During the Lunar New Year holiday, online gaming is an ideal leisure activity choice, which is favorable for gaming stocks. According to data from mainland China, last year the domestic gaming market's actual sales revenue reached 350.789 billion yuan, setting a historical record and reflecting a bright outlook for gaming stocks. Although NetEase (9999) experienced a decline in profits in the fourth quarter last year, the drop in stock price has already reflected the situation, presenting an opportunity to buy at a low. XD INC (2400) showed strong profit growth in the first half of last year and is worth paying attention to.
NetEase's profit performance in the first half and third quarter of last year was ideal, but the performance in the fourth quarter deteriorated. As of the end of the fourth quarter on December 31, 2025, the group's net profit was 6.242 billion yuan, a year-on-year decrease of 28.8%, falling short of market expectations; the net profit per share was 1.96 yuan, with a fourth-quarter dividend of 0.232 USD per share. The cumulative annual net profit was 33.76 billion yuan, an increase of 13.7%; the net profit per share was 10.59 yuan. The net revenue for the fourth quarter was 27.547 billion yuan, a year-on-year increase of 3%. Among them, the net revenue from games and related value-added services was 22 billion yuan, a year-on-year increase of 3.4%; Youdao's net revenue was 1.6 billion yuan, a year-on-year increase of 16.8%; NetEase Cloud Music's net revenue was 2 billion yuan, a year-on-year increase of 4.7%; and the net revenue from innovation and other businesses was 2 billion yuan, a year-on-year decrease of 10.4%.
<h2>NetEase Expected to be Included in the Shanghai-Shenzhen-Hong Kong Stock Connect</h2>
Fortunately, the group's gaming business performed well. Earlier, American toy manufacturer Mattel invested 159 million USD to acquire 50% of the shares of the joint venture company held by NetEase. This joint venture was established in 2018 and has since launched four games based on Mattel's intellectual property, including Uno and Skip-Bo card games. These games have accumulated 550 million downloads, with 20 million monthly active users.
In addition, NetEase is expected to meet the dual primary listing standards of the Hong Kong Stock Exchange, as the trading volume of its shares listed in Hong Kong has accounted for 57% of its global trading volume, exceeding the 55% threshold required for dual primary listing on the Hong Kong Stock Exchange. If NetEase successfully obtains dual primary listing status, it will be included in the Shanghai-Shenzhen-Hong Kong Stock Connect, opening up the northbound capital inflow.
NetEase's financial data for the fiscal year 2025 remains ideal, with a return on equity of 21% and a return on total assets of 15%. The group's debt is low, with a total assets to shareholders' equity ratio of about 4%. Before the Spring Festival holiday, NetEase's stock closed at 187.3 HKD, up 0.8%.
As for XD INC, it has several successful games such as &#34;Etheria: Restart&#34; and &#34;Torchlight,&#34; with strong profit growth in the first half of the year, earning 755 million yuan, a year-on-year increase of 268%; earnings per share were 1.57 yuan, with no dividend declared. During the period, the revenue was 3.082 billion yuan, a year-on-year increase of 38.8%; gross profit increased by 50.5% to 2.253 billion yuan, with a gross profit margin rising to 73.1% year-on-year. In the first half of the year, gaming business revenue increased by 39.4% to 2.071 billion yuan; revenue from the TapTap platform increased by 37.6% to 1.01 billion yuan
<h2>Citigroup Optimistic About XD INC's Game Performance</h2>
The group previously invested USD 37.18 million to acquire all rights to the game and the intellectual property of &#34;Torchlight&#34; from Golden Arc. The group believes that with complete ownership of the &#34;Torchlight&#34; intellectual property, it will be able to independently develop sequels, derivative works, and cross-platform products.
Additionally, the group announced last month that it has established an automatic share repurchase plan with an independent brokerage, aiming to repurchase up to HKD 400 million worth of shares by June 4, 2026. This move is expected to support the stock price.
Citigroup is optimistic about XD INC's game performance exceeding market expectations and believes that the group can further consolidate market confidence through enhanced shareholder returns and active product development, giving a target price of HKD 82 with a &#34;Neutral&#34; rating. XD INC's stock closed at HKD 80.85 before the Lunar New Year holiday, up 3.5%.
JP Morgan has lowered its earnings per share forecast for NetEase by 3% this year, reducing the target price from HKD 295 to HKD 280, while reiterating that NetEase is the top choice in China's digital entertainment industry with an &#34;Overweight&#34; rating

ESPO

GAMR

517770

159869

HERO

516010

02400

The long holiday is favorable for gaming stocks. NetEase (9999) saw a decline in profits in the fourth quarter of last year, but the stock price has already reflected the situation, making it suitable for bottom fishing. XD INC (2400) experienced strong growth in interim profits. NetEase's annual net profit was HKD 33.76 billion, with a return on equity of 21%. NetEase is expected to meet the dual primary listing standards of the Hong Kong Stock Exchange, and if successful, it will be included in the Shanghai-Hong Kong Stock Connect. Before the Spring Festival holiday, NetEase's stock price rose to HKD 187.3

Stheadline

VanEck Video Gaming and eSport ETF

Wedbush ETFMG Video Game Tech ETF

AXA SPDB CSI Hugangshen Game and Culture Media ETF

ChinaAMC CSI Animation Game ETF

VanEck Gaming ETF

Global X Video Games & Esports ETF

Guotai CSI Animation Game ETF

XD INC

NetEase

NTES-S

The long holiday is favorable for gaming stocks, NetEase may meet dual primary listing standards, major firms are optimistic about XD INC