Written by Josh Yeh
HONG KONG (Reuters) – China’s Tencent Holdings said on Tuesday its first-quarter revenue rose 6%, beating analysts’ expectations as business services and advertising sales delivered strong gains. Ta.
But the recovery in the games business, which generates nearly half of the group’s overall profits, remains weak, illustrating the challenges the world’s largest video game company faces as it seeks to revamp its games pipeline. China’s largest internet company and operator of messaging platform WeChat said its revenue for the three months ended March 31 reached 159.5 billion yuan ($22.04 billion). By comparison, the average estimate of 19 analysts compiled by LSEG was 158.44 billion yuan.
This marks Tencent’s fifth consecutive quarterly revenue increase as it emerges from tighter regulation by the Chinese government in 2022. While the company’s business services and advertising revenues continue to grow, the company’s core gaming business is facing a noticeable slowdown due to the declining popularity of its existing games. It reaches a plateau and fades.
Domestic gaming revenue in the first quarter fell 2% to 34.5 billion yuan. His two major titles on Tencent, Honor of Kings and Peacekeeper Elite, have both suffered notable revenue declines. However, international gaming revenue returned to growth this quarter, increasing 3% year-on-year to 13.6 billion yuan.
Online advertising revenue rose 26% to 26.5 billion yuan as Tencent upgraded its advertising infrastructure and further commercialized WeChat Video Accounts, a short video platform that rivals ByteDance’s TikTok analogue Douyin in China. It became.
“To help advertisers establish advertising campaigns more effectively, we have upgraded our advertising technology platform and made generative AI-powered ad creation tools available to all advertisers,” Tencent said in an exchange filing. I did,” he said.
Revenue from fintech and business services rose 7% to 52.3 billion yuan, as the company’s suite of payment, e-commerce and productivity software and services continues to gain momentum in China.
Net profit rose 62% to 41.8 billion yuan, compared to the average analyst estimate of 43.03 billion yuan.
Reuters reported last month that Tencent has canceled several big-ticket projects based on overseas franchises, leading to a major shift in its game strategy to focus on developing in-house games rather than adapting old overseas hits for smartphones. It was reported that there was.
Tencent founder and CEO Pony Ma has been blunt about the need to improve the company’s video game division (which had sales of 180 billion yuan last year, or about 30% of overall revenue). Told.
That said, analysts believe that upcoming games, including the “Arad War” mobile game, which took Tencent seven years to develop and gain regulatory approval, will drive Tencent’s gaming revenue in coming quarters. I believe we can push it forward.
Sean Yang, senior research analyst at Arete Research, said he expects gaming revenue to be weak in the first quarter, but added that it is likely to improve from March and the second quarter.
“They’re releasing new games from Supercell, and there’s going to be a new Game of Thrones game,” he said, adding, “By then, the revenue from Honor of Kings and Peacekeeper Elite will also be coming out.” It may stabilize.”
He said the increase in advertising revenue was the highlight of the quarter for Tencent, which exceeded expectations.
“Tencent even specifically mentioned advertising displayed on WeChat’s search engine, which has rarely been talked about until now,” he said, adding that such search-based advertising could lead to potential growth for the company in the future. He added that it could be a point.
(1 dollar = 7.2378 Chinese yuan)
(Reporting by Josh Ye; Editing by Jacqueline Wong)
