the VIEs which is not
attributable, directly or indirectly, to the controlling shareholder.
The noncontrolling interest will continue to be attributed its share of losses even if that attribution results in a deficit noncontrolling
interest balance.

Table of Contents
F-28
Redeemable noncontrolling interests represent redeemable equity interests issued by the Group’s subsidiaries to certain investors (see
Note 19), and have been classified as mezzanine classified noncontrolling interests in the consolidated financial statements as these
redeemable interests are contingently redeemable upon the occurrence of certain conditional events, which is not solely within the
control of the Group. The Group accreted the redeemable equity interests to their redemption value, which is purchase price plus interest
per year over the period since issuance to the earliest redemption date. The accretions were recorded against retained earnings, or in the
absence of retained earnings, by charges against additional paid-in capital. Once additional paid-in capital had been exhausted, additional
charges were recorded by increasing the accumulated deficit.
(x) Related parties
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to
common control or significant influence, such as a family member or relative, stockholder, or a related corporation.
(y) Comprehensive income
Comprehensive income is defined as the change in equity of the Group during a period arising from transactions and other events and
circumstances excluding transactions resulting from investments by shareholders and distributions to shareholders.
(z) Segment reporting
The Group’s internal organizational structure as well as information about geographical areas, business segments and major customers in
financial statements is set out in detail under Note 28.
(aa)Dividends
Dividends of the Company are recognized when declared.
(bb) Recently issued accounting pronouncements not yet adopted
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU No.
2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information
on income taxes paid. The guidance is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early
adoption is permitted.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income- Expense
Disaggregation Disclosures (Subtopic 220-40). ASU No. 2024-03 requires publicly-traded business entities to disclose specified
information about the components of certain costs and expenses that are currently disclosed in the financial statements. The guidance is
effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15,
2027. Early adoption is permitted.
The Group is currently evaluating the impact of these accounting standard updates on the consolidated financial statements.
3.
Discontinued Operations
In 2022, the Company recognized net income from discontinued operations of RMB624.9 million which was related to the disposal of
the Kaola business in 2019.

Table of Contents
F-29
4.
Acquisition
Acquisitions in 2022
In 2022, the Group completed several acquisitions to complete its existing businesses and achieve synergies. Among them, the Group
acquired an additional 50.5% equity interest of a previously held equity investment with total cash consideration of RMB760.4 million.
Upon the acquisition, the Group increased its equity interest in this investment from 41.5% to 92.0%, and accounted for it as a
consolidated subsidiary of the Group. A gain of RMB310.4 million in relation to the revaluation of the previously held equity interests
was recorded in “Investment income, net” in the consolidated statements of operations and comprehensive income for the year ended
December 31, 2022. The acquired entities individually and in aggregate were insignificant. The Group’s acquisitions in 2022 are
summarized in the following table (in thousands):
Amounts
    
RMB
Net liabilities acquired
 
(34,671)
Amortizable intangible assets (i)
 
  
Trademark
 
143,146
Other identified intangible assets
 
525,853
Deferred tax liabilities
 
(104,137)
Goodwill
 
1,571,206
Noncontrolling interests
 
(122,983)
Total
 
1,978,414
(i)
Trademarks and other identified intangible assets acquired in the acquisitions are included in “Copyrights, licenses, domain names,
trademark and technology”.
There was no significant acquisition incurred in 2023 and 2024.
Pro forma results of operations for all the acquisitions have not been presented because they were not material to the consolidated
statements of operations and comprehensive income for the years ended December 31, 2022, 2023 and 2024, either individually or in
aggregate.
5.
Concentrations and Risks
(a) Server and bandwidth service provider
The Group relied on over 100 telecommunications service providers and their affiliates for server and bandwidth service to support its
operations during fiscal years 2022, 2023 and 2024 as follows:
For the year ended December 31, 
    
2022
    
2023
    
2024
Number of service providers, offering 10% or more of the Group’s server and bandwidth
service expenditure
 
4
4
4
Total% of the Group’s server and bandwidth service expenditure provided by 10% or
greater service providers
 
62.7 %
59.4 %
63.1 %
(b) Credit risk
Financial instruments that potentially subject the Group to significant concentrations of credit risk consist primarily of cash and cash
equivalents, time deposits, restricted cash, accounts receivable and short-term investments. As of December 31, 2023 and 2024,
substantially all of the Group’s cash and cash equivalents, time deposits and restricted cash were held in major financial institutions
located in the PRC or Hong Kong, which management considers being of high credit quality. Accounts receivable are typically
unsecured and are generally derived from revenue earned from mobile games services, online music services and advertising services.

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F-30
One channel had a receivable balance exceeding 10% of the total accounts receivable balance as of December 31, 2023 and 2024,
respectively as follows:
     December 31,      
December 31,   
    
2023
    
2024
 
Channel A
 
23.5 %  
14.0 %
In addition, receivable from one customer accounted for 11% of the total accounts receivable balance as of December 31, 2024.
Short-term investments consist of financial products issued by commercial banks in China with a variable interest rate indexed to
performance of underlying assets, which have a maturity date within one year as of the purchase date. The effective yields of the short-
term investments range from 1.41% to 6.70% per annum as of December 31, 2024. Any negative events or deterioration in financial
well-being with respect to the counterparties of the above investments and the underlying collateral may cause a material loss to the
Group and have a material effect on the Group’s financial condition and results of operations.
(c) Major customers
No single customer represented 10% or more of the Group’s total net revenues for the years ended December 31, 2022, 2023 and 2024.
(d) Online games
The Group derived 29.6%, 36.8% and 35.7% of its total net revenues from its top 5 online games for the years ended December 31,
2022, 2023 and 2024, respectively.
6.
Prepayments and Other Current Assets, net
The following is a summary of prepayments and other current assets, net (in thousands):
    
December 31,      
December 31, 
2023
2024
RMB
RMB
Prepayment for royalties, revenue sharing cost
 
1,729,241  
2,522,296
Interest receivable
 
2,271,944  
1,934,920
Prepayments of content and marketing cost and other operational expenses
 
638,697  
485,587
Prepayment for deductible value added tax and refundable subsidy
 
581,228  
603,670
Bridge loans in connection with ongoing investments
 
27,369  
13,196
Deposits
 
81,712  
91,576
Employee advances
57,949
51,652
Advance to suppliers
43,820
40,852
Receivable within one year related to disposal of investments
512,367
529,051
Others
 
132,268  
144,068
 
6,076,595  
6,416,868
As of December 31, 2023 and 2024, prepayments for royalties and revenue sharing cost mainly represented prepaid royalties or revenue
sharing cost related to game distribution and operations of online games.
The amount of employee advances listed above included staff housing loan balances of RMB18.2 million and RMB12.1 million
repayable within 12 months from December 31, 2023 and 2024 respectively (see Note 12). No advances were made directly or indirectly
to the Group’s executive officers for their personal benefit for the years ended December 31, 2023 and 2024.

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F-31
7.
Short-term Investments
As of December 31, 2023 and 2024, the Group’s short-term investments mainly consisted of financial products issued by commercial
banks in China with a variable interest rate indexed to the performance of underlying assets and a maturity date within one year when
purchased. As of December 31, 2024, the effective yields of short-term investments ranged from 1.41% to 6.70% per annum (2023:
1.85% to 8.31% per annum).
The following is a summary of short-term investments (in thousands):
December 31, 2023
    
    
Unrealized
    
Estimated
Cost
Gains
Fair Value
RMB
RMB
RMB
Short-term investments
 
4,275,329
160,728
4,436,057
December 31, 2024
    
    
Unrealized
    
Estimated
Cost
Gains
Fair Value
RMB
RMB
RMB
Short-term investments
10,565,640
190,503
10,756,143
During the years ended December 31, 2022, 2023 and 2024, the Group recorded investment income related to short-term investments of
RMB342.6 million, RMB414.2 million and RMB530.6 million in the consolidated statements of operations and comprehensive income,
respectively.
8.
Property, Equipment and Software, net
The following is a summary of property, equipment and software, net (in thousands):
    
December 31,      
December 31, 
2023
2024
RMB
RMB
Building and decoration
 
4,063,468  
6,888,673
Leasehold improvements
 
311,156  
197,230
Furniture, fixtures, office and other equipment
 
508,185  
559,271
Vehicles
 
106,027  
93,596
Servers and computers
 
6,144,176  
6,094,887
Software
 
367,472  
340,038
Construction in progress
 
3,675,879  
1,696,018
 
15,176,363  
15,869,713
Less: accumulated depreciation and amortization
 
(6,923,618) 
(7,181,872)
Less: impairment
(177,701)
(167,740)
Net book value
 
8,075,044  
8,520,101
Depreciation and amortization expense was RMB1.1 billion, RMB769.7 million and RMB781.2 million for the years ended December
31, 2022, 2023 and 2024, respectively.
As of December 31, 2023 and 2024, the construction in progress balance mainly comprised of construction of buildings in Shanghai and
Hangzhou that have not yet been placed in service for the Group’s intended use. All the related cost is capitalized in construction in
progress to the extent it is incurred for the purposes of bringing the construction development to a usable state.

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F-32
9.
Land Use Rights, net
Land use rights represent acquired right to use the land on which the Group’s offices and warehouses are built. In 2023 and 2024, the
Group obtained the land use rights from the local authorities, including in Beijing and Guian. Amortization of the land use right is made
over the remaining term of the land use right period from the date when the land was made available for use by the Group. The land use
rights, net are summarized as follows (in thousands):
    
December 31,      
December 31, 
2023
2024
RMB
RMB
Cost
 
4,590,902  
4,801,005
Incentive payment from local government
 
(15,000) 
(15,000)
Accumulated amortization
 
(486,475) 
(599,256)
Impairment
(14,284)
(14,284)
Land use right, net
 
4,075,143  
4,172,465
The total amortization expense for each of the years ended December 31, 2022, 2023 and 2024 amounted to approximately RMB91.8
million, RMB101.9 million and RMB112.8 million, respectively.
10. Leases
The Group has operating leases for corporate offices, warehouses and retail stores. In addition, upon the adoption of ASC 842, land use
rights with total carrying amount of RMB4.1 billion and RMB4.2 billion (Note 9) were identified as operating lease right-of-use assets as
of December 31, 2023 and 2024, respectively.
The Group’s leases have remaining lease terms of 1 month to 66 years, some of which include options to terminate the leases within
certain periods. The Group considers these options in determining the classification and measurement of the leases when it is reasonably
certain that the Group will exercise that option.
The following table provides information related to the Group’s operating leases (in thousands):
    
For the year ended December 31,
    
2022
    
2023
    
2024
RMB
RMB
RMB
Operating lease cost
 
409,196
344,606
249,169
Cash paid for amounts included in the measurement of operating lease liabilities
 
471,214
331,579
271,670
Right-of-use assets obtained in exchange for operating lease obligations
 
336,381
215,209
40,557
Additionally, the short-term lease cost was RMB27.4 million, RMB42.3 million and RMB44.6 million for the years ended December 31,
2022, 2023 and 2024, respectively.
The following table provides a summary of the Group’s operating lease terms and discount rates, which excludes the land use rights, as
of December 31, 2023 and 2024:
    
December 31,     
December 31,
 
2023
2024
 
Weighted average remaining lease term
 
2.92 years  
2.87 years
Weighted average discount rate
 
3.77 %  
3.62 %

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F-33
Maturities of operating lease liabilities as of December 31, 2024 were as follows (in thousands):
    
RMB
2025
 
189,853
2026
 
141,039
2027
 
101,221
2028
 
92,245
2029
61,015
Thereafter
 
51,056
Total operating lease payments
 
636,429
Less: imputed interest
 
(52,220)
Total
 
584,209
11. Long-term Investments
The following is a summary of long-term investments (in thousands):
    
December 31,      
December 31, 
2023
2024
RMB
RMB
Investments in equity method investees
 
6,109,240  
6,406,167
Equity investments with readily determinable fair values
3,107,266
2,375,785
Equity investments without readily determinable fair values
 
12,021,518  
11,104,510
Other investments
545,163
319,894
 
21,783,187  
20,206,356
(a) Investments in equity method investees
The Group recorded equity share of earnings of RMB1.3 billion and RMB473.9 million for the years ended December 31, 2022 and
2023, respectively, and recorded equity share of losses of RMB155.6 million for the year ended December 31, 2024, which was included
in “Investment income, net” in the consolidated statements of operations and comprehensive income. As of December 31, 2023, the
Group invested an aggregated cash consideration of RMB2.0 billion in five limited partnerships as a limited partner, and in 2024, the
Group further contributed totally RMB204.7 million cash in four of them. The objectives of these limited partnerships are to engage in
investment in online game business. The Group accounted such investments under the equity method.
(b) Equity investments with readily determinable fair values
As of December 31, 2024, equity investments with readily determinable fair values mainly included RMB1.1 billion invested in shares of
Alibaba Group Holding Limited, RMB568.0 million invested in shares of Huatai Securities Company Limited, RMB473.8 million
invested in shares of Shenzhen Transsion Holding Limited and RMB155.6 million invested in shares of Embracer Group AB (publ). The
Group recorded fair value loss of RMB3.4 billion, fair value gain of RMB535.3 million and RMB1.2 billion related to the equity
investments with readily determinable fair value for the year ended December 31, 2022, 2023 and 2024, respectively.
The Group also recorded cash dividend income of RMB26.5 million, RMB51.0 million and RMB66.5 million from these investments for
the years ended December 31, 2022, 2023 and 2024, respectively.

