Tencent, the Chinese giant active in social networks, games, and media streaming, in the first quarter of 2024 benefited from a 62 percent increase in profit and a 6 percent increase in net revenue. This company, with a value of over 26 billion dollars, was able to place among the top 50 companies of 2024. Tencent's continued financial successes have also had a major impact on the dynamism of China's economy, such that this country ranked second after the United States among the world's top 100 brands.
Tencent's revenue, including a 6 percent increase, rose to 159.5 billion yuan (equivalent to 22 billion dollars), a figure that exceeded analysts' forecasts. Their forecast for Tencent at best was in the range of 158 billion yuan. Things are going well for Tencent this year, to the point that the company's profit between January and March reached 42.6 billion yuan (5.92 billion dollars). This figure also indicates a 55 percent increase in revenue generation compared with the previous quarter. On the other hand, net profit also increased by more than gross profit, namely 62 percent.
Tencent's greater focus on the video game sector compared with last year
In 2012 Tencent purchased 40 percent of Epic's shares and subsequently, by buying a portion of the shares of major companies such as Activision/Blizzard and the Finnish company Supercell, showed its power and influence in the video game market to rivals. From then until today, Tencent's dominance in the video game industry has caused this company to move forward every year with a leap in the video game sector.
Tencent's gross revenue from international games has increased 34 percent compared with last year. Due to the renewed popularity of Supercell's games, especially "Brawl Stars," and growth in users and gross revenue from the game "PUBG Mobile," and also after excluding currency fluctuations, Tencent's international games revenue increased 3 percent compared with the previous year and reached 13.6 billion yuan. This led the company to attribute this development to a long revenue cycle for Supercell's games.
Tencent's game-making division, which in the not-too-distant past was Tencent's main revenue arm, has many plans for its next successes. The company said in a statement to regulatory authorities:
Several of our top games in the domestic and international segments led to productivity and the reorganization of teams that are the factor in increasing games' gross revenue and creating a foundation for games revenue growth in the coming quarters.
Investment in newer titles and the impact on sales growth of other Chinese games
Supercell, Tencent's large subsidiary, will soon release its first new game after five years. But given that Tencent's advertising and financial services segment has grown significantly, the value-added services segment in this quarter has faced a decline, a segment that specifically includes revenue from games. But this is not all of Tencent's focus on the video game sector; for the first time in several years, the company announced the total amount of revenue from games, "Gross gaming receipts." Tencent announced that this figure increased in the first quarter of 2024 and indicates a more precise measure of players' spending in games.
Tencent's video game sector has had a clear impact on the sales of other Chinese titles. The profitability of other Chinese games and their gross revenue returned to annual growth and increased 3 percent, but Chinese games revenue fell 2 percent compared with the previous year and, due to deferred revenue, reached 34.5 billion yuan. For example, the revenue rate from games such as "Honour of Kings" and "Peacekeeper Elite" declined compared with the previous year. On the other hand, newly released games in the market including "Valorant," "Ark Lost," and "Fight of the Golden Spatula" have been among the profitable titles among Chinese games.
WeChat, Tencent's most powerful weapon in competition with other social networks
WeChat's short-video section, thanks to users spending 80 percent of their time there, has become the main factor in increasing Tencent's profit margin among social networks. This shows that Tencent's efforts to attract audiences from rivals such as ByteDance and Instagram are paying off. Although Tencent's total social network revenue has fallen about 2 percent and reached 30.5 billion yuan, WeChat has still shown good performance.
WeChat's advertising revenue in the first quarter of the year increased 30 percent and reached 42 billion yuan (6.3 billion dollars). The increase in WeChat's monthly active users (MAU) and also users' greater willingness to buy and pay online on this platform have been the main reasons for advertising growth on WeChat. Advertising revenue of Tencent's other video platforms such as "Tencent Video" also increased 25 percent and reached 28 billion yuan (4.2 billion dollars).
The growth in financial profitability in Tencent's social networks segment is due to the increased popularity of video content among Chinese users and also brands' increased investment in video advertising. This strong growth indicates Tencent's growing power and influence in China's online advertising market as well as international markets. In total, Tencent's advertising revenue in the first quarter of 2024 reached 70 billion yuan (10.5 billion dollars), which increased 22 percent compared with the previous year.
Video content is always taken seriously at Tencent
The Tencent Video division last year released several popular drama series and animations that had a major impact on profitability in the quarter ending in March. Series such as "Blossoms Shanghai" directed by Wong Kar-wai, as well as "The Hunter" and season four of "A Perfect World," which led to an 8 percent increase in long-term video subscriptions compared with the previous year.
Also, the daily average of streaming video and music subscriptions in the first quarter was 116 million. Value-added services revenue fell 1 percent compared with last year and reached 78.6 billion yuan (10.9 billion dollars) in the first quarter of 2024. According to Tencent's entertainment division report, the total profit of this subsidiary, with the increase in streaming subscriptions and revenue per user, increased by about 28 percent compared with last year.
Closing remarks
Above it was noted that Tencent's total social network revenue (not only WeChat) has fallen about 2 percent and, on the other side, it is facing an increase in revenue from music and video streaming service subscriptions. A figure that indicates an 8 percent improvement in the music and video segment compared with the previous quarter. Also, in a conference call after the announcement to the media and financial analysts, Tencent's management claimed that they see no risk in the game-making process. These points are acceptable evidence of Tencent's potential in generating revenue and managing it across all existing platforms. Tencent's managers miss no opportunity to earn revenue.
Tencent's total gross profit margin, at 53 percent, has reached its highest level since 2016. Tencent's various divisions have caused this Chinese company's stock to increase by nearly 30 percent this year. This has placed the company on the threshold of entering the cloud technologies and artificial intelligence industry. For example, Tencent recently announced a plan to increase the buyback segment's shares to at least 12.8 billion dollars this year, which is a sign of this economic giant's continued advance in China and the world.
Short link: nmfr.ir/fe9
Machine-translated from Persian by Namafar; the Persian original is authoritative. Read the original in Persian