NetEase CEO Ding Lei: AI Raises the "Success Threshold" for Leading Products and Does Not Blindly Pursue General-Purpose Large Models

Ning Lei publicly discusses the overall impact of AI on the gaming industry and NetEase for the first time.

On February 11, NetEase (Nasdaq: NTES; 09999.HK) released its Q4 financial report for last year. The report shows that NetEase’s net revenue for Q4 2025 was 27.5 billion yuan, a 3.0% year-over-year increase. Net profit attributable to shareholders was 6.24 billion yuan, down 28.8% year-over-year.

Among these, net revenue from games and related value-added services was 22 billion yuan, up 3.4%; Youdao’s net revenue was 1.6 billion yuan, up 16.8%; NetEase Cloud Music’s net revenue was 2 billion yuan, up 4.7%; and net revenue from innovation and other businesses was 2 billion yuan, a decrease of 10.4% year-over-year.

During the subsequent earnings call, regarding questions about AI technology and other topics of public concern, NetEase CEO Ning Lei stated that the market largely misunderstands the impact of Google Genie3 (Google’s latest large model) on the gaming industry. AI indeed lowers the “entry barrier” for game development, but at the same time, it greatly raises the “success threshold” for top-tier products.

“In the AI era, game production costs are decreasing, but the scarcity of ‘soft skills’ such as judgment of top gameplay, insight into user needs, and game aesthetic taste is becoming more prominent. These require deep design expertise and operational experience, forming a moat that new entrants without accumulated experience find difficult to cross,” Ning Lei said. He added that the greater significance of AI world models lies in fostering entirely new entertainment types different from traditional games, but current world models are still far from practical application.

Regarding AI investment strategies, Ning Lei stated that the focus is not on blindly pursuing general large models but on vertical domains, aiming to build “the most knowledgeable AI experts in gaming.”

He mentioned that in vertical fields, high-quality private data is more important than computing power, and application scenarios are more critical than parameter scale. It is reported that NetEase’s self-developed vertical models, based on years of accumulated gaming data, have successfully been integrated into internal AI pipelines to improve industrial efficiency, promote scalable implementation of AI-native gameplay such as intelligent NPCs and AI teammates in multiple games, and effectively convert into user retention and commercial value.

According to previous financial disclosures, NetEase’s AI-native pipelines now cover the entire production process, including concept art, modeling, animation, audio, levels, and testing, with some efficiency improvements of up to 300%. In terms of AI gameplay innovation, the mobile game “Reverse Water Cold”’s intelligent NPC system, based on reinforcement learning for intelligent decision-making, won the “First Prize of Scientific and Technological Progress” at the 2025 China Graphics and Image Society Awards.

Ning Lei stated that NetEase’s core advantage lies in its rare “multidisciplinary” talent team. “Having expertise in both algorithms and graphics engines, as well as deep cross-disciplinary understanding of game design, is key to ensuring AI technology is truly implemented and ultimately enhances gameplay. In the future, the company will continue to invest heavily in vertical models, AI-native gameplay, and cultivating multidisciplinary talent, leveraging AI technology to further expand its leadership in high-quality R&D and long-term operations.”

In response to investor questions about AI’s impact on the music industry, Ning Lei said that 2026 will be the year of AI’s breakout, leading to a flourishing and diverse music content landscape. “It’s like everyone has a digital camera; they may not take great photos, but there will be more photos overall.”

Last year’s Q4 performance in overseas markets was a highlight for NetEase’s gaming business. Following “Naraka: Bladepoint,” “Yanyun Sixteen Sounds” also achieved success internationally.

When asked by analysts about NetEase’s global talent reserves, management stated, “China has the largest number of game development talents in the world. We are very confident in cultivating high-quality creative personnel capable of producing world-class games.”

The progress and commercialization plans for the highly anticipated “Infinite” and “Sea of Oblivion” also became focal points of analyst inquiries.

The management provided updates on these products during the call. Regarding “Sea of Oblivion,” development is proceeding smoothly, with a planned official launch in the third quarter of this year. The technical testing that began on February 5 has seen enthusiastic participation from players, and the pre-release promotional videos on Bilibili have quickly surpassed ten million views. “Infinite” underwent a closed beta in January and is still being refined, with efforts to improve completeness and content richness before market release, following the scheduled plan.