Tencent's revenue in the first quarter exceeded expectations by 150 billion yuan

Tech 2023-05-18 08:13:52 Source: Network

Image insect creativity/Image supply Chen Jinxing/DrawingSecurities Times reporter Yu ShengliangAfter the fourth quarter of last year, Tencent's financial report continued to improve. On the 17th, it released a quarterly report showing that the company's revenue increased by 11% year-on-year to 150 billion yuan, and adjusted net profit was 32

Image insect creativity/Image supply Chen Jinxing/Drawing

Securities Times reporter Yu Shengliang

After the fourth quarter of last year, Tencent's financial report continued to improve. On the 17th, it released a quarterly report showing that the company's revenue increased by 11% year-on-year to 150 billion yuan, and adjusted net profit was 32.5 billion yuan, a year-on-year increase of 27%.

For the high growth in net profit, Tencent stated that this was partly due to a lower base compared to the same period last year, as well as improvements in revenue structure and operational efficiency.

Tencent stated that it is vigorously investing in the construction of artificial intelligence capabilities and cloud infrastructure to embrace the opportunities brought by basic models. We believe that artificial intelligence will become a multiplier for Tencent's business development, enabling Tencent to better serve users, customers, and even the entire society. Among Tencent's three major business segments, revenue from value-added services including games increased by 9% year-on-year to 79.3 billion yuan, revenue from online advertising business increased by 17% year-on-year to 21 billion yuan, and revenue from financial technology and enterprise services increased by 48.7 billion yuan year-on-year to 14%.

Tencent stated that in the first quarter, its payment business helped domestic consumption, and payment amounts also benefited from it. Game revenue improved, while advertising revenue maintained rapid growth, driving overall revenue growth. In addition, the combined monthly active accounts of WeChat and WeChat, which are the cornerstone of Tencent, reached 1.319 billion, a year-on-year increase of 2%, continuing to achieve growth on a high base.

In terms of communication and social networking

In terms of WeChat, the usage of video accounts continues to grow, with user usage duration and playback volume rapidly increasing. Tencent is cultivating a video account creator ecosystem, upgrading support for new creators, providing more traffic incentives, wider creator coverage, and more effective content creation tools. In addition, the infrastructure for carrying goods has been strengthened to assist creators in benefiting from sales commissions related to carrying goods transactions. The video account creator ecosystem has become increasingly active: the number of daily active creators and average daily video uploads is more than twice that of the same period last year, and the number of creators with over 10000 fans is more than three times that of the same period last year.

In terms of QQ, Tencent has adopted a new technical architecture to optimize development efficiency, enhance security, and enhance visual experience. The new technological architecture will significantly enhance the cross platform product deployment of QQ in the future.

In terms of digital content, the number of paid members for long videos decreased by 9% year-on-year to 113 million, while subscription revenue decreased by 6% year-on-year, mainly affected by delayed content broadcasting. Tencent is optimizing its content to meet the constantly changing user needs. In April this year, Tencent's self-made drama "Long Season" became the highest rated local TV drama on Douban in the past five years. Tencent is expanding its cooperation with short video services to enhance the popularity of long video content and seize more commercial opportunities.

In terms of music, Tencent has upgraded its listening experience and strengthened cooperation with record companies and artists, thereby increasing user stickiness and willingness to pay, resulting in a 30% year-on-year increase in music subscription revenue.

In terms of value-added service business

The revenue of this sector in the first quarter increased by 9% year-on-year to 79.3 billion yuan. The international market gaming revenue increased by 25% to 13.2 billion yuan, with an increase of 18% after excluding the impact of exchange rate fluctuations. This is driven by the strong performance of the recently released "Victory: Nikki" and "TripleMatch3D", as well as the steady growth of "VOLT".

The revenue of local market games increased by 6% to 35.1 billion yuan, benefiting from the strong performance of several of the most popular games, and Tencent's revenue resumed growth. The King of Glory launched a skin series and precision marketing plan with the theme of "The Classic of Mountains and Seas", and the first season of 2023 achieved a historic high in running water. The personal computer game "Crossing the Line of Fire" and the mobile game "Crossing the Line of Fire" both reached historical highs in the first season of 2023.

