In 2022, Tencent faces many headwinds, including a slowdown in China’s economy due to the COVID-19 epidemic and more severe conditions in the gaming market.
Bobby Ye | Reuters
Tencent First-quarter revenue and profit beat analysts’ expectations, thanks to a slight improvement in sales at the Chinese tech giant’s core gaming business and improved profitability in its advertising and business services units.
Here’s how Tencent’s March quarter performance compared to LSE consensus estimates:
- Revenue: 159.5 billion yuan ($22 billion), compared with expectations of 158.4 billion yuan.
- Profit attributable to shareholders of the company: 41.9 billion yuan, expected to be 36.64 billion yuan.
LSEG data shows that Tencent’s adjusted net profit increased by 62% annually, the fastest growth since the third quarter of 2021. Revenue increased by 6% year-on-year.
The Chinese internet giant, which runs WeChat, the world’s largest messaging app, is now on the road to recovery after suffering its first annual revenue decline in 2022.
The company began cutting costs and exiting non-core businesses that year to focus on its core gaming unit and other areas such as advertising and cloud computing.
Investors have rewarded the company’s efforts so far, with shares up 30% this year.
Tencent said that China’s gaming business revenue fell by 2% year-on-year in the first quarter, which was an improvement from the 3% decline in the fourth quarter. The company said revenue from one of its high-profile games, “Honor of Kings,” fell year-on-year on a high Spring Festival base, while “Peacekeeper Elite” had “weak monetizable content.”
In the first quarter, international game revenue increased by 3% year-on-year, which was better than the 1% growth in the previous quarter. Tencent said the growth was driven by an increase in PUBG Mobile players and a resurgence in popularity of games from its studio Supercell.
Still, growth in Tencent’s gaming unit remains weak.
“In the first quarter of 2024, several of our leading games in China and internationally began to benefit from the team restructuring we implemented, resulting in an increase in total game revenue and laying the foundation for our game revenue to resume growth in the coming quarters.” , Tencent said in its financial report.
Advertising and cloud help Tencent make profits
Tencent’s other businesses helped the company in the first quarter.
The online advertising department’s revenue was 26.5 billion yuan, an annual increase of 26%, and the growth rate accelerated compared with the fourth quarter. The company attributed this to increased engagement across WeChat’s various features and “continued enhancements” to Tencent’s “artificial intelligence-driven advertising infrastructure.”
Advertising business gross profit increased 66% year-on-year to 14.5 billion yuan.
Revenue from Tencent’s financial technology and business services division, which includes mobile payment service WeChat Pay and its cloud computing unit, increased 7% year-on-year to 52.3 billion yuan. The business’s gross profit increased by 42% year-on-year.
Tencent said in its financial report: “We continue to cultivate high-quality revenue sources, including video accounts and WeChat search advertising, mini-game platform service fees and e-commerce technology service fees, which have contributed to our gross profit and operating profit growth exceeding revenue growth. contributed.
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