Tencent posts fastest profit growth in 3 years as online ads, business services offset slower gaming

• Tencent beat analyst estimates for revenue and profit in the first quater of the year.
• The Chinese tech giant saw slightly better performance in its core gaming business as well as improved profitability in its advertising and business services division.
• The Chinese internet giant, which runs the world’s largest messaging app WeChat, has been on a path to recovery after suffering its first annual revenue decline in 2022.

Tencent beat analyst estimates for revenue and profit in the first quarter, thanks to slightly better sales in the Chinese tech giants core gaming business and improved profitability at its advertising and business services division.

Here’s how Tencent did in the March quarter versus LSEG consensus estimates:

• Revenue: 159.5 billion Chinese yuan ($22 billion) versus 158.4 billion yuan expected.
• Profit attributable to equity holders of the company: 41.9 billion yuan versus 36.64 billion yuan anticipated.

Tencent’s adjusted net profit was up 62% year-on-year, marking the fastest growth since the March quarter of 2021, according to LSEG data. Revenue jumped 6% year-on-year.

The Chinese internet giant, which runs the world’s largest messaging app WeChat, has been on a path to recovery after suffering its first annual revenue decline in 2022.

It embarked on a cost-cutting drive that year and exited non-core businesses, in a bid to focus on its core gaming division and other areas like advertising and cloud computing.

Investors have rewarded the company’s efforts so far, with shares up 30% this year.

Tencent said revenue for its China gaming business in the first quarter fell 2% year-on-year, an improvement on the 3% fall seen in the fourth quarter. The company said revenue from one of is high-profiles games “Honour of Kings” declined year-on-year against a high base versus Chinese New Year, while there was “weak monetisable content” from “Peacekeeper Elite.”

International games revenue rose 3% year-on-year in the first quarter, better than the 1% increase seen in the previous quarter. Tencent said the growth was thanks to a rise in players of PUBG Mobile and a resurgence in popularity of games from its studio Supercell.

Still, the growth in Tencent’s gaming division remains weak.

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