Source: Visual China

Tencent posted total revenue of RMB150 billion (US$21.8 billion) in the quarter ended March, 31, beating the analysts’ estimates of RMB146.29 billion. The sales suggest an 11% year-over-year (YoY) increase, the first double-digit growth since the third quarter, 2021. The profit attributable to equity holders on an IFRS basis for the quarter climbed 10% YoY to RMB25.8 billion, missing the expected RMB28.89 billion. The profit dropped 76% from the previous quarter, when the profit surge was driven by one-time gain of more than RMB85 billion from offloading about 948 million shares of Meituan.

Value-added services, the segment includes Tencent’s key business games, generated RMB79.34 billion with a 9% YoY increase, topping the analysts’ forecast of RMB74.54 billion. Revenue from International games jumped 25% YoY to a new record RMB13.2 billion, thanks to the strong performance of recently launched GODDESS OF VICTORY: NIKKE and Triple Match 3D, as well as the robust growth of VALORANT. Domestic games resumed growth with the quarterly revenue of RMB35.1 billion, up 6% YoY. Tencent attributed the results to popular games’ robust performance. Honor of Kings, CrossFire PC and CrossFire Mobile achieved record-high gross receipts in the first quarter in China. Outside the home market, VALORANT’s gross receipts grew more than 30% YoY in the quarter, fueled by popular Japan-themed and alien-themed weapon items.

Online advertising revenue gained 17% YoY to RMB21 billion, missing the expectation of RMB21.34 billion, and decreased 15% from the previous quarter, reflecting the slowdown in a typical off-season during the Chinese New Year. Video Accounts emerged as a new pillar of growth for advertising as they attracted new advertisers and incremental spending from existing advertisers.

Video Accounts’ eCPM, or effective cost per thousand impressions, sustained at a premium level versus those of other short-form video platforms, reflecting advertisers’ recognition of our capability to route video views to Mini Program transactions within the WeChat app, Tencent said. The Shenzhen-based company also revealed the number of daily active creators and daily video uploads of Video Accounts more than doubled YoY while the number of creators with over 10,000 followers more than tripled YoY.

Revenues from FinTech and business services added 14% YoY to RMB48.7 billion. FinTech’s growth accelerated compared with the last quarter of 2022, owing to a consumption rebound in China, Business services returned to positive year-on-year growth during this period, due to increased sales of certain cloud services, as well as initial revenues generated via technology support fee related to live streaming eCommerce transactions within Video Accounts.

In a rarely blunt and harsh speech made last December, Tencent Chairman and CEO Pony Ma, also known as Ma Huateng, warns of axing some businesses, while showed great expectation on the video feature of WeChat by labeling it as the most eye-catching business under the Weixin Group (WXG) , even touted it as the fundamental hope of the whole company. Ma said it is going to be a challenge for Tencent to facilitate e-commerce through the form of short video as his company has little experience in integrating short video with e-commence.

In a press release on Wednesday, Ma commented the solid revenue growth was achieved as the payment volumes benefitted from, and facilitated, domestic consumption recovery, the improved games revenue of his company, and the sustained rapid growth of its advertising revenue.

Ma stressed his company to continue the work on AI. “We are 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, ” Ma stated.

Tencent was making good developments in building AI models, and we still believe AI is an industry that will have exponential growth, especially for our company, the president Martin Lau told analysts at an earnings call. Lau said his company is scaling up the AI model training and basically collect data across the internet, specially adding high-quality data from China. While admitted AI industry has to be regulated, Lau noted, generally speaking, the Chinese government was supportive of innovations in the sector. He said AI regulation is necessary and added that is not a unique issue in China because there has been increasing relevant discussions in the United States.

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