Tencent Reports Significant Growth In First Quarter Amidst Economic Challenges
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Tencent Holdings Limited (HKEX:0700.HK), one of the world’s largest technology conglomerates, continues to dominate the digital landscape with its expansive portfolio, including social networking, gaming, and fintech services. As a pivotal player in the global tech industry, Tencent’s strategic investments and innovative advancements have solidified its position as a market leader. The company’s robust financial performance and continuous growth trajectory make it a focal point for investors and analysts alike, underscoring its significant influence in shaping the future of technology.
China’s most valuable listed company, Tencent Holdings Limited (HKEX: 0700.HK), has reported a substantial surge in its quarterly profit, marking a more than 60% increase. The internet and technology giant, known for its extensive range of services including social media, gaming and fintech, has demonstrated robust performance in its high-margin businesses, contributing to this impressive financial outcome. The unaudited consolidated results for the first quarter, ending March 31, 2024, reveal a 6% year-over-year increase in total revenues, reaching RMB159.5 billion (USD22.5 billion). The company’s gross profit saw a notable rise of 23% year-over-year, amounting to RMB83.9 billion (USD11.8 billion). On a non-IFRS basis, operating profit increased by 30% year-over-year to RMB58.6 billion (USD8.3 billion), with the operating margin improving to 37% from the previous year’s 30%.
The net margin also experienced a significant boost, climbing to 32% from 22% last year. Tencent’s Chairman and CEO, Ma Huateng, highlighted the positive impact of team reorganizations on the company’s gaming sector, which led to increased gross receipts and laid a foundation for future revenue growth. The company’s focus on high-quality revenue streams, such as advertising in Video Accounts and Weixin Search, Mini Games platform service fees and eCommerce technology service fees, has been instrumental in driving gross and operating profit growth. Additionally, Tencent has committed to returning excess capital to shareholders through an extensive buyback plan, aiming to repurchase over HKD100 billion of shares in 2024, alongside paying an increased dividend and investing in AI technology and high-production value content.
Video Accounts reported an 80% year-on-year increase in total user time spent, while Mini Programs saw a 20% rise in user engagement. Tencent Video’s long-form video subscriptions grew by 8% year-on-year, reaching 116 million and Tencent Music subscriptions increased by 20% year-on-year to 114 million. The company’s flagship domestic games, Honour of Kings and Peacekeeper Elite, registered year-on-year growth in gross receipts, with several other games achieving record high gross receipts during the quarter. Internationally, Supercell’s games, particularly Brawl Stars, saw substantial increases in usage and gross receipts. The advertising technology platform upgrades have enabled more effective advertising campaigns, contributing to a 26% year-on-year increase in online advertising revenues, which reached RMB26.5 billion for the first quarter.
The company’s fintech and business services also experienced growth, with revenues increasing by 7% year-on-year to RMB52.3 billion. This growth was driven by higher cloud services revenues and increased eCommerce technology service fees within Video Accounts. The challenges posed by a faltering Chinese economic recovery, Tencent’s strategic initiatives have positioned it well for continued growth. The efforts to monetize WeChat through advertising, e-commerce sales and in-game purchases have helped offset weaknesses in other segments. Tencent’s cloud division is on track to reach break-even and its payment arm received regulatory approval in March to boost its registered capital, potentially unlocking new revenue streams through consumer loans.
As Tencent continues to navigate the evolving economic landscape, its focus on high-quality growth and technological innovation remains a key driver of its success. The company’s exploration of generative AI and its investments in domestic AI model startups further underscore its commitment to staying at the forefront of technological advancements. The shares have surged roughly 30% so far this year, reflecting investor confidence in the company’s strategic direction and growth potential. The firm’s first-quarter results highlight the company’s ability to adapt and thrive amidst economic challenges. The company’s continued focus on high-quality revenue streams and its commitment to returning capital to shareholders further reinforce its strong financial performance and growth prospects.
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