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F-34
(c) Equity investments without readily determinable fair value
Equity investments without readily determinable fair value represent investments in privately held companies with no readily
determinable fair value. The Group does not have significant influence on these investees, or the investments are not common stock or in
substance common stock. These investments are classified as equity investments without readily determinable fair value, and are carried
at cost less impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a
similar investment of the same issuer. For the years ended December 31, 2022, 2023 and 2024, there were no upward adjustments to the
carrying value of equity securities without readily determinable fair value resulted from such transactions.
The Group recognized a gain of RMB1.8  billion, RMB22.3 million and RMB22.2 million related to the disposal of the Group’s
investments in equity securities without readily determinable fair value as “Investment income, net” in the consolidated statements of
operations and comprehensive income for the years ended December 31, 2022, 2023 and 2024, respectively.
The Group recognized impairment provision of RMB85.2 million, RMB274.2 million and RMB1.0 billion related to certain of the equity
investments without readily determinable fair value as “Investment income, net” in the consolidated statements of operations and
comprehensive income for the years ended December 31, 2022, 2023 and 2024, respectively.
12. Other Long-term Assets
The following is a summary of other long-term assets (in thousands):
    
December 31,      
December 31, 
2023
2024
RMB
RMB
Copyrights, licenses, domain names, trademark and technology
 
1,884,603  
1,412,931
Goodwill
1,855,394
1,855,293
Long-term receivable
1,500,100
1,193,662
Non-current deposits
179,399
143,005
Long-term interest receivables
38,174
49,850
Staff housing loans
 
34,690  
17,053
Others
 
446,746  
411,464
 
5,939,106  
5,083,258
Balances of copyrights and licenses represents prepaid minimum royalties for exploitation of related intellectual properties, which was
amortized over the term of the respective licensing agreements or estimated amortization periods.
Goodwill
December 31,
December 31,
    
2023
    
2024
RMB
RMB
Beginning balance
 
2,166,486  
1,855,394
Additions
 
—  
—
Disposal and others
(311,092)
(101)
Ending balance
 
1,855,394  
1,855,293
For the years ended December 31, 2023 and 2024, the carrying value of goodwill was mainly recorded under the games and related
value-added services segment.The Group performed impairment tests using the qualitative and quantitative method and concluded that
the goodwill was not impaired as at December 31, 2023 and 2024, therefore, no provision was recorded.

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F-35
The Group made housing loans to its employees (excluding executive officers) for house purchases via a third-party commercial bank in
China. Each individual staff housing loan is collateralized either by the property for which the loan is extended or by approved personal
guarantees for the loan amount granted. The repayment term is five years from the date of drawdown. The interest rate is fixed varying
from 2.10% to 4.75% per annum both for the years ended December 31, 2023 and 2024. The outstanding portion of the staff housing
loans repayable within 12 months as of December 31, 2023 and 2024 amounted to approximately RMB18.2 million and RMB12.1
million, respectively. The amounts are reported under “Prepayments and other current assets, net” in the consolidated balance sheets (see
Note 6).
13. Taxation
(a) Income taxes
Cayman Islands
Under the current laws of the Cayman Islands, the Company and its intermediate holding companies in the Cayman Islands are not
subject to tax on income or capital gain. Additionally, upon payments of dividends by the Company or its subsidiaries in the Cayman
Islands to their shareholders, no Cayman Islands withholding tax will be imposed.
British Virgin Islands (“BVI”)
Subsidiaries in the BVI are exempted from income tax on its foreign-derived income in the BVI. There are no withholding taxes in the
BVI.
Hong Kong
Subsidiaries in Hong Kong are subject to 16.5% income tax on their taxable income generated from operations in Hong Kong. For the
years ended December 31, 2022, 2023 and 2024, the first HK$2 million of profits earned by one of the Company’s subsidiaries
incorporated in Hong Kong is taxed at half the current tax rate (i.e., 8.25%) while the remaining profits will continue to be taxed at the
existing 16.5% tax rate. The payments of dividends by these companies to their shareholders are not subject to any Hong Kong
withholding tax.
China
Under the EIT Law, Foreign Invested Enterprises (“FIEs”) and domestic companies would be subject to EIT at a uniform rate of 25%.
Preferential tax treatments continue to be granted to FIEs or domestic companies which conduct businesses in certain encouraged sectors
and to entities otherwise classified as “Software Enterprises”, “Key Software Enterprises” and/or “High and New Technology
Enterprises” (“HNTEs”). The EIT Law became effective on January 1, 2008.
Boguan, NetEase Hangzhou and certain other PRC subsidiaries were qualified as HNTEs and enjoyed a preferential tax rate of 15% for
2022, 2023 and 2024.
The aforementioned preferential tax rates are subject to annual review by the relevant tax authorities in China.

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F-36
The following table presents the combined effects of EIT exemptions and tax rate reductions enjoyed by the Group for the years ended
December 31, 2022, 2023 and 2024 (in thousands except per share data):
For the year ended December 31, 
    
2022
    
2023
    
2024
RMB
RMB
RMB
Aggregate amount of EIT exemptions and tax rate reductions
 
2,631,764  
3,228,359  
3,654,069
Earnings per share effect, basic
 
0.81  
1.00  
1.14
Earnings per share effect, diluted
 
0.80  
0.99  
1.13
The following table sets forth the components of income tax expenses of the Group for the years ended December 31, 2022, 2023 and
2024 (in thousands):
For the year ended December 31, 
    
2022
    
2023
    
2024
RMB
RMB
RMB
Current tax expense
 
4,542,168  
4,568,267  
5,140,682
Deferred tax expense
 
489,670  
131,437  
320,726
Income tax expenses
 
5,031,838  
4,699,704  
5,461,408
The following table presents a reconciliation from the PRC statutory income tax rate of 25% where the Group primarily operates in to the
effective income tax rate of the Group for the years ended December 31, 2022, 2023 and 2024:
For the year ended December 31, 
    
2022
    
2023
    
2024
%  
%  
%  
Statutory income tax rate
 
25.0  
25.0  
25.0
Permanent differences
 
(5.0) 
(7.1) 
(6.3)
Effect due to different tax rates applicable to overseas entities
 
0.2  
0.2  
1.0
Effect of lower tax rate applicable to HNTEs and EIT exemptions
 
(10.1) 
(9.5) 
(10.2)
Change in valuation allowance and others
 
1.8  
0.6  
1.5
Effect of withholding income tax (d)
 
8.8  
4.6  
4.3
Effective income tax rate
 
20.7  
13.8  
15.3
As of December 31, 2024, certain entities of the Group had net operating tax loss carry forwards of RMB22.4 billion, which is mainly
from its PRC subsidiaries and VIEs with expiration period from 2025 to 2034.
Full valuation allowance was provided on the related deferred tax assets as the Group’s management does not believe that sufficient
positive evidence exists to conclude that recoverability of such deferred tax assets is more likely than not to be realized.
(b) Sales tax
Pursuant to the provision regulation of the PRC on VAT and its implementation rules, the Company’s subsidiaries and the VIEs are
generally subject to VAT at a rate of 6% from revenues earned from services provided or 16% from sales of general goods, which was
reduced to 13% effective from 1 April, 2019.

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F-37
(c) Deferred tax assets and liabilities
The following table presents the tax impact of significant temporary differences that give rise to the deferred tax assets and liabilities as
of December 31, 2023 and 2024 (in thousands):
    
December 31,      
December 31, 
2023
2024
RMB
RMB
Deferred tax assets:
Contract liabilities, primarily for advanced payments from online games customers
 
1,043,715  
1,088,998
Accruals and others
 
810,707  
256,777
Net operating tax loss carry forward
 
3,424,344  
3,684,913
 
5,278,766  
5,030,688
Less: valuation allowance
 
(3,718,678) 
(3,917,253)
Total
 
1,560,088  
1,113,435
    
December 31,      
December 31, 
2023
2024
RMB
RMB
Deferred tax liabilities:
Withholding income tax(d)
 
2,165,573  
2,053,668
Others
 
133,730  
119,449
Total
 
2,299,303  
2,173,117
The Group does not believe that sufficient positive evidence exists to conclude that the recoverability of deferred tax assets of certain
entities of the Group is more likely than not to be realized. Consequently, the Group has provided full valuation allowances for certain
entities of the Group on the related deferred tax assets. The following table sets forth the movement of the aggregate valuation
allowances for deferred tax assets for the periods presented (in thousands):
    
Balance at
    
Net change
    
Balance at
January 1
for the year
December 31
RMB
RMB
RMB
2022
 
3,648,870
322,646
3,971,516
2023
 
3,971,516
(252,838)
3,718,678
2024
 
3,718,678
198,575
3,917,253
(d) Withholding income tax
The EIT Law also imposes a withholding income tax of 10% on dividends distributed by an enterprise in China to its non-resident
enterprise investors. A lower withholding income tax rate of 5% is applied if the non-resident enterprise investor is registered in Hong
Kong with at least 25% equity interest in the PRC enterprise and meets the relevant conditions or requirements pursuant to the tax
arrangement between mainland China and Hong Kong. On February 22, 2008, the Ministry of Finance and State Taxation Administration
jointly issued a circular which stated that for FIEs, all profits accumulated up to December 31, 2007 are exempted from withholding tax
when they are distributed to foreign investors.
The Group accrued RMB2.1 billion, RMB1.5 billion and RMB1.6 billion (US$215.9 million) withholding tax liabilities mainly
associated with all of its earnings expected to be distributed from its PRC subsidiaries to overseas for general corporate purposes in 2022,
2023 and 2024, respectively. The Group have repatriated a portion of these earnings and paid related withholding income tax in 2022,
2023 and 2024. As of December 31, 2023 and 2024, deferred tax liabilities were fully provided related to undistributed earnings of the
Group’s PRC subsidiaries.