The duration of underage games and streaming accounts for only 0.4% and 0.7% of the total gaming duration in Tencent's local market, respectively, a decrease of 96% and 90% compared to the same period three years ago.

Social network revenue increased by 6% to 31 billion yuan, driven by in-game virtual prop sales and paid music membership services. Investors are quite concerned about the gaming sector, and the recovery of the gaming sector may enhance investor confidence. Tencent has paid a lot of attention to the gaming sector in its first quarter report of this year.

In terms of online advertising business

The revenue of this sector increased by 17% year-on-year to 21 billion yuan, thanks to the new revenue sources of video accounts, the increase in advertising in mini programs, and the recovery of mobile advertising alliances. Advertising expenses in most industries have increased year-on-year, thanks to the recovery of Chinese consumption, and Tencent's upgraded advertising infrastructure has further amplified this benefit. Large e-commerce platforms are gradually recognizing Tencent's services as a key channel for user acquisition, thereby increasing advertising expenses on Tencent.

Tencent has upgraded its machine learning platform for advertising, integrating its deep learning model and standardized product library, thereby bringing better advertising targeting ability and higher conversion rates to advertisers. The video account has attracted new advertisers and new budgets from existing advertisers. The average eCPM of video accounts is higher than other short video platforms, reflecting advertisers' recognition of the ability to convert video account browsing into mini program transactions within WeChat.

In terms of mobile advertising alliances, on the supply side, Tencent has increased its advertising inventory with high conversion rates, such as applications from smartphone manufacturers. On the demand side, Tencent has attracted more advertisers who focus on advertising efficiency, such as e-commerce platforms.

In terms of financial technology and enterprise services

The revenue of this sector increased by 14% year-on-year to 48.7 billion yuan. Compared to the fourth quarter of 2022, the year-on-year growth of fintech services has accelerated, mainly due to the recovery of commercial payment activities caused by the rebound in Chinese consumption. The revenue of the enterprise service business increased at a positive year-on-year rate during the period, thanks to the increase in sales of some cloud services and the first revenue generation of technical service fees related to video account live streaming and goods trading.

In addition, the year-on-year growth rate of enterprise service revenue has turned positive, and the gross profit margin has significantly increased. Tencent's smart transportation solutions assist in the digital upgrading of large-scale transportation projects, such as leveraging its expertise in cloud infrastructure, digital maps, and 3D rendering technology to serve smart highways in Sichuan Province and subway projects in Guangzhou.

In addition, the growth of enterprise service revenue has also benefited from Tencent's collection of live streaming and goods trading technology service fees.

In terms of various expenses and AI layout

In the field of scientific research, Tencent's research and development expenses reached 15.2 billion yuan in the first quarter, maintaining a historical high. Since 2018, Tencent has invested over 220 billion yuan in research and development, and its independent innovation capability has steadily improved. As of the end of last year, Tencent had a total of over 62000 patent applications publicly disclosed in major countries and regions around the world, ranking second in terms of authorized invention patents among private enterprises in China.

Tencent's sales and marketing expenses decreased by 13% year-on-year in the first quarter to 7 billion yuan, reflecting a reduction in marketing activity expenses. As a percentage of revenue, sales and marketing expenses have decreased from 6% in the first quarter of 2022 to 5% in the first quarter of 2023.

In addition, income tax expenses in the first quarter increased by 118% year-on-year to RMB 11.5 billion, due to an increase in pre tax profits, an increase in provision for deferred income tax, and a one-time adjustment to deferred income tax related to an overseas subsidiary.

Recently, Tencent has continued to expand its layout in the AI field. At present, Tencent has disclosed the research and development progress of the "hybrid" AI model, which fully covers the basic models such as NLP (natural language processing), CV (computer vision), multi-mode and many industry models. In the fourth quarter of last year, "hybrid" launched the first low-cost, landing NLP trillion model in China.

Last year, Tencent achieved a revenue of 554.55 billion yuan, a slight decrease of 1% year-on-year; The adjusted net profit was 115.65 billion yuan, a year-on-year decrease of 7%. However, in the fourth quarter of last year, Tencent achieved a revenue of 144.95 billion yuan, a year-on-year increase of 1%; The adjusted net profit was 29.711 billion yuan, a year-on-year increase of 19%.

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