Although slightly below the expected 32.3 billion yuan, Tencent’s profitability demonstrates its financial resilience in the face of economic turmoil.
Chinese tech giant Tencent Holdings has released its second-quarter financial earnings report for the year. The company reported revenue of 149.2 billion yuan ($20.5 billion), showing an 11% increase compared to the 132 billion yuan it posted in the same period last year. Despite the current macroeconomic conditions in China and evolving market dynamics, the company’s revenue growth remains strong.
Bloomberg analysts had earlier projected Tencent’s revenue to reach 152 billion yuan. However, the Chinese firm, operating the world’s largest gaming business and owner of the social media platform WeChat, reported lower-than-expected income, missing market expectations by a slight margin.
Tencent’s Gaming Revenue: Domestic Stability and Global Growth
According to the announcement, Tencent’s Q2 profits reached 26.2 billion yuan, marking an impressive 41% surge from last year. Although slightly below the expected 32.3 billion yuan, Tencent’s profitability demonstrates its financial resilience in the face of economic turmoil.
The company’s co-founder and chief executive officer, Pony Ma Huateng, said in a statement that the company is committed to boosting revenue quality and margins through innovative AI initiatives.
“We will continue to drive innovation, including through generative AI, where we will provide a library of models to our partners via our Tencent Cloud Model-as-a-Service (MaaS) offering, as well as refining our proprietary foundation model,” Huateng.
Tencent’s domestic gaming revenue held steady at 31.8 billion yuan year-on-year due to the integration of “less-commercial content” in key titles. However, this phenomenon is anticipated to be short-lived, with a projected resumption of year-on-year growth in the third quarter.
Revenue from its international games unit surged by 19% to 12.7 billion yuan, powered by popular games like Valorant. With a focus on bolstering global gaming revenue amidst weak domestic sales and regulatory challenges in China, Tencent expressed optimism about recovering from the pandemic-induced downturn in mobile gaming activity.
Tencent Music Entertainment Group Scores 5.5% Profit Growth
The company’s entertainment subsidiary, Tencent Music Entertainment Group, dubbed the “Spotify of China”, also reported a 5.5% increase in its quarterly revenue. The growth was attributed to a rise in user subscriptions. However, the company has warned about its future income due to stricter controls on live-streaming activities.
Tony Yip, the company’s chief strategy officer, told Reuters during a phone call that Tencent Music Entertainment Group is taking steps to revamp its live-streaming business to exert better control over potential risks that might arise down the line.
Meanwhile, while the company’s revenue growth remains robust, Tencent has further reduced its headcount. During the first quarter report that ended in March, the Chinese company had about 106,221 employees. However, this quarter, the number decreased to 104,503 at the end of June.
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