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Document and Entity Information	12 Months Ended
Document and Entity Information	Dec. 31, 2017 shares
Document and Entity Information
Entity Registrant Name	NetEase, Inc.
Entity Central Index Key	0001110646
Document Type	20-F
Document Period End Date	Dec. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	3,283,217,456
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY

Consolidated Balance Sheets ¥ in Thousands, $ in Thousands	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)
Current assets:
Cash and cash equivalents	$ 424,841	¥ 2,764,140	¥ 5,439,499
Time deposits	4,703,652	30,603,369	19,361,098
Restricted cash	910,949	5,926,906	3,473,273
Accounts receivable, net	556,342	3,619,725	4,251,297
Inventories, net	841,481	5,474,929	1,578,130
Prepayments and other current assets	586,514	3,816,028	3,697,952
Short-term investments	1,497,420	9,742,663	11,582,116
Total current assets	9,521,199	61,947,760	49,383,365
Non-current assets:
Property, equipment and software, net	579,335	3,769,326	2,419,510
Land use right, net	91,185	593,279	588,887
Deferred tax assets	126,569	823,495	560,323
Time deposits	15,370	100,000	550,000
Restricted cash	31	200	2,060,000
Long-term investments	412,643	2,684,776	1,970,027
Other long-term assets	170,998	1,112,579	499,748
Total non-current assets	1,396,131	9,083,655	8,648,495
Total assets	10,917,330	71,031,415	58,031,860
Current liabilities:
Accounts payable (including accounts payable of the consolidated VIEs without recourse to the primary beneficiaries of RMB917,264 and RMB941,358 as of December 31, 2016 and 2017, respectively)	375,410	2,442,531	1,396,187
Salary and welfare payables (including salary and welfare payables of the consolidated VIEs without recourse to the primary beneficiaries of RMB89,578 and RMB106,265 as of December 31, 2016 and 2017, respectively)	336,460	2,189,110	1,491,448
Taxes payable (including taxes payable of the consolidated VIEs without recourse to the primary beneficiaries of RMB43,309 and RMB22,058 as of December 31, 2016 and 2017, respectively)	240,489	1,564,692	1,722,501
Short-term loans	1,018,014	6,623,502	3,815,691
Deferred revenue (including deferred revenue of the consolidated VIEs without recourse to the primary beneficiaries of RMB7,223,764 and RMB5,853,904 as of December 31, 2016 and 2017, respectively)	958,758	6,237,969	7,531,238
Accrued liabilities and other payables (including accrued liabilities and other payables of the consolidated VIEs without recourse to the primary beneficiaries of RMB1,697,195 and RMB1,966,436 as of December 31, 2016 and 2017, respectively)	721,195	4,692,310	3,219,419
Total current liabilities	3,650,326	23,750,114	19,176,484
Long-term payable:
Deferred tax liabilities	32,771	213,215	392,235
Other long-term payable (including long-term payable of the consolidated VIEs without recourse to the primary beneficiaries of nil and RMB7,500 as of December 31, 2016 and 2017, respectively)	2,805	18,250	200
Total liabilities	3,685,902	23,981,579	19,568,919
Commitments and contingencies (See Note 21)
Redeemable noncontrolling interests	94,477	614,696
Shareholders' equity:
Ordinary shares, US$0.0001 par value: 1,000,300,000 shares authorized, 3,281,480 shares issued and outstanding as of December 31, 2016 and 3,283,217 shares issued and outstanding as of December 31, 2017	412	2,678	2,676
Additional paid-in capital	269,499	1,753,439	1,637,953
Statutory reserves	185,393	1,206,224	1,160,161
Accumulated other comprehensive income	5,623	36,585	61,479
Retained earnings	6,567,954	42,733,081	35,328,812
NetEase, Inc's shareholders' equity	7,028,881	45,732,007	38,191,081
Noncontrolling interests	108,070	703,133	271,860
Total shareholders' equity	7,136,951	46,435,140	38,462,941
Total liabilities, redeemable noncontrolling interests and shareholders' equity	$ 10,917,330	¥ 71,031,415	¥ 58,031,860

Consolidated Balance Sheets (Parenthetical) shares in Thousands, $ in Thousands	Dec. 31, 2017 USD ($) $ / shares shares	Dec. 31, 2017 CNY (¥) shares	Dec. 31, 2016 $ / shares	Dec. 31, 2016 CNY (¥) shares
Accounts payable of the consolidated VIEs without recourse to the primary beneficiaries	$ 375,410	¥ 2,442,531,000		¥ 1,396,187,000
Salary and welfare payables of the consolidated VIEs without recourse to the primary beneficiaries	336,460	2,189,110,000		1,491,448,000
Taxes payable of the consolidated VIEs without recourse to the primary beneficiaries	240,489	1,564,692,000		1,722,501,000
Deferred revenue of the consolidated VIEs without recourse to the primary beneficiaries	958,758	6,237,969,000		7,531,238,000
Accrued liabilities and other payables of the consolidated VIEs without recourse to the primary beneficiaries	721,195	4,692,310,000		3,219,419,000
Long-term payable of the consolidated VIEs without recourse to the primary beneficiaries	$ 2,805	¥ 18,250,000		¥ 200,000
Ordinary shares, US$0.0001 par value (in dollars per share) \| $ / shares	$ 0.0001		$ 0.0001
Ordinary shares, shares authorized \| shares	1,000,300,000	1,000,300,000		1,000,300,000
Ordinary shares, shares issued \| shares	3,283,217	3,283,217		3,281,480
Ordinary shares, shares outstanding \| shares	3,283,217	3,283,217		3,281,480
Primary Beneficiary Consolidated VIEs
Accounts payable of the consolidated VIEs without recourse to the primary beneficiaries		¥ 941,358,000		¥ 917,264,000
Salary and welfare payables of the consolidated VIEs without recourse to the primary beneficiaries		106,265,000		89,578,000
Taxes payable of the consolidated VIEs without recourse to the primary beneficiaries		22,058,000		43,309,000
Deferred revenue of the consolidated VIEs without recourse to the primary beneficiaries		5,853,904,000		7,223,764,000
Accrued liabilities and other payables of the consolidated VIEs without recourse to the primary beneficiaries		1,966,436,000		1,697,195,000
Long-term payable of the consolidated VIEs without recourse to the primary beneficiaries		¥ 7,500,000		¥ 0

Consolidated Statements of Operations and Comprehensive Income ¥ in Thousands, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) $ / shares shares	Dec. 31, 2017 CNY (¥) ¥ / shares shares	Dec. 31, 2016 CNY (¥) ¥ / shares shares	Dec. 31, 2015 CNY (¥) ¥ / shares shares
Net revenues:
Services	$ 6,555,951	¥ 42,654,982	¥ 33,748,455	¥ 21,685,341
Product	1,759,377	11,447,037	4,430,389	1,117,554
Total net revenues	8,315,328	54,102,019	38,178,844	22,802,895
Cost of revenues
Services	(2,726,758)	(17,741,107)	(12,602,876)	(8,345,541)
Product	(1,605,862)	(10,448,219)	(3,912,156)	(1,053,719)
Total Cost of revenues	(4,332,620)	(28,189,326)	(16,515,032)	(9,399,260)
Gross profit	3,982,708	25,912,693	21,663,812	13,403,635
Operating expenses:
Selling and marketing expenses	(1,069,362)	(6,957,596)	(4,481,815)	(2,958,229)
General and administrative expenses	(373,462)	(2,429,858)	(1,506,154)	(1,014,395)
Research and development expenses	(671,876)	(4,371,428)	(3,046,979)	(2,158,888)
Total operating expenses	(2,114,700)	(13,758,882)	(9,034,948)	(6,131,512)
Operating profit	1,868,008	12,153,811	12,628,864	7,272,123
Other income/(expenses):
Investment income, net	55,656	362,113	200,333	62,341
Interest income	102,566	667,323	541,969	596,930
Exchange gains/(losses)	(68,983)	(448,827)	146,510	133,776
Other, net	42,586	277,080	377,685	45,138
Income before tax	1,999,833	13,011,500	13,895,361	8,110,308
Income tax	(332,349)	(2,162,363)	(2,102,498)	(1,273,408)
Net income	1,667,484	10,849,137	11,792,863	6,836,900
Net income attributable to noncontrolling interests	(19,443)	(126,502)	(188,343)	(101,792)
Net income attributable to redeemable noncontrolling interests	(2,259)	(14,696)
Net income attributable to the NetEase, Inc.'s shareholders	1,645,782	10,707,939	11,604,520	6,735,108
Net income	1,667,484	10,849,137	11,792,863	6,836,900
Other comprehensive income
Unrealized gains/(losses) on available-for-sale securities, net of tax	(3,584)	(23,321)	(232,633)	27,452
Reclassification adjustment for losses on available-for-sale securities recorded in net income, nil of tax \| ¥			266,660
Foreign currency translation adjustment	(242)	(1,573)
Total other comprehensive income	(3,826)	(24,894)	34,027	27,452
Total comprehensive income	1,663,658	10,824,243	11,826,890	6,864,352
Comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interests	(21,702)	(141,198)	(188,343)	(101,792)
Comprehensive income attributable to the NetEase, Inc.'s shareholders	$ 1,641,956	¥ 10,683,045	¥ 11,638,547	¥ 6,762,560
Net income per share, basic (in CNY and dollars per share) \| (per share)	$ 0.50	¥ 3.25	¥ 3.54	¥ 2.05
Net income per ADS, basic (in CNY and dollars per share) \| (per share)	12.50	81.36	88.40	51.27
Net income per share, diluted (in CNY and dollars per share) \| (per share)	0.50	3.23	3.51	2.04
Net income per ADS, diluted (in CNY and dollars per share) \| (per share)	$ 12.41	¥ 80.74	¥ 87.72	¥ 50.94
Weighted average number of ordinary shares outstanding, basic (in shares)	3,290,312	3,290,312	3,281,729	3,284,382
Weighted average number of ADS outstanding, basic (in shares)	131,612	131,612	131,269	131,375
Weighted average number of ordinary shares outstanding, diluted (in shares)	3,315,478	3,315,478	3,307,109	3,305,213
Weighted average number of ADS outstanding, diluted (in shares)	132,619	132,619	132,284	132,209

Consolidated Statements of Operations and Comprehensive Income (Parenthetical) - CNY (¥)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Consolidated Statements of Operations and Comprehensive Income
Reclassification adjustment for losses on available-for-sale securities recorded in net income, tax	¥ 0	¥ 0	¥ 0

Consolidated Statements of Shareholders' Equity ¥ in Thousands, shares in Thousands, $ in Thousands	Ordinary shares CNY (¥) shares	Additional paid-in capital CNY (¥)	Treasury stock CNY (¥) shares	Statutory reserves CNY (¥)	Accumulated other comprehensive income CNY (¥)	Retained earnings CNY (¥)	Noncontrolling interests CNY (¥)	USD ($) shares	CNY (¥) shares
Balance at Dec. 31, 2014	¥ 2,674	¥ 1,226,416		¥ 937,282		¥ 21,223,973	¥ (32,185)		¥ 23,358,160
Balance (in shares) at Dec. 31, 2014 \| shares	3,268,019
Ordinary shares issued upon settlement of restricted share units	¥ 14	(14)
Ordinary shares issued upon settlement of restricted share units (in shares) \| shares	23,541
Share-based compensation		687,332							687,332
Appropriation to statutory reserves				73,635		(73,635)
Net income attributable to NetEase, Inc. and noncontrolling interest shareholders						6,737,321	100,689		6,838,010
Repurchase of shares			¥ (132,192)						(132,192)
Repurchase of shares (in shares) \| shares			(4,628)
Cancellation of treasury stock	¥ (3)	(132,189)	¥ 132,192
Cancellation of treasury stock (in shares) \| shares	(4,628)		4,628
Net change in unrealized gains on available-for-sale securities					¥ 27,452				27,452
Capital injection in subsidiaries by noncontrolling interest shareholders		(1)				4	15,012		15,015
Dividends to shareholders						(1,467,965)			(1,467,965)
Exchanges losses on repurchase of redeemable noncontrolling interests		(2,213)							(2,213)
Balance at Dec. 31, 2015	¥ 2,685	1,779,331		1,010,917	27,452	26,419,698	83,516		29,323,599
Balance (in shares) at Dec. 31, 2015 \| shares	3,286,932
Ordinary shares issued upon settlement of restricted share units	¥ 18	(18)
Ordinary shares issued upon settlement of restricted share units (in shares) \| shares	27,664
Share-based compensation		1,057,715							1,057,715
Appropriation to statutory reserves				149,244		(149,244)
Net income attributable to NetEase, Inc. and noncontrolling interest shareholders						11,604,520	188,343		11,792,863
Repurchase of shares			¥ (1,199,102)						(1,199,102)
Repurchase of shares (in shares) \| shares			(33,116)
Cancellation of treasury stock	¥ (27)	(1,199,075)	¥ 1,199,102
Cancellation of treasury stock (in shares) \| shares	(33,116)		33,116
Net change in unrealized gains on available-for-sale securities					34,027				34,027
Capital injection in subsidiaries by noncontrolling interest shareholders						3	1		4
Dividends to shareholders						(2,546,165)			(2,546,165)
Balance at Dec. 31, 2016	¥ 2,676	1,637,953		1,160,161	61,479	35,328,812	271,860		¥ 38,462,941
Balance (in shares) at Dec. 31, 2016 \| shares	3,281,480							3,281,480	3,281,480
Ordinary shares issued upon settlement of restricted share units	¥ 21	(21)
Ordinary shares issued upon settlement of restricted share units (in shares) \| shares	29,805
Share-based compensation		2,177,079							¥ 2,177,079
Appropriation to statutory reserves				46,063		(46,063)
Net income attributable to NetEase, Inc. and noncontrolling interest shareholders						10,707,939	126,502		10,834,441
Repurchase of shares			¥ (2,061,591)						(2,061,591)
Repurchase of shares (in shares) \| shares			(28,068)
Cancellation of treasury stock	¥ (19)	(2,061,572)	¥ 2,061,591
Cancellation of treasury stock (in shares) \| shares	(28,068)		28,068
Net change in unrealized gains on available-for-sale securities					(23,321)				(23,321)
Capital injection in subsidiaries by noncontrolling interest shareholders							311,500		311,500
Dividends to shareholders						(3,257,607)			(3,257,607)
Foreign currency translation adjustment					(1,573)				(1,573)
Deconsolidation of a subsidiary							(6,729)		(6,729)
Balance at Dec. 31, 2017	¥ 2,678	¥ 1,753,439		¥ 1,206,224	¥ 36,585	¥ 42,733,081	¥ 703,133	$ 7,136,951	¥ 46,435,140
Balance (in shares) at Dec. 31, 2017 \| shares	3,283,217							3,283,217	3,283,217

Consolidated Statements of Cash Flows ¥ in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Cash flows from operating activities:
Net income	$ 1,667,484	¥ 10,849,137	¥ 11,792,863	¥ 6,836,900
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	123,235	801,804	327,515	182,450
Investment impairment	8,997	58,537	278,906	12,037
Share-based compensation cost	308,050	2,004,263	990,131	684,467
Allowance for provision for doubtful accounts	9,349	60,826	9,952	4,041
Loss on disposal of property, equipment and software	780	5,072	1,276	5,903
Unrealized exchange (gains)/losses	67,299	437,868	(166,638)	(116,772)
Gain on disposal of long-term investments	(1,475)	(9,595)	(234,050)
Deferred income taxes	(67,326)	(438,043)	66,676	(147,285)
Net equity share of losses from associated companies	1,880	12,232	85,813	76,134
Fair value changes of short-term investments	(59,910)	(389,793)	(304,605)	(140,104)
Changes in operating assets and liabilities:
Accounts receivable	86,874	565,228	(1,646,885)	(1,744,059)
Inventories	(598,927)	(3,896,799)	(760,365)	(789,514)
Prepayments and other current assets	(17,866)	(116,240)	(1,063,997)	(1,249,573)
Accounts payable	169,188	1,100,787	604,089	243,140
Salary and welfare payables	107,662	700,479	570,466	386,417
Taxes payable	(23,962)	(155,904)	986,390	401,924
Deferred revenue	(198,560)	(1,291,890)	2,879,489	2,683,970
Accrued liabilities and other payables	244,574	1,591,269	1,071,240	746,844
Net cash provided by operating activities	1,827,346	11,889,238	15,488,266	8,076,920
Cash flows from investing activities:
Purchase of property, equipment and software	(283,254)	(1,842,933)	(1,135,533)	(866,314)
Proceeds from sale of property, equipment and software	680	4,425	2,064	1,292
Purchase of intangible assets and licensed copyrights of music content	(103,715)	(674,803)	(4,434)	(347)
Purchase of land use right	(997)	(6,488)	(60)	(163,998)
Net change of short-term investments with terms of three months or less	(137,605)	(895,298)	(3,704,332)	(231,306)
Purchase of short-term investments	(1,919,832)	(12,491,000)	(12,439,000)	(5,687,000)
Proceeds from maturities of short-term investments	2,400,065	15,615,544	9,879,319	3,103,463
Investment in an associated company	(36,237)	(235,769)	(364,486)	(187,532)
Acquisitions of other long-term investments	(138,437)	(900,712)	(181,117)	(1,178,929)
Proceeds from disposal of investment in associated company and long-term investments	53,858	350,418	249,569
Transfer to restricted cash	(60,560)	(394,021)	(2,140,421)	(763,493)
Placement/rollover of matured time deposits	(5,223,268)	(33,984,148)	(20,367,430)	(19,017,824)
Proceeds from maturity of time deposits	3,447,366	22,429,597	16,377,449	22,582,480
Change in other assets	(34,446)	(224,103)	(173,402)	(127,016)
Net cash used in investing activities	(2,036,382)	(13,249,291)	(14,001,814)	(2,536,524)
Cash flows from financing activities:
Proceeds of short-term bank loans	9,426,742	61,333,209	11,354,866	5,828,758
Payment of short-term bank loans	(8,949,516)	(58,228,239)	(9,860,110)	(5,741,616)
Dividends paid to shareholders	(500,685)	(3,257,607)	(2,546,165)	(1,467,965)
Capital (repurchase of)/injection from redeemable noncontrolling interests shareholders	92,218	600,000		(134,736)
Capital injection from noncontrolling interest shareholders	47,877	311,500	4	15,015
Repurchase of shares	(316,862)	(2,061,591)	(1,199,102)	(132,192)
Net cash used in financing activities	(200,226)	(1,302,728)	(2,250,507)	(1,632,736)
Effect of exchange rate changes on cash held in foreign currencies	(1,933)	(12,578)	132,067	142,374
Net increase/(decrease) in cash and cash equivalents	(411,195)	(2,675,359)	(631,988)	4,050,034
Cash and cash equivalents beginning of the year	836,036	5,439,499	6,071,487	2,021,453
Cash and cash equivalents end of the year	424,841	2,764,140	5,439,499	6,071,487
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net of tax refund	416,961	2,712,875	1,097,178	1,124,339
Supplemental schedule of non-cash investing and financing activities:
Fixed asset purchases financed by accounts payable	$ 45,063	¥ 293,194	¥ 260,277	¥ 216,328

Organization and Nature of Operations

12 Months Ended

Dec. 31, 2017

Organization and Nature of Operations

Organization and Nature of Operations

1.Organization and Nature of Operations

(a)The Group

NetEase.com, Inc. was incorporated in the Cayman Islands on July 6, 1999 and changed its name to “NetEase, Inc.” (“the Company”) with effect from March 29, 2012. The Company has been listed on the Nasdaq National Market (now the Nasdaq Global Select Market) in the United States of America since July 2000. As of December 31, 2017, the Company has wholly-owned and majority-owned subsidiaries incorporated in countries and jurisdictions mainly in the People’s Republic of China (“PRC”), Hong Kong, Cayman Islands and British Virgin Islands (“BVI”). The Company also effectively controls a number of variable interest entities (“VIEs”) for which the Company is the primary beneficiary. The Company, its subsidiaries and VIEs are hereinafter collectively referred to as the “Group”. The major subsidiaries and VIEs through which the Company conducts its business operations as of December 31, 2017 are described below:

Major Subsidiaries		Place and year of Incorporation
NetEase Information Technology (Beijing) Co., Ltd. (“NetEase Beijing”)		Beijing, China 1999
Guangzhou Boguan Telecommunication Technology Co., Ltd. (“Boguan”)		Guangzhou, China 2003
NetEase Youdao Information Technology (Beijing) Co., Ltd. (“Youdao Information”)		Beijing, China 2006
NetEase (Hangzhou) Network Co., Ltd. (“NetEase Hangzhou”)		Hangzhou, China 2006
Hangzhou Langhe Technology Co., Ltd. (“Hangzhou Langhe”)		Hangzhou, China 2009
Lede Technology Co., Ltd. (“Lede Technology”)		Beijing, China 2011
NetEase Media Technology (Beijing) Co., Ltd. (“Media Beijing”)		Beijing, China 2012
HQG, Limited (“HQG”)		Hong Kong, China 2014
Hangzhou Youmai Technology Co., Ltd. (“Hangzhou Youmai”)		Hangzhou, China 2014
Tianjin Wang Zhi Yi Innovation and Technology Co., Ltd. (“Tianjin Technology”)		Tianjin, China 2015
Hangzhou Netease Yanxuan Trading Co., Ltd. (“Hangzhou Yanxuan”)		Hangzhou, China 2016

Major VIEs and VIEs’ subsidiaries		Place and year of Incorporation
Guangzhou NetEase Computer System Co., Ltd. (“Guangzhou NetEase”)		Guangzhou, China 1997
Beijing NetEase Media Co., Ltd. (previously named “Beijing Guangyitong Advertising Co., Ltd.”) (“NetEase Advertising”)		Beijing, China 1999
Shanghai EaseNet Network Technology Co., Ltd. (“Shanghai EaseNet”)		Shanghai, China 2008
StormNet Information Technology (Hong Kong) Limited (“StormNet IT HK”)		Hong Kong, China 2008
StormNet Information Technology (Shanghai) Co., Ltd. (“StormNet IT SH”)		Shanghai, China 2008
Hangzhou NetEase Leihuo Network Co., Ltd. (“HZ Leihuo”)		Hangzhou, China 2009
Wangyibao Co., Ltd. (“Wangyibao Company”)		Hangzhou, China 2010

Guangzhou NetEase, a principal VIE of the Company, was incorporated in June 1997 in China and owned by William Lei Ding, or Mr. Ding, the Company’s Chief Executive Officer, director and major shareholder, and another Chinese employee of the Group. It is responsible for providing online game, e-mail and other value-added telecommunication services.

NetEase Advertising, owned by Mr. Ding and another Chinese employee of the Group, was incorporated in November 1999 in China. NetEase Advertising operates the Company’s portal business.

HZ Leihuo was incorporated in April 2009 in China by two Chinese employees of the Group and currently operates the Company’s mobile game business.

Wangyibao Company was incorporated in July 2010 in China as a wholly-owned subsidiary of Guangzhou NetEase for the purpose of operating the Wangyibao online payment platform of the Company to facilitate e-payments by online game or other services customers to the Company.

In addition, Shanghai EaseNet is a PRC company owned by Mr. Ding, and has contractual arrangements with the joint venture established between, and owned equally by, Blizzard Entertainment, Inc. (“Blizzard”) and the Company, and with the Company. The joint venture was established concurrently with the licensing of certain online games in August 2008 and provides technical services to Shanghai EaseNet. The joint venture currently consists of two companies, StormNet IT HK and its wholly-owned subsidiary StormNet IT SH.