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F-38
14. Taxes Payable
The following is a summary of taxes payable as of December 31, 2023 and 2024 (in thousands):
    
December 31,      
December 31, 
2023
2024
RMB
RMB
Sales Tax payable
 
277,201  
423,773
Withholding individual income taxes for employees
 
378,103  
383,291
EIT payable
 
1,790,393  
1,740,126
Others
 
125,837  
211,995
 
2,571,534  
2,759,185
15. Short-term Loans
As of December 31, 2023 and 2024, the short-term loans balances represent short-term loan arrangements with financial institutions
which were repayable within a maturity term ranging from one week to one year and charged at a fixed interest rates ranging 0.80% and
5.85% per annum. As of December 31, 2023 and 2024, the weighted average interest rate for the outstanding short-term loans was
approximately 3.79% and 3.37%, respectively. The short-term loans are mainly denominated in RMB and US$.
The Group has entered into several uncommitted loan credit facility agreements provided by certain financial institutions. As of
December 31, 2024, US$4.6 billion of such credit facilities has not been utilized.
The Group has also entered into several guarantee agreements in the aggregate amount of US$2.7 billion in respect of certain credit
facilities taken by the Company and its subsidiaries. As at December 31, 2024, US$1.5 billion of such credit facilities had not been
utilized.
16. Contract Liabilities
Contract liabilities represents sales proceeds from prepaid points sold, unamortized in-game spending, prepaid products fees before
delivery and prepaid subscription fees for internet value-added services for which services are yet to be provided as of the balance sheet
dates.
For the year ended December 31, 2024, the additions to the contract liabilities balance were primarily due to cash payments received or
due in advance of satisfying the Group’s performance obligations, while the reductions to the contract liabilities balance were primarily
due to the recognition of revenues upon fulfillment of the Group’s performance obligations, both of which were in the ordinary course of
business. During the years ended December 31, 2023 and 2024, RMB12.0 billion and RMB13.2 billion of revenues recognized were
included in the contract liabilities balance at the beginning of the year, respectively.
As of December 31, 2024, the aggregate amount of transaction price allocated to the unsatisfied performance obligations is RMB16.0
billion, which was recorded under contract liabilities and to be recognized as revenues in future periods. The Group expects to recognize
RMB15.3 billion as revenues over the next 12 months, and the remaining unsatisfied performance obligations expected to be recognized
thereafter were recognized in other long-term liabilities.

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F-39
17. Accrued Liabilities and Other Payables
The following is a summary of accrued liabilities and other payables as of December 31, 2023 and 2024 (in thousands):
    
December 31,      
December 31, 
2023
2024
RMB
RMB
Customer deposits on NetEase Pay accounts
 
3,268,237  
3,884,420
Marketing expenses and promotion materials
 
3,063,280  
3,161,538
Content cost
1,432,706
1,976,929
Accrued fixed assets related payables
 
1,027,401  
1,012,438
Accrued revenue sharing
 
969,903  
935,818
Professional fees and technical charges
 
789,955  
925,419
Deferred government grants
356,239
460,360
Administrative expenses and other staff related cost
448,926
417,286
Server and bandwidth service fees
196,202
192,942
Accrued freight and warehousing charge
83,902
58,936
Acquisition considerations
204,229
13,544
Customer refund for licensed games
97,301
5,524
Others
 
732,625  
1,183,878
 
12,670,906  
14,229,032
18. Long-term Loans
On June 2, 2021, the Group entered into a five-year term loan facility and revolving loan facility agreement with aggregate commitments
of US$1.0 billion. The facility is priced at 85 basis points per annum over LIBOR and has a commitment fee of 0.20% on the undrawn
portion. There were nil of borrowings outstanding under the syndicated loan facility with no pledge as of December 31, 2023 and in early
2024, the Group voluntarily canceled this loan facility.
19. Noncontrolling Interests and Redeemable Noncontrolling Interests
Cloud Music
In 2018 and 2019, Cloud Music issued preferred shares (“Cloud Music Preferred Shares”) to certain investors.
The Cloud Music Preferred Shares were entitled to certain preferences and privileges with respect to redemption. The Group determined
that the preferred shares should be classified as redeemable noncontrolling interests since they are contingently redeemable upon the
occurrence of a conditional event or a deemed redemption event, which is not solely within the control of the Group. The redemption
price equals to the net initial investment amount plus annual interests, if any. Upon completion of the IPO of Cloud Music in December
2021, all Cloud Music Preferred Shares held by external preferred shareholders were automatically re-designated and converted on a
one-for-one basis into ordinary shares of Cloud Music.
Youdao
In April 2018, Youdao issued equity interests with preferential rights (“Youdao Preferred Shares”) to two investors for a total cash
consideration of US$70.0 million. The Group determined that the equity interests with preferential rights should be classified as
redeemable noncontrolling interest since they are contingently redeemable upon the occurrence of a conditional event, which is not
solely within the control of the Company. The redemption price equals to the net initial investment amount plus annual interests. Upon
completion of the IPO of Youdao in October 2019, all Youdao Preferred Shares held by external preferred shareholders were
automatically re-designated and converted on a one-for-one basis into Class A ordinary shares of Youdao.
Each issuance of the preferred shares is recognized at the respective issue price at the date of issuance net of issuance costs. The Group
records accretions on the redeemable noncontrolling interest to the redemption value from the issuance dates to the earliest redemption
dates if redemption is probable. The accretions using the effective interest method, are recorded as deemed dividends to preferred
shareholders, which reduces retained earnings and equity classified noncontrolling interests, and earnings available to common
shareholders in calculating basic and diluted earnings per share.

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F-40
20. Capital Structure
The holders of ordinary shares in the Company are entitled to one vote per share and to receive ratably such dividends, if any, as may be
declared by the board of directors of the Company. In the event of liquidation, the holders of ordinary shares are entitled to share ratably
in all assets remaining after payment of liabilities. The ordinary shares have no preemptive, conversion, or other subscription rights.
21. Employee Benefits
The Company’s subsidiaries and the VIEs incorporated in China participate in a government-mandated multi-employer defined
contribution plan under which certain retirement, medical, housing and other welfare benefits are provided to employees. Chinese labor
regulations require the Company’s Chinese subsidiaries and the VIEs to pay to the local labor bureau a monthly contribution at a stated
contribution rate based on the monthly basic compensation of qualified employees. The relevant local labor bureau is responsible for
meeting all retirement benefit obligations; hence, the Group has no further commitments beyond its monthly contribution. The following
table presents the Group’s employee welfare benefits expense for the years ended December 31, 2022, 2023 and 2024 (in millions):
For the year ended December 31, 
    
2022
    
2023
    
2024
RMB
RMB
RMB
Contributions to medical and pension schemes
 
1,710.4
1,786.5
1,778.7
Other employee benefits
 
1,202.8
1,398.1
1,412.9
 
2,913.2
3,184.6
3,191.6
22. Share-based Compensation
For the years ended December 31, 2022, 2023 and 2024, total share-based compensation expenses recognized were RMB3.2 billion,
RMB3.2 billion and RMB3.9 billion, respectively. The table below presents a summary of the Group’s share-based compensation cost (in
thousands):
For the year ended December 31, 
    
2022
    
2023
    
2024
RMB
RMB
RMB
Cost of revenues
 
758,413
823,765
1,185,854
Selling and marketing expenses
 
120,171
132,801
104,534
General and administrative expenses
 
1,214,995
1,119,018
1,069,850
Research and development expenses
 
1,080,581
1,167,226
1,522,701
 
3,174,160
3,242,810
3,882,939
(a) Restricted Share Units Plan
2009 RSU Plan
In November 2009, the Company adopted 2009 Restricted Share Unit Plan for the Company’s employees, directors and consultants (the
“2009 RSU Plan”). The Company has reserved 323,694,050 ordinary shares for issuance under the plan. The 2009 RSU Plan was
adopted by a resolution of the board of directors on November 17, 2009 and became effective for a term of ten years unless sooner
terminated. The 2009 RSU Plan was expired on November 16, 2019.
2019 Share Plan
In October 2019, the Company adopted 2019 Restricted Share Unit Plan for the Company’s employees, directors and others, with a ten-
year term and a maximum number of 322,458,300 ordinary shares available for issuance pursuant to all awards under the plan.

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F-41
Effective February 22, 2023, the Company amended and restated the 2019 Restricted Share Unit Plan to permit to grant stock option
awards to the Company’s employees, directors and others, and renamed it as Amended and Restated 2019 Share Incentive Plan (the
“2019 Share Plan”).
The Group recognizes share-based compensation cost related to RSUs in the consolidated statements of operations and comprehensive
income based on awards ultimately expected to vest, after considering estimated forfeitures. Forfeitures are estimated based on the
Group’s historical experience over the last five years and revised in subsequent periods if actual forfeitures differ from those estimates.
As of December 31, 2024, total unrecognized compensation cost related to unvested awards under the 2019 Share Plan, adjusted for
estimated forfeitures, was US$402.1 million (RMB2.9 billion) and is expected to be recognized through the remaining vesting period of
each grant. As of December 31, 2024, the weighted average remaining vesting periods was 1.44 years.
Restricted Share Unit Award Activities
The following table presents a summary of the Company’s RSUs award activities for the years ended December 31, 2022, 2023 and
2024:
Weighted average
grant date fair
    
Number of RSUs
    
value
(in thousands)
US$
Outstanding at January 1, 2022
 
12,996  
75.40  
Granted
 
5,335  
93.98  
Vested
 
(4,630) 
75.01  
Forfeited
 
(696) 
84.55  
Outstanding at December 31, 2022
 
13,005  
82.67  
Outstanding at January 1, 2023
 
13,005  
82.67  
Granted
 
4,795  
84.73  
Vested
 
(5,190) 
76.27  
Forfeited
 
(523) 
88.24  
Outstanding at December 31, 2023
 
12,087  
86.00  
Outstanding at January 1, 2024
 
12,087  
86.00  
Granted
 
6,023  
104.48  
Vested
 
(5,375) 
81.78  
Forfeited
 
(976) 
94.58  
Outstanding at December 31, 2024
 
11,759  
96.68  
The aggregate intrinsic value of RSUs outstanding as of December 31, 2024 was US$1.0 billion. The intrinsic value was calculated based
on the Company’s closing stock price of US$89.21 per ADS as of December 31, 2024.
The Company’s practice is to issue new shares or utilize treasury stock upon vesting of RSUs. The number of shares available for future
grant under the Company’s 2019 RSU Plan was 211,437,320 as of December 31, 2024.
(b) Other Share Incentive Plan
Certain of the Company’s subsidiaries have adopted stock incentive plans, which are stock option plans or RSU plans and allow the
related subsidiaries to grant options or RSUs to certain employees of the Group. The options expire in four to seven years from the date
of grant and either vest or have a vesting commencement date upon certain conditions being met (“Vesting Commencement Date”). The
award can become 100% vested on the Vesting Commencement Date, or vests in two, three, four or five substantially equal annual
installments with the first installment vesting on the Vesting Commencement Date. But for certain share options granted with vesting
conditions outside the Group’s control, no expenses will be recorded until the occurrence of the vesting conditions when the Group
determine that it is probable that the vesting conditions will be satisfied.

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F-42
The Group has used the binomial model to estimate the fair value of the options granted and RSUs are measured at the fair market value
of the shares on the grant date. For the years ended December 31, 2022, 2023, and 2024, RMB327.9 million, RMB289.0 million and
RMB266.4 million compensation expenses were recorded for the share options and RSUs granted.
As of December 31, 2024, there were approximately RMB18.0 million unrecognized share-based compensation expenses related to share
options for which the service condition had been met and are expected to be recognized when the vesting conditions are achieved.
23. Net Income Per Share
The following table sets forth the computation of basic and diluted net income per share for the years ended December 31, 2022, 2023
and 2024:
For the year ended December 31, 
    
2022
    
2023
    
2024
Numerator (RMB in thousands):
Net income from continuing operations attributable to the Company’s
shareholders
19,712,736
29,416,552
29,697,609
Net income from discontinued operations attributable to the Company’s
shareholders
624,864
—
—
Net income attributable to the Company’s shareholders for basic/dilutive net
income per share calculation
 
20,337,600
29,416,552
29,697,609
Denominator (No. of shares in thousands):
Weighted average number of ordinary shares outstanding, basic
 
3,263,455
3,216,475
3,200,453
Dilutive effect of restricted share units
32,559
35,554
30,149
Weighted average number of ordinary shares outstanding, diluted
3,296,014
3,252,029
3,230,602
Net income per share from continuing operations attributable to the
Company’s shareholders, basic (RMB)
6.04
9.15
9.28
Net income per share from discontinued operations attributable to the
Company’s shareholders, basic (RMB)
0.19
—
—
Net income per share, basic (RMB)
 
6.23
9.15
9.28
Net income per share from continuing operations attributable to the
Company’s shareholders, diluted (RMB)
5.98
9.05
9.19
Net income per share from discontinued operations attributable to the
Company’s shareholders, diluted (RMB)
0.19
—
—
Net income per share, diluted (RMB)
 
6.17
9.05
9.19
Basic net income per share is computed using the weighted average number of the ordinary shares outstanding during the year. Diluted
net income per share is computed using the weighted average number of ordinary shares and potential ordinary shares outstanding during
the year. For the years ended December 31, 2022, 2023 and 2024, RSUs that were anti-dilutive and excluded from the calculation of
diluted net income per share totaled approximately 11.3 million shares, 6.3 million shares and 15.3 million shares, respectively.

