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Segment Information

12 Months Ended

Dec. 31, 2022

Segment Information

Segment Information

28. Segment Information

(a) Description of segments

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision making group, in deciding how to allocate resources and in assessing performance. The Group’s CODM is the Chief Executive Officer.

The Group’s organizational structure is based on a number of factors that the CODM uses to evaluate, view and run its business operations which include, but are not limited to, customer base, homogeneity of products and technology. The Group’s operating segments are based on this organizational structure and information reviewed by the Group’s CODM to evaluate the operating segment results.

Effective in the fourth quarter of 2021, the Group changed its segment disclosure to separately report the results of Cloud Music. Effective in the second quarter of 2022, the Company renamed its “online game services” segment as “games and related value-added services,” and transferred certain business lines that are related or ancillary to its games from “innovative businesses and others” to “games and related value-added services,” including the NetEase CC live streaming service and other value-added services. As a result, the Group now reports segments as games and related value-added services, Youdao, Cloud Music and innovative businesses and others. This change in segment reporting aligns with the manner in which the Group’s CODM currently receives and uses financial information to allocate resources and evaluate the performance of reporting segments. This change in segment presentation does not affect consolidated balance sheets, consolidated statements of operations and comprehensive income or consolidated statements of cash flows. The Group retrospectively recast prior years segment information, to conform to current year presentation.

(b) Segment data

The table below provides a summary of the Group’s operating segment results for the years ended December 31, 2020, 2021 and 2022. The Group does not allocate any operating costs or assets to its business segments as the Group’s CODM does not use this information to measure the performance of the operating segments. There was no significant transaction between reportable segments for the years ended December 31, 2020, 2021 and 2022 (in thousands).

​

​	​	​	​	​	​	​
​	​	For the year ended December 31,
​		2020		2021		2022
​	​	RMB	​	RMB	​	RMB
Net revenues:	​	​	​	​	​	​
Games and related value-added services		58,719,895	​	67,819,288	​	74,566,471
Youdao		3,167,515	​	5,354,357	​	5,013,182
Cloud Music	​	4,895,731	​	6,997,622	​	8,992,221
Innovative businesses and others		6,883,992	​	7,434,759	​	7,923,935
Total net revenues		73,667,133	​	87,606,026	​	96,495,809
​	​	​	​	​	​	​
Cost of revenues:	​	​	​	​	​	​
Games and related value-added services		(22,730,558)	​	(26,007,412)	​	(27,784,419)
Youdao		(1,713,229)	​	(2,448,146)	​	(2,430,738)
Cloud Music	​	(5,491,066)	​	(6,854,948)	​	(7,699,103)
Innovative businesses and others		(4,748,878)	​	(5,324,719)	​	(5,815,423)
Total cost of revenues		(34,683,731)	​	(40,635,225)	​	(43,729,683)
​	​	​	​	​	​	​
Gross profit:	​	​	​	​	​	​
Games and related value-added services		35,989,337	​	41,811,876	​	46,782,052
Youdao		1,454,286	​	2,906,211	​	2,582,444
Cloud Music	​	(595,335)	​	142,674	​	1,293,118
Innovative businesses and others		2,135,114	​	2,110,040	​	2,108,512
Total gross profit		38,983,402	​	46,970,801	​	52,766,126

​

The following table set forth the disaggregation of net revenues by timing of revenue recognition for the years ended December 31, 2020, 2021 and 2022 (in thousands):

​

​	​	​	​	​	​	​
​	​	For the year ended December 31,
​		2020		2021		2022
​	​	RMB	​	RMB	​	RMB
A point in time	​	15,911,575	​	19,581,668	​	23,322,675
Over time	​	57,755,558	​	68,024,358	​	73,173,134
Total Net revenue		73,667,133		87,606,026		96,495,809

​

The following table presents the total depreciation expenses of property and equipment recorded under cost of revenues by segment for the years ended December 31, 2020, 2021 and 2022 (in thousands):

​

​	​	​	​	​	​	​
​	​	For the year ended December 31,
​		2020		2021		2022
​	​	RMB	​	RMB	​	RMB
Games and related value-added services		270,457	​	278,780	​	339,300
Youdao		7,239	​	9,330	​	11,610
Cloud Music	​	6,878	​	3,827	​	6,044
Innovative businesses and others		189,536	​	114,442	​	129,693
Total depreciation expenses of property and equipment		474,110	​	406,379	​	486,647

​

As substantially all of the Group’s long-lived assets are located in the PRC and substantially all of the Group’s revenue of reportable segments are derived from China based on the geographical locations where services and products are provided to customers, no geographical information is presented.

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- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

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