Morgan Stanley: NetEase (NTES.O) 4Q25 Call: Sea of Remnants Set for 3Q26 Launch; AI as Beneficiary
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Morgan Stanley's February 11, 2026, report summarized NetEase's 4Q25 earnings call, emphasizing management's view that NetEase is an early AI adopter in gaming and a beneficiary, rather than a target disrupted by AI world models. The highly anticipated title Sea of Remnants is on track to launch in 3Q26, ideally before the summer peak season. Its trailer on Bilibili has surpassed 10 million views, signaling robust player interest.
Management suggested AI world models lower production barriers but raise the bar for AAA games, making soft power—gameplay innovation and live-ops—even more scarce and valuable. NetEase's proprietary data, specific use cases, and cross-disciplinary talent form a competitive moat.
Financially, extended deferred revenue cycles reflect a structural shift driven by improved user engagement, particularly in hardcore PC games. Overseas revenue remained in the low double digits for 2025 but is expected to gradually increase as most new titles target global markets. NetEase is in talks with regulators regarding a potential dual-primary listing, passively triggered as Hong Kong trading volume exceeded 55% in 2025, though there is no firm timeline yet.
For shareholder returns, the 2025 full-year dividend payout ratio increased to 40%, supplemented by a remaining $3 billion buyback authorization. Morgan Stanley maintained its Overweight rating on NetEase with a target price of $168.00, implying a 36% upside from the February 10 closing price of $123.52.