Tencent exceeded analyst expectations in the first quarter, reporting higher revenue and profit figures. This positive outcome was largely driven by improved sales in the core gaming business and enhanced profitability in the advertising and business services divisions. The company’s revenue reached 159.5 billion Chinese yuan ($22 billion), surpassing the anticipated 158.4 billion yuan. Similarly, the profit attributable to equity holders of the company rose to 41.9 billion yuan, exceeding the expected 36.64 billion yuan.
Tencent’s adjusted net profit surged by 62% year-on-year, showcasing the fastest growth rate since the March quarter of 2021. This significant increase in profitability indicates the company’s ability to recover from its previous annual revenue decline in 2022. Through strategic cost-cutting measures and a focus on core gaming and other key areas like advertising and cloud computing, Tencent has managed to regain investor confidence, with shares up by 30% this year.
In the first quarter, Tencent’s China gaming business experienced a 2% decline in revenue compared to the previous year. However, this decline represents an improvement from the 3% fall witnessed in the fourth quarter. The company cited a drop in revenue from “Honour of Kings” and “Peacekeeper Elite” as contributing factors. On the international front, Tencent saw a 3% revenue increase in the first quarter, driven by games like PUBG Mobile and titles from Supercell.
Apart from gaming, Tencent’s online advertising division recorded a 26% year-on-year revenue growth, with a focus on enhancing engagement on WeChat and improving advertising infrastructure. The gross profit for the ad business also saw a substantial 66% increase. The fintech and business services unit, which includes WeChat Pay and cloud computing, posted a 7% revenue rise and a 42% gross profit growth. The company emphasized the development of revenue streams like Video Accounts, Weixin Search, and Mini Games platform service fees as key contributors to overall growth.
Looking ahead, Tencent remains optimistic about future revenue growth in its gaming division, emphasizing reorganizations within the team as a catalyst for increased gross receipts. The company plans to leverage its core strengths in gaming, advertising, and business services to drive continued growth and profitability. By cultivating high-quality revenue streams and investing in technology services, Tencent aims to outpace revenue growth with an increase in gross and operating profits.
Tencent’s first-quarter performance reflects the company’s resilience and strategic focus on key business areas. Through consistent efforts to optimize core operations and enhance customer engagement, Tencent has managed to surpass market expectations and position itself for sustained growth in the future.
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