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F-43
24. Commitments and Contingencies
(a) Commitments
As of December 31, 2024, future minimum payment for server and bandwidth service fee commitments, capital commitments, royalties
and other expenditures commitments related to licensed contents, as well as other commitments related to services purchases, were as
follows (in thousands):
Server and
Royalties and
Bandwidth
Expenditure for
Service Fee
Capital
Licensed Content
Other
    Commitments    Commitments    
Commitments
    Commitments    
Total
RMB
RMB
RMB
RMB
RMB
2025
 
364,056
393,743
692,640
214,284
1,664,723
2026
 
211,660
182,897
261,029
2,519
658,105
2027
 
101,866
48,363
116,286
318
266,833
2028
91,796
—
—
8
91,804
Beyond 2028
 
91,449
7,343
—
—
98,792
 
860,827
632,346
1,069,955
217,129
2,780,257
(b) Litigation
Overview
From time to time, the Group is involved in claims and legal proceedings that arise in the ordinary course of business. Based on currently
available information, management does not believe that the ultimate outcome of these unresolved matters, individually and in the
aggregate, is reasonably possible to have a material adverse effect on the Group’s financial position, results of operations or cash flows.
However, litigation is subject to inherent uncertainties and the Group’s view of these matters may change in the future. Were an
unfavorable outcome to occur, there exists the possibility of a material adverse impact on the Group’s financial position, results of
operations or cash flows for the period in which the unfavorable outcome occurs, and potentially in future periods. The Group records a
liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Group
reviews the need for any such liability on a regular basis. The Group has not recorded any material liabilities in this regard as of
December 31, 2023 and 2024.
Litigation
In April 2018, PUBG Corporation and PUBG Santa Monica, Inc. (now known as Krafton, Inc. and Krafton Americas, Inc., respectively,
or “the Krafton Parties”), filed a lawsuit against defendants NetEase, Inc., NetEase Information Technology Corp. and NetEase (Hong
Kong) Limited in the U.S. District Court for the Northern District of California. The Krafton Parties subsequently dropped all claims
against NetEase (Hong Kong) Limited, and added Hong Kong NetEase Interactive Entertainment Limited to the lawsuit. The Krafton
Parties’ complaint generally alleged that two of the Group’s mobile games, Rules of Survival and Knives Out, infringed the Krafton
Parties’ copyrights and trade dress in their competing game, Player Unknown’s Battlegrounds. On March 11, 2019, the Group entered
into a settlement agreement with the Krafton Parties, and the lawsuit was dismissed. On October 15, 2019, the Krafton Parties filed a
second lawsuit against the same NetEase defendants, also in the U.S. District Court for the Northern District of California, claiming the
Group had allegedly breached the settlement agreement. On March 3, 2020, the court dismissed the Krafton Parties’ new lawsuit, without
prejudice, for lack of subject matter jurisdiction. On March 4, 2020, the Group initiated a declaratory judgment action against the Krafton
Parties in the Superior Court of California for the County of San Mateo, requesting a declaration that the Group had not breached the
settlement agreement. On March 13, 2020, the Krafton Parties filed a cross claim, realleging that the Group breached the settlement
agreement. In May 2023, the court held a bench trail and subsequently found that the Group had breached such settlement agreement and
awarded the Krafton Parties US$6 million in liquidated damages but denied a request for injunctive relief by the Krafton Parties. After
the court issued its final statement of decision, the parties settled the matter to avoid further litigation. There was no material impact on
the Group’s consolidated financial statements.

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F-44
25. Dividends
Quarterly Dividend Policy
Under the Company’s current dividend policy, the determination to make dividend distributions and the amount of such distributions in
any particular quarter will be made at the discretion of the Company’s board of directors and will be based upon its operations and
earnings, cash flow, financial condition, capital and other reserve requirements and surplus, any applicable contractual restrictions, the
ability of the Company’s PRC subsidiaries to make distributions to their offshore parent companies, and any other conditions or factors
which the board deems relevant and having regard to the directors’ fiduciary duties.
Dividends are recognized when declared. There is no significant dividend payable as of December 31, 2023 and 2024, respectively. The
cash dividend declared related to the net profits of fiscal year 2023 and fiscal year 2024 was RMB11.7 billion and RMB11.8 billion
(US$1.6 billion) in total, respectively.
26. Share Repurchase Programs
The Company accounts for repurchased ordinary shares under the cost method and includes such treasury stock as a component of the
common shareholders’ equity. Cancellation of treasury stock is recorded as a reduction of ordinary shares, additional paid-in-capital and
retained earnings, as applicable. An excess of purchase price over par value is allocated to additional paid-in-capital first with any
remaining excess charged entirely to retained earnings. The Company may from time to time utilize treasury stock upon vesting of RSUs.
The cost of treasury stock reissued is determined using the weighted average method and recorded as a reduction of additional paid-in-
capital.
In February 2021, the Company announced that its board of directors had approved a share repurchase program of up to US$2.0 billion
of the Company’s outstanding ADSs and ordinary shares in open market transactions for a period not to exceed 24 months beginning on
March 2, 2021. In August 2021, the Company announced that its board of directors had approved an amendment to such program to
increase the total authorized repurchase amount to US$3.0 billion. As of January 9, 2023, this share repurchase program was completed
with the Company having purchased an aggregate of approximately 33.6 million ADSs for nearly US$3.0 billion.
On November 17, 2022, the Company announced that its board of directors had approved a new share repurchase program of up to
US$5.0 billion of the Company’s ADSs and ordinary shares in open market transactions. This new share repurchase program
commenced on January 10, 2023 and will be in effect for a period not to exceed 36 months from such date. As of December 31, 2024, the
Company has repurchased approximately 21.2 million ADSs for approximately US$1.9 billion under this program.
In August 2021, the Company announced that its board of directors had approved a share purchase program of up to US$50.0 million of
Youdao’s outstanding ADSs for a period not to exceed 36 months beginning on September 2, 2021. Under the terms of this program,
NetEase may purchase Youdao’s ADSs in open-market transactions on the New York Stock Exchange. As of December 31, 2024,
approximately 2.7 million ADSs had been purchased under this program for a total cost of US$22.0 million.
27. Related Party Transactions
The Group had no material transactions with related parties for the years ended December 31, 2022, 2023 and 2024, and no material
related parties’ balances as of December 31, 2023 and 2024.
28. Segment Information
(a) Description of segments
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated
regularly by the chief operating decision maker (“CODM”), or decision making group, in deciding how to allocate resources and in
assessing performance. The Group’s CODM is the Chief Executive Officer.

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F-45
The Group’s organizational structure is based on a number of factors that the CODM uses to evaluate, view and run its business
operations which include, but are not limited to, customer base, homogeneity of products and technology. The Group’s operating
segments are based on this organizational structure and information reviewed by the Group’s CODM to evaluate the operating segment
results.
Effective in the second quarter of 2022, the Company renamed its “online game services” segment as “games and related value-added
services,” and transferred certain business lines that are related or ancillary to its games from “innovative businesses and others” to
“games and related value-added services”. As a result, the Group now reports segments as games and related value-added services,
Youdao, NetEase Cloud Music and innovative businesses and others. This change in segment reporting aligns with the manner in which
the Group’s CODM currently receives and uses financial information to allocate resources and evaluate the performance of reporting
segments. This change in segment presentation does not affect consolidated balance sheets, consolidated statements of operations and
comprehensive income or consolidated statements of cash flows. The Group retrospectively recast prior years’ segment information, to
conform to current year presentation.
(b) Segment data
The table below provides a summary of the Group’s operating segment results under which the cost of revenues is considered as the
significant segment expense for the years ended December 31, 2022, 2023 and 2024 (in thousands). The Group does not allocate any
operating costs or assets to its business segments as the Group’s CODM does not use this information to measure the performance of the
operating segments. There was no significant transaction between reportable segments for the years ended December 31, 2022, 2023 and
2024.
For the year ended December 31, 
    
2022
    
2023
    
2024
RMB
RMB
RMB
Net revenues:
Games and related value-added services
 
74,566,471
81,565,449
83,622,643
Youdao
 
5,013,182
5,389,208
5,625,919
NetEase Cloud Music
8,992,221
7,866,992
7,950,146
Innovative businesses and others
 
7,923,935
8,646,510
8,096,528
Total net revenues
 
96,495,809
103,468,159
105,295,236
Cost of revenues:
Games and related value-added services
 
(27,784,419)
(25,938,865)
(26,142,623)
Youdao
 
(2,430,738)
(2,621,746)
(2,877,428)
NetEase Cloud Music
(7,699,103)
(5,764,322)
(5,268,634)
Innovative businesses and others
 
(5,815,423)
(6,079,832)
(5,199,467)
Total cost of revenues
 
(43,729,683)
(40,404,765)
(39,488,152)
Gross profit:
Games and related value-added services
 
46,782,052
55,626,584
57,480,020
Youdao
 
2,582,444
2,767,462
2,748,491
NetEase Cloud Music
1,293,118
2,102,670
2,681,512
Innovative businesses and others
 
2,108,512
2,566,678
2,897,061
Total gross profit
 
52,766,126
63,063,394
65,807,084

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F-46
The following table set forth the disaggregation of net revenues by timing of revenue recognition for the years ended December 31, 2022,
2023 and 2024 (in thousands):
For the year ended December 31, 
    
2022
    
2023
    
2024
RMB
RMB
RMB
A point in time
23,322,675
27,140,994
24,144,017
Over time
73,173,134
76,327,165
81,151,219
Total Net revenue
 
96,495,809  
103,468,159  
105,295,236
The following table presents the total depreciation and amortization expenses of property, equipment and software recorded under cost of
revenues by segment for the years ended December 31, 2022, 2023 and 2024 (in thousands):
For the year ended December 31, 
    
2022
    
2023
    
2024
RMB
RMB
RMB
Games and related value-added services
 
339,300
223,156
246,422
Youdao
 
11,610
9,275
9,119
NetEase Cloud Music
6,044
2,452
3,027
Innovative businesses and others
 
129,693
60,126
47,084
Total depreciation expenses of property and equipment
 
486,647
295,009
305,652
As substantially all of the Group’s long-lived assets are located in the PRC and substantially all of the Group’s revenue of reportable
segments are derived from China based on the geographical locations where services and products are provided to customers, no
geographical information is presented.
29. Financial Instruments
The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December
31, 2023 (in thousands):
Fair Value Measurements
    
    
(RMB)
    
Quoted Prices in
Active Market
Significant Other
Significant
for Identical
Observable
Unobservable
Assets
Inputs
Inputs
    
Total
    
(Level 1)
    
(Level 2)
    
(Level 3)
Equity investments with readily determinable fair values
3,107,266
3,107,266
—
—
Short-term investments
 
4,436,057
—  
4,436,057
—
Investments accounted for at fair values
 
490,781
—
—
490,781
Total
8,034,104
3,107,266  
4,436,057
490,781

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F-47
The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December
31, 2024 (in thousands):
Fair Value Measurements
    
    
(RMB)
    
    
Quoted Prices in
Active Market
Significant Other
Significant
for Identical
Observable
Unobservable
Assets
Inputs
Inputs
    
Total
    
(Level 1)
    
(Level 2)
(Level 3)
Equity investments with readily determinable fair values
2,375,785
2,375,785
—
—
Short-term investments
 
10,756,143
—  
10,756,143
—
Investments accounted for at fair values
241,570
—
—
241,570
Total
 
13,373,498
2,375,785  
10,756,143
241,570
The rates of interest under the loan agreements with the lending banks were determined based on the prevailing interest rates in the
market. The Group classifies the valuation techniques that use these inputs as Level 2 of fair value measurements of short-term bank
loans. For other financial assets and liabilities with carrying values that approximate fair value, if measured at fair value in the financial
statements, these financial instruments would be classified as Level 3 in the fair value hierarchy. As of December 31, 2023 and 2024,
certain equity investments without determinable fair value (Note 11) were measured using significant unobservable inputs (Level 3) and
written down from their respective carrying value to fair value, with impairment charges of RMB274.2 million and RMB1.0 billion
incurred and recorded in earnings for the years then ended.
30. Restricted Net Assets
Relevant PRC laws and regulations permit PRC companies to pay dividends only out of their retained earnings, if any, as determined in
accordance with PRC accounting standards and regulations. Additionally, the Company’s PRC subsidiaries and the VIEs can only
distribute dividends upon approval of the shareholders after they have met the PRC requirements for appropriation to the general reserve
fund and the statutory surplus fund respectively. The general reserve fund and the statutory surplus fund require that annual
appropriations of 10% of net after-tax income should be set aside prior to payment of any dividends. As a result of these and other
restrictions under PRC laws and regulations, the PRC subsidiaries and the VIEs are restricted in their ability to transfer a portion of their
net assets to the Company either in the form of dividends, loans or advances, which restricted portion amounted to approximately
RMB14.2 billion, or 10.0% of the Company’s total consolidated net assets, as of December 31, 2024. Even though the Company
currently does not require any such dividends, loans or advances from the PRC subsidiaries and the VIEs for working capital and other
funding purposes, the Company may in the future require additional cash resources from its PRC subsidiaries and the VIEs due to
changes in business conditions, to fund future acquisitions and developments, or merely declare and pay dividends to or distributions to
the Company’s shareholders.

