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Tencent earnings report for the first quarter of 2023

Chinese tech giant Tencent released quarterly results 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 significant rebound in payment volumes and ad and game sales.

Here’s how Tencent fared in the first quarter, against Refinitiv consensus estimates:

  • he won: 150 billion yuan ($21.4 billion) vs. 146.09 billion yuan expected, an increase of 11%% on an annual basis.
  • Profit attributable to the shareholders of the company: 25.8 billion yuan against an expected 31 billion yuan, up 10% year on year.

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The results indicate a strong rebound in growth for Tencent after a series of negative and flat quarters. The company said in its earnings that it benefited from a strong recovery in domestic consumption in China, which finally began to ease strict Covid-19 restrictions in December.

Net profit “increased at a faster pace, reflecting a positive shift in revenue mix, operating efficiencies and easy base period,” Tencent said in the report on Wednesday.

Investors have been focusing on whether reopening the Chinese 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.

Games recovery

Tencent said its gaming business has benefited from a return to growth in domestic game sales.

The company’s popular home-released game Honor of Kings saw record gross revenue in the quarter, while CrossFire PC and CrossFire Mobile lured returning gamers thanks to promotions targeting internet cafes and additional in-game content.

China’s tech industry as a whole has faced intense scrutiny as part of a broader regulatory tightening by Beijing that began in late 2020 and has wiped out more than a combined $1 trillion from the country’s largest companies.

Recently, however, there have been indications that the central government is softening its stance towards Internet giants such as Tencent, Alibaba, and Didi.

In 2021, Chinese regulators froze approval of new video game releases, which hit Tencent hard. However, over the past few months, Beijing has loosened its grip on the industry, giving the green light to more titles to be released.

The company said that restrictions on when children could play games had a significant impact on the contribution of minors to overall gaming revenue. Minors contributed 0.4% of total time spent and 0.7% of total revenue for home games in the quarter, down 96% and 90% year-over-year.

Amidst a tougher gaming market at home, Tencent has strengthened its focus on international markets. Tencent said its international gaming business has seen strong growth, with battle royale title Valorant seeing total revenue year-on-year growth of 30%.

Tencent said that PUBG Mobile, another popular battle royale game, has resumed exponential growth in daily active users.

Tencent, the owner and major investor in tech companies around the world, has dumped some of its equity investments as Beijing remains on high alert over the size of domestic tech companies.

Artificial intelligence in focus

Artificial intelligence is expected to attract a fair amount of attention to the company’s earnings call when executives speak later on Wednesday.

In its earnings release, Tencent said it is “investing in AI capabilities and our cloud infrastructure to embrace the opportunities presented by core models, and expects AI to be a growth multiplier that enables us to better serve our users, customers, and society at large.”

Artificial intelligence has become a major focus of the tech industry amid buzz surrounding the development of so-called foundation models such as OpenAI’s advanced GPT-4 language processing software.



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