NetEase Denies "AI Layoff of All Contractors," Lei Ding Raises AI Flag with 310 Billion

Text | Radar Finance Peng Cheng

Editor | Meng Shuai

Recently, news that “NetEase plans to use AI to lay off all outsourced employees” has sparked widespread attention, once again bringing this veteran internet giant into the public spotlight.

In response, NetEase clarified that the recent personnel changes are only normal business adjustments and personnel replacements for certain projects, part of the company’s daily operational management, and will not affect the overall or individual business lines’ normal operations.

Although NetEase quickly denied the rumors, it cannot be ignored that AI technology is sweeping across various industries with great momentum, bringing unprecedented transformation and opportunities, while also exerting organizational restructuring pressure on many gaming companies, including NetEase.

Notably, in the early March release of the “2026 Hurun Global Rich List,” NetEase founder Ding Lei ranked fifth among Chinese billionaires with a wealth of 310 billion yuan.

However, the latest financial report from NetEase reveals short-term performance pressures. In the fourth quarter of last year, the company’s net profit attributable to shareholders dropped nearly 30% year-on-year. Before and after the release of the financial report, international investment banks such as Goldman Sachs and UBS lowered their target prices or profit forecasts.

Ding Lei stated that looking ahead, NetEase’s various business lines will continue to focus on creating high-quality products. By building an innovative talent ecosystem, deepening cooperation with global partners, and steadily advancing AI application capabilities, the company aims to enhance the vitality of its games, provide novel product experiences, and create greater value for global players and shareholders.

Denying the “layoff of all outsourced employees” rumors: normal personnel adjustments and optimizations

The trigger for this incident was a widely circulated chat screenshot on social media.

According to Red Star News, the online chat records suggest that NetEase Interactive Entertainment has successfully experimented with using AI to write code, create art, and test, aiming to replace outsourced positions. It is expected that in April, 30-40% of such staff will be cut, and by May, up to 80% or even all outsourced staff may be laid off.

These messages quickly spread online, sparking widespread discussion. On March 18, NetEase clarified to multiple media outlets that the rumor is false. “Currently, due to project adjustments within the company, there are personnel replacements, but this is normal personnel adjustment and optimization.”

According to 21st Century Business Herald, NetEase stated that recent personnel changes are only normal business adjustments and personnel replacements for certain projects, part of daily operational management, and will not impact the overall or individual business lines’ normal operations.

Additionally, Red Star News learned from relevant channels that NetEase does have plans to adjust some basic skill positions, but not to replace all outsourced positions with AI.

Tianyancha shows that NetEase was founded by Ding Lei in Guangzhou in 1997, and was listed in the US stock market in 2000 and in Hong Kong in 2020.

In 2001, NetEase officially established its online gaming division. As the largest gaming division, the Interactive Entertainment Group has developed over 20 years, launching flagship IPs and popular products such as the “Fantasy Westward Journey” series, “Westward Journey” series, and “Onmyoji” series.

Although NetEase has denied the rumors of “using AI to lay off all outsourced employees,” the explosion of AI technology is reshaping the global wealth landscape, which is an undeniable fact.

In the recent “2026 Hurun Global Rich List” published by Hurun Research Institute, 114 billion-dollar entrepreneurs come from AI companies, including 46 new entrants. AI has become the largest source of new billion-dollar entrepreneurs.

Notably, Ding Lei, as the founder and actual controller of NetEase, has personal wealth that has long ranked among China’s top entrepreneurs, fluctuating with the company’s market value.

In this year’s “Hurun Global Rich List,” Ding Lei ranked fifth among Chinese billionaires with 310 billion yuan, behind Zhang Yiming, Zhong Shanshan, Ma Huateng, and Zeng Yuqun, with his wealth increasing by 33% compared to last year.

Short-term pressure from operating expense investment losses drags down Q4 performance

Despite Ding Lei’s substantial personal wealth, NetEase’s recent financial disclosures show the company faces short-term performance pressures.

According to the latest financial report, in Q4 last year, NetEase achieved revenue of 27.5 billion yuan, a year-on-year increase of about 3%.

On the profit side, although gross profit for the quarter increased by 8.7% to 17.7 billion yuan, with gross margin rising from 61% to around 64%, net profit attributable to shareholders plummeted 28.8% year-on-year to 6.242 billion yuan.

The company’s core business—games and related value-added services—generated 22 billion yuan in revenue, up 3.4% year-on-year but below analysts’ expectations of 23.42 billion yuan.