1
Exhibit 4.16
COOPERATION AGREEMENT
This Cooperation Agreement (this “Agreement”) is entered into as of [        ] between the following parties:
Party A: [VIE]
Registered Address: [       ]
Party B: [WFOE]
Registered Address: [       ]
In this Agreement, Party A and Party B are collectively referred to as the “Parties” and individually as a “Party”.
Whereas:
A.
Party A is a company incorporated in [       ] under the laws of the PRC, mainly engaging in [       ], and has obtained the [       ]
license according to the applicable laws (the “Special License”).
B.
Party B is a company incorporated in [       ] under the laws of the PRC, mainly engaging in [       ].
C.
Party A and Party B shall collaborate and operate together to provide services and products such as [       ] to clients.
Now, therefore, upon amicable negotiation, the Parties hereby agree as follows:
1.
Scope of Cooperation
Party A and Party B, leveraging their respective technologies and marketing resources, shall capitalize on their business strengths to
jointly collaborate and operate, providing services and products such as [       ] to clients. The specific details of the cooperation are
as follows:
1.1 Scope of Cooperation Provided by Party A
Party A shall, within the scope of the Special Licenses issued for its business needs, lawfully provide clients with services and
products such as [       ] or provide such services and products on behalf of Party B, as authorized by Party B, and shall obtain
the resulting revenue.

2
1.2 Scope of Cooperation Provided by Party B
Party B shall cooperate with Party A, and provide the following services to Party A (and ultimately to clients) as determined by
Party B within the business scope of Party A, according to this Agreement, including but not limited to:
1.2.1.1
Be responsible for the research and development of various application software and systems related to services
and products such as [       ], and authorize Party A to operate the aforementioned software/systems developed by
Party B to provide services to clients;
1.2.1.2
Provide technical support and maintenance services related to services and products such as [       ], including but
not limited to server maintenance, software/system updates, and upgrades; and
1.2.1.3
Provide technical research and development, as well as related technical assistance and support for services and
products such as [       ].
2.
Manner of Joint Service
2.1 Besides the services stipulated in Article 1, Party B shall also utilize its own resources to promote and advertise the services
provided to clients under this Agreement, and shall bear the relevant promotional and production expenses incurred thereby.
Meanwhile, Party B shall pay the costs for the services rendered pursuant to this Agreement, including, without limitation, the
remuneration for R&D personnel, expense for equipment, and etc.
2.2 Party A and Party B agree that business activities requiring the Special Licenses held by Party A shall be directly conducted by
Party A, which will receive the related revenue and then pay Party B the technical service fee as calculated according to this
Agreement. For other services and products, Party B may uniformly collect the revenue from clients and then pay Party A the
platform service fee as calculated according to this Agreement.
2.3 Party A and Party B shall collaborate sincerely and indispensably, while the absence of either Party will result in the failure to
achieve the cooperation content and related services and products under this Agreement. Party A agrees to designates Party B as
the exclusive partner for the cooperation content of this Agreement. Without Party B’s written consent, Party A shall not enter
into the same or similar cooperation agreement with any third party regarding the cooperation content of this Agreement. If
Party B gives written consent, Party A may cooperate with Party B’s affiliated companies to jointly provide services to clients of
the related services and products.

3
2.4 Both Parties further confirm that Party A, Party B, and Party B’s affiliated companies may separately sign project cooperation
agreements or similar documents regarding the specific operation model, revenue sharing, and other matters related to the
cooperation content of this Agreement, to further clarify the rights and obligations of both Parties in specific cooperation
matters, which shall serve as the basis for execution.
3.
Fee Settlement
Through friendly consultation, Party A and Party B agree to calculate and settle the service fee in the form of sharing of revenue
generated from the cooperation content under this Agreement based on the following principles or with other calculation method
agreed by the Parties:
3.1 The revenue-sharing base between Party A and Party B and Party B’s affiliated companies is calculated as Party A’s total
income (excluding tax), minus the expenses incurred by Party A in operating the cooperation content (including taxes and
surcharges, excluding the revenue-sharing fee paid to Party B and its affiliated companies, hereinafter referred to as the “Actual
Expenses”) and Party A’s retainable profit:
Revenue-sharing base = Party A’s income (excluding tax) - Party A’s Actual Expenses - Party A’s retainable profit.
3.2 When determining the specific service fees by Party B, the following factors may be considered: (a) the number and
qualifications of the professional personnel involved in the services provided by Party B to Party A during such invoice cycle;
(b) time and efforts spent by Party B’ professional personnel in providing services during such invoice cycle; (c) the specific
contents and commercial value of the services provided by Party B during such invoice cycle; (d) the difficulty in technologies
provided by Party B and the complexity of technological consulting and other services provided by Party B; and (e) market
price of the services of the same type.
3.3 The specific revenue-sharing ratio, service fee calculation, payment method, settlement amount, and cycle, Party A’s retainable
profit, and Party B’s payable expenses (when Party A’s income is insufficient) will be confirmed through service settlement
statements. Both Parties should confirm the service settlement statements in writing, such as by email.
3.4 After each service settlement statement is confirmed by both Parties, the Party responsible for payment should promptly pay the
other Party’s due income for the current period in full by bank transfer to the designated bank account. The

4
receiving Party should promptly issue a corresponding, legitimate, and valid VAT invoice to the paying Party.
4.
Intellectual Property and Confidential Provisions
4.1 Party B shall have sole and exclusive rights for any rights, ownership, interest, including, without limitation, any copyright,
patent, proprietary rights, trade secrets, etc., over any and all intellectual property arising from the performance of this
Agreement.
4.2 With the written consent of the right owner, Party A may accept the transfer of any rights, ownership, interests of all and any
intellectual property arising from Party B’s performance of this Agreement, with the transfer method to be otherwise determined
between both Parties.
4.3 To fulfill this Agreement, Party A and Party B agree that the Parties may execute intellectual property license agreements during
the term of this Agreement, which shall permit Party A to use Party B’s relevant intellectual property rights [for free] within
Party A’s business requirements, or Party B agrees to transfer part of Party B’s intellectual property rights to Party A or register
such intellectual property rights in Party A’s name if necessary. However, Party A shall transfer the foregoing intellectual
property rights registered under Party A to Party B at no consideration or at the lowest price permitted by law upon Party B’s
request. Party A shall execute all appropriate documents, take all appropriate actions, submit all filings and/or applications,
render all appropriate assistance and otherwise conduct whatever is necessary as deemed by Party B at its sole discretion for the
purposes of vesting any ownership, right or interest of any such intellectual property rights in Party B, and/or perfecting the
protections for any such intellectual property rights in Party B. Party B is entitled to use any intellectual property registered
under Party A for free.
4.4 Both Parties agree to use their best reasonable efforts to protect or keep confidential all information marked with “confidential”
or all or part of the information of the other Party (“Confidential Information”). Without the prior written consent of the
providing Party, the receiving Party shall not disclose, provide or transfer such Confidential Information to any third party.
Upon termination or expiration of this Agreement, the receiving Party shall return any document, material or software
containing such Confidential Information to its respective owner as requested by the providing Party, or shall destroy the same
on its own, and delete any Confidential Information stored in all of receiving Party’s electronic devices and stop using the same.
5.
Representations and Warranties

5
5.1 Party A hereby represents and warrants that:
5.1.1
Party A is a corporation legally registered and validly existing in [       ] under the laws of PRC.
5.1.2
Party A has all the rights, powers, authorities and capabilities, and all the consents and approvals necessary for the
execution, delivery and performance of this Agreement.
5.1.3
This Agreement will be legal, effective and binding on Party A upon execution, and may be enforced against Party A
according to its provisions.
5.2 Party B hereby represents and warrants that:
5.2.1
Party B is a corporation legally registered and validly existing in [       ] according the laws of PRC.
5.2.2
Party B has all the rights, powers, authorities and capabilities, and all the consents and approvals necessary for the
execution, delivery and performance of this Agreement.
5.2.3
This Agreement will be legal, effective and binding on Party B upon execution, and may be enforced against Party B
according to its provisions.
6.
Effectuation and Term of Cooperation
This Agreement will become effective upon duly sealing or signing. Except for early termination pursuant to the provisions herein,
this Agreement shall remain effective.
7.
Termination
7.1 During the validity period of the Agreement, Party B may terminate this Agreement by giving 30 days’ written notice to Party
A. Party A shall not terminate this Agreement without Party B’s written consent.
7.2 Article 4 shall survive the termination or expiration of this Agreement.
8.
Force Majeure
8.1 “Force Majeure” refers to any matter that is out of the reasonable control of a Party, which is unavoidable even with reasonable
attention of the Party being affected, including, without limitation, acts of governments, acts of nature, fire, explosion, storm,
flood, earthquake, tide, thunder or war. However, any shortage of credit, capital or finance shall not be regarded as an event of
Force

6
Majeure. The Party affected by Force Majeure and seeking for the exemption from performing its obligations hereunder shall
notify the other Party of such event as soon as possible.
8.2 In the event that the affected Party is delayed in or prevented from performing its obligations hereunder by Force Majeure, only
within the scope of such delay or prevention, neither Party shall be liable for any loss, increased expense, or damage caused
thereby under this Agreement, while such failure or delay of performance shall not be deemed as a breach of contract. However,
the Party claiming to be affected by Force Majeure shall use its best reasonable efforts to minimize or remove the effects of
Force Majeure. Upon the elimination of Force Majeure event, both Parties agree to resume the performance of this Agreement
with their best efforts.
9.
Applicable Laws
The validity, interpretation and performance of this Agreement shall be governed by the laws of PRC.
10. Dispute Resolution
10.1  Any dispute arising from the interpretation and performance of this Agreement shall first be resolved through friendly
consultations by the Parties. If the dispute fails to be resolved within thirty (30) days after one Party gives notice requesting
consultations to the other Party, either Party may submit the relevant dispute to the China International Economic and Trade
Arbitration Commission (“CIETAC”) for arbitration, in accordance with its then effective arbitration rules. The arbitration
shall be conducted in [Beijing]. The arbitration tribunal shall be consisted three (3) arbitrators according to the arbitration rules
and procedures, among whom one of them shall be designated by the applicant, one of them shall be designated by the
respondent and one of them shall be designated upon the negotiation by aforesaid two arbitrators or by CIETAC. The
arbitration shall be conduct confidentially and the language of the arbitration shall be Chinese. The arbitration award shall be
final and binding on all Parties.
10.2 To the extent permitted by PRC Law and where appropriate, the arbitration tribunal may grant any remedies in accordance with
the provisions of this Agreement and applicable PRC Law, including preliminary and permanent injunctive relief (such as
injunction against carrying out business activities, or mandating the transfer of assets), specific performance of contractual
obligations, remedies concerning the equity interest or assets of the Domestic Company and awards directing the Domestic
Company to conduct liquidation. To the extent permitted by PRC Law, when awaiting the formation of the arbitration tribunal
or otherwise under appropriate conditions, either Party may seek preliminary

