Games Recovery Helps Revenues at Tencent in Uneven Third Quarter

Modest increases in its Chinese and international games sectors helped Chinese tech giant Tencent achieve respectable results for the three months from July to September, the third quarter of its financial year.

Group revenues weighed in at RMB154 billion ($21.5 billion), an increase of 10% year on year and 4% quarter on quarter. Some analysts interpreted that as below their forecasts, but others saw it as beating China’s currently sluggish economy.

Profit for the period was RMB36.8 billion ($5.14 billion), which was down 5% year on year, but a 38% improvement on the group’s second quarter.

Moreover, Tencent claims that a non-IFRS treatment of its accounts better reflects core earnings. On that measure profit for the period was RMB45.8 billion ($6.4 billion, a year-on-year increase of 37%.

International Games revenues increased by 14% to RMB13.3 billion, or up 7% excluding the impact of currency movements. The group said it “saw a revenue recovery for ‘PUBG Mobile,’ alongside healthy revenue contributions from ‘Goddess of Victory: Nikke,’ ‘Valorant’ and ‘Triple Match 3D,’ versus decreased revenue from ‘Tower of Fantasy,’ attributable to a tough comparison against its launch quarter in the same period last year. [Chinese] games revenues grew by 5% to RMB32.7 billion, driven by the recent launches of ‘Lost Ark’ and ‘Valorant,’ as well as increased revenues from evergreen titles such as ‘Honour of Kings’ and ‘DnF’.”

Video subscriptions declined 3% year-on-year, but grew 1% quarter-on-quarter, to 117 million, the group said. On Tuesday, subsidiary Tencent Music Entertainment revealed a strong 21% year-on-year leap in music streaming subscriptions and an increase in subscription revenue.

Revenues from online advertising were RMB25.7 billion for the third quarter of 2023, up 20% year-on-year, “propelled by robust advertising demand for social media video accounts, our mobile ad network and Weixin Search, with notable growth in the local services and FMCG categories,” the group said in a filing.

“During the third quarter of 2023, we achieved solid and high quality revenue growth, notable margin expansion, and structural operating leverage. Relatively new services such as video accounts and mini games contributed high margin revenue streams while we re-focused away from less-scalable activities,” said Ma Huateng (aka Pony Ma) chairman and CEO of Tencent. “We are increasing investment in our AI models, providing new features to our products and enhancing our targeting capabilities for both content and advertising. We aspire to position our leading AI capability not only as a growth multiplier for ourselves, but also as a value provider to our enterprise customers, and the society at large.”