Tencent income jumps 62% for quarter
Strong advertising revenue and rebound in economy drive results
Tencent Holdings, operator of China’s biggest social media app and the world’s largest video gaming business by revenue, reported a 62 per cent jump in profit to 41.9 billion yuan (HK$45.2 billion) in the first quarter on the back of strong advertising revenue, marking the first quarterly profit growth since last June.
Profit grew significantly over its 25.8 billion yuan in profit a year ago, and it beat consensus estimates of 34.5 billion yuan by analysts surveyed by Bloomberg.
Revenue rose by 6 per cent for the quarter amid a rebound in the domestic economy and an easing regulatory environment.
Quarterly revenue for the Shenzhen-based internet giant reached 159.5 billion yuan, up from 150 billion yuan a year ago, marking its sixth consecutive quarter of growth.
It also beat consensus estimates of 158.8 billion yuan, according to analysts polled by Bloomberg.
“During the first quarter of 2024, several of our leading games in China and internationally started to benefit from team reorganisations we put in place, resulting in an increase in gross receipts and creating a foundation for our game revenue to resume growth in future quarters,” founder and chief executive Pony Ma Huateng said in a statement.
“We continue to cultivate high-quality revenue streams including advertising in Video Accounts and Weixin Search, Mini Games platform service fees and e-commerce technology service fees, contributing to our gross and operating profit growth outpacing our revenue growth.”
Tencent has been enjoying a rebound in its share price, which has risen by more than 30 per cent since March when the firm announced a plan to at least double the size of its repurchases from HK$49 billion in 2023 to over HK$100 billion this year. It said yesterday it was on track to execute the buy-back plan.
Shares in Tencent added 1 per cent yesterday ahead of the earnings announcement to close at HK$381.80. The tech giant is the largest stock on the Hang Seng Index with a 9.2 per cent weighting.
The results come as Tencent is looking for new growth through its efforts in artificial intelligence (AI) and videos on its WeChat super-app. The firm is also benefiting from Beijing’s toneddown regulatory scrutiny of the video gaming industry, paving the way for the launch of muchanticipated titles such as Dungeon & Fighter (DnF) Mobile.
DnF Mobile, developed by Japanese-South Korean studio Nexon and operated on the mainland by Tencent, is on track for release next Tuesday after receiving the green light from China’s publishing regulator in February. Analysts have high hopes for the title to drive the company’s gaming sales back to solid growth.
DnF Mobile is expected to gross around 6 billion yuan in a year, according to a recent note by investment bank Jefferies.
Tencent has been stepping up on monetisation of Channels, its fast-growing short-video service on WeChat, with efforts to grow live-streaming e-commerce in the ecosystem.
Combined monthly active users for the domestic and international versions of WeChat hit 1.36 billion by the end of March.
The firm is also pushing for the adoption of its self-developed Hunyuan AI large language model in various industries, including cars.
Revenue from value-added services, which include the video gaming and social network businesses, came in at 78.6 billion yuan in the first quarter, down by 0.9 per cent from a year ago.
Video gaming sales, traditionally Tencent’s strongest revenue driver, declined by 2 per cent in the domestic market while rising by 3 per cent overseas, reaching 34.5 billion yuan and 13.6 billion yuan, respectively.
Revenue from online advertising jumped by 26 per cent year on year to 26.5 billion yuan in the quarter, making it the fastestgrowing segment.
Chinese tech giants Tencent Holdings and NetEase announced back-to-back new title releases, in a sign of intensified competition among the country’s top two video gaming publishers, as other big tech firms throw in the towel.
NetEase, the country’s second-largest online gaming firm, planned to release about a dozen new games next week, including titles in collaboration with big-name franchises Marvel
Entertainment and The Lord of the Rings, the company said on Monday.
It said it would announce updates to a series of existing titles such as the popular casual game Eggy Party.
NetEase’s releases will face off against new titles Tencent is adding to its WeGame game portal on Sunday.
The video game distribution platform is set to introduce dozens of new titles, according to its announcement on Monday. It did not offer any details about the games.
Tencent, which operates the world’s largest video gaming business by revenue, has not yet announced a date this year for its largest annual game release event, the Spark conference.
The competition between Tencent and NetEase has grown more heated recently as rivals like TikTok owner ByteDance have retreated from an industry that has proven challenging for new entrants.
Beijing has also been showing support for the industry by granting more licences in recent months after a crackdown in 2021. developed by Japanese-South Korean game studio Nexon and operated in China by Tencent, received a licence from the National Press and Publication Administration (NPPA) in February. Tencent said the game would launch on Tuesday.
Black Myth: Wukong, one of the titles most awaited by Chinese gamers, also received approval from the NPPA in February. The action role-playing game, developed by Hangzhou-based Game Science, will launch on personal computers in August, according to the studio’s website.
NetEase received the green light to launch several games in its pipeline as well, including the shooting game Ashfall, previously known as Code 56. The firm is slated to launch the game for both mobile platforms and personal computers at its annual release event next week.
The firm also received NPPA approval to release a personal computer version of its hugely popular mobile game Diablo
Immortal, which it launched in China in 2022 as part of the 25-year-old Diablo franchise.
NetEase worked with franchise owner Blizzard Entertainment to develop the game.
The NPPA has continued to step up the pace of approvals as mainland authorities try to restore confidence in the industry.
In January, it retracted a draft proposal published in December that aimed to put a cap on user spending in games and ban “excessive” rewards.
The response from investors to the draft wiped at least US$80 billion in value from mainland video gaming stocks listed in Shanghai, Hong Kong and New York. A key central government official stepped down as a result of that proposal, the Post reported.