7
injunctive relief or other interlocutory remedies from a court with competent jurisdiction to facilitate the arbitration. Without
violating the applicable governing laws, the Parties agree that the courts of Hong Kong, Cayman Islands, China and the place
where the principal assets of the Domestic Company are located shall all be deemed to have competent jurisdiction. The Parties
further agree to request that the court conduct any proceedings in closed session and to keep the existence of the proceedings
and any element of it, including the decision of the court, confidential and refrain from publishing or otherwise disclosing any
of the foregoing information to the public, except as may be lawfully required in judicial proceedings or as otherwise required
by applicable law.
10.3 During the existence of any dispute, the Parties shall continue to exercise their remaining respective rights, and fulfill their
remaining respective obligations under this Agreement, except insofar as the same may relate directly to the matters in dispute.
11. Notices
Any notice or other communication sent by any Party hereunder shall be written in Chinese and English, and shall be delivered to
the following addresses of the recipient(s) by hand, registered airmail, airmail with postage prepaid, recognized courier service or
email.
Party A:
[VIE]
Address:
[       ]
Email:
[       ]
Attention:
[       ]
Party B:
[WFOE]
Address:
[       ]
Email:
[       ]
Attention:
[       ]
12. Assignment
12.1 Party A hereby agrees that Party B may independently decide to assign its rights and obligations under this Agreement to any
third party. For such assignment,

8
Party B only needs to provide written notice to Party A and does not need to obtain Party A’s consent.
12.2 Party A shall not assign any of its rights or obligations under this Agreement to any third party without prior written consent
from Party B.
13. Severability
If any provision herein becomes invalid, illegal or un-enforceable because of any laws, such provision shall only be invalid in the
corresponding jurisdiction. The invalid provision shall not affect the legal effects of the remaining provisions of this Agreement in
such jurisdiction, and shall not cause such provision to be invalid, illegal or unenforceable in any other jurisdictions.
14. Modifications and Supplements
Both Parties may make modifications and supplements to this Agreement in writing. Upon proper execution by both Parties, the
relevant modifications and supplemental agreements shall become an integral part of this Agreement with the same force and effects.
15. Supplementary Provisions
This Agreement is made in two counterparts. Each Party shall hold one counterpart.
[Signature Page Follows]

[Signature Page to Cooperation Agreement]
IN WITNESS WHEREOF, this Agreement has been duly executed by the Parties as of the date first written above.
Party A: [VIE]
(Seal)
Party B: [WFOE]
(Seal)

Exhibit 11.2
Copyright © 2024 NetEase, Inc. All rights reserved.
NetEase, Inc. Insider Trading Policy
Last revised January 1, 2025
Table of Contents
A. Introduction
1
B. Applicability
2
C. Individual Responsibility
2
D. Material Non-Public Information
2
E. General Prohibited Conduct
4
F. Trading Procedures
5
G. Special and Prohibited Transactions
7
H. Exceptions from the Policy
8
I. Trading in Listed Subsidiaries of the Company
9
J. Violations
9
K. Questions
10
L. Acknowledgement, Training & Certification
10
A. Introduction
NetEase, Inc. (“NetEase” or the “Company”), as a publicly traded company, is committed to complying with all applicable securities laws
and regulations.1 In view of the responsibilities and potential liabilities arising under such laws and regulations, the Board of Directors of
NetEase has adopted this Insider Trading Policy (“Policy”). The Policy is designed to:
1.
Establish procedures and guidelines regarding the use and disclosure of confidential information;
2.
Prohibit securities-related misconduct, including insider trading, improper disclosure of confidential information, and misuse of
confidential information; and
3.
Inform and educate colleagues of their individual responsibilities under applicable securities laws.
1
NetEase has American Depositary Shares, each representing five ordinary shares of the Company, traded on the Nasdaq Global Select
Market in the United States and its ordinary shares admitted to trading on The Stock Exchange of Hong Kong Limited (the “Hong Kong
Stock Exchange”).

Insider Trading Policy (01/2025)
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Copyright © 2024 NetEase, Inc. All rights reserved.
B. Applicability
The Policy applies to all “Covered Persons”, which is defined to include:
1.
All directors, officers and employees, including employees working on a part-time or temporary basis (collectively, “colleague,” “you,”
or “your”) of NetEase and its subsidiaries and controlled affiliates;
2.
All colleagues’ Family Members, which include any (i) spouse, siblings, parents, stepparents, grandparents, children, stepchildren,
grandchildren and in-laws (whether by blood, marriage or common-law partnership), and (ii) any other family members who reside in
the colleague’s household or whose transactions in Company’s securities are directed by the colleague or are subject to such
colleague’s influence or control;
3.
All colleagues’ and their Family Members’ Controlled Entities, which include any entities over which the colleague and/or their Family
Members exercise voting or investment control; and
4.
On a case-by-case basis determined by the Company, other persons, such as contractors, consultants, or former colleagues, who have
access to or possess material non-public information.
C. Individual Responsibility
Every Covered Person has individual responsibility to comply with this Policy and all applicable securities laws and regulations. This is
regardless of whether the Company has taken or abstained from an action, such as not objecting to a Covered Person’s representation that
they do not possess MNPI (defined in Section D below), opening/closing of Trading Windows (see Section F.4 below), or pre-clearing
transactions (see Section F.5 below). Appropriate individual judgment should be exercised in connection with any trade in the Company’s
securities or another company’s securities.
Where the Covered Person is a Family Member or Controlled Entity of a colleague or a person subject to this Policy (e.g., a consultant), it is
that colleague’s / person’s individual responsibility for ensuring that their Family Members and Controlled Entities comply with this Policy.
D. Material Non-Public Information
In general, any information which the Company has not made available to the general public is considered “confidential information” or
“non-public” information.2 For information to be considered “public,” it must be widely disseminated in a manner that makes it generally
available to investors, such as through:
2
For additional guidance on the classification of “confidential information” and your responsibilities to safeguard such information,
please refer to NetEase’s information handling and management procedures.

Insider Trading Policy (01/2025)
3
Copyright © 2024 NetEase, Inc. All rights reserved.
·
The Company’s reports to shareholders;
·
Annual or other reports, documents or other filings submitted to the U.S. Securities and Exchange Commission (the “SEC”) and
the Hong Kong Stock Exchange;
·
Proxy statements; and
·
Previously issued press releases.
“Material Non-Public Information” (“MNPI”) encompasses any non-public information (i) that, if publicly known, could reasonably be
expected to impact the market price of listed securities, and/or (ii) if there is a substantial likelihood that a reasonable investor would
consider such information important in making a decision to buy, sell or hold securities in a company.3
There is no bright line test for determining whether particular information is material.  Such a determination depends on the facts and
circumstances unique to each situation and cannot be made solely based on the potential financial impact of the information. The
following non-exhaustive list sets forth examples of information which could be regarded as material:
·
Financial results or projections;
·
Changes in financial condition or asset value;
·
Negotiations for the acquisition or disposition of significant subsidiaries or assets;
·
Significant new contracts or the loss of a contract;
·
Significant increases or decreases in the number of users, revenue per user or other relevant operating metrics of the Company’s
products and services;
·
Significant pricing changes;
·
Significant new products or services;
·
Significant product or service defects or modifications;
·
Significant marketing plans and changes in such plans;
·
Significant capital investment plans and changes in such plans;
·
Pending or threatened material litigation, administrative actions or governmental investigations or inquiries concerning the
Company or any of its affiliated companies, officers or directors, or the resolution of any of the foregoing;
·
Major financing or borrowings;
·
New equity or debt offerings;
·
Changes in dividend policy, the declaration of a share split or other changes in the Company’s capital structure;
·
Establishment or cessation of any repurchase programs for the Company’s securities, including any securities of any direct or
indirect subsidiaries of the Company;
3
In Hong Kong SAR, there is concept similar to MNPI called “inside information” in relation to companies listed on the Hong Kong Stock
Exchange. Specifically, “inside information” is defined as any specific information about such company, a shareholder or officer of such
company or the listed securities of such company which is not generally known to persons who are accustomed or would be likely to
deal in the listed securities of the company but would, if generally known to them, be likely to materially affect the price of its listed
securities.

Insider Trading Policy (01/2025)
4
Copyright © 2024 NetEase, Inc. All rights reserved.
·
Significant personnel changes;
·
Changes in accounting methods and write-offs; and
·
Any substantial change in industry circumstances or competitive conditions which could significantly affect the Company’s
earnings or prospects for expansion.
It is important to remember that whether information is material will be viewed by enforcement authorities with the benefit of hindsight.
 In other words, if the price of the Company’s securities changed as a result of the information having been made public, it will likely be
considered material by enforcement authorities.
E. General Prohibited Conduct
The prohibitions below apply to actions a Covered Person may take directly or indirectly through Family Members, Controlled Entities or
other persons or entities:
a.
Non-disclosure of MNPI. MNPI must not be disclosed to anyone, except persons within the Company or third-party agents of the
Company (such as auditors or outside legal counsel) whose positions require them to know it, until such information has been
publicly released by the Company.
b.
Trading in the Company’s Securities. No Covered Person may buy, sell, donate or otherwise transact in the Company’s securities
while aware of MNPI concerning the Company. Additionally, no Covered Person may buy, sell, donate or otherwise transact in the
Company’s securities except in compliance with the Trading Procedures set forth in Section F below.
c.
Tipping. Providing MNPI to another person who may trade or advise others to trade on the basis of that information is known as
“tipping” and is illegal. Therefore, no Covered Person may “tip” or provide MNPI concerning the Company to any person other
than a director, officer, or employee of the Company, unless required as part of that Covered Person’s regular duties for the
Company and authorized by the relevant legal team.
d.
Giving Trading Advice. No Covered Person may give trading advice of any kind about the Company to anyone, whether or not
such Covered Person is aware of MNPI about the Company, except that Covered Persons should advise other Covered Persons not
to trade if such trading might violate the law or this Policy.
e.
Trading in Other Companies’ Securities. Covered Persons are prohibited from trading or recommending that another person
trade in the securities of another company about which the Covered Person has MNPI acquired through his or her position with
the Company, including other companies with which the Company has a business relationship or economic link such as the
Company's suppliers, customers, partners, or competitors. Note that information not material to the Company may be material to
another company.

