NetDragon (00777) 2026 Interim Results: Gaming and Education Business Operating Performance Steady Recovery, Actively Fulfilling HK$600 Million Shareholder Return Promise

The Zhitong Finance App learned that on August 27, NetDragon (00777) announced the 2026 interim results. During the period, the company achieved revenue of 2.09 billion yuan (RMB, same below), gross profit of 1.46 billion yuan, and gross margin increased 0.4 percentage points to 69.9% year-on-year. Benefiting from continued cost optimization and efficiency improvements, the company's operating expenses fell 17.8% year on year to 1.11 billion yuan, and operating profit reached 140 million yuan, up 24.1% year on year; profit attributable to company owners was 36 million yuan, up 20.0% year on year. The company also announced an interim dividend of HK$0.5 per share.

Judging from business performance, the game and application services business showed a recovery trend. In the first half of the year, the business achieved revenue of 1.59 billion yuan, an increase of 3.1% over the previous month; operating classification profit reached 460 million yuan, an increase of 10.3% over the previous month. The company said that as the self-developed AI employee matrix achieved organization, full link and systematic deployment in the game business, division operating expenses fell 14.4% year on year and 10.5% month on month, further unlocking profitability through efficiency improvements and cost savings brought about by AI applications.

In terms of core IP, Magic Domain IP performed particularly well. In the first half of 2026, the average number of monthly active users (MAU) of Magic Domain IP exceeded 3 million, up 24.1% year on year and 15.8% month on month, driving a 3.7% month-on-month increase in Magic Domain IP revenue. At the same time, Conquest IP's overseas revenue in US dollars increased 19.3% year on year, and Soul Blade IP mobile game revenue increased 4.4% year on year, and achieved year-on-year growth for seven and a half years, indicating that the company's core gaming IP is still highly resilient. The share of AI employees in the first half of the year has increased to nearly 40%, and 269 AI employees have been launched, and plans are to use AI production lines to expand overseas multilingual versions of Magic Domain and Soul Blade IP and launch multiple special versions.

Another business segment, Mynd.AI, has also improved significantly. In the first half of the year, its gross margin increased from 25.4% in the same period last year to 27.7%, operating expenses fell 29.6% year on year to 250 million yuan, net loss narrowed sharply by 30.8% year on year to 160 million yuan; adjusted EBITDA loss improved by 53.7% year on year to 63 million yuan. At the same time, service and SaaS revenue maintained year-on-year growth, and the recurring revenue business continued to show a good momentum of development.

In terms of the AI business, the company has accelerated the creation of a new growth curve and made key progress in its journey to transform into an AI native company: the “Meyu AI” platform has been officially launched and tested, and the mobile version is also being tested simultaneously in overseas markets. Currently, the focus is on AI application scenarios such as content creation and education, providing new impetus for the company's transformation into an AI-native enterprise.

Overall, NetDragon's profit quality improved markedly in the first half of the year. Both operating profit and net profit to mother achieved year-on-year growth. The game business rebounded month-on-month, Mynd drastically reduced losses, and the newly launched “Meyu AI” accelerated commercialization, opening up a new growth curve and became the main highlight of the performance. It is worth noting that as of the end of June, the company's net cash and liquidity investment reserves were close to 1.8 billion yuan, providing sufficient financial support for subsequent AI business investment and continuous improvement of shareholder returns. The board of directors stated that it will continue to deliver on shareholders' return promises and has approved the payment of an interim dividend of HK$0.5 per share, with a dividend rate of up to 13% corresponding to the closing price on August 27.