Ding Lei returns to the front line, NetEase stabilizes its "empire"

On the evening of February 11th, NetEase (NTES.NASDAQ; 09999.HK) founder Ding Lei announced the substantial results of his “return” after a year through a financial report.

The financial data shows that in 2025, NetEase achieved total revenue of 112.6 billion yuan, a 7% increase year-over-year; net profit attributable to shareholders was 33.8 billion yuan, up 13.8%. Specifically, net revenue from games and related value-added services was 92.1 billion yuan, with online game net revenue reaching 89.6 billion yuan, an 11% increase.

The past year coincided with what is widely recognized as Ding Lei’s return to the core power center. Starting at the end of 2024, Ding Lei significantly increased his control over frontline operations, strictly controlled expenses, streamlined the game lineup, and focused on high-quality, evergreen games.

Accompanying this were a series of personnel changes and organizational adjustments, with many veteran executives leaving. These included Li Kaiming, head of NetEase Interactive Entertainment’s Tenth Business Unit, who developed “Rate of Land” and “Endless Lagrange,” as well as Jin Tao, head of NetEase’s “Onmyoji” division. In December 2025, Ding Yingfeng, Executive Vice President and head of the Interactive Entertainment Division, also retired. Ding Yingfeng had led the design and development of several iconic NetEase products, including “Fantasy Westward Journey.”

From shrinking the scope to consolidating internal factions, Ding Lei proved the value of his “iron-fisted” approach within a year. As the crisis subsided, NetEase’s focus gradually shifted. During the conference call after the earnings release, Ding Lei spent most of his time discussing new game launch plans and how “AI integration capabilities” will replace production capacity, becoming a new moat for gaming giants.

“In the AI era, the cost of game production will decrease, but the judgment of top-level gameplay, insights into user needs, and aesthetic taste—these soft skills—are becoming increasingly scarce,” Ding Lei said.

Ding Lei’s Firm Reforms

The failure of “The Legend of the Condor Heroes” in 2024 directly triggered Ding Lei’s return.

In March 2024, NetEase launched “The Legend of the Condor Heroes,” an open-world martial arts game developed over six years with a 1 billion yuan investment. This game was expected to be NetEase’s brightest star in 2024, but it unexpectedly faced a setback. Just two months after launch, “The Legend of the Condor Heroes” announced a complete overhaul, releasing version 2.0 in March 2025, and ceasing operations in November 2025.

The underperformance of the new game, combined with the natural decline of older titles, caused significant losses for NetEase. In 2024, NetEase’s revenue was 105.3 billion yuan, only a 1.8% increase year-over-year, marking the slowest growth in nearly 20 years. According to the “2024 China Gaming Industry Report,” the national gaming market sales increased by 7.53% that year, far exceeding NetEase’s growth rate.

Faced with this major setback, Ding Lei abandoned his previous lenient management style and returned to frontline leadership, initiating a series of sweeping reforms. These included strict cost controls, reducing reliance on paid user acquisition, and closing several overseas studios, including Ouka in Japan, Worlds Untold in Canada, Jar of Sparks in the US, among others. The strategic investment department was also significantly downsized.

Meanwhile, NetEase redirected resources toward proven, evergreen high-quality games, shutting down many underperforming titles. According to incomplete statistics from Times Weekly, in 2025, NetEase shut down at least 14 games, including “The Legend of the Condor Heroes,” “Dead by Daylight Mobile,” “Meteor Shower Heroes,” “Non-Human School,” and “Pokémon Adventure,” many of which had once been hugely popular.

At the 2024 annual financial report briefing, Ding Lei openly stated: if a project does not meet user needs, they will decisively stop it; if a project has excellent quality and efficiency, more resources will be invested.

Ding Lei’s decisive actions helped stabilize NetEase, with many old games experiencing varying degrees of revival. For example, “Fantasy Westward Journey,” which has been operating for 23 years, saw record revenue after launching the “Enjoyable Server”; the SLG game “Rate of Land,” launched in 2015, introduced a new “Fun Mode” to attract more new users and sustain DAU growth.

The return of Blizzard games also contributed significantly to NetEase’s growth. According to NetEase, Blizzard’s overall revenue in 2025 hit a new high. Additionally, NetEase made breakthroughs in overseas markets: “Yanyun Sixteen Sounds” surpassed 80 million global users, and “Marvel Contest of Champions” ranked among Steam’s annual platinum bestsellers.

Through these efforts, NetEase successfully maintained its position.

NetEase Still Has Work to Do

Reforms are ongoing, and NetEase still needs to keep pushing forward.

Refined management of existing titles can help stabilize the overall performance, but to reach new heights, NetEase needs more blockbuster hits. In 2025, the company has yet to launch a new major hit. The best-performing new game was “Marvel Contest of Champions,” released in December 2024.

Furthermore, the gaming industry faces disruptions from AI. At the end of January, Google released the generative world model Genie 3, which caused industry upheaval, leading to sharp sell-offs in US gaming and advertising tech stocks. Market concerns center on whether AI can automatically generate game worlds and basic interactions, potentially drastically reducing game development costs, and diminishing the importance of traditional game engines and development teams, ultimately weakening the moat of existing game companies.

As a result, during the 2025 earnings call, most investor questions focused on these two areas. Regarding new game launches, Ding Lei revealed that the self-developed open-world naval game “Sea of Oblivion” is progressing smoothly, with a technical test starting on February 5th, and planned to launch in the third quarter of 2026; the city-themed open-world RPG “Infinite” also completed closed testing in January, with positive feedback.

“Based on retention data and content evaluations, our current product direction is sufficiently innovative and attractive. We are still refining these products,” Ding Lei said.

Addressing the challenges posed by AI, Ding Lei spent more time responding: “We believe the market has largely misunderstood the impact of Google’s models on the gaming industry.”

He pointed out that, from handheld cameras to smartphones, the barrier to video creation has been decreasing, but Hollywood’s entry threshold has been rising. AI has indeed lowered the entry barrier for game creation but has simultaneously raised the success threshold for top-tier products.

The same applies to gaming. Ding Lei believes that while AI tools will promote the explosion of creative content, for commercial blockbusters, the core barrier has shifted from pure capacity to integration ability. How to seamlessly combine AI with complex digital systems, long-term economic models, and deep social ecosystems requires profound game design and operational experience—an insurmountable moat for inexperienced newcomers.

Moreover, current world models are still far from practical application. Ding Lei noted that games require certainty, while world models are probabilistic. Their advantage lies in providing high creative freedom, but their disadvantages include high uncertainty, difficulty in control, latency issues, and high costs, making them currently unsuitable for traditional games.

“Of course, we also see the rapid iteration and evolution of these models—this is just the beginning. We believe that for talented teams, this is a rare opportunity. NetEase will actively embrace these cutting-edge technologies and explore new interactive experiences,” Ding Lei said.