The following combined financial information of the Group’s VIEs was included in the accompanying consolidated financial statements of the Group as follows:

	December 31,	December 31,
	2016	2017
	RMB	RMB
Total assets	10,631,045	9,729,718
Total liabilities	9,971,110	8,897,521

	For the year ended December 31,
	2015	2016	2017
	RMB	RMB	RMB
Net revenues	19,819,474	31,043,737	40,584,251
Net income	343,942	448,771	357,163

	For the year ended December 31,
	2015		2016		2017
	RMB		RMB		RMB
Net cash provided by/(used in) operating activities	931,049		1,736,702		(124,670	)
Net cash (used in)/provided by investing activities	(327,330	)	(270,733	)	122,286
Net cash (used in)/provided by financing activities	(89,996	)	(57,000	)	4,000

In accordance with various contractual agreements, the Company has the power to direct the activities of the VIEs and can have assets transferred out of the VIEs. Therefore, the Company considers that there are no assets in the respective VIEs that can be used only to settle obligations of the respective VIEs, except for the registered capital of the VIEs amounting to approximately RMB533.2 million and RMB536.2 million, respectively, as of December 31, 2016 and 2017, as well as certain non-distributable statutory reserves amounting to approximately RMB21.3 million and RMB27.2 million, respectively, as of December 31, 2016 and 2017. As the respective VIEs are incorporated as limited liability companies under the PRC Company Law, creditors do not have recourse to the general credit of the Company for the liabilities of the respective VIEs.

Currently, there are certain contractual arrangements between the Company and several of its VIEs which require the Company to provide additional financial support or guarantees to its VIEs, where necessary. Please see Note 1(b) for additional information.

There is no entity in the Company’s group for which the Company has a variable interest but is not the primary beneficiary as of December 31, 2017.

(b)Nature of operations

The Group generates revenues from providing online game services, e-commerce, advertising services, and e-mail and other services.

The industry in which the Group operates is subject to a number of industry-specific risk factors, including, but not limited to, rapidly changing technologies; government regulations of the Internet, online game and e-commerce industry in China; significant numbers of new entrants; dependence on key individuals; competition of similar services from larger companies; customer preferences; and the need for the continued successful development, marketing and selling of its services.

VIE Arrangements with Guangzhou NetEase, NetEase Advertising, HZ Leihuo, and Shanghai EaseNet

The Group conducts its business mainly in China. The Chinese government regulates Internet access, telecommunications services, the distribution of news and other information and the provision of commerce through strict business licensing requirements and other governmental regulations, which include, among others, those restricting foreign ownership in Chinese companies providing Internet advertising and other Internet or telecommunications value-added services. To comply with the existing Chinese laws and regulations, the Company and certain of its subsidiaries have entered into a series of contractual arrangements with its principal VIEs with respect to the operation of the NetEase websites, operation of self-developed and licensed online and mobile games, Internet content and wireless value-added services, as well as the provision of advertising services. Our major VIEs include:

(1) Guangzhou NetEase (owned by Mr. Ding and a Chinese employee of the Group, (together referred as “the VIE shareholders”)),

(2) NetEase Advertising (owned by Mr. Ding and another Chinese employee of the Group*),

(3) HZ Leihuo (owned by two employees of the Group), and

(4) Shanghai EaseNet (owned by Mr. Ding).

Based on the agreements with these VIEs, the Company’s subsidiaries NetEase Beijing, Media Beijing, Boguan and NetEase Hangzhou provided technical consulting and related services to these VIEs. In 2012, these agreements were replaced with the following new cooperative agreements to reflect a change in the tax rules in China which resulted in the Company’s business in China becoming subject to a value-added tax instead of a business tax. The principal agreements that transfer economic benefits of Guangzhou NetEase and NetEase Advertising to the Company and its subsidiaries are:

Cooperative agreements with Guangzhou NetEase — under these agreements, the Company’s subsidiaries NetEase Beijing, Boguan and NetEase Hangzhou provide various technical consulting and related services to Guangzhou NetEase in exchange for substantially all of Guangzhou NetEase’s net profits.

Cooperative agreements with NetEase Advertising — under these agreements, NetEase Beijing until October 2013, and Media Beijing from October 2013 onwards, provide various technical consulting and related services in exchange for substantially all of NetEase Advertising’s profits.

Each cooperative agreement will remain in effect indefinitely unless any one of the contract parties terminates such agreement by written notice or otherwise required by law.

The principal agreements that provide the Company and its subsidiaries effective control over Guangzhou NetEase are:

Shareholder Voting Rights Trust Agreement among the VIE shareholders and NetEase Beijing. Each of the VIE shareholders irrevocably appoints NetEase Beijing to represent him to exercise all the voting rights to which he is entitled as a shareholder of Guangzhou NetEase. The term of this agreement was 10 years from May 12, 2000, which was extended on June 10, 2011 with a term of 20 years from May 12, 2010.

Letter of Agreement. Each of the VIE shareholders have agreed that any amendments to be made to the agreements to which the Company, NetEase Beijing and/or their respective affiliates is a party, on the one hand, and any of their variable interest entities and/or the shareholders of such entities, on the other hand, shall be subject to the approval by the vote of a majority of the Board of the Company, excluding the vote of Mr. Ding. The VIE shareholders have also agreed that, if any amendments to the above mentioned agreements require a vote of the shareholders of NetEase or Guangzhou NetEase, as applicable, both of them will vote in their capacity as direct or indirect shareholders of these companies to act based upon the instructions of the Company’s Board. The term of this agreement is 20 years from May 12, 2010.

Other Governance Arrangements. The parties have agreed that upon NetEase’s determination and at any time when NetEase Beijing or its affiliates are able to obtain approval to invest in and operate all or any part of any business operated by Guangzhou NetEase, NetEase Beijing or its affiliates may acquire all or any part of the assets or equity interests of Guangzhou NetEase, to the extent permitted by Chinese law.

* In November 2015, Guangzhou NetEase transferred its 80.0% interest in NetEase Advertising to Mr. Ding (79.0%) and one Chinese employee of the Group (1.0%). As a result of this transfer, Mr. Ding and that employee of the Group own 99.0% and 1.0% of the equity interest in NetEase Advertising, respectively.

The principal agreements that provide the Company and its subsidiaries effective control over NetEase Advertising are:

Operating Agreement among Media Beijing, NetEase Advertising and the VIE shareholders of NetEase Advertising. To ensure the successful performance of the various agreements between the parties, NetEase Advertising and its VIE shareholders have agreed that, except for transactions in the ordinary course of business, NetEase Advertising will not enter into any transaction that would materially affect the assets, liabilities, rights or operations of NetEase Advertising without the prior written consent of Media Beijing. Media Beijing has also agreed that it will provide performance guarantees and, at Media Beijing’s discretion, guarantee loans for working capital purposes to the extent required by NetEase Advertising for its operations. Furthermore, the VIE shareholders of NetEase Advertising have agreed that, upon instruction from Media Beijing, they will appoint NetEase Advertising’s board members, president, chief financial officer and other senior executive officers. The term of this agreement is 20 years from November 30, 2015 and can be extended with the written consent of Media Beijing.

Shareholder Voting Rights Trust Agreement among Media Beijing and the VIE Shareholders of NetEase Advertising. Under these agreements, each dated November 30, 2015, each of the VIE shareholders agreed to irrevocably entrust a person designated by Media Beijing to represent him to exercise all the voting rights and other shareholders’ rights to which he is entitled as a shareholder of NetEase Advertising. Each agreement shall remain effective for as long as the VIE shareholder remains a shareholder of NetEase Advertising unless Media Beijing unilaterally terminates the agreement by written notice.

Exclusive Purchase Option Agreements among Media Beijing, NetEase Advertising and the VIE shareholders of NetEase Advertising. Under the Exclusive Purchase Option Agreements, each dated November 30, 2015, each of the VIE shareholders has granted Media Beijing an option to purchase all or a portion of his equity interest in NetEase Advertising at a price equal to the original paid-in capital paid by the VIE shareholder. In addition, NetEase Advertising has granted Media Beijing an option under the Exclusive Purchase Option Agreements to purchase all or a portion of the assets held by NetEase Advertising or its subsidiaries at a price equal to the net book value of such assets. Each of NetEase Advertising and the VIE shareholders of NetEase Advertising agrees not to transfer, mortgage or permit any security interest to be created on any equity interest in or assets of NetEase Advertising without the prior written consent of Media Beijing. Each Exclusive Purchase Option Agreement shall remain in effect until all of the equity interests in or assets of NetEase Advertising have been acquired by Media Beijing or its designee or until Media Beijing unilaterally terminates the agreement by written notice.

The principal agreements that provide the Company and its subsidiaries effective control over HZ Leihuo are:

Operating Agreement among NetEase Hangzhou, HZ Leihuo and the VIE shareholders of HZ Leihuo. To ensure the successful performance of the various agreements between the parties, HZ Leihuo and its VIE shareholders have agreed that, except for transactions in the ordinary course of business, HZ Leihuo will not enter into any transaction that would materially affect the assets, liabilities, rights or operations of HZ Leihuo without the prior written consent of NetEase Hangzhou. NetEase Hangzhou has also agreed that it will provide performance guarantees and, at NetEase Hangzhou’s discretion, guarantee loans for working capital purposes to the extent required by HZ Leihuo for its operations. Furthermore, the VIE shareholders of HZ Leihuo have agreed that, upon instruction from NetEase Hangzhou, they will appoint HZ Leihuo’s board members, president, chief financial officer and other senior executive officers. The term of this agreement is 20 years from December 1, 2015 and can be extended with the written consent of NetEase Hangzhou.

Cooperation Agreement between NetEase Hangzhou and HZ Leihuo. Under this agreement, starting from January 1, 2010, NetEase Hangzhou agreed to provide various technical consulting and related services to HZ Leihuo in exchange for a monthly service fee paid by HZ Leihuo. The agreement will continue to be effective unless it is terminated by written notice of NetEase Hangzhou or, in case of a material breach of the agreement, it is terminated by written notice of the non-breaching party.

Shareholder Voting Rights Trust Agreement among NetEase Hangzhou and the VIE shareholders of HZ Leihuo. Under these agreements, each dated December 1, 2015, each of the VIE shareholders of HZ Leihuo has agreed to irrevocably entrust a person designated by NetEase Hangzhou to represent him to exercise all the voting rights and other shareholders’ rights to which he is entitled as a shareholder of HZ Leihuo. Each agreement shall remain effective for as long as the VIE shareholder remains a shareholder of HZ Leihuo unless NetEase Hangzhou unilaterally terminates the agreement by written notice.

Exclusive Purchase Option Agreements among NetEase Hangzhou, HZ Leihuo and the VIE shareholders of HZ Leihuo. Under the Exclusive Purchase Option Agreements, each dated December 1, 2015, each of VIE shareholders of HZ Leihuo has granted NetEase Hangzhou an option to purchase all or a portion of his equity interest in HZ Leihuo at a price equal to the original paid-in capital paid by the ultimate shareholder. In addition, HZ Leihuo has granted NetEase Hangzhou an option to purchase all or a portion of the assets held by HZ Leihuo or its subsidiaries at a price equal to the net book value of such assets. Each of HZ Leihuo and the VIE shareholders of HZ Leihuo agrees not to transfer, mortgage or permit any security interest to be created on any equity interest in or assets of HZ Leihuo without the prior written consent of NetEase Hangzhou. Each Exclusive Purchase Option Agreement shall remain in effect until all of the equity interests in or assets of HZ Leihuo have been acquired by NetEase Hangzhou or its designee or until NetEase Hangzhou unilaterally terminates the agreement by written notice.

The Joint Venture

In addition to the foregoing, in connection with the licensing of certain online games by Blizzard to Shanghai EaseNet for operation in the PRC, there are certain contractual arrangements among Shanghai EaseNet, the joint venture established between Blizzard and the Company, and the Company.

StormNet IT HK, StormNet IT SH and Shanghai EaseNet (collectively referred to as the “JV Group”) are variable interest entities as equity investment at risk is not sufficient to permit the JV Group to finance its activities without additional subordinated financial support provided by any parties. Due to the restriction on the disposition of their respective shares in the joint venture, Blizzard and NetEase are considered related parties for purposes of identifying which party is the primary beneficiary under ASC 810. Since the aggregate variable interests held by Blizzard and NetEase would, if held by a single party, identify that party as the primary beneficiary, either Blizzard or NetEase will be the primary beneficiary. Based on the assessment of all relevant facts and circumstances, the Company determined that NetEase is most closely associated with the JV Group and therefore is the primary beneficiary. As a result, the JV Group’s results of operations, assets and liabilities have been included in the Company’s consolidated financial statements.

The Company conducts substantially all of its business through the various VIEs discussed above and their subsidiaries, and therefore these companies directly affect the Company’s financial performance and cash flows. As discussed below, if the Chinese government determines the VIE agreements do not comply with applicable laws and regulations and requires the Company to restructure its operations entirely or discontinue all or any portion of its business, or if the uncertainties in the PRC legal system limit the Group’s ability to enforce these contractual agreements, the Group’s business operations will be significantly disrupted and the Group might be unable to consolidate these companies in the future. In the opinion of management, the likelihood of loss in respect of the Group’s current ownership structure or the contractual arrangements with its VIEs is remote.

Risks related to the VIE arrangements

The Company believes that its contractual arrangements with the VIEs are in compliance with PRC law and are legally enforceable. Mr. Ding, who is the major shareholder of Guangzhou NetEase, and is in turn the major shareholder of Wangyibao Company, and of Shanghai EaseNet, NetEase Advertising and Youdao Computer, is the largest shareholder of the Company. He therefore has no current interest in seeking to act contrary to the contractual arrangements. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce these contractual arrangements and if Mr. Ding were to reduce his interest in the Company, his interests may diverge from that of the Company and that may potentially increase the risk that he would seek to act contrary to the contractual terms, for example by influencing the VIEs not to pay the service fees when required to do so. If the VIEs or their respective shareholder fail to perform their respective obligations under the current contractual arrangements, the Company may have to incur substantial costs and expend significant resources to enforce those arrangements and rely on legal remedies under Chinese laws. The Chinese laws, rules and regulations are relatively new, and because of the limited volume of published decisions and their non-binding nature, the interpretation and enforcement of these laws, rules and regulations involve substantial uncertainties. These uncertainties may impede the ability of the Company to enforce these contractual arrangements, or suffer significant delay or other obstacles in the process of enforcing these contractual arrangements and materially and adversely affect the results of operations and the financial position of the Company.

In addition, many Chinese regulations are subject to extensive interpretive powers of governmental agencies and commissions, and there are substantial uncertainties regarding the interpretation and application of current and future Chinese laws and regulations. Accordingly, the Company cannot be assured that Chinese regulatory authorities will not ultimately take a contrary view to its belief and will not take action to prohibit or restrict its business activities. The relevant regulatory authorities would have broad discretion in dealing with any deemed violations which may adversely impact the financial statements, operations and cash flows of the Company (including the restriction on the Company to carry out the business). It is unclear, however, how such restructuring could impact the Company’s business and operating results, as the Chinese government has not yet found any such contractual arrangements non-compliant. If the legal structure and contractual arrangements were found to be in violation of any existing PRC laws and regulations, the PRC government could potentially:

revoke the Group’s business and operating licenses;

require the Group to discontinue or restrict operations;

restrict the Group’s right to collect revenues;

block the Group’s websites;

require the Group to restructure the operations in such a way as to compel the Group to establish a new enterprise, re-apply for the necessary licenses or relocate the Group’s businesses, staff and assets;

impose additional conditions or requirements with which the Group may not be able to comply; or

take other regulatory or enforcement actions against the Group that could be harmful to the Group’s business.

The imposition of any of these penalties may result in a material and adverse effect on the Group’s ability to conduct the Group’s business. In addition, if the imposition of any of these penalties causes the Group to lose the rights to direct the activities of the VIEs or the right to receive their economic benefits, the Group would no longer be able to consolidate the VIEs. The Group does not believe that any penalties imposed or actions taken by the PRC government would result in the liquidation of the Company, its subsidiaries or the VIEs.

Principal Accounting Policies

12 Months Ended

Dec. 31, 2017

Principal Accounting Policies

Principal Accounting Policies

2.Principal Accounting Policies

(a)Basis of consolidation

The consolidated financial statements include the financial statements of the Company, its subsidiaries and VIEs for which the Company is the primary beneficiary with the ownership interests of minority shareholders reported as noncontrolling interests. All significant transactions and balances among the Company, its subsidiaries and VIEs have been eliminated upon consolidation. The Company consolidates a VIE if the Company has the power to direct matters that most significantly impact the activities of the VIE, and has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.

(b)Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The consolidated financial statements are prepared based on the historical cost convention.

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reporting periods. Actual results might differ from those estimates. These estimates and assumptions include, but are not limited to, assessing the following: lives of the permanent in-game items, average playing period of paying players of mobile games, the determination of whether sales prices are fixed or determinable and collectability is reasonably assured, realization of deferred tax assets and the determination of uncertain tax positions, lower of cost and market value of inventories, useful lives and impairment provision of property, equipment and software and intangibles, assumptions related to stock-based compensation and assumptions related to the valuation of long-term investments.

(c)Revenue recognition

The Group recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured.

Net revenues presented in the consolidated statements of operations and comprehensive income represent revenues from service and product sales net off sales discount, and value-added tax (“VAT”). Service sales represent revenues from online game services, advertising services, e-mail and other services. Service sales are recognized when service has been rendered. Product sales represent revenue from the sale of products through its e-commerce platform where the Group record revenue on a gross basis. Product sales are recorded when the products are shipped and title passes to customers.

(i)Online game services

Mobile games

The Group operates mobile games including both self-developed and licensed mobile games primarily through HZ Leihuo and generates mobile game revenues from the sale of in-game virtual items, including items, avatars, skills, privileges or other in-game consumables, features or functionality, within the games.

The Group records revenue generated from mobile games on a gross basis as the Group is acting as the principal to fulfill all obligations related to the mobile game operation. Fees paid to game developers, distribution channels (app stores) and payment channels are recorded as cost of revenues.

For the purposes of determining when the service has been provided to the end-users, the Group determined that an implied obligation exists to provide on-going services to the end-users who purchased virtual items to gain an enhanced game-playing experience over an average playing period of the paying players. Accordingly, the Group recognizes the revenues ratably over the estimated average playing period of these paying players, starting from the point in time when virtual items are delivered to the players’ accounts and all other revenue recognition criteria are met.

The Group considers the average period that players typically play the games and other game player behavior patterns, as well as various other factors to arrive at the best estimates for the estimated playing period of the paying players for each game. If a new game is launched and only a limited period of paying player data is available, then the Group considers other qualitative factors, such as the playing patterns for paying users for other games with similar characteristics and playing patterns of paying players, such as targeted players and purchasing frequency. While the Group believes its estimates to be reasonable based on available game player information, the Group may revise such estimates based on new information indicating a change in the game player behavior patterns and any adjustments are applied prospectively.

PC-client games

The Group sells prepaid point cards through Guangzhou NetEase and Shanghai EaseNet to the end user. Customers can purchase physical prepaid point cards in different locations in China, including Internet cafés, software stores, convenience stores and bookstores. Customers can also purchase “virtual” prepaid points from vendors who register the points in the Group’s system and “virtual” prepaid cards online via debit and credit cards or bank transfers via the online payment services platforms, and receive the prepaid point information over the Internet. Customers can use the points to play the Group’s online games, pay for in-game items and use other fee-based services. Proceeds received from the sales of prepaid point cards and online points to players are recorded as deferred revenues. The Group earns revenue through providing online game services to players under two types of revenue models: time-based revenue model and item-based revenue model. For online games using the time-based model, players are charged based on the time they spend playing games.

Under the item-based model, the basic game play functions are free of charge, and players are charged for purchases of in-game items. Revenues from the sales of in-game items are recognized when the items are consumed by the customers or over the estimated lives of the in-game items. The Group considers the average period that players typically play the games and other game player behavior patterns, as well as various other factors, including the acceptance and popularity of expansion packs, promotional events launched and market conditions to arrive at the best estimates for the estimated lives of the permanent in-game items. The Group assesses the estimated lives of the permanent in-game items for the item-based games on a quarterly basis. Adjustments arising from the changes of estimated lives of permanent in-game items are applied prospectively as such changes are resulted from new information indicating a change in the game player behavior patterns.

Unused online points in a personal game account are recognized as revenues when the likelihood that the Group would provide further online game services with respect to such online points is remote. The revenue recognized from the inactive accounts was insignificant in 2015, 2016 and 2017.

(ii)E-commerce services

The Group’s e-commerce businesses mainly include cross-border and domestic e-commerce business. The Group established its cross-border e-commerce platform, Kaola.com (“Kaola”), in January 2015 and primarily sells imported maternity and baby products, skincare and cosmetics and other general merchandise through online direct sales. The Group also established its domestic e-commerce platform, You.163.com (“Yanxuan”), in April 2016 and sells its private label products, including apparel, homeware, kitchenware and other general merchandise which are sourced primarily directly from original design manufacturers in China.

E-commerce revenues are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured. The Group evaluates whether it is appropriate to record the net amount earned as commissions or the gross amount of product sales. When the Group is not the primary obligor, doesn’t bear the inventory risk and doesn’t have the ability to establish the price, revenues are recorded on a net basis. When the Group is primarily obligated in a transaction, is subject to inventory risk, has latitude in establishing prices and selecting suppliers, or has several but not all of these indicators, revenues are recorded on a gross basis.

The Group also provides discount coupons to its customers for use in purchases on the Kaola and Yanxuan platform, which are treated as a reduction of revenue when the related transaction is recognized.

(iii)Advertising services

The Group derives its advertising revenues principally from short-term online advertising contracts engaged by NetEase Advertising. Advertising service contracts may consist of multiple elements with a typical term of less than three months. Such elements generally represent different formats of advertisement, including but not limited to banners, text-links, videos, logos, buttons and rich media. Each element is time-based and the service period of the element is usually within three months. In accordance with ASU No.2009-13 Revenue Recognition - Multiple-Deliverable Revenue Arrangements (“ASU No.2009 -13”), the Group treats advertising contracts with multiple deliverable elements as separate units of accounting for revenue recognition purposes and recognizes revenue over the advertising period during the contract when each deliverable elements of advertisements is provided and all the other revenue recognition criteria are met. Since the contract price is for all deliverables, the Group allocates the arrangement consideration to all deliverables at the inception of the arrangement on the basis of their relative selling price according to the selling price hierarchy established by ASU No.2009-13. The Group uses (a) vendor-specific objective evidence of selling price (“VSOE”), if it exists, otherwise, (b) third-party evidence of selling price. If neither (a) nor (b) exists, the Group will use (c) the management’s best estimate of the selling price for that deliverable. As the deliverables are not sold separately, the best estimate of the selling price has taken into consideration the pricing of advertising areas of the Group’s platform with a similar popularities and advertisements with similar formats and quoted prices from competitors as well as other market conditions. Revenues recognized with reference to best estimation of selling price were immaterial for all periods presented.

The Group also enters into performance-based advertising arrangements with customers. The Group enters into cost per mille (“CPM”), or cost per thousand impressions, advertising arrangements with customers, under which the Group recognizes revenues based on the number of times that the advertisement has been displayed.

The Group also enters into cost per action (“CPA”) advertising arrangements with customers, under which the Group recognizes revenues based on the number of actions completed resulted from the advertisements, including but not limited to when users click on links.

The Group recognizes revenue and expense at fair value from a barter transaction involving advertising services provided by the Group only if the fair value of the advertising services surrendered in the transaction is determinable based on the entity’s own historical practice of receiving cash and cash equivalents, marketable securities, or other consideration that is readily convertible to a known amount of cash for similar advertising from buyers unrelated to the counterparty in the barter transaction.

For the years ended December 31, 2015, 2016 and 2017, the Group was engaged in certain advertising barter transactions for which the fair value was not determinable and therefore no revenues or expenses derived from these barter transactions were recognized. These transactions primarily involved exchanges of advertising services rendered by the Group for advertising, promotional benefits, content, consulting services and software provided by the counterparties.

(iv)E-mail and others

Revenue from e-mail and others is predominantly derived from activities related to fee-based premium services, online payment platform services and other online services.

Fee-based premium services revenues, operated on a monthly subscription basis, are derived principally from providing premium e-mail and other wireless value-added services. Prepaid subscription revenues are deferred and are recognized by the Group over the period in which the services are provided.

In February 2009, the Group launched its Wangyibao payment platform, through which game players registered for Wangyibao operations can deposit money in their accounts and use the accounts to pay for game point cards and other fee-based services and products rendered by the Group. The Group recognizes revenue when services are rendered to account holders in accordance with service agreement.

