Game Business as Core Growth Engine: Perfect World (002624.SZ) Eyes Performance Recovery in H2 2026

Chinese game and entertainment firm Perfect World has released its 2026 interim financial report. The company recorded operating revenue of RMB 2.751 billion and a net loss attributable to shareholders of RMB 118 million for the first halfyear. The shortterm book loss stems mainly from accounting timing mismatch between heavy launchphase expenses for flagship title Neverness to Everness (NTE / 异环) and deferred revenue recognition, alongside deliberate revenue contraction in its filmandtelevision segment under the “qualityoverquantity” strategy. It does not reflect weakened operational cashgenerating capacity. Net cash generated from operating activities reached RMB 647 million, rising 29% yearonyear. Ample operating cash flow, substantial deferred revenue and a welldefined product pipeline have built high market expectations for a performance inflection in the second half of 2026. As the primary growth driver, the game segment will play a decisive role in Perfect World’s business transformation and longterm corporate development.

Launched globally across multiple platforms in late April, supernatural urban openworld RPG Neverness to Everness serves as the company’s flagship release, covering more than 180 countries and regions. Its cumulative global gross billings exceeded RMB 2 billion as of August 18. Under accounting standards, heavy marketing costs totalling RMB 1.032 billion for the game’s launch were fully expensed in H1, while player topup billings must be recognised as revenue gradually throughout the product lifecycle, creating a timing gap of upfront expenses versus deferred income. With reduced marketing intensity starting Q3, deferred revenue corresponding to contract liabilities of RMB 2.231 billion will progressively translate into topline revenue and profits. Notably, nearly 60% of gross billings come from direct official PC and Android channels, cutting thirdparty distribution costs and positioning the title to deliver aboveaverage profit margins in subsequent periods. Beyond strong commercial returns, the title has validated Perfect World’s technical capability and operational knowhow for simultaneous multiplatform global launches, accumulating practical experience for future overseasbound Chinese game projects.

Besides the progressive realisation of deferred revenue from Neverness to Everness, new IPbased titles will deliver secondary growth momentum. New Fantasy Zhuxian: Lite, a lightweight turnbased MMO built on the twodecadeold classic Zhuxian IP, is scheduled for public beta launch on September 3. Designed for casual, fragmented play patterns with flexible verticalhorizontal screen switching, it is viewed as a key incremental contributor in the second half of the year. Following an agile “rapidvalidation, iterativedevelopment” approach, Perfect World maintains a robust pipeline of more than nine indevelopment projects spanning lightweight MMOs, animestyle card games, SLGs, simulation titles and shortvideoplatform minigames. The diversified portfolio helps expand user demographics and offsets natural decline in traditional MMO categories.

Complementing its core games, the esports business continues to unlock industrial value. Hosted in Shanghai, DOTA2 The International 2026 further consolidates Perfect World’s leading domestic esports operator position as exclusive mainlandChina licenseholder, unlocking opportunities for event commercialisation and crossborder outreach. The filmandtelevision division pursues selective highquality content, with multiple pending drama productions entering production and release pipelines to deliver supplementary contributions in later periods. Even so, games already account for over 95% of corporate revenue, forming the decisive pillar for mediumandlongterm corporate prospects. Healthy operating cash flow, sufficient monetary reserves, deferred revenue from hit titles and tiered newgame offerings collectively buffer against industry cyclical risks.

Industry analysts widely agree that Perfect World has entered a new productdelivery cycle. The interim book loss represents standard accounting treatment for major newgame launches rather than fundamental business deterioration. Its ability to deliver earnings recovery and sustainable future growth hinges largely on gamesegment execution: maximising Neverness to Everness lifetime value through liveops updates, retaining existing audiences via ZhuxianIP sequels, capturing new user groups with diversified pipeline projects, and scaling overseas revenue via global publishing. Success within its game portfolio will directly determine whether Perfect World can complete its ongoing strategic transformation and achieve sustained operational improvement.