"Legend of Sword and Fairy World" setbacks drag down performance, with a continued loss of 1.48B yuan in 2025, as China Mobile Games "shrinks" its full-time staff by 60%.

Through adjustments in non-operating expenses reduction and asset impairment, China Mobile Games and Entertainment Group (CMGE) still reported losses in 2025, but the losses narrowed significantly. On March 29, CMGE released its 2025 financial report showing that its total revenue for the year was 1.39 billion yuan, a 28.0% decrease year-over-year; the net loss was 1.48B yuan, compared to a loss of 2.11B yuan in 2024.

According to sources, CMGE’s self-developed game “Sword World” took three years to develop and launched in February 2025, but its performance did not meet expectations, resulting in significant financial losses for CMGE. Regarding future development, a company representative told the “Huaxia Times” reporter, “We will adhere to the development strategy of ‘small-cost trial and error, large-scale operation and promotion, rapid iteration,’ relying on our group’s IP resource advantages, with a core business model of ‘APP + mini-games’ on both ends, simultaneously promoting global game publishing and自主研发 of legendary categories, to create high-quality products with market competitiveness and long-term profitable games with sustainable operations.”

Three major business revenue streams all declined

CMGE’s revenue decreased from 1.93 billion yuan in 2024 to 1.39 billion yuan in 2025, a drop of about 28.0%, with all three major business lines experiencing declines.

Specifically, game publishing revenue, which accounts for over 80% of CMGE’s income, fell from 1.66B yuan in 2024 to 1.16B yuan in 2025, a 30.2% decrease.

In 2025, CMGE launched a mini-game “Spring and Autumn Mysteries,” which performed well and gained market and player recognition. The IP game “The New Three Kingdoms: Cao Cao’s Legend” also achieved good rankings. The company also launched heavyweight IP games overseas, including “Battle Through the Heavens: Wushuang,” “Soul Land: Shrek Academy,” and “Soul Land: Reversal of Time,” leading to a significant increase in overseas revenue.

Sources from CMGE revealed that “Spring and Autumn Mysteries” was launched in January 2025, and within three months, it accumulated over 1.48B yuan in revenue, exceeding expectations and entering the profit recovery phase in 2025, bringing considerable returns.

However, the new games launched in 2025, “Three Thousand Illusions” and “Daily Life in the Chat Group,” did not meet revenue expectations. Additionally, the IP licensing for the successful game “The Legend of the Condor Heroes: Iron-Blooded Heart” expired, and after friendly negotiations, operations were terminated in 2024, with no revenue generated in 2025.

In terms of game development, CMGE’s revenue in 2025 was 116 million yuan, a 22.4% decrease year-over-year. The financial report explained that this decline was partly due to poor performance of the self-developed game “Sword World” and the lack of other self-developed titles launched, leading to reduced game development income. Additionally, the legendary category game “Nightmare Legend” developed by Wenmai Interactive took longer than expected for testing and was not launched in 2025.

Furthermore, revenue from CMGE’s intellectual property licensing business also declined slightly by 3.1%, reaching 113 million yuan.

While revenue declined, CMGE’s losses in 2025 narrowed to 2.11B yuan, compared to a loss of 3.59B yuan in 2024, with a total two-year loss of 3.588 billion yuan.

The significant narrowing of losses in 2025 was mainly due to reductions in non-operating other expenses. It is understood that CMGE’s goodwill impairment for Wenmai Interactive was about 58.3 million yuan, a substantial decrease from approximately 530 million yuan in 2024; at the same time, impairment of intangible assets and prepayments was offset, leading to asset impairment being counterbalanced and further reducing losses. Additionally, fair value losses on financial assets decreased, and improved investment environment reduced profit drag.

“Sword World” underperformed

In 2025, it is important to note that “Sword World,” which had high expectations from all sectors, was launched but failed to meet expectations, becoming a major reason for CMGE’s losses.

Sources said that the first open-world RPG IP of Sword World ended development in 2024 and was launched across all platforms on February 19, 2025, with cross-platform compatibility for PC, mobile, and cloud gaming.

However, public information shows that “Sword World” began pre-downloading on February 16, 2025, and topped the iOS free charts on the 17th and 18th. The game remained at the top on launch day but dropped to second place after the first day. After the first weekend, its ranking on iOS free charts fell to 36th; currently, it has fallen out of the top 200.