The Group offer online services related to third-party virtual products to facilitate the sale of products from third-party providers. The Group acts as an agent and do not buy, sell, manufacture, or design such products. Revenues are recognized when services are rendered to customers based on the pre-determined service fee rate. The Group also operates its “Duobao” platform, which provides services that allow users to purchase the virtual currency, “Duobao Bi”, and use them to exchange for products. For the services where the Group acts as an agent, products are provided by third-party suppliers and revenues are recognized on a net basis when services are rendered. The Group discontinued the Duobao platform in early 2017.

The Group also generate revenue from the operation of its live streaming platforms whereby users can enjoy live performances provided by the hosts and interact with the hosts. Most of the hosts host the performance on their own. The Group creates and sells virtual items to users so that the users present them simultaneously to hosts to show their support. The virtual items sold by the Group comprise of either (i) consumable items or (ii) time-based item, such as privilege titles etc. Under the arrangements with the hosts, the Group shares with them a portion of the revenues derived from the sales of virtual items. Revenues derived from the sale of virtual items are recorded on a gross basis as the Group acts as the principal to fulfill all obligations related to the sale of virtual items. Accordingly, revenue is recognized when the virtual item is delivered and consumed if the virtual item is a consumable item or, in the case of time-based virtual item, recognized ratably over the period each virtual item is made available to the user.

The Group also earns membership revenue from customers in respect of the sale of membership packages which allow them to access premium content on the Group’s paid content platforms, such as Cloud Music platform. These service fees are paid in advance for a specific contracted service period. All these fees are initially deferred when received and revenue is recognized ratably over the term of the respective service contracts as the services are rendered.

(d)Cost of revenues

Costs of revenue consist primarily of purchase price, inbound shipping costs and inventory write downs relating to merchandise sold, staff costs, royalties and consultancy fees related to licensed games, revenue sharing cost related to mobile games, depreciation and amortization of computers and software, server custody fees, bandwidth, and other direct costs of providing these services. These costs are charged to the consolidated statements of operations and comprehensive income as incurred. Shipping and handling costs, which primarily include third-party delivery costs relating to the delivery of products from distribution centers to customers, fulfillment expenses occurred in the Group’s various distribution facilities and packing material expenses, are classified as selling and marketing expenses. Shipping and handling costs included in selling and marketing expenses were approximately RMB155.4 million, RMB503.0 million and RMB1,182.7 million (US$181.8 million) for the years ended December 31, 2015, 2016 and 2017, respectively.

(e)Research and development costs

Research and development costs mainly consist of personnel-related expenses and technology service costs incurred for the development of online games prior to the establishment of technological feasibility and costs associated with new product development. For the years ended December 31, 2015, 2016 and 2017, the costs incurred for development of online game products have not been capitalized because the period after the date technical feasibility is reached and the time when the game is marketed is short historically and the development cost incurred in the period are insignificant.

(f)Cash, cash equivalents and time deposits

Cash and cash equivalents mainly represent cash on hand, demand deposits placed with large reputable banks in Hong Kong or China, and highly liquid investments that are readily convertible to known amounts of cash and with original maturities from the date of purchase with terms of less than three months. As of December 31, 2016, there were cash at bank and demand deposits with terms of less than three months denominated in US dollars and Euro amounting to approximately US$394.8 million and Euro1.3 million, respectively. As of December 31, 2017, there were cash at bank and demand deposits with terms of less than three months denominated in US dollars and Euro amounting to approximately US$112.5 million and Euro1.6 million, respectively (equivalent to approximately RMB733.4 million and RMB12.8 million, respectively).

Time deposits represent time deposits placed with banks with original maturities of three months or more. As of December 31, 2016, there were time deposits denominated in US dollars amounting to approximately US$750.2 million. As of December 31, 2017, there were time deposits denominated in US dollars amounting to approximately US$2,547.8 million (equivalent to approximately RMB16,648.1 million).

As of December 31, 2016 and 2017, the Group had approximately RMB17.0 billion and RMB15.1 billion cash and cash equivalents and time deposits held by its PRC subsidiaries and VIEs, representing 66.9% and 45.1% of total cash and cash equivalents and time deposits of the Group, respectively.

As of December 31, 2016 and 2017, the Group had a restricted cash balance approximately RMB5,533.3 million and RMB5,927.1 million, respectively, comprising as follows (in millions):

	December 31, 2016	December 31, 2017
	RMB	RMB
Escrow account deposit for sales and marketing activities of Blizzard’s licensed games	134.4	—
Customer deposit of Wangyibao accounts	1,318.0	1,554.8
Pledge deposits for short-term bank borrowings — Current	1,935.0	4,091.0
Others	85.9	281.1

Subtotal	3,473.3	5,926.9

Pledge deposits for short-term bank borrowings — Non-current	2,060.0	—
Others	—	0.2

Subtotal	2,060.0	0.2

Total	5,533.3	5,927.1

The Group had no other lien arrangements during 2016 and 2017.

(g)Fair value of financial instruments

Accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value:

Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets

Level 2 — Include other inputs that are directly or indirectly observable in the marketplace

Level 3 — Unobservable inputs which are supported by little or no market activity

The Group’s financial instruments include cash and cash equivalents and time deposits, accounts receivable, prepayments and other current assets, short-term investments, accounts payable, short-term loan, deferred revenue and accrued liabilities and other payables, which the carrying values approximate their fair value. Please see Note 26 for additional information.

(h)Inventories, net

Inventories, mainly represent products for the Group’s e-commerce business, are stated at the lower of cost or net realizable value in the consolidated balance sheets. Cost of inventory is determined using the weighted average cost method. Adjustments are recorded to write down the cost of inventory to the estimated net realizable value due to slow-moving merchandise and damaged goods, which is dependent upon factors such as historical and forecasted consumer demand, and promotional environment. The Group takes ownership, risks and rewards of the products purchased. Write downs are recorded in cost of revenues in the consolidated statements of operations and comprehensive income. Certain costs attributable to buying and receiving products, such as purchase freights, are also included in inventories.

(i)Investments

Short-term investments include investments in financial instruments with a variable interest rate indexed to performance of underlying assets and investments that the Group has positive intent and ability to hold to maturity, all of which are with an original maturities of less than 12 months.

In accordance with ASC 825, for investments in financial instruments with a variable interest rate indexed to performance of underlying assets, the Group elected the fair value method at the date of initial recognition and carried these investments at fair value. Changes in the fair value are reflected in the consolidated statements of operations and comprehensive income as other income /(expense). Fair value is estimated based on quoted prices of similar products provided by banks at the end of each period. The Group classifies the valuation techniques that use these inputs as Level 2 of fair value measurements. Please see Note 6 and Note 26 for additional information.

The investments that the Group has positive intent and ability to hold to maturity are classified as held-to-maturity investments and stated at amortized cost. For individual investment classified as held-to-maturity investments, the Group evaluates whether a decline in fair value below the amortized cost basis is other than temporary in accordance with the Group’s policy and ASC 320-10. If the Group concludes that, it does not intend or is not required to sell an impaired debt investment before the recovery of its amortized cost basis, the impairment is considered temporary and the held-to-maturity investments continue to be recognized at the amortized cost.

Investments not classified as trading or as held-to-maturity are classified as available-for-sale securities. An available-for-sale investment is reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income (loss). Realized gains or losses are charged to earnings during the period in which the gain or loss is realized. An impairment loss on the available-for-sale debt securities would be recognized in the consolidated statements of comprehensive income when the decline in value is determined to be other-than-temporary. Investments with maturities of greater than 12 months are recorded in long-term investments.

For investments in an investee over which the Group does not have significant influence and which do not have readily determinable fair value, the Group carries the investment at cost and only adjusts for other-than-temporary declines in fair value and distributions of earnings that exceed the Group’s share of earnings since its investment. Management regularly evaluates the impairment of the cost method investments based on performance and financial position of the investee as well as other evidence of market value. Such evaluation includes, but is not limited to, reviewing the investee’s cash position, recent financing, projected and historical financial performance, cash flow forecasts and financing needs. An impairment loss is recognized in earnings equal to the excess of the investment’s cost over its fair value at the balance sheet date of the reporting period for which the assessment is made. The fair value would then become the new cost basis of investment.

(j)Investment in associated companies

Investments in associated companies in which the Group is in a position to exercise significant influence by participating in, but not controlling or jointly controlling, the financial and operating policies are accounted for using the equity method and are reported under long-term investments in the consolidated balance sheets.

(k)Property, equipment and software

Property, equipment and software are stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line basis over the following estimated useful lives, taking into account any estimated residual value:

Building		20 years
Decoration		5 years
Leasehold improvements		lesser of the term of the lease and the estimated useful lives of the assets
Furniture, fixtures and office equipment		5-10 years
Vehicles		5 years
Servers and computers		3 years
Software		3 years

Repairs and maintenance expenditures, which are not considered improvements and do not extend the useful life of the property and equipment, are expensed as incurred.

(l)Intangible assets

Finite-lived intangible assets are tested for impairment if impairment indicators arise. The Group amortizes its finite-lived intangible assets using the straight-line method:

Land use right		over the remaining term of the land use right period
License right		over the license period
Technology		10 years

The Group obtains music content for customers through licensing agreements. When the license fee for music title is determinable or reasonably estimable and the content is available for streaming, the Group recognizes an asset representing the fee and a corresponding liability for the amounts owed. The Group relieves the liability as payments are made and the Group amortizes the asset to “Cost of revenues” on a straight-line basis over the term of the respective licensing agreements.

(m)Advertising expenses

The Group expenses advertising costs as incurred and reports these costs under selling and marketing expense. Advertising expenses totaled approximately RMB697.9 million, RMB1,116.9 million and RMB2,310.6 million for the years ended December 31, 2015, 2016 and 2017, respectively.

(n)Foreign currency translation

The Group’s reporting currency is RMB. The Company and its subsidiaries and VIEs, with an exception of several subsidiaries incorporated in Cayman Islands, use RMB as their functional currency. In 2017, several of the Company’s subsidiaries incorporated in Cayman Islands changed their functional currency from RMB to US$. The determination of the respective functional currency is based on the criteria of ASC 830, Foreign Currency Matters and such change has not resulted in any material effect on the Group’s financial statements.

In the financial statements of the Company’s subsidiaries and VIEs, transactions in currencies other than the functional currency are measured and recorded in the functional currency using the exchange rate in effect at the date of the transaction. At the balance sheet date, monetary assets and liabilities that are denominated in currencies other than the functional currency are translated into the functional currency using the exchange rate at the balance sheet date. The resulting exchange differences are included in the consolidated statements of operations and comprehensive income.

Assets and liabilities of the Group companies are translated from their respective functional currencies to the reporting currency at the exchange rates at the balance sheet dates, equity accounts are translated at historical exchange rates and revenues and expenses are translated at the average exchange rates in effect during the reporting period. The exchange differences for the translation of group companies with non-RMB functional currency into the RMB functional currency are included in foreign currency translation adjustments, which is a separate component of shareholders’ equity on the consolidated financial statements.

Translations of amounts from RMB into United States dollars for the convenience of the reader were calculated at the noon buying rate of US$1.00 = RMB6.5063 on the last trading day of 2017 (December 29, 2017) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into United States dollars at such rate.

(o)Share-based compensation

Under its 2009 Restricted Share Unit Plan (see Note 19(a)), the Company issues restricted share units (RSUs) to its employees, directors and consultants with performance conditions and service vesting periods ranging from one year to five years. Some of the RSUs issued are to be settled, at the Company’s discretion, in stock or cash upon vesting based on the stock price at grant date. At each reporting period, the Company evaluates the likelihood of performance conditions being met. Share-based compensation costs are then recorded for the number of RSUs expected to vest on a graded-vesting basis, net of estimated forfeitures, over the requisite service period. The compensation cost of the RSUs to be settled in stock only is measured based on the fair value of stock when all conditions to establish the grant date have been met. The compensation cost of RSUs to be settled either in stock or cash at the Company’s discretion is remeasured until the date when settlement in stock or cash is determined by the Company.

The Company records share-based compensation to the consolidated statements of operations and comprehensive income with the corresponding credit to the additional paid-in-capital for share options and RSUs to the extent that such awards are to be settled only in stock. On the other hand, for RSUs which will either be settled in stock or cash as discussed above, the Company continues to mark to market such awards and, in accordance with the vesting schedules of such awards, record the resulting potential liabilities under other long-term payables and accrued liabilities. There were no significant cash payments for share-based liabilities for the years ended December 31, 2015, 2016 and 2017.

Certain subsidiaries of the Company granted options exercisable for ordinary shares to certain of the Group’s employees. The options expire five to seven years from the date of grant and either vest or have a vesting commencement date upon certain conditions being met (“Vesting Commencement Date”). The Group adopts the binomial option pricing model to determine the fair value of stock options and accounts for share-based compensation cost using an estimated forfeiture rate.

Forfeitures were estimated based on the Group’s weighted average historical forfeiture rate of the past five years. Differences between actual and estimated forfeitures are expensed in the period that the differences occur. See Note 19 for further information regarding share-based compensation assumptions and expense.

(p)Taxation

Income tax expense is recognized in accordance with the laws of the relevant taxing authorities, with deferred taxes being provided for temporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. Tax rate changes are reflected in income during the period the changes are enacted.

A deferred income tax asset or liability is computed for the expected future impact of differences between the financial reporting and tax bases of assets and liabilities as well as the expected future tax benefit to be derived from tax loss and tax credit carry forwards.

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount “more likely than not” to be realized in future tax returns.

For a particular tax-paying component of an enterprise and within a particular tax jurisdiction, all deferred tax assets and liabilities are offset and presented as a single amount. The Group does not offset deferred tax assets and liabilities attributable to different tax-paying components of the enterprise or to different tax jurisdictions.

The Group reports tax-related interest expense and penalty in Other, net in the consolidated statements of operations and comprehensive income, if there is any. The Group did not incur any material penalty or interest payments in connection with tax positions during the years ended December 31, 2015, 2016 and 2017.

The Group did not have any significant unrecognized uncertain tax positions as of December 31, 2016 and 2017.

In order to assess uncertain tax positions, the Group applies a more likely than not threshold and a two-step approach for the tax position measurement and financial statement recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement.

(q)Net earnings per share (“EPS”) and per American Depositary Share (“ADS”)

Basic earnings per share are computed on the basis of the weighted-average number of ordinary shares outstanding during the period under measurement. Diluted earnings per share are based on the weighted-average number of ordinary shares outstanding and potential ordinary shares. Potential ordinary shares result from the assumed exercise of outstanding stock options, RSUs or other potentially dilutive equity instruments, when they are dilutive under the treasury stock method or the if-converted method.

(r)Statutory reserves

The Company’s subsidiaries and VIEs incorporated in China are required to make appropriations to certain non-distributable statutory reserves. In accordance with the laws applicable to foreign invested enterprises in China, its subsidiaries have to make appropriations from its after-tax profit as reported in their PRC statutory accounts to non-distributable statutory reserves including (i) general reserve fund. (ii) enterprise expansion fund and (iii) staff bonus and welfare fund. The appropriation to the general reserve fund is at least 10% of the after-tax profits as reported in the PRC statutory accounts. Appropriation is not required if the reserve fund has reached 50% of the registered capital of the respective company. The appropriation to the other reserve funds is at the discretion of the board of directors of the respective company. At the same time, the Company’s VIEs, in accordance with the China Company Laws, must make appropriations from their after-tax profit as reported in their PRC statutory accounts to non-distributable statutory reserves including (i) statutory surplus fund and (ii) discretionary surplus fund. The appropriation to the statutory surplus fund is at least 10% of the after-tax profits as reported in their PRC statutory accounts. Appropriation is not required if the statutory surplus fund has reached 50% of the registered capital of the respective company. Appropriation to the discretionary surplus fund is made at the discretion of the board of directors of the respective companies.

The general reserve fund and statutory surplus fund are restricted to set off against losses, expansion of production and operation or increase in the registered capital of the respective companies. The staff bonus and welfare fund is available to fund payments of special bonuses to staff and for collective welfare benefits. Upon approval by the board of directors, the discretionary surplus and enterprise expansion fund can be used to offset accumulated losses or to increase capital.

The staff bonus and welfare fund is a liability in nature. The other statutory reserves are not transferable to the Company in the form of cash dividends, loans or advances, and therefore are not available for distribution except in liquidation.

The following table presents the Group’s appropriations to general reserve funds and statutory surplus funds for the years ended December 31, 2015, 2016 and 2017 (in thousands):

	For the year ended December 31,
	2015	2016	2017
	RMB	RMB	RMB
Appropriations to general reserve funds and statutory surplus funds	73,635	149,244	46,063

NetEase Beijing, Boguan and Netease Hangzhou did not make appropriations to statutory reserves for the years ended December 31, 2015, 2016 and 2017, Guangzhou NetEase did not make appropriations to statutory reserves for the years ended December 31, 2016 and 2017, and Media Beijing did not make appropriations to statutory reserves for the years ended December 31, 2017, as their cumulative appropriations in the past have already reached the statutory limit, namely 50% of the registered capital of the respective companies.

(s)Noncontrolling interests and Redeemable noncontrolling interests

Noncontrolling interests are recognized to reflect the portion of the equity of majority-owned subsidiaries and VIEs which is not attributable, directly or indirectly, to the controlling shareholder.

The noncontrolling interest will continue to be attributed its share of losses even if that attribution results in a deficit noncontrolling interest balance.

Redeemable noncontrolling interests represent redeemable equity interests issued by one of the Group’s subsidiary to certain investors (see Note 16), and have been classified as mezzanine classified noncontrolling interests in the consolidated financial statements as these redeemable interests are contingently redeemable upon the occurrence of a conditional event, which is not solely within the control of the Company. The Group accreted the redeemable equity interests to their redemption value, which is purchase price plus interest per year over the period since issuance to the redemption date.

(t)Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as a family member or relative, stockholder, or a related corporation.

(u)Comprehensive income

Comprehensive income is defined as the change in equity of the Group during a period arising from transactions and other events and circumstances excluding transactions resulting from investments by shareholders and distributions to shareholders.

Comprehensive income for the periods presented includes net income, change in unrealized gains (losses) on marketable securities classified as available-for-sale securities (net of tax) and foreign currency translation adjustment.

(v)Segment reporting

The Group’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements is set out in detail under Note 25.

(w)Dividends

Dividends of the Company are recognized when declared.

(x)Recently issued accounting pronouncements

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. This guidance supersedes current guidance on revenue recognition in Topic 605, ‘‘Revenue Recognition.’’ In addition, there are disclosure requirements related to the nature, amount, timing, and uncertainty of revenue recognition. In August 2015, the FASB issued ASU No.2015-14 to defer the effective date of ASU No. 2014-09 for all entities by one year. For public entities that follow U.S. GAAP, the deferral results in the new revenue standard are being effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted for interim and annual periods beginning after December 15, 2016. The FASB has issued several amendments and updates to the new revenue standard, including ASU 2016-08 “Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”, ASU 2016-10 “Identifying Performance Obligations and Licensing”, ASU 2016-12 “Narrow-Scope Improvements and Practical Expedients” and ASU 2016-20 “Technical Corrections and Improvements”.

The Group will adopt the new standard in the first quarter of fiscal 2018, using the modified-retrospective transition approach. Under this approach, the Group will apply the new revenue standard on a prospective basis, effective January 1, 2018, and record adjustments to its fiscal 2018 opening balance sheet (as of January 1, 2018) to reflect the cumulative effect of the new revenue standard. The Group will also provide quantitative and qualitative disclosures of the new standard’s impact to each of its financial statement line items during fiscal 2018. The new revenue standard will primarily impact the accounting of the recognition of breakage associated with its unused online points in a personal game account as a result of recording revenue based upon estimates of breakage under the new revenue standard. Under the historical accounting, revenue for unused points was not recorded until the points expired. Thus, for unused points, revenue will be recorded earlier under the new standard. The cumulative-effect adjustment will include a reduction of its deferred revenue of approximately RMB81.7 million and a net increase to its retained earnings of approximately RMB27.4 million (net of tax).

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred income taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. The Group adopted this ASU in Q1 2017 and retrospectively presented the amount of current deferred tax assets and liabilities as noncurrent in the balance sheets of prior periods. Upon adoption, current deferred tax assets of RMB536.3 million and current deferred tax liabilities of RMB358.5 million in its consolidated balance sheet as of December 31, 2016 had been reclassified as non-current.

In January 2016, the FASB issued Accounting Standards Update No. 2016-01 (ASU No. 2016-01) “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. With respect to the Group’s consolidated financial statements, the most significant impact relates to the accounting for equity investments. In February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, that clarifies the guidance in ASU No. 2016-01 on equity securities and certain fair value option liabilities among other things. ASU 2016-01 and ASU 2018-03 are effective for annual reporting periods, and interim periods within those years beginning after December 15, 2017. The Group anticipate that the adoption of the new standard will increase the volatility of its investment income, net, as a result of the remeasurement of its equity and cost method investments. The Group will adopt this guidance in the first quarter of 2018 and RMB38.2 million of accumulated other comprehensive income for the Group’s available-for-sale equity securities that exist as of December 31, 2017 will be reclassified into retained earnings upon the adoption.

In February 2016, the FASB issued ASU 2016-02 “Leases” to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 creates a new Accounting Standards Codification Topic 842 “Leases” to replace the previous Topic 840 “Leases.” ASU 2016-02 affects both lessees and lessors, although for the latter the provisions are similar to the previous model, but updated to align with certain changes to the lessee model and also the new revenue recognition provisions contained in ASU 2014-09 (see above). ASU 2016-02 is effective for fiscal years and interim periods beginning after December 15, 2018. Early adoption is permitted. The Group is currently assessing the impact of ASU 2016-02 on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-07 “Investments—Equity method and joint ventures (Topic 323)”, to simplify the accounting for equity method investments, which eliminates the requirement in ASC 323 “Investments — equity method and joint ventures” that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. ASU 2016-07 is effective for fiscal years and interim periods beginning after December 15, 2016. Early adoption is permitted. The implementation of this update did not have a material impact on the Group’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09 “Compensation — Stock Compensation: Improvements to Employee Share-Based Payment Accounting”, which relates to accounting for employee share-based payments. This standard addresses several aspects of the accounting for share-based payment award transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification in the statement of cash flows; and (d) accounting for forfeitures of share-based payments. This standard will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Group continues to estimate expected forfeitures and the implementation of this update did not have a material impact on the Group’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments-Credit Losses (Topic 326)”, which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Group is currently evaluating the impact that the standard will have on its consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15 “Statement of Cash Flows — Classification of Certain Cash Receipts and Cash Payments”, which clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Group will adopt this guidance in the first quarter of 2018 with no material impact on its consolidated financial statements at adoption.

In November 2016, the FASB issued ASU 2016-18 “Statement of Cash Flows (Topic 230): Restricted Cash”. The guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, and interim period within those fiscal years. Early adoption is permitted, including adoption in an interim period. The standard should be applied using a retrospective transition method to each period presented. The Group will adopt this guidance in the first quarter of 2018. The adoption will impact the Group’s consolidated statements of cash flow as the Group has restricted cash totaling RMB5,927.1 million as of December 31, 2017.

Concentrations and Risks

12 Months Ended

Dec. 31, 2017

Concentrations and Risks

Concentrations and Risks

3.Concentrations and Risks

(a)Bandwidth and server custody service provider

The Group relied on telecommunications service providers and their affiliates for bandwidth and server custody service to support its operations during fiscal years 2015, 2016 and 2017 as follows:

	For the year ended December 31,
	2015		2016		2017
Total number of telecommunications service providers	14		14		23
Number of service providers provided by 10% or more of the Group’s bandwidth and server custody expenditure	3		3		3
Total % of the Group’s bandwidth and server custody expenditure provided by 10% or greater service providers	83.0	%	79.5	%	67.8	%

(b)Credit risk

Financial instruments that potentially subject the Group to significant concentrations of credit risk consist primarily of cash and cash equivalents, time deposits, restricted cash, accounts receivable and short-term investments. As of December 31, 2016 and 2017, substantially all of the Group’s cash equivalents, time deposits and restricted cash were held in major financial institutions located in the PRC or Hong Kong, which management consider being of high credit quality. Accounts receivable are typically unsecured and are generally derived from revenue earned from mobile games services (mainly related to remittances from distribution channels) and advertising services. One distribution channel had a receivable balance exceeding 10% of the total accounts receivable balance for the year ended December 31, 2016 and 2017, as follows:

	December 31, 2016	December 31, 2017
Distribution channel A	55.6%	34.6%
Allowance for doubtful accounts	Not applicable	Not applicable

Short-term investments consist of financial products issued by commercial banks in China with a variable interest rate indexed to performance of underlying assets, which have a maturity date within one year as of the purchase date. The effective yields of the short-term investments range from 1.90% to 5.30% per annum. Any negative events or deterioration in financial well-being with respect to the counterparties of the above investments and the underlying collateral may cause a material loss to the Group and have a material effect on the Group’s financial condition and results of operations.

