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Tencent Reports Strong Q1 Results with 11% Rise in Revenue
Quarterly Performance Overview
Tencent reported an 11% jump in quarterly revenue Wednesday, marking its fastest growth in more than a year, as the company saw a big rebound in payment volumes, ad sales, and gaming.
Here’s how Tencent did in the first quarter versus Refinitiv consensus estimates:
- Revenue: 150 billion Chinese yuan ($21.4 billion) vs. 146.09 billion yuan expected, a rise of 11%% year-on-year.
- Profit attributable to equity holders of the company: 25.8 billion yuan vs. 31 billion yuan expected, a rise of 10% year-on-year.
The results mark a strong bounce back to growth for Tencent after a succession of negative and flat quarters. In its earnings, the company said it benefited from a solid recovery in domestic consumption in China, which finally began easing its aggressive Covid-19 restrictions in December.
Net profit “increased faster, reflecting a positive revenue mix shift, operational efficiencies, and an easy base period,” Tencent said in the report Wednesday.
Investors focused on whether the reopening of China’s economy will boost the country’s tech giants, including Tencent. China’s economy grew 4.5% in the first quarter, the fastest in a year.
Tencent said its gaming business benefited from a return to growth in domestic game sales.
The company’s popular locally released Honor of Kings game saw record-high gross receipts in the quarter. At the same time, CrossFire PC and CrossFire Mobile attracted returning players thanks to promotions aimed at internet cafes and additional in-game content.
The Chinese tech industry faced intense scrutiny as part of a broader regulatory tightening by Beijing that began in late 2020 and wiped off more than a combined $1 trillion from the country’s biggest companies.
But more recently, there have been signs the central government is softening its stance towards internet titans like Tencent, Alibaba, and Didi.
In 2021, Chinese regulators froze the approval of new video game releases, which badly impacted Tencent. However, over the past few months, Beijing has loosened its grip on the industry, greenlighting more titles for release.
The company said that limitations on when kids can play games had a big impact on the contribution of minors to its overall gaming revenue. Minors contributed 0.4% of total time spent and 0.7% of gross receipts for domestic games in the quarter, down 96% and 90%, respectively, year-over-year.
Amid a tougher gaming market at home, Tencent has boosted its focus on international markets. Tencent said its international gaming business saw strong growth, with the company’s battle royale title Valorant seeing year-on-year gross receipts growth of 30%.
PUBG Mobile, another popular battle royale title, resumed sequential growth in daily active users, Tencent said.
Tencent, a major owner of and investor in tech businesses worldwide, has been shedding some of its equity investments as Beijing remains on high alert about the size of domestic tech companies.
AI in Focus
AI is expected to draw a decent amount of attention on the company’s earnings call when executives speak later Wednesday.
In its earnings statement, Tencent said it was “investing in our AI capabilities and cloud infrastructure to embrace the opportunities brought by foundation models and expect AI to be a growth multiplier that enables us to better serve our users, customers, and society at large.”
AI has become a huge focus for the tech industry amid the buzz surrounding the development of so-called foundation models like OpenAI’s GPT-4 advanced language processing software.