In terms of user feedback, “Sword World” received a TapTap score of 5.9 on launch day, which declined to 5.1 by March 30.

CMGE Chairman Xiao Jian stated at the March 30 financial briefing, “‘Sword World’ took over three years to develop and was a self-developed project with significant investment of funds and effort. Although it underwent multiple rounds of testing and optimization, its revenue after launch still did not meet expectations, resulting in major financial losses.”

He added, “The huge R&D and marketing costs for ‘Sword World’ have had a significant negative impact on our performance. These one-time expenses have been fully accounted for in 2025 and will not have a sustained negative effect on our future financials.”

In response to the failure of the “Sword World” project, CMGE promptly reorganized its organizational structure and optimized personnel, significantly reducing project investment, replacing the project leader, and redesigning the game’s monetization model to maximize recovery of early investments.

Sources from CMGE said that since launch, “Sword World” has undergone nearly 50 updates, and the company will continue to maintain version updates to ensure stable operation and strive to increase revenue.

Entertainment industry analyst Zhang Shule believes that failure of large-investment game projects is not surprising and is quite common. In an interview with the “Huaxia Times,” he said that the gaming industry is a high-investment, high-trial-and-error field. Successful trial and error can yield high returns, unless the strategy is to keep re-skinning and buying traffic to sustain low-quality survival; but even failures can sometimes be revived, as Tencent’s “Honor of Kings” experienced failure, rework, and explosive success. As a classic IP, “Sword World” is a new exploration, and failure is inevitable; success is a matter of luck. With careful reconstruction, it might still succeed. “The premise is whether CMGE truly has the capability to operate and open-world large-scale projects.”

“Small steps and quick iterations”

After the failure of the large-investment “Sword World,” CMGE began to shrink and adopted a “small steps and quick iterations” development strategy.

Sources said that in 2025, the development team for “Sword World” was reorganized and downsized, reducing R&D personnel salaries and benefits from 192 million yuan in 2024 to 97.3 million yuan in 2025—a 49.2% decrease. At the same time, related outsourcing costs for “Sword World” dropped significantly, with production expenses decreasing by 33.9% from 28 million yuan in 2024 to 18.5 million yuan in 2025.

Additionally, CMGE also vacated some office spaces, reducing office and utility costs from 13.2 million yuan in 2024 to 11.7 million yuan in 2025, an 11.4% decrease. By the end of 2025, CMGE employed about 260 full-time staff, down from 710 in 2024.

Moreover, CMGE set a target to reduce outsourcing costs by 50%–60% in 2025. Company representatives explained that this goal is not simply about cost-cutting but about leveraging AI to handle basic tasks, reducing resource consumption, and freeing up core teams for creative exploration and product trial-and-error, thereby increasing organizational flexibility. “In the future, we will further explore AI-native game creation and production, allowing creative teams to fully unleash their ideas and develop games more efficiently and at lower costs.”

Looking ahead to 2026, the same representative said the company will continue to follow the “small-cost trial and error, large-scale operation and promotion, rapid iteration” strategy, relying on its IP resource advantages, with a core business model of “APP + mini-games,” and simultaneously promoting global game publishing and自主研发 of legendary categories, to create competitive high-quality products and long-term profitable games.

“The company will continue to deepen the value of the ‘Legend of Swords and Heroes’ IP, through high-quality content creation, premium game development, diversified derivative products, and refined fan operations, to elevate the Sword IP to a world-class cultural IP, ultimately driving the group’s performance back to steady growth,” the representative added.

Sources said CMGE plans to launch 19 new games globally in 2026, most of which are popular or classic IP-based titles.

Zhang Shule believes that, despite claiming to own the largest number of IP in China, CMGE has yet to truly make its IP-based games explode in popularity. “The so-called small-cost trial and error might just be reusing existing mature game types connected to IP, while large-scale operation and promotion could rely on marketing and user acquisition for quick traffic, or using mini-games to quickly ignite nostalgia or emotional engagement. This approach has been common in CMGE’s previous mobile game strategies—it’s just a transfer of tactics into the mini-game space,” he said.