(c)Major Customers

No single customer represented 10% or more of the Group’s total net revenues for the years ended December 31, 2015, 2016 and 2017.

(d)Online Games

The Group derived a combined total of 42.2%, 49.6% and 46.9% of its total net revenues for the years ended December 31, 2015, 2016 and 2017, respectively, from several of the Group’s mobile games including the Fantasy Westward Journey mobile game, the Westward Journey Online mobile game, Onmyoji, the mobile version of New Ghost, as well as Blizzard’s Hearthstone® and self-developed massively multi-player online role-playing games Fantasy Westward Journey Online (previously known as Fantasy Westward Journey II).

Additionally, 45.7%, 61.9% and 70.8% of the Group’s total net game revenues were generated from mobile games for the years ended December 31, 2015, 2016 and 2017, respectively.

(e)Chinese Regulations

The Chinese market in which the Group operates exposes the Company to certain macro-economic and regulatory risks and uncertainties. These uncertainties extend to the ability of the Group to provide Internet services through contractual arrangements in China as this industry remains highly regulated. The Chinese government may issue from time to time new laws or new interpretations on existing laws to regulate this industry. In January 2015, the Ministry of Commerce published a discussion draft of the proposed Foreign Investment Law. Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of ‘‘actual control’’ in determining whether a company is considered a foreign-invested enterprise. If the actual controlling person(s) is/are of foreign nationalities, then the variable interest entities will be treated as foreign-invested enterprises and any operation in the industry category on the ‘‘negative list’’ without market entry clearance may be considered as illegal. It is uncertain whether the Company would be considered as ultimately controlled by Chinese parties under the draft Foreign Investment Law. Moreover, the draft Foreign Investment Law has not taken a position on what actions will be taken with respect to the existing companies with a VIE structure. Further, it is uncertain when or if the draft Foreign Investment Law will be passed and if it is, when it will become effective. In addition, it is uncertain whether the industries of online games, portal and other virtual products, in which the Company’s VIEs operate, will be subject to the foreign investment restrictions or prohibitions set forth in the ‘‘negative list’’ that is to be issued. If the enacted version of the Foreign Investment Law and the final ‘‘negative list’’ mandate further actions, such as market entry clearance or certain restructuring of the Group’s corporate structure and operations, to be completed by companies with existing VIE structures, there may be substantial uncertainties as to whether the Group can complete these actions in a timely manner, or at all, and the Group’s business and financial condition may be materially and adversely affected.

Regulatory risk also encompasses the interpretation by the tax authorities of current tax laws, the status of properties leased for the Group’s operations, its legal structure and scope of operations in China, which could be subject to further restrictions resulting in limitations on the Group’s ability to conduct business in China.

Allowance for Doubtful Accounts

12 Months Ended

Dec. 31, 2017

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

4.Allowance for Doubtful Accounts

The Group closely monitors the collection of its accounts receivables and records a reserve for doubtful accounts against aged accounts and for specifically identified non-recoverable amounts. If the economic situation and the financial condition of the customer deteriorate resulting in an impairment of the customer’s ability to make payments, additional allowances might be required.

Receivable balances are written off when they are determined to be uncollectible. The following table sets out the movements of the allowance for doubtful accounts for the years ended December 31, 2015, 2016 and 2017 (in thousands):

	Balance at January 1,	Charged to (write-back against) cost and expenses	Write-off of receivable balances and corresponding provisions		Balance at December 31,
	RMB	RMB	RMB		RMB
2015	11,162	4,041	(1,018	)	14,185
2016	14,185	9,952	(1	)	24,136
2017	24,136	60,826	(53	)	84,909

Prepayments and Other Current Assets

12 Months Ended

Dec. 31, 2017

Prepayments and Other Current Assets

Prepayments and Other Current Assets

5.Prepayments and Other Current Assets

The following is a summary of prepayments and other current assets (in thousands):

	December 31, 2016	December 31, 2017
	RMB	RMB
Guarantee payment made to Blizzard - royalty fees	154,009	42,697
Prepayment for royalties, revenue sharing cost	2,399,434	1,479,817
Interest receivable	274,020	417,843
Prepayments of content and marketing cost and other operational expenses	209,147	381,213
Prepayment for sales tax and deductible value added tax	148,505	698,902
Bridge loans in connection with ongoing investments	46,279	30,575
Deposits	156,020	138,633
Employee advances	50,244	55,045
Advance to suppliers	173,057	337,938
Others	87,237	233,365

	3,697,952	3,816,028

In accordance with the license agreements of World of Warcraft® , StarCraft® II series, Hearthstone, Heroes of the Storm® , Diablo® III and Overwatch® , the Group made certain guarantee payments to Blizzard on behalf of Shanghai EaseNet for the minimum guaranteed royalties as of December 31, 2016 and 2017. The guarantee amounts will be released to the Group when actual royalties are paid by Shanghai EaseNet to Blizzard.

As of December 31, 2016 and 2017, prepayments for royalties and revenue sharing cost representing prepaid royalties or revenue sharing cost related to operations of licensed PC and mobile games.

The amount of employee advances listed above included staff housing loan balances of RMB45.5 million and RMB48.5 million repayable within 12 months from December 31, 2016 and 2017, respectively (see Note 10). No advances were made directly or indirectly to the Group’s executive officers for their personal benefit for the years ended December 31, 2016 and 2017.

Short-term Investments

12 Months Ended

Dec. 31, 2017

Short-term Investments

Short-term Investments

6.Short-term Investments

As of December 31, 2016 and 2017, the Group’s short-term investments mainly consisted of financial products issued by commercial banks in China with a variable interest rate indexed to the performance of underlying assets and a maturity date within one year when purchased. As of December 31, 2017, the effective yields of short-term investments ranged from 2.00% to 5.30% per annum (2016: 1.90% to 5.30% per annum).

The following is a summary of short-term investments (in thousands):

	December 31, 2016
	Cost	Unrecognized Gains/(Losses)	Estimated Fair Value
	RMB	RMB	RMB
Other short-term investments	11,582,116	—	11,582,116

	11,582,116	—	11,582,116

	December 31, 2017
	Cost	Unrecognized Gains/(Losses)	Estimated Fair Value
	RMB	RMB	RMB
Other short-term investments	9,742,663	—	9,742,663

	9,742,663		9,742,663

During the years ended December 31, 2015, 2016 and 2017, the Group recorded investment income related to short-term investments of RMB143.1 million, RMB303.4 million and RMB389.5 million in the consolidated statements of operations and comprehensive income, respectively.

Property, Equipment and Software

12 Months Ended

Dec. 31, 2017

Property, Equipment and Software

Property, Equipment and Software

7.Property, Equipment and Software

The following is a summary of property, equipment and software (in thousands):

	December 31, 2016		December 31, 2017
	RMB		RMB
Building and decoration	1,207,607		1,496,971
Leasehold improvements	39,880		98,278
Furniture, fixtures and office equipment	104,779		124,201
Vehicles	52,396		68,414
Servers and computers	1,700,463		2,583,270
Software	54,273		86,650
Construction in progress	663,374		1,086,773

	3,822,772		5,544,557


Less: accumulated depreciation	(1,403,262	)	(1,775,231	)


Net book value	2,419,510		3,769,326

Depreciation expense was RMB178.9 million, RMB312.9 million and RMB522.2 million for the years ended December 31, 2015, 2016 and 2017, respectively.

As of December 31, 2016 and 2017, the construction in progress balance mainly represented a prepayment of RMB642.4 million and RMB1,084.6 million, respectively, for the construction of office buildings in Hangzhou, Zhoushan, Guangzhou and Ningbo. All the related cost is capitalized in construction in progress to the extent it is incurred for the purposes of bringing the construction development to a usable state.

Land Use Right

12 Months Ended

Dec. 31, 2017

Land Use Right

Land Use Right

Land Use Right

8.Land Use Right

Land use right represents the land acquired for the purpose of constructing offices and warehouses. In 2016, the Group obtained the land use right certificate for Boguan from the local authorities. Amortization of the land use right is made over the remaining term of the land use right period from the date when the Group first obtained the land use right certificate from the local authorities. The land use right is summarized as follows (in thousands):

	December 31, 2016		December 31, 2017
	RMB		RMB
Cost	620,127		637,057
Incentive payment from local government	(15,000	)	(15,000	)
Accumulated amortization	(16,240	)	(28,778	)

Land use right, net	588,887		593,279

The total amortization expense for each of the years ended December 31, 2015, 2016 and 2017 amounted to approximately RMB2,768,000, RMB11,384,000, and RMB12,538,000, respectively.

Long-term Investments

12 Months Ended

Dec. 31, 2017

Long-term Investments

Long-term Investments

9.Long-term Investments

	December 31, 2016	December 31, 2017
	RMB	RMB
Investments in associated companies	652,635	563,896
Equity investments	461,664	1,292,620
Available-for-sale securities	855,728	828,260

	1,970,027	2,684,776

(a)Investments in associated companies

The Group recorded equity share of loss of RMB76.1 million, RMB85.8 million, and RMB12.2 million for the years ended December 31, 2015, 2016 and 2017, respectively, which was included in “investment income, net” in the consolidated statements of comprehensive income. Significant investments in associated companies are summarized as follows.

(1)

In August 2013, the Group established a joint venture with China Telecom Corp. Ltd. (“China Telecom”), Hangzhou Yixin Technology Co., Ltd. (“Yixin”) to launch “YiChat”, a proprietary social instant messaging application for smart phones. The Group contributed RMB200.0 million cash in exchange for a 27.0% equity interest in Yixin.

The investment was accounted for under the equity method of accounting with allocation of the investment cost as follows (in thousands):

	RMB
Tangible assets	58,320
Intangible assets	15,876
Goodwill	129,773
Deferred tax liabilities	(3,969	)

	200,000

In July 2015, the Group increased its equity shares in Yixin to 35.0% with a cash consideration of approximately RMB127.5 million. The allocation of the purchase price of the assets acquired and liabilities assumed based on their fair values was as follows (in thousands):

	RMB
Tangible assets	8,579
Intangible assets	15,564
Goodwill	107,280
Deferred tax liabilities	(3,891	)

	127,532

(2)

In 2016, the Group acquired a 49.0% equity interest in MAXWIN (B.V.I) LIMITED (“MAXWIN”), which is engaged in the retail business of casual and sportswear apparel, for a consideration of approximately RMB344.6 million in cash. In 2017, the Group disposed the 49.0% equity interest in MAXWIN for a cash consideration of approximately RMB340.4 million.

(b)Equity investments

Equity investments represent investments in privately held companies with no readily determinable fair value. The Group carries the investment at cost as the Group does not have significant influence or the investments are not common stock or in substance common stock.

The Group recognized a gain of RMB234.1 million and RMB9.6 million related to the partial disposal of the Group’s investment in an equity investee as “investment income, net” in the consolidated statements of comprehensive income for the years ended December 31, 2016 and 2017.

Impairment provision of RMB12.0 million, RMB12.2 million and RMB58.5 million related to certain of the equity investments were recognized as “investment income, net” in the consolidated statements of comprehensive income for the years ended December 31, 2015, 2016 and 2017, respectively, as the Group determined that the decline in its fair value is determined to be other-than-temporary.

(c)Available-for-sale securities

As of December 31, 2017, available-for-sale securities included RMB610.0 million invested in shares of Huatai Securities Company Limited (“Huatai”) and RMB218.3 million invested in shares of Caissa Touristic Group (“Caissa”). Total net unrealized gains of RMB34.0 million and net unrealized losses of RMB23.3 million (net of tax benefit of RMB47.7 million and RMB4.1 million) were recorded in other comprehensive income for the year ended December 31, 2016 and 2017, respectively.

	December 31, 2016
	Adjusted Cost	Unrealized Gains/(Losses)		Fair Value
	RMB	RMB		RMB
Huatai	660,528	(39,684	)	620,844
Caissa	100,000	134,884		234,884

	760,528	95,200		855,728

	December 31, 2017
	Adjusted Cost	Unrealized Gains/(Losses)		Fair Value
	RMB	RMB		RMB
Huatai	660,528	(50,563	)	609,965
Caissa	100,000	118,295		218,295

	760,528	67,732		828,260

The Group reviews its available-for-sale investments regularly to determine if an investment is other-than-temporarily impaired due to changes in quoted market price or other impairment indicators. Changes in market conditions and other facts and circumstances may change the business prospects of these issuers. The assessment that these investments are not other-than-temporarily impaired included a review of the business and financial outlook, the financial condition, the severity and duration of the drop in share price compared to the carrying value, as well as the Group’s ability and current intent to hold these securities until the prices recover. For the year ended December 31, 2016 and 2017, RMB266.7 million and nil impairment provision for Huatai were recognized as “investment income, net” in the consolidated statements of comprehensive income, respectively. The Group also received cash dividends from Huatai for the years ended December 31, 2016 and 2017 of RMB21.4 million and RMB20.9 million, respectively.

Other Long-term Assets

12 Months Ended

Dec. 31, 2017

Other Long-term Assets

Other Long-term Assets

10.Other Long-term Assets

The following is a summary of other long-term assets (in thousands):

	December 31,	December 31,
	2016	2017
	RMB	RMB
Copyrights, licenses and domain names	254,067	820,362
Staff housing loans	105,208	107,203
Non-current deposits	88,398	93,147
Others	52,075	91,867

	499,748	1,112,579

The Group made housing loans to its employees (excluding executive officers) for house purchases via a third-party commercial bank in China. Each individual staff housing loan is collateralized either by the property for which the loan is extended or by approved personal guarantees for the loan amount granted. The repayment term is five years from the date of drawdown. The interest rate is fixed varying from 1.5% to 3.5% per annum for the years ended December 31, 2016 and 2017, respectively. The outstanding portion of the staff housing loans repayable within 12 months as of December 31, 2016 and 2017 amounted to approximately RMB45.5 million and RMB48.5 million, respectively, and are reported under prepayments and other current assets in the consolidated balance sheets (see Note 5).

Taxation

12 Months Ended

Dec. 31, 2017

Taxation

Taxation

11.Taxation

(a)Income taxes

Cayman Islands

Under the current laws of the Cayman Islands, the Company, and its intermediate holding companies in the Cayman Islands are not subject to tax on income or capital gain. Additionally, upon payments of dividends by the Company or its subsidiaries in the Cayman Islands to their shareholders, no Cayman Islands withholding tax will be imposed.

British Virgin Islands (“BVI”)

Subsidiaries in the BVI are exempted from income tax on its foreign-derived income in the BVI. There are no withholding taxes in the BVI.

Hong Kong

Subsidiaries in Hong Kong are subject to 16.5% income tax for 2015, 2016 and 2017 on their taxable income generated from operations in Hong Kong. The payments of dividends by these companies to their shareholders are not subject to any Hong Kong withholding tax.

China

On March 16, 2007, the National People’s Congress of PRC enacted the Enterprise Income Tax Law, under which Foreign Invested Enterprises (“FIEs”) and domestic companies would be subject to enterprise income tax (“EIT”) at a uniform rate of 25%. Preferential tax treatments will continue to be granted to FIEs or domestic companies which conduct businesses in certain encouraged sectors and to entities otherwise classified as “Software Enterprises”, “Key Software Enterprises” and/or “High and New Technology Enterprises” (“HNTEs”). The Enterprise Income Tax Law became effective on January 1, 2008.

NetEase Beijing, Boguan, NetEase Hangzhou, Media Beijing and Hangzhou Langhe were qualified as HNTEs and enjoyed a preferential tax rate of 15% for 2015, 2016 and 2017. In 2016 and 2017, Boguan, Netease Hangzhou and Media Beijing were qualified as a Key Software Enterprise and enjoyed a further reduced preferential tax rate of 10% for 2015 and 2016. The related tax benefit was recorded in 2016 and 2017, respectively.

Wangyibao was recognized as a Software Enterprise in 2011. Accordingly it was exempt from EIT for 2011 and 2012 and subject to a 50% reduction in its EIT rate from 2013 to 2015. In 2015, Wangyibao was also qualified as a HNTE and enjoyed a preferential tax rate of 15% from 2016 to 2017.

Lede Technology was recognized as a Software Enterprise in 2014. It was exempt from EIT for 2014 and 2015 and subject to a 50% reduction in its EIT rate from 2016 to 2018.

Tianjin Technology was recognised as a Software Enterprise in 2016 to enjoy exemption from EIT for 2015 and 2016 and subject to a 50% reduction in its EIT rate from 2017 to 2019. Hence, the related tax benefit for 2015 was recorded in 2016.

StormNet IT SH was qualified as a HNTE in 2016 and applied a uniform tax rate of 25% for its 2016 and 2017 annual filling.

The aforementioned preferential tax rates are subject to annual review by the relevant tax authorities in China.

The following table presents the combined effects of EIT exemptions and tax rate reductions enjoyed by the Group for the years ended December 31, 2015, 2016 and 2017 (in thousands except per share data):

	For the year ended December 31,
	2015	2016	2017
	RMB	RMB	RMB
Aggregate amount of EIT exemptions and tax rate reductions	895,725	1,417,150	1,464,587

Earnings per share effect, basic	0.27	0.43	0.45

Earnings per share effect, diluted	0.27	0.43	0.44

The following table sets forth the component of income tax expenses of the Group for the years ended December 31, 2015, 2016 and 2017 (in thousands):

	For the year ended December 31,
	2015		2016	2017
	RMB		RMB	RMB
Current tax expense	1,420,693		2,035,822	2,600,406
Deferred tax (benefit)/expense	(147,285	)	66,676	(438,043	)

Income tax expenses	1,273,408		2,102,498	2,162,363

The following table presents a reconciliation of the differences between the statutory income tax rate and the Group’s effective income tax rate for the years ended December 31, 2015, 2016 and 2017:

	For the year ended December 31,
	2015		2016		2017
	%		%		%
Statutory income tax rate	25.0		25.0		25.0
Permanent differences	(1.5	)	(0.8	)	(0.5	)
Effect due to overseas tax-exempt entities	(0.3	)	(0.1	)	(0.5	)
Effect of lower tax rate applicable to Software Enterprises, Key Software Enterprise and HNTEs	(11.6	)	(13.3	)	(16.2	)
Change in valuation allowance	1.9		1.4		3.4
Effect of withholding income tax	2.2		2.9		5.4

Effective income tax rate	15.7		15.1		16.6

As of December 31, 2017, certain entities of the Group had net operating tax loss carry forwards as follows (in thousands):

		RMB
Loss expiring in 2018		142,614
Loss expiring in 2019		141,227
Loss expiring in 2020		117,944
Loss expiring in 2021		346,214
Loss expiring in 2022		1,581,834

		2,329,833

Full valuation allowance was provided on the related deferred tax assets as the Group’s management does not believe that sufficient positive evidence exists to conclude that recoverability of such deferred tax assets is more likely than not to be realized.

(b)Sales tax

Pursuant to the provision regulation of the PRC on Value Added Tax (“VAT”) and its implementation rules, the Company’s subsidiaries and VIEs are generally subject to VAT at a rate of 6% from revenues earned from services provided. All entities engaged in the sale of goods in China are generally required to pay VAT at a rate of 17% or other applicable value added tax rate implemented by the provision regulation of the gross sales proceeds received, less any creditable value added tax already paid or borne by the taxpayer.

The Group is also subject to cultural development fee on the provision of advertising services in China. The applicable tax rate is 3% of the advertising services revenue.

(c)Deferred tax assets and liabilities

The following table presents the tax impact of significant temporary differences that give rise to the deferred tax assets and liabilities as of December 31, 2016 and 2017 (in thousands):

	December 31,		December 31,
	2016		2017
	RMB		RMB
Deferred tax assets:
Deferred revenue, primarily for advanced payments from online games customers	224,994		285,919
Accruals	336,063		510,522
Depreciation of fixed assets	1,732		3,697
Amortization of Intangible assets	22,252		55,168
Net operating tax loss carry forward	342,710		742,512

	927,751		1, 597,818
Less: valuation allowance	(367,428	)	(774,323	)

Total	560,323		823,495

The Group does not believe that sufficient positive evidence exists to conclude that the recoverability of deferred tax assets of certain entities of the Group is more likely than not to be realized. Consequently, the Group has provided full valuation allowances for certain entities of the Group on the related deferred tax assets. The following table sets forth the movement of the aggregate valuation allowances for deferred tax assets for the periods presented (in thousands):

	Balance at	Provision/(reversal)	Balance at
	January 1	for the year	December 31
	RMB	RMB	RMB
2015	209,327	14,317	223,644
2016	223,644	143,784	367,428
2017	367,428	406,895	774,323

(d)Withholding income tax

The Enterprise Income Tax Law also imposes a withholding income tax of 10% on dividends distributed by a FIE to its immediate holding company outside of China. A lower withholding income tax rate of 5% is applied if the FIE’s immediate holding company is registered in Hong Kong or other jurisdictions that have a tax treaty arrangement with China. Such withholding income tax was exempted under the previous income tax law. On February 22, 2008, the Ministry of Finance and State Administration of Taxation jointly issued a circular which stated that for FIEs, all profits accumulated up to December 31, 2007 are exempted from withholding tax when they are distributed to foreign investors. Based on the interpretation of the current tax laws, management believes that the Company and all its non-PRC subsidiaries are not considered as a “resident enterprise” in China for corporate income tax purposes, but it cannot be certain that the relevant PRC tax authorities will agree with this determination. Except for the foregoing withholding taxes, the Company’s non-PRC subsidiaries, which are currently all incorporated in Hong Kong, the British Virgin Islands or Cayman Islands are not subject to taxation on dividends they receive from the Company’s PRC subsidiaries.

In 2015 and 2016, the Group accrued RMB180.7 million and RMB404.8 million withholding tax liabilities, respectively, associated with its quarterly dividend and cash expected to be distributed from its PRC subsidiaries to overseas for general corporate purposes.

In 2017, the Group altered its capital allocation strategy due to the change of business strategy. As a result, the Group recorded a withholding tax liability of RMB707.1 million (US$108.7 million) in 2017. The Group have repatriated these earnings and paid withholding income tax in 2017.

Aside from the above distributions, the Group intends to indefinitely reinvest all remaining undistributed earnings as of December 31, 2017 in its PRC subsidiaries. Accordingly, no other withholding tax is expected to be incurred, and the unrecognized deferred tax liabilities as of December 31, 2016 and 2017 were approximately RMB1,088.3 million and RMB1,079.5 million (US$165.9 million), respectively.

Taxes Payable

12 Months Ended

Dec. 31, 2017

Taxes Payable

Taxes Payable

12.Taxes Payable

The following is a summary of taxes payable as of December 31, 2016 and 2017 (in thousands):

	December 31,	December 31,
	2016	2017
	RMB	RMB
Value Added Tax payable	55,996	103,182
Withholding individual income taxes for employees	131,006	161,814
Enterprise income taxes	1,360,686	1,248,518
Others	174,813	51,178

	1,722,501	1,564,692

Short-term Loan	12 Months Ended
Short-term Loan	Dec. 31, 2017
Short-term Loan
Short-term Loan	13.Short-term Loan As of December 31, 2016 and 2017, the short-term loan balances represent short-term loan arrangements with banks which were repayable within a maturity term ranging from one month to six months and charged at a fixed interest rates ranging from 0.98% to 1.29% and 0.78% to 2.42% per annum, respectively. The short-term loan are denominated in US$, HK$ or JPY. As of December 31, 2016 and 2017, certain short-term loans were secured by RMB deposits of the Group in onshore branches of the banks in the amount of RMB3,995.0 million and RMB4,091.0 million (US$628.8 million), which was recognized as restricted cash (see Note 2(f)). In 2017, the Group entered into several loan credit facility agreements provided by certain financial institution. As at December 31, 2017, US$625.1 million of such credit facilities has not been utilized. In the year ended December 31, 2017, the Company also entered into several guarantee agreements in the aggregate amount of US$510.0 million in respect of certain credit facilities taken by its subsidiaries. As at December 31, 2017, US$265.0 million of such credit facilities had not been utilized.