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Copyright © 2024 NetEase, Inc. All rights reserved.
F. Trading Procedures
The below trading procedures (hereinafter “Trading Procedures”) apply to all transactions in the Company’s securities (including American
Depositary Shares, ordinary shares or any other equity or debt securities of the Company) by all Covered Persons, unless otherwise
specified in this Policy.
1.
Determination of no MNPI
Before any trade of the Company’s securities or another company’s securities, Covered Persons must determine that they do not have
knowledge of, or are in possession of, MNPI concerning the Company or the other company. If you have any doubt as to whether or not
you have MNPI, or if you may buy or sell the Company’s securities or another company’s securities, you must consult with the NetEase
Group General Counsel or the Group International Legal Department (“Legal”).
Please remember that – regardless of any consultation with Legal – it is ultimately your responsibility to ensure that you do not know of or
possess MNPI at the time of the trade.
2.
Waiting Period after Public Dissemination of MNPI
In general, Covered Persons should allow at least one full Trading Day after public disclosure of MNPI by the Company for it to become
widely disseminated to the public. “Trading Day” means a day on which the Nasdaq Global Select Market is open for trading.  Nasdaq’s
regular trading hours are from 9:30 a.m. to 4:00 p.m. Eastern Standard Time (“EST”), Monday through Friday.
3.
Blackout Period
Legal may declare “Blackout Periods” at the times that they deem appropriate and need not provide any reason for making a declaration.
During such Blackout Periods, no Covered Persons designated by Legal can trade in Company securities (or any other company’s securities
as designated by Legal) without pre-clearance by Legal, regardless of whether such Covered Persons possess any MNPI. Persons made
aware of a Blackout Period should not disclose it to anyone else.
4.
Trading Window
Covered Persons shall only conduct transactions involving the purchase or sale of Company securities during designated “Trading
Windows”.
For purposes of this Policy, the “Trading Window” for any fiscal quarter generally begins at 6:00 p.m. EST, on the second Trading Day
following the date of public disclosure of the financial results for the prior quarter or year, and ends at 6:00 p.m. EST, on the last day of
each quarter (March 31, June 30,

Insider Trading Policy (01/2025)
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Copyright © 2024 NetEase, Inc. All rights reserved.
September 30 and December 31).  If public disclosure occurs on a Trading Day prior to 12:00 noon EST, then such date of disclosure shall be
considered the first Trading Day following such public disclosure. See Attachment A for sample dates and times for the opening and closing
of a Trading Window.
Trading in the Company’s securities during the Trading Window should not be considered a “safe harbor.” All Covered Persons are
expected to use good judgment when trading in securities.  Even during a Trading Window, any person with knowledge or possession of
MNPI concerning the Company should not engage in any transactions in the Company’s securities until such information has been widely
disseminated to the public (see Section F.2 above).
From time to time, the Company may impose a Blackout Period which may suspend any open Trading Windows for designated Covered
Persons. During such Blackout Periods, the rules specified in Section F.3 above shall apply.
The Board of Directors of NetEase, in its sole discretion, may approve additional open Trading Windows from time to time.
5.
Pre-Clearance of Insider Trades
All purchases and sales of the Company’s securities by Insiders and their Family Members and Controlled Entities must be pre-cleared by
Legal, even during Trading Windows. The only exception to this rule is transactions made under a Rule 10b5-1 trading plan approved
pursuant to the terms and requirements set forth in Attachment B of this Policy.
For purposes of this Policy, “Insider” is defined to include: (i) board directors and executive officers of NetEase, Inc., as indicated in the
Company’s most recent annual report (subject to any updates occurring subsequent to the publication of such report) and (ii) any
individuals designated by Legal and who have been notified of such designation in writing. Legal shall maintain a list of the individuals
covered by (ii), which shall be reviewed and updated periodically. See Attachment C for additional information on the categories of
individuals who may be designated as “Insiders”.
Insiders must submit pre-clearance requests by email to Legal at least two business days in advance of each proposed transaction. Pre-
clearance requests should use the email template in Attachment C of this Policy.
Once the proposed transaction is pre-cleared, the Insider may proceed with it on the approved terms, provided that the Insider complies
with all other provisions of this Policy and all securities law requirements such as, in the case of directors, officers and other affiliates of the
Company, Rule 144 of the U.S. Securities Act of 1933, as amended (“Rule 144”).4 Notwithstanding receipt of pre-clearance, if
4
If you have any questions regarding Rule 144, please contact Legal for guidance.

Insider Trading Policy (01/2025)
7
Copyright © 2024 NetEase, Inc. All rights reserved.
the Insider becomes aware of MNPI, or becomes subject to a blackout period before the transaction is effected, the transaction may not be
completed.
Any transactions by the NetEase Group General Counsel shall be subject to pre-clearance by the Chief Executive Officer, using the same
procedures described above.
6.
Foregoing Certain Transactions
To comply with this Policy, a Covered Person may, from time to time, have to forego a proposed transaction in the Company’s securities.
This may be required even if, for example, he or she planned to make the transaction before learning of MNPI, or where the Covered
Person may suffer an economic loss or forego anticipated profit by doing so.
7.
Post-Termination Transactions
This Policy continues to apply to transactions in the Company’s securities after termination of service to the Company.  If an individual is in
possession of MNPI when his or her service terminates, or if the Company’s trading window is closed at the time of termination, that
individual may not trade in the Company’s securities until any such MNPI has become public or is no longer material and/or the Company’s
trading window has opened.  The pre-clearance procedures specified in Section F.5 above, however, will cease to apply to transactions in
the Company’s securities upon the opening of the Company’s trading window and/or expiration of any special trading blackout period, at
which point the provisions set forth in Section F.4 above shall no longer apply.  Notwithstanding the foregoing, the Company may require
certain employees who occupied positions of seniority or high importance (e.g., certain business unit or department heads) to continue to
comply with the Trading Procedures for a reasonable period of time post-termination and will notify such employees of those requirements
in writing.
G. Special and Prohibited Transactions
The Company has determined that there is a heightened legal risk and/or the appearance of improper or inappropriate conduct associated
with certain types of transactions by certain persons subject to this Policy. Attachment D of this Policy specifies which transactions are
prohibited by the Company and which persons are subject to these prohibitions. If a person subject to such prohibitions determines that
they must engage in an otherwise prohibited transaction, they must first contact Legal for pre-clearance prior to engaging in the
transaction.

Insider Trading Policy (01/2025)
8
Copyright © 2024 NetEase, Inc. All rights reserved.
H. Exceptions from the Policy
The Trading Procedures do not apply to the types of transactions below, unless otherwise specifically noted in this Policy or noted in writing
by Legal on a case-by-case basis.
1.
Restricted Share Units and Other Equity Awards
The Trading Procedures do not apply to the vesting and settlement of restricted share units or similar awards or the exercise of share
options.
However, Trading Procedures do apply to any market sale of shares or other Company securities received upon the settlement of any
restricted share unit or similar award or the exercise of any option. The Trading Procedures also apply to any sale of Company securities as
part of a broker-assisted cashless exercise of an option, and any other market sale for the purpose of generating the cash needed to pay the
exercise price of an option or the taxes withheld by the Company with respect to options, restricted share units or similar awards.
2.
Transactions with the Company
The Trading Procedures do not apply to any purchase of the Company’s securities from the Company or sales of the Company’s securities
to the Company.
3.
Transactions not Involving a Purchase or Sale
In general, the Trading Procedures do not apply to:
·
Bona fide gifts of shares to another person, unless: (i) the Covered Person making the gift has reason to believe that the recipient
intends to sell the Company securities while this Covered Person is aware of MNPI, or (ii) the Covered Person making the gift is
subject to particular trading restrictions as to Company securities and the sales by the recipient of the Company securities occur
outside a Trading Window.
·
Other transactions not involving a purchase or a sale, such as inheritance of the Company’s securities or receipt of the Company’s
securities in a legal settlement, provided that this Policy would apply to any subsequent market sale of such securities.
·
Transactions in mutual funds that are invested in Company securities or in broad-based exchange traded funds that provide
indirect and immaterial exposure to the Company’s securities.
4.
Rule 10b5-1 Trading Plans
The Trading Procedures do not apply to purchases or sales of the Company’s securities made pursuant to a Rule 10b5-1 trading plan that:
(i) was entered into during a Trading Window, (ii) meets all

Insider Trading Policy (01/2025)
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Copyright © 2024 NetEase, Inc. All rights reserved.
requirements of the affirmative defense provided by Rule 10b5-1 promulgated under the U.S. Securities Exchange Act of 1934, as amended
(the “Exchange Act”), (iii) was pre-cleared in advance pursuant to the terms and requirements set forth in Attachment B of this Policy, and
(iv) has not been amended or modified in any respect after such initial pre-clearance. Please refer to Attachment B for more information.
I. Trading in Listed Subsidiaries of the Company
NetEase, Inc. has publicly listed subsidiaries, including Youdao, Inc, and NetEase Cloud Music Inc. (hereinafter, along with any other
subsidiaries listed on Hong Kong Stock Exchange, Nasdaq, the New York Stock Exchange or any other exchange, a “Listed Subsidiary”).
Covered Persons who wishes to trade in the securities of any Listed Subsidiary must: (i) only trade within the trading windows of such
Listed Subsidiary, (ii) follow the instructions and notices with respect to the time of any applicable trading window or blackout period
established by the Company or any Listed Subsidiary, and (iii) comply with the rules and prohibitions regarding MNPI in this Policy and all
applicable insider trading policies and procedures of the relevant Listed Subsidiary.5
J. Violations
A violation of this Policy will be considered a material breach of your duties to the Company and will result in appropriate disciplinary
measures in accordance with our Code of Business Conduct and your Employee Handbook. Violations of this Policy may also result in
ineligibility for future participation in the Company’s share incentive plans.
Moreover, violations of this policy may also be a violation of applicable insider trading laws and other securities laws and regulations,
including U.S. federal and state laws and regulations, Hong Kong SAR laws and regulations, and/or the securities laws and regulations of
another country in which you work or reside. Legal liabilities for violating such laws include criminal penalties (including the possibility of
imprisonment), civil penalties, and certain injunctions and prohibitions. Such violations – or even allegations of violations – are expensive
to defend and tend to significantly impact the reputation of the Company and the individuals involved.
The Company reserves the right to determine, in its own discretion and on the basis of information available to it, whether this Policy has
been violated. It is not necessary for the Company to await the filing or conclusion of a civil or criminal action against the alleged violator
before taking disciplinary action. As a matter of principle, the Company will cooperate with all relevant law enforcement
5
If a Listed Subsidiary does not have its own insider trading policy, then Covered Persons will need to comply with all relevant rules and
requirements of this Policy when trading in the securities of that Listed Subsidiary.

Insider Trading Policy (01/2025)
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Copyright © 2024 NetEase, Inc. All rights reserved.
authorities in connection with the investigation or prosecution of any actual or possible violation of this Policy or applicable law.
Please note that the fact that you are a citizen and/or a resident of one country will not necessarily insulate you from liability for any
violations of the laws of another country. For example, in many instances, a PRC citizen may be sued, prosecuted and imprisoned on
account of a violation of U.S. or Hong Kong law.
K. Questions
Please promptly consult a member of the Group International Legal Department at international.legal@service.netease.com if you have
any questions regarding the Policy or related to securities trading. You should also first contact Group International Legal if you are
uncertain regarding the applicability, interpretation and/or operation of any section of this Policy.
If you would like to report an actual or suspected violation of this Policy, or would like to raise a concern related to this Policy, you can (in
addition to contacting Group International Legal) use any of the appropriate channels listed in our Code of Business Conduct.
L. Acknowledgement, Training and Certification
This Policy is to be delivered to all colleagues at the start of their relationships with the Company and will be redelivered to them upon any
material amendment to the Policy. This Policy is also available to all colleagues on NetEase’s intranet.
You are also expected to periodically refresh your understanding of this Policy and certify your ongoing compliance with its requirements
by participating in mandatory training and certification activities.

Insider Trading Policy (01/2025)
11
Copyright © 2024 NetEase, Inc. All rights reserved.
Attachment A – Trading Window Sample Dates
The following table shows sample dates and times for the opening and closing of a Trading Window. Please note that the actual dates and
times for earnings announcements vary from quarter to quarter and from year to year, and therefore the actual opening of a Trading
Window may be earlier or later than the ones illustrated below.
Closing of Q2 Trading Window
(end of each quarter)
Opening of Q3 Trading Window
(two Trading Days after earnings release)
Closing of
Q3 Trading Window
(end of each quarter)
Eastern Standard
Time (EST)
Hong Kong
Time1
Eastern Standard
Time (EST)
Hong Kong
Time1
June 30 at 6:00
p.m.
July 1 at 6:00
a.m.
Assume earnings announcement released at:
10:00 a.m. on Thursday, Aug. 22, 2024 (HK time) / 10:00 p.m. on
Wednesday, Aug. 21, 2024 (EST)
The applicable Trading Window would begin at:
6:00 a.m. on Saturday, Aug. 24, 2024 (HK time) / 6:00 p.m. on Friday,
Aug. 23, 2024 (EST)
September 30 at
6:00 p.m.
October 1 at
6:00 a.m.
Assume earnings announcement released at:
7:30 p.m. on Thursday, Aug. 22, 2024 (HK time)
/ 7:30 a.m. on Thursday, Aug. 22, 2024 (EST),
The applicable Trading Window would begin at:
6:00 a.m. on Saturday, Aug. 24, 2024 (HK time) /  6:00 p.m. on Friday, 
Aug. 23, 2024 (EST)
_________________________
1
Please note that the time difference between EST and Hong Kong may vary depending on if/when the U.S. switches between standard
time and daylight savings time.

