Citigroup: 1Q26 China online gaming growth remains solid, but A-share gaming rerating still needs stronger catalysts

Overview

This is a Citigroup monthly on China's online gaming industry for April 2026, focusing on 1Q26 results from A-share gaming companies, CNG's 1Q26 industry data, and Century Games' new casual-game testing and overseas gross bookings. The report overall concludes that industry fundamentals remain resilient, especially for PC games and overseas revenue from Chinese self-developed titles, but A-share gaming stocks have fallen about 14% year to date. A rerating will require sturdier catalysts, including a disruptive AI narrative, a larger global casual gaming market share, better visibility on flagship products, and more generous shareholder returns.

Core views

The key views are: first, 1Q26 A-share gaming results were mixed, with Giant and Kingnet beating on revenue, Century Huatong and G-Bits broadly meeting expectations, and 37 Interactive Entertainment and Perfect World still missing due to a lack of new-game contributions; on profits, 37 was the only company to beat on operating leverage, helped by lower user acquisition spending. Second, industry data were stronger than the company-level dispersion: China's online gaming market revenue reached RMB 972 hundred-million yuan in 1Q26, up 13.4% year over year, driven mainly by improved user engagement and willingness to pay during the Lunar New Year period and updates to key titles. Third, PC games performed far better than the overall market, with clear contributions from cross-platform titles. Fourth, overseas revenue from Chinese games remained in rapid growth, with Century Games' Kingshot and Tasty Travel standing out as major highlights.

Analysis framework

The report combines industry data, 1Q26 results from listed companies, third-party game gross-bookings tracking, and product-catalyst events. It first compares revenue and profit performance across major A-share gaming companies, then uses CNG industry data to break down mobile games, PC games, and overseas revenue from Chinese self-developed titles, and finally combines Gamelook and SensorTower tracking to assess Century Games' new title testing and the overseas rankings of leading products.

Methodology notes

• Industry trackingMonthly industry data and quarterly results cross-checking

  Use CNG industry revenue growth and listed companies' 1Q26 revenue and profit performance to cross-check industry momentum and company-level execution differences.

  The report does not only look at total industry growth, but also compares whether companies such as Giant, Kingnet, Century Huatong, G-Bits, 37, and Perfect World beat or miss expectations on revenue and profit.

• Catalyst analysisProduct gross bookings and new-game testing tracking

  Assess future revenue visibility and rerating catalysts through the progress of Kingshot, Tasty Travel, Just Desserts, Tomb Busters, NTE and other products.

  The report treats global casual-game share, the sustainability of flagship products, overseas publishing, and new-game launches as important inputs to stock ranking.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Century Huatong (002602.SZ)

  No. 1 in Citigroup's preference ranking, mentioned as Buy reiterated

  Strengths

  Strong earnings growth visibility, with Kingshot and Tasty Travel under Century Games posting strong overseas performance; Just Desserts has already been tested in Australia, Canada, the Philippines, and the U.K.

  Weaknesses

  The chairman's announced share reduction is pressuring near-term valuation, and the report says the overhang remains before 2Q results.

  Comparison

  Leads Citigroup's ranking ahead of 37, Perfect World, Kingnet, Giant, Kingsoft, XD and G-Bits.

  Risks

  Share-reduction pressure, a pullback in overseas casual-game popularity, weaker-than-expected new-game testing, and rising overseas user acquisition costs.

• 37 Interactive Entertainment (002555.SZ)

  No. 2 in Citigroup's preference ranking

  Strengths

  1Q26 profit beat expectations, mainly because lower user acquisition spending improved operating leverage; future upside may come from low-base ramp-up for Last Asylum: Plague.

  Weaknesses

  Revenue continued to miss expectations because new-game contributions were insufficient.

  Comparison

  Its profit performance was better than most A-share gaming peers, but its revenue momentum was weaker than Giant and Kingnet.

  Risks

  Insufficient new-game contribution, unsustainable user acquisition efficiency gains, and weaker-than-expected low-base repair.

• Perfect World (002624.SZ)

  No. 3 in Citigroup's preference ranking, mentioned as upgraded to Buy

  Strengths

  There is upside optionality from sentiment reversal if NTE's overseas launch succeeds.

  Weaknesses

  1Q26 revenue and profit continued to miss expectations, mainly because new-game contributions were insufficient, and profit remained under pressure before NTE.

  Comparison

  Its near-term fundamentals are weaker than those of revenue-beating Giant and Kingnet, but potential new-title catalysts keep it relatively high in the ranking.

  Risks

  NTE underperforming expectations, weak feedback from version updates, and delayed earnings recovery.

• Kingnet (002517.SZ)

  No. 4 in Citigroup's preference ranking, mentioned as Buy maintained

  Strengths

  1Q26 revenue beat expectations thanks to strong performance from Lie Yan Jue Xing, while profit was broadly in line; legacy IP has been refreshed through hybrid gameplay.

  Weaknesses

  Profit upside did not further exceed expectations relative to the revenue outperformance.

  Comparison

  Its revenue performance was better than Century Huatong, G-Bits, 37 and Perfect World, but Citigroup ranks it below Perfect World.

  Risks

  The lifecycle of legacy IP, fading popularity of hybrid gameplay, and insufficient follow-on new titles.