Accrued Liabilities and Other Payables

12 Months Ended

Dec. 31, 2017

Accrued Liabilities and Other Payables

Accrued Liabilities and Other Payables

14.Accrued Liabilities and Other Payables

The following is a summary of accrued liabilities and other payables as of December 31, 2016 and 2017 (in thousands):

	December 31,	December 31,
	2016	2017
	RMB	RMB
Customer deposits on Wangyibao accounts	1,321,762	1,554,789
Marketing expenses	689,055	1,434,596
RSU payables (see Note 2(o))	172,815	—
Accrued fixed assets related payables	259,675	294,970
Server custody fees and telecommunication charges	132,062	232,395
Accrued revenue sharing	68,474	187,838
Other staff related cost	49,423	38,950
Content cost	67,742	406,890
Professional fees	40,863	65,404
Accrued freight and warehousing charge	107,760	257,877
Others	309,788	218,601

	3,219,419	4,692,310

Deferred Revenue	12 Months Ended
Deferred Revenue	Dec. 31, 2017
Deferred Revenue
Deferred Revenue	15.Deferred Revenue Deferred revenue represents sales proceeds from prepaid point cards, online points sold, unamortized mobile game in-game spending and prepaid subscription fees for Internet value-added services for which services are yet to be provided as of the balance sheet dates.

Noncontrolling Interests and Redeemable Noncontrolling Interests	12 Months Ended
	Dec. 31, 2017
Noncontrolling Interests and Redeemable Noncontrolling Interests
Noncontrolling Interests and Redeemable Noncontrolling Interests	16.Noncontrolling Interests and Redeemable Noncontrolling Interests In the first quarter of 2017, certain of the Group’s subsidiaries and VIE (together referred as “Netease Cloud Music”) and some investors entered into several investment agreements to issue equity interests of Netease Cloud Music with preferential rights to certain investors for a total cash consideration of RMB600.0 million (US$92.2 million). In addition, NetEase Cloud Music issued equity interest to one investor for a total cash consideration of RMB150.0 million (US$23.1 million). After the issuance of the equity interests, the investors together held approximately 12.59% equity interests in Netease Cloud Music. The Group determined that the equity interests with preferential rights of RMB600.0 million should be classified as redeemable noncontrolling interests since they are contingently redeemable upon the occurrence of a conditional event, which is not solely within the control of the Company. The redemption price equals initial investment plus annual interests. Equity interests issued of RMB150.0 million was classified as noncontrolling interests. In April 2018, a subsidiary of the Group issued equity interests with preferential rights to a group of investor. The Group determined that the equity interests with preferential rights should be classified as redeemable noncontrolling interest since they are contingently redeemable upon the occurrence of a conditional event, which is not solely within the control of the Company.

Capital Structure	12 Months Ended
Capital Structure	Dec. 31, 2017
Capital Structure
Capital Structure	17.Capital Structure The holders of ordinary shares in the Company are entitled to one vote per share and to receive ratably such dividends, if any, as may be declared by the board of directors of the Company. In the event of liquidation, the holders of ordinary shares are entitled to share ratably in all assets remaining after payment of liabilities. The ordinary shares have no preemptive, conversion, or other subscription rights.

Employee Benefits

12 Months Ended

Dec. 31, 2017

Employee Benefits

Employee Benefits

18.Employee Benefits

The Company’s subsidiaries and VIEs incorporated in China participate in a government-mandated multi-employer defined contribution plan under which certain retirement, medical, housing and other welfare benefits are provided to employees. Chinese labor regulations require the Company’s Chinese subsidiaries and VIEs to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly basic compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; hence, the Group has no further commitments beyond its monthly contribution. The following table presents the Group’s employee welfare benefits expense for the years ended December 31, 2015, 2016 and 2017 (in millions):

	For the year ended December 31
	2015	2016	2017
	RMB	RMB	RMB
Contributions to medical and pension schemes	366.4	481.8	626.4
Other employee benefits	235.5	315.1	410.5

	601.9	796.9	1,036.9

Share-based Compensation

12 Months Ended

Dec. 31, 2017

Share-based Compensation

Share-based Compensation

19.Share-based Compensation

(a)Restricted share units plan

In November 2009, the Company adopted a restricted share units plan for the Company’s employees, directors and consultants (the “2009 RSU Plan”). The Company has reserved 323,694,050 ordinary shares for issuance under the plan. The 2009 RSU Plan was adopted by a resolution of the board of directors on November 17, 2009 and became effective for a term of ten years unless sooner terminated.

(b)Share-based compensation expense

The Group recognizes share-based compensation cost in the consolidated statements of operations and comprehensive income based on awards ultimately expected to vest, after considering estimated forfeitures. Forfeitures are estimated based on the Group’s historical experience over the last five years and revised in subsequent periods if actual forfeitures differ from those estimates.

The table below presents a summary of the Group’s share-based compensation cost for the years ended December 31, 2015, 2016 and 2017 (in thousands):

	For the year ended December 31,
	2015	2016	2017
	RMB	RMB	RMB
Cost of revenues	328,480	444,187	820,281
Selling and marketing expenses	36,023	52,689	95,382
General and administrative expenses	120,925	238,750	581,337
Research and development expenses	199,039	254,505	507,263

	684,467	990,131	2,004,263

As of December 31, 2017, total unrecognized compensation cost related to unvested awards under the 2009 RSU Plan, adjusted for estimated forfeitures, was US$674.2 million (RMB4,386.8 million) and is expected to be recognized through the remaining vesting period of each grant. As of December 31, 2017, the weighted average remaining vesting period was 3.06 years.

(c)Restricted share units award activities

The following table presents a summary of the Company’s RSUs award activities for the years ended December 31, 2015, 2016 and 2017:

	Employees		Senior Management	Director and Consultants		Total
	(in thousands)		(in thousands)	(in thousands)		(in thousands)

Number of ordinary shares issuable upon vesting of restricted share units:
Outstanding at January 1, 2015	36,842		—	232		37,074
Granted	27,968		—	132		28,100
Vested	(23,339	)	—	(202	)	(23,541	)
Forfeited	(1,848	)	—	—		(1,848	)

Outstanding at December 31, 2015	39,623		—	162		39,785


Outstanding at January 1, 2016	39,623		—	162		39,785
Granted	30,980		—	100		31,080
Vested	(27,545	)	—	(119	)	(27,664	)
Forfeited	(1,633	)	—	—		(1,633	)

Outstanding at December 31, 2016	41,425		—	143		41,568


Outstanding at January 1, 2017	41,425		—	143		41,568
Granted	31,452		—	45		31,497
Vested	(29,705	)	—	(100	)	(29,805	)
Forfeited	(1,465	)	—	—		(1,465	)

Outstanding at December 31, 2017	41,707		—	88		41,795

The following table presents the total fair value of RSUs on vesting dates for the years ended December 31, 2015, 2016 and 2017, respectively:

	RSU
	US$	RMB
	(in millions)	(in millions)
Total fair value vested:
2015	99.0	641.3
2016	177.2	1,230.4
2017	343.6	2,235.9

The following table presents the weighted average remaining contractual life for the RSUs outstanding as of December 31, 2017:

Exercise Price	Number Outstanding / Exercisable	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price
	(in thousands)	Years	US$
Restricted Share Units
Performance-based settled in stock	10,057	1.85	n/a
Time-based-settled in stock/cash	66,309	2.94	n/a
Time-based-settled in stock	10,467	2.58	n/a

	86,833	2.77	n/a

The aggregate intrinsic value of RSUs outstanding as of December 31, 2017 was US$674.2 million. The intrinsic value was calculated based on the Company’s closing stock price of US$345.07 per ADS, or US$13.8028 per ordinary share as of December 31, 2017.

It is the Company’s policy to issue new shares upon vesting of RSUs. The number of shares available for future grant under the Company’s 2009 RSU Plan was 110,603,250 as of December 31, 2017.

(d)Other Share Incentive Plan

Certain of the Company’s subsidiaries have adopted stock option plans, which allow the related subsidiaries to grant options to certain employees of the Group. The options expire in five to seven years from the date of grant and either vest or have a vesting commencement date upon certain conditions being met (“Vesting Commencement Date”). The award can become 100% vested on the Vesting Commencement Date, or vests in two, four or five substantially equal annual installments with the first installment vesting on the Vesting Commencement Date.

The Group has used the binomial model to estimate the fair value of the options granted. For the years ended December 31, 2015, 2016 and 2017, nil, nil and RMB93.1 million compensation expenses were recorded for the share options granted.

While certain share options granted will become vested or commence vesting beginning on the Vesting Commencement Date, the effectiveness of the conditions is not within the control of the Group and is not deemed probable to occur for accounting purposes until the Vesting Commencement Date. For such share options, no compensation expenses were recorded. As of December 31, 2017, there were RMB266.0 million unrecognized share based compensation expenses are related to such share options for which the service condition had been met and are expected to be recognized when the conditions are achieved.

Net Income Per Share

12 Months Ended

Dec. 31, 2017

Net Income Per Share

Net Income Per Share

20.Net Income Per Share

The following table sets forth the computation of basic and diluted net income per share for the years ended December 31, 2015, 2016 and 2017:

	For the year ended December 31,
	2015	2016	2017
Numerator (RMB in thousands):
Net income attributable to NetEase, Inc.’s shareholders for basic/dilutive net income per share calculation	6,735,108	11,604,520	10,707,939


Denominator (No. of shares in thousands):
Weighted average number of ordinary shares outstanding, basic	3,284,382	3,281,729	3,290,312
Dilutive effect of employee stock options and restricted share units	20,831	25,380	25,166

Weighted average number of ordinary shares outstanding, diluted	3,305,213	3,307,109	3,315,478

Net income per share, basic (RMB)	2.05	3.54	3.25

Net income per share, diluted (RMB)	2.04	3.51	3.23

Basic net income per share is computed using the weighted average number of the ordinary shares outstanding during the year. Diluted net income per share is computed using the weighted average number of ordinary shares and potential ordinary shares outstanding during the year. For the years ended December 31, 2015, 2016 and 2017, options to purchase ordinary shares and RSUs that were anti-dilutive and excluded from the calculation of diluted net income per share totaled approximately 2.1 million shares, 2.7 million shares and 3.8 million shares, respectively.

Commitments and Contingencies

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies

Commitments and Contingencies

21.Commitments and Contingencies

(a)Commitments

The Group leases office space, staff quarters and certain equipment under non-cancelable operating lease agreements, which expire at various dates through December 2022. As of December 31, 2017, future minimum lease under non-cancelable operating lease agreements, capital commitments and other commitment related to content and services purchases were as follows (in thousands):

	Rental Commitments	Server Custody Fee Commitments	Capital Commitments	Office Machines and Other Commitments	Total
	RMB	RMB	RMB	RMB	RMB
2018	247,422	46,276	904,596	447,243	1,645,537
2019	131,175	15,022	49,945	272,249	468,391
2020	83,650	14,208	15,811	160,392	274,061
2021	72,446	11,069	—	189,137	272,652
Beyond 2021	48,403	—	—	16,487	64,890

	583,096	86,575	970,352	1,085,508	2,725,531

For the years ended December 31, 2015, 2016 and 2017, the Group incurred rental expenses in the amounts of approximately RMB139.4 million, RMB146.3 million and RMB231.9 million, respectively.

Additionally, under certain license agreements entered into during the period from 2008 to 2015 pursuant to which Blizzard licensed to Shanghai EaseNet the exclusive right to operate StarCraft II series, World of Warcraft, Heroes of the Storm, Hearthstone, Diablo III and Overwatch in the PRC, Shanghai EaseNet was required to pay license fees (excluding Hearthstone, Hero of the Storm and Diablo III for which no license fee was required to be paid), royalties and consultancy fees (except Hearthstone, Heroes of the Storm and Diablo III for which no consultancy fee was required to be paid) to Blizzard for the games. The license agreements also include minimum marketing expenditure commitments.

In September 2016, Shanghai EaseNet renewed its license and joint venture agreement with Blizzard, extending its collaboration with Blizzard in mainland China to January 2020. The renewed license and joint venture agreement includes licenses for Blizzard’s World of Warcraft, StarCraft II series, Diablo III, Hearthstone, Heroes of the Storm and Overwatch, as well as new content for these games during the agreement period. Under the new license agreements, Shanghai EaseNet is required to pay royalties and make a minimum marketing expenditure commitment for the games.

In accordance with the above-mentioned license agreements, the Group has incurred an overall commitment totaling approximately RMB7.4 billion (US$1.1 billion). As of December 31, 2017, the Group’s outstanding commitments under these license agreements totaled RMB2.9 billion which can be summarized as follows (in millions):

		RMB
2018		1,015
2019		984
2020		945

Total		2,944

In addition, Shanghai EaseNet is also obligated to purchase or lease certain prescribed hardware and then make such prescribed hardware available to fulfill its obligations under the license agreements with Blizzard in the aggregate amount of up to approximately RMB94.3 million over the remaining term of licenses as of December 31, 2017. This amount represents the maximum expenditure Shanghai EaseNet would have to make for the prescribed hardware, but it may not be required to spend this amount in order to satisfy its obligations with respect to such hardware.

With respect to the above commitment table related to Blizzard licensed games, the Group has guaranteed the foregoing amounts if and to the extent Shanghai EaseNet has insufficient funds to make such payments. The Group will be entitled to reimbursement of any amounts paid for the marketing of the games and for hardware support to operate the games under the guarantee from any net profits subsequently generated by Shanghai EaseNet, after the deduction of, among other things, various fees and expenses payable to Blizzard, the Group and the joint venture with Blizzard which provides technical services to Shanghai EaseNet.

(b)Litigation

Overview

From time to time, the Group is involved in claims and legal proceedings that arise in the ordinary course of business. Based on currently available information, management does not believe that the ultimate outcome of these unresolved matters, individually and in the aggregate, is reasonably possible to have a material adverse effect on the Group’s financial position, results of operations or cash flows. However, litigation is subject to inherent uncertainties and the Group’s view of these matters may change in the future. Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on the Group’s financial position, results of operations or cash flows for the period in which the unfavorable outcome occurs, and potentially in future periods.

Litigation

In April 2018, PUBG Corporation and PUBG Santa Monica, Inc. filed suit against defendants NetEase, Inc., NetEase Information Technology Corp. and NetEase (Hong Kong) Limited in the U.S. District Court for the Northern District of California. The complaint generally alleges that two of the Company’s mobile games, Rules of Survival and Knives Out, infringe the plaintiffs’ copyrights and trademarks and that the Company have engaged in unfair business competition under California law. For relief, the plaintiffs request unspecified compensatory and statutory damages and an injunction requiring the Company to remove each version of allegedly infringing games. The Company intends to defend the action vigorously and respond in due course.

Dividends	12 Months Ended
Dividends	Dec. 31, 2017
Dividends
Dividends	22.Dividends Quarterly Dividend Policy In May 2014, the Company’s board of directors approved a new quarterly dividend policy. Under this policy, the Company intends to make quarterly cash dividend distributions at an amount equivalent to approximately 25% of the Group’s anticipated net income after tax in each fiscal quarter. Dividends are recognized when declared. There is no dividend payable as of December 31, 2016 and 2017 respectively. The cash dividend declared and paid with respect to fiscal year 2016 and fiscal year 2017 was RMB2,910.5 million and RMB2,656.0 million (US$408.2 million) in total, respectively. The determination to make dividend distributions and the amount of such distributions in any particular quarter will be made at the discretion of the Company’s board of directors and will be based upon its operations and earnings, cash flow, financial condition, capital and other reserve requirements and surplus, any applicable contractual restrictions, the ability of the Company’s PRC subsidiaries to make distributions to their offshore parent companies, and any other conditions or factors which the board deems relevant and having regard to the directors’ fiduciary duties.

Share Repurchase Programs	12 Months Ended
Share Repurchase Programs	Dec. 31, 2017
Share Repurchase Programs
Share Repurchase Programs	23.Share Repurchase Programs The Company accounts for repurchased ordinary shares under the cost method and includes such treasury stock as a component of the common shareholders’ equity. Cancellation of treasury stock is recorded as a reduction of ordinary shares, additional paid-in-capital and retained earnings, as applicable. An excess of purchase price over par value is allocated to additional paid-in-capital first with any remaining excess charged entirely to retained earnings. In September 2015, the Company announced that its board of directors approved a new share repurchase program of up to US$500 million of the Company’s outstanding ADSs for a period not to exceed 12 months. As of expiration date of the program, the Company has repurchased approximately 1.5 million ADSs (equivalent to 37.7 million ordinary shares) for approximately US$205.3 million under this program. In November 2016, the Company announced that its board of directors approved a new share repurchase program of up to US$1.0 billion of the Company’s outstanding ADSs for a period not to exceed 12 months. As of expiration date of the program, the Company has repurchased approximately 1.1 million ADSs (equivalent to 28.1 million ordinary shares) for approximately US$306.1 million under this program. In November 2017, the Company announced that its board of directors approved a new share repurchase program of up to US$1.0 billion of the Company’s outstanding ADSs for a period not to exceed 12 months. As of 31 December 2017, no ADSs were repurchased under this program.

Related Party Transactions	12 Months Ended
Related Party Transactions	Dec. 31, 2017
Related Party Transactions
Related Party Transactions	24.Related Party Transactions In November, 2014, one of the Company’s subsidiaries, Lede Inc., issued 5,673,796 preferred shares to certain investors, including LNT Holdings, Shining Globe and two Directors of the Company, for US$3.74 per share in exchange of a total consideration of US$21.2 million. LNT Holdings is a private trust company incorporated under the laws of the British Virgin Islands, controlled by a group of employees of the Group (other than the employees of Lede). Shining Globe is a private company incorporated under the laws of the British Virgin Islands, controlled by Mr. Ding. In November 2015, Lede Inc. repurchased all the preferred shares from LNT Holdings, Shining Globe and the two Directors of the Company at the price of US$3.74 per shares for a total consideration of US$21.2 million (RMB134.7 million). Other than the above issuance and repurchase of preferred shares, the Group had no material transactions with related parties for the year ended December 31, 2015, 2016 and 2017, and no material related parties’ balances as of December 31, 2017.

Segment Information

12 Months Ended

Dec. 31, 2017

Segment Information

Segment Information

25.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 2017, the Group changed its segment disclosure to separately report the financial results of its e-commerce business in light of the significant growth of the revenue contribution from e-commerce to the Group’s total consolidated net revenues in 2017. This segment primarily reflects the results of NetEase’s two e-commerce platforms, Kaola.com and Yanxuan, which were established in January 2015 and April 2016, respectively. The Group now reports four reporting segments: 1) Online game services, 2) E-commerce, 3) Advertising services, and 4) Email 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 income or consolidated statements of cash flows. The Group retrospectively revised prior period segment information, to conform to current period presentation.

(b)Segment data

The table below provides a summary of the Group’s operating segment results for the years ended December 31, 2015, 2016 and 2017. 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, 2015, 2016 and 2017 (in thousands).

	For the year ended December 31,
	2015		2016		2017
	RMB		RMB		RMB
Net revenues:
Online game services	17,314,148		27,980,491		36,281,642
E-commerce	1,173,620		4,541,744		11,670,416
Advertising services	1,789,377		2,152,379		2,408,823
E-mail and others	2,525,750		3,504,230		3,741,138

Total net revenues	22,802,895		38,178,844		54,102,019


Cost of revenues:
Online game services	(5,393,555	)	(9,974,146	)	(13,473,339	)
E-commerce	(1,098,186	)	(3,986,871	)	(10,464,714	)
Advertising services	(599,032	)	(749,652	)	(797,892	)
E-mail and others	(2,308,487	)	(1,804,363	)	(3,453,381	)

Total cost of revenues	(9,399,260	)	(16,515,032	)	(28,189,326	)


Gross profit:
Online game services	11,920,593		18,006,345		22,808,303
E-commerce	75,434		554,873		1,205,702
Advertising services	1,190,345		1,402,727		1,610,931
E-mail and others	217,263		1,699,867		287,757

Total gross profit	13,403,635		21,663,812		25,912,693

The following table presents the total depreciation and amortization expenses of property and equipment and land use rights by segment for the years ended December 31, 2015, 2016 and 2017:

	For the year ended December 31,
	2015	2016	2017
	RMB	RMB	RMB

Online game services	51,031	101,400	157,695
E-commerce	32	274	4,745
Advertising services	4,180	4,061	8,712
E-mail and others	40,381	52,933	89,953

Total depreciation and amortization expenses of property and equipment and land use rights	95,624	158,668	261,105

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

Financial Instruments

12 Months Ended

Dec. 31, 2017

Financial Instruments

Financial Instruments

26.Financial Instruments

The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2016 (in thousands):

	Fair Value Measurements
		(RMB)
	Total	Quoted Prices in Active Market for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)
Time deposits-short term	19,361,098	19,361,098	—
Time deposits-long term	550,000	550,000	—
Available-for-sale securities	855,728	855,728	—
Other short-term investments	11,582,116	—	11,582,116

Total	32,348,942	20,766,826	11,582,116

The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2017 (in thousands):

	Fair Value Measurements
		(RMB)
	Total	Quoted Prices in Active Market for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)
Time deposits-short term	30,603,369	30,603,369	—
Time deposits-long term	100,000	100,000	—
Available-for-sale securities	828,260	828,260	—
Other short-term investments	9,742,663	—	9,742,663

Total	41,274,292	31,531,629	9,742,663

The rates of interest under the loan agreements with the lending banks were determined based on the prevailing interest rates in the market. The Group classifies the valuation techniques that use these inputs as Level 2 of fair value measurements of short-term bank loans. For other financial assets and liabilities with carrying values that approximate fair value, if measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy. As of December 31, 2016 and 2017, certain cost method investments (Note 9) were measured using significant unobservable inputs (Level 3) and written down from their respective carrying value to fair value, with impairment charges of RMB12.2 million and RMB58.5 million incurred and recorded in earnings for the years then ended.

Restricted Net Assets	12 Months Ended
Restricted Net Assets	Dec. 31, 2017
Restricted Net Assets
Restricted Net Assets	27.Restricted Net Assets Relevant PRC laws and regulations permit PRC companies to pay dividends only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Additionally, the Company’s PRC subsidiaries and VIEs can only distribute dividends upon approval of the shareholders after they have met the PRC requirements for appropriation to the general reserve fund and the statutory surplus fund respectively. The general reserve fund and the statutory surplus fund require that annual appropriations of 10% of net after-tax income should be set aside prior to payment of any dividends. As a result of these and other restrictions under PRC laws and regulations, the PRC subsidiaries and VIEs are restricted in their ability to transfer a portion of their net assets to the Company either in the form of dividends, loans or advances, which restricted portion amounted to approximately RMB6.8 billion, or 14% of the Company’s total consolidated net assets, as of December 31, 2017. Even though the Company currently does not require any such dividends, loans or advances from the PRC subsidiaries and VIEs for working capital and other funding purposes, the Company may in the future require additional cash resources from its PRC subsidiaries and VIEs due to changes in business conditions, to fund future acquisitions and developments, or merely declare and pay dividends to or distributions to the Company’s shareholders.

Principal Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Principal Accounting Policies

Basis of consolidation

(a)Basis of consolidation

Basis of presentation

(b)Basis of presentation

Revenue recognition

(c)Revenue recognition

The Group recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured.

(i)Online game services

Mobile games

PC-client games

(ii)E-commerce services

(iii)Advertising services

(iv)E-mail and others

Revenue from e-mail and others is predominantly derived from activities related to fee-based premium services, online payment platform services and other online services.

