Tencent faced numerous headwinds in 2022, including a Covid-induced slowdown in China’s economy and a tougher gaming market.
Bobby Yip | Reuters
Tencent The company beat analysts’ estimates for revenue and profit in the primary quarter, because of barely higher sales within the Chinese tech giant’s core gaming business and improved profitability in its promoting and business services divisions.
Here’s how Tencent performed within the March quarter in comparison with LSEG’s consensus estimates:
- Revenue: 159.5 billion Chinese yuan ($22 billion) versus 158.4 billion yuan expected.
- Profit attributable to the corporate’s shareholders: 41.9 billion yuan versus expected 36.64 billion yuan.
Tencent’s adjusted net profit rose 62% year-on-year, marking the fastest growth for the reason that March quarter of 2021, in response to LSEG data. Sales increased 6% yr over yr.
The Chinese web giant, which runs the world’s largest messaging app WeChat, is on the road to recovery after suffering its first annual revenue decline in 2022.
This yr, the corporate launched into a cost-cutting effort, divesting non-core businesses to deal with its core gaming division and other areas similar to promoting and cloud computing.
Investors have rewarded the corporate’s efforts thus far, sending shares up 30% this yr.
Tencent said revenue from its China gaming business fell 2% year-on-year in the primary quarter, an improvement from the three% decline within the fourth quarter. The company said revenue from one in all its high-profile games, “Honour of Kings,” was down year-on-year while its base was high in comparison with Chinese New Year, while it said it had “weakly monetized content” from “Peacekeeper Elite.” give.
International gaming revenue rose 3% year-over-year in the primary quarter, higher than the 1% increase within the previous quarter. Tencent said the expansion was driven by a surge in PUBG Mobile player base and a resurgence in the recognition of games from its studio Supercell.
Still, growth in Tencent’s gaming division stays weak.
“In the first quarter of 2024, several of our leading games in China and internationally began to benefit from the team restructurings we implemented, resulting in an increase in gross gaming revenue and providing a foundation for our gaming revenue to return to growth in future quarters.” said Tencent in its earnings release.
Advertising and cloud help Tencent make profits
Tencent’s other businesses helped the corporate in the primary quarter.
The internet marketing division posted revenue of 26.5 billion yuan, up 26% year-on-year, an acceleration from the fourth quarter. The company attributed this to increased engagement across WeChat’s various features and “continuous improvement” of Tencent’s “AI-powered advertising infrastructure.”
Gross profit of the promoting business rose 66% year-on-year to 14.5 billion yuan.
Tencent’s fintech and business services unit, which incorporates mobile payment service WeChat Pay and cloud computing division, saw revenue rise 7% year-on-year to 52.3 billion yuan. The company’s gross profit increased 42% yr over yr.
“We continue to cultivate high-quality revenue streams, including advertising in video accounts and Weixin search, mini-game platform service fees and e-commerce technology service fees, helping our gross and operating profit growth exceed our revenue growth,” Tencent said in its earnings release .
