NetEase Cloud Music Reports 3.4% Revenue Growth in First Half 2026, Profit Slips as Deferred Tax Credit Vanishes

On 20 August 2026, NetEase Cloud Music Inc. (HKEX: 9899) unveiled its first‑half 2026 financial results. The company earned RMB 4.0 billion in revenue, a 3.4 % rise over the RMB 3.8 billion reported a year earlier. The uptick came from a 3.4 % increase in online music services revenue—RMB 3.1 billion—and a modest rise in membership subscription income, which climbed to RMB 2.6 billion.

Gross profit grew 5.9 % to RMB 1.5 billion, pushing the gross margin to 37.2 % from 36.4 %. Analysts note that the margin lift was largely driven by the stronger online services segment. However, operating profit fell to RMB 746.2 million from RMB 844.5 million, a decline attributed to higher promotion and advertising spend aimed at acquiring new users. Adjusted operating profit, which strips out equity‑settled share‑based payments, slipped to RMB 796.7 million versus RMB 905.4 million a year earlier.

Net profit for the six months ended 30 June 2026 was RMB 809.2 million, down sharply from RMB 1.882 billion in the same period 2025. The drop is largely explained by the disappearance of a RMB 849.4 million deferred tax credit that was recognised in 2025 when the company booked deferred tax assets from cumulative tax losses of a wholly‑owned subsidiary. Adjusted net profit was RMB 859.7 million, compared with RMB 1.946 billion in 2025.

Despite the profit wobble, management highlighted that user engagement remained robust. The daily active user to monthly active user ratio stayed above 30 % and edged higher both year‑over‑year and sequentially. Average daily mobile listening time and community content interaction rates also rose. Membership renewal and retention improved, though the average revenue per paying user declined due to a shift in the subscriber mix.

NetEase Cloud Music continued to broaden its catalog through renewed deals with major labels, including Universal Music Group, Warner Music and CJ Entertainment. The platform added Chinese, Korean and Western titles, featuring new releases from artists such as Faye Wong, Lee Hyori and the K‑pop group YOUNG POSSE. In‑house releases also gained traction, with the single “12.31” receiving critical acclaim.

Product and technology updates were a key focus. The company upgraded its AI‑driven recommendation engine, Climber, and introduced AI‑inspired playlists along with a “Heartbeat Mode” page that explains recommendation logic. Player interface enhancements—such as a customisable “Diamond Player” style and full‑screen cover playback—were rolled out. Community features were strengthened with an upgraded “Listen Together” function that now supports voice comments.

In the audio‑content arena, NetEase Cloud Music expanded its audiobook and podcast offerings. New titles from publishers like Tomato Novel and COL Group were added, and the platform launched a series of music‑themed podcasts featuring artists and public figures.

The company also widened its multi‑device ecosystem. Partnerships with automotive brands such as Chery and XPeng Robotaxi extended in‑vehicle playback, while smart TV and smartwatch integrations received upgrades. The desktop recommendation experience was refreshed with new AI‑powered features.

Management will host an earnings conference call on 20 August 2026 at 7:00 p.m. Beijing/Hong Kong time, with the session available for replay until 27 August.

These results illustrate a modest revenue uptick amid a fiercely competitive Chinese streaming market, but also underscore the volatility of profit figures when large tax‑related items are removed. NetEase Cloud Music’s strategy remains anchored in content diversification, AI‑enhanced user experience, community engagement and cross‑platform expansion.

Full financial details are available on the company’s investor relations website.