Cost of revenues

(d)Cost of revenues

Research and development costs

(e)Research and development costs

Cash, cash equivalents and time deposits

(f)Cash, cash equivalents and time deposits

As of December 31, 2016 and 2017, the Group had a restricted cash balance approximately RMB5,533.3 million and RMB5,927.1 million, respectively, comprising as follows (in millions):

	December 31, 2016	December 31, 2017
	RMB	RMB
Escrow account deposit for sales and marketing activities of Blizzard’s licensed games	134.4	—
Customer deposit of Wangyibao accounts	1,318.0	1,554.8
Pledge deposits for short-term bank borrowings — Current	1,935.0	4,091.0
Others	85.9	281.1

Subtotal	3,473.3	5,926.9

Pledge deposits for short-term bank borrowings — Non-current	2,060.0	—
Others	—	0.2

Subtotal	2,060.0	0.2

Total	5,533.3	5,927.1

The Group had no other lien arrangements during 2016 and 2017.

Fair value of financial instruments

(g)Fair value of financial instruments

Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets

Level 2 — Include other inputs that are directly or indirectly observable in the marketplace

Level 3 — Unobservable inputs which are supported by little or no market activity

Inventories, net

(h)Inventories, net

Investments

(i)Investments

Investment in associated companies

(j)Investment in associated companies

Property, equipment and software

(k)Property, equipment and software

Building		20 years
Decoration		5 years
Leasehold improvements		lesser of the term of the lease and the estimated useful lives of the assets
Furniture, fixtures and office equipment		5-10 years
Vehicles		5 years
Servers and computers		3 years
Software		3 years

Repairs and maintenance expenditures, which are not considered improvements and do not extend the useful life of the property and equipment, are expensed as incurred.

Intangible assets

(l)Intangible assets

Finite-lived intangible assets are tested for impairment if impairment indicators arise. The Group amortizes its finite-lived intangible assets using the straight-line method:

Land use right		over the remaining term of the land use right period
License right		over the license period
Technology		10 years

Advertising expenses

(m)Advertising expenses

Foreign currency translation

(n)Foreign currency translation

Share-based compensation

(o)Share-based compensation

Taxation

(p)Taxation

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount “more likely than not” to be realized in future tax returns.

The Group did not have any significant unrecognized uncertain tax positions as of December 31, 2016 and 2017.

Net earnings per share ("EPS") and per American Depositary Share ("ADS")

(q)Net earnings per share (“EPS”) and per American Depositary Share (“ADS”)

Statutory reserves

(r)Statutory reserves

The following table presents the Group’s appropriations to general reserve funds and statutory surplus funds for the years ended December 31, 2015, 2016 and 2017 (in thousands):

	For the year ended December 31,
	2015	2016	2017
	RMB	RMB	RMB
Appropriations to general reserve funds and statutory surplus funds	73,635	149,244	46,063

Noncontrolling interests and Redeemable noncontrolling interests

(s)Noncontrolling interests and Redeemable noncontrolling interests

Noncontrolling interests are recognized to reflect the portion of the equity of majority-owned subsidiaries and VIEs which is not attributable, directly or indirectly, to the controlling shareholder.

The noncontrolling interest will continue to be attributed its share of losses even if that attribution results in a deficit noncontrolling interest balance.

Related parties

(t)Related parties

Comprehensive income

(u)Comprehensive income

Segment reporting

(v)Segment reporting

The Group’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements is set out in detail under Note 25.

Dividends

(w)Dividends

Dividends of the Company are recognized when declared.

Recently issued accounting pronouncements

(x)Recently issued accounting pronouncements

Organization and Nature of Operations (Tables)

12 Months Ended

Dec. 31, 2017

Organization and Nature of Operations

Schedule of major subsidiaries and VIEs

The major subsidiaries and VIEs through which the Company conducts its business operations as of December 31, 2017 are described below:

Major Subsidiaries		Place and year of Incorporation
NetEase Information Technology (Beijing) Co., Ltd. (“NetEase Beijing”)		Beijing, China 1999
Guangzhou Boguan Telecommunication Technology Co., Ltd. (“Boguan”)		Guangzhou, China 2003
NetEase Youdao Information Technology (Beijing) Co., Ltd. (“Youdao Information”)		Beijing, China 2006
NetEase (Hangzhou) Network Co., Ltd. (“NetEase Hangzhou”)		Hangzhou, China 2006
Hangzhou Langhe Technology Co., Ltd. (“Hangzhou Langhe”)		Hangzhou, China 2009
Lede Technology Co., Ltd. (“Lede Technology”)		Beijing, China 2011
NetEase Media Technology (Beijing) Co., Ltd. (“Media Beijing”)		Beijing, China 2012
HQG, Limited (“HQG”)		Hong Kong, China 2014
Hangzhou Youmai Technology Co., Ltd. (“Hangzhou Youmai”)		Hangzhou, China 2014
Tianjin Wang Zhi Yi Innovation and Technology Co., Ltd. (“Tianjin Technology”)		Tianjin, China 2015
Hangzhou Netease Yanxuan Trading Co., Ltd. (“Hangzhou Yanxuan”)		Hangzhou, China 2016

Major VIEs and VIEs’ subsidiaries		Place and year of Incorporation
Guangzhou NetEase Computer System Co., Ltd. (“Guangzhou NetEase”)		Guangzhou, China 1997
Beijing NetEase Media Co., Ltd. (previously named “Beijing Guangyitong Advertising Co., Ltd.”) (“NetEase Advertising”)		Beijing, China 1999
Shanghai EaseNet Network Technology Co., Ltd. (“Shanghai EaseNet”)		Shanghai, China 2008
StormNet Information Technology (Hong Kong) Limited (“StormNet IT HK”)		Hong Kong, China 2008
StormNet Information Technology (Shanghai) Co., Ltd. (“StormNet IT SH”)		Shanghai, China 2008
Hangzhou NetEase Leihuo Network Co., Ltd. (“HZ Leihuo”)		Hangzhou, China 2009
Wangyibao Co., Ltd. (“Wangyibao Company”)		Hangzhou, China 2010

Schedule of combined financial information of the Group's VIEs included in the accompanying consolidated financial statements of the Group

	December 31,	December 31,
	2016	2017
	RMB	RMB
Total assets	10,631,045	9,729,718
Total liabilities	9,971,110	8,897,521

	For the year ended December 31,
	2015	2016	2017
	RMB	RMB	RMB
Net revenues	19,819,474	31,043,737	40,584,251
Net income	343,942	448,771	357,163

	For the year ended December 31,
	2015		2016		2017
	RMB		RMB		RMB
Net cash provided by/(used in) operating activities	931,049		1,736,702		(124,670	)
Net cash (used in)/provided by investing activities	(327,330	)	(270,733	)	122,286
Net cash (used in)/provided by financing activities	(89,996	)	(57,000	)	4,000

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

+ References + Details

Principal Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2017

Principal Accounting Policies

Schedule of restricted cash balance

As of December 31, 2016 and 2017, the Group had a restricted cash balance approximately RMB5,533.3 million and RMB5,927.1 million, respectively, comprising as follows (in millions):

	December 31, 2016	December 31, 2017
	RMB	RMB
Escrow account deposit for sales and marketing activities of Blizzard’s licensed games	134.4	—
Customer deposit of Wangyibao accounts	1,318.0	1,554.8
Pledge deposits for short-term bank borrowings — Current	1,935.0	4,091.0
Others	85.9	281.1

Subtotal	3,473.3	5,926.9

Pledge deposits for short-term bank borrowings — Non-current	2,060.0	—
Others	—	0.2

Subtotal	2,060.0	0.2

Total	5,533.3	5,927.1

Schedule of property and equipment useful lives

Building		20 years
Decoration		5 years
Leasehold improvements		lesser of the term of the lease and the estimated useful lives of the assets
Furniture, fixtures and office equipment		5-10 years
Vehicles		5 years
Servers and computers		3 years
Software		3 years

Schedule of intangible assets and its estimated useful life

Land use right		over the remaining term of the land use right period
License right		over the license period
Technology		10 years

Schedule of Group's appropriations to general reserve funds and statutory surplus funds

The following table presents the Group’s appropriations to general reserve funds and statutory surplus funds for the years ended December 31, 2015, 2016 and 2017 (in thousands):

	For the year ended December 31,
	2015	2016	2017
	RMB	RMB	RMB
Appropriations to general reserve funds and statutory surplus funds	73,635	149,244	46,063

Concentrations and Risks (Tables)

12 Months Ended

Dec. 31, 2017

Service providers | Bandwidth and server custody service provider

Concentrations and Risks

Schedule of concentration risk by risk factor

	For the year ended December 31,
	2015		2016		2017
Total number of telecommunications service providers	14		14		23
Number of service providers provided by 10% or more of the Group’s bandwidth and server custody expenditure	3		3		3
Total % of the Group’s bandwidth and server custody expenditure provided by 10% or greater service providers	83.0	%	79.5	%	67.8	%

Accounts receivable | Credit risk

Concentrations and Risks

Schedule of concentration risk by risk factor

	December 31, 2016	December 31, 2017
Distribution channel A	55.6%	34.6%
Allowance for doubtful accounts	Not applicable	Not applicable

Allowance for Doubtful Accounts (Tables)

12 Months Ended

Dec. 31, 2017

Allowance for Doubtful Accounts

Schedule of movements of the allowance for doubtful accounts

The following table sets out the movements of the allowance for doubtful accounts for the years ended December 31, 2015, 2016 and 2017 (in thousands):

	Balance at January 1,	Charged to (write-back against) cost and expenses	Write-off of receivable balances and corresponding provisions		Balance at December 31,
	RMB	RMB	RMB		RMB
2015	11,162	4,041	(1,018	)	14,185
2016	14,185	9,952	(1	)	24,136
2017	24,136	60,826	(53	)	84,909

Prepayments and Other Current Assets (Tables)

12 Months Ended

Dec. 31, 2017

Prepayments and Other Current Assets

Summary of prepayments and other current assets

The following is a summary of prepayments and other current assets (in thousands):

	December 31, 2016	December 31, 2017
	RMB	RMB
Guarantee payment made to Blizzard - royalty fees	154,009	42,697
Prepayment for royalties, revenue sharing cost	2,399,434	1,479,817
Interest receivable	274,020	417,843
Prepayments of content and marketing cost and other operational expenses	209,147	381,213
Prepayment for sales tax and deductible value added tax	148,505	698,902
Bridge loans in connection with ongoing investments	46,279	30,575
Deposits	156,020	138,633
Employee advances	50,244	55,045
Advance to suppliers	173,057	337,938
Others	87,237	233,365

	3,697,952	3,816,028

Short-term Investments (Tables)

12 Months Ended

Dec. 31, 2017

Short-term Investments

Summary of short-term investments

The following is a summary of short-term investments (in thousands):

	December 31, 2016
	Cost	Unrecognized Gains/(Losses)	Estimated Fair Value
	RMB	RMB	RMB
Other short-term investments	11,582,116	—	11,582,116

	11,582,116	—	11,582,116

	December 31, 2017
	Cost	Unrecognized Gains/(Losses)	Estimated Fair Value
	RMB	RMB	RMB
Other short-term investments	9,742,663	—	9,742,663

	9,742,663		9,742,663

Property, Equipment and Software (Tables)

12 Months Ended

Dec. 31, 2017

Property, Equipment and Software

Summary of property, equipment and software

The following is a summary of property, equipment and software (in thousands):

	December 31, 2016		December 31, 2017
	RMB		RMB
Building and decoration	1,207,607		1,496,971
Leasehold improvements	39,880		98,278
Furniture, fixtures and office equipment	104,779		124,201
Vehicles	52,396		68,414
Servers and computers	1,700,463		2,583,270
Software	54,273		86,650
Construction in progress	663,374		1,086,773

	3,822,772		5,544,557


Less: accumulated depreciation	(1,403,262	)	(1,775,231	)


Net book value	2,419,510		3,769,326

Land Use Right (Tables)

12 Months Ended

Dec. 31, 2017

Land Use Right

Land Use Right

Summary of land use right

The land use right is summarized as follows (in thousands):

	December 31, 2016		December 31, 2017
	RMB		RMB
Cost	620,127		637,057
Incentive payment from local government	(15,000	)	(15,000	)
Accumulated amortization	(16,240	)	(28,778	)

Land use right, net	588,887		593,279

Long-term Investments (Tables)

12 Months Ended

Dec. 31, 2017

Long-term Investments

Schedule of long-term investments

	December 31, 2016	December 31, 2017
	RMB	RMB
Investments in associated companies	652,635	563,896
Equity investments	461,664	1,292,620
Available-for-sale securities	855,728	828,260

	1,970,027	2,684,776

Investments in associated companies and equity method investments

Allocation of the purchase price or investment cost

The investment was accounted for under the equity method of accounting with allocation of the investment cost as follows (in thousands):

	RMB
Tangible assets	58,320
Intangible assets	15,876
Goodwill	129,773
Deferred tax liabilities	(3,969	)

	200,000

Schedule of available-for-sale securities

	December 31, 2016
	Adjusted Cost	Unrealized Gains/(Losses)		Fair Value
	RMB	RMB		RMB
Huatai	660,528	(39,684	)	620,844
Caissa	100,000	134,884		234,884

	760,528	95,200		855,728

	December 31, 2017
	Adjusted Cost	Unrealized Gains/(Losses)		Fair Value
	RMB	RMB		RMB
Huatai	660,528	(50,563	)	609,965
Caissa	100,000	118,295		218,295

	760,528	67,732		828,260

Yixin

Investments in associated companies and equity method investments

Allocation of the purchase price or investment cost

The allocation of the purchase price of the assets acquired and liabilities assumed based on their fair values was as follows (in thousands):

	RMB
Tangible assets	8,579
Intangible assets	15,564
Goodwill	107,280
Deferred tax liabilities	(3,891	)

	127,532

- Definition

Tabular disclosure of available-for-sale securities which includes, but is not limited to, changes in the cost basis and fair value, fair value and gross unrealized gain (loss), fair values by type of security, contractual maturity and classification, amortized cost basis, contracts to acquire securities to be accounted for as available-for-sale, debt maturities, transfers to trading, change in net unrealized holding gain (loss) net of tax, continuous unrealized loss position fair value, aggregate losses qualitative disclosures, other than temporary impairment (OTTI) losses or other disclosures related to available for sale securities.

+ References + Details

Other Long-term Assets (Tables)

12 Months Ended

Dec. 31, 2017

Other Long-term Assets

Summary of other long-term assets

The following is a summary of other long-term assets (in thousands):

	December 31,	December 31,
	2016	2017
	RMB	RMB
Copyrights, licenses and domain names	254,067	820,362
Staff housing loans	105,208	107,203
Non-current deposits	88,398	93,147
Others	52,075	91,867

	499,748	1,112,579

Taxation (Tables)

12 Months Ended

Dec. 31, 2017

Taxation

Schedule of the combined effects of EIT exemptions and tax rate reductions

	For the year ended December 31,
	2015	2016	2017
	RMB	RMB	RMB
Aggregate amount of EIT exemptions and tax rate reductions	895,725	1,417,150	1,464,587

Earnings per share effect, basic	0.27	0.43	0.45

Earnings per share effect, diluted	0.27	0.43	0.44

Schedule of component of income tax expenses

The following table sets forth the component of income tax expenses of the Group for the years ended December 31, 2015, 2016 and 2017 (in thousands):

	For the year ended December 31,
	2015		2016	2017
	RMB		RMB	RMB
Current tax expense	1,420,693		2,035,822	2,600,406
Deferred tax (benefit)/expense	(147,285	)	66,676	(438,043	)

Income tax expenses	1,273,408		2,102,498	2,162,363

Schedule of reconciliation of the differences between the statutory income tax rate and the Group's effective income tax rate

	For the year ended December 31,
	2015		2016		2017
	%		%		%
Statutory income tax rate	25.0		25.0		25.0
Permanent differences	(1.5	)	(0.8	)	(0.5	)
Effect due to overseas tax-exempt entities	(0.3	)	(0.1	)	(0.5	)
Effect of lower tax rate applicable to Software Enterprises, Key Software Enterprise and HNTEs	(11.6	)	(13.3	)	(16.2	)
Change in valuation allowance	1.9		1.4		3.4
Effect of withholding income tax	2.2		2.9		5.4

Effective income tax rate	15.7		15.1		16.6

Summary of net operating tax loss carry forwards

As of December 31, 2017, certain entities of the Group had net operating tax loss carry forwards as follows (in thousands):

		RMB
Loss expiring in 2018		142,614
Loss expiring in 2019		141,227
Loss expiring in 2020		117,944
Loss expiring in 2021		346,214
Loss expiring in 2022		1,581,834

		2,329,833

Schedule of tax impact of significant temporary differences that give rise to the deferred tax assets and liabilities

The following table presents the tax impact of significant temporary differences that give rise to the deferred tax assets and liabilities as of December 31, 2016 and 2017 (in thousands):

	December 31,		December 31,
	2016		2017
	RMB		RMB
Deferred tax assets:
Deferred revenue, primarily for advanced payments from online games customers	224,994		285,919
Accruals	336,063		510,522
Depreciation of fixed assets	1,732		3,697
Amortization of Intangible assets	22,252		55,168
Net operating tax loss carry forward	342,710		742,512

	927,751		1, 597,818
Less: valuation allowance	(367,428	)	(774,323	)

Total	560,323		823,495

Schedule of movement of the aggregate valuation allowances for deferred tax assets

The following table sets forth the movement of the aggregate valuation allowances for deferred tax assets for the periods presented (in thousands):

	Balance at	Provision/(reversal)	Balance at
	January 1	for the year	December 31
	RMB	RMB	RMB
2015	209,327	14,317	223,644
2016	223,644	143,784	367,428
2017	367,428	406,895	774,323

Taxes Payable (Tables)

12 Months Ended

Dec. 31, 2017

Taxes Payable

Summary of taxes payable

The following is a summary of taxes payable as of December 31, 2016 and 2017 (in thousands):

	December 31,	December 31,
	2016	2017
	RMB	RMB
Value Added Tax payable	55,996	103,182
Withholding individual income taxes for employees	131,006	161,814
Enterprise income taxes	1,360,686	1,248,518
Others	174,813	51,178

	1,722,501	1,564,692

Accrued Liabilities and Other Payables (Tables)

12 Months Ended

Dec. 31, 2017

Accrued Liabilities and Other Payables

Summary of accrued liabilities and other payables

The following is a summary of accrued liabilities and other payables as of December 31, 2016 and 2017 (in thousands):

	December 31,	December 31,
	2016	2017
	RMB	RMB
Customer deposits on Wangyibao accounts	1,321,762	1,554,789
Marketing expenses	689,055	1,434,596
RSU payables (see Note 2(o))	172,815	—
Accrued fixed assets related payables	259,675	294,970
Server custody fees and telecommunication charges	132,062	232,395
Accrued revenue sharing	68,474	187,838
Other staff related cost	49,423	38,950
Content cost	67,742	406,890
Professional fees	40,863	65,404
Accrued freight and warehousing charge	107,760	257,877
Others	309,788	218,601

	3,219,419	4,692,310

Employee Benefits (Tables)

12 Months Ended

Dec. 31, 2017

Employee Benefits

Schedule of group's employee welfare benefits expense

The following table presents the Group’s employee welfare benefits expense for the years ended December 31, 2015, 2016 and 2017 (in millions):

	For the year ended December 31
	2015	2016	2017
	RMB	RMB	RMB
Contributions to medical and pension schemes	366.4	481.8	626.4
Other employee benefits	235.5	315.1	410.5

	601.9	796.9	1,036.9

Share-based Compensation (Tables)

12 Months Ended

Dec. 31, 2017

Share based Compensation

Summary of the Group's share-based compensation cost

The table below presents a summary of the Group’s share-based compensation cost for the years ended December 31, 2015, 2016 and 2017 (in thousands):

	For the year ended December 31,
	2015	2016	2017
	RMB	RMB	RMB
Cost of revenues	328,480	444,187	820,281
Selling and marketing expenses	36,023	52,689	95,382
General and administrative expenses	120,925	238,750	581,337
Research and development expenses	199,039	254,505	507,263

	684,467	990,131	2,004,263

2009 RSU Plan

Share based Compensation

Summary of the Company's RSUs activities

	Employees		Senior Management	Director and Consultants		Total
	(in thousands)		(in thousands)	(in thousands)		(in thousands)

Number of ordinary shares issuable upon vesting of restricted share units:
Outstanding at January 1, 2015	36,842		—	232		37,074
Granted	27,968		—	132		28,100
Vested	(23,339	)	—	(202	)	(23,541	)
Forfeited	(1,848	)	—	—		(1,848	)

Outstanding at December 31, 2015	39,623		—	162		39,785


Outstanding at January 1, 2016	39,623		—	162		39,785
Granted	30,980		—	100		31,080
Vested	(27,545	)	—	(119	)	(27,664	)
Forfeited	(1,633	)	—	—		(1,633	)

Outstanding at December 31, 2016	41,425		—	143		41,568


Outstanding at January 1, 2017	41,425		—	143		41,568
Granted	31,452		—	45		31,497
Vested	(29,705	)	—	(100	)	(29,805	)
Forfeited	(1,465	)	—	—		(1,465	)

Outstanding at December 31, 2017	41,707		—	88		41,795

Schedule of total fair value of RSUs vested during the period

	RSU
	US$	RMB
	(in millions)	(in millions)
Total fair value vested:
2015	99.0	641.3
2016	177.2	1,230.4
2017	343.6	2,235.9

Schedule of weighted average remaining contractual life for the RSUs outstanding

The following table presents the weighted average remaining contractual life for the RSUs outstanding as of December 31, 2017:

Exercise Price	Number Outstanding / Exercisable	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price
	(in thousands)	Years	US$
Restricted Share Units
Performance-based settled in stock	10,057	1.85	n/a
Time-based-settled in stock/cash	66,309	2.94	n/a
Time-based-settled in stock	10,467	2.58	n/a

	86,833	2.77	n/a

Net Income Per Share (Tables)

12 Months Ended

Dec. 31, 2017

Net Income Per Share

Schedule of computation of basic and diluted net income per share

	For the year ended December 31,
	2015	2016	2017
Numerator (RMB in thousands):
Net income attributable to NetEase, Inc.’s shareholders for basic/dilutive net income per share calculation	6,735,108	11,604,520	10,707,939


Denominator (No. of shares in thousands):
Weighted average number of ordinary shares outstanding, basic	3,284,382	3,281,729	3,290,312
Dilutive effect of employee stock options and restricted share units	20,831	25,380	25,166

Weighted average number of ordinary shares outstanding, diluted	3,305,213	3,307,109	3,315,478

Net income per share, basic (RMB)	2.05	3.54	3.25

Net income per share, diluted (RMB)	2.04	3.51	3.23

Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies

Schedule of future commitments under various contracts

As of December 31, 2017, future minimum lease under non-cancelable operating lease agreements, capital commitments and other commitment related to content and services purchases were as follows (in thousands):

	Rental Commitments	Server Custody Fee Commitments	Capital Commitments	Office Machines and Other Commitments	Total
	RMB	RMB	RMB	RMB	RMB
2018	247,422	46,276	904,596	447,243	1,645,537
2019	131,175	15,022	49,945	272,249	468,391
2020	83,650	14,208	15,811	160,392	274,061
2021	72,446	11,069	—	189,137	272,652
Beyond 2021	48,403	—	—	16,487	64,890

	583,096	86,575	970,352	1,085,508	2,725,531

Summary of Group's outstanding commitments under several license contracts

As of December 31, 2017, the Group’s outstanding commitments under these license agreements totaled RMB2.9 billion which can be summarized as follows (in millions):

		RMB
2018		1,015
2019		984
2020		945

Total		2,944

Segment Information (Tables)

12 Months Ended

Dec. 31, 2017

Segment Information

Summary of the Group's operating segment results

The table below provides a summary of the Group’s operating segment results for the years ended December 31, 2015, 2016 and 2017 (in thousands).

