Tencent’s Third-Quarter Performance
Tencent Holdings has disclosed a 10% upswing in third-quarter revenue, marking a robust revival in its gaming sector post-regulatory hurdles in China’s tech realm. Recognized as the globe’s leading video game entity and steward of the WeChat messaging platform, Tencent achieved sales totaling 154.6 billion yuan ($21.4 billion), aligning with market projections. This constitutes the third consecutive quarter of revenue growth, rebounding from the setbacks encountered during the 2021 regulatory crackdown, which led to Tencent’s first annual revenue decline.
The Chinese video game industry weathered a formidable period last year, enduring an eight-month hiatus on new game licenses and heightened constraints on minors’ gaming engagements. However, this year has witnessed a resurgence as regulators resumed the issuance of game licenses. Tencent’s domestic games revenue for the quarter expanded by 5%, propelled by the success of titles like “Lost Ark” and “Valorant,” both unveiled in China in July.
During engagements with analysts, Tencent underscored an optimistic pipeline of forthcoming games, encompassing titles such as “Honor of Kings World,” “Valorant Mobile,” “Monster Hunter Mobile,” and “Assassin’s Creed Mobile.” Martin Lau, the company’s president, emphasized the development of fresh games broadening their own intellectual properties (IPs) and mobile games leveraging esteemed licensed IPs.
Tencent’s stock concluded 4.8% higher in Hong Kong before the earnings disclosure, indicating resilience in the market. The online advertising arm also delivered a sturdy quarter, witnessing a 20% revenue uptick fueled by heightened demand for advertising within Tencent’s video content sphere. E-commerce entities played a pivotal role in elevating ad revenue during the quarter, a phenomenon linked to their historically heightened advertising activities in the latter half of the year.
Financial Technology Success and Margin Improvement
Beyond gaming and advertising triumphs, Tencent’s financial technology division reported a 16% surge in sales, propelled by an enhanced performance in wealth management services and online transactions. Despite a 9% year-on-year dip in net profit, the company’s overall gross margin ascended, nearing the 50% threshold last observed in 2018. Tencent ascribed this improvement to a strategic focus on phasing out non-lucrative ventures, a strategy discernible in recent quarters.
Pony Ma, Tencent’s chairman, accentuated the company’s persistent efforts to redirect focus from less scalable activities throughout the third quarter. He underscored an emphasis on high-margin revenue streams. Addressing concerns about the ramifications of fresh U.S. chip export restrictions, Tencent reassured investors, asserting possession of a substantial supply of Nvidia chips for short-term artificial intelligence (AI) initiatives and expressed intentions to explore domestic channels for AI chip procurement.
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