Insider Trading Policy (01/2025)
12
Copyright © 2024 NetEase, Inc. All rights reserved.
Attachment B – NetEase, Inc. Requirements for Rule 10b5-1 Trading Plans
A.
General Information
Rule 10b5-1 issued under the Exchange Act can protect directors, officers and employees from insider trading liability for transactions
made under a previously established contract, plan or instruction to trade in the Company’s securities entered into in good faith and in
accordance with the terms of Rule 10b5-1 (a “Rule 10b5-1 Plan”). Rule 10b5-1 presents an opportunity for Covered Persons to establish
arrangements to sell (or purchase) the Company’s securities in the United States without the restrictions of Trading Windows and Blackout
Periods, even when there is material non-public information. However, Rule 10b5-1 Plans also require commitments regarding the trades in
advance and thus limit flexibility and discretion, and may not be suitable for all Covered Persons. If you have any questions regarding Rule
10b5-1 Plans, please contact Legal for guidance.
B.
Specific Requirements
1.
Pre-Approval. A number of legal requirements must be satisfied to establish or modify a Rule 10b5-1 Plan. Therefore, all Rule
10b5-1 Plans and modifications thereto must be approved by Legal prior to adoption.
2.
Material Nonpublic Information and Blackout Period. A Covered Person may only enter into a Rule 10b5-1 Plan at a time when
they are not aware of any material nonpublic information about the Company or otherwise subject to any Blackout Period.
3.
Trading Window. Each Rule 10b5-1 plan may only be established at a time when the Company’s trading window is open.
4.
Limitations on Number of Rule 10b5-1 Plans. A Covered Person may not establish overlapping Rule 10b5-1 Plans which trade
under the same time period, or enter into more than one Rule 10b5-1 Plan during any 12-month period, except under the limited
circumstances permitted by Rule 10b5-1 and subject to pre-approval by Legal.
5.
Cooling-Off Periods. The first trade made under the Rule 10b5-1 Plan cannot occur until the applicable date described below (the
time between adoption of the Rule 10b5-1 Plan and such first trade is referred to as the “Cooling-Off Period”).
a.
For a director or officer (as defined in Section 16 of the Exchange Act) of NetEase: the later of 90 days after adoption or
modification of a Trading Plan or two business days after filing the Form 20-F or Form 6-K disclosing financial results covering
the fiscal quarter in which the Trading Plan was adopted, up to a maximum of 120 days; and

Insider Trading Policy (01/2025)
13
Copyright © 2024 NetEase, Inc. All rights reserved.
b.
For persons who are not directors or officers of NetEase: 30 days after adoption of the Rule 10b5-1 Plan.
6.
Certification. The Rule 10b-5 Plan must include the following certifications: the Covered Person is: (i) not aware of any material
non-public information about the Company or the Company’s securities; and (ii) adopting the plan in good faith and not as part of
a plan or scheme to evade the prohibitions of Rule 10b-5.
7.
Company Rights. The Company reserves the right to publicly disclose, announce, or respond to inquiries from the media regarding
the adoption, modification, or termination of a Rule 10b-5 Plan, or the execution of transactions made under a Rule 10b-5 Plan.

Insider Trading Policy (01/2025)
14
Copyright © 2024 NetEase, Inc. All rights reserved.
Attachment C – Pre-Clearance Procedures
A.
Current Definition of Insiders
As of this Policy’s last-revised date, the following categories of colleagues are considered Insiders:
·
All board directors and executive officers of NetEase, Inc., as indicated in the Company’s most recent annual report (subject to any
updates occurring subsequent to the publication of such report)
·
Any of the following colleagues who have been notified of their status as an “Insider” by Legal in writing:
o
Colleagues in the Finance Department, Internal Audit Department, Internal Controls Department, Tax Department, Investor
Relations Department and Group International Legal Department who are closely involved in preparing and reporting the
Company’s financial results
o
1st-level Department Heads or Business Group (Unit) heads with access to financial information that represents 25% or more
of the Company’s total revenues
o
Other colleagues that Legal, at its sole discretion, deems appropriate to be considered as an “Insider”.

Insider Trading Policy (01/2025)
15
Copyright © 2024 NetEase, Inc. All rights reserved.
B.
Pre-Clearance Email Template
Subject: Securities Trading Pre-Clearance Request
I, [name], [job title], am writing to request the NetEase Group General Counsel or his or her designee (“Legal”) to pre-clear the below
proposed securities transaction:
·
Transaction type: [purchase] [sale] [exercise of option] [other]
·
Number of shares involved:
·
Proposed transaction price:
·
Expected transaction date: [dd/mm/yyyy]
·
Broker contact information:
·
[Optional] Other relevant information:
I hereby certify that:
·
All information provided above is truthful, accurate and not misleading;
·
I will not execute the proposed transaction until I receive pre-clearance from Legal, nor in any manner that deviates from the
terms approved in the pre-clearance;
·
The proposed transaction complies with all applicable laws and regulations and all applicable NetEase policies, including the Code
of Business Conduct and the Insider Trading Policy;
·
I do not currently have knowledge or possession of any material non-public information (“MNPI”) regarding NetEase, Inc., its
subsidiaries and controlled affiliates, or any other company that may be relevant to the proposed transaction;
·
To the extent that I have knowledge or possession of information which may be considered MNPI, I have provided such
information to Legal and received appropriate guidance from Legal;
·
The transaction will not be effected in any manner other than on the Nasdaq Global Select Market or the Hong Kong Stock
Exchange (or if it will be, I have provided the relevant information above) and will be effected in compliance with applicable
securities laws, including Rule 144 under the U.S. Securities Act of 1933 (as applicable);
·
The undersigned understands and acknowledges that pre-clearance for such transaction by the General Counsel of the Company
or a designee does not relieve the undersigned of his or her obligations under securities laws; and
·
I acknowledge that pre-clearance of the above-referenced proposed transaction shall be effective for five Trading Days (as defined
in the Insider Trading Policy) following my receipt of approval of the pre-clearance.

Insider Trading Policy (01/2025)
16
Copyright © 2024 NetEase, Inc. All rights reserved.
Attachment D – Special and Prohibited Transactions
As of this Policy’s last-revised date, the following categories of transactions are prohibited by the Company, unless written pre-approval is
obtained from Legal:
A.
Short Sales
Short sales of Company securities (i.e., the sale of a security that the seller does not own) may evidence an expectation on the part of the
seller that the securities will decline in value and therefore have the potential to signal to the market that the seller lacks confidence in the
Company’s prospects. In addition, short sales may reduce a seller’s incentive to seek to improve the Company’s performance. For these
reasons, short sales of Company securities by Covered Persons are prohibited.
B.
Publicly Traded Options
Given the relatively short term of publicly traded options, transactions in options may create the appearance that a director, officer or
employee is trading based on MNPI and focus such person’s attention on short-term performance at the expense of the Company’s long-
term objectives. Accordingly, transactions by Covered Persons in put options, call options or other derivative securities, on an exchange or
in any other organized market, are prohibited by this Policy.
C.
Hedging Transactions
Hedging or monetization transactions can be done through several possible mechanisms, including through the use of financial instruments
such as prepaid variable forwards, equity swaps, collars and exchange funds. Such hedging transactions may permit a colleague to continue
to own the Company’s securities obtained through Company equity incentive plans or otherwise, but without the full risks and rewards of
ownership. When that occurs, the colleague’s objectives may differ from the Company’s other shareholders. Therefore, Covered Persons
are prohibited from engaging in any such transactions.
D.
Margin Accounts and Pledged Securities
Securities held in a margin account as collateral for a margin loan may be sold by the broker without the customer’s consent if the
customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the
borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the pledgor is aware of MNPI or
otherwise is not permitted to trade in the Company’s securities, Covered Persons are prohibited from holding Company securities in a
margin account or otherwise pledging such securities as collateral for a loan.

Exhibit 12.1
CERTIFICATION
I, William Lei Ding, certify that:
1.I have reviewed this annual report on Form 20-F of NetEase, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the company and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered
by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial
reporting; and
5.The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent
functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s
internal control over financial reporting.
Date: April 15, 2025
By:
/s/ William Lei Ding
Name:William Lei Ding
Title: Chief Executive Officer
(principal executive officer)

Exhibit 12.2
CERTIFICATION
I, Sarah Ying Li, certify that:
1.I have reviewed this annual report on Form 20-F of NetEase, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the company and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered
by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial
reporting; and
5.The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent
functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s
internal control over financial reporting.
Date: April 15, 2025
By:
/s/ Sarah Ying Li
Name:
Sarah Ying Li
Title:
Head of Financial Reporting
(principal financial officer)

Exhibit 13.1
906 Certification
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Ladies and Gentlemen:
In connection with the annual report of NetEase, Inc. (the “Company”) on Form 20-F for the year ended December 31, 2024 as filed with
the Securities and Exchange Commission (the “Report”), I, William Lei Ding, the Chief Executive Officer of the Company, hereby
certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my
knowledge:
1.The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company at the dates and for the periods indicated.
This Certificate has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.
Date: April 15, 2025
By:
/s/ William Lei Ding
Name:William Lei Ding
Title: Chief Executive Officer
(principal executive officer)

Exhibit 13.2
906 Certification
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Ladies and Gentlemen:
In connection with the annual report of NetEase, Inc. (the “Company”) on Form 20-F for the year ended December 31, 2024 as filed with
the Securities and Exchange Commission (the “Report”), I, Sarah Ying Li, the Head of Financial Reporting of the Company, hereby
certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my
knowledge:
1.The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company at the dates and for the periods indicated.
This Certificate has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.
Date: April 15, 2025
By:
/s/ Sarah Ying Li
Name:
Sarah Ying Li
Title:
Head of Financial Reporting
(principal financial officer)

Exhibit 15.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No.333-234189) of NetEase, Inc. of our
report dated April 15, 2025 relating to the financial statements and the effectiveness of internal control over financial reporting, which
appears in this Form 20-F.
/s/PricewaterhouseCoopers Zhong Tian LLP
Beijing, the People’s Republic of China
April 15, 2025

Exhibit 15.3
Our ref          MCR/302157-000001/32075916v1
E-mail            matt.roberts@maples.com
BY COURIER
NetEase, Inc.
NetEase Building, No. 599 Wangshang Road
Binjiang District, Hangzhou, 310052
People’s Republic of China
15 April 2025
Dear Sir
Re: NetEase, Inc.
We have acted as legal advisors as to the laws of the Cayman Islands to NetEase, Inc., an exempted limited liability company
incorporated in the Cayman Islands (the “Company”), in connection with the filing by the Company with the United States Securities
and Exchange Commission (the “SEC”) of an annual report on Form 20-F for the year ended 31 December 2024 (the “Annual
Report”).
We hereby consent to the reference of our name under the headings “Item 10. Additional Information – E. Taxation – Cayman Islands
Taxation” and “Item 10. Additional Information – E. Taxation – Enforcement of Civil Liabilities” in the Annual Report.
We consent to the filing with the SEC of this consent letter as an exhibit to the Annual Report. In giving such consent, we do not thereby
admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, or under the
Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated thereunder.
Yours faithfully
/s/ Maples and Calder (Hong Kong) LLP
Maples and Calder (Hong Kong) LLP

Exhibit 15.4
To
NETEASE, INC.
NetEase Building, No. 599 Wangshang Road
Binjiang District, Hangzhou
Zhejiang Province, PRC
April 15, 2025
Dear Sir/Madam:
We consent to the reference to our firm under the headings of “Enforcement of Civil Liabilities” in NETEASE, INC.’s Annual Report on
Form 20-F for year ended December 31, 2024, which will be filed with the Securities and Exchange Commission.
In giving such consent, we do not hereby admit that we come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated
thereunder.
[The remainder of this page is intentionally left blank]

[Signature Page]
Yours faithfully,
/s/ Zhong Lun Law Firm
Zhong Lun Law Firm