	For the year ended December 31,
	2015		2016		2017
	RMB		RMB		RMB
Net revenues:
Online game services	17,314,148		27,980,491		36,281,642
E-commerce	1,173,620		4,541,744		11,670,416
Advertising services	1,789,377		2,152,379		2,408,823
E-mail and others	2,525,750		3,504,230		3,741,138

Total net revenues	22,802,895		38,178,844		54,102,019


Cost of revenues:
Online game services	(5,393,555	)	(9,974,146	)	(13,473,339	)
E-commerce	(1,098,186	)	(3,986,871	)	(10,464,714	)
Advertising services	(599,032	)	(749,652	)	(797,892	)
E-mail and others	(2,308,487	)	(1,804,363	)	(3,453,381	)

Total cost of revenues	(9,399,260	)	(16,515,032	)	(28,189,326	)


Gross profit:
Online game services	11,920,593		18,006,345		22,808,303
E-commerce	75,434		554,873		1,205,702
Advertising services	1,190,345		1,402,727		1,610,931
E-mail and others	217,263		1,699,867		287,757

Total gross profit	13,403,635		21,663,812		25,912,693

Schedule of total depreciation and amortization expenses of property and equipment and land use rights by segment

	For the year ended December 31,
	2015	2016	2017
	RMB	RMB	RMB

Online game services	51,031	101,400	157,695
E-commerce	32	274	4,745
Advertising services	4,180	4,061	8,712
E-mail and others	40,381	52,933	89,953

Total depreciation and amortization expenses of property and equipment and land use rights	95,624	158,668	261,105

Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2017

Financial Instruments

Schedule of financial instruments, measured at fair value

The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2016 (in thousands):

	Fair Value Measurements
		(RMB)
	Total	Quoted Prices in Active Market for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)
Time deposits-short term	19,361,098	19,361,098	—
Time deposits-long term	550,000	550,000	—
Available-for-sale securities	855,728	855,728	—
Other short-term investments	11,582,116	—	11,582,116

Total	32,348,942	20,766,826	11,582,116

The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2017 (in thousands):

	Fair Value Measurements
		(RMB)
	Total	Quoted Prices in Active Market for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)
Time deposits-short term	30,603,369	30,603,369	—
Time deposits-long term	100,000	100,000	—
Available-for-sale securities	828,260	828,260	—
Other short-term investments	9,742,663	—	9,742,663

Total	41,274,292	31,531,629	9,742,663

Organization and Nature of Operations (Details) $ in Thousands					1 Months Ended	12 Months Ended
	Dec. 01, 2015	Nov. 30, 2015	May 12, 2010	May 12, 2000	Nov. 30, 2015	Dec. 31, 2017 USD ($) entity	Dec. 31, 2017 CNY (¥) entity company	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)	Apr. 30, 2009 employee
Principle subsidiaries and variable interest entities
Total assets							¥ 9,729,718,000	¥ 10,631,045,000
Total liabilities							8,897,521,000	9,971,110,000
Net revenues						$ 8,315,328	54,102,019,000	38,178,844,000	¥ 22,802,895,000
Net income						1,667,484	10,849,137,000	11,792,863,000	6,836,900,000
Net cash provided by/(used in) operating activities						1,827,346	11,889,238,000	15,488,266,000	8,076,920,000
Net cash (used in)/provided by investing activities						(2,036,382)	(13,249,291,000)	(14,001,814,000)	(2,536,524,000)
Net cash (used in)/provided by financing activities						$ (200,226)	(1,302,728,000)	(2,250,507,000)	(1,632,736,000)
Amount of assets for settlement of obligations except for the registered capital of the VIEs and certain non-distributable statutory reserves							0
Registered capital of VIEs							536,200,000	533,200,000
Non-distributable statutory reserves of the consolidated VIEs							¥ 27,200,000	21,300,000
Number of entities for which the company has a variable interest but is not the primary beneficiary \| entity						0	0
Primary Beneficiary Consolidated VIEs
Principle subsidiaries and variable interest entities
Net revenues							¥ 40,584,251,000	31,043,737,000	19,819,474,000
Net income							357,163,000	448,771,000	343,942,000
Net cash provided by/(used in) operating activities							(124,670,000)	1,736,702,000	931,049,000
Net cash (used in)/provided by investing activities							122,286,000	(270,733,000)	(327,330,000)
Net cash (used in)/provided by financing activities							¥ 4,000,000	¥ (57,000,000)	¥ (89,996,000)
HZ Leihuo
Principle subsidiaries and variable interest entities
Number of employees incorporating new entity \| employee										2
HZ Leihuo \| Operating agreement
Principle subsidiaries and variable interest entities
Term of principal (or amended principal) agreement	20 years
StormNet IT HK and StormNet IT SH Joint Venture
Principle subsidiaries and variable interest entities
Number of companies in joint venture \| company							2
Guangzhou NetEase \| Shareholder voting rights trust agreement
Principle subsidiaries and variable interest entities
Term of principal (or amended principal) agreement			20 years	10 years
Guangzhou NetEase \| Letter of agreement
Principle subsidiaries and variable interest entities
Term of principal (or amended principal) agreement			20 years
NetEase Advertising \| Operating agreement
Principle subsidiaries and variable interest entities
Term of principal (or amended principal) agreement		20 years
NetEase Advertising \| Guangzhou NetEase
Principle subsidiaries and variable interest entities
Ownership percentage, owned by parent		80.00%			80.00%
NetEase Advertising \| Mr. Ding
Principle subsidiaries and variable interest entities
Percentage of ownership transferred					79.00%
Ownership percentage, owned by parent, after transaction					99.00%
NetEase Advertising \| One Chinese employee
Principle subsidiaries and variable interest entities
Percentage of ownership transferred					1.00%
Ownership percentage, owned by noncontrolling shareholders, after transaction					1.00%

Principal Accounting Policies (Details) $ in Thousands, € in Millions	12 Months Ended
	Dec. 31, 2017 USD ($) item	Dec. 31, 2017 CNY (¥) item	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)	Dec. 31, 2017 EUR (€)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 EUR (€)	Dec. 31, 2016 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2014 CNY (¥)
Revenue recognition
Number of revenue models used for online game services \| item	2	2
Revenues derived from barter transactions		¥ 0	¥ 0	¥ 0
Expenses derived from barter transactions		0	0	0
Cash, cash equivalents and time deposits
Cash at bank and demand deposits				6,071,487,000		$ 424,841	¥ 2,764,140,000		$ 836,036	¥ 5,439,499,000	¥ 2,021,453,000
PRC subsidiaries and VIEs
Cash, cash equivalents and time deposits
Cash and cash equivalent and time deposits held by PRC subsidiaries and VIEs							¥ 15,100,000,000			¥ 17,000,000,000
Percentage of cash and cash equivalent and time deposits held by PRC subsidiaries and VIEs					45.10%	45.10%	45.10%	66.90%	66.90%	66.90%
Denominated in USD
Cash, cash equivalents and time deposits
Cash at bank and demand deposits						$ 112,500	¥ 733,400,000		$ 394,800
Time deposits						$ 2,547,800	16,648,100,000		$ 750,200
Denominated in EUR
Cash, cash equivalents and time deposits
Cash at bank and demand deposits					€ 1.6		¥ 12,800,000	€ 1.3
Selling and marketing expenses
Cost of revenues
Shipping and handling costs	$ 181,800	¥ 1,182,700,000	¥ 503,000,000	¥ 155,400,000
Less than
Revenue recognition
Term of advertising service contracts	3 months	3 months
Service period of the element	3 months	3 months

Principal Accounting Policies (Details 2) ¥ in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) agreement	Dec. 31, 2016 CNY (¥) agreement	Dec. 31, 2017 CNY (¥)
Restricted cash
Restricted cash, current	$ 910,949	¥ 3,473,273	¥ 5,926,906
Restricted cash, non-current	$ 31	2,060,000	200
Restricted Cash, Total		¥ 5,533,300	5,927,100
Number of other lien arrangements \| agreement	0	0
Escrow account deposit for funding sales and marketing activities of Blizzard's licensed games
Restricted cash
Restricted cash, current		¥ 134,400
Customer deposit \| Wangyibao
Restricted cash
Restricted cash, current		1,318,000	1,554,800
Pledge deposit for short-term bank borrowing
Restricted cash
Restricted cash, current		1,935,000	4,091,000
Restricted cash, non-current		2,060,000
Others
Restricted cash
Restricted cash, current		¥ 85,900	281,100
Restricted cash, non-current			¥ 200

Principal Accounting Policies (Details 3)	12 Months Ended
Principal Accounting Policies (Details 3)	Dec. 31, 2017
Building
Property, Equipment and Software
Estimated useful lives of assets	20 years
Estimated useful lives of assets	20 years
Decoration
Property, Equipment and Software
Estimated useful lives of assets	5 years
Estimated useful lives of assets	5 years
Leasehold improvements
Property, Equipment and Software
Estimated useful lives of assets	lesser of the term of the lease and the estimated useful lives of the assets
Furniture, fixtures and office equipment
Property, Equipment and Software
Estimated useful lives of assets	5-10 years
Furniture, fixtures and office equipment \| Equal to or more than
Property, Equipment and Software
Estimated useful lives of assets	5 years
Furniture, fixtures and office equipment \| Less than
Property, Equipment and Software
Estimated useful lives of assets	10 years
Vehicles
Property, Equipment and Software
Estimated useful lives of assets	5 years
Estimated useful lives of assets	5 years
Servers and computers
Property, Equipment and Software
Estimated useful lives of assets	3 years
Estimated useful lives of assets	3 years
Software
Property, Equipment and Software
Estimated useful lives of assets	3 years
Estimated useful lives of assets	3 years

Principal Accounting Policies (Details 4) ¥ in Millions	12 Months Ended
Principal Accounting Policies (Details 4) ¥ in Millions	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)	Dec. 29, 2017
Advertising Expense
Advertising expenses	¥ 2,310.6	¥ 1,116.9	¥ 697.9
Foreign currency translation
Buying rate per US$				6.5063
Land Use Right
Intangible assets
Estimated useful lives of assets	over the remaining term of the land use right period
Licensing Rights
Intangible assets
Estimated useful lives of assets	over the license period
Technology
Intangible assets
Estimated useful lives of assets	10 years
Estimated useful lives of assets	10 years

Principal Accounting Policies (Details 5)		12 Months Ended
Principal Accounting Policies (Details 5)	Nov. 17, 2009	Dec. 31, 2017
Share based Compensation
Number of preceding years considered for estimating forfeiture		5 years
2009 RSU Plan
Share based Compensation
Expiration period	10 years
2009 RSU Plan \| 2009 RSU Plan \| Equal to or more than
Share based Compensation
Service vesting period		1 year
2009 RSU Plan \| 2009 RSU Plan \| Less than
Share based Compensation
Service vesting period		5 years
Certain subsidiaries \| Stock Options \| Equal to or more than
Share based Compensation
Expiration period		5 years
Certain subsidiaries \| Stock Options \| Less than
Share based Compensation
Expiration period		7 years

Principal Accounting Policies (Details 6) - CNY (¥) ¥ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
NetEase Beijing
Statutory reserves
Appropriation of after tax profit to reserve fund limit registered capital percentage reached by the entity	50.00%	50.00%	50.00%
Boguan
Statutory reserves
Appropriation of after tax profit to reserve fund limit registered capital percentage reached by the entity	50.00%	50.00%	50.00%
NetEase Hangzhou
Statutory reserves
Appropriation of after tax profit to reserve fund limit registered capital percentage reached by the entity	50.00%	50.00%	50.00%
Guangzhou NetEase
Statutory reserves
Appropriation of after tax profit to reserve fund limit registered capital percentage reached by the entity	50.00%	50.00%
Media Beijing
Statutory reserves
Appropriation of after tax profit to reserve fund limit registered capital percentage reached by the entity	50.00%
PRC
Statutory reserves
Appropriations to general reserve funds and statutory surplus funds	¥ 46,063	¥ 149,244	¥ 73,635
PRC \| General reserve fund
Statutory reserves
Required minimum percentage of annual appropriations	10.00%
Statutory threshold percentage of the reserve fund to the registered capital of the respective company, above which the appropriation is not required	50.00%
PRC \| Statutory surplus reserve
Statutory reserves
Required minimum percentage of annual appropriations	10.00%
Statutory threshold percentage of the reserve fund to the registered capital of the respective company, above which the appropriation is not required	50.00%

Principal Accounting Policies (Details 7) ¥ in Thousands, $ in Thousands	Mar. 31, 2018 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)
Recently issued accounting pronouncements
Reduction of deferred revenue		$ (958,758)	¥ (6,237,969)	¥ (7,531,238)
Increase to retained earnings		$ 6,567,954	42,733,081	35,328,812
Total restricted cash			¥ 5,927,100	5,533,300
ASU No. 2014-09 \| Cumulative-effect adjustment \| Proforma adjustment
Recently issued accounting pronouncements
Reduction of deferred revenue	¥ 81,700
Increase to retained earnings	27,400
ASU No. 2015-17 \| Adjustment
Recently issued accounting pronouncements
Current deferred tax assets				536,300
Non-current deferred tax assets				536,300
Current deferred tax liabilities				358,500
Non-current deferred tax liabilities				¥ 358,500
ASU No. 2016-01 \| Proforma adjustment \| Subsequent event
Recently issued accounting pronouncements
Increase to retained earnings	38,200
Accumulated other comprehensive income for available-for-sale equity securities reclassified	¥ 38,200

Concentrations and Risks (Details)	12 Months Ended
Concentrations and Risks (Details)	Dec. 31, 2017 item customer	Dec. 31, 2016 item customer	Dec. 31, 2015 item customer
Service providers \| Bandwidth and server custody service provider
Concentrations and Risks
Total number of telecommunications service providers	23	14	14
Number of service providers provided by 10% or more of the Group's bandwidth and server custody expenditure	3	3	3
Concentration risk (as a percent)	67.80%	79.50%	83.00%
Service providers \| Bandwidth and server custody service provider \| Equal to or more than
Concentrations and Risks
Threshold for disclosure of risk (as a percent)	10.00%	10.00%	10.00%
Accounts receivable \| Credit risk
Concentrations and Risks
Number of distribution channel	1	1
Accounts receivable \| Credit risk \| Distribution channel A
Concentrations and Risks
Concentration risk (as a percent)	34.60%	55.60%
Accounts receivable \| Credit risk \| Equal to or more than
Concentrations and Risks
Threshold for disclosure of risk (as a percent)	10.00%	10.00%
Total net revenues \| Major Customers
Concentrations and Risks
Number of customers \| customer	0	0	0
Total net revenues \| Major Customers \| Equal to or more than
Concentrations and Risks
Threshold for disclosure of risk (as a percent)	10.00%	10.00%	10.00%
Total net revenues \| Self-developed Massively Multi-player Online Role-playing Games
Concentrations and Risks
Concentration risk (as a percent)	46.90%	49.60%	42.20%
Total net game revenues \| Mobile Games
Concentrations and Risks
Concentration risk (as a percent)	70.80%	61.90%	45.70%
Short-term investments \| Credit risk \| Equal to or more than
Concentrations and Risks
Effective yields of short-term investments	1.90%
Short-term investments \| Credit risk \| Less than
Concentrations and Risks
Effective yields of short-term investments	5.30%

Allowance for Doubtful Accounts (Details) ¥ in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Allowance for Doubtful Accounts
Balance at the beginning of the year		¥ 24,136	¥ 14,185	¥ 11,162
Charged to (write-back against) cost and expenses	$ 9,349	60,826	9,952	4,041
Write-off of receivable balances and corresponding provisions		(53)	(1)	(1,018)
Balance at the end of the year		¥ 84,909	¥ 24,136	¥ 14,185

Prepayments and Other Current Assets (Details) $ in Thousands	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)
Prepayments and Other Current Assets
Guarantee payment made to Blizzard - royalty fees		¥ 42,697,000	¥ 154,009,000
Prepayment for royalties, revenue sharing cost		1,479,817,000	2,399,434,000
Interest receivable		417,843,000	274,020,000
Prepayments of content and marketing cost and other operational expenses		381,213,000	209,147,000
Prepayment for sales tax and deductible value added tax		698,902,000	148,505,000
Bridge loans in connection with ongoing investments		30,575,000	46,279,000
Deposits		138,633,000	156,020,000
Employee advances		55,045,000	50,244,000
Advance to suppliers		337,938,000	173,057,000
Others		233,365,000	87,237,000
Prepayments and other current assets	$ 586,514	3,816,028,000	3,697,952,000
Staff housing loans outstanding repayable within 12 months		48,500,000	45,500,000
Advances were made directly or indirectly to the executive officers for their personal benefit		¥ 0	¥ 0

Short-term Investments (Details) ¥ in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)
Short-term Investments
Cost		¥ 11,582,116		$ 1,497,420	¥ 9,742,663
Investment income related to short-term investments	¥ 389,500	303,400	¥ 143,100
Other short-term investments
Short-term Investments
Cost		11,582,116			9,742,663
Estimated Fair Value		11,582,116			9,742,663
Short-term investments
Short-term Investments
Estimated Fair Value		¥ 11,582,116			¥ 9,742,663
Short-term investments \| Equal to or more than
Short-term Investments
Short-term investments, effective yields (as a percent)	2.00%	1.90%
Short-term investments \| Less than
Short-term Investments
Short-term investments, effective yields (as a percent)	5.30%	5.30%

- Definition

Fair value portion of investment securities, including, but not limited to, marketable securities, derivative financial instruments, and investments accounted for under the equity method.

+ References + Details

- Definition

This item represents the net total realized and unrealized gain (loss) included in earnings for the period as a result of selling or holding marketable securities categorized as trading, available-for-sale, or held-to-maturity, including the unrealized holding gain (loss) of held-to-maturity securities transferred to the trading security category and the cumulative unrealized gain (loss) which was included in other comprehensive income (a separate component of shareholders' equity) for available-for-sale securities transferred to trading securities during the period.

+ References + Details

Property, Equipment and Software (Details) ¥ in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)
Summary of property, equipment and software
Gross book value		¥ 3,822,772			¥ 5,544,557
Less: accumulated depreciation		(1,403,262)			(1,775,231)
Net book value		2,419,510		$ 579,335	3,769,326
Depreciation expense	¥ 522,200	312,900	¥ 178,900
Building and decoration
Summary of property, equipment and software
Gross book value		1,207,607			1,496,971
Leasehold improvements
Summary of property, equipment and software
Gross book value		39,880			98,278
Furniture, fixtures and office equipment
Summary of property, equipment and software
Gross book value		104,779			124,201
Vehicles
Summary of property, equipment and software
Gross book value		52,396			68,414
Servers and computers
Summary of property, equipment and software
Gross book value		1,700,463			2,583,270
Software
Summary of property, equipment and software
Gross book value		54,273			86,650
Construction in progress
Summary of property, equipment and software
Gross book value		663,374			1,086,773
Construction in progress \| Hangzhou, Zhoushan, Guangzhou and Ningbo
Summary of property, equipment and software
Gross book value		¥ 642,400			¥ 1,084,600

Land Use Right (Details) - Land Use Right - CNY (¥)	12 Months Ended
Land Use Right (Details) - Land Use Right - CNY (¥)	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Intangible assets
Cost	¥ 637,057,000	¥ 620,127,000
Incentive payment from local government	(15,000,000)	(15,000,000)
Accumulated amortization	(28,778,000)	(16,240,000)
Land use right, net	593,279,000	588,887,000
Total amortization expense	¥ 12,538,000	¥ 11,384,000	¥ 2,768,000

Long-term Investments (Details) ¥ in Thousands, $ in Thousands	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)
Long-term Investments
Investments in associated companies		¥ 563,896	¥ 652,635
Equity investments		1,292,620	461,664
Available-for-sale securities		828,260	855,728
Total	$ 412,643	¥ 2,684,776	¥ 1,970,027

- Definition

Investments in debt and equity securities which are categorized neither as held-to-maturity nor trading and which are intended to be sold or mature more than one year from the balance sheet date or operating cycle, if longer. Such securities are reported at fair value; unrealized gains (losses) related to Available-for-sale Securities are excluded from earnings and reported in a separate component of shareholders' equity (other comprehensive income), unless the Available-for-sale security is designated as a hedge or is determined to have had an other than temporary decline in fair value below its amortized cost basis. All or a portion of the unrealized holding gain (loss) of an Available-for-sale security that is designated as being hedged in a fair value hedge is recognized in earnings during the period of the hedge, as are other than temporary declines in fair value below the cost basis for investments in equity securities and debt securities that an entity intends to sell or it is more likely than not that it will be required to sell before the recovery of its amortized cost basis. Other than temporary declines in fair value below the cost basis for debt securities categorized as Available-for-sale that an entity does not intend to sell and for which it is not more likely than not that the entity will be required to sell before the recovery of its amortized cost basis are bifurcated into credit losses and losses related to all other factors. Other than temporary declines in fair value below cost basis related to credit losses are recognized in earnings, and losses related to all other factors are recognized in other comprehensive income.

+ References + Details

Long-term Investments (Details 2) ¥ in Thousands, $ in Thousands	1 Months Ended		12 Months Ended
	Jul. 31, 2015 CNY (¥)	Aug. 31, 2013 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Investments in associated companies
Equity share of losses from associated companies				¥ 12,200	¥ 85,800	¥ 76,100
Equity investments
Gain related to the partial disposal of the Group's investment in an equity investee			$ 1,475	9,595	234,050
Impairment provision			$ 8,997	¥ 58,537	¥ 278,906	12,037
Yixin
Investments in associated companies
Percentage of equity interest acquired	35.00%	27.00%
Consideration in cash	¥ 127,500	¥ 200,000
Allocation of the purchase price
Tangible assets	8,579	58,320
Intangible assets	15,564	15,876
Goodwill	107,280	129,773
Deferred tax liabilities	(3,891)	(3,969)
Total	¥ 127,532	¥ 200,000
MAXWIN
Investments in associated companies
Percentage of equity interest acquired					49.00%
Consideration in cash					¥ 344,600
Percentage of equity interest disposed			49.00%	49.00%
Cash consideration from equity interest disposed				¥ 340,400
Certain of equity investments \| Investment income, net
Equity investments
Impairment provision				¥ 58,500	¥ 12,200	¥ 12,000

Long-term Investments (Details 3) - CNY (¥)	12 Months Ended
Long-term Investments (Details 3) - CNY (¥)	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Available-for-sale securities
Total net unrealized gains (losses) (net of tax) recorded in other comprehensive income	¥ (23,321,000)	¥ 34,027,000	¥ 27,452,000
Tax benefit of total net unrealized gains	4,100,000	47,700,000
Available-for-sale securities, cost to fair value
Adjusted Cost	760,528,000	760,528,000
Unrealized Gains	67,732,000	95,200,000
Fair Value	828,260,000	855,728,000
Huatai
Available-for-sale securities, cost to fair value
Adjusted Cost	660,528,000	660,528,000
Unrealized (Losses)	(50,563,000)	(39,684,000)
Fair Value	609,965,000	620,844,000
Huatai \| Available-for-sale securities
Available-for-sale securities, cost to fair value
Cash dividends received	20,900,000	21,400,000
Huatai \| Investment income, net
Available-for-sale securities, cost to fair value
Impairment provision recorded in the consolidated statements of comprehensive income	0	266,700,000
Caissa
Available-for-sale securities, cost to fair value
Adjusted Cost	100,000,000	100,000,000
Unrealized Gains	118,295,000	134,884,000
Fair Value	¥ 218,295,000	¥ 234,884,000

Other Long-term Assets (Details) ¥ in Thousands, $ in Thousands	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)
Other Long-term Assets
Copyrights, licenses and domain names		¥ 820,362	¥ 254,067
Staff housing loans		107,203	105,208
Non-current deposits		93,147	88,398
Others		91,867	52,075
Total	$ 170,998	¥ 1,112,579	¥ 499,748

Other Long-term Assets (Details 2) - CNY (¥) ¥ in Millions	12 Months Ended
Other Long-term Assets (Details 2) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Housing loans made to employees
Term of staff housing loan	5 years
Staff housing loans outstanding repayable within 12 months	¥ 48.5	¥ 45.5
Equal to or more than
Housing loans made to employees
Interest rate on staff housing loan (as a percent)	1.50%	1.50%
Less than
Housing loans made to employees
Interest rate on staff housing loan (as a percent)	3.50%	3.50%

