NetDragon (00777) released its 2026 interim results on August 27, reporting revenue of RMB 2.09 billion for the period, with gross profit reaching RMB 1.46 billion. The gross margin improved by 0.4 percentage points year-on-year to 69.9%. Benefiting from continued cost optimization and efficiency enhancements, the company's operating expenses decreased 17.8% year-on-year to RMB 1.11 billion, while operating profit climbed 24.1% to RMB 140 million. Profit attributable to owners of the company rose 20.0% to RMB 36 million, with an interim dividend of HK$0.50 per share declared.
The gaming and application services segment showed signs of recovery, generating RMB 1.59 billion in revenue during the first half, up 3.1% quarter-on-quarter. Segment operating profit reached RMB 460 million, representing a 10.3% sequential increase. The company noted that with its proprietary AI employee matrix now deployed across the gaming business in an organized, full-chain, and systematic manner, segment operating expenses declined 14.4% year-on-year and 10.5% quarter-on-quarter, with efficiency gains and cost savings from AI applications further unlocking profitability.
Among core intellectual properties, the 魔域 IP delivered particularly strong performance. During the first half of 2026, its average monthly active users surpassed 3 million, growing 24.1% year-on-year and 15.8% sequentially, driving 魔域 IP revenue up 3.7% quarter-on-quarter. Meanwhile, overseas revenue from the 征服 IP grew 19.3% year-on-year in USD terms, and 英魂之刃 IP PC-game revenue increased 4.4% year-on-year, marking its seventh consecutive half-year of growth, underscoring the resilience of the company's core gaming franchises.
AI employees now account for nearly 40% of total workload, with 269 AI positions deployed across 269 roles. The company plans to leverage its AI production line to expand multilingual overseas versions of the 魔域 and 英魂之刃 IPs, as well as launch multiple specialized editions.
The Mynd.ai segment also demonstrated notable operational improvement. Its gross margin rose from 25.4% in the prior-year period to 27.7%, while operating expenses fell 29.6% year-on-year to RMB 250 million. Net losses narrowed sharply by 30.8% to RMB 160 million, and adjusted EBITDA losses improved 53.7% year-on-year to RMB 63 million. Services and SaaS revenue continued to grow year-on-year, with recurring revenue streams maintaining solid momentum.
On the AI front, the company is accelerating the development of new growth drivers, achieving key milestones in its transformation into an AI-native organization. The "Muyu AI" platform has officially entered testing, with a mobile version also launched for trial in overseas markets. The platform currently focuses on AI applications in content creation and education, providing fresh impetus for the company's shift toward an AI-native enterprise model.
Overall, NetDragon delivered a marked improvement in earnings quality during the first half, with both operating profit and net profit attributable to owners growing year-on-year. The gaming business recovered sequentially, Mynd significantly narrowed its losses, and the newly launched "Muyu AI" is accelerating commercialization, with a new growth curve emerging as a key highlight of the results.
Notably, the company held net cash and liquid investment reserves of nearly RMB 1.8 billion as of end-June, providing ample support for future AI investments and continued enhancement of shareholder returns. The board reaffirmed its commitment to delivering on shareholder return promises, having approved an interim dividend of HK$0.50 per share, representing a dividend yield of as high as 13% based on the August 27 closing price.