Caixin notes that while long-term products like “Fantasy Westward Journey” and “Identity V” performed steadily, new titles like “Yanyun Shili Sheng” and “Marvel Clash” contributed incremental revenue, but market expectations for monetization were not met. Some institutions pointed out that the slowdown in new product releases in the first half of 2026 has heightened concerns about growth momentum.

Analyzing the reasons for the decline in NetEase’s Q4 performance, the growth in operating expenses directly eroded profit margins.

In Q4, NetEase’s operating costs were 9.9 billion yuan, down from 10.2 billion and 10.5 billion yuan in the previous quarter and same period last year, respectively.

The decrease was mainly due to lower revenue sharing, while the year-on-year decrease was primarily due to reduced costs for agency game copyrights and revenue sharing.

Meanwhile, operating expenses increased by 10.9% to 9.4 billion yuan from the same period last year, mainly due to increased marketing investments in online games. In the highly competitive gaming industry, high user acquisition costs have become a common challenge.

Additionally, in Q4 last year, NetEase recorded about 2.2 billion yuan in impairment losses and exchange losses, compared to about 1 billion yuan in gains in the same period last year, which also weighed on net profit.

Looking at the full year, NetEase expects 2025 revenue of 112.6 billion yuan, up 6.96%, and net profit attributable to shareholders of 33.76 billion yuan, up 13.68%.

The financial report also repeatedly mentions AI. NetEase states that after years of focus and investment, it has achieved comprehensive AI application deepening, empowering game development and gameplay innovation throughout the process, covering art, design, programming, animation, and quality assurance.

The company emphasizes that these initiatives not only significantly enhance its large-scale, scalable production capacity but also ensure the smooth implementation of AI-native gameplay in multiple flagship products.

Multiple institutions slightly adjust target prices, with AI potentially driving organizational restructuring pressures

Notably, several international investment banks recently adjusted their profit forecasts and target prices for NetEase.

Before the financial report, in early February, Goldman Sachs issued a research report indicating that recent pressure on NetEase’s stock price may stem from market concerns over slowing game revenue growth, high base effects in Q4 2025 and Q1 2026 profits, and potential impacts of the Genie 3/AI game creation tools.

Goldman Sachs slightly lowered its revenue forecasts for 2025-2027 by about 1% to reflect the pipeline’s focus on the second half of this year and next; similarly, profit forecasts for 2025-2027 were reduced by about 3% due to slower profit margin expansion under high base effects.

However, Goldman Sachs reaffirmed its “Buy” rating on NetEase, with the H-share target price slightly lowered from HKD 266 to HKD 264, and the US stock target price from $170 to $169.

After the earnings release, Morgan Stanley issued a report stating that NetEase’s Q4 2025 revenue increased only 3% year-on-year to 27.5 billion yuan, with online game revenue up 4% to 21.3 billion yuan, below their expectations due to slower revenue recognition.

The bank estimates total game revenue grew 10% annually, a healthy increase, with deferred revenue rising 34% to 20.5 billion yuan, hitting a new high. Non-GAAP net profit fell 27% year-on-year to 7.1 billion yuan, 25% below expectations.

UBS’s report indicates that NetEase’s Q4 2025 revenue and operating profit were 5% below market consensus, and adjusted net profit was 23% lower due to investment losses.

The bank believes that although the performance appears weak on the surface, it is offset by three positive factors: strong deferred revenue growth of 34%, progress in dual listing plans, and management’s constructive outlook on AI applications.

UBS slightly lowered its US stock target price from $185 to $180 and its Hong Kong stock target price to HKD 280.8, corresponding to a 2026 forecast P/E ratio of 21, maintaining a “Buy” rating.

Besides short-term performance pressures, the impact of AI technology on organizational structure has also attracted significant attention. While NetEase denies the “AI to lay off all outsourced employees” rumor, it states that “internal personnel replacements are indeed happening due to project adjustments.”

Combining Goldman Sachs’s mention of the potential impact of Genie 3/AI game creation tools and the current wealth creation driven by AI revealed in the 2026 Hurun Global Rich List, traditional gaming giants are likely facing organizational restructuring pressures caused by technological iteration.

Notably, some industry insiders point out that the rumor has obvious logical flaws. While AI development has indeed improved efficiency in certain basic tasks, outsourced roles such as technical support, art outsourcing, operations review, administrative logistics, and others involve complex execution and human emotional logic that cannot be fully replaced by AI at present.

The idea of “AI instantly taking over and laying off all outsourced staff” not only exaggerates current AI capabilities but also contradicts the operational realities and common sense of large internet companies.

As AI technology continues to develop inexorably, what kind of results will NetEase deliver in the future? Radar Finance will continue to monitor.