Goldman Sachs has raised its price target on NetEase (HKEX: 09999) to HK$263 from HK$262, while keeping a "Buy" rating, according to a research report released on Thursday.

The brokerage highlighted that NetEase stands out as a high-quality "non-AI" conglomerate, achieving record gross margins and free cash flow even as industry-wide AI spending escalates and some peers face margin compression. In the second quarter, the company's gaming revenue grew 10% year-over-year, while operating profit surged 29% annually, underscoring the resilience of its gaming business and its capacity for earnings growth.

Driven by a favorable mix of PC and mobile games, reduced iOS/Android channel fees, and a shift toward its own distribution channels, NetEase's gaming gross margin hit an all-time high in the second quarter. Goldman Sachs believes this margin expansion is structural, and with ongoing operational efficiency improvements, operating profit is expected to maintain high double-digit year-over-year growth in the second half of the year. The bank also noted that its net profit forecasts for 2027 to 2028 remain largely unchanged.