TENCENT Holdings’ revenue accelerated its growth after the blockbuster summer release of Dungeon & Fighter Mobile helped lift China’s most valuable company out of a gaming trough.
Revenue jumped 8 per cent to 161.1 billion yuan (S$29.7 billion) for the April-to-June period, versus the projected estimate of 161.4 billion yuan. Net income surged to 47.6 billion yuan, compared with the estimated 39.9 billion yuan.
The world’s biggest games publisher reversed two consecutive quarters of contraction for its games business, thanks to the May release of the Nexon-produced DnF Mobile in China. Its ubiquitous WeChat app is also powering new growth, bolstering ad sales as well as transactions for virtual items and ecommerce purchases through its mini programmes and TikTok-style video feed.
Because of its strength in these high-margin businesses, the Shenzhen-based outfit may emerge in a better position than rivals like Alibaba Group Holding and JD.com, both of which will deliver their quarterly prints this week. China’s biggest Internet players rely on a confident consumer, but the appetite for big-ticket purchases has been dented by a protracted battle with economic challenges from a property crisis to high youth unemployment.
Competition in China’s US$40 billion-plus gaming arena sparked back to life this summer. DnF Mobile got off to a hot start and maintained momentum even with the debuts of major rival titles by NetEase and Genshin Impact studio Mihoyo. Tencent’s hack-and-slash game could rack up 22 billion yuan this year, or 3 per cent of Tencent’s total revenue, according to an estimate by Morningstar.
Tencent is still on the hunt for more blockbuster releases to augment its Honor of Kings, long China’s most lucrative title. Black Myth: Wukong is another highly anticipated title that’ll go live on consoles and PCs on Aug 20, and is already the top seller on gaming platform Steam. Tencent is the Chinese publisher of the big-budget action game and a major investor in its developer. Its own Breaking Dawn – an extension of the Honor of Kings franchise in the fighting game genre – is also expected to roll out in the next few months.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Outside gaming, WeChat sits at the heart of Tencent’s effort to tap is massive user traffic for what it calls high-quality growth. The super-app’s foray into short videos and live shopping helps diversify revenue streams into areas like ads and payments, improving margins across the board. It’s an enviable and unique position, as rivals like Alibaba and Baidu struggle to keep users engaged on their flagship apps.
Tencent has joined the rest of the tech industry in embracing artificial intelligence as a future growth lever, though the company has yet to tap that technology in its core businesses. So far, AI has helped improve ad targeting, but the firm’s proprietary large language model and ChatGPT-style tool are behind competitors like TikTok parent ByteDance Ltd. and Alibaba in user uptake. Both Alibaba and Tencent have invested in the majority of China’s up-and-coming model builders, an elite group of six startups that have collectively attracted billions of US dollars of venture funding.
“Tencent’s revenue streams are well diversified, with the firm positioned as a leader in many of its end markets, including video games,” Bloomberg Intelligence analysts Robert Lea and Jasmine Lyu wrote in a note before the results. “Unlike its ecommerce peers, Tencent’s divisions benefit from relatively high technical barriers to entry, making them less exposed to risk from low-cost disruptors.”
Tencent has spent almost US$8 billion this year to repurchase its stock, according to a Bloomberg News calculation, outpacing the buyback activity of other Hong Kong-listed firms as the local market sagged. Shares of the WeChat operator surged roughly 27 per cent this year, versus a 10 per cent drop in the Hang Seng Tech Index. BLOOMBERG
