February 23, 2024

Tencent, the global gaming and messaging giant, has reported robust revenue growth in its latest financial results. This growth is mainly driven by a strong performance in both games and advertising segments.

In the third quarter, Tencent experienced a significant 10% increase in revenue. This surge signals a notable recovery in its games business following regulatory challenges faced by the tech sector in China.

Tencent’s Third Quarter Revenue Growth

The company, known as the world’s largest video game company and operator of the WeChat messaging platform, achieved sales of 154.6 billion yuan ($21.4 billion) for the three months ending in September.

This marks the third consecutive quarter of revenue growth for Tencent.

However, the previous year posed considerable difficulties for Chinese video game companies due to a regulatory crackdown in 2021. This unforeseen circumstance resulted in an eight-month freeze on new game licenses and increased restrictions on playing time for minors.

Tencent, specifically, witnessed its first-ever annual revenue decline during this period. However, this year, the industry has recorded a positive turnaround as regulators resumed granting game licenses.

The company’s domestic games revenue for the quarter grew by 5%, fueled by the success of titles such as Lost Ark and Valorant.

Both games, developed by Riot Games, were recently introduced to the Chinese market by Tencent. Furthermore, the video games sector substantially boosted in August, with combined revenue reaching 29.2 billion yuan. 

According to a government-backed industry data firm, CNG, this was the highest level in at least 20 months.

In addition to the flourishing gaming business, Tencent’s online advertising segment reported a significant 20% increase in revenue. This progress received a push from strong demand for advertising within its video content.

Also, the company’s fintech business, its second-largest business unit, saw a notable 16% rise in sales, attributed to improved performance in wealth management services and online transactions.

Tencent’s Holdings Decline in Net Profit for Q3

Amid the success of Tencent’s third-quarter revenue, there was a notable plunge in its holdings’ net profit. This was primarily attributed to the absence of special gains generated from asset sales recorded in the previous year.

Despite demonstrating operational strength in its gaming, advertising, and fintech sectors, the Chinese video game and social media giant reported a 9.4% decrease in net profit, amounting to 36.18 billion Chinese yuan ($4.99 billion) for the period ending on September 30.

This performance surpassed the analysts’ estimate of CNY 32.47 billion, based on a Visible Alpha poll. Notably, the company’s results in the same period of the previous year were positively influenced by gains derived from asset disposals.

Supporting these disposals was the revaluation of specific companies in which it had investments. But despite the 9.4% decline in net profit, Tencent’s overall performance highlights a positive trajectory for the company in the dynamic landscape of the gaming and technology industry.

The impressive revenue growth reflects the resilience and adaptability of Tencent in scaling through the regulatory challenges, capitalizing on the demand for both gaming and advertising services.

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