• Giant Network (002558.SZ)

  No. 5 in Citigroup's preference ranking

  Strengths

  1Q26 revenue beat expectations, with strong performance from Tomb Busters; overseas Tomb Busters and Ming Jiang Sha are summer follow-up catalysts.

  Weaknesses

  Profit was broadly in line, and the report notes that pressure from major shareholder selling is one source of pressure on the A-share gaming sector.

  Comparison

  Its revenue performance was one of the 1Q26 highlights together with Kingnet, but it ranks below Kingnet.

  Risks

  Weaker-than-expected overseas launch execution, valuation pressure from shareholder selling, and product-popularity volatility.

• G-Bits (603444.SS)

  Last in Citigroup's preference ranking

  Strengths

  1Q26 revenue and profit were broadly in line with market expectations, and there is still overseas expansion upside to wait for.

  Weaknesses

  It lacks a stronger near-term upside surprise signal.

  Comparison

  It ranks below Century Huatong, 37, Perfect World, Kingnet, Giant, Kingsoft and XD in Citigroup's main gaming-company preference list.

  Risks

  Overseas expansion catalysts not materializing, a slowdown in the product cycle, and a lack of rerating drivers.

• Tencent Holdings (0700.HK)

  A key contributor of products in the industry data

  Strengths

  HoK, Peacekeeper, Delta Force, Valorant Mobile, Roco Kingdom and other titles were mentioned as product or operating contributors.

  Weaknesses

  This report mainly focuses on the industry and A-share gaming companies, and does not provide a rating or target-price analysis for Tencent.

  Comparison

  As a large platform-style gaming company, its products make an important contribution to growth in mobile and cross-platform games.

  Risks

  Effectiveness of content updates for key games, changes in user willingness to pay, and regulatory and competitive pressure.

• NetEase (NTES.O)

  A related gaming asset listed in the appendix price table

  Strengths

  Included in the set of relevant stocks as an important Chinese gaming company.

  Weaknesses

  The core analysis in the body does not focus on NetEase.

  Comparison

  Compared with A-share gaming companies, the report does not provide a clear ranking or catalyst comparison for it.

  Risks

  Lack of specific earnings and product-catalyst evidence in this report.

Key data

• A-share gaming sector performance year to date-14% YTDThe report says the decline mainly came from divergent growth expectations and selling pressure from major shareholders.
• 1Q26 China online gaming market revenueRMB 972 hundred-million yuanCNG estimated 13.4% year-over-year growth and 2.5% quarter-over-quarter growth.
• 1Q26 China mobile gaming market revenueRMB 676 hundred-million yuanUp 6.3% year over year and 0.4% quarter over quarter, driven by HoK, Peacekeeper, Delta Force, Valorant Mobile, Arknights: Endfield and others.
• 1Q26 China PC gaming market revenueRMB 250 hundred-million yuanUp 39.4% year over year and 11.2% quarter over quarter, with cross-platform games making a clear contribution.
• 1Q26 overseas revenue from Chinese self-developed gamesUSD 63.3 hundred millionUp 31.8% year over year and 6.2% quarter over quarter, with growth coming from Kingshot, Tasty Travel, Gossip Harbor, Heartopia and others.
• Kingshot overseas gross bookings rankingNo. 2 in overseas revenue among Chinese mobile gamesSensorTower tracking shows that as of April 2026, Kingshot surpassed WOS in channel gross bookings, ranking No. 2 and No. 3 respectively.
• Tasty Travel monthly gross bookingsAbout USD 35 millionThe report says Tasty Travel rose to No. 7 in the overseas revenue ranking for Chinese mobile games.
• Citigroup preference rankingCentury Huatong > 37 > Perfect World > Kingnet > Giant > Kingsoft > XD > G-BitsThe ranking is based on factors such as earnings growth visibility, low-base repair, new-game catalysts, IP revitalization, overseas products, and shareholder returns.

Impact & implications

For investors, the industry-level data support the view that Chinese gaming demand remains resilient, especially as PC games and overseas revenue from Chinese-developed titles show structural growth opportunities. But A-share gaming companies are not moving in lockstep, and the market may prefer companies with high earnings growth visibility, a clear rise in global casual-game share, nearer-term new-title or version catalysts, and more transparent shareholder returns. In the near term, shareholder selling, launch timing, and user acquisition efficiency will still influence the speed of valuation repair.

Risks

• Continued divergence in growth expectations across the A-share gaming sector may weigh on rerating.
• Shareholder selling pressure may create short-term price and sentiment volatility.
• New-game launches, version updates, or overseas releases may underperform expectations.
• Rising user acquisition costs or weaker traffic acquisition efficiency could reduce profit leverage.
• A pullback in overseas casual-game popularity could lead to lower gross bookings and rankings.
• Changes in regulation, user willingness to pay, and the macro consumer environment could affect revenue growth.

What to watch

• The progress of Century Huatong's chairman share reduction and the market reaction before and after 2Q results.
• Overseas gross bookings, test data, and ranking changes for Kingshot, Tasty Travel and Just Desserts.
• The ramp-up of 37's Last Asylum: Plague and whether user acquisition spending control can be sustained.
• Perfect World's NTE overseas launch and feedback from subsequent version updates.
• Whether Giant's overseas Tomb Busters and Ming Jiang Sha summer catalysts materialize.
• Whether the divergence in mobile games, PC games, and overseas revenue growth continues in CNG's subsequent quarterly data.