Tencent Profit Jumps as High-Margin Businesses Grow — Update
By Sherry Qin
Chinese technology giant Tencent reported a sharp rise in profit for the first quarter, buoyed by rapid growth in its high-margin businesses.
The Chinese videogame and social-media company said Tuesday that its net profit rose 62% to 41.89 billion yuan ($5.79 billion), higher than the CNY35.61 billion expected in a FactSet poll of analysts.
The Shenzhen-based company's gross profit margin expanded to 53% from 45% a year earlier, supported by high-margin businesses, such as short videos and mini games embedded in its super app WeChat. Its short videos saw its total user time grow 80% on year and gross receipts of mini games rise 30%.
Revenue for the period rose 6% from a year earlier, as solid ad revenue offset weakness in its gaming segment. Online ad revenue rose 26%, while domestic game sales fell 2% on year amid a lack of meaningful title releases during the period, improving slightly from the 3% decline in the fourth quarter.
"Several of our leading games in China and internationally started to benefit from team reorganizations we put in place... creating a foundation for our games revenue to resume growth in future quarters," the company said.
China's online-game industry has been in the spotlight amid a regulatory crackdown since 2021, but authorities have signaled a letup in recent months.
In a surprise move, China's gaming regulator in February approved a new batch of foreign video games, which analysts see as part of efforts to reverse a prolonged decline in the country's stock markets, as well as support a slowing economy.
Investors have welcomed the move, with the tech giant's Hong-Kong listed shares gaining 30% so far this year, outpacing the 12% growth of the benchmark Hang Seng Index.
Tencent is due to release its highly anticipated game title "Dungeon & Fighter Mobile" on May 21 in China. Citi analysts expect the game and a few other releases to help Tencent's domestic gaming revenue return to growth in the second quarter.
After announcing its plan to more than double its share repurchase in 2024, the company said it is "on track" to buy back over 100 billion Hong Kong dollars (US$12.80 billion) of its shares this year, as well as pay higher dividend.
Write to Sherry Qin at sherry.qin@wsj.com
(END) Dow Jones Newswires
May 14, 2024 06:48 ET (10:48 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.-
These Stocks Are (Still) Powering the Bull Market
-
5 Undervalued Energy Stocks to Play the AI Data Center Demand Boom
-
After Earnings, Is Lowe’s Stock a Buy, Sell, or Fairly Valued?
-
5 Stocks With the Largest Fair Value Estimate Cuts After Q1 Earnings
-
10 Stocks With the Largest Fair Value Estimate Increases After Q1 Earnings
-
Markets Brief: Inflation Back in the Spotlight
-
AI Is Booming, but Consumer Spending Is Slowing. Which Will Prevail in the Stock Market?
-
What’s Happening In the Markets This Week
-
3 Dividend Stocks for June 2024
-
After Earnings, Is Alibaba Stock a Buy, Sell, or Fairly Valued?
-
MongoDB Earnings: Slashing Valuation as Execution and Macro to Blame for Lower Guidance
-
Marvell Earnings: We Raise Our Medium-Term AI Forecast and Bring Our Valuation Up to $75
-
Zscaler Earnings: Impressive Traction in Emerging Products Drives Sales Growth for the Quarter
-
Dell Earnings: Raising Valuation on Strong AI, but the Stock Remains Severely Overvalued
-
After Earnings, Is Nvidia Stock a Buy, Sell, or Fairly Valued?
-
The 10 Best Companies to Invest in Now