tencent First-quarter sales and profits exceeded analysts’ expectations, driven by slightly higher sales in the Chinese tech giant’s core gaming business and improved profitability in its advertising and business services division.
Here are Tencent’s March quarter earnings and LSEG consensus forecasts.
- Revenues: CNY 159.5 billion ($22 billion) compared to expectations of CNY 158.4 billion.
- Profit attributable to company shareholders: 41.9 billion yuan compared to the expected 36.64 billion yuan.
According to LSEG data, Tencent’s adjusted net profit increased by 62% year-on-year, marking the highest growth since the fiscal year ended March 2021. Sales increased 6% compared to the same period last year.
The Chinese internet giant, which operates WeChat, the world’s largest messaging app, is on the road to recovery after suffering its first annual revenue decline in 2022.
That same year, the company began cutting costs and exiting non-core businesses to focus on its core gaming division and other areas such as advertising and cloud computing.
Investors have rewarded the company’s efforts so far, with the stock up 30% this year.
Tencent announced that revenue from its China gaming business fell 2% year-on-year in the first quarter, improving from a 3% decline in the fourth quarter. The company stated that revenue from one of its high-profile games, “Honour of Kings,” decreased year-on-year despite the high level of the Lunar New Year, and “monetizable content is weak” for “Peacekeeper Elite.” Ta.
International gaming revenue increased 3% year-over-year in the first quarter, exceeding the 1% increase in the previous quarter. Tencent said the growth was due to the increase in PUBG Mobile players and the resurgence in popularity of the game from its studio Supercell.
Still, growth in Tencent’s gaming division remains weak.
“In the first quarter of 2024, some of our major games in China and overseas will begin to benefit from the team restructuring we have implemented, resulting in increased gross gaming revenue and The foundation has been laid for renewed revenue growth,” Tencent said in its earnings release.
Advertising, cloud contribute to Tencent’s profits
Tencent’s other businesses helped the company in the first quarter.
Online advertising segment revenue increased 26% year-on-year to 26.5 billion yuan, accelerating from the fourth quarter. The company attributed this to increased engagement across WeChat’s various features and “continuous enhancements” of Tencent’s “AI-powered advertising infrastructure.”
Advertising business gross profit increased 66% year-on-year to 14.5 billion yuan.
Revenue of Tencent’s fintech and business services division, which includes mobile payment service WeChat Pay and cloud computing division, rose 7% year-on-year to 52.3 billion yuan. The business’ gross profit increased 42% year-on-year.
“We continue to cultivate high-quality revenue sources, such as advertising on video accounts and Weixin search, service fees for mini-game platforms, and service fees for e-commerce technology, and our gross profit and operating revenue growth exceeds revenue growth. This has contributed to profit growth,” Tencent said in its financial results. .