Chinese tech giant Tencent released its quarterly results on Wednesday.
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Tencent posted an 11 percent jump in quarterly revenue on Wednesday, marking its fastest growth in greater than a yr as the corporate saw an enormous rebound in payment volume, ad sales and gaming.
Here’s how Tencent fared in the primary quarter, in comparison with Refinitiv’s consensus estimate:
- Income: CNY 150 billion (US$21.4 billion) vs. 146.09 billion yuan expected, up 11%% Every yr.
- Profit attributable to the corporate’s shareholders: 25.8 billion yuan in comparison with the expected 31 billion yuan, up 10% year-on-year.
Tencent reported the outcomes after the Hong Kong market closed on Wednesday. The shares of Prosus, the important shareholder of Tencent in Europe, haven’t modified much.
The outcomes mark a powerful return to growth for Tencent after a series of negative and flat quarters. The corporate said in its earnings that it benefited from a solid recovery in domestic consumption in China, which finally began to ease aggressive Covid-19 restrictions in December.
Net income “grew at a faster pace, reflecting a positive shift in revenue composition, operational efficiency and a simple base period,” Tencent said in a Wednesday report.
Investors have been focused on whether reopening China’s economy will toughen Chinese tech giants, including Tencent. China’s economy grew 4.5% in the primary quarter, the fastest in a yr.
Reflection in games
Tencent said its gaming business benefited from a return to growth in game sales in its domestic market.
Tencent said the corporate’s popular locally released game Honor of Kings posted record gross receipts for the quarter. The corporate saw revenue growth from other acclaimed titles including DnF and CrossFire Mobile, in addition to the recently launched Arena Breakout.
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China’s tech industry as an entire faced intense scrutiny as a part of a broader tightening of regulations by Beijing that began in late 2020 and deprived the country’s largest firms of greater than $1 trillion in total.
Tencent, which is a serious owner and investor in tech firms around the globe, is shedding some equity investments as Beijing stays on high alert over the scale of domestic tech firms.
But there have been signs recently that the central government is softening its stance against web titans like Tencent, Alibaba and Didi.
In 2021, Chinese regulators froze the approval of recent video game releases, which badly affected Tencent. Nevertheless, over the past few months, Beijing has loosened its grip on the industry, giving the green light to more titles to release.
Tencent said on Wednesday that restrictions on when children can play games had a huge impact on the share of minors in overall gaming revenue. Minors contributed 0.4% of total time spent and 0.7% of total domestic gaming gross receipts for the quarter, down 96% and 90% year-on-year, respectively.
Facing a tougher gaming market at home, Tencent has increased its deal with international markets. Tencent said the international gaming business saw strong growth, with the Battle Royale title Valorant seeing a year-on-year increase in gross receipts of 30%.
PUBG Mobile, one other popular Battle Royale title, has resumed its sequential growth in day by day lively users, Tencent said.
Most of Tencent’s overall revenue got here from value-added services that relate to virtual goods, including video games. This segment accounted for 57% of the corporate’s total sales.
On this segment, international gaming was the most important driver, Tencent said, with overseas game sales up 25% year-on-year to 13.2 billion yuan.
Against this, domestic game sales increased by 6% year-on-year to 35.1 billion yuan.
Revenue from social networks including Tencent’s WeChat and QQ easy messengers grew 6% to 31 billion yuan due to the sale of in-game virtual items and the corporate’s music subscription service.
Fintech and business services, including Tencent’s WeChat Pay payment service, accounted for 32% of revenue. Revenue on this segment grew 14% year-on-year to 48.7 billion yuan, accelerating from the fourth quarter of 2022, driven by a recovery in industrial payment volumes as consumption rebounded in China, Tencent said.
Growth in business services was primarily driven by a surge in sales in Tencent’s cloud services division, which has recently grow to be the main focus of the corporate’s increased focus.
Artificial intelligence within the highlight
The AI is predicted to offer decent attention to the corporate’s earnings talk when executives speak afterward Wednesday, which begins at 8 a.m. EST.
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In its earnings statement, Tencent said it was “investing in our AI capabilities and cloud infrastructure to leverage the opportunities offered by Core Models and expect AI to be a growth multiplier that enables us to higher serve our users, customers and society at large.”
Artificial intelligence has grow to be the main focus of the tech industry with the hype surrounding the event of so-called core models, equivalent to OpenAI’s advanced GPT-4 language processing software.
Tencent said on Wednesday that the corporate updated its machine learning promoting platform with a deep learning model and a so-called standard product entity database, “giving advertisers higher targeting and better conversion.”
Tencent’s internet advertising revenue grew 17% to 21 billion yuan in the primary quarter, driven by promoting on video accounts, “mini programs” in Tencent’s WeChat app, and mobile promoting.
While many other Chinese tech firms are developing their very own ChatGPT alternatives, Tencent has yet to publicly comment on whether it’s developing its own chatbot that might compete with those being developed by a few of its closest competitors.
Based on Reuters, the corporate reportedly arrange a team to review a ChatGPT-like product in February.