Taxation (Details) - CNY (¥)	12 Months Ended			24 Months Ended		36 Months Ended
Taxation (Details) - CNY (¥)	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2015
Income taxes
Income tax rate (as a percent)	25.00%	25.00%	25.00%
Combined effects of EIT exemptions and tax rate reductions
Aggregate amount of EIT exemptions and tax rate reductions	¥ 1,464,587,000	¥ 1,417,150,000	¥ 895,725,000
Earnings per share effect, basic (in CNY per share)	¥ 0.45	¥ 0.43	¥ 0.27
Earnings per share effect, diluted (in CNY per share)	¥ 0.44	¥ 0.43	¥ 0.27
Cayman Islands
Income taxes
Withholding tax amount	¥ 0			¥ 0
BVI
Income taxes
Withholding tax amount	¥ 0			¥ 0
Hong Kong
Income taxes
Income tax rate (as a percent)	16.50%	16.50%	16.50%
PRC
Income taxes
Income tax rate (as a percent)	25.00%
PRC \| NetEase Beijing \| HNTEs
Income taxes
Preferential tax rate	15.00%	15.00%	15.00%
PRC \| Boguan \| HNTEs
Income taxes
Preferential tax rate	15.00%	15.00%	15.00%
PRC \| Boguan \| Key Software Enterprise
Income taxes
Preferential tax rate					10.00%
PRC \| NetEase Hangzhou \| HNTEs
Income taxes
Preferential tax rate	15.00%	15.00%	15.00%
PRC \| NetEase Hangzhou \| Key Software Enterprise
Income taxes
Preferential tax rate					10.00%
PRC \| Media Beijing \| HNTEs
Income taxes
Preferential tax rate	15.00%	15.00%	15.00%
PRC \| Media Beijing \| Key Software Enterprise
Income taxes
Preferential tax rate					10.00%
PRC \| Hangzhou Langhe \| HNTEs
Income taxes
Preferential tax rate	15.00%	15.00%	15.00%
PRC \| Wangyibao \| HNTEs
Income taxes
Preferential tax rate				15.00%
PRC \| Wangyibao \| Software Enterprises
Income taxes
Percentage of tax reduction								50.00%
PRC \| Lede Technology \| Software Enterprises
Income taxes
Percentage of tax reduction							50.00%
PRC \| Tianjin Technology \| Software Enterprises
Income taxes
Percentage of tax reduction						50.00%
PRC \| StormNet IT SH
Income taxes
Income tax rate (as a percent)	25.00%	25.00%

Taxation (Details 2) ¥ in Thousands, $ in Thousands	12 Months Ended
Taxation (Details 2) ¥ in Thousands, $ in Thousands	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Component of income tax expenses
Current tax expense		¥ 2,600,406	¥ 2,035,822	¥ 1,420,693
Deferred tax (benefit)/expense		(438,043)	66,676	(147,285)
Income tax expenses	$ 332,349	¥ 2,162,363	¥ 2,102,498	¥ 1,273,408
Reconciliation of the differences between the statutory income tax rate and the Group's effective income tax rate
Statutory income tax rate (as a percent)	25.00%	25.00%	25.00%	25.00%
Permanent differences (as a percent)	(0.50%)	(0.50%)	(0.80%)	(1.50%)
Effect due to overseas tax-exempt entities (as a percent)	(0.50%)	(0.50%)	(0.10%)	(0.30%)
Effect of lower tax rate applicable to Software Enterprises, Key Software Enterprise and HNTEs (as a percent)	(16.20%)	(16.20%)	(13.30%)	(11.60%)
Change in valuation allowance (as a percent)	3.40%	3.40%	1.40%	1.90%
Effect of withholding income tax (as a percent)	5.40%	5.40%	2.90%	2.20%
Effective income tax rate (as a percent)	16.60%	16.60%	15.10%	15.70%
Net operating tax loss carry forwards
Net operating tax loss carry forwards		¥ 2,329,833
2018
Net operating tax loss carry forwards
Net operating tax loss carry forwards		142,614
2019
Net operating tax loss carry forwards
Net operating tax loss carry forwards		141,227
2020
Net operating tax loss carry forwards
Net operating tax loss carry forwards		117,944
2021
Net operating tax loss carry forwards
Net operating tax loss carry forwards		346,214
2022
Net operating tax loss carry forwards
Net operating tax loss carry forwards		¥ 1,581,834

Taxation (Details 3)	12 Months Ended
Taxation (Details 3)	Dec. 31, 2017
Sales tax
Value added tax rate, services provided (as a percent)	6.00%
Value added tax rate, sale of goods (as a percent)	17.00%
Cultural development fee rate on advertising services revenue (as a percent)	3.00%

Taxation (Details 4) ¥ in Thousands, $ in Thousands	12 Months Ended
Taxation (Details 4) ¥ in Thousands, $ in Thousands	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Deferred tax assets:
Deferred revenue, primarily for advanced payments from online games customers					¥ 285,919	¥ 224,994
Accruals					510,522	336,063
Depreciation of fixed assets					3,697	1,732
Amortization of Intangible assets					55,168	22,252
Net operating tax loss carry forward					742,512	342,710
Deferred tax assets , gross					1,597,818	927,751
Less: valuation allowance	¥ (367,428)	¥ (223,644)	¥ (209,327)		(774,323)	(367,428)	¥ (223,644)
Total				$ 126,569	823,495	560,323
Movement of the aggregate valuation allowances for deferred tax assets
Balance at the beginning of the period	367,428	223,644	209,327
Provision/(reversal) for the year	406,895	143,784	14,317
Balance at the end of the period	¥ 774,323	¥ 367,428	¥ 223,644
Withholding income tax
Withholding tax rate on dividend distributed by foreign investment entities to its immediate holding company outside of China (as a percent)	10.00%
Lower withholding income tax rate on dividend applied, if the FIE's immediate holding company is registered in Hong Kong or other jurisdictions that have a tax treaty arrangement with China (as a percent)	5.00%
Accrued withholding tax liabilities				108,700	707,100	404,800	¥ 180,700
Unrecognized deferred tax liabilities				$ 165,900	¥ 1,079,500	¥ 1,088,300

Taxes Payable (Details) ¥ in Thousands, $ in Thousands	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)
Taxes Payable
Value Added Tax payable		¥ 103,182	¥ 55,996
Withholding individual income taxes for employees		161,814	131,006
Enterprise income taxes		1,248,518	1,360,686
Others		51,178	174,813
Total taxes payable	$ 240,489	¥ 1,564,692	¥ 1,722,501

Short-term Loan (Details) ¥ in Millions, $ in Millions	12 Months Ended
Short-term Loan (Details) ¥ in Millions, $ in Millions	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2017 CNY (¥)
Short-term Loan
Deposits to secure short-term loan	$ 628.8	¥ 3,995.0	¥ 4,091.0
Credit facilities not utilized	625.1
Guarantee agreements \| the Company
Short-term Loan
Aggregate amount of certain credit facilities taken by its subsidiaries	510.0
Unutilized amount of credit facilities taken by its subsidiaries	$ 265.0
Equal to or more than
Short-term Loan
Short-term loan, maturity term	1 month	1 month
Short-term loan, fixed interest rate (as a percent)	0.78%	0.98%	0.78%
Less than
Short-term Loan
Short-term loan, maturity term	6 months	6 months
Short-term loan, fixed interest rate (as a percent)	2.42%	1.29%	2.42%

Accrued Liabilities and Other Payables (Details) ¥ in Thousands, $ in Thousands	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)
Accrued Liabilities and Other Payables
Customer deposits on Wangyibao accounts		¥ 1,554,789	¥ 1,321,762
Marketing expenses		1,434,596	689,055
Accrued fixed assets related payables		294,970	259,675
Server custody fees and telecommunication charges		232,395	132,062
Accrued revenue sharing		187,838	68,474
Other staff related cost		38,950	49,423
Content cost		406,890	67,742
Professional fees		65,404	40,863
Accrued freight and warehousing charge		257,877	107,760
Others		218,601	309,788
Total accrued liabilities and other payables	$ 721,195	¥ 4,692,310	3,219,419
2009 RSU Plan
Accrued Liabilities and Other Payables
RSU payables			¥ 172,815

Noncontrolling Interests and Redeemable Noncontrolling Interests (Details) ¥ in Thousands, $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2017 USD ($) shareholder	Mar. 31, 2017 CNY (¥) shareholder	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Noncontrolling Interests and Redeemable Noncontrolling Interests
Total cash consideration from issuance of redeemable noncontrolling interest			$ 92,218	¥ 600,000		¥ (134,736)
Cash consideration from issuance of noncontrolling interests			$ 47,877	¥ 311,500	¥ 4	¥ 15,015
Netease Cloud Music
Noncontrolling Interests and Redeemable Noncontrolling Interests
Total cash consideration from issuance of redeemable noncontrolling interest	$ 92,200	¥ 600,000
Number of investors	1	1
Cash consideration from issuance of noncontrolling interests	$ 23,100	¥ 150,000
Ownership percentage, owned by noncontrolling owners	12.59%	12.59%

Capital Structure (Details)	12 Months Ended
Capital Structure (Details)	Dec. 31, 2017 Vote
Capital Structure
Voting rights per share	1

Employee Benefits (Details) - CNY (¥) ¥ in Millions	12 Months Ended
Employee Benefits (Details) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Employee Benefits
Contributions to medical and pension schemes	¥ 626.4	¥ 481.8	¥ 366.4
Other employee benefits	410.5	315.1	235.5
Total group's employee welfare benefits expense	¥ 1,036.9	¥ 796.9	¥ 601.9

Share-based Compensation (Details) - 2009 RSU Plan - shares	Nov. 17, 2009	Nov. 30, 2009
Share based Compensation
Number of ordinary shares reserved for issuance under the plan		323,694,050
Term of plan	10 years

Share-based Compensation (Details 2) - CNY (¥) ¥ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation
Number of preceding years considered for estimating forfeiture	5 years
Share-based compensation cost
Share-based Compensation Expense	¥ 2,004,263	¥ 990,131	¥ 684,467
Cost of revenues
Share-based compensation cost
Share-based Compensation Expense	820,281	444,187	328,480
Selling and marketing expenses
Share-based compensation cost
Share-based Compensation Expense	95,382	52,689	36,023
General and administrative expenses
Share-based compensation cost
Share-based Compensation Expense	581,337	238,750	120,925
Research and development expenses
Share-based compensation cost
Share-based Compensation Expense	¥ 507,263	¥ 254,505	¥ 199,039

Share-based Compensation (Details 3) shares in Thousands, ¥ in Millions, $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($) shares	Dec. 31, 2017 CNY (¥) shares	Dec. 31, 2016 USD ($) shares	Dec. 31, 2016 CNY (¥) shares	Dec. 31, 2015 USD ($) shares	Dec. 31, 2015 CNY (¥) shares	Dec. 31, 2017 CNY (¥)
2009 RSU Plan
Number of ordinary shares issuable upon vesting of restricted share units:
Outstanding at the beginning of the period (in shares)	41,568	41,568	39,785	39,785	37,074	37,074
Granted (in shares)	31,497	31,497	31,080	31,080	28,100	28,100
Vested (in shares)	(29,805)	(29,805)	(27,664)	(27,664)	(23,541)	(23,541)
Forfeited (in shares)	(1,465)	(1,465)	(1,633)	(1,633)	(1,848)	(1,848)
Outstanding at end of the period (in shares)	41,795	41,795	41,568	41,568	39,785	39,785
Total intrinsic value of options exercised and the total fair value of RSUs on vesting dates
Total fair value vested	$ 343.6	¥ 2,235.9	$ 177.2	¥ 1,230.4	$ 99.0	¥ 641.3
2009 RSU Plan \| Employees
Number of ordinary shares issuable upon vesting of restricted share units:
Outstanding at the beginning of the period (in shares)	41,425	41,425	39,623	39,623	36,842	36,842
Granted (in shares)	31,452	31,452	30,980	30,980	27,968	27,968
Vested (in shares)	(29,705)	(29,705)	(27,545)	(27,545)	(23,339)	(23,339)
Forfeited (in shares)	(1,465)	(1,465)	(1,633)	(1,633)	(1,848)	(1,848)
Outstanding at end of the period (in shares)	41,707	41,707	41,425	41,425	39,623	39,623
2009 RSU Plan \| Director and Consultants
Number of ordinary shares issuable upon vesting of restricted share units:
Outstanding at the beginning of the period (in shares)	143	143	162	162	232	232
Granted (in shares)	45	45	100	100	132	132
Vested (in shares)	(100)	(100)	(119)	(119)	(202)	(202)
Outstanding at end of the period (in shares)	88	88	143	143	162	162
2009 RSU Plan
Share based Compensation
Total unrecognized compensation cost related to unvested awards	$ 674.2						¥ 4,386.8
Weighted average remaining vesting period over which unrecognized compensation cost is recognized	3 years 22 days	3 years 22 days

Share-based Compensation (Details 4) shares in Thousands	12 Months Ended
Share-based Compensation (Details 4) shares in Thousands	Dec. 31, 2017 shares
2009 RSU Plan
Share based Compensation
Number Outstanding/ Exercisable	86,833
Weighted Average Remaining Contractual Life	2 years 9 months 7 days
Performance-based settled in stock
Share based Compensation
Number Outstanding/ Exercisable	10,057
Weighted Average Remaining Contractual Life	1 year 10 months 6 days
Time-based-settled in stock/cash
Share based Compensation
Number Outstanding/ Exercisable	66,309
Weighted Average Remaining Contractual Life	2 years 11 months 9 days
Time-based-settled in stock
Share based Compensation
Number Outstanding/ Exercisable	10,467
Weighted Average Remaining Contractual Life	2 years 6 months 29 days

Share-based Compensation (Details 5) $ / shares in Units, $ in Millions	Dec. 31, 2017 USD ($) $ / shares shares
2009 RSU Plan
Share based Compensation
Number of shares available for future grant \| shares	110,603,250
2009 RSU Plan
Share based Compensation
Aggregate intrinsic value of RSUs outstanding \| $	$ 674.2
Company's closing stock price per ADS used to calculate intrinsic value	$ 345.07
Company's closing stock price per share used to calculate intrinsic value	$ 13.8028

Share-based Compensation (Details 6)	12 Months Ended
Share-based Compensation (Details 6)	Dec. 31, 2017 CNY (¥) installment	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Share based Compensation
Compensation expenses \| ¥	¥ 2,004,263,000	¥ 990,131,000	¥ 684,467,000
Unrecognized share based compensation expenses relating to share options \| ¥	266,000,000
Stock Options
Share based Compensation
Compensation expenses \| ¥	¥ 93,100,000	¥ 0	¥ 0
Certain subsidiaries \| Stock Options \| Vesting option I
Share based Compensation
Percentage of vesting of equity awards on the predefined Vesting Commencement Date	100.00%
Certain subsidiaries \| Stock Options \| Vesting option II
Share based Compensation
Number of equal installments of vesting of equity awards from the predefined Vesting Commencement Date \| installment	2
Certain subsidiaries \| Stock Options \| Vesting option III
Share based Compensation
Number of equal installments of vesting of equity awards from the predefined Vesting Commencement Date \| installment	4
Certain subsidiaries \| Stock Options \| Vesting option IV
Share based Compensation
Number of equal installments of vesting of equity awards from the predefined Vesting Commencement Date \| installment	5
Certain subsidiaries \| Equal to or more than \| Stock Options
Share based Compensation
Expiration period	5 years
Certain subsidiaries \| Less than \| Stock Options
Share based Compensation
Expiration period	7 years

Net Income Per Share (Details) ¥ / shares in Units, $ / shares in Units, ¥ in Thousands, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) $ / shares shares	Dec. 31, 2017 CNY (¥) ¥ / shares shares	Dec. 31, 2016 CNY (¥) ¥ / shares shares	Dec. 31, 2015 CNY (¥) ¥ / shares shares
Numerator (RMB in thousands):
Net income attributable to NetEase, Inc.'s shareholders for basic/dilutive net income per share calculation	$ 1,645,782	¥ 10,707,939	¥ 11,604,520	¥ 6,735,108
Denominator (No. of shares in thousands):
Weighted average number of ordinary shares outstanding, basic (in shares)	3,290,312	3,290,312	3,281,729	3,284,382
Dilutive effect of employee stock options and restricted share units	25,166	25,166	25,380	20,831
Weighted average number of ordinary shares outstanding, diluted	3,315,478	3,315,478	3,307,109	3,305,213
Net income per share, basic \| (per share)	$ 0.50	¥ 3.25	¥ 3.54	¥ 2.05
Net income per share, diluted \| (per share)	$ 0.50	¥ 3.23	¥ 3.51	¥ 2.04
Anti-dilutive ordinary shares and restricted share units excluded from the calculation of diluted net income per share	3,800	3,800	2,700	2,100

Commitments and Contingencies (Details) - CNY (¥) ¥ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Rent expense - additional disclosures
Rental expenses	¥ 231,900	¥ 146,300	¥ 139,400
Total
Commitments
2018	1,645,537
2019	468,391
2020	274,061
2021	272,652
Beyond 2021	64,890
Total	2,725,531
Rental Commitments
Commitments
2018	247,422
2019	131,175
2020	83,650
2021	72,446
Beyond 2021	48,403
Total	583,096
Server Custody Fee Commitments
Commitments
2018	46,276
2019	15,022
2020	14,208
2021	11,069
Total	86,575
Capital Commitments
Commitments
2018	904,596
2019	49,945
2020	15,811
Total	970,352
Office Machines and Other Commitments
Commitments
2018	447,243
2019	272,249
2020	160,392
2021	189,137
Beyond 2021	16,487
Total	¥ 1,085,508

Commitments and Contingencies (Details 2) - Dec. 31, 2017 - Blizzard $ in Billions	USD ($)	CNY (¥)
Personal Computer Strategy Games and Battle.net Platform
Commitments
Total commitment incurred for license contracts	$ 1.1	¥ 7,400,000,000
Commitments under several license contracts
2018		1,015,000,000
2019		984,000,000
2020		945,000,000
Total		2,944,000,000
Shanghai EaseNet \| Hearthstone, Heroes of the Storm and Diablo III
Commitments
License fees		0
Consultancy fees		0
Shanghai EaseNet \| Prescribed hardware purchase/lease commitments \| Less than
Commitments under several license contracts
Total		¥ 94,300,000

Dividends (Details) $ in Millions	1 Months Ended	12 Months Ended
Dividends (Details) $ in Millions	May 31, 2014	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Dividends
Quarterly cash dividend distribution percentage	25.00%
Dividend payable			¥ 0	¥ 0
Cash dividend declared and paid			3,257,607,000	2,546,165,000	¥ 1,467,965,000
With respect to fiscal year 2016
Dividends
Cash dividend declared and paid				¥ 2,910,500,000
With respect to fiscal year 2017
Dividends
Cash dividend declared and paid		$ 408.2	¥ 2,656,000,000

Share Repurchase Programs (Details) ¥ in Thousands, $ in Millions	1 Months Ended			12 Months Ended
	Nov. 30, 2017 USD ($)	Nov. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Dec. 31, 2017 CNY (¥) shares	Nov. 30, 2017 USD ($) shares	Dec. 31, 2016 CNY (¥)	Aug. 31, 2016 USD ($) shares	Dec. 31, 2015 CNY (¥)
Share repurchases
Value of shares repurchased \| ¥				¥ 2,061,591		¥ 1,199,102		¥ 132,192
ADS shares \| 2015 share repurchase program
Share repurchases
Authorized amount \| $			$ 500.0
Share repurchase program period, maximum			12 months
Shares repurchased (in shares) \| shares							1,500,000
Value of shares repurchased \| $							$ 205.3
ADS shares \| 2016 share repurchase program
Share repurchases
Authorized amount \| $		$ 1,000.0
Share repurchase program period, maximum		12 months
Shares repurchased (in shares) \| shares					1,100,000
Value of shares repurchased \| $					$ 306.1
ADS shares \| 2017 share repurchase program
Share repurchases
Authorized amount \| $	$ 1,000.0				$ 1,000.0
Share repurchase program period, maximum	12 months
Shares repurchased (in shares) \| shares				0
Ordinary shares \| 2015 share repurchase program
Share repurchases
Shares repurchased (in shares) \| shares							37,700,000
Ordinary shares \| 2016 share repurchase program
Share repurchases
Shares repurchased (in shares) \| shares					28,100,000

Related Party Transactions (Details) - Series A convertible redeemable preferred shares - Certain investors and two directors - Lede Inc. $ / shares in Units, ¥ in Millions, $ in Millions	1 Months Ended
	Nov. 30, 2014 USD ($) $ / shares shares	Nov. 30, 2015 USD ($) $ / shares	Nov. 30, 2015 CNY (¥)
Related Party Transactions
Number of shares issued (in shares) \| shares	5,673,796
Share price	$ 3.74
Total consideration \| $	$ 21.2
Repurchase price (in dollars per share)		$ 3.74
Total consideration for preferred shares repurchased		$ 21.2	¥ 134.7

Segment Information (Details) ¥ in Thousands, $ in Thousands	3 Months Ended	12 Months Ended
	Dec. 31, 2017 segment item	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Segment Information
Number of e-commerce platforms \| item	2
Number of reportable segments \| segment	4
Net revenues:
Net revenues		$ 8,315,328	¥ 54,102,019	¥ 38,178,844	¥ 22,802,895
Cost of revenues
Cost of revenues		(4,332,620)	(28,189,326)	(16,515,032)	(9,399,260)
Gross profit:
Gross profit		$ 3,982,708	25,912,693	21,663,812	13,403,635
Depreciation and amortization expenses
Total depreciation and amortization expenses of property and equipment and land use rights by segment			261,105	158,668	95,624
Online game services
Net revenues:
Net revenues			36,281,642	27,980,491	17,314,148
Cost of revenues
Cost of revenues			(13,473,339)	(9,974,146)	(5,393,555)
Gross profit:
Gross profit			22,808,303	18,006,345	11,920,593
Depreciation and amortization expenses
Total depreciation and amortization expenses of property and equipment and land use rights by segment			157,695	101,400	51,031
E-commerce
Net revenues:
Net revenues			11,670,416	4,541,744	1,173,620
Cost of revenues
Cost of revenues			(10,464,714)	(3,986,871)	(1,098,186)
Gross profit:
Gross profit			1,205,702	554,873	75,434
Depreciation and amortization expenses
Total depreciation and amortization expenses of property and equipment and land use rights by segment			4,745	274	32
Advertising services
Net revenues:
Net revenues			2,408,823	2,152,379	1,789,377
Cost of revenues
Cost of revenues			(797,892)	(749,652)	(599,032)
Gross profit:
Gross profit			1,610,931	1,402,727	1,190,345
Depreciation and amortization expenses
Total depreciation and amortization expenses of property and equipment and land use rights by segment			8,712	4,061	4,180
E-mail and others
Net revenues:
Net revenues			3,741,138	3,504,230	2,525,750
Cost of revenues
Cost of revenues			(3,453,381)	(1,804,363)	(2,308,487)
Gross profit:
Gross profit			287,757	1,699,867	217,263
Depreciation and amortization expenses
Total depreciation and amortization expenses of property and equipment and land use rights by segment			¥ 89,953	¥ 52,933	¥ 40,381

Financial Instruments (Details) ¥ in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)	Dec. 31, 2017 CNY (¥)
Fair Value Measurements
Time deposits-short term	$ 4,703,652		¥ 19,361,098		¥ 30,603,369
Time deposits-long term	15,370		550,000		100,000
Available-for-sale securities			855,728		828,260
Other short-term investments			11,582,116		9,742,663
Total			32,348,942		41,274,292
Impairment charges of certain cost method investments	$ 8,997	¥ 58,537	278,906	¥ 12,037
Quoted Prices in Active Market for Identical Assets (Level 1)
Fair Value Measurements
Time deposits-short term			19,361,098		30,603,369
Time deposits-long term			550,000		100,000
Available-for-sale securities			855,728		828,260
Total			20,766,826		31,531,629
Significant Other Observable Inputs (Level 2)
Fair Value Measurements
Other short-term investments			11,582,116		9,742,663
Total			11,582,116		¥ 9,742,663
Significant Unobservable Inputs (Level 3) \| Certain of equity investments
Fair Value Measurements
Impairment charges of certain cost method investments		¥ 58,500	¥ 12,200

Restricted Net Assets (Details) ¥ in Billions	12 Months Ended
Restricted Net Assets (Details) ¥ in Billions	Dec. 31, 2017 CNY (¥)
Restricted Net Assets
Restricted net assets	¥ 6.8
Restricted net assets as a percentage of total consolidated net assets	14.00%
PRC \| General reserve fund
Restricted Net Assets
Required minimum percentage of annual appropriations	10.00%
PRC \| Statutory surplus reserve
Restricted Net Assets
Required minimum percentage of annual appropriations	10.00%