By Yi Wei Wong


NetEase Inc. shares rebounded Friday, after the company reported solid third-quarter results and won regulatory approval for a game title, helping investors shrug off the end of its licensing partnership with Activision Blizzard Inc.

The Chinese internet-technology company's Hong Kong-listed shares rose as much as 8.0% and were recently 6.3% higher at 110.00 Hong Kong dollars (US$14.05).

Shares closed 9.1% lower at HK$103.50 Thursday after Blizzard Entertainment Inc., an Activision Blizzard subsidiary, said licensing agreements with NetEase for several of its game titles in China won't be renewed after they expire in Jan. 23.

NetEase said after Thursday's market close that its third-quarter net income attributable to shareholders more than doubled from a year earlier to 6.70 billion yuan (US$936.1 million).

The Chinese company also said that the expiration of some of its agreements with Blizzard won't have a material impact on its results, as the affected games contributed low-single-digit shares to its revenue and income in 2021 and the first nine months of 2022.

Separately, China's National Press and Publication Administration released the approval of 70 domestic games Thursday, including one for NetEase.

Although the end of the Blizzard partnership is a pity, it could be positive for NetEase, as its licensing deals with Blizzard carry a lower profit margin relative to other games in NetEase's portfolio, Citi analysts said in a note.

NetEase also managed to keep its partnership to co-develop and publish the game "Diablo Immortal," which is covered under a separate agreement, the analysts said. They raise their 2022 net profit forecast for NetEase by 13.3%, saying that the termination of some Blizzard deals had a "limited impact on profits given low margin licensing titles."

In a Nomura research note, analysts Jialong Shi and Thomas Shen said NetEase's earnings beat market estimates by 51%, thanks to the group's higher investment income and foreign-exchange gains.

Regarding the nonrenewal of Blizzard game titles, Nomura has a positive outlook on NetEase's "strong game portfolio, underpinned by its solid in-house production capacities."

"We expect little impact in both near and long term on NetEase's gaming business as a result of the loss of Activision Blizzard's game licenses," the analysts said.


Write to Yi Wei Wong at yiwei.wong@wsj.com


Corrections & Amplifications


This article was corrected at 11:18 p.m. ET to reflect that NetEase Inc. won Chinese regulatory approval for a new game title. The original article incorrectly said that more than one NetEase game title was approved in the lede and sixth paragraph. The error also appeared in the headline.

(END) Dow Jones Newswires

11-17-22 2309ET