Chinese tech giant Tencent released quarterly results on Wednesday.
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Tencent reported an 11% jump in quarterly revenue on Wednesday, marking its fastest growth in more than a year, as the company saw a big rise in payment volumes, ad sales and gaming.
Here’s how Tencent did in the first quarter, against consensus estimates from Refinitiv:
- Revenue: 150 billion Chinese yuan ($21.4 billion) versus 146.09 billion yuan expected, an increase of 11%% year on year.
- Profit attributable to shareholders of the company: 25.8 billion yuan against 31 billion yuan expected, an increase of 10% year-on-year.
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The results mark a strong return to growth for Tencent after a succession of negative and flat quarters. The company said in its earnings that 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 at a faster pace, reflecting a positive shift in revenue mix, operational efficiency and an easy base period,” Tencent said in the report Wednesday.
Investors focused on whether the reopening of China’s economy will give a boost to the country’s tech giants, including Tencent. China’s economy grew 4.5% in the first quarter, the fastest pace in a year.
Gaming rebound
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, while CrossFire PC and CrossFire Mobile attracted returning players through promotions aimed at Internet cafes and additional in-game content.
The Chinese tech industry as a whole has faced intense scrutiny as part of a broader regulatory tightening by Beijing that began in late 2020 and diverted more than a combined $1 trillion from the country’s largest companies.
But more recently, there have been signs that the central government is softening its stance against internet titans such as Tencent, Alibaba and Didi.
In 2021, Chinese regulators froze the approval of new video game releases, which badly affected Tencent. However, in recent months, Beijing has loosened its grip on the industry by releasing more titles.
The company said that restrictions on when children play games can have a major impact on the contribution of minors to their overall gaming revenue. Minors contributed 0.4% of total time spent and 0.7% of total 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 stepped up its focus on international markets. Tencent said that 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, posted sequential growth in daily active users, Tencent said.
Tencent, which is a major owner and investor in technology companies worldwide, has shed some of its investments in the stock as Beijing remains on high alert over 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 is “investing in our AI capabilities and cloud infrastructure to embrace the opportunities brought by foundational models, and expect AI to be a growth multiplier that enables us to serve our users, customers and to better serve society in general.”
AI has become a huge focus for the tech industry amid buzz surrounding the development of so-called basic models such as OpenAI’s GPT-4 advanced language processing software.
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