Blab Music
NetEase Cloud Music Reports Modest Revenue Growth but Sharp Profit Decline in First Half 2026
On August 20 2026, NetEase Cloud Music Inc. (HKEX: 9899) announced its first‑half financial results. Revenue edged up 3.4 % year‑on‑year to RMB 3,958 million, yet net profit plunged 57 % to RMB 809 million. The sharp drop was largely due to the disappearance of a RMB 849 million deferred tax credit that had been recognised in the 2025 reporting period.
The company’s top line was powered by its core online‑music services, which grew 3.4 % to RMB 3,127 million. Membership‑subscription revenue increased modestly to RMB 2,600 million from RMB 2,500 million a year earlier, while social‑entertainment services and other revenue rose 3.7 % to RMB 891 million.
Gross profit climbed to RMB 1,474 million, up 5.9 % from RMB 1,392 million, lifting the gross margin to 37.2 % from 36.4 %. The improvement was driven mainly by higher online‑music‑service revenue. Operating profit, however, fell to RMB 746 million from RMB 844 million, reflecting higher promotion and advertising costs aimed at brand awareness and user acquisition.
Adjusted figures, which exclude equity‑settled share‑based payments, showed operating profit at RMB 796 million and net profit at RMB 860 million—down from RMB 905 million and RMB 1,946 million, respectively, in the same period last year.
The company clarified that the pronounced profit decline stemmed from the loss of the deferred tax credit. The RMB 849 million credit had arisen from deferred tax assets tied to cumulative tax losses of a wholly‑owned subsidiary. When those losses were finally applied against taxable income in 2026, the credit was eliminated.
Beyond the numbers, NetEase Cloud Music stressed its ongoing commitment to strengthening its core online‑music business. The platform continued to prioritize user experience, distinctive content, and community engagement. Daily active users and the DAU/MAU ratio remained above 30 %, both rising sequentially. Average daily mobile listening time and community‑content interaction rates also climbed.
Content strategy was anchored in renewing partnerships with major labels such as Universal Music Group, Warner Music and CJ Entertainment, while expanding the catalogue with Chinese, Korean and Western titles. The company highlighted the success of original artist Gareth.T’s single “Glass” (《玻璃》), which surpassed 100 million cumulative plays on the platform, and promoted in‑house releases like “12.31”.
Product innovation centered on AI‑driven recommendation. NetEase upgraded its Climber model, launched an AI‑inspired playlist feature, a new player interface, and an “AI‑Mood Tuner” function. Community features were broadened through an enhanced “Listen Together” function that added voice comments.
Membership revenue grew steadily, driven by an expanding subscriber base, though average revenue per paying user diluted slightly because of changes in the subscriber mix. The company said it was refining membership benefits around content, features and artist‑related offerings.
The platform also widened its audio‑content library, adding audiobooks, podcasts and radio dramas. Partnerships with domestic copyright organisations such as Tomato Novel and COL Group were cited as part of this expansion.
Looking ahead, NetEase Cloud Music plans to keep investing in content, product features and community engagement while pursuing cost optimisation to improve profitability. The company will host an earnings conference call on August 20 2026 at 7:00 p.m. Beijing/Hong Kong time.
These results illustrate a modest revenue uptick amid a fiercely competitive Chinese streaming market, but also underscore the volatility of profit when large non‑recurring tax items are involved. The company’s focus on AI recommendation, independent‑artist support and cross‑platform integration signals its strategy for long‑term platform value.
The company’s top line was powered by its core online‑music services, which grew 3.4 % to RMB 3,127 million. Membership‑subscription revenue increased modestly to RMB 2,600 million from RMB 2,500 million a year earlier, while social‑entertainment services and other revenue rose 3.7 % to RMB 891 million.
Gross profit climbed to RMB 1,474 million, up 5.9 % from RMB 1,392 million, lifting the gross margin to 37.2 % from 36.4 %. The improvement was driven mainly by higher online‑music‑service revenue. Operating profit, however, fell to RMB 746 million from RMB 844 million, reflecting higher promotion and advertising costs aimed at brand awareness and user acquisition.
Adjusted figures, which exclude equity‑settled share‑based payments, showed operating profit at RMB 796 million and net profit at RMB 860 million—down from RMB 905 million and RMB 1,946 million, respectively, in the same period last year.
The company clarified that the pronounced profit decline stemmed from the loss of the deferred tax credit. The RMB 849 million credit had arisen from deferred tax assets tied to cumulative tax losses of a wholly‑owned subsidiary. When those losses were finally applied against taxable income in 2026, the credit was eliminated.
Beyond the numbers, NetEase Cloud Music stressed its ongoing commitment to strengthening its core online‑music business. The platform continued to prioritize user experience, distinctive content, and community engagement. Daily active users and the DAU/MAU ratio remained above 30 %, both rising sequentially. Average daily mobile listening time and community‑content interaction rates also climbed.
Content strategy was anchored in renewing partnerships with major labels such as Universal Music Group, Warner Music and CJ Entertainment, while expanding the catalogue with Chinese, Korean and Western titles. The company highlighted the success of original artist Gareth.T’s single “Glass” (《玻璃》), which surpassed 100 million cumulative plays on the platform, and promoted in‑house releases like “12.31”.
Product innovation centered on AI‑driven recommendation. NetEase upgraded its Climber model, launched an AI‑inspired playlist feature, a new player interface, and an “AI‑Mood Tuner” function. Community features were broadened through an enhanced “Listen Together” function that added voice comments.
Membership revenue grew steadily, driven by an expanding subscriber base, though average revenue per paying user diluted slightly because of changes in the subscriber mix. The company said it was refining membership benefits around content, features and artist‑related offerings.
The platform also widened its audio‑content library, adding audiobooks, podcasts and radio dramas. Partnerships with domestic copyright organisations such as Tomato Novel and COL Group were cited as part of this expansion.
Looking ahead, NetEase Cloud Music plans to keep investing in content, product features and community engagement while pursuing cost optimisation to improve profitability. The company will host an earnings conference call on August 20 2026 at 7:00 p.m. Beijing/Hong Kong time.
These results illustrate a modest revenue uptick amid a fiercely competitive Chinese streaming market, but also underscore the volatility of profit when large non‑recurring tax items are involved. The company’s focus on AI recommendation, independent‑artist support and cross‑platform integration signals its strategy for long‑term platform value.
