Tencent, the Chinese games, social media, and streaming giant, has reported a further recovery in quarterly profits following a challenging 2022. However, its revenues for the April-June period fell short of financial analysts’ expectations, indicating continued weakness in the Chinese economy. Group revenues for the period reached RMB149 billion ($20.6 billion), representing an 11% YoY growth but a 1% QoQ decline.
Despite the revenue decline, Tencent’s profitability showed improvement, with net profits of RMB26.2 billion for the three-month period, compared to RMB18.6 billion in the same period last year. The company attributed this increase to cost-cutting measures and improved efficiency. This growth was achieved despite the doubling of profits tax payments and a RMB3 billion fine imposed on its financial payments unit.
Tencent, known for operating China’s largest video streaming platforms and games business, experienced a 5% YoY decrease in Tencent Video subscriptions, but saw a 2% QoQ rebound to reach 115 million subscribers. Tencent Music, a subsidiary of Tencent, also reported reaching 100 million paying subscribers through enhanced membership privileges and content offerings.
While the Chinese games business saw a 9% revenue decrease due to government regulations on game licenses and access for minors, Tencent believes that this decline was temporary and expects the Chinese games revenue to pick up in the third quarter of 2023. On the other hand, the international games business saw a 19% YoY increase in revenue, driven ongoing growth in PC games and positive contributions from recently released games.
Tencent’s WeChat/Weixin social media platform continues to be a significant driver of the company’s success, with increased user engagement across video accounts, mini-programs, and moments. Weixin user engagement has grown, with video accounts seeing a significant increase in user time spent. Mini-programs, including mini-games, have exceeded 1.1 billion monthly average users.
Despite the revenue shortfall, Tencent remains a dominant force in the Chinese digital landscape due to its diverse portfolio of products and its ability to adapt to changing market conditions.
1. Variety – article Patrick Frater titled “Tencent Reports Quarterly Profits Recovery, But